Brexit: feeding from the same trough

18/12/2017  


The media had perhaps one opportunity to get it right, and set the agenda for the next few months that reflects the reality we face. They blew it.

Instead of hard analysis of Friday's European Council, most went for the easy shots with two of the Sunday newspapers (the Express and the Sunday Telegraph) buying into the No. 10 propaganda and offering authored puffs from Theresa May. Thus we have the front-page headline in the Telegraph blaring: "May: I've proved doubters wrong".

Her government "is getting on with the job", May says. "We are proving the doubters wrong and we will stick to the task: securing the best possible Brexit and building a Britain fit for the future – stronger, fairer, ever more global, and a country that truly works for everyone".

The Observer, ignoring the puff, focused on the coming parliamentary battle rather than the events just past, and the Mail on Sunday chose to exclude the EU from its front page altogether. On its inside pages, it too buys into the No. 10 propaganda and Mrs May's "summit victory", the headline borrowed from the Telegraph, declaring: "May claims she's 'proved the doubters wrong'".

Ever on the lookout for a domestic biff-bam slant, the paper then adds: "but the fragile Tory truce cracks as Boris says Britain must leave EU rules behind on the eve of crunch Cabinet talks".

The reference to "Cabinet talks" is to the discussions scheduled for today, and for tomorrow when for the first time the full Cabinet is to be formally asked for its views on the type of trade deal we should push for. As for "Boris", this is a reference to the Sunday Times.

It has plumbed the depths, delivering an inane interview with the Foreign Secretary who, once again, has demonstrated his complete failure to grasp the EU and trade issues.

Misleadingly, in the light of comments from Mr Mogg yesterday on the EU's transition proposals, the piece was entitled: "Boris Johnson: Brexit mustn't leave us a 'vassal state'". While one might have expected this to have been directed at the Council's transition ideas, these have obviously passed Johnson by.

Instead, the buffoon is talking about the "trade deal" that he wants his boss, Mrs May, to strike. In a nutshell, he wants something that gives Britain the power to ditch EU laws, and prattles that failure to do so would render the UK a "vassal state" of Brussels.

Spelling this out in more detail, Johnson says: "What we need to do is something new and ambitious, which allows zero tariffs and frictionless trade but still gives us that important freedom to decide our own regulatory framework, our own laws and do things in a distinctive way in the future".

This is straight out of the moronic "have your cake and eat it" playbook that has blighted post-referendum politics, telling us yet again that Johnson isn't safe to be let out on his own. Yet this is the sort of crass stupidity which the Sunday Times feels important enough to put on its front page.

With a nice sense of timing, Michel Barnier tells Prospect magazine some home truths which, if he was capable of blushing, would have the man-child Johnson glowing a bright cherry red – from all the fruit he plans to pick.

But says Barnier of the UK government, "They have to realise there won't be any cherry picking". He then points out that the EU will not mix up the various scenarios to create a specific one and accommodate UK wishes. For instance, he avers, there is no chance that we will get the advantages of the Norway model, with its membership of the single market, tied in with the simple requirements of the Canadian deal.

This is not the first time that Barnier has made that point. Add in his colleagues and run a Google search on the Europa website for "cherry picking" and "Brexit" and you will get over 200 separate entries. From the highest to the lowest. EU officials have been at pains to point out to the UK that options are limited. Yet months down the line, the moron still speaks in those terms.

Here, though, we have two dynamics at play: the idiot politician who will take every opportunity to blather his nonsense, and the "serious" newspaper which is prepared to give space to this stupidity, pushing it out uncritically – even conveying a sense of approval.

Barnier, in the same interview with Prospect, tells the UK, "They have to face the consequences of their own decision," but that's the one thing the likes of Johnson never do. There are no adverse consequences in British politics for stupidity. More often, the more you blather, the more publicity you get.

And with this, there is also the opportunity cost. Space given by the newspapers to Johnson's mad effluvia, or the sucking up to the incompetent May, means that there has been less devoted to an evaluation of the European Council and the publication of the new guidelines.

In fact, you will struggle to find any significant coverage of the guidelines. Most media outlets are happily burbling about moving into "phase two" but evidently do not feel it their duty to explain to the public the implications of that move.

But actually, the rot goes deeper than that. Alongside the uncritical presentation of Johnson's stupidity, the Sunday Times tells us he "acknowledges that going our own way could lead to 'trading consequences' with tariffs and other barriers imposed by Brussels". But, we are told. "the Foreign Secretary says Britain should grin and bear that while making the case for global free trade".

This newspaper, of course, would not stoop so low as to spell out what those "trading consequences" might be. More to the point, Tim Shipman – Johnson's gushing interviewer – doesn't think to ask the Foreign Secretary to be specific about what the British public should "grin and bear".

Thus, the world is full of politicians who can glibly consign us to penury (which is our intended destination, for all that Shipman knows) and it doesn't warrant the slightest exploration. No wonder that, when it comes to degrees of distrust, there is precious little difference expressed in opinion polls between politicians and journalists. They are pigs sharing the same trough.

As to the Cabinet meeting today, this is very much going to be a case of the blind leading the blind. I cannot think of a single Cabinet Minister who, in their public pronouncements, has displayed any clear understanding of how trade with the EU works, and even less so the global trade issues so ably outlined by Pete.

What we should realise here is that the Cabinet members are the privileged few. With the resources of the State to whatever extent they feel necessary at their disposal, these people have access to an unimaginable amount of information. They have staff to process, analyse and present it to them in any way they demand and yet the whole lot of them could not muster a respectable GCSE pass on the subject.

The Telegraph, with its own lamentable grasp of the subject, argues that the "new divide" in British politics is no longer between Remainers and Leavers, but "convergers and divergers". To what extent will post-Brexit Britain effectively mirror what the EU does on trade and services or plough its own furrow in the world?

We still do not know how these two conflicting visions can be reconciled, the paper then adds, not admitting the obvious. They cannot be reconciled. "Ploughing our own furrow" hasn't been an option since the days of Empire, and the mere suggestion that we can is to ignore the effects of decades of globalisation.

Thus, the fact that a top-level newspaper can even think to characterise the Brexit debate in these terms tells you all you need to know about the parlous state of the media. Unable of unwilling to address the real issues, they spiral off into flights of fantasy that bear no relation to reality or the needs of the public they serve.

Administrative note 

Today and possibly for the rest of the week, I will be in Scotland, in Hamilton Sheriff court, where I am attending as an expert witness on a food safety matter concerning Errington Cheese Ltd.

As an expert, I am not able to comment publicly on the issues until the hearing is resolved, and I cannot therefore write up my experiences over the next week. Even then, there is a fatal accident inquiry planned, which will preclude me from further comment.

The demands on my time over the next week will be severe, which will make normal blogging extremely difficult. I may have trouble doing anything more than perfunctory posts. Pete has agreed to step in with a guest post for tomorrow and I will then take each day as it comes.



Richard North 18/12/2017 link

Brexit: the march to a vassal state

16/12/2017  


As expected, the European Council yesterday decided to open what Donald Tusk called "the second phase" of the Brexit negotiations.

Also as expected, work on all withdrawal issues left over from phase one has to be completed. In addition, the transition arrangements have to be agreed. But that's it. There is nothing else until the March Council when, all being well, guidelines for the framework relationship will be produced.

Bearing in mind that the transition period was not originally part of the plan – and not formally introduced until after Mrs May's Florence speech - only by some perverse definition could this next part of the talks be called phase two. More realistically, it is phase one-plus – covering all the previous issues with one addition, the Council's transition proposals.

Details can be found in the final guidelines comprising three pages (without the cover sheet), nine paragraphs and approximately 750 words. They have survived mostly unchanged from the draft guidelines seen last week.

Crucially, paragraphs three and four, on the transition arrangements, have been repeated almost intact. In para three, the European Council notes the proposal put forward by the UK for a transition period of around two years, and agrees to negotiate on this.

However, the EU is demanding that during the period, the UK must obey the whole of the acquis. Meanwhile, as a third country, the UK will no longer participate in or nominate or elect members of the EU institutions, nor participate in the decision-making of the Union bodies, offices and agencies.

Here, there is a slight change from the draft, which referred to "EU institutions". Just to make it clear, this is extended to "Union bodies, offices and agencies".

And with that is spelt out the degree of humiliation which we are expected to accept. Stripped of all representation, for the two years of the transition period (or for however long it takes), we truly become a vassal state. Unlike the EEA where would have had substantial influence on the running of the EU, we are condemned to the worst possible outcome where our only option is to obey.

In paragraph 4, this humiliation is spelt out in more detail. The EU would have it that the transitional arrangements will be "part of the Withdrawal Agreement" – even though the provisions extend past what Article 50 would seem to allow. But that makes the arrangements part of a treaty obligation, from which there must be no deviation.

The arrangements must be clearly defined and precisely limited in time – with the word "precisely" a later addition. And, unlike most treaties - which are negotiated for the mutual advantage of all parties – the one-sided nature of this deal is there for all to see. It "must be in the interest of the Union", the guidelines say.

Furthermore, this draconian regime extends into the future, to cover areas as yet unspecified, giving the EU a carte blanche for the entire period. "In order to ensure a level playing field based on the same rules applying throughout the Single Market", the guidelines say, "changes to the acquis adopted by EU institutions, bodies, offices and agencies will have to apply both in the United Kingdom and the EU.

So the misery goes on. All existing Union regulatory, budgetary, supervisory, judiciary and enforcement instruments and structures will also apply. The extent is made clear by a later addition not found in the draft. That, we are told, includes "the competence of the Court of Justice of the European Union".

There is then another less than subtle change. In the draft, the UK would "remain a member of" the Customs Union and the Single Market (with all four freedoms) during the transition. This has now been changed. Membership confers rights as well as obligations and the EU is not prepared to tolerate that. We are simply going to be allowed to "participate".

In another change, we see an important addition, with the requirement that we continue to comply with EU trade policy – thus preventing us signing up to third country trade deals for the duration. And we must apply EU customs tariffs and collect EU customs duties (thereby remitting about £2 billion a year to the EU), and ensure that all EU checks are being performed on the border vis-à-vis other third countries.

To all intents and purposes, for the entire transition period, we remain in the EU – but on the worst of all possible terms. We may escape the queues at Dover and all the other problems for the time being (if only to confront them again when the transition period is over) but, on 29 March 2019, we see Brexit in name only. We will not actually leave, at the earliest, until 29 March 2021 – with just a year to go to the general election, if Mrs May is still in office.

And, if this is the worst of what we must accept, that is only a matter of degree. The Union negotiator and the UK must complete work on the (phase one) withdrawal issues, including those which have not yet been addressed. The parties must then consolidate the results obtained and start drafting the relevant parts of the Withdrawal Agreement.

This, one must appreciate, is not kindly advice. Further negotiations are entirely conditional on this. They can "only progress as long as all commitments undertaken during the first phase are respected in full and translated faithfully into legal terms as quickly as possible". Furthermore, the European Council guidelines of 29 April 2017 "continue to apply in their entirety and must be respected".

As to Mrs May's trade deal, the blunt language of the guidelines is uncompromising. An agreement on a future relationship can only be finalised and concluded once the United Kingdom has become a third country, it says.

The Union will only "engage in preliminary and preparatory discussions with the aim of identifying an overall understanding of the framework for the future relationship, once additional guidelines have been adopted to this effect". Such an understanding "should be elaborated in a political declaration accompanying and referred to in the Withdrawal Agreement".

By paragraph seven, the language then gets even more compromising, with another change to the text from the draft. Originally, it said that the UK had "stated its intention to leave the Customs Union and the Single Market after the end of the transition period". But now the intention is "to no longer participate".

So we leave the Customs Union and the Single Market on 29 March 2019, but continue participating in them until the end of the transition period. Further trade and economic cooperation will then be "calibrated" in the light of this position.

In all of this, the EU's objectives are to ensure a balance of rights and obligations, preserve a level playing field, avoid upsetting existing relations with other third countries, and to respect all other principles set out in its guidelines of 29 April 2017, in particular the need to preserve the integrity and proper functioning of the Single Market.

If we ever get that far, bearing in mind that the Irish question will be almost impossible to resolve, the chances of negotiating a comprehensive trade deal in the two-year transition period are next to nil.

Interestingly, at the conclusion of the European Council yesterday, Jean-Claude Juncker refused to comment. But there was no need – the guidelines told us all we needed to know, and spoke for themselves. And there is more to come.

The European Council will adopt additional guidelines in March 2018, "in particular as regards the framework for the future relationship" and meanwhile calls on the UK "to provide further clarity on its position on the framework for the future relationship". That's as near as we'll get to trade talks.

The Council of Ministers will continue internal preparatory discussions, "including on the scope of the framework for the future relationship" and the Commission will put forward "appropriate recommendations" on the management of the transition, and the Council will "adopt additional negotiating directives" on the arrangements in January 2018.

Yet, for all that, the media response is patchy. Gary Gibbon, political editor of Channel 4 sees this as "news which Theresa May can put under the Christmas tree". At least the Guardian has noticed something is amiss, reporting that this "deal" leaves Britain "as an entirely captive supplicant until at least April 2021".

In broad terms, though, the guidelines say just one thing. The UK has been shafted – the only thing we don't get is the orange jump suit. The stupidity of Mrs May and her advisors and all those precious little groups of intellectual pygmies who eschewed the "Norway option" have led us down the path to perdition, the very outcome we could have avoided by re-joining Efta and staying in the EEA.

In the annals of stupidity, this ranks alongside the Charge of the Light Brigade, even if the survivors are going to walk away alive. By the time this has finished, they may well wish the Russian guns had mown them down.



Richard North 16/12/2017 link

Brexit: adding it up

19/11/2017  


What should have been one of last week's biggest stories was the attempt by senior figures in our hugely successful car industry to explain to the Commons business committee the consequences of Theresa May's decision that we will leave the EU's Single Market to become what the EU classifies as a "third country".

So writes Booker in his truncated column. He notes that, last year our car industry, on which 770,000 jobs directly and indirectly depend, exported a record 1.6 million cars, representing 12 percent of our total exports. Of those 57 percent go to the EU, worth £40 billion.

What the MPs were told was that every single one of those cars can only be built and exported under an EU "type approval" which, when we become a "third country", will automatically lapse.

Replacing those necessary "type approvals" with a UK equivalent that would be recognised world-wide would be a very long and complex process: meaning that much of our car industry will grind to a halt. Even though this was first explained to MPs back in March, yet again its astonishing significance seemed wholly to pass them by.

But then the car industry is only one of several major industries which are going to be affected by Mrs May's unthinking decision to take the UK out of the Single Market. But it is not only the Prime Minister who seems oblivious to the consequences of this decision.

Most of our politicians seem equally oblivious, even when not dissimilar problems will face our chemicals and pharmaceuticals industries, with exports to the EU currently totalling £45 billion a year. And then there is civil aviation, with exports worth £28 billion, and food worth £12 billion.

All this, says Booker, is what we are putting at risk, with or without a trade deal, by Mrs May's decision that we will shut ourselves out not just from the EU's single market but also from the wider European Economic Area.

What is really terrifying is that it has hardly yet begun to sink in that, entirely by our own choice, we could be sleepwalking towards the greatest disaster to hit our economy since World War Two.

Adding up the value of these industries, in terms of export to EU, the potential losses to the economy could be as much as £125 billion. These five sectors, therefore, amount to more than 50 percent of our EU exports.

Then, there are other potential losses. There is little dispute that UK airlines will be badly affected and we have identified the specific problem of Third Country Operator approvals which will prevent British-registered airlines flying into Europe. Exact losses are difficult to quantify but it has been estimated that spending by foreign tourists who arrived by air supported a £19.6 billion gross value added contribution to UK GDP.

Other enterprises that may be damaged include Formula 1 racing, horseracing and bloodstock exports, and a wide range of manufacturing operation covering such things as ATEX equipment (equipment and protective systems intended for use in potentially explosive atmospheres), passenger lifts and cosmetics.

There is also the financial services sector to take into account. An estimate referred to in a recent House of Lords select committee report suggests that £40–50 billion of UK financial services revenues relate to the EU, with the trade surplus for financial services for 2014 at £19 billion. As to the proportionate impact, it is difficult to estimate, but it would be fair to assert that £40-50 billion is at risk, potentially costing the UK government £20 billion in lost revenue.

The crucial point, common to all these enterprises, is that the impacts will arises irrespective of whether we have a deal or not. It cannot be emphasised enough that the damage arises from leaving the Single Market – something that seems to escape even the high and the mighty.

For instance, in the Observer today, we see the views of Sir Martin Donnelly, the chief civil servant in Liam Fox's Department for International Trade until earlier this year.

He states that leaving the Single Market in favour of negotiating a long-winded, Canada-style trade deal will "damage UK competitiveness and leave us with less investment, lower living standards and long queues at the border". He thus warns merely that leaving the EU's legal structures will leave Britain "more protected, more regulated and poorer".

Nevertheless, Donnelly helpfully spells out that the benefits Britain enjoys from its single market membership cannot be replicated in a trade deal and argues that Britain could buy time through temporary membership of the EEA. Doing so, he says, will allow more time to "see if we can find a realistic alternative that meets our economic needs".

This is very much in line with Sir Ivan Rogers, who warns that there is a "radical difference" between the free trade arrangement that Britain would be offered and membership of the customs union and the single market that it was giving up.

David Davis is also getting some hammer, this time from another of those anonymous "senior EU officials". He dismisses the Brexit Secretary's assertion during his speech in Berlin that the UK should enjoy a better deal than Norway, due to its comparative size.

This official also notes that suggestions from British politicians that the UK could remodel its economy to be more like Singapore "had cut through to EU leaders". They are saying: "But we are a big country so we can get something better than Norway".

His answer is that it is the other way round. Norway is a fisheries and oil economy. They are not a competitor. The UK is a competitor. Particularly when it comes to safeguards against various types of dumping. Threats have been made and safeguards will have to be introduced.

And, it seems, business is beginning to wake up, although the lobbying is over the effects of leaving the EU with no deal. The tourism industry has privately warned that 25,000 jobs held by Britons working in the industry in Europe, as well as £1 billion in tax revenue, are at risk.

However, if we look in crude GDP terms, things begin to look extremely bleak. Our calculations suggest that the possible effect of leaving the Single Market is a hit to the GDP in the order of £140 billion - or £190 billion if financial services are included. This is the cumulative effect of the export losses.

But, through direct and indirect taxation, the government takes 40 percent of GDP which suggests that a fall of that magnitude in export earnings translates into a loss of government revenue of nearly £80 billion a year. That figure would probably not stand up, but it does point up that damage to the UK economy has a direct impact on tax income. And to that, one must add, potentially, an increase of between £15-20 billion in welfare payments to cover an estimated 2.5 million unemployed.

On the basis of these rough and ready figures, there is a case to make that leaving the Single Market could cost us far more that the supposed savings from cutting EU contributions. It certainly outstrips the so-called "divorce bill" payments that are in dispute, and which are deemed to be the price of market access. Here, any gains from holding back payments could turn out to illusory.

Quite evidently, though, none of this has been thought through, with the Brexit debate focused almost entirely on the costs of payments to the EU. There has been nothing like the same emphasis on the potential costs of various policy options.  Adding up, it seems, is so very hard to do.



Richard North 19/11/2017 link

Brexit: a retreat to sanity

08/11/2017  


Now in my fourteenth year of continuous blogging (the late Helen Szamuely and I started EURef on 22 April 2004), I've prided myself in never missing a single day apart from the period when I was locked up by West Yorkshire's finest, and for three days while I recovered from open heart surgery. That's nearly five thousand days of blogging, with millions of words written.

Writing the day's piece starts early, with the review of the papers and reading a few selected blogs. Depending on the nature of the post, the whole day might be taken up by searching for and reading online material. Writing proper usually starts by about 9pm – although sometimes earlier – and I try to be finished by about 2am.

Even when I've been falling apart from illness, or so tired that I've been barely able to keep my eyes open, I've delivered the goods, with the focus since the referendum almost exclusively on the impending train-wreck of the Brexit negotiations which, in my view, could hardly have been handled worse.

But I have to say that, with each passing day, it gets harder and harder to write my daily article. And it's not that there isn't anything to write about – quite the reverse. It's that politics are getting to the point where events are so surreal that, if you put them altogether under a fiction wrapper, no one would actually believe them.

Of the latest instalments of this mad soap opera, we have the ghastly Priti Patel conducting her own private foreign policy with the Israelis while the unspeakable Johnson has been compromising British woman Nazanin Zaghari-Ratcliffe, who has the misfortune to be incarcerated in an Iranian jail, while refusing to apologise for his error.

And then there is David Davis – with his sidekick Steve Baker - trying to fend off demands to see over 60 "sector analyses" that have transmuted in 58 "sectoral impact assessments" that don't actually exist.

The media, on the other hand, have locked themselves into a moral panic, giving rise to a situation where a minister touching a journalist's knee sometime in the distant past is a resigning offence, while the serial liar Johnson, potentially condemning a guiltless woman to jail in the most dire conditions, stays in office.

Unable then to concentrate on the most important domestic political event since the war, the fourth estate is waxing indignant over the "Paradise Papers", stolen documents which have been in circulation for over a year – only now dominating the headlines just when the entire future of our nation is at risk through the incompetence of our government's approach to Brexit.

Given these circumstances, it is not only hard to write anything rational – one is constantly asking oneself why one should bother. What really is the point of trying to inject clinical analysis into this maelstrom of insanity?

The thing is though, I'm not much good at this introspective stuff. Pete does it better, leaving me to plod on with the technical stuff in the certain knowledge that the greater and more thorough the research, the lower the readership – there is a direct inverse correlation.

But then, how could I possibly compete with such scintillating journalism as that offered by Lou Stoppard, GQ's Contributing Editor who "talks you through the jacket that is slowly replacing the suit" under the heading: "The death of the suit? Thanks Brexit".

If this is what people really want, then not only am I wasting my time. I'm on the wrong planet. I don't even belong here. I'm the person reading the piece in the Guardian under the headline "Brexit: EU warns UK it has less than a month to make concessions", where we are told that: "Senior officials in Brussels say EU unlikely to agree to trade talks in December unless the UK offers more on Brexit divorce settlement".

We've actually heard in the Sunday Times that Mrs May has used officials to signal financial concessions, with EU negotiators now drawing up the outlines of a future trade deal with Britain after the UK government suggested that it would agree to pay more than €60bn (£53bn) for the "Brexit bill".

But this is just another instalment in the ebb and flow of the soap opera. It's all rumour and innuendo, relying on unattributed briefings from anonymous officials – many of them denied or discredited within hours of their emerging. Thus, as it stands, we may not get trade talks given the go-ahead in December, or we may not. You pays your money and you makes your choice.

Needless to stay, those who say it's "all down to the money" neglect the Irish question, which is still no closer to solution than it was 501 days ago – when we had the referendum. And then there's the rights of EU citizens in the UK, post Brexit.

The Government has come up with another compromise solution, pledging a "streamlined system" for allowing EU nationals to stay in the UK after Brexit.

Details are set out in a five-page technical note in which the UK says it will be "bound by the obligations set out in the Withdrawal Agreement as a matter of international law". But the appeal provisions reside with the UK courts and there is no role envisaged for the ECJ.

Given, therefore, that the EU's own red line is breached, one can see a situation in December where even an enhanced money offer will not be good enough. There must be "sufficient progress" in all three of the "phase one" issues, and the money only gives us one out of three.

This puts us on the cusp of an existential crisis, where the December talks are set to collapse in a welter of recriminations, leaving the UK to face a bleak future in a decade-long depression. However, you would struggle to find even a hint of this on the front pages of the print media, where the fate of Priti Patel dominates the broadsheets, balanced by news of the suicide of a Welsh politician.

Huffing and puffing on its inside pages, the Guardian vents its opinion on Boris Johnson and Priti Patel: "incompetent, insubordinate and still in office", it says. We would not disagree.

But where we would disagree with this paper, and the legions of politicians who infest Westminster, is in their sense of priorities. For this country, there is nothing more important than Brexit, yet they are treating the issue like a game, tossed around as a party-political plaything with no progress ever being made.

It should be, I suppose, some small comfort that the great Wolfgang Münchau has come to the conclusion that: "Only sane route for Brexit is taking the Norway option". But then, I came to that conclusion in 2012, five years ago, only to have it rejected by the IEA, who rigged their competition to deliver a different answer.

If it takes Münchau five years to draw the obvious conclusion, how long is it going to take him to come up with the detail needed to make this option work? At this rate, we could be looking at the end of the century.

And with that, I've decided I can't be bothered to write a piece for tonight. To keep myself sane, I'll do some modelling instead. To keep the blog warm, I've posted a pic of a model I made earlier. They never look much when you photograph them, but this Dingo scout car is less than two inches long, with nearly 40 parts. It's the nearest thing I'll get to sanity this side of Brexit.



Richard North 08/11/2017 link

Brexit: spelling out the consequences

29/10/2017  


There is something very odd going on in the media. From several quarters, we are seeing journalists write inanely optimistic scenarios for Brexit which defy logic and almost defeat explanation.

In the Telegraph (no paywall), for instance, we see Dia Chakravarty offer the quintessence of stupidity, suggesting major political events will always come with a period of uncertainty, while its ramifications take shape and the details of the final outcome become clear.

The past few months, she writes, indicate that our economy is resilient enough to weather this period, on which slender basis she suggests we "all just calm down a little".

Then, at the other extreme, we have the Independent with John Rentoul writing that "leaving the EU might not trigger the apocalypse", arguing that "a non-disastrous Brexit would give Theresa May a renewed chance and could even act to firmly unite the Labour Party".

Then, as always, we see the Express, doggedly inhabiting a world of its own, telling us that "'Influential' European companies will push EU leaders into signing good deal with Britain".

In the face of the facts, even speculation of a " non-disastrous Brexit" is bizarre, representing a flight into unreality that belongs in realms of fiction rather than serious journalism. Yet here it is, embedded in UK titles presenting the public with a ridiculous scenario which, if not meant as entertaining fantasy, is a waste of everyone's time.

Even the newspaper which are giving some details on the downside seem to be pulling their punches, viz the Observer today. It list of woes comes down-page tacked on to a story telling us of how Tory donors are telling Mrs May that "no deal is better that a bad Brexit" – despite the ultimate definition of a "bad Brexit" being one in which a deal is not reached.

In a lacklustre catalogue of woes, which lacks any real impact, we learn of European Parliament modelling which suggests that a "no deal" Brexit would increase UK consumer prices by 4 percent in 2030 and wipe 2.4 percent off the UK's GDP. The British Retail Consortium states that the average tariff on food products imported from the EU would be 22 percent, with tariffs on Irish cheddar as high as 44 percent and beef up to 40 percent.

We then learn that financial sector advocacy group TheCityUK warns that EU-related financial services activity, worth about £18-20 billion, could be at risk, along with up to 35,000 jobs. The London First business group said companies had been forced to put investment and recruitment decisions on hold and revise their supply chains or were seeing "reduced demand for products and services".

GuildHE, one of the representative bodies for higher education, said that a "tough immigration policy in the event of no deal… could put our institutions at risk of not continuing to compete successfully in a global field". Then we have the American Chambers of Commerce to the EU saying that leaving with no deal would have "potentially devastating consequences". It added: "Companies would subsequently be forced to make difficult decisions regarding their investments and trading arrangements".

Yet, downbeat though this is, it barely compares with the potential £50 billion in chemical and pharmaceutical exports to the EU that we stand to lose just by leaving the Single Market – even if we get a deal.

However, there seems more to under-stating the consequences of a bodged Brexit than the efforts of a few importunate journalists. There is quite decidedly a direction of travel here, with the media going out of its way to minimise the impact of a "hard" Brexit – that is, when it's not too busy reporting on other issues, the same newspaper that recently wrote of "business brimming with confidence in post-Brexit Britain".

A good measure of the media's reluctance to address the current dire situation is the difference (in tone and content) of its coverage of Ivan Rogers's evidence to the Treasury select committee last week, in marked contrast with Booker's piece in today's Sunday Telegraph.

In his pieces, headed, "The terrible Brexit prophecy of Ivan Rogers is coming true. We should have listened", Booker tells us that, last week, one of the chief spectres at the Brexit feast was Sir Ivan Rogers, who last January resigned as our vastly experienced ambassador to the EU, after warning against "ill-founded arguments and muddled thinking" in our approach to leaving it.

This was just before Theresa May's announcement that we were to leave the single market and the European Economic Area (EEA), to seek a one-off trade deal that would give us the same "frictionless" access to the market we have now.

On Wednesday, writes Booker, Sir Ivan tried to explain to the Commons Treasury committee some of the realities inevitably resulting from our decision to become what the EU classifies as a "third country", with "no more rights than Yemen or Venezuela". And the picture he painted, although diplomatically couched, was devastating.

Allowing for ratification, we effectively now have only a year left for our negotiations. Even the "thousands of pages" required by a "Canada-type" trade deal, giving us considerably less access to our largest export market than we have now, would take years to hammer out.

But the consequences of a "no deal" would be so "dire", "chaotic" and "bloody" as to be unthinkable. We could not hope just to rely on "WTO rules", which are not "rules" at all but merely principles that must govern any trade agreement; and without a deal we would simply drop into "a legal void".

The difficulties of achieving continued access for our exports in pharmaceuticals and chemicals (worth £50 billion a year), food products, "large chunks of financial services", and much else would be insurmountable.

Booker recalls that Sir Ivan tried to discuss other problems, both with and without a deal, such as all the new border controls and infrastructure required not just in Ireland but on the continent. But most of this seemed to pass the MPs by.

When Sir Ivan tried to explain in some detail, based on discussions going back to 2015 with senior figures in the aviation industry, just how flights from the UK to the EU and the US could "cease" overnight, because these are all now legally authorised only by EU regulations that would require incredibly complex negotiations to replace, one MP simply cut him short in order to change the subject.

Yet, as Booker notes, elsewhere in the Commons the same day, David Davis, the Brexit Secretary, was airily assuring another committee that, however slowly the negotiations might seem to be dragging on, from the way the EU works, everything will inevitably get happily sorted out "at the 59th minute of the 11th hour".

From stray hints, it did seem Sir Ivan was aware that virtually all the problems he was discussing could have been avoided if only we had joined Norway to remain inside the EEA. But undoubtedly his underlying message throughout was that we have now set our different course and will just have to learn to live with the consequences: however "dire", "chaotic" and “bloody" they may be.

Yet, until today, nothing of this will have reached the public via the legacy media. On the day that Sir Ivan gave evidence, it focused mainly on the Westminster soap opera of the Brexit vote promise, heedless of the growing possibility that there would not be a deal for MPs to vote on.

We are reminded, though, that the reluctance of the media to address reality is not entirely new. When Sir Ivan first gave evidence in January, the Telegraph was quick to demand that he "should be replaced by someone who is positive about Brexit".

The Mail was equally quick to report that the "knives were out" for Sir Ivan, with "Eurosceptics" calling for him to be replaced by a diplomat who was pro-Brexit after he had predicted that negotiating a trade deal could take as long as ten years. Its matching opinion piece was headed: " Memo to the Foreign Office - stop whining and back the UK".

Here, it is almost as if the media is taking an old-fashioned jingoistic view that to criticise the government's handling of Brexit is somehow unpatriotic and that, in its battle with the "enemy" – as Hammond put it – we must show a united front.

Whatever their actual motivation, the media – and the politicians – are doing us no favours by downplaying the effects of a "hard" Brexit, or even the effects of leaving the Single Market. Certain consequences are easy to predict, simply be reference to EU sectoral rules for treating imports from "third countries". To point out factual evidence can hardly be "unpatriotic" or even, for that matter, pessimistic.

If the country – its will divined by whatever means – is determined to embark on a "hard" Brexit, then no doubt we will deal with the consequences. But the one thing that should happen is that those consequences should be spelled out, clearly and in detail.

That, last Wednesday, was what Sir Ivan Rogers was trying to do. The determination was the media to ignore his warnings was beyond irresponsible. It was downright dishonest.



Richard North 29/10/2017 link

Brexit: saturation point

08/09/2017  


Yesterday - in terms of maintaining coherent coverage of events - represented something of a crisis. Information flow, covering a wide range of events, effectively reached saturation point – more than could be properly reported in any one post, and way beyond the capacity of the average reader to absorb it.

What grabbed my attention and what in normal times might have made the substance of a single post is this report which features David Dingle, the chairman of Maritime UK, the organisation which represents marine and shipping industries.

In a press briefing, he said he was "very nervous" about the future and concerned the government was putting £16 billion-worth of business in jeopardy with threats of no Brexit deal, his concerns stemming from the reality of developing new customs declarations systems in time to prevent gridlock at ports and their approach roads.

Dingle, who is to lead a delegation to see Theresa May and Liam Fox on Monday – the first such meeting since the referendum - said it had taken HM Revenue and Customs "eight to ten years" to put its latest customs declaration system in place. It is due to go live in October, suggesting a Brexit system will take many years to put in place.

He warned that there would be an "awful shutdown" in trade if the government ended up with no deal, branding such a scenario as "daft". As to HMRC delivering a new system that could do electronic matching of trucks and their cargo to enable continued speed in roll-on-roll-off ports such as Dover and Holyhead, Dingle said: "It has taken an extremely long time to build the new system planned before Brexit – eight to ten years – and then suddenly it [HMRC] is supposed to have another step change in just two years?"

"That", he continued, "makes me nervous. It's why we need to have… a lengthy transition period so that work is completed. We need to land this. We need to land this in a really sensible and pragmatic way".

Supporting him was the chairman of Carnival UK, which operates cruises for P&O. He said: "Having looked at the time it takes, even in my own company, to build complex new systems, I would be sceptical we will be where we need to be in two years". Dingle thus concluded that the transition period must be extended "until frictionless trade could be guaranteed".

What is worrying here is that Monday's meeting will be the first with government since the referendum – yet Dingle is conveying crucial information which should be playing an important part in exit plans. Somebody in his position talking of an "awful shutdown" in trade is someone who needs to be listened to, and should have been talking to government for some time.

Clearly, though, there is little connection between the real world and the foetid bubble of Westminster politics, although we are to see a select committee look at the customs situation. Nevertheless, May and her ministerial team are more likely to listen to the European Research Group than they are real people with experience of cutting-edge operations.

This secretive group, supported by 60-plus "Ultra" MPs with very suspicious funding arrangements – and dubious arrangements with Brexit minister Steve Baker - is about to launch a "major drive" in an attempt to keep Mrs May on track for a "hard" Brexit, eschewing continued participation in the Single Market even as part of a transitional arrangement.

To an extent, though, they are knocking at an open door, with David Davis at yesterday's Brexit questions responding to John Whittingdale who rehearsed the tired canard that continued membership of the Single Market "would negate many of the advantages of leaving the European Union, while requiring us still to accept decisions that we could no longer influence".

To the charge that "it would actually be worse than continued membership as a full member", Davis agreed that, "In many ways, it is the worst of all outcomes". "We did consider it", he said: "I gave it some considerable thought, maybe as an interim measure - but it seemed to me to be more complicated, more difficult and less beneficial than other options".

This is a shorter re-run of the answer he gave in Washington but how Mr Davis can assert that adopting an off-the-shelf option is "more complicated" and "more difficult" has yet to be explained – by him or anybody else.

But then, it is very far from clear that Mr Davis actually understands the purpose of transition arrangements. It is my understanding that, in the absence of a full-blown trade agreement with the EU, we will need such arrangements to enable us to continue trading with EU Member States, giving our companies access to their markets without, as Dingle puts it, an "awful shutdown" in trade.

This, however, does not even feature in Davis's explanation to Keir Starmer. The Secretary of State believes they will meet three different requirements: "to provide time for the British Government, if need be, to create new regulatory agencies and so on; time for companies to make their arrangements to deal with new regulation; and time for other countries to make arrangements on, for example, new customs proposals".

That, says Davis, "is what will be required. That is why we need to be as close as we are to our current arrangements. It does not mean that, in the long run, we are in either the customs union or the single market".

What then does the man propose to do about REACH, and the fact that UK registered chemicals will no longer be afforded access to EU Member State markets? What are his plans for marketing in the EU the British medicines which no longer carry valid authorisations? What happens to food export when there are no facilities to inspect them in EU Member States?

We could fill this whole post with details of unresolved issues, which must – in the absence of a final trade agreement – be addressed in a transition agreement, and which do not fall within the scope of Davis's idea of such an agreement. And once we become a third country, our "current arrangements" will no longer suffice – which is why Mr Dingle is so concerned.

Personally, when we get little more than vague generalities from the person supposedly masterminding our Brexit effort, I think we are entirely justified in feeling more than a little concerned – especially in the context of what we know of David Davis's behaviour and the general conduct of the negotiations.

We can recognise, therefore, the sentiments behind Barnier's observations, expressed to the Commission after the first round of negotiations. The EU's chief negotiator noted that the UK "had not yet really engaged in the negotiations or spelled out its positions" and that Davis "did not regard his direct involvement in these negotiations as his priority".

This we saw for ourselves last week, when Davis spent only an hour in Brussels at the beginning of the session, then only returning for the final session and press conference, then to jet off to Washington to address a private seminar on business unrelated to his duties as chief UK negotiator. This is not a man demonstrating full engagement in or even direct involvement with the talks.

Barnier himself emphasised the importance of being able to negotiate with a "stable, accountable and authorised interlocutor who was available for the negotiations", and regarded these as "a fundamental condition" for the smooth conduct of the negotiations.

In this context, we see Commission President Juncker express his own concern about the question of the stability and accountability of the UK negotiator and his apparent lack of involvement. This, he though, "risked jeopardising the success of the negotiations".

Specifically, Juncker wanted Barnier to avoid discussions "at the purely technical level with negotiators who had no political mandate, while fundamental political questions still remained". In other words, he wanted each of the chief negotiators to be negotiating directly with each other – something which is scarcely happening.

Nor more so was this evident than in the Irish question, the "extreme sensitivity and the complexity" of which Barnier has acknowledged. Interestingly, he noted "the particular problem of the trade in animals and animal products owing to the sanitary issues raised and the difficulty of ensuring controls without reintroducing a physical border with Northern Ireland".

We've heard very little indeed of this "absolute nightmare scenario" from Mr Davis, and in the government's position paper we had the suggestion that border controls could be avoided through what amounted to mutual recognition of standards, based on "regulatory equivalence.

This is something to which the EU could never agree. Where food and animals have not been subject to control by officials under the jurisdiction of the Commission, working to EU standards, the Union has always insisted on imposing its own official controls at its external border. It cannot afford to concede on that point without weakening its entire animal health system.

With no agreement on the border question, therefore, we have got to the stage where yesterday the Commission published its Guiding Principles for the dialogue on Ireland/Northern Ireland. It states:
Issues unique to Ireland include the protection of the gains of the peace process and of the Good Friday Agreement ('Belfast Agreement') in all its parts, the maintenance of existing bilateral agreements and arrangements between the United Kingdom and Ireland including the Common Travel Area, and specific issues arising from Ireland’s unique geographic situation, including the aim of avoiding a hard border between Ireland and Northern Ireland. The invisible border on the island of Ireland is one of the major achievements and societal benefits of the Peace Process. Border issues are broader than economic questions. The physical border itself was a symbol of division and conflict.
Making absolutely no concessions to the desire of the UK to have the border question rolled into the broader trade deal, the Commission is stating that: "The onus to propose solutions which overcome the challenges created on the island of Ireland by the United Kingdom's withdrawal from the European Union and its decision to leave the customs union and the internal market remains on the United Kingdom".

And, in what amounts to a clear a rejection of the UK's position paper as we'll get, it tells us that, "a thorough understanding of the other issues beyond customs arrangements which are relevant to the border is also required in order to move forward to discussing solutions in the context of the dialogue with the United Kingdom".

"It is the responsibility of the United Kingdom", the Commission says, "to ensure that its approach to the challenges of the Irish border in the context of its withdrawal from the European Union takes into account and protects the very specific and interwoven political, economic, security, societal and agricultural context and frameworks on the island of Ireland".

"These challenges", it adds, "will require a unique solution which cannot serve to preconfigure solutions in the context of the wider discussions on the future relationship between the European Union and the United Kingdom". And any solutions "must respect the proper functioning of the internal market and of the Customs Union as well the integrity and effectiveness of the Union legal order".

For all the noise generated by the Second Reading debate in the Commons today, that was the least important event of the day. Ireland has become the make-or-break. The UK is expected to come up with a solution that can be integrated into the Article 50 withdrawal agreement and now with an additional proviso that it "must be achieved in a way which ensures that Ireland's place within the Internal Market and Customs Union is unaffected".

So important is this issue that Barnier held a press conference in Brussels to mark the publication of the Guiding Principles. "The UK wants to use Ireland as a kind of test case for the future EU-UK customs relations", he observed, telling his audience: "This will not happen".

In unequivocal terms, he went on to declare: "Creativity and flexibility cannot be at the expense of the integrity of the Single Market and the Customs Union. It would not be fair for the European Union".

Pete rehearses the best options for Ireland in one of his Twitter threads, the bottom line of which is that the entire island of Ireland becomes a single administrative area for the purpose of managing external trade. The CTA also becomes the Common Trade Area.

This is spelt out by the Irish Times which writes of the North retaining "a special status", which "would mean border checks on goods leaving and entering the North for Britain". This, the paper notes, would be "unacceptable for the DUP and for the North's businesses, who trade more with Britain than the Republic".

But Barnier had a bombshell in his press conference which he left until last. "The sooner we see sufficient progress, real progress", he said, "the sooner we start discussing at the same time a possible transition period, if requested by the United Kingdom, and our future relationship which will require a second treaty. He thus continued:
Through this second treaty, he said, we want an ambitious agreement with the United Kingdom, not only for trade but also for our necessary cooperation in security, counter-terrorism and defence.

This second treaty must be founded and built on a balance of rights and obligations, as is the case with each of the agreements we have already concluded with third countries.

I am thinking, for example, of Norway, Iceland and Liechtenstein, which have chosen to be part of the single market, to accept its rules and to contribute financially to European cohesion.

I am also thinking of Canada, with whom we have just negotiated a very ambitious free trade agreement, AACC. Canada is not part of the domestic market. It does not have the opportunities or the obligations.

It is well understood that it is not possible and will not be possible for a third State to have at the same time the benefits of the Norwegian model and the weak constraints of the Canadian model.

And it is in the light of these principles that the United Kingdom knows well since it has been applying them for 44 years, which we look forward to and that we will study with objectivity and I promise you constructively the next proposals of the British government that we need to make progress.
Had Mrs May decided to keep us in the Single Market, the Irish problem would largely have gone away. And now we are getting the clearest of hints from Barnier as to the best direction to take. It is thus so ironic that the Walter Mitty-like David Davis regards this as being "more complicated, more difficult and less beneficial than other options", when it is the one thing that could resolve a problem that he isn't even beginning to address.

For my part, I see the irony of an issue which is largely being ignored by the mainstream, and widely misunderstood, but which could collapse the entire Brexit negotiations, dropping us out of the EU without an agreement.

Then, at least, the "Ultras" will get an education in what the WTO option really means, as we queue outside nearly empty supermarkets for supplies that are no longer reaching the shelves. But what an expensive education that will prove to be.



Richard North 08/09/2017 link

Brexit: "not at the top of the list"

02/09/2017  


David Davis was in Washington DC yesterday addressing the US-UK Business Council, an organisation formed under the aegis of the US Chamber of Commerce. What he was doing there has not been properly explained and, with the Brussels talks in crisis, one might have thought he would be closeted with his officials in London, debriefing and working on future strategy.

Huffpost was on the case, displaying its usual skill for getting to the really important issues (not), describing the speech as "cringeworthy", after he responded to a question from a journalist who asked him, "Do you feel more a lot welcome in Washington than you do in Brussels?"

The issue at large was whether at some time he had been called a "charming bastard", an appellation which supposedly found its way onto the front page of the Financial Times, or he had applied the label to himself, for it then to appear on page 19 of the august journal.

But if this adequately illustrates the legacy media's addiction to trivia, with the Mail telling us of Davis warning Brussels he is a "charming b**stard" – suddenly coy over using the word "bastard" despite the pics of tits and bums all over the page - it is left to Politico to come up with the most misleading headline covering the Davis event, as it claimed: "Norway model is one option for UK after Brexit".

"Britain", the Politico story went, "is considering joining Norway and Switzerland as a temporary member of the European Free Trade Association to avoid a potential economic cliff edge after Brexit, the UK's Secretary of State for Exiting the EU David Davis said Friday".

In fact, courtesy of Bloomberg we have the video recording of the event and, just over forty minutes in we find the episode which tells us just how wrong that claim is. What happened was that Gier Haarde, currently Icelandic Ambassador to the US – and former prime minister of Iceland - put a question to David Davis. "I'm wondering", he said:
… how seriously you've thought about using the European Free Trade Association and the European Economic Area Agreement between Efta and the EU as a transitory mechanism. In other words for the period where you have to work out all the details for your completely leaving the internal market.
I exchanged e-mails with a reader on this and his "take" was that Haarde's question was (as close as he dare) inviting David Davis to join Efta/EEA – everything short of actually saying: "Please come and join us in Efta/EEA". He was also saying, as close as he dares, my reader ventured: "Look, we know it'll be a temporary thing, but please use Efta/EEA to help you through your difficulty. You'll be welcome".

To convey the exact flavour of Davis's response, thought, there can be no short-cuts. To summarise it would not do it justice. Here it is in full:
Well, we honestly thought about it. The … one of the great arguments for … none of you would have followed it in the detail I have to, but … one of the great arguments that takes place in the United Kingdom is how much transition will we have … how will we avoid a cliff edge is the term of art … sudden change … and this is, this transition period, people think, tend to think of as a single thing, actually it's not. It is a different thing if you are a bank or you're in financial services than if you are producing agri-products, or if you are working in a regime which is heavily regulated, maybe cars or whatever, or indeed whether you got cross-border traffic going backwards and forwards – perhaps you got a just in time manufacturing operation with your suppliers in many countries and customs in many countries.

So the first thing to say is that the nature of the implementation period or the transition period, we agree such a thing, is not as clear-cut as people say, or people think at the beginning. In terms of the idea of using Efta and EEA - again for those of you who are not familiar with it, the countries like Norway and Switzerland have different relationships through an EEA arrangement , erm, the … it has its own burdens. It has its own negotiating issue to get over, so it doesn't necessarily save us much time and the issue in this thing, as you can possibly imagine, this is probably the most complicated negotiation in history actually – er, and our enemy in a way is time.

We've got two years, we've got to conclude it in two years, we've got to conclude the negotiation in two years, and the reason for transition is to give us a bit more time for the practicalities, which will allow other countries to put customs arrangements in, to allow us to build a regulatory regime, to allow businesses to change their way of doing business to cope with the outcome and so on. So those are the sorts of reasons and it's not at this stage clear enough to know how … what the transition will look like, but adding in another phase of the negotiation wouldn't necessarily help that, so it's not, it's not at the top of our list. We've thought about it, but it's not, it's not at the top of the list.
One thing which immediately stands out is Davis's assertion that, "countries like Norway and Switzerland have different relationships through an EEA arrangement", one of those absolutely rookie mistakes that, when it comes from a Secretary of State, drives one to despair. Can he be that stupid? Can he be that ignorant? Let his own words be his judge.

Something which does not come out that clearly – but is referred to in other comments made by Davis in response to another question, is his confusion between the "transition" and "implementation". Davis say he prefers the latter, although he uses the words interchangeably.

The confusion – or lack of differentiation – is revealing, because it tells us how narrowly drawn is Davis's thinking. He sees it is a limited technical device to assist in easing in the final settlement, which actually suggests that he is confident (which, he says, he is) that he will get a deal.

But a man who lumps Norway in with Switzerland in having an "EEA arrangement" is not someone who knows a great deal about the EEA. But he cannot possibly be displaying either knowledge or rationality if he believes that the Efta/EEA option would not save us time – when this is the primary purpose of adopting it.

For sure, the best way of handing it would have been for the UK government to have started negotiations with members to re-join Efta immediately Mrs May had been appointed prime minister, then holding back the Article 50 notification until we had had a clear indication of whether we were going to be accepted back in that club.

But, even now, the time it would take to conduct negotiations with Efta can be only a tiny proportion of the time it would take to negotiate a "bespoke" transitional agreement, and would not affect the overall timetable, as the talks are still bogged down with Phase 1, and look like going nowhere for 4-5 months.

Nothing that Davis says, therefore, makes any sense. He drowns a simple, intelligent question in a sea of waffle, splats out irrelevances with the force of projectile vomiting and then dismisses what is probably our only life-saver with a thoroughly unconvincing argument.

At least, though, there wasn't the usual waffle about "pay, no say", or the canard about having to accept freedom of movement, but to argue that we should not consider the option because it won't necessarily save any time is something else. Mr Davis is breaking new ground here.

As for the media, well Politico confuses itself by talking only about Efta membership. It doesn't refer to the EEA at all its story – another own goal for the legacy media. But then, despite what is the first admission that the Efta/EEA option had been considered, the greatest lapse comes from the rest of the media, with none of them picking up the story at all.

With coverage elsewhere of Liam Fox's outburst about not giving into blackmail – given preference over the Davis admission on the EEA, we also see the Mail with an extraordinary piece recording a "leaked briefing documents" which purports to have British airlines treated as "third country citizens" when we leave the EU.

It is not only the politicians, therefore, who cannot come to terms with fact that the UK will automatically assume "third country" status, when we leave. The legacy media is similarly finding it difficult to get to grips with the concept. This is not the case in Ireland (as much as it was), of which we are starting to see stories which are beginning to give a hint as to trauma that is on its way if we don't get a deal.

But with Davis at the helm of the negotiations, there cannot be any confidence at all that we are dealing with a man who is on top of the game – or even very far from the bottom. Between him, his team, and the almost total inability of the media properly (or at all) to report the issues, we seemingly have an unfillable vacuum.

Sky News, at least ventures the view that, from what we have seen from the three rounds of talks so far, "the negotiations cannot succeed. "If they go on as they are", says correspondent Lewis Goodall, "Britain will fall out of the EU without a deal".

They catch up eventually – or some do – but it won't be the media which records its own role in the failure. And then you have to go to Germany, to see the May, Johnson, Davis and Fox Quartet dismissed as "the clueless" who will one day be just "a total serene footnote" in the eventful history of the United Kingdom.

That day cannot come too soon.



Richard North 02/09/2017 link

Brexit: all the fault of the EU

31/08/2017  


It's been a while since I read anything Ambrose Evans Pritchard has written but having popped over for a look at his recent effort, one learns that Labour's "sudden embrace" of the EU customs union as a "possible end destination" is a calamitous proposition.

Says AEP, it is a destination to permanent peonage with no way out. The strategic imperative for Britain is to avoid such a trap at all costs. The only good reason to remain in it beyond Brexit, he adds, is to avert a "hard" economic border with Ireland.

But, according to the great man, there are ways to mitigate the damage to intra-island trade with digital tracking technology, mimicking the Sweden's economic border with Norway – or Mexico's border with the US, before Donald Trump started smashing the furniture.

However, in terms of the "invisible border" that the Government is so keen to install in Ireland, Mexico may be a little challenging, to judge from the picture of the El Paso truck crossing (above). In the invisibility stakes, although it is hard to put a finger on it, one has to say that there is something lacking.

The situation between Norway and Sweden is a little more promising, but then the two countries have a long-standing agreement on customs cooperation, in place before the EU came into being, while Norway being in the Single Market, via the EEA, does help to speed the flow of traffic somewhat.

What does not exist between Norway and Sweden, of course, is a customs union. But, as the Kapikule border crossing between Turkey and Bulgaria indicates – countries joined in a customs union – the existence of such an agreement does very little to assist rapid customs clearance.

But if Ambrose is a little confused about the respective roles of the Single Market and a customs union, he is by no means the only one. If he wants minimal delays at the Irish border, though, he needs to forget about customs unions. The EEA, with its provisions for a customs agreement, is about as good as it can get without there being a special deal.

Arguably, the level of customs checks between EEA members would be tolerable, to the extent that the relationship has been explored as a model for Ireland. Even then, smuggling is still an issue between Norway and Sweden, and there are many who believe that the special conditions which prevail in Ireland would rule out this option.

If the UK Government is sincere about wanting an invisible border, therefore, the only option – as we have suggested earlier - is to relocate it, either between the Republic and the EU, or between Northern Ireland and the rest of the UK, making the island a single administrative area for the purposes of border control.

Since either of those options is politically fraught, we can understand the UK's reluctance to table them, but the trouble is that the chosen strategy of arguing that the Irish question be folded into general discussions on trade isn't going to work either. If the Irish border is to operate under normal EU-third country trade rules, not only is it not going to be "invisible", it is going to be the hardest of hard borders.

And there lies the heart of the UK's problems in the current round of talks. Unwilling to specify a workable solution, the UK has offered a complex of ideas which David Davis hopes will allow him to kick the can down the road when he divert talks into more profitable areas – presumably in the hope that "magical thinking" can divine a solution that has so far been hidden from sight.

The same then applies to the financial settlement, where the UK has so far refused to offer a position paper on the issue, leaving the UK stance up in the air. The third of the triumvirate, on the rights of expats, is similarly on hold, while arguments are tossed about over the role of the ECJ.

From the point of view of the EU, there seems little point in deferring discussions on these issues, allowing other matters onto the agenda if these same issues are to re-emerge at the end of the talks, still unresolved and still capable of scuppering the entire settlement. It is best in their view, to bite the bullet early and get these issues out of the way.

That the UK disagrees is neither here nor there. Readers will recall Ivan Rogers advising Theresa May to "go long" on the Article 50 notice, thereby setting the political agenda for the talks. She chose to ignore that advice, proffering vague generalities to accompany the notice, thereby ceding the initiative to the EU, where it has remained ever since. There is not point now in complaining. Mrs May had her chance and she blew it.

One can then understand the frustration, leading to suggestions that Mrs May is looking to by-pass Michel Barnier and his team, and appeal directly to Macron and Merkel. But, as others are quick to point out, that isn't going to work either.

It has been pointed out that the European Council's negotiating plan says the negotiations are to be conducted as "as a single package" where "individual items cannot be settled separately". So as not to undercut the position of the Union, "there will be no separate negotiations between individual Member States and the United Kingdom on matters pertaining to the withdrawal of the United Kingdom from the Union", the Council says.

On the last day of this round of talks, that presents the UK team with what the Irish Times calls a "huge gulf" in the negotiations, and in particular on the "divorce bill" where the UK has chosen the line of arguing over the legal base for any financial obligation, spending three hours telling their counterparts that their claims are "flimsy and confected".

This is actually a win-lose tactic, as even if the UK wins the argument, it loses the political battle where the UK's acknowledgement of a financial liability is as much an article of faith as it is a legal argument. Thus, while the British negotiators are boasting of their 43-page legal response to the Commission's four-page document on the financial settlement, they have failed to impress the EU side.

Meanwhile, Mrs May has travelled to Japan to reassure its government and anxious Japanese investors that the Brexit negotiations are on track, and that relations will be undamaged - something she is unable to do.

Defending the work done by her MinBrex overlord, she stated: "We have been publishing a series of papers over the summer, there will be more papers to come, where we are setting out the key issues that both sides need to address, the options that we have, the ideas we have, of how to deal with those".

As an indication of her disconnect, she then claimed that, "It's the United Kingdom that has been coming forward with the ideas and with the clarity about the future".

In a curious episode, she was asked if she still believed no deal is better than a bad deal, whence she answered: "Yes, I think that is right. But if you talk about the point at which we leave the European Union, we want to ensure that at that point we do have a deal and that we have a deal that is the right deal for the UK". The implications of that Delphic comment could be that the UK is prepared to walk away with no deal, but then return to the table in time for a last-minute agreement.

Also at the last minute, it could seem that Mrs May is expecting the UK to replicate the EU's trade deals after Brexit before recasting its own agreements in the future. The current EU-Japan talks could be basis for future UK-Japan agreement.

This would appear to indicate that the Government has abandoned the idea of going for continuity agreements, carrying over existing EU deals so that they continue to apply to the UK after Brexit. This is a more risky approach, but it has the merits of not requiring EU assent.

Some 40 free trade agreements are being mentioned but that leaves hanging the 953 bilateral agreements concluded by the EU and the 267 multilateral agreements to which the EU is party, some of which may be affected by Brexit.

Dealing with just the 40 high-profile agreements is hardly going to make a dent in the problem. Labour MP Alison McGovern accuses ministers of focusing on "imaginary trade deals" rather than shoring up existing agreements. The UK could drop out of nine bilateral agreements between Japan and the EU, including a vital treaty on cooperation and mutual administrative assistance in customs matters.

That, however, is the least of the EU's problems at the moment. As we predicted, the Brussels talks are grinding to a halt, a situation picked up by a number of papers including the Independent, which has UK officials claiming that the EU mandate is "too rigid".

This sets the scene for the Tory alibi, explaining away the Government's failure to secure an early agreement. The deadlock will all be the fault of the EU.



Richard North 31/08/2017 link

Brexit: "magical thinking"

26/08/2017  


Gradually, with the help of sources in Brussels, the vacuity of the Government's position on the Irish border question is beginning to dawn on the media or, at least, the Guardian).

This paper has the UK Government accused of "magical thinking" over its plans, or the lack of them, on the border issue, with its call for "flexible solutions" leaving EU officials "rolling their eyes" in despair, apparently at the lack of a sensible solution being offered.

Published elsewhere, and not directly related to the Irish issue is as neat a summary of the UK position as I have seen.

Our negotiators, it says, just can't stop telling us that if we only keep on chanting "no deal is better than a bad deal" for long enough, the EU will eventually crack. Why will it crack? Because EU exporters, above all the German car-industry will, perhaps at the last minute, force the German government to require the EU to do Britain’s bidding. The narrative then continues:
Not everyone is so convinced. Analysts at Bank of America Merrill Lynch, for instance, who report: "We are often confronted with the view that Germany’s stance... will have to soften because the UK market is too important for German exporters – car makers in particular. We are sceptical". They are also logical: "If Germany had to choose between protecting a market, which absorbs 50 percent of its exports (i.e., the EUxUK) and is thereby a 6.7 times bigger export market than the UK, it seems obvious where the long-term strategic economics preferences may be".

But Liam Fox & Co. simply know, in their hearts, that the EU is a wholly-owned division of Germany and that Germany, despite being so logically mighty – no, because it is so logically mighty! – can always be outplayed by plucky Brits.

Because we British do not work on wretched Germanic logic. If the Leave narrative has changed from "there will be no Brexit downside" to "OK, so now we need the Dunkirk spirit", so much the better! Did we vote Leave out of any short-term economic calculation? No! We acted from a noble desire reclaim our ancient sovereignty, and in glorious trust that things will then naturally, somehow, start getting better, by, say 2030. The Germans, on the other hand being naturally calculating, rational, but fatally unimaginative, will go for the short-term bottom line.
There is no dispute that this is something of a pastiche, verging on the parodic, but the Government position is beyond logic, having solidified into a belief system that defies all rationality.

There can also be no dispute that the Government is in a very difficult position. Anyone who is being halfway honest knows that a hard border between the North and the Irish Republic simply cannot work. It didn't work during the Troubles, with all the military resources thrown at it, and it isn't going to work now.

Something of the prevailing sentiment in Ireland came from an Irish MP, Declan Breathnach who remarked that, "It will take four years to fix Big Ben yet Britain thinks it can have a unique Brexit in 18 months".

"Not alone do they believe in the above, and not alone do they want their cake and eat it they think that they have the only recipe for that cake, want to produce the ingredient of their own , prepare and bake it in their own bakery and expect the 27 other EU countries to consume it or take the crumbs from their table", he says.

And it isn't just a matter of customs. The sanitary and phytosanitary checks that must be carried out at the external border of the EU are not part of the customs regime, and there is not the slightest possibility that physical inspections can be avoided under any normal regime.

Then there is the matter of VAT. Assuming we keep this system in place, UK exporters will we able to recover their VAT on goods shipped to Ireland. But with a highly porous border, those same goods can slip back into the North only to become a vehicle for another tranche of VAT repayments. This is the so-called "carousel fraud" and Brexit, potentially, provides a whole new money-making opportunity.

If there cannot be a hard border in between Ireland and Northern Ireland, that only leaves two options. It be positioned either between Ireland and the rest of the EU, bringing the Republic into the UK's customs area, or the border can be moved to the Irish Sea, between Northern Ireland and Great Britain, making the island of Ireland a single administrative area, working under EU law.

That would mean that any goods produced in Great Britain would have to undergo border checks on entry anywhere on the island, and any external checks which we applied to EU traffic would have to apply when goods arrived from Northern Ireland to the mainland.

Politically, as we have already observed, either option is difficult, if not impossible, which is why the UK government had gone for the "invisible border" – something so unrealistic that it cannot possibly survive as a serious proposition. Hence do we get the charge of "magical thinking.

But, from Brussels, suspicions are emerging that this lack of realism on the part of the UK is intentional. "If you look at the Irish paper, it is very good on aspirations but it is short on workable solutions", says an EU diplomat, who then expresses the view that the British are trying to push responsibility for solving the Irish issue back on to them.

To Brussels then attaches the opprobrium when it sets out politically untenable options, leaving to UK free to criticise and, if it deems it tactically advantageous, to walk out of the talks and blame the "colleagues" for not coming up with anything better.

But, if this gamesmanship plays well with a domestic audience, it has little appeal on the other side of the Channel. "The decision to leave the EU is the UK's decision. It was not the decision of Ireland and it was not the decision of the EU, so the UK has to take responsibility for the impact of that. And in that respect the uniqueness and the creativity, that cannot be only a burden on the EU side", an official says.

And there is no doubt that Brussels can hold the line on this as Barnier holds all the cards. It is on his recommendation that the European Council will decide whether there has been "sufficient progress" for the talks to move on to trade, and without a firm, realistic proposal for Ireland on the table, the talks will be stalled.

That still leave the possibility of the UK picking up the Efta/EEA option which keeps it in the Single Market and avoids most of the border problems we would otherwise experience. And, while the experience of Norway and Sweden shows that border controls cannot be entirely eliminated, the sort of soft border arrangements they have would be tolerable.

The thing is that such an arrangement is for the UK to propose. It cannot come from the EU as Efta membership is not within the gift of the Commission to offer. The UK must itself make contact with the four Efta states and then float the suggestion of UK membership.

Failing that, we learn that the EU will publish a position paper of its own on Ireland, but that will not come until early September. Most likely, its primary purpose will be to inform the October European Council, and it will not be doing us any favours – especially if it reiterates the position that it is up to the UK to show "sufficient progress" before the talks can move on.

Nor is there any likelihood that the UK can drive a wedge between the Member States and the Commission. We are told that yesterday's report in The Sun indicating that Davis is to go on the offensive, attacking Brussels for being "stubborn and unreasonable" has gone down badly.

If anything, so transparent an attempt to split the "enemy forces" is likely to strengthen the determination of the "colleagues" to maintain a common front, leaving Davis no room to manoeuvre. Like as not, he is going to come back from Brussels as empty-handed as he arrives. With nothing credible to offer, he will get nothing credible in return.

And nor can Davis leave the issue to his minions. In the published agenda for the three-day talks, starting on the Bank Holiday Monday, "issues related to Northern Ireland … will be addressed by the Coordinators" – i.e., Barnier and Davis.

If Davis is going to charge Barnier with being "stubborn and unreasonable", he will have to do it to his face. Even then, he will still have to come up with some sensible ideas to break the logjam. And if the cupboard is bare, it isn't only the poor dog that will get none.



Richard North 26/08/2017 link

Brexit: another fine mess

18/08/2017  


Not for the first time, and doubtless not the last, I'm having to point out that the conclusions we came to in Flexcit were not arbitrary. In particular, the "Norway" (aka Efta/EEA) option became our choice not for its specific merits but after eliminating the less favourable alternatives.

There was a brief period when it became fashionable to list as many variations and sub-variations as possible but, in truth, there were only ever three: the unilateral (WTO), bilateral (Swiss) and the multilateral (Norway) options.

The great advantage of our choice – which makes it the least-worst option – was (is) that the systems and infrastructure already exist. That gave us something that could at least be implemented within the two-year time span afforded by Article 50, buying us time for a longer-term solution.

In fourteen months or so since the referendum, it looks as if our Government has been going through the same process, eliminating choices one by one until it ends up with what it believes to be the only available option.

Interestingly, when the Treasury published its evaluation in April 2016, it came to roughly same conclusion that we did. The net impact on tax receipts, it concluded, would be £20 billion a year in the central case of the EEA, £36 billion a year in the case of the negotiated bilateral agreement, and £45 billion a year in the case of the WTO. By that measure, the EEA was the "least worst" scenario.

What we have seen from the last two days, though – with the publication of the first two "partnership papers" – is that the Government has come to a different conclusion. At least, it is now favouring a different outcome, opting for a messy series of bilateral deals, roughly following the Swiss model.

We are not privy to the Government thinking on this matter – assuming that "thinking" is one of the processes involved – but it seems to have come to this different conclusion by employing a different filter.

While we chose practicality – i.e., that which was practically possible – the government test seems to have been one of political acceptability, defined in terms of notional "red lines". For entirely political reasons, which have a lot to do with internal Conservative Party politics, it has rejected the Efta/EEA option.

Having then been forced to walk away from the idea of relying on the WTO (also known as the "no deal" option) on the grounds of practicability, that has left it with nowhere to go other than the messy compromise of seeking multiple bilateral deals to cover the territory.

Then, because the Government has quite evidently concluded that these deals cannot be finalised within the two years allowed, it is talking of a transitional or "interim" deal, despite not having the first idea of how to go about achieving one.

As for the end game – the longer-term solution - this exists in name only, the fabulous, all-singing, all-dancing "bold and comprehensive trade agreement", the like of which no man's eyes have ever seen (or probably will see). Despite its pivotal importance, the Government has not seen fit to publish any details – or even tell the European Union what it wants.

This is a mad situation. There is no other way of putting it. We have a government that has rejected – by its own estimation – the least-worst option, in favour of a less attractive scenario, and one that it can't possibly deliver. It is doing so in order to buy time for an end game that it has not defined and is now arguing for an "interim" deal that is almost certainly unattainable.

Still though, the chatterati don't understand. We've long given up on the media, academia (if we're allowed to generalise) has lost the plot and the think-tanks are engaged in the detailed exploration of their lower intestinal tracts – without the aid of equipment.

Latest in a long line of dereliction is the Institute of Government, which is still talking of a "single market and a customs union arrangement" as if it was an option worth considering.

If endless platitudes were the answer to our problems, then the IoG would be our saviour, but it offers the idea of Single Market as the option that would lead to the least impact on supply chains, putting us back to where the Treasury report was in April 2016, with the EEA as the least-worst option.

Beyond this fictional "bold and comprehensive" free trade agreement, for which there is no substance, no draft on the table, or even a scoping report to work with, no one seems to have the faintest idea of what Brexit really looks like. Apart from the ideas set out in Flexcit, there is not the slightest attempt to address the end game in any realistic sense.

All we have to go on therefore, is the Commission pouring cold water on the UK Government's ideas, insisting that its "phase one" housekeeping matters take precedence over the aspirations published in the last few days.

Meanwhile, as Mr Barnier keeps telling us, the clock is ticking, and will keep ticking. This is ironic, in a sense, given that Big Ben has lost its "bong", but then life relies on such symbols to send us a message.

The trouble is that, there are only the platitudes left. The Government has managed to make such a mess of Brexit that there is no obvious (or any) way forward. To keep the conversation going, we must keep churning out more and more extruded verbal material, with meaning long departed.

Right from the beginning, of all the short- to medium-term options, Efta/EEA was not only the best but the only way forward. We offered as a fall-back, the "shadow EEA" which, while less acceptable, could have at least been workable, had we sought from the very beginning to put our resources behind such a plan.

But, as we see time is dribbling away, with the media talking of only ten months being left for trade talks – assuming the "housekeeping" issues can be resolved.

Not only can't we do a trade deal in that time, we could not even produce a working draft of a transitional deal within that period. Already, we have run out of time, and there is no turning back.

The real test for analysts, therefore, is to identify the point at which business will wake up to the coming disaster and start bailing out. Every now and again, we see reports of businesses preparing contingency plans – led by the banks – but there must soon be a realisation that Government is set to deliver only chaos.

There are, however, concerns for small- and medium-sized businesses that may not have the capacity to conduct detailed contingency planning, but these will have to go down with the ship like the rest of us. But the "big boys" will jump ship, leaving only skeleton crews behind.

That may just be sufficient to jolt the Government into taking emergency action, although such is the air of unreality in Whitehall that even with the "rats" pouring down the sides of the ship, the likes of Mr Davis will be reassuring us that everything is under control.

Whitehall, however, looks to be in the final stages of a Laurel and Hardy comedy film, where we all await the predictable punch line that everybody but the actors must know is coming. But this is not comedy - it's tragedy played out on a vast scale. The results are not going to be pretty.



Richard North 18/08/2017 link

Brexit: no solution at all

17/08/2017  


One of the great lies perpetrated by remainers and "Ultras" alike is the claim that pursuing the "Norway" (Efta/EEA) option would require us (the UK) to continue obeying EU laws, with "no say" in their creation. That never was true, even within the constraints of the EEA institutional arrangements, but it doesn't stop those opposed to a "soft" Brexit trotting it out at every opportunity.

With no doubt unintended irony, however, it is exactly that scenario which the Government is proposing in its latest "position paper", this one on the Irish border, in respect of cross-border movement of animals and foodstuffs.

So desperate is the Government to avoid a hard border in relation to checks on particular types of goods, those it terms "Sanitary and Phytosanitary (SPS) measures for agri-food" that it is suggesting that the EU allows us to adopt the "Swiss option", which "could ensure that there would be no requirement for any SPS or related checks for agri-food products at the border between Northern Ireland and Ireland".

You have to look quite carefully for the Swiss reference as it is confined to a footnote – the one exception outside the EEA where routine border checks on these products have been all but eliminated.

But the price paid for this "freedom" is one which the "Ultras" are seriously not going to like – and nor it is going to be without complications. Firstly, as with Switzerland and the EU, the UK will have to be defined as a "common veterinary area" for the purposes of disease control.

This though rests on a comprehensive EU-Swiss treaty known as the Agriculture Agreement which includes 11 Appendices covering 37 pages on animal health matters, bringing Swiss law into line with the lengthy list of EU legislation.

This agreement also creates a Joint Veterinary Committee between the EU and Switzerland which has the authority to frame joint "acts" binding the parties, one purpose of which, as illustrated here is to keep Swiss law updated and in line with EU provisions.

This is not simply a question of "equivalence", as the UK Government would like it to be, but more-or-less complete harmonisation of law, systems and procedures, with the EU setting the agenda.

Sanitary and Phytosanitary agreements between the EU and third countries are by no means unusual, with the Commission website thirteen such, of which the Swiss agreement is clearly the most comprehensive. Mostly, such agreements are either free-standing treaties (as with the Swiss) or built into broader free trade agreements. Special "simplified procedures" apply to Efta/EEA states.

To ensure effective collaboration between Switzerland and the EU in the event of the detection of a listed animal disease, Switzerland is fully linked via a computerized network to the veterinary authorities of the European Commission and individual Member States of the EU through the Trade Network and Expert System (TRACES) and the Animal Disease Notification System (ADNS). Furthermore, Switzerland participates in different working groups and meetings of the Standing Committee on the Food Chain and Animal Health (SCFCAH).

All this could be replicated to form an agreement between the UK and the EU, with the added proviso (also built into the Swiss agreement), that any agri-food products entering into the UK from other third countries has to be subject to the same import regime as applied by EU member states to similar products entering their territories.

This would include the provision of Border Inspection Posts and the diversion of imports to them before they were submitted to customs clearance. Any goods coming into to Ireland with a final destination in the UK or an EU Member State must be inspected by the Irish authorities at a BIP (or other approved location). The combined effect of this regime would be to rule out independent trade deals in the agri-food sector with other third countries, where more relaxed or different standards were applied.

As far as agri-food products go, this would certainly give us the "invisible border" that the UK Government so much wants. What is not going to happen though, is the EU exempting traders and farmers from checks – as the Guardian avers.

The UK will have to maintain the full spectrum of internal checks, and paperwork, applying EU law to its fullest extent. But the effect would be that, in respect of this major sector, the UK would gain no relief from Brexit. To all intents and purposes, it will not have left the EU.

As to whether this would political tenable in the UK remains to be seen but it would quite obviously contradict any claim to us having regained control over our laws.

One possible advantage though is that, in the Swiss agreement, there is no judicial element in relation to dispute settlement. The Joint Committee acts as an informal arbitration body. Failing that, there is always the WTO dispute settlement procedure. Thus, there is no problem with ECJ jurisdiction.

Whether the EU would allow the same informal approach to apply in an agreement with the UK also remains to be seen. If it wanted more, then this could become a sticking point. That aside, a comprehensive sanitary and phytosanitary agreement (whether or not part of a more general agricultural agreement) would be a complex and time-consuming thing to negotiate.

Now that the UK has tentatively put it on the table, by way of its position paper, it is open for the parties (the EU and the UK) to place it firmly on the agenda. However, Barnier has already made it clear that he is keeping to the sequencing outlined in his negotiation mandate, so it is unlikely that we could see talks on this complex subject start until the end of the year, if not later.

Then to conclude an agreement before Brexit day would be possible, given that our laws and systems are already fully integrated with the EU- provided there are no unexpected glitches. The key though is whether the parties can find a slot in what will be an increasingly crowded agenda. The sheer volume of issues to be negotiated is going to make that difficult.

And that is just one small part of the whole, which will have to go to making the Irish border "invisible". All the other sectors, from aviation to chemicals, pharmaceuticals and engineering, each with their own specific regulatory requirements, will require their own agreements, on top of broad-ranging mutual recognition agreements on conformity assessment.

At least, though, for these position papers, the UK government is beginning to think in concrete terms about what is necessary to secure a working settlement with the EU. But, as it does so, the complications multiply rather than fade away while, as Mr Barnier keeps reminding us, the clock keeps on ticking.

Many of the problems, of course, would melt away should the UK – even at this late hour – adopt the Efta/EEA option – which offers a far better deal than the UK is seeking through its position paper. This is a bizarre example of negotiators turning down an option only to go for something less advantageous.

And even then there are countless other issues which need to be addressed, with the Irish Times recording that IT experts are dismissing the idea of a frictionless border altogether.

When push comes to shove, the border will form the EU's external border and the EU is not going to allow Northern Ireland to become a "back door" into the single market. With agri-foods as the model, that could see the Irish tail wagging the British dog, with the UK having to erect barriers at the borders between itself and third countries in order to preserve free movement across the Irish border.

And on that basis, the Irish solution that we have seen outlined yesterday could end up being no solution at all.



Richard North 17/08/2017 link

Brexit: an ocean of incoherence

06/08/2017  


As our confidence in the handling of Brexit deteriorates by the hour, Politico is telling us that our government is shortly to counter suggestions they are underprepared by releasing a series of position papers.

These papers, it would appear, will "reveal" that the UK wants a smooth route out of the European Union and will seek a "transitional customs agreement" before moving to a new permanent relationship.

This dramatic disclosure, we are told, has been pencilled in for the week of 14 August, then to be followed by a paper outlining the government's long-awaited solution to the Northern Ireland border problem. This is considered to be bound up with its customs relationship with the EU.

London is insisting that the Irish border question is considered alongside future customs arrangements, cutting across the EU's own priorities. It hopes to persuade Barnier that the two cannot be dealt with separately.

Alongside this, up to a dozen papers will form part of what officials describe as a "big push" to counter a perception among the EU27 that the UK is underprepared for Brexit, the first dozen to be published over the next two months, ahead of the European Council meeting in October.

With no real detail being offered, we are to understand that the government is seeking to preserve trading relations, although it is not clear whether the transitional arrangement to be proposed would allow the UK to strike trade deals with third countries outside the EU.

According to Politico, the bulk of the work on the position papers was completed some time ago, but in recent weeks there has been a discernible "pickup of the pace". There is an "awareness" that the UK has to show "seriousness" to the European Council, which has seen the "machine" being cranked up into another gear.

At talks scheduled for later this month, the UK will make a concerted effort to agree on a final package on expats' rights. Officials say that there is a determination to put the issue "to bed as soon as possible". Supposedly, "We will exert some pressure to get that one over the line at the next round".

However, in an almost certain show stopper, it seems that the government is still not prepared to agree a financial settlement. That would seem to render all this inside information somewhat redundant. Until the money question is settled, this ain't going anywhere.

Even that may not be cut and dried. The Telegraph (no paywall) claims that the UK might pay about €40 billion, which is not so very far from the the figure we suggested in April last year. Here, though, it is paid off over three years, rather than the seven years I suggested. Needless to say, a Number 10 official tells the Independent that the figure is "speculative and wrong".

Racking up the pain in other directions is former Commission President Romano Prodi. He has been telling the Observer that Britain will be committing economic suicide unless it is prepared to compromise to reach a comprehensive Brexit deal. He also says that more and more people are suggesting to him in private that a second referendum may be needed.

Prodi believes a "historic compromise" will eventually be reached because the Europe-wide economic consequences of failure had been heavily underestimated. "Maybe I am biased, being an economist", he says, "but it may be that there is still an imprecise [understanding] of the real economic consequences of Brexit". A compromise must be found "to avoid suicide", he says, justifying the "strong language" because of "the damage for the UK” that would come as a result of crashing out of the EU with no deal".

Looking at the EU side, Prodi is calling on Brussels to preserve as much trade with Britain as possible to avert serious economic damage. "It is so clear that it is impossible to dismantle this type of agreement without real damage on both sides", he says. "In this case, the weight of damage is probably heavier on the UK side, but there is damage on both sides".

As an interesting counterpoint to the Politico report, and the Telegraph, his intervention – says the Guardian - comes with no sign that the EU is prepared to cut a deal that would dilute the principle of free movement. Barnier, we are told, is signalling that he may not even sanction the beginning of talks in October unless the UK begins to compromise over finance or the expat issue.

The plot then thickens with Britain's most senior union bosses calling for free movement to remain in place. This is Dave Prentis, general secretary of Unison, saying: "The government must give European workers the right to remain, or face losing skilled and experienced health and social care staff for ever".

Prentis thinks that any trade deal should be without tariffs and guarantee future free movement of EU labour. He adds: "It must protect employment standards, jobs, and economic growth. It should also provide for well-funded public services safe from any further privatisations".

Adding more noise to the mêlée is Nigel Farage, telling an American audience that he thinks "the great Brexit betrayal has already begun". He says: "I'm hearing British Ministers speaking about fisheries, speaking about financial contributions, speaking about immigration and frankly doing so in a way that is backsliding, is gutless and is weak and I think we're gonna get Brexit but we may finish up in two years' time with Brexit in name only".

That is actually a possibility, not least through the failure of the likes of Farage to frame or endorse a workable exit plan. Wedded to their empty mantras, he and his followers have no ideas of their own, beyond wanting out "yesterday" and at any price.

His noise, though, is no more coherent than the input from Mervyn King - another "former" – this one having served as Bank of England governor. His great contribution to a debate, that is also deteriorating to the point where it's getting surreal, is to argue that more work needed to be done to show the European Union that the UK was serious about walking away if there was no agreement.

"If you are going to have any successful negotiation", he says, "you have got to have a fallback position which the other side understands and believes is credible. So we need to able to say if we can't reach an agreement we will nevertheless leave and we can make it work". Needless to say, he doesn't go so far as to tell us what this fallback position should be. It is simply "a practical thing that the civil service ought to be taking a lead on".

Clearly, he hasn't been reading Andrew Adonis who bemoans the lack of expertise in the very same civil service. Without saying as much, he argues that our people couldn't negotiate their way out of a paper bag – which augers ill for them devising some amazing fallback plan that would overcome the disaster of leaving the EU without a deal.

In this ocean of incoherence, you will find few islands of sense, although this on the Efta/EEA option is worth a read. Otherwise, the only constant is that those who believe there are simple solutions, such as Mr Fysh-out-of water, are the ones who don't have the first idea of what is going on.

Those are the ones that you find trotting out the Legatum briefing notes, telling us that regulatory conformity, mutual recognition and trusted trader schemes are the answer to a maiden's dreams. The higher they pile the jargon, the more it is clear that they lack even the most basic of understanding.

But, if we leave the Express to add its unique brand of incoherence to the rest, with the observation that, "Theresa May 'will not compromise with Brussels' and be pushed into a soft Brexit", we end up with a picture of almost total confusion – just another synonym for the incoherence that is swamping the Brexit debate.



Richard North 06/08/2017 link

Brexit: reality creep

04/08/2017  


On the back of yesterday's piece on the fishing industry, we get a key intervention by the Guardian which has Environment Secretary Michael Gove telling the Danish fishing industry that vessels from EU Member States will still be able to fish in UK waters after Brexit.

The rationale for this, it would seem, is that the UK fleet does not have enough capacity to catch and process all the fish available in UK waters, apparently prompting complaints from the Lib Dems and SNP that the government's stance on the issue was confused.

The initial comments do not come directly from the environment secretary, but have been conveyed by Danish fishing leaders after they met Gove on Monday. Specifically, Niels Wichmann, head of the Danish Fishermen's Association, has said that Gove told him that the UK: "does not have the capacity to catch and process all the fish in British waters and thus boats from EU nations would be allowed continued access post-Brexit".

This has been contrasted by UK politicians with a statement by Gove in July when he said Britain was "taking back control" of its fisheries by ending its participation in the Common Fisheries Policy.

Needless to say, there is no conflict at all between the statements, as the return of control over UK fisheries does not preclude foreign vessels being allowed to exploit the resource under license. Allowing foreign vessels to mop up surpluses is a normal feature of many national fishing policies.

Thus we have Defra confirming that the plan had always been to allow other nations some access to UK territorial waters after Brexit. But in accordance with the intention to "take back control", the extent of this "could now be decided by the UK".

Wichmann , for the Danish fishermen, says, "It is a logical announcement, but it is still very positive and a little surprising that it comes … so early in the negotiation process". But he said Gove did not make clear whether Danish vessels would be able to keep the same quotas or would have them reduced.

Esben Sverdrup-Jensen, head of Denmark's Fish Industries Association, told the Danish language Jyllands-Posten that while the quotas remained uncertain, it was positive that the UK was "being constructive and has not slammed the door".

It is, however, the Lib Dems' Brexit spokesman, Tom Brake, in a harbinger of the storm of criticism to come, who is making the mischief. Demonstrating a lack of grasp of the issues which typifies UK politicians across the board, he says Gove's comments showed promises by the leave campaign about fishing were being broken.

In his view, "Michael Gove chose to put stopping EU fishing in British waters front and centre of his campaign to leave the EU, yet is now telling Danish fishermen the opposite".

Brake is joined by the SNP which says that the government should clarify what was to happen. Stewart Stevenson, the party's MSP for Banff and Buchan Coast, said the government would not "stand up for rural Scotland's interests" on the issue. He adds: "They might well be trying to keep voters and fishermen sweet at home with all sorts of promises, yet Michael Gove is jet setting around Europe reassuring EU members that there will be nothing of the sort".

Grown-up politicians, however, might have held back the empty rhetoric, recalling that the pre-referendum calls mainly centred around leaving the CFP. There were never any serious suggestions that there should be a free-for-all or that foreign vessels would be excluded from UK waters.

Instead of going for cheap shots, they might have analysed the disturbing statements from the Defra spokeswoman who pitched in to support the environment secretary.

She said the issue was that the UK would be able to control which foreign ships fished within its territory. "Leaving the EU means we will take back control of our territorial waters", she said. "As we have always said, other countries will be able to access our waters – but for the first time in 50 years it will be on our terms and under our control".

The spokeswoman went on to say: "We will allocate quotas on the basis of what is scientifically sustainable, making sure we have a healthy marine environment and profitable fishing industry in the UK".

If this is an accurate rendition of what was said, then there are clear indications that Defra has not got a grip on the post-Brexit policy requirements and is heading for a chaotic exit. The tone of the statement clearly indicates that the department is looking to a unilateral solution, allocating rather than negotiating quotas on the basis of a bilateral treaty with the European Union.

Attractive though it might seem, we are seeing reality creep out of the back door. If the UK seeks to impose a settlement unilaterally, it opens the way to multiple disputes with vessel operators from EU Member States who consider they have been disadvantaged by the new regime. Without the cover of an international agreement, the UK will find it impossible to enforce any quotas it may set, without the risk of them being overturned by the international court at The Hague. 

What we are thus seeing is the strongest evidence yet that the UK government is failing to prepare adequately for the post-Brexit environment. It should be talking in terms of placing commercial fishing on the agenda in Brussels, and initiating talks on a bilateral fisheries agreement with a view to a rapid conclusion.

The reference to quotas is also troubling as it could be taken to suggest that the government has not yet given any thought to the allocation of the fisheries resource, beyond simple quantitative measures. By now, it should be turning its thoughts to operating a days at sea regime, and the adoption of a wide range of technical measures which make quota-based systems of control obsolete.

It is in fact the quota system, at the heart of the CFP, which makes it such a damaging and inequitable policy – implemented for administrative convenience rather than as an effective means of managing the marine resource.

But not only should Mr Gove be looking for a more effective management system, he needs to be acutely conscious of the need for an international agreement, and the difficulty in securing a settlement in the short time available. He also needs to be aware that the absence of an agreement could create a new "wild west" in national waters, with the UK unable to regulate the fishing effort with existing resources.

That he is showing no sign of appreciating what is needed to secure a stable, post-Brexit commercial fisheries environment, and is failing to display anything of the urgency that this issue requires, suggests that we are likely to see a chaotic exit. But then, this will not only be a government failure. The media hasn't a clue and none of the opposition politicians seem to have any more idea of what is needed than the government.

Even Owen Paterson seems all at sea, lost in nationalistic rhetoric which fails to take account of the legal realities of a negotiated withdrawal. He forgets that, when we crafted the draft fishing policy in 2005, this predated the Lisbon Treaty and Article 50. We were, therefore, only considering the technical aspects of fisheries policy.

Where we have a negotiated withdrawal using Article 50, we have to consider the broader legal framework, within the context of treaty law. Whatever technical measures are adopted, they must exist within that framework. This, to me, does not seem to have been considered.

Within that, of course, is the problem of "flag boats" and the controversial practice of quota hopping, where foreign-owned boats registered in the UK and flying the Red Ensign are able to buy UK quota. This is not a problem specific to the CFP but rests with the treaty provisions relating to free movement of capital.

In Iceland, Article 112 of the EEA Agreement (safeguard measures) is invoked to ensure that fishing in their economic zone is reserved for Icelandic nationals and only Icelandic registered vessels may be used. For joint stock companies wishing to engage in fishing, at least half the capital has to be owned by nationals of Iceland. Companies must be domiciled in Iceland, the directors must be Icelandic nationals and at least half the board of directors must live in Iceland.

As to Norway, fishing vessels must be owned by Norwegian nationals or joint-stock companies established in Norway, where all members of the board are shareholders and Norwegian nationals with residence in Norway (and at least 60 percent of the capital is owned by Norwegian nationals). Here, they rely on an OECD derogation.

The UK needs to secure similar provisions if it is to safeguard the UK fleet and prevent quota hopping, but the best and easiest way of securing this is via the Efta/EEA option. This is the very option that the "Ultras", who are so keen to protect British fishing, refuse to adopt.

Unless there is a rapid change in direction on this and the current approach to withdrawing from the CFP, the inevitable chaos which will result could take many years to sort out, creating unnecessary disturbance and uncertainty.



Richard North 04/08/2017 link

Brexit: dross from on high

02/08/2017  


"Following the EU Referendum result and Mrs May's election of the Conservative Party", says the Policy Exchange in its 2016 report to the Charity Commission, "the Trustees agreed that the priorities and character of Policy Exchange's research agenda should be adjusted to take account of the radical change in the UK's political landscape". It continues:
At the heart of this is the nexus of policy issues thrown up by the UK's departure from the EU. These range from constitutional and legal questions, to issues around trade and the future of UK foreign policy and Britain's place in the world.

The new political landscape and change of administration has redefined the objectives and purposes of policy. They will now principally focus on matters relating to Brexit, the economy and industrial strategy, and social reform Central to this readjustment is a much greater emphasis on economic research.
The no doubt accidental omission of a couple of words in the first sentence, those referring to Mrs May's leadership status, is rather a poor show for a supposedly leading think-tank, as is the erroneous assertion that Mrs May was elected to the office. After her rivals fell away, her candidature was uncontested and no election was held.

Small things sometimes tell their own story, and the lack of attention to detail from a think-tank reporting a £2.5 million income for the year could be considered revealing.

It is certainly something to bear in mind as we begin to see the fruits of the "research" on Brexit this organisation is producing, the latest of which is a report called Farming Tomorrow, offering views on a post-Brexit agricultural policy.

Here, though, the think tank avoids making small mistakes, such as leaving out a few words. Instead, it goes for the grand slam, filling 70 pages with what could easily be described as unmitigated trash – if one was of a kindly disposition. It includes a turgid repetition of the CAP hagiography, which could have benefited from a read of The Great Deception, helping them understand the politics of the EU's agriculture policy.

This report isn't just trash, though, it's Tory Boy trash, that unique meld of arrogance and ignorance in which the London Tory think-tank scene excels, churning out the same tired nostrums which are treasured by the bubble they inhabit. 

Page 29, for instance, takes us to this classic piece of dissimulation where lead author Warwick Lightfoot and his seven co-authors tell us:
In the case of a UK/EU FTA, assuming it is the wish of EU27 to reach an agreement with the UK, then negotiating an FTA should be straightforward. The UK and EU are deeply integrated with completely free trade as the starting point, and the UK's rules and regulations are currently based on the EU acquis.
Once again, we are seeing the classic Tory myth, the blithe assumption that, because we have regulatory convergence, hooking up with the EU in an FTA is going to be easy. These people are children.

Recently, Oliver Norgrove picked up this theme, calling in aid Professor Grey at Royal Holloway University, to debunk the myth.  But not for one minute does Policy Exchange look beyond their simplistic mantras and explore the real situation where, as I wrote recently, regulatory convergence is just a starter for ten. Their idea of "research" is to collect up the mantras from their peers and to regurgitate them.  

The point one should not evade is that Lightfoot and his colleagues are the cream of the Tory think-tank research establishment. And even though none of them can claim any agricultural experience, they regard themselves as competent to write a report on the highly specialist and complex area of agricultural policy. This takes arrogance into new dimensions. 

Predictably, all you get is the repetition of discredited myths and not the slightest attempt to verify their assertions. The factoids have become the perceived wisdom, cast in stone. 

The arrogance is their undoing. For instance, they know of my work, and occasionally they read it. But they ignore it. They know better than me with my 30 years experience in the food, farming and related industries, and years working on EU policies. Sixteen years ago, I wrote Death of British Agriculture, which is still ahead of the game on policy, much of which is reflected in Flexcit. But we have superior beings here. They need nothing from us lesser mortals.

And then there's the tribal loyalty. The regulatory convergence myth has been perpetrated by none other than Liam Fox and, since he is one of their own, he cannot be contradicted. By such means is error reinforced and disseminated, to be repeated by all the derivative Tory Muppets and wannabes, as the gospel from on high. And this is why the work from Tory think-tanks is worthless, even where, in this case, the over-generous donors have spent £2.5 million on it.

For that money we also get another of their treasured little mantras, to the effect that a "significant cause of higher prices" of food in the UK "has been the combination of tariffs and agricultural support", from the CAP, "increasing costs and subsidising inefficient methods of production".

Lightfoot and his team particularly vent their spleen on the high rates of agricultural tariffs protecting EU produce, point out that it averages 8.5 percent across the board. Against this, they compare tariffs with Australia and their poster child, the subsidy-free New Zealand, which applies the equivalent of only a 0.4 percent tariff to agriculture.

What these precious little Muppets never seem to do, though, is look at the comparative price of a grocery basket between their heavenly New Zealand and the subsidy-ridden, protectionist UK, in the thrall of the CAP. Yet, only in June, the New Zealand Herald was complaining that a typical grocery shopping bag in Auckland was twice as expensive as it was in London. A comparison two years earlier came out at 46 percent higher on nine basic items.

This compares with the cost of living generally in New Zealand, which is only 17 percent higher than in United Kingdom. And New Zealanders in Australia are united in saying that Kiwis pay too much for food.

The way Lightfoot et al get round this inconvenient problem is by comparing UK prices with global commodity prices, claiming that UK consumers also pay above the odds for food indirectly through the tax system and wider income support. In the European Union, they say, this is equivalent to another 20 percent boost to farm prices.

The fact is, though, that global commodity prices bear little direct relationship to supermarket prices, which are affected by so many other factors that actual raw material costs can be the smaller part of the finished price. Furthermore, there is considerable variation between retail food prices throughout the EU, even where the subsidy system is supposed to be uniform.

And, outside the EU and the CAP, Norway, Iceland and Switzerland all pay higher subsidies than Brussels allows for its farmers, deciding that it is in their national interest to keep the countryside populated, and traditional farming methods alive. 

While the EU average total subsidy is about 18 percent of farming income, Norwegian farmers gain just short of 60 percent, slightly ahead of Switzerland, while Iceland farmers are paid just short of 50 percent. All three are at the top of the list for food prices, yet consumers pay less in the shops than New Zealanders do for their food.

Across Europe, retail price indices range from 58 (Macedonia), where the EU-28 = 100, to 173 (Switzerland). Denmark, with its country name synonymous with bacon, comes in at 148, compared with the UK at 98, slightly below the EU average. Eurostat offers further interesting statistics.

In short, the subsidy argument, in the way presented by the Tory right, is utterly crass. The removal of subsidies, per se, will not necessarily – or at all – see a reduction in retail prices. With other factors taken into account, we could in fact see major increases in some commodities.

What will certainly be a consequence of precipitate tampering with the subsidy system, though, is considerable damage to farming. Furthermore, Lightfoot and his friends talk glibly of the CAP "subsidising inefficient methods of production". Yet, it is the more inefficient methods which produce the most spectacular scenery, which underwrites a £12 billion rural tourism industry. It keeps the countryside populated and provides much-needed jobs.

Not once in 70 pages does the Policy Exchange report mention the economic value of scenery, or that this is a tangible by-product of farming. It is created by farmers, for which they receive no direct compensation. And not only does scenery have a significant economic value, it shapes our perception of ourselves, and contributes to the quality of life. 

Instead, they quote Matt Ridley, prattling on about "gardening", completely failing to understand that the scenery that makes England (Scotland, Wales and Northern Ireland) stems from its farming practices. To preserve the countryside, you must preserve "inefficient" farming - not turn farmers into gardeners.

Without more than a sideways look at such issues, which should actually be driving a post-Brexit agriculture policy, the Policy Exchange argues that "the UK should work to phase out direct subsidies and tariff protection for production, and instead look to create a more productive, innovative and ultimately sustainable sector". Do they not realise that production subsidies have been almost completely phased out already? Forgive them Lord, they know not what they do. 

And in that category, nowhere at all do we see any reference to the probable impact of Brexit on agricultural exports to the EU. This is a huge lacuna, as the impact of border controls could bring UK exports to an end for a considerable period, and have a massive effect on the economic health of both agriculture and the food industry.

Unbelievably, there is not a single reference to border issues, or inspection requirements or any of the related issues. And Ireland, it seems, is to be addressed in the next report.

But this simply underlines the obvious. We are not going to get anything sensible from the Tory right on agriculture, and this think-tank has totally lost the plot. All you get from it is dross from on high. What they are offering is wrong, and dangerously so. They would destroy British farming as we know it, for no gain at all.



Richard North 02/08/2017 link

Brexit: transition from nothing to nowhere

29/07/2017  


With Theresa May on holiday, we get something of a feel of the mice playing while the cat's away – if Philip Hammond can in any sense be regarded as a mouse. I'm not sure what sort of animal I'd cast him as but, if limited to rodents, I'd put him down as a lean, sharp-toothed rat.

Anyhow, Mr Hammond has been making waves with his BBC interview in which he argues for a "transitional deal" in the period after Brexit, but suggests that it must end in time for the election in June 2022 – allowing just over three years.

The first thing to note is that, four years after we first worked up the idea and three years after we formally lodged the concept of an interim settlement, in our very first edition of Flexcit submitted for the IEA Brexit competition, the Chancellor of the Exchequer is at last putting it on the table, albeit in a less-developed form than we offered.

However, it is fair to say that, had the debased IEA run an honest competition, we might have been there sooner with the only logical response to the wholly unrealistic two-year Article 50 timetable.

This is a point that needs to be made time and time again. We've been round the houses with the Muppets arguing that Brexit was straightforward. The idiot Redwood argued that it could be settled in a morning in Brussels, while the feline Lilley even suggested it could be done in ten minutes.

Any dispassionate and halfway intelligent analysis will inevitably come to the conclusion that the two-year period is too short and, therefore (unless we were going to bid for extra time), we needed to arrange an interim or "transitional" plan.

While Flexcit currently argues for the Efta/EEA option, it should be remembered that we offered a menu of options. We allowed for the failure of the so-called Norway option, proposing in its stead the adoption of a "shadow EEA" plan, or even what we called the "Australian process", relying on political declarations rather than binding agreements – the ultimate in flexibility.

But there is a lot more to Flexcit than just a transitional phase. That is only phase one, dedicated to the procedural task of extracting us from the EU. Phase two deals with the important issue of immigration but the real meat of the plan – as far as Europe is concerned – is phase three.

This sets out ideas for a genuine European Single Market, constructed on intergovernmental lines and freed from the political integration agenda that Brussels has superimposed upon it. Relocated in Geneva, using the already established UNECE, the idea has the merit of mirroring the 1948 structure offered by Winston Churchill at The Hague conference, while working with the very latest developments in globalisation.

And while Hammond has just about got his brain around the concept of a transitional phase, no one in the mainstream has given any serious thought to what comes next, having told businesses he wants a "standstill" transition leaving companies with full access to the single market and customs union.

Hammond believes such a deal should allow people and businesses to "get on with their lives" without "massive disruption" where, in the immediate aftermath, goods would "continue to flow across the border between the UK and the EU in much the same way as they do now". Many things, he says, will look similar – including, it would appear, freedom of movement of persons.

That is an intelligent objective but, as I have pointed our many times, it is fundamentally flawed if, at the end of the process all we are going to have to show for our efforts is a free trade agreement (FTA). This will put us in a considerably less advantageous position than we have now, something which neither the nation in general nor business in particular is going to tolerate.

As Pete points out in a study that is far ahead of the field, the idea of an FTA is simply not a sensible option. We need drastically to rethink our trade policy, confronting a massive learning curve which should bring us finally to the realisation that FTAs are 19-20th Century solutions which are not appropriate for the needs of the 21st Century.

Remarkable, four years down the line, Allie Renison of the Institute of Directors wants us, for the sake of business, to phase in Brexit slowly.

She believes a "short spell" in the EEA "would certainly remove much of the potential for disruption to trade". And it would also give our regulatory agencies the time to build up capacity to take over functions from - and negotiate new relationships with - their European counterparts, who currently act as a one-stop shop for regulating our access to the EU market.

Nevertheless, she falls for the idea that we would need to renegotiate our way back into the EEA agreement once outside the EU, via rejoining Efta first, and then negotiate our exit from it later. She does not understand that it is possible to stay within the EEA without have to renegotiate entry.

But the ultimate flaw is the same lacuna we get from Hammond. Accepting that we will have a time-limited transition "for political reasons", her horizons stop at a free trade deal to replace our current arrangements. But, with nothing better than the EEA on offer, the danger is that the transitional becomes permanent.

In that, I have a great deal of sympathy with those who oppose the EEA because of the danger of it becoming permanent. Where I have less sympathy with these people is with their inability to come up with sensible alternatives that will give us something better.

And neither are we getting any realism on the timing. Hammond obviously wants to get Brexit out of the way before the next general election – just supposing the Conservative government lasts that long. But dropping out of the EEA into a less favourable position within an FTA is not going to confer any electoral advantages. It might be reasonable to expect that Labour is still in a mess by then, but if they are not, the Tories could struggle to get re-elected.

But then, Hammond doesn't seem to have thought through the mechanics of a transitional deal either. He may want goods to "continue to flow across the border between the UK and the EU in much the same way as they do now", but that is not going to be easy to arrange.

Within the terms of Article 50, the EU treaties cease to apply on Brexit, and the UK assumes the status of a "third country". For this to be any different, the "colleagues" will have selectively to re-apply treaty provisions to the UK, a process which necessarily constitutes changes to the existing treaties.

There is, of course, only one way that can happen, and that is through treaty change. It is a long-held principle in international law that the only way a treaty can be modified is with another treaty. For convenience's sake, we can call this a secession treaty, but whatever it is called, it will need the unanimous assent of all [28] parties, and ratification.

I've been thinking more and more about this, and especially the UK situation. When we arrive at Brexit, Article 50 cuts in and all the existing treaties fall away. If provisions are then to reapply, that means a new treaty must be agreed, one which actually undoes Article 50 and gives powers to the EU that it had just lost.

Under the terms of the European Union Act 2011, that seems to be a case of conferring new competences on the EU, in which case the "referendum lock" cuts in and we end up with another referendum. This is still in force, and although scheduled for repeal in the European Union (Withdrawal) Bill, it would still be in force when (if) any secession treaty has to be ratified. 

I'm not going to argue that this will necessarily be the case, but one cannot rule out someone might preempt the repeal and take the UK government to court (again) to fight out the legality of a transitional (aka secession) treaty. Any case would be fought on the basis that the treaties end with Article 50 and Brexit, so any transitional powers granted to the EU must be treated as new powers.

What we now have to confront is the prospect that what looks like progress, with Hammond's initiative, is nothing of the sort. Even if the Prime Minister endorses it, when she gets back from holiday, and the Cabinet lines up behind it, we are no closer to a workable Brexit settlement.

In fact, we are making a transition from nothing, and the overall plan is going nowhere.



Richard North 29/07/2017 link

Brexit: a surplus of stupidity

22/07/2017  


One of my seminal experiences when researching for The Great Deception was to follow the media coverage of our applications to join the EEC and then to compare the public record with what was being said in secret by officials and politicians.

One also sees how, in crucial areas, a lack of knowledge or communication distorted contemporary perceptions of events. People, doubtless, were making statements which they believed to be truthful which, with hindsight, were (at best) misleading.

The experience, for me at any rate, serves as a reminder that nothing about Brexit currently coming out of Brussels, or leaking from Cabinet, can be trusted. Even discounting the normal fog of war, there may be active attempts in play either to confuse, distract or even misinform.

In this respect, the recent media reports on transitional periods, and extending freedom of movement past exit day, must be taken with more than a sprinkling of salt. And this is especially so, given that the latest source is Michael Gove, a man not exactly known for his non-partisan views.

However, the leaked report that Philip Hammond is pushing for a lengthy transition period is credible, especially in view of the context, where he was apparently reassuring jittery bankers that the government was seeking to avoid a "cliff-edge" Brexit.

Even the BBC, which dismisses many of the reports as "kite flying", concludes that there appears to have been a "hardening of opinion" in Cabinet around the concept of a transitional period, with greater willingness to accept that certain aspects of EU membership (such as free movement of persons) must continue after exit day.

This is borne out by the Irish Times which writes of a significant change in mood around the British Cabinet. It has it that "senior sources" have suggested that a major shift in opinion is under way that will delay the full implementation of a Brexit deal until 2022.

The irony of this is that, if the Cabinet is indeed willing to accept an extension of free movement, then this rather undermines the Prime Minister's case for leaving the Single Market. During her Lancaster House speech on 17 January, she specifically made the linkage, arguing that we could not continue with the Single Market, as that "would mean complying with the EU's rules and regulations" that implement the four freedoms.

However, it is not only the badgers who seem to be moving the goalposts. Owen Paterson is arguing that the problem with the Single Market – in the form of continued EEA membership – is that "we need to have authority over domestic regulation in order to strike new trade deals".

This is a rather odd assertion, especially coming from one who previously favoured EEA membership, but it pales into insignificance with the Moronic Mogg who is actually arguing that those advocating a transitional phase are seeking to undermine the result of the referendum.

The man told Newsnight: "If we are subject to the rules of the single market and the regulations of the single market, and subject to the fiat of the European Court of Justice, we are paying for the privilege and we can't do free trade deals with the rest of the world, then we are in the EU".

This bovine stupidity gainsays the fact that the Single Market/EEA acquis comprises less than a quarter of the EU legislation in force – and ignores the fact that a large and increasing proportion of rules originate at global level. In or out of the Single Market, we would still have to comply with them.

Mogg also fails to recognise that Efta/EEA members are subject to the Efta Court rather than the ECJ, a confusion that clearly irritates former ECJ Judge David Edward. The EU treaties don't apply directly in the Efta/EEA states, he says, so a soft Brexit wouldn't necessarily mean that the UK would be within the scope of the ECJ jurisdiction any more than Norway is. He then goes on to say:
But if you're going to trade and the whole point of being in the single market is to have freedom of movement, then the ultimate authority on what the rules are within the EU 27 is the ECJ. So for example if there's a question over pharmaceutical standards and there's a dispute as to what the directive on particular pharmaceutical standards says, then the ultimate arbiter is the ECJ. And to that extent traders in the UK who want to trade with the EU 27 have to obey those standards. And the same thing applies in all aspects of freedom of movement.
The other element of Mogg stupidity encompasses the finances. The bulk of Efta State payments (such as Norway/EEA Grants) are not even paid to the EU, yet this venal man wants to turn them into Single Market budget contributions. And as for free trade deals, if he is not aware that Efta/EEA States make their own agreements across the world, then he is competing with cabbages in the IQ stakes.

Most bizarrely of all, with talk of a transitional period lasting five years, during which we will be subject to some EU rules – and thereby fall under the jurisdiction of the ECJ – the one way of ensuring a clean break, taking us out of the EU completely, would have been the Efta/EEA option. Membership of Efta is practically and legally incompatible with EU membership.

And nor, as we keep having to say, do Efta/EEA states adopt EU laws. The EEA Joint Committee takes the laws and converts them to EEA laws, adding them to the relevant annexes, thereby making them integral parts of the EEA Agreement. Once the changes are ratified, they become binding – as treaty obligations.

Sadly, the Moggish tendency to over-simplify (to the point of being grossly over-simplistic) reflects what appears to be a similar tendency in the legacy media. They have managed to turn the debate into a fight between "remoaners" on the one hand, who want a "soft Brexit", and "leavers" who are pushing for a "hard Brexit".

This binary treatment takes no account of nuances, which means that Flexcit supporters have been "disappeared" (along with all other "leavers" who want a "soft" Brexit). The simplistic narrative favoured by the media can only handle a black-and-white representation. There are only "leavers" or "remoaners" and nothing in between.

Nonetheless, the Government does seem to be capable of taking a more nuanced view and looks to be funnelling its thinking down the obvious and necessary route of a transitional agreement. But if that is what it is doing, it is only coming to the same conclusion that we reached over four years ago, having wasted more than a year thrashing around trying to avoid the obvious.

What no one seems to be doing, though, is revisiting the Liechtenstein solution, and exploring means by which freedom of movement can be limited. That has been well and truly buried by the legacy media and the noisemakers who provide most of their copy.

Even now, its adoption could transform the debate, to the extent that one really does wonder whether any of the major players actually want a solution. When one thinks it through, though, even if the UK Government did negotiate limits on citizens of EU Member States, the Borders Agency and the Home Office are so inept that they most likely would fail to enforce them.

The spectre of hard-won concessions from the EU (and the cost of reduced mobility for UK citizens), which are then undermined by enforcement failures, could almost be enough to deter the Government from seeking a settlement.

Still, there are two more glaring omissions. The first is the absence of any clearly defined "vision" from the Brexit team, highlighting the obvious but scarcely discussed premise, that one cannot define a transition agreement until we know what we are transitioning to. We are in very great danger of letting the process define the destination, which can only lead to the mother and father of all messes.

The second omission is one to which we have made constant references, but which is even more invisible than Flexcit. This is the need for a secession treaty to implement a transitional agreement. So far, I have seen nothing written (outside this blog and a brief reference on Booker) on the mechanics of an agreement. This could cost us dearly, if the agreement founders not on content but on execution.

Yet, for a nation that only woke up the detail of Article 50 some months after the referendum, and seems to have difficulty telling the difference between a customs union and a customs agreement, the lack of focus should perhaps be unsurprising.

After all, it has taken long enough for the idea of a transitional period to take root. It is far too much to expect there to be any broad understanding of how this should be achieved – especially in a political community where Rees-Mogg is actually regarded as intelligent.

But this laborious process of discovery, dealing tardily with issues only as they emerge rather than pre-empting the pitfalls and planning for them, does not auger well for the negotiation process as a whole. If it takes to the end of the year before we even start discussing the need for a secession treaty, we will have left it far too late. At the current rate of progress, it will probably take longer.

In the broader scheme of things, though, it probably is already too late. The train left the rails half a mile back and, in truth, we're just waiting for it to grind to a halt. We can handle anything in this country, I have averred – except Tory stupidity. And that we have in surplus.



Richard North 22/07/2017 link

Brexit: Humpty Dumpty facts

10/07/2017  


Brexit: trying to make sense of the world On 6 July, the European Commission published a press release stating that the EU and Japan had reached agreement in principle on Economic Partnership Agreement.

This was accompanied by an explanatory note, offering the summary of the agreement, alongside this disclaimer:
The negotiations between EU and Japan on Economic Partnership Agreement are not concluded yet, therefore the published texts should be considered provisional and not final. In particular, the provisions which appear in brackets are still under negotiations. However, in view of the growing public interest in the negotiations, the texts are published at this stage of the negotiations. The texts are published for information purposes only and are without prejudice to the final outcome of the agreement between the EU and Japan. Any such texts become binding upon the Parties under international law only after completion by each Party of its internal legal procedures necessary for the entry into force of the Agreement, and after the final texts are submitted and approved by the legislators.
From this, two things should be very clear. First, the EU hasn't signed a trade deal with Japan. Secondly, the EU has not claimed it has signed a trade deal with Japan.

Strangely, even the Daily Telegraph understand this, headlining its report, "EU and Japan promise to commit to free trade deal", with scribe Tim Wallace writing: "Japan and the EU have reached a “political agreement” on a free trade deal in a sign that both parties will commit to negotiating an agreement to reduce barriers between the two".

Turning now to the dross in yesterday's Sunday Telegraph view (prop. Allister Heath), however, we see written": "Last week the EU excitedly announced a trade deal with Japan, but all that was actually unveiled was an agreement to talk".

That is a pretty good indicator of the degree of respect for that truth that the paper holds. But then it adds:
Speaking to the BBC, the Japanese ambassador to the UK said that it took more than four years to nail down the principles of an EU deal and will take yet more time to hammer out the detail. It is conceivable that a deal between Tokyo and London, which the ambassador implied ought to be straightforward, could be concluded before one with Brussels. Switzerland took just two years to do this, which underscores an important fact: bilateral trade deals are a lot easier than multilateral ones.
But in this, the art of lying flourishes to an extraordinary extent. For sure, the starting point for the Swiss-Japan free trade agreement was in January 2007, and the agreement was signed on 19 February 2009, together with an implementing agreement.

But what is rather germane to note is that, while the EU's last three major treaties (South Korea, Ukraine and Canada) have each been in excess of a thousand pages, the Swiss-Japan treaty was a mere 119 pages. The implementing treaty was a further 24. Furthermore, the agreements were the fruition of "bilateral economic consultations between the Japanese and Swiss governments" which have been held "on a regular basis" since 1995.

That has the Sunday Telegraph effectively lying by omission – putting it in John Mills territory when he made similar claims about the Norwegian free trade agreement – only this was with the EEC, taking only two years. That, however, was 113 pages.

In other words, we get "Humpty Dumpty" facts. They mean what people want them to mean. When it is important that the UK does a deal with the EU quickly, it can be done in two years because, in 1993, Norway signed a deal in two years.

When it is important that the UK does free trade deal with Japan quickly. It can be done quickly because in 2009, Japan signed a deal in two years (on the back of talks starting in 1995).

And those are just brief observations. I wasn't going to write anything at all for overnight - I'm too tired. This, then, is a starter for ten. Pete will pick up some more threads tomorrow, when we'll both continue trying to make sense of world. I'll do Booker and Grenfell as well.



Richard North 10/07/2017 link

Brexit: Barnier - "that is not possible"

07/07/2017  


In the wake of Mrs May's Lancaster House speech in January, I wrote that her idea of a "bold and ambitious" free trade agreement with the EU inside two years was not just difficult. "It is impossible", I said. "It cannot be done. And it doesn't matter how many times it is discussed amongst the chattering classes, it still can't be done".

Just to re-emphasise the point, in March, I wrote a whole post under the title "impossible means impossible", where I reminded people of my view, that the commitment to securing a free trade agreement (signed and ratified) within two years, was akin to a British commander addressing his troops on Salisbury Plain, telling them they were to invade Iraq the next day – but they had to walk all the way from the UK.

But then who am I? Just a mere "blogger", with the best part of 40 year campaigning under my belt and 14 years devoted to writing about the EU – with the most comprehensive published exit plan yet written under my belt. Clearly, I'm a know-nothing – not even an "expert" who knows so much more than us mere plebs.

Mostly, people like me, therefore, can either be ignored (apart from the inconvenient fact that we've had upwards of 50,000 people in a day on this site). If we persist, the bubble-dwellers excel in treating non-conformist views with utter contempt.

But then, some four years after we first started writing seriously that the "free trade" option for Brexit is a non-starter (only to have the wondrous IEA, along with Lord Lawson, reject the warning), we now have somebody else pop up and say more or less the same things.

This time, though, it just happens to be Michel Barnier, speaking in Brussels to the European Economic and Social Committee. As the chief EU negotiator for Brexit, this man has a certain status – and in this man's world, status is everything. To get a hearing, you must have status (aka "prestige"), and once you have it (or been given it by the media), the media listens.

At this event, speaking "frankly and sincerely" on the theme of Brexit, M. Barnier pulls no punches, taking his line straight out of the Flexcit playbook. "There will be no business as usual", he says. "The UK will become a third country at the end of March 2019".

The number of times we've seen the Muppets on the Booker column comments and elsewhere deny this is legion. There is nothing quite so calculated to wind up the kippoid tendency as to point out this simple fact. I even wrote a post on precisely this point, but they still don't get it.

Anyhow, here we have M. Barnier stating the obvious (and not for the first time), but this time he goes further. The UK government, he says, has defined a number of "red lines" for the future relationship. Mrs May, Davis and the rest of the motley crew, want no more free movement for EU citizens, full autonomy over UK laws, autonomy to conclude its own trade agreements and no role for the ECJ.

This, says Barnier, implies leaving the single market and leaving the EU Customs Union – and he's not wrong in saying that. But he goes on to say that, "on the EU side, we made three things very clear". The particular point he and others have been making is that "free movement of persons, goods, services and capital are indivisible", on the basis that "We cannot let the single market unravel".

Not to put too fine a point on this, however, the doctrine of indivisibility applies only to EU Member States. It does not apply to Efta/EEA states, where both Iceland and Liechtenstein have modified the "four freedoms" without causing the Single Market to unravel.

Nevertheless, Barnier lays out his pitch: "There can be no sector by sector participation in the single market: you cannot leave the single market and then opt-in to those sectors. You cannot be half-in and half-out of the single market". He then adds:
The EU must maintain full sovereignty for deciding regulations: the EU is not only a big marketplace. It is also an economic and social community where we adopt common standards. All third countries must respect our autonomy to set rules and standards. And I say this at the moment when the UK has decided to leave this community and become a third country.
That is fighting talk if ever I saw it. It's also bullshit – but never mind, Barnier probably believes it. He is, at his heart, a French politician – and they have the ability to believe ten contradictory things before breakfast. They then rest until dinner, so the end of the day count is the same. But a pre-breakfast count is so much more impressive.

However, those are his red lines, and one can almost hear the echoes of Verdun: Ils ne passerons pas. These three points, he says, were already made clear by the European Council and the European Parliament. But, he says, "I am not sure whether they have been fully understood across the Channel".

That is something of an understatement, but deserves repeating: "I am not sure whether they have been fully understood across the Channel". This is what is known as diplomacy. Barnier knows full well that they haven't been "fully understood". All he has to do is tune into the drivel filling the UK media, day after day, after day.

Thus, he says: "I have heard some people in the UK argue that one can leave the single market and keep all of its benefits", to which he adds, with disarming frankness: "that is not possible".

He then says: "I have heard some people in the UK argue that one can leave the single market and build a custom union to achieve 'frictionless trade'", to which he adds, with disarming frankness, "that is not possible".

"The decision to leave the EU has consequences", says Barnier. "And we have to explain to them, the businesses and civil society on both sides of the Channel, what these consequences mean for them". He adds: "Let me be clear: these consequences are the direct result of the choices made by the UK, not by the EU. There is no punishment for Brexit. And of course no spirit of revenge. But Brexit has a cost, also for business in the EU27".

Rubbing the salt in the wound, Barnier says that, "Whatever the outcome of the negotiations, at midnight on 29 March 2019, the United Kingdom will at the present stage be a third State, which will therefore not have the same facilities and rights as a State Member of the European Union. It's its choice. Not ours".

This, apart from anything else, is as clear a statement as any that we will not have anything like the "bold and ambitious" free trade deal that Mrs May wants". All Barnier is prepared for is travail préparatoire, with no question of concluding a deal.

As to trade in general, he reminds us that Member States benefit from a "frictionless" trade for goods because they form part of the internal market. This, he says, has made it possible to harmonise the rules or to ensure their mutual recognition by ensuring that goods lawfully produced in one Member State can be sold in all the other Member States without further formalities.

He further argues that there is little use in having no customs duties if at the same time divergent national regulations prevent products from circulating freely – thus highlighting the problem of non-tariff barriers. Only the combination of the Customs Union and the rules of the internal market allows us to trade freely, "without friction". One does not go without the other.

By choosing to leave the Union, Barnier then says, the UK moves to the other side of the external border. This not only delimits the customs union, but also the space for the adoption and application of internal market rules. That is exactly the point I made in February, using the analogy of a medieval walled city. And, as Barnier says, it's our choice."

Inevitably, Barnier concludes, "a trade relationship with a country that does not belong to the European Union obviously involves frictions". For example, economic operators from third countries do not enjoy the same facilities as the Member States on VAT returns.

For another country, he says, 100 percent of imports of live animals and products of animal origin - and this is a former Minister of Agriculture who is talking - is and will be subject to controls. There it is – for the first time from a public figure, you get what I've been saying on this blog again and again and again. What price the racehorse industry now?

Barnier goes to some trouble to emphasise this point. The border of the European Union, he says, it is one of the challenges that we must face in Ireland's unique case, without recreating a hard frontier. He adds:
On the other hand, the general sanitary and phytosanitary conditions of such exports must always be established before the export of a product of this nature from a third country to the European Union is possible. We can clearly see, if I speak frankly, the constraints that are there, especially for the agri-food sector.
He then further reminds us that these constraints apply equally to all companies that derive their dynamism from the integration of production centres in Europe within the common market.

As to the "no deal", scenario, this says Barnier, means a return to the status quo. In the case of Brexit, "no deal" would be a return to a distant past. It would mean that our trade relations with the UK would be based on WTO rules. It would be a good idea to have the customs duties of almost 10 percent on an average of 19 percent for alcoholic beverages, and an average of 12 percent on lamb and also fish, for which the vast majority of British exports go to the EU.

While leaving the customs union in any case involves border formalities, "no deal" would mean very cumbersome procedures and controls, without facilitation. This would be particularly damaging for companies operating on a "just in time" basis.

In practice, he warns, "no deal" would worsen the "lose-lose" situation which is bound to result from Brexit. Objectively, he thinks, the UK would have more to lose than its partners. He is thus entirely unequivocal. "I therefore want to be very clear", he says, "to my mind there is no reasonable justification for the 'no deal' scenario. There is no sense in making the consequences of Brexit even worse".

Whether this sinks in, I don't know. But for many months, on this blog, I've been attempting to spell out the problems and consequences of leaving the Single Market, and going for the "no deal" scenario – only to be derided or ignored. Booker has had much the same treatment, with his own management undermining him in the letters pages.

Now, chickens are coming home to roost. Says Barnier: "Business should assess, with lucidity, the negative consequences of the UK's choice on trade and investment. And prepare to manage them". Of course, most of business hasn't. With some honourable exceptions, they've had their heads in the sand – or been pursuing a far more sinister agenda.

Ironically, one of my commenters yesterday posted on my article about Grenfell Tower some detail on Cameron's Damascene conversion to the Norway option. He prefaced it by saying: "to move away from Grenfell and back to Brexit for a moment…".

I can quite understand the point, but my response was that, in pursuing the truth behind Grenfell Tower, "we never left Brexit". Forces which brought us the Grenfell disaster are the key to understanding Brexit.

Note here that Barnier refers to the UK "red line" of "full autonomy over UK laws", reflecting the Vote Leave slogan of: "Let's take back control". But what we also have to recall is that Vote Leave was not a people's campaign. It was funded mainly by a small number of very rich business people, who saw in Brexit an opportunity to promote a "deregulation" agenda for their own commercial advantage.

It is no coincidence that these same people are inimically hostile to the "Norway option". In an attempt to stop it happening, they are supporting the Leave means leave campaign, the Tory "ultra" European Research Group" and, latterly, the secretive Red Tape Initiative.

These groups are supporting their paymasters who see in Brexit profit-creating opportunities which would be limited if we were still bound by the Single Market acquis represented by the Efta/EEA (aka "Norway") option.

Deregulation, of course, can be no bad thing (although I have long preferred the term "re-regulation"). But, as we've been seeing with Grenfell, the problem can just as easily be that existing regulation is not rigorous enough, with progress held back by the EU.

Thus, while returning control of the legislative agenda affords the chance to make our own laws (as long as they don't conflict with international standard-setting), this does not necessarily imply getting rid of laws. Many should stay, and be tougher – remember horse meat, anyone?

The thing is, "Let's take back control" never did mean restoring control to the people. Whether in the EU or supposedly as an independent nation, in Vote Leave's scheme of things, we don't get a look in. In the view of its wealthy business backers, control goes to born-to-rule Tories, who will look after their friends by reducing their legislative "burdens".

In this, Monbiot does have a point, except that he just wants the control to pass from "big business" to his green NGOs. He and his likes are no more interested in giving power back to the people than are the Tory right.

Thus – even if for the wrong reasons – Monbiot has correctly identified Grenfell Tower as a key Brexit battlefield. But if the question is: "who rules Britain" (or the UK) - as between business and unelected NGOs (his preferred NGOs) – he wants his green NGOs to take the prize. Nowhere in Monbiot's scenario do the people even feature.

Our battle, therefore, is in ensuring that we have a measured exit from the EU and that when powers are eventually returned from Brussels, they go back to the people, rather than just to a different set of masters. That is why Flexcit in its Phase 6, includes The Harrogate Agenda.

For the time being, though, the "mad deregulators" are driving the Brexit agenda up a dangerous cul-de-sac. It is that totally selfish agenda which is blocking a sensible approach to the Article 50 talks and is the real reason why the right is blocking the Efta/EEA option. But, as Pete points out , deregulation is not a viable option. It isn't going to happen. Thus, if we are going to make any progress, we are going to have to reclaim the agenda, and put the "deregulators" back in their box.

And that has to be possible, or Brexit will be a disaster. But then, readers of this blog already knew that.



Richard North 07/07/2017 link

Brexit: in danger of being grounded

03/07/2017  


So, after a complex and lengthy piece covering Booker's article about Grenfell Tower, I'm able to turn to his shorter and simpler piece on the Efta/EEA (Norway) option.

As the great Brexit shambles continues, the issue that attracts his attention is whether our politicians have the faintest clue of what they are talking about. And one of the most telling hints as to their state of knowledge is their view on whether we can somehow leave the EU but remain in its "Customs Union".

The likes of Philip Hammond and Chuka Umunna, the leader of last week's Labour rebels, clearly haven't even got to square one in their failure to grasp that a country can only be in the "Customs Union" if it is a full member of the EU (under treaty rules laid down in 1957).

It really is quite remarkable how many politicians do fail to grasp that single, fundamental point, that the EU's customs union is so embedded in the core of its founding treaty that there is not the remotest possibility of the UK staying in it after Brexit.

Not a few of these politicians doubtless confuse the different concepts of customs union and customs cooperation, and by far the majority of those believe that the free movement of goods depend intrinsically on the customs union, rather than the Single Market.

Even those who have some dim idea about the role of the customs union in abolishing tariffs between members, fail to understand that, if tariff elimination is the issue (and only that), then a basic free trade agreement will achieve the desired effect, without having to buy into the common external tariff (CET).

Not subscribing to the CET does, of course, mean that we could have to deal with rules of origin (ROO), if we were then to diverge from the EU's external tariffs. But, since we intend to adopt the EU's WTO schedules of tariffs – for the time being – there will be no divergence. The UK will not become a back door to the EU, and ROO simply will not apply. It is a non-problem.

The crucial issues then are the free movement of goods and services, to which effect – says Booker - our gifted MPs should be focusing on the EU's sophisticated system of "Customs Co-operation”, set up in 1994, which is what allows 14,000 lorries a day to move effortlessly between Dover and Calais, as also across the Northern Irish border, and much else besides.

Free movement, though, does not just cover goods. The Single Market – even if with less efficiency – also covers services, including the massive financial sector, on which the City relies.

It's not commonly thought of in such terms, but air transport is classified as a service. Alongside tourism and related services, it is as important to our economy as financial services. Thus, our politicians should also be heeding the growing alarm over what could happen if we are excluded from the equally complex EU system that governs every aspect of aviation and air traffic.

Last week, Peter Fankhauser, the chief executive of Thomas Cook, colourfully predicted that unless our politicians wake up to these potential dangers, we risk being taken back to the "medieval age", echoing the rather plainer warnings of Michael O'Leary, the chief executive of Ryanair, that in Britain we could even find ourselves no longer entitled to fly our aircraft anywhere outside UK airspace.

It is all this and more, Booker advises us, we could have held on to if we had joined Norway in Efta and remained in the wider EEA (and therefore the single market). But it is this from which, by deciding instead to become what the EU classifies as a "third country", requiring the re-erection of the full panoply of border controls, we are choosing to exclude ourselves.

Booker thus concludes that, in this way only chaos lies; as David Davis and his fellow "ultra-Brexiteers" will soon very uncomfortably come to learn.

Interestingly, of the two main Booker articles, it was this to which the majority of comments were attached – with the usual diatribes but also some more considered responses. There is a sense of the mood changing, as more people are prepared to come out into the open and support the Efta/EEA proposition.

But it isn't only the ignorance of the politicians and the "ultra-Brexiteers" that we have to deal with. We also have the formidable ignorance of journalists, those such as Patrick Wintour in the Guardian who writes an illiterate piece about Efta "associate membership" and then goes on to tell us that this could become the settled position of the UK.

Alternatively, he writes, it could be a precursor to two further stages – either full Efta membership or even potentially rejoining the EU's single market through the European Economic Area. There is a certain ambiguity there, but are we really seeing a journalist write, "either … or"?

This, fortunately, isn't the only contribution from the Guardian. Running on its front page is the headline, "British officials drop 'cake and eat it' approach to Brexit negotiations", with the story having insiders saying that ministers will have to choose between economic interests or sovereignty.

The body text lays out the detail, announcing that British officials have quietly abandoned hope of securing the government's promised "cake and eat it" Brexit deal. They are increasingly accepting the inevitability of a painful trade-off between market access and political control when the UK leaves the EU.

This comes from "government insiders" and, in a welcome change from the euphoric "sunlit uplands" rhetoric coming from Davis, they report a "dramatic change of mood" at DExEU since the general election, with growing Treasury influence helping force ministers to choose between prioritising economic interests or sovereignty.

Civil servants are now said to be presenting ministers with a more binary choice: accept political compromises similar to aspects of the European Economic Area (EEA), or settle for a much more limited trade deal such as the recent EU-Canada free trade agreement (Ceta).

"We have a problem in that really there are only two viable options", one official told the Guardian. "One is a high-access, low-control arrangement which looks a bit like the EEA. The other is a low-access, high-control arrangement where you eventually end up looking like Ceta – a more classic free trade agreement, if you are lucky".

As to the "high-access, high-control situation" – outlined in Mrs May's Lancaster House speech - that remains the official policy position. But the author of that speech [reported to be Downing Street adviser Nick Timothy] is "no longer in an influential position".

Sadly, though, Whitehall still hasn't quite (or at all) got there. Full EEA-style participation in the single market is still seen as politically toxic, "due to its requirement to accept freedom of movement".

Thus, pressure is building for a rethink of opposition to a customs union with the EU. This, it is said, "would satisfy many business leaders, who are clamouring for ways to avoid trapping manufacturers behind an inflexible tariff wall but possibly still allow new international trade deals to be pursued in the service sector".

"What we've seen post-election is that business voices that had felt bullied into silence pre-election are recovering their voice", explained a senior official. "The economic arguments that had got lost in the last six months are now being heard again and those who had tried to railroad this by saying you are talking your country down are being given a run for their money".

This, though, is layering ignorance on ignorance. This is not so much the blind leading the blind, as the changing of the white sticks – a different set of ignoramuses leading the fray.

One again, the extraordinary lack of knowledge about the European Union and its systems is coming to the fore. I was pretty shocked yesterday to read the Architects Journal and he comment of Konstantinos Tsavdaridis, associate professor of structural engineering at the University of Leeds. Both are saying, in respect of Grenfell Tower, that the UK needs to adopt system testing. Both seem completely unaware of BS8414, much less the EU role in preventing its full adoption.

If you still think that people in high places necessarily know their stuff, or that the civil service and the higher echelons of business are filled with people who know what they are talking about, you need to disabuse yourself of what is a cruel illusion. The higher you go, the more ignorance you meet.

However, some civil service insiders are aware of the need to agree "which vision will prevail before the first phase of EU negotiations is concluded over the summer" (has it really taken them this long to realise?).

Our prescient senior official warns that, "there is still a fudge and before we get down to negotiating in October/November we have got to decide once and for all which of those two options we are going for". He then adds: "What you can't do is sustain a fudge because then you are going into negotiations without knowing what you want".

One is pleased that the message is finally getting through to the senior level but, if this is only the point that they have reached – a year since the referendum – then we will be seeing the turn of the century before they come up with a credible negotiating position.

We really haven't got time for this. We need our officials out of the crèche and into the real world. We're not paying them for Janet & John lessons.



Richard North 03/07/2017 link

Brexit: a year of learning

26/06/2017  


Briefly less concerned with immediate events, I've been upgrading the First Year of Brexit, adding a front cover to it, designed by a reader (pictured) and trimming forty pages from the length. If anyone who has already bought a copy and wants the upgrade, drop me an e-mail and I'll send you a copy. Otherwise, you can buy one for £4 from the link on the sidebar.

Going back through the year was extremely useful, reminding me of half-forgotten events and, in particular, illustrating how much I've learned over the year.

There is an interesting dynamic at play here, in that you tend to think you know about many things until you start to write about them. It's then that you discover how little you know, making the process of writing the blog one of the most educative processes I know. If readers have learned a great deal – and many tell me they have – I have learned a great deal as well.

Speaking with other bloggers, I find they share the learning experience which one gains from writing. In the case of EUReferendum.com, though, there is the volume effect, and the sheer relentlessness of the coverage. In the space of a year, writing over 440,000 words on one subject (before editing) with a post almost every day, linking to over 2,000 references (from newspaper cuttings to reports hundreds of pages long), covering over 1,000 A4 pages, cannot but help make its mark.

Of the previous coverage, one post I edited yesterday I had posted in early July last year, drawing attention to a paper by the Robert Schuman Foundation, which explored how the UK could stay in the Single Market.

What was particularly interesting were the observations on the EEA, where it was suggested that the UK could explore the opportunity to revise the EEA rules so that the non-EU members of the latter have a right to vote (like Norway, for example) on policies in which they participate, notably those involving the Single Market.

This, as we now know (as recorded in Monograph 9), was the original intention of Jacques Delors, which had been articulated as early as 1987 and had begun to take form as the European Economic Space (EES), with "houses" in a European "village", each with equal decision-making rights.

In this scenario, the Robert Schuman Foundation says, "the UK would continue to participate in the internal market and apply the corresponding rules", adding that it would have to contribute to the EU’s budget, "but only for certain policies" – presumably to cover things like the decentralised agencies in which we continued to participate.

Almost as a throw-away line, the Foundation also said that freedom of movement would continue to apply, "but the EEA Agreement provides safeguard mechanisms that can be activated unilaterally".

After all the pompous, self-opinionated rubbish that I've had to read, this is so refreshing. Of course the EEA Agreement provides for safeguard mechanisms, and of course they can be activated unilaterally (by Efta states). If the Robert Schuman Foundation knows this, you can bet that the Commission knows it – and has as few hang-ups as the Foundation. The measures are a treaty provision and there to be used.

But what is also especially encouraging is the thought that this type of scenario, "might eventually lead to the realignment of the Economic and Monetary Union (EMU) with the European Union". Thus, we see the "greater EU" splitting into two parts – the one as a fully-developed economic entity called the Eurozone, and the other the EEA, which would offer an institutional framework for the single market.

This is very much along the lines of Flexcit, where Brussels no longer has the exclusive right to manage the Single Market, the functioning of which becomes the shared responsibility of all its members. Says the Foundation, a modification of the EEA Agreement would therefore allow to settle several difficulties facing the EU at present, whilst providing welcome clarification for citizens, as well as economic and financial actors alike.

It adds that this type of arrangement might also offer an alternative to candidate countries, which could opt to enter the EEA rather than the EU, as was originally mooted for the former Soviet satellites. And there is no reason why we should see it limited to candidate countries. The EEA should also open its doors to the Russian Federation and to non-aligned states.

Specifically, the Foundation says that the EEA would be open to States which want to take advantage of the internal market above all, without taking part in all of the other aspects of integration. It is highly likely, it says, that the UK would be tempted to join the EEA.

With simple logic, it says that this kind of arrangement would be advantageous to the UK in that it would offer it a compromise, thereby avoiding a brutal break from the EU. Crucially, it adds, it would also provide a solution to the Scottish and Northern Irish questions.

The UK would continue to participate in the internal market and apply the corresponding rules, which it would continue to help define. Of course it would have to contribute to the EU budget but only in certain policy areas (the UK would no longer take part for example in the common agricultural policy).

Bringing us up-to-date, yesterday Brexit Secretary David Davis was on the Marr show – about the only Brexit news in an otherwise thin day. But about the only things of even marginal interest was his assertion that he was "pretty sure" there would be a deal, and that the transitional period would run from one to two years.

Neither statement is particularly encouraging. There are many levels of deal potentially on offer and there is nothing to say that Davis can bring home anything that will be needed by our businesses. And, as to the "one to two years", this is so unrealistic as to be laughable.

One must remember though that Davis has a recent history of making unrealistic statement and then altering his position later one – right up to the "summer row" that never was.

What we continue to see is a poverty of vision and a generally response-driven strategy coming out of Downing Street. But, the closer we get to the crunch, the closer we get to the reality that there is no way on God's earth we can conclude a trade agreement in the time - "impossible means impossible". We must focus on a transitional agreement.

Here, reality hits us between the eyes. Following on from the Robert Schuman Foundation, we can use the EEA acquis and seek a sensible "modification" which could overcome the worst feature of the Agreement and give us something we could live with.

Even though the end product might look very much like the EEA Agreement, there is no reason why it should keep its name. Something like a European Enterprise Zone (EEZ) might be sufficient to calm nerves, which red-white and blue "bespoke" additions could tailor it for the UK. In fact, the EEA Agreement is already a series of bespoke agreements stitched together under one treaty roof.

At a domestic level, unless she is to be bogged down in the aftermath of Grenfell Tower, Mrs May has got to take the initiative. She must storm the high ground, or be seen to be reacting to the EU's agenda. In other words, we need a plan. But it needs to be bigger than that. We need to engage the EU, and make them feel they have a dog in the fight.

Given that it has been floated by the Robert Schuman Foundation, I'm sure there would be political support in Europe for a "modified" EEA. Oddly enough, 2019 is the 25th anniversary of the EEA Agreement coming into force, so there is some logic in tying in Brexit with EEA enhancement and merging the agendas.

In a nutshell, we buy time by agreeing a transitional agreement - leading up to March 2019 when, with the "colleagues" we jointly announce (alongside Efta) the commencement of talks to build a 21st Century version of the EEA, with a target for completion (say) of 2025.

We might even call it, "Agenda 2025", and the EU could also take in reform and rationalisation of its Neighbourhood Policy, building a "positive, forward-looking" agenda. That way, we all own a slice of the action and it justifies the political investment. It is no longer just about Brexit. UK withdrawal has become a catalyst for something much bigger and better.

And isn't it just amazing what a year of learning can do.



Richard North 26/06/2017 link
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