Brexit: an accidental crisis


It is generally held that there are three main options available to Brexit negotiators to settle our trading relations with the EU: the Efta/EEA Option (often known as the Norway Option); the bilateral free trade (or bespoke) option; and the so-called WTO Option.

Although we have looked at this WTO option and its potential consequences for the UK, many times, the complexity of the systems involved suggest we need to look at it in even more detail.

Firstly, though, it is necessary to define what is meant by the WTO Option. This is taken to be a scenario where, for whatever reason, the UK eschews any form of trading agreement with the EU and trades solely and exclusively within the framework set by the diverse WTO Agreements. This might occur by design (even though this is unlikely) with the UK deciding not to conduct negotiations with the EU, or by accident.

The accidental scenario is conceivable, arising in the event that the UK fails to secure a negotiated Article 50 settlement within the two years initially allowed by the Article, and then fails to get an extension of time. In this event, the EU Treaties cease to have an effect and the UK is forced to trade with the EU on the basis of WTO rules.

It must be said, and strongly emphasised in this context, that the WTO Option is an absolute. Some commentators advocate relying on the WTO rules to provide a basic framework, while additionally broking side-agreements with the EU to cover areas of specific interest to the UK.

There may or may not be merit in such arrangements but point has to be made that these are not the WTO Option. Confusingly, some have used the description "WTO plus" – but this is already applied to new WTO entrants who are required to undertake Protocol commitments that are more stringent than those of original WTO Members. (known as WTO-plus commitments).

Others have suggested the term "beyond WTO" but, whether this or "WTO-plus" is considered, the essence – as Pascal Lammy has pointed out – is that in each bilateral free trade agreement we have the "WTO plus" provision". It is best therefore, when referring to the WTO Option, to use a definition that excludes any other form of agreement.

The acceptability of the WTO Option is often justified by reference to other nations which supposedly trade with the EU without the benefit of bilateral trade agreements. Often cited are the United States, Australia and China, which are assumed to be operating under WTO rules.

Such assumptions, however, are flawed – resting on an unduly narrow interpretation of a free trade agreement (or, technically, a regional trade agreement) as one which concerns tariff reduction and which are notified to the WTO and held on their databases. Trade agreements which do not deal specifically with tariffs are not notified to the WTO but are instead held on the United Nations treaty database.

Although regulatory cooperation forms a major part of any comprehensive free trade agreement, and the OECD identifies eleven categories of agreement involving what is known as "International Regulatory Cooperation" (IRC), only one encompasses the traditional trade agreement and is thus notified to the WTO.

The countries cited as having no trade agreements with the EU do in fact have multiple agreements with the EU – although none of them are notified to the WTO. They cannot in any respect be regarded as operating exclusively under WTO rules and cannot be held as examples of the WTO option.

This is especially the case with the United States which has its own State Department declare: "The United States and the 28 Member States of the EU share the largest and most complex economic relationship in the world". Transatlantic trade flows (goods and services trade plus earnings and payments on investment) averaged $4.3 billion each day of 2013.

On the European Commission's Europa website, there is the Treaties Office Database which boasts an advanced search facility. Search by "country" (United States of America) and "nature of agreement" (trade agreement) and the database will list 23 agreements. Under the category of "Agreement for trade and cooperation", there are a further eight agreements, in particular the 1976 Framework Agreement for commercial and economic cooperation between the European Communities and Canada.

This is described as a "non-preferential agreement" and the very first formal agreement of its kind between the EEC and an industrialised third country, under which the parties committed "to develop and diversify their reciprocal commercial exchanges and to foster economic co-operation".

With this and the categories, "agreement on Customs Matters" - an issue which is intimately trade-related - "Agreement on internal market matters", there are recorded 38 EU-US "trade deals", of which at least 20 are bilateral.

A similar exploration of China's status with the EU identifies multiple agreements - 65 over term, including 13 bilateral agreements, ranging from this on trade and economic co-operation, to one on customs co-operation. None of these agreements are of the simple, tariff reduction variety, but collectively they have enabled China to become the EU's second largest trading partner, with trade valued at over €1 billion a day.

So many other countries have their own trade deals with the EU that it is difficult to identify countries which do trade solely under WTO rules – there are so few of them. One cannot even cite North Korea, ranking 182 as an EU trading partner, as this is not a WTO member. Altogether, the EU has 880 bilateral agreements with its trading partners, and there is no example of a developed nation trading with the EU solely by reference to WTO rules.

For the UK to trade with the EU relying on the WTO Option would be unique for a developed nation, creating an unprecedented situation. Because it is a unique event, it is not possible accurately or completely to define the entire range of consequences arising from the UK dropping out of the EU Treaties, with no replacement agreements, relying solely on WTO rules. That is an issue in itself, as the prospect raises considerable uncertainties.

Of the known knowns, however, one significant issue is that the EU's Customs Union is an exclusive EU competence. This means that Customs law which provides the legal base for, and defines the procedures adopted by officials to regulate the flow of goods (and some services) in and out of this country, is produced exclusively by the European Union.

This law drives an EU-wide system that handles 17 percent of world trade – over two billion tonnes of goods a year with a value of €3.3 trillion. Between 2004 and 2010, despite the impact of the financial crisis, the value of EU external trade had grown by almost 50 percent.

The EU is at the centre of global trade and supply chain logistics, and is the number one trading partner for the United States, China and Russia. More than 90 percent (8.4 billion tons of merchandise) of global trade is carried by sea, of which more than 20 percent is unloaded in Europe.

The EU has over 250 international airports. The eastern land border runs to almost 10,000km with 133 commercial road and rail entry points. Taking into account the entire EU external border (land, air, sea) there are in total more than 1,000 customs offices of entry.

In 2011, EU customs processed 36 million pre-arrival cargo declarations, 140 million import declarations, 96 million export declarations and 9 million transit declarations. These figures represent an average of 8.9 declarations per second handled by the Member States' customs administrations. They collected customs duties that contributed an estimated €16.6 billion the EU budget, i.e., approximately 13 percent of the total.

In settling for the EU option, the UK will be, whether by accident on design, embarking on a course of action that will cause significant damage to this system.

As far as the UK goes, the problem is that there is no applicable UK law-originated Customs law.The entire body of law has been replaced by the EU acquis, known as the Union Customs Code (UCC) legal package. It comprises the Union Customs Code itself, adopted on 9 October 2013 as Regulation (EU) No 952/2013 of the European Parliament and of the Council. This entered into force on 30 October.2013 although most of its substantive provisions apply from 1 May 2016.

It also includes the UCC Delegated Act, which was adopted on 28 July 2015 as Commission Delegated Regulation No 2015/2446. It contains certain non-essential elements of the UCC. Then there is the UCC Implementing Act, adopted on 24 November 2015 as Commission Implementing Regulation No 2015/2447. This is required to ensure the existence of uniform conditions for the implementation of the UCC and a harmonised application of procedures by all Member States.

Two other measures then complete the basic package. One is the UCC Transitional Delegated Act, adopted on 17 December 2015 as Commission Delegated Regulation No 2016/341. It establishes transitional rules for operators and customs authorities pending the upgrading or the development of the relevant IT systems to create a fully electronic customs environment.

The other is the UCC Work Programme, adopted on 11 April 2016 as Commission Implementing Decision No 2016/578. It relates to the development and deployment of the electronic systems provided for in the UCC and is closely linked to the UCC Transitional Delegated Act.

The point to be made here is that this body of law has emerged in its present form over many decades since its inception in 1968 and currently comprises over 1,300 pages. As regulations and decisions, the law has direct effect but, with UK independence, would cease to have any legal effect in the UK. To rebuild a Customs code in the UK, the elements which were applicable to the UK (and within its jurisdiction) would have to be replaced.

With the UK outside the EU, though, it is unlikely that the EU law could simply be re-enacted. Adaptation would almost certainly be needed. This might be complex and time-consuming process and, assuming that the UK had lost Union law as a result of the expiry of the Article 50 process, this might be an unplanned event.

No doubt a series of emergency orders could be rushed into place but, during the period when new legislation was being produced, there would be no legal code applying to UK Customs operations. Temporary measures aside, it is difficult to see how a comprehensive code could be quickly or easily replicated, even if there were the personnel available with the necessary skills and experience. This might be further complicated by certain aspects requiring Union and international recognition.

Nor is it necessarily the case that the resultant system could be fully functional at an operational level. Without ongoing agreements to ensure continuity of cooperation, UK Customs authorities would be cut off from risk management and other databases, and previously shared systems for communication and information exchange.

On this basis alone, the result would inevitably be serious perturbation to the Customs system and the management of traffic flow at the borders and UK ports. As I have remarked before, within a week, Operation Stack could have reached Leeds, as the disruption spread.

This will not because anyone wanted it or intended it to happen. It will be in the nature of an accidental crisis, not so very different from the scenario which brought the First World War into being, where the troops were mobilised and there was no means of turning back.

Richard North 29/07/2016 link

Brexit: the Brexit dividend


Full immersion in the Brexit issue for the month since the referendum has not delivered anything like the euphoria that one might have expected. After all, the success of the "leave" proposition has not yet secured our exit from the EU and, Mrs May's assurances aside, until we are actually out, we are not in a position to count our chickens.

However, aided and abetted by the Express and others, there are those who are being rather precious about what constitutes leaving the EU, suggesting that continued membership of the EEA via the Efta – or "Brexit-lite" as it is sometimes called – is tantamount to staying within the EU.

Nothing, of course, could be further from the truth. Norway, Iceland and Liechtenstein are all fully paid-up members of the EEA Agreement yet, not by any measure, could they be considered to be part of the EU.

Nevertheless, we do understand the reservations about remaining in the EEA – although it is not always clear that people fully understand that we are already members. As a destination, or end point, the EEA is not optimal, although it has distinct advantages over full EU membership. We would have broken free from the drive to political integration and the jurisdiction of the ECJ, while staying in the Single Market.

As to freedom of movement, we have no doubts whatsoever that the Article 112 "safeguard measures" provide a mechanism which will enable us to resolve the issue of unrestricted immigration from EU Member States, at least for the short- to medium-term, creating space to engineer a lasting solution.

What then becomes essential though is that we define the end game. There is absolutely no point in bleating about the EEA being an "interim option", if the end game is defined in facile terms, such as a "free trade area". That cannot in any way compete with participation in the EEA/Single Market which is, after all, the largest and most comprehensive free trade agreement in the world – and certainly one of the most dynamic.

This is why, in Flexcit, we have gone to such trouble in phases three and five to set out the European alternative, and then the global dimensions which constitute the structures which are capable of delivering the Brexit dividend.

The problem we have is that the media and many of the pundits, having done little thinking over the last few years, are now focused on the immediate exit strategy, without in any way understanding that the Brexit opportunity lies not in the mechanics of securing an exit, but in the use we make of the freedom so gained.

Reviewing the elements of the Brexit dividend, the first and almost immediate gain is the ability to resume full participation in the global bodies of which we are members, casting our votes on our own behalf instead of being required to support the EU's "common position".

But what is not fully (or at all) appreciated is that, through the developments in globalisation – and in particular to TBT/SPS Agreements and the Vienna and Dresden agreements, we recover one of the most important legislative attributes which we have currently ceded to the European Commission – the right of initiative.

What in many ways makes EU membership so objectionable is precisely this right of initiative – the monopoly power to propose new laws and, because to repeal or remove a law requires a new law, the power to protect the acquis from dismantling.

Freed from the tyranny of right of initiative, the UK in concert with other states, can define the rule book at the global level and continental level. A remarkable example of this is the UNECE WP.6 Working Party on Regulatory Cooperation and Standardisation Policies.

Through this we have seen the development of the "International Model" of regulation, using the mechanisms of the Common Regulatory Objective (CRO) which achieves in a steady, unspectacular way the degree of regulatory convergence that agreements such as CETA and TTIP aim to achieve but somehow never actually deliver.

Then, through the TBT/SPS, etc., Agreements, the participating states are able to require the Commission to redefine the Single Market acquis, setting the rules for the market that the Commission must implement in preference to its own.

Over term, we have the ability completely to reshape the EU's Single Market, acquiring considerably more influence outside the EU than we have within it. The result will be the Holy Grail of European politics, an intergovernmental trading agreement created and managed by a community of equals.

But another huge element of the Brexit dividend is the ability to break away from the claustrophobic grip of the bilateral deals and the "big bang" regional trade agreements (the RTAs) which are actually holding back the expansion of global trade.

Instead, we can kick-start multilateralism and, in particular, concentrate on brokering narrowly-focused sectoral and product agreements which are easier and quicker to negotiate and yield more immediate cash benefits.

Then there is the issue of trade facilitation – the object of sneers from the trade deal "professionals" – which has the potential to deliver trillion-dollar annual dividends which relegate the modest gains from the likes of TTIP to the margins.

This, then, points to the way we should be framing Brexit – not as a sterile, mechanical process of extracting ourselves from the EU, but as a huge opportunity to redefine our position in Europe and the world. The key phrase is "Brexit dividend", the positive result of leaving and the reason we have worked so hard to achieve it.

Richard North 27/07/2016 link

Brexit: the consequences of failure


I was given sight of a draft paper recently in which it was argued that we should "exit" the Single Market and then negotiate a free trade agreement between the UK and the EU.

This is common enough fare, but when it came to how long this might take, the author averred that, after Norway had rejected EU membership in 1972, the Norwegians negotiated a trade deal with the EU in just under eight months.

We are advised that our agreement "might take rather longer than", but "with the prospect of German car manufacturers and French wine producers losing market share in the UK, the pressure to get a deal concluded within the two-year period allowed by the Lisbon Treaty would be substantial".

In the first instance, therefore, we are invited to accept that because Norway concluded a deal with the six Member States of the EEC, some 44 years ago, this provides some guidance as to how long an agreement between the EU and the UK might take during the expected negotiations.

However, if we look at the 1973 Norway Agreement, we find that the full dossier runs to 113 pages. The actual, substantive treaty runs to seven pages, and most of the rest deals with tariff reductions, the basis for which had already set by the GATT Agreement.

When we look to contemporary examples of free trade agreements, though, we see a rather different picture. The EU agreement with the Republic of Korea runs to 1,426 pages. This is accompanied by a 64-page framework agreement, with negotiations having started in 1993 and running on for 18 years before the agreements entered into force on 1 July 2011.

Another well-known treaty is the EU-Canada Comprehensive Economic and Trade Agreement (CETA) which runs to 1,598 pages. More than seven years after the main negotiations started, it is still not in force.

With this and much more, I think it is fair to say that the overwhelming balance of probability is that a comprehensive free trade agreement between the UK and the EU would take more than two years to negotiate. Almost certainly, it would be a "mixed agreement" so it would have to be ratified by all the 27 remaining EU Member States – which could present further problems.

Ratification aside, we are told that the" prospect of German car manufacturers and French wine producers losing market share in the UK" would create substantial pressure to get a deal concluded within the two-year period allowed by the Lisbon Treaty.

But, in fact, EU Member States does not need a trade deal to export to the UK, and neither can the UK impose any barriers to goods from the EU, without also imposing those self-same barriers on all other countries selling goods to the UK. This is part of WTO non-discrimination rules, where the UK acquires Most Favoured Nation (MFN) status.

On the other hand, the EU – as an established Regional Trade Agreement (RTA) – is allowed to impose discriminatory access rules to its members' markets, applying to nations defined as "third countries" a complex series of hurdles that make import difficult and expensive.

Since it is extremely unlikely that the UK would want to beggar its economy by erecting trade barriers (over and above those already in existence, and perhaps not even those), it is unlikely to impose any significant barriers to trade with the EU. By contrast though, EU barriers apply automatically to "third countries", built into the EU acquis.

Thus, the UK needs a trade agreement with the EU far more than it needs an agreement with us. And if the negotiations take us up to the two-year limit set by Article 50, that puts EU Member States in a very powerful position. They will be able to use an agreement to extend time as leverage to extract any number of unwelcome concessions.

Now, let's walk away from the land of fixed positions and their attendant certainties and ask how likely it is that we reach a full-blown free-trade agreement with the EU inside two years – not forgetting that it must be ratified and ready to come into force on the day we leave the EU?

If there is an element of uncertainty – and it is hard to argue that there isn't – then the next issue to address is the potential consequences if we fail to reach an agreement in the time, or the price demanded for a time extension is unacceptably high.

There are those who argue that the price of failure would be relatively modest – the imposition of the EU's common external tariff on a range of our products, which would render some of them less competitive, thereby reducing overall our exports to the EU-27 and increasing marginally our trade deficit.

This, however, neglects the impact of non-tariff barriers. Within the Single Market, most of these have been eliminated but, on exiting the market, many would re-emerge.

A small indication of the problems we would face are illustrated by this blogpost, illustrating the vital role of product certification as a requirement for access to Community markets. As we have discussed previously, this goes to recognition of conformity assessment. Outside the Single Market, existing arrangements lapse, as does mutual recognition of standards.

In the first weeks after we leave the EU, without any agreements in place, there is no doubt that importers attempting to bring goods from the UK into circulation within the Community would have a torrid time.

As the narrative to which I have linked above indicates, the crucial element of the EU system is that it is the importers' responsibility to ensure compliance of products presented to EU Member States ports, without evidence of which they cannot be released into circulation.

Without formal arrangements for testing and recognition of the associated documentation, consignments which were previously allowed through on the basis of documentation checks alone will have to be physically inspected. In many instances loads will have to be sampled and detained while testing is carried out.

The effects will be drastic. By comparison, the current delays in Dover are a minor disturbance, but they do show how quickly even small disruptions can turn into a crisis.

Nor have I even sketched the half of it. The inspection regime discussed applies to general goods, but for food and agricultural products, a different regime applies. Products from third countries - which the UK would become, without a trade agreement - must enter though specific ports, designated as Border Inspection Posts (BIPs). These are specific to each country.

Of course, there are no BIPs for the UK as we are in the Single Market. To equip a port (or ports) to function as a BIP capable of handling the traffic from the UK would require a major investment in infrastructure, personnel and systems. Exports of food to the EU-27 would cease, until facilities were made available.

No rational British Government would want this to happen. But under pressure from those who advocate exiting the Single Market, this Government with its slender majority could be forced into making a series of negotiating errors which could drive it down the path to disaster.

This becomes all the more relevant with a Daily Express poll which has 98 percent of respondents - 3,548 people – wanting immediate withdrawal from the EU. John Redwood, we are told, has come up with a plan to get Britain out of the EU "in just a matter of weeks". This "simple solution" involves repealing the 1972 European Communities Act and then informing the EU that the UK is no longer a member but intends to trade tariff free.

If the EU then decides to impose tariffs (which, of course, it would have to do under WTO rules) then Britain would respond. But because the UK has a trade deficit with the EU of almost £24 billion, Redwood has it that a trade war would be more damaging to European countries especially Germany which could lose its biggest car market.

There is no point in beating about the bush here. Such nostrums are insane - they drive a cart and horse through treaty and international law, and would precipitate a massive crisis in the UK, bringing EU trade almost immediately to a halt. Why, after the years of debate on exit strategies, is anyone even talking about immediate repeal of the ECA?

Handled properly, the benefits of Brexit for the UK could be huge, but there should be no illusions about the effects of a botched exit, based on this sort of insanity. We thus need people to stop playing fantasy Brexit and to focus on reality. We really cannot afford these games.

Richard North 26/07/2016 link

Brexit: mixed fortunes for May


Through the fog of political rhetoric, we get from French Finance Minister Michel Sapin a glimpse of the other side of the Brexit adventure, where the uncertainty is as damaging to the other Member States as it is to the United Kingdom.

Thus, while he is reflecting the realism stemming first from Angela Merkel and then his own boss, that the UK was unprepared for the outcome of the referendum to leave the European Union and so should be given time to respond, Sapin is also saying that, it should not take too long because of the damaging uncertainty, said.

"At the time, which is understandable given the shock and the lack of preparation of the British authorities, Britain needed a bit of time to organise itself and reflect on the way it should respond" Sapin tells Reuters.

He then adds: "But the time should not be indefinite, uncertainty is damaging, also economically, and in particular for Great Britain. So one needs to engage in negotiations as soon as possible. The talks cannot be done in bits".

The very last comment – on doing the talks in bit - is a little curious. If, for instance, we are staying in the EEA and rejoining Efta, than the only way the talks can be done is "in bits".

However, one should not run away with the idea that Sapin necessarily knows what he's talking about. Very often in politics, the higher up the tree you go, the less you know of what is going on around you. It would not be the first time that a Minister has been the last one in his own building to learn of important developments.

Nevertheless, the recognition that the UK will need to take a little time before it invokes Article 50 is at least seeping through the body politic, and that bodes well for the UK government, if it uses the time wisely.

On the other hand, nothing we're seeing indicates that the Government has in any way got as grip on the strategic aspects of Brexit, to the extent that it can define its strategic objectives.

Most likely, Mrs May – described by her detractors as a "belief-free zone" - doesn't have any strategic objectives. Rather, she is overly focused on the mechanics of leaving, without giving any thought to what we as a nation can achieve from the process.

All we have on offer of any substance comes from Mr Alexander (aka Boris) Johnson, temporarily on the other side of the Atlantic at the United Nations. He is saying that there is "absolutely no doubt that a balance can be struck" between access to the tariff-free market and the Single Market four freedoms.

But that is not pleasing back-benchers such as Bill Cash. He declares that the 1972 Act has to be repealed, whence he says, "Once we repeal the Act, we can't remain inside that market".

Although Cash has a reputation for being able to clear a room faster than the most strident of fire alarms, one should not under-estimate the mesmeric hold he has on the backbench group of Tory "eurosceptics". They treat him with a reverence normally reserved for minor deities. What Cash says, no "eurosceptic" Tory backbencher dare put asunder.

Thus, behind the scenes, his brooding presence poisons the well of discourse and the group cannot even agree publically on the basics, such as invoking Article 50. In the Land of Cash, to get out of the EU, we repeal the ECA and drop out of the Single Market.

Unsurprisingly, the Cash stance has been adopted by the European Research Group, and informal grouping of Tory eurosceptic MPs, formerly chaired by Chris Heaton-Harris, but now led by Steve Baker.

This is the same MP on the Treasury Committee who was so pressed for time that he couldn't hear my views on the need to stay in the Single Market. His group of MPs "do not trust" May to deliver on her pledge that "Brexit means Brexit" and have decided to insist on "total control of migration" as a "red line" in the Brexit negotiations, the scrapping of the ECA and severance of full links to the Single Market.

Baker says the MPs want to be "constructive" and "don't want to be oppositional ... at the moment", adding that if May sticks to her pledges, "all will be well". But he warns: "If we end up with the government doing things that don't end the supremacy of EU law, don’t leave us able to control our own migration policy and leave us in the EEA, then there will be a great deal of dissatisfaction".

May's position is said to be somewhere "between Canada and Norway", which means it might as well be on planet Zog where she can join Baker who, I guess, is not going to be terribly supportive of Flexcit in the Treasury Committee report.

With the Government limited to a working majority of 16, there are enough of these back-bench trouble-makers to bring down May if things don't go their way, and one MP warns of potential trouble, saying: "We showed under [David] Cameron that we can easily overturn that whenever we want to if we don't like the direction things are going in".

This puts May, potentially, in a difficult position. Seemingly lacking a coherent position of her own, she is also going to be pressured by a totally incoherent group of Tory backbenchers who are so far from reality that planet Zog, by comparison, is a garden suburb.

At a European level, though, May is being told that she cannot expect any special favours when the UK negotiates a new deal. A German government source warned that Merkel believes there will be, "tough times ahead" and that "we are entering a long and difficult process".

With her backbenchers playing hardball, the new Prime Minister may find herself having to rely on Opposition support to keep her agenda on track, with some serious squabbling to come when reality bites and deals have to be made with the "colleagues".

Perversely, that has the Independent forecasting that Mrs May will enjoy only the very briefest of honeymoons, following which she must expect trouble. I wonder at which point she might decide that becoming Prime Minister was a rather bad idea.

Richard North 24/07/2016 link

Brexit: unlimited dishonesty


A much-repeated tweet from Wolfgang Munchau has him complaining that the remain camp not only lost the referendum. "They are, he says, now losing the post-Brexit debate too".

The greatest irony of this is the suggestion that there is any kind of debate going on at all. What we mostly see are hermetically sealed groups, constantly repeating their entrenched positions without variation or deviation – entirely oblivious to the arguments of the competing factions.

As far as I can see, none of them read each other's work (or acknowledge that they have), and from their lofty heights the only thing they have in common is a sneery disdain for outsiders such as, the only sources from which new ideas and information are coming.

In his own article, Munchau thus cites one of his own group, John Springford, who writes a thoroughly dishonest piece under the label of the Centre for European Reform, purporting to inform us of the limited nature of Britain's exit options.

Springford's dishonesty is a classic of its kind. He relies on a mixture of half-truths and disinformation to build a straw man argument, which he then proceeds to demolish in a quite transparent attempt to control the agenda. But it is not a debate – it is simply a series of assertions which Springford wants you to believe, in lieu of the truth.

Interestingly, the main aim is an attempt to convince us that it is not possible to negotiate an exit deal with the EU which keeps us in the Single Market while allowing us to imposing quotas on the number of immigrants from the EU.

To make the case, Springford chooses to contrast two of the three Efta State members of the EEA, Liechtenstein and Norway, while ignoring Iceland. Norway and Liechtenstein, we are told, are full members of the single market, signing up to all rules and standards in goods, services and capital, as they are members of the European Economic Area (EEA). But, it is conceded, "they have different rules governing the free movement of workers".

And it is at this point that the lies, half-truths and deception start. Springford would have it that: "The EEA agreement allows Norway and Liechtenstein to restrict the flows of people if 'serious economic, societal or environmental difficulties of a sectoral or regional nature arise'".

But, in fact, that's not what the EEA Agreement says. The relevant part, Article 112, actually states:
If serious economic, societal or environmental difficulties of a sectorial or regional nature liable to persist are arising, a Contracting Party may unilaterally take appropriate measures under the conditions and procedures laid down in Article 113.
Three issues arise from this. Firstly, the provision applies to all contracting parties, not just Norway and Liechtenstein. Secondly, the scope is far wider than just the movement of people and, thirdly, the application is unilateral. The party taking action does not require the permission of the other parties.

The relevance of Article 112 applying to all contracting parties immediately becomes apparent when we see Springford claiming that "Norway has never used this 'safeguard clause'". That much is true. But the missing country, Iceland, has used the safeguard clause – twice – albeit not in respect of the free movement of persons. And one should also note that the European Commission has used the safeguard measures against Norway, to restrict the flow of farmed salmon.

Furthermore, when the EEA Agreement was first signed, two other signatories, Austria and Switzerland also invoked Article 112, the latter also in respect of free movement of persons. Crucially, once it is realised that safeguard measures are of general application and can be invoked unilaterally, the perspective changes somewhat. But this, Springford doesn't want to happen.

Instead, in Springford's little world, we move on to the lie direct. The reason, he claims, is that Norway didn't invoke safeguard measures is because "under the agreement, the EU may retaliate by restricting imports of goods or services from Norway".

And that really is a lie, at several levels. Firstly, we have to look at the Agreement – in this case Article 114 – which states:
If a safeguard measure taken by a Contracting Party creates an imbalance between the rights and obligations under this Agreement, any other Contracting Party may towards that Contracting Party take such proportionate rebalancing measures as are strictly necessary to remedy the imbalance. Priority shall be given to such measures as will least disturb the functioning of the EEA.
Even a lay interpretation will suffice here to tell the reader that "retaliation" is not an appropriate word. We are looking at "proportionate rebalancing measures", which would be of a limited extent and confined to like measure in respect of the free movement of persons. Such measures could not extend to the movement of goods and services.

The second lie is that Norway never intended to invoke Article 112 in respect of free movement of persons. This country's bigger problem is not immigration but under-population. Half as big again as the entire United Kingdom, it has a population of less than one-twelfth. And, as regards immigration, the major movements come from outside the EU, driven by the country's generous and liberal asylum policy.

Nevertheless, one can see how Springford is building the lies, as he then goes on to claim that: "Liechtenstein has been allowed to restrict free movement since 1998 by imposing quotas on the number of EEA nationals who could live and work in the country".

The key word here is "allowed" – in that, resides another lie. Liechtenstein unilaterally invoked Article 112. It wasn't "allowed" to invoke it. It invoked it as of right, calling in a treaty provision which had been agreed and ratified by all parties.

But then comes the lie indirect – the lie by omission. To understand the story properly, and to put it fully into context, one needs to know that Liechtenstein only briefly invoked the Article – in order then to broker amendments to the EEA Agreement which gave it a permanent solution (taking it outside the ambit of Article 112).

Furthermore, we must factor in Switzerland with its eight million population which, in signing up to the EEA Agreement in 1992, came under the same Protocol 15 which exempted Liechtenstein from the free movement of persons. Had Switzerland remained in the EEA, doubtless it too would be exempt from the full free movement of persons provisions.

Knowing this as we do, the next Springford lie has the transparency of the water in a summer Norwegian fjord. Says our man, the EU "tolerated" the Liechtenstein deal because "it is politically and economically insignificant, and its curbs on free movement do not threaten the integrity of the EU".

That is the lie Springford wants to sell you – one which the establishment is only too keen to perpetrate. Mostly likely, the Treasury Select Committee will buy it, relying on the ignorance of Monnet Professor Dougan, rather than my better researched paper, which they will either not publish or will hide away.

Just to be on the safe side, though, Wolfgang Munchau picks up the lie and runs with it, embellishing it on the way. Liechtenstein becomes a "a tiny city-state" (which it isn't), the outcome becomes "a cherry-picking deal" (which it isn't) and he calls it "an emergency brake on immigration" (which it isn't).

This is the way the game is played. We are fed a diet of lies and half-truths and then what passes for a debate is rigged, so that important information is kept from the people. Sources of alternative information are sneered at, denigrated or simply ignored. The truth will not out. The lies must prevail.

Richard North 20/07/2016 link

Booker: does Brexit mean Brexit?


In his column this week Booker starts with reminding us of the obvious – but oft' neglected point that there will be two sides to the forthcoming Brexit negotiations. Our own attention, he writes, has naturally been focused on the three "leavers" appointed to be chiefly responsible for the negotiations: Alexander (aka Boris) Johnson, David Davis and Liam Fox.

The main worry about these three is that they all suffer from the key problem which bedevilled the official Vote Leave campaign: showing little grasp of the tortuous technicalities involved, none of them are known to be "good on detail".

Each them are tapped in the mind-sapping delusion that the UK could negotiate a one-off trade deal, similar to that between the EU and Canada, which would allow us to continue trading freely with the Single Market, while also allowing us to "take control of our borders" and cut further migration from within the EU.

Davis and the rest of the trio even look on with equanimity the prospect of being forced to rely on WTO rules – clearly without having the first idea of the consequences of this option.

But those who have done their homework, says Booker, point out that the trio's ideas are just dangerous wishful thinking. The Canada deal took seven years to negotiate, and would anyway exclude us from significant aspects of the single market, not least those crucial "passport" rights on financial services.

As for relying on "WTO rules" this could even land us in the absurd situation where EU countries could continue exporting to us while we no longer had the EU paperwork needed to sell to them.

This is something that those few pundits who actually think about such things have a great deal of difficulty – denying this possibility. And thereby we see a perpetuation of wishful thinking, bolstered by the profound ignorance which seems to characterise the "leaver" community.

It actually takes little effort to look up the WTO website and look up the rules for Regional Trade Areas and find that RTAs (of which the EU is an example) are partially exempted from discrimination rules, and are thus allowed to impose special conditions on "third countries" – which the UK would become if it left the EU without negotiating a trade deal.

Further explored here (at length – see p.479 et seq), the corollary of this is that the UK, bound by MFN anti-discrimination rules, cannot exclude imports of products from EU Member States, and certainly can't take retaliatory action.

The case, therefore, is exactly as Booker makes out. We could find ourselves in the absurd position where our goods are held up on entry at EU Member State ports, while goods from EU countries sail through customs here, with very little difficulty.

I must admit to getting seriously fed up with the vacuous optimists who so casually assure us that things will work out, without them displaying the least idea of how the EU rules actually work – especially when it comes to the "WTO option".

For goods to be placed on the "Community market" they must conform with the requirements of Decision No 768/2008/EC on a common framework for the marketing of products, with the provisions set out in more detail in the 144-page Blue Book.

Basically, this Decision presents three hurdles: the requirement is for "economic operators" to ensure that the goods to comply with "all applicable legislation", to ensure that all information they provide with regard to their products is accurate, complete and in compliance with Community rules, and that conformity assessment processes are carried out as appropriate.

It is this latter hurdle that presents so much of a problem for those who would have us rely on the WTO option, for there is no provision here for the automatic recognition of conformity assessment procedures. And without recognition, goods will not be permitted entry into the Community Market.

In all probability, there would be little difficulty in securing a Mutual Recognition Agreement (MRA) on conformity assessment, but the point is that the recognition does not come automatically. It must be negotiated.

Thus does Booker remark that it is now being increasingly realised on the continent that the simplest and most practical way for Britain to achieve what we want is to go for that off-the-shelf solution whereby we leave the EU but remain in the European Economic Area (EEA), where we already are, and join Norway in the European Free Trade Area.

Contrary to common misunderstanding, this would in fact give us more influence over the shaping of single market rules than we have as members of the EU. Furthermore, under Article 112 of the EEA agreement, we could unilaterally insist on limited opt-outs from the EU's "Four Freedoms", including free movement of people, exercising a legal right which has already been used a dozen times.

However, the answer to the "British question" that is now being actively discussed in Brussels (which is desperately keen not to see us, or indeed any other country which might wish to follow our example, leave the EU) is a "two-tier Europe", with the eurozone countries at its core, bent on greater political integration, and the rest, including Britain and Turkey, as "associate" or "outer ring" members.

On paper such a compromise might seem quite attractive. Indeed there are those who spoke privately to Mrs May before the referendum who think she might be among them.

But even if we had escaped from some of the political elements of full EU membership, including the European Court of Justice, we would still then belong to what is being called a "restructured Europe", with Brussels at its gravitational centre.

It is this, warns Booker, we need to keep our eye on in the treacherous months ahead. Because it would definitely be very different from the "Brexit" we thought we were voting for on 23 June. In the event, we could find ourselves trapped in a sort of EEA-plus which is very little different from what we would have ended up with had we stayed in the EU through the next treaty change.

The essence here is that concessions made would look so attractive – at a superficial level – that some would be tempted to treat the EEA as the destination rather than the way-station on the way to something better. We must, therefore, keep emphasising that the EEA (in whatever form offered) is only an interim solution.

Richard North 17/07/2016 link

Brexit: they haven't a clue


When Mr Cameron told us before the referendum that there was no "plan B", and there was no contingency planning being carried out in the Civil Service, it appears that he was not in any way exaggerating. As a result, there is no official view as to what should be done next.

But what is also emerging, as the weeks since the referendum drift by, is that the "remains" generally don't have a clue either.

A graphic example of this can be seen from last week's Treasury Select Committee hearing, when Monnet Professor Michael Dougan, Dr Robin Niblett, Director of Chatham House, Sir Emyr Jones Parry, former UK Permanent Representative to the United Nations, and Raoul Ruparel, Co-Director of Open Europe were brought together to offer Mr Andrew Tyrie (the Chair) and his team their views on the: "Future economic relationship with the European Union".

From the transcript which is now available, we see in the early part of the session a focus not on the future but on what should not or cannot be done. In a bid to change the tone of the meeting, we then get this remarkable exchange:
Chair: Rather than you giving us all the negatives all morning, we are really after what you think the preferred route should be.

Sir Emyr Jones Parry: I think a Commonwealth arrangement is an illusion. What can we do? We have to first identify what our real interests are and what we want. When we have done that we need to see how that fits into any of these arrangements and what price we would be prepared to pay for what we want. Only when you have done that and come up with a sui generis model for the UK.

Q146 Mark Garnier: What you are potentially suggesting is that there will be some parts of the UK economy that we might be prepared to sacrifice in order to benefit other parts which are more important to us.

Sir Emyr Jones Parry: I am not saying that. Judgments will have to be made about real interests, the importance of the Single Market, and whether we were talking just about services. That is the argument about Article 50. Until you have done that I do not see how you can jump in.

Q147 Chair: What is your view?

Sir Emyr Jones Parry: When you have done your homework you then try to devise—

Q148 Chair: What is your view about that homework? What is it?

Sir Emyr Jones Parry: We have to go for as much access to the Single Market as is possible consistent with not paying too high a price for it.

Chair: Okay, that is where we began the hearing a couple of hours ago. We are trying to put some flesh on that.

Sir Emyr Jones Parry: If the whole of Whitehall and the political class has not done its homework do not expect us now to give you a ready-made answer.

Chair: You are supposed to be a bit more alert than the political class to this stuff. After all you have been telling us all along how half-asleep we are.

Professor Dougan: Part of the difficulty why people like us struggle to articulate what comes next is because our position as a country has effectively been hobbled by distorted debates about immigration and about sovereignty. That means that we cannot just identify our national interest and say we want global influence and global leadership and economic prosperity, because a large part of what we would naturally want to do as a sensible, pragmatic country has been distorted and hobbled by these myths around immigration and sovereignty.

Chair: We have got that message pretty loud and clear.
Of all that, what particularly stands out is Sir Emyr Jones Parry saying: "If the whole of Whitehall and the political class has not done its homework do not expect us now to give you a readymade answer". In other words, they have spent so much time and energy telling us that Brexit would be a disaster that they haven't any thought at all to how we actually get out.

And that, it seems, runs across the board, from "remains" to "leavers". But it seems to me also that we have three categories. There are those such as last week's witnesses who were totally opposed to Brexit and so would not even dream of devising an exit plan. They can be categorised as the "negatives".

Then, in the middle are the vast tranche of (mainly) "leavers" who never gave a thought to how we should leave. But they did so because they thought an exit plan wasn't necessary and/or that it was someone else's problem – like the Civil Services. These are the "vacuous".

The third category, on the other hand, are those who think they know how we should leave but whose ideas are so off the wall that they are an embarrassment.

This group includes those who would have us repeal the ECA instead of invoking Article 50, those who opt for the WTO option, and those who believe we can wave a magic wand and wind up with an instant free trade agreement - despite Philip Hammond now telling us that it could take up to six years to complete Brexit.

I suppose we could call the wand-wavers the "disasters", not least because so many of them have absolutely no idea of the damage they seek to cause. And there we have it – basically three shades of ignorance: the "negatives", the "vacuous" and the "disasters". None of them have a clue.

Interestingly from the other side of the divide, we see the idea that "a new form of associate membership in the European Union could rise out of the ashes of the referendum".

This is from Der Spiegel, which tells us that many countries - like Norway and Switzerland, but also Ukraine and Turkey - aren't likely to ever be fully integrated into the European club. But it is in the EU's interest to have long-term relationships with them.

Europe, we are told, has to find a way of not losing Britain entirely in the coming years. The 48 percent on the island who voted to remain in the EU are still there. That's almost half the country who are disappointed in the other half and are now looking to Europe. The greatest mistake possible would be to abandon this part of Britain.

There lies the danger – the very great danger. So grossly unprepared is the establishment that we end up, for want of a plan, with a watered-down version of EU membership encompassing the worst of all possible worlds. We can only hope that the danger will be recognised, and sense will prevail.

Richard North 13/07/2016 link

Brexit: danger either way


With the first round of the Conservative Party leadership contest out of the way, we see Theresa May emerge with what should be an unassailable lead of 165, taking votes from exactly half of the 330 Conservative MPs.

Leadsom trailed badly with a mere 66 votes but beat Gove, with only 48 votes, to second place. Crabb took fourth place with 34 votes and Fox brought up the rear with a mere 16. These two have now pulled out, pledging their support to Mrs May for the next round, to be held on Thursday.

On the face of it, this should give Mrs May a commanding lead, but leave Leadsom still in the race, with the final decision to be put to the constituency members. Struck down by the "curse of the Tory frontrunner", we could then see Leadsom take the crown – and the keys to No 10.

However, we are dealing with what is slated to be one of the most sophisticated electorates in the world. In a bid to strengthen May's position out in the country, her supporters could transfer enough votes to Gove to assure him the second place, reducing to run-off to a contest between May and Gove the "Boris killer". In that scenario, May wins convincingly.

Should the more likely scenario arise, with a final contest between May and Leadsom, and Leadsom wins, we are faced with the great danger of having a woman as prime minister who has little understanding of what it takes to negotiate a successful withdrawal from the EU, and no capacity to develop that understanding.

On the other hand, if May is elected, we are faced with a danger just as great, in having a prime minister who brokers an exit plan which is so successful that we end up stuck with it, and in a position far worse than we are at present.

If this sounds perverse, it is. What we are seeing from the "remains" is a sudden enthusiasm for the Efta/EEA or "Norway option", an option which, prior to the referendum, they had all been falling over themselves to demolish.

This, as readers here well know, we support as an interim option, acknowledging that it would be completely untenable for the United Kingdom in the longer term. We thus look for a different end game, which then takes us out of the EEA – with other Efta members – leaving the Agreement to collapse.

Unfortunately, the opposition is wise to the flaws of the EEA option and, from the Robert Schuman Foundation, the intellectual heart of the EU, we see proposals to modify the EEA to such an extent that it will soften some of the worst features of the EEA, and thus weaken the pressure to move on.

What they have in mind are changes to Part VII of the EEA Agreement, addressing "the inability of the EEA States" (they mean Efta states) to take part in the vote over the internal market rules.

Instead of the Council of the European Union (formerly the Council of Ministers) taking the dominant role, the EEA Council would be the body charged with approving Single Market legislation, thereby giving Efta members some "say" in how the rules were made.

These decision-making powers might also be extended to the Union’s programmes in which the Efta states had chosen to participate, such as the research framework.

Similarly, the Foundation argues, it might be possible for the mixed EEA parliamentary committee to be transformed to include all Union parliamentarians and "European Members of Parliament" appointed by the non-EU EEA States. These EMPs would meet in Brussels and be able to take part in co-decision in the same way as the EEA Council.

As to freedom of movement, the Foundation acknowledges that it would continue to apply. But it notes that "the EEA Agreement provides safeguard mechanisms that can be activated unilaterally". Thus, far from trying to conceal or argue against the Liechtenstein solution, it seems possible that the UK could be offered this as a way out of the free movement impasse

The changes proposed, if implemented - plus the application of the Liechtenstein solution (which would perhaps involve some reciprocal restrictions) - would effectively formalise the creation of a multi-speed Europe. The UK would become part of the "outer circle" of a construct dominated by the eurozone, the result little different from the "associate membership" expected of a new treaty.

By this means, we could be on the way to becoming a "second-class citizen", locked in a Greater Europe whose appetite for the creation of a United States of Europe would be entirely undiminished. The only difference is that it would be disguised as membership of an enhanced EEA, possibly termed the "EEA-plus". We would be "out" but still in.

In the choice between May and Leadsom, therefore, we could find ourselves wedged between two undesirable outcomes – a choice between second-class membership in an enhanced EEA, or the chaos of a world outside the Single Market with no coherent replacement. In these choices, there is danger either way.

The obvious antidote is to create a third way, the idea set out in Flexcit, where the third phase offers the opportunity of creating a genuine Europe-wide single market, freed from the grip of Brussels. For that, we will probably have to look not to either of the leadership contender front runners, but to Parliament, which has the power to shape the exit settlement, if it chooses to use that power.

To that effect, as Flexcit nears 100,000 downloads, we have published a new edition, Version 7. This is the first written specifically for the post-referendum period. It is marginally shorter, despite additions which cover border issues in Ireland, EU budget contributions and the Liechtenstein solution, omitting some of the arguments relevant only to the referendum campaign.

Progressively, we will reshape the contents to put more emphasis on the end game, rather than on the mechanics of leaving the EU, in the hope of influencing the final outcome. For the moment, though, we must watch the ghastly charade of the leadership election, knowing that neither candidate is ideal, and that there is danger either way, irrespective of who is elected.

Richard North 06/07/2016 link

Brexit: the rats rejoin the ship


In yesterday's speech (Friday), running to around 5,000 words and taking an hour to deliver, Michael Gove's "plan for the United Kingdom" certainly demonstrated that he is fond of the sound of his own voice – excessively so.

When it actually came to talking about his plans for Brexit, though, that took less than 250 words. Mr Gove promised to deliver "specific changes". We would, "leave the European Union, end the supremacy of EU law and take back control of our democracy". With my leadership, it will be delivered, he said.

On the promise to take back control of our borders, Mr Gove informed us that he would "end free movement, introduce an Australian-style points-based system for immigration, and bring numbers down".

As to the money we currently send to Brussels, with his "leadership", it would be invested "on the priorities of the British people - principally in the NHS - and to cut VAT on domestic fuel".

The referendum, he said, "was about democratic accountability the principle that politicians must answer, as directly as possible, to the people who elected them". Because of that, Mr Gove believed that the next Prime Minister had to be "on the winning side of the argument".

Put simply, he said: "the best person to lead Britain out of the European Union is someone who argued to get Britain out of the European Union. That is best for the country - to retain the trust of millions of voters - and it is best for the Conservative party too".

What this "best person" singularly failed to deliver, though, was any detail at all about how he would achieve such wondrous things. And, in terms of trade, all we got from him, in one of two mentions, was that he was "a passionate supporter of free markets, free trade and free enterprise".

"We need bold leadership", said this best person, "both to negotiate our new relationship with the European union, and to pursue new trade deals with the rest of the world… with the US, the Commonwealth and the growing markets in South and East Asia".

With 5,000 words at his disposal, and the undivided attention of the world's press, you might have thought that he could then devote even a tiny ration to telling us what sort of relationship he had in mind, when he was going to trigger Article 50 to set negotiations in motion and how he was going to reconcile the need for a trade agreement with free movement of persons.

That we got such thin gruel, at this stage, is completely unacceptable. Business, for all its support of staying in, nevertheless needs more to go on than what Mr Gove had to offer, just as we all need a better idea of what he has in mind, in order to make an informed choice (not that we actually get a choice).

One suspects, though, that Mr Gove, having wafted through the referendum campaign with no clear exit plan, has very little more idea than when he was clambering out of a bright red bus proclaiming that we would give £350 million a week to the NHS – a detail noticeably absent from yesterday's speech.

But then, with only Dominic Cummings to rely on, the "best person" was hardly equipped to do detail. Perhaps the only real detail to come from Mt Gove – and then only in the questions session – was that he would not give Cummings a job in No 10 or his government.

As to a coherent exit plan, no more detail is forthcoming from the other contenders but, while the politicians retreat behind their smokescreens of waffle, the world and his wife is leaping into print, to offer ideas – mostly centring around the Norway/EEA option.

With far more clarity than "best person" Gove was able to muster, we thus have David Frost, head of the Scotch Whisky Association, talking up the Norway option, "but explicitly as a transitional arrangement", while relying on the protection of "the EEA safeguard clause for free movement".

Despite the uncanny similarity in approach, there was no mention of Flexcit, but his adoption of the principles at least puts Frost streets ahead of Wolfgang Münchau hiding behind the Financial Times paywall to tell us the Norway option "is the best available for the UK".

The Norway option, the Great Sage says, is "the economically most benign of all" and "is economically almost neutral" – which is exactly what I've been saying forever. But in FT land, time has stood still, as Wolfgang gravely informs us that "it would not allow Britain to curtail free movement of labour".

But at least this man is also thinking "transitional arrangement", arguing that you could impose a time limit - say, ten years. We could then continue the arrangement indefinitely, opt out of the EEA and seek a bilateral trade agreement, opt back into full EU membership under Article 49.

Gradually, but oh so slowly, the message is beginning it get through – more than two years after I launched the idea in my paper rejected by the IEA. But then, at least we have a Ukip plan on which to rely.

How interesting it is, therefore, that about the only politician so far to offer anything sensible about leaving the EU is the dyed-in the wool "remainer" Theresa May. The mumsy Andrea Leadsom clearly isn't cutting it, thus opening the way for May's uncontested "coronation" some time next week – or so the "Fleet Street" scuttlebutt goes.

By then, one suspects, the "rats" who so quickly deserted the "Norway option" ship will all be swarming back on board. 


I'm shortly off to Bristol, thence to attend Yeovilton Air Show tomorrow (Saturday) – something of an annual North tradition – returning late Sunday. Until I return, blogging will be light to non-existent.

Richard North 02/07/2016 link

Brexit: letting off steam


What does not come over from the media reports, but is extremely evident from President Tusk's statement, is that the meeting in Brussels yesterday of Heads of States and Governments (HSGs) was an informal gathering which had no official status whatsoever.

The gathering, from which the UK was excluded, was not meeting as the European Council (even though it was using – or abusing – Council facilities) and had thus no authority to make decisions or policy on behalf of the European Union. Effectively, this was an exercise in letting off steam.

On the receiving end of the messages, we assume that the "colleagues", individually and collectively, are talking to us. This isn't always the case, and sometimes it isn't the case at all. For the most part, these are politicians speaking to their own domestic audiences - especially Merkel and Hollande, who are facing re-election next year.

What this means, though, is that the much-touted "decision" that the UK "will not be given access to Europe's single market without accepting freedom of movement rules", has no legal force – and probably no practical effect.

Even the choice of terminology is a bit odd, with President Tusk, speaking in English, saying that: "Leaders made it crystal clear that access to the Single Market requires acceptance of all four freedoms, including the freedom of movement. There will be no single market à la carte".

One is never really sure in these circumstances what is meant by "access" to the Single Market. Properly defined, the Single Market is a common regulatory area. A country is either part of it, or it is not. If it is not, then it can trade with the countries forming the Single Market, on defined terms. But for the most part those countries which have trading privileges are not required to accept the full freedoms.

The more one explores this subject, though, the more anomalies are thrown up. For instance, it is common to talk of the Single Market acquis is if it was a monolithic block, common to the entire area. Yet, that is not the case. There is unrestricted trade in agricultural products between the EU-28 but not within the EEA. The Efta states are not part of that market.

Thus, while all Single Market legislation supposedly has the description, "EEA Relevance" appended to it, this is not the case with laws governing agricultural products. We can see that from this example. Norway, Iceland and Liechtenstein do not apply these standards (through the EU).

The point that emerges from this is that the Single Market is actually quite flexible - more so than would appear. It can be modified according to circumstances, and different versions of it exist, in different areas. There is no reason in principle, therefore, why the UK should not negotiate its own specific version of the supposedly Single (but actually "variable") Market.

And that very much appears to be the case with freedom of movement. It actually matters not what the HSGs say in an informal meeting because – as we saw with Leichtenstein - the provision for exemption is built into the EEA agreement.

The important thing here is that invoking Article 112 is not bending or twisting the law. Nor is the Article a "loophole" – it is a fundamental part of the Agreement. Thus, to use it to cap immigration is to use it precisely for one of the purposes for which it was intended. And, given that – for Efta states – its application is unilateral, there is no mechanism for over-riding it.

It could of course, come to pass in the Article 50 negotiations, that the remaining EU members refuse to allow the UK to stay in the EEA, or seek to modify the Agreement.

Either would be problematical, and would create as many problems for the EU as it would the UK. Administratively, the EU simply does not want another unique arrangement with a neighbour, absorbing disproportionate amounts of resource.

This has actually been the problem with the Swiss agreements. From the EU's point of view, they are resource-intensive. It would prefer to fold Switzerland into a standard "neighbourhood agreement", common to all its near-neighbours.

Switzerland also has another edge to it, with the outcome of the 2014 referendum on immigration quotas, which is very far from resolved. The EU could find itself fighting quota battles on two fronts, from a weaker position than currently appears.

Nevertheless, as always, our own people are proving to be the greater part of the problem. Fresh out of the "stupid bin" is our old friend Farage who is blithely disowning the Norway option. "We didn't vote for that", he says. "We did not vote to be part of this outdated cartel that is called the single market. We voted to be free of it, to stop regulating the 88 percent of the economy that does not export goods to the European Union".

Having given no serious thought to a post-exit settlement, it is not helpful to have the likes of Farage sounding off, especially as he is speaking against the one option that has any great utility as part of an interim settlement.

He is by no means the only one, but gradually, Flexcit is getting an airing. We're now recording well over 90,000 downloads and will be reaching 100K shortly. The determination in some quarters to ignore the only plan in town is now looking not just small-minded but downright silly. 

For all that, I'm glad I called it Flexcit, with the "Fl" standing for flexibility. We are having to adjust to the changing circumstances, but at least we can. It's the EU which is having the problems adjusting. We're ahead of the game.

Richard North 30/06/2016 link

EU Referendum: winning the peace


When I was researching for my book, The Many, Not The Few, on the Battle for Britain, I was staggered to read in Cabinet papers in 1940, when Britain's peril was at its height, discussions about the post-war reconstruction of Europe.

That was the sort of forward thinking that the "eurosceptic" movement should have been doing but, apart from Flexcit and the heroic efforts of EUReferendum readers, there is is precious little to fall back on. We've been fighting the "war" for so many decades, with so little expectation of winning, that we've not devoted anything like enough time to winning the "peace".

Now, we are probably in greater peril than we've ever been before. The "leave" factions are still split, and with much energy being soaked up in the Conservative Party leadership campaign, this means we are still not focused on the issue at hand.

The ex-remains (XRs), however, are by no means as distracted. Most of the ideas for the the post-exit settlement are coming from that quarter, mainly centred around the "Norway/EEA option" which is suddenly coming into fashion as the alternative to EU membership. Even Kenneth Clarke recommended it, you will recall.

But there is no way that this option was ever acceptable as the end game. It always was sub-optimal, and was tolerable only as a short-term interim measure. If it is imposed on us by the XRs, we will be worse off than when we were in the EU. Frying pan and fire are still very much in my mind.

Yesterday, I was in London at a Leave Alliance meeting and there it dawned on me how ill-prepared we are to fight the coming battle. It is absolutely true that Whitehall didn't have a plan, and Vote Leave certainly doesn't have one. And, of course, neither does Farage. We are, therefore, at risk of losing the battle before many of us even realise what is at stake.

The media are thrashing around, reinventing the wheel and dealing with issues at a pathetically simplistic level. Politicians likewise are so far behind the curve that they're struggling to catch up. Most of them never will.

With tiredness temporarily at bay, I will return to the issues today, adding to this blogpost, and then do a round-up for the overnight post. To my mind, there are two immediate issues to resolve. Firstly, when and under what conditions should we invoke Article 50? Second, how do we resolve the conflict between Single Market participation and the requirement to allow free movement of persons.

In the meantime, treat the "comments" as an open thread, and I'll take up the conversation on this blogpost as it develops.


Update: A change of mind ... I'm preparing a new post, on the timing of our Article 50 notification.

Richard North 29/06/2016 link

EU Referendum: the Liechtenstein solution


Updated: see this post here

Throughout much of the referendum debate, it has been assumed that, in order to continue participating in the Single Market, we would have to accept freedom of movement. Any number of high-ranking Commission officials have warned us that this is "non-negotiable".

Now, at last, we are beginning to have the debate we should have had before the referendum, we have the know-all BBC creeping out of the woodwork, together with others, to remind us of this, as more and more Johnny-come-latelys leap on the EEA bandwagon, including the revered Chatham House.

However, we should have known that the Commission officials (and the European politicians who joined them), were not telling the truth about freedom of movement – or at least the whole truth in respect of the EEA.

Almost too late, we discovered something hidden in plain sight: the fact that the EU has been quite willing to negotiate with one of the three Efta/EEA states on freedom of movement. Furthermore, they have come to an amicable solution, which has allowed it to secure an amendment to the treaty giving it a permanent opt-out to freedom of movement. The state concerned now operates a quota system little different in principle to the Australian points system.

That the state is the principality of Liechtenstein need not worry us. It may be a tiny micro-state with a population of 37,000 spread over an area of 61 square miles – less than half the area of the Isle of Wight – but it is a fully-fledged Contracting Party to the EEA Agreement. It has assumed exactly the same rights and responsibilities as any other Efta state.

Furthermore, Iceland has used exactly the same provisions to suspend free movement of capital following the 2008 financial crisis, demonstrating that there is a real and effective option within the EEA Agreement which could be available to the UK, and solve a lot of problems.

I've already told the story in parts, but for the record, I am now bringing it together under one head in this blogpost. That way, the  media and politicians can ignore it properly, instead of pretending they haven't seen it. I've also written up a version in Flexcit, so that they can ignore it there as well, leaving its 90,000-plus readers better informed than those who seek to instruct us.

The story starts – and a fascinating one it is – before Liechtenstein joined the EEA on 1 May 1995. We can actually take 10 March 1995 as the beginning, when the EEA Council - part of the formal consultation structure set up under the agreement – looked at the situation dominating Liechtenstein's entry.

The Council recognised that Liechtenstein had "a very small inhabitable area of rural character with an unusually high percentage of non-national residents and employees". And it decided that this microstate could easily be swamped by immigrants if unrestricted free movement of workers was permitted. Like the UK, but at the opposite end of the scale, the country was not able to absorb unlimited numbers.

Moreover, the Council acknowledged "the vital interest of Liechtenstein to maintain its own national identity". It thus concluded that the situation "might justify the taking of safeguard measures by Liechtenstein as provided for in Article 112 of the EEA Agreement".

Article 112 is part of the "safeguard measures" – popularly known as the "emergency brake". Where serious economic, societal or environmental difficulties of a sectorial (sic) or regional nature arise, which are liable to persist, it allows Efta states (but not EU Member States) unilaterally to take appropriate measures to resolve them. EU Member States have to rely on the Commission to take action.

Back in 1995, with a massive immigration problem looming, the EEA Council asked all members to "endeavour to find a solution which allowed Liechtenstein to avoid having recourse to safeguard measures". However, no long-term solution was found so a temporary expedient was arranged: transitional arrangements which allowed the country to impose "quantitative limitations" on immigration until 1 January 1998. These were incorporated into Protocol 15, appended to the Agreement.

The next move was towards the end of 1997, just before the end of the transitional period. There had been no long-term solution found so Liechtenstein unilaterally invoked the Article 112 safeguard measures. By this means, it kept the existing immigration restrictions in place when the transitional period ended. 

There were further attempts to resolve the situation in 1998, which were unsuccessful. Then, on 17 December 1999 after a further review, the EEA Joint Committee (another of the formal EEA bodies that mysteriously have "no influence") decided that the "specific geographical situation of Liechtenstein" still justified "the maintenance of certain conditions on the right of taking up residence in that country".

This unstable situation, however, could not be allowed to last. In order to resolve it, the Joint Committee came up with a proposal for a longer-term solution. Liechtenstein was to be allowed to introduce a quota system controlling the number of workers allowed to enter the country. This was given formal status by an amendment to Annex VIII of the EEA Agreement, setting out what were called "sectoral adaptations", cross-referred to Annex V on the free movement of workers.

As a formal amendment to the EEA Agreement, the decision provided for a new transitional period until 31 December 2006, and allowed for the new measures to apply subject to a review "every five years, for the first time before May 2009".

After reviews in 2009 and in 2015, it was concluded that there was no need to make any change to the current rules. The provisions on the "sectoral adaptations" could remain unchanged. Under the current arrangement, Liechtenstein issues 56 residence permits for economically active and 16 permits to economically non-active persons each year. Half of the totally available permits are decided by lottery, held twice a year.

The numbers involved are, of course, small beer, but Liechtenstein is a tiny country. What matters is that a precedent has been set. Within the framework of the EEA Agreement, an Efta state has suspended freedom of movement and replaced it with a quota system for what amounts to an indefinite period.

This is where the situation currently stands. Thus, whatever the EU might declare in terms of freedom of movement being "non-negotiable" for EU Member States, it is undeniable that it is negotiable within the framework of the EEA Agreement, as it applies to Efta states.

Therefore, if the UK chooses to follow the Efta/EEA option as an interim solution to expedite the Article 50 settlement, once the agreement is adopted it can follow the procedural steps pioneered by Liechtenstein. And by this means, it can impose limits on immigration from EEA states.

In terms of applying a quota system, it should be noted that, in the Australian-style points system, only 23 percent of the migrants admitted come under the points system. The overall limit is set by way of an arbitrary quota, set annually – currently at 190,000. This is, by any measure, a quota system.

To that extent, the UK can have some of its cake and eat it. The "Liechtenstein solution" potentially gives our negotiators far more flexibility than at first imagined. We accept the EEA acquis as it stands, but negotiate "sectoral adaptations" that bring the Agreement into line with UK needs. This should help us reach an amicable settlement with the EU, while keeping us in the Single Market.

Richard North 28/06/2016 link

EU Referendum: the opportunity we didn't deserve?


000a Booker-026 govern.jpg

"Are we still capable of governing ourselves?", is the headline of the Booker column today. There could be no better summing-up of the extraordinary situation in which we all find ourselves this weekend, he writes, than the quotation at the beginning of The Great Deception, the history of the EU we wrote a decade ago.

In 1950, when steps were first being made to create a supranational government for Europe, Britain's then-foreign secretary, Ernest Bevin, memorably observed "if you open that Pandora’s box, you never know what Trojan 'orses will jump out".

Says Booker, despite having spent much of the past 24 years trying to explain why Britain's decision to submit to that weird supranational form of government had been, in Lady Thatcher's words, "a political error of the first magnitude", he confesses that on Thursday night he was just as startled as anyone by how the referendum results unfolded.

So dismally had the campaign been conducted by both sides that, right to the end, he was predicting as the best outcome a 48-52 per cent split in favour of Remain – except that it turned out to be exactly the other way round.

Booker, of course, was not the only one to call it wrong, but now we are faced with this Brexit earthquake, Booker is reminded of a scene in a Marx Brothers film where one of them asks a bystander to choose five cards before putting them back in the pack. "Do you want them one at a time" he asks, "or all at once?". When the answer is "all together", he throws the cards up in the air so that they shower all over the place.

Such is our position today – when the cards of Britain's future seem suddenly to have been scattered in all directions. Now Humpty Dumpty has fallen so unexpectedly off his wall, where are all the king's men to put him together again?

The last people to advise on how we should now proceed are those leaders of the Vote Leave campaign, who we all feared would lose us the battle by their refusal to offer a properly worked-out "exit plan": one capable of neutralising Project Fear by allowing us to continue trading, like independent Norway, just as freely with the single market as we do now; but without the political baggage and without having to obey three quarters of the EU's laws.

That, says Booker, is the only intelligent way to go. Yet, as he has asked before, are our politicians and civil servants any longer capable of negotiating such a sensible withdrawal? For decades they have become so used to working within the claustrophobic supranational Brussels system that one has to wonder whether we are any longer capable of governing ourselves.

The real reason why the British people voted as they did, it seems, was not due to the lamentably inadequate arguments put forward by Vote Leave, but by a deep sense that they no longer wish to be ruled by a system they don't understand and by a remote, self-serving political elite, wholly unresponsive to their concerns – exactly that sense of alienation we now see welling up across the EU.

That is why we see crises piling in on the EU from all sides, as that wishful thinking dedicated to suppressing national identity collides with the sense of national interest in all directions – the euro, migration, Ukraine. All these are self-inflicted wounds, and now Brexit adds yet another.

Booker then reminds us that the process of disentangling ourselves from this infinitely complex supranational system will be a much more difficult and lengthier task than most people realise.

"Have we slept so long cocooned in its emasculating embrace that we are no longer capable of rising to that challenge in the grown-up way that it requires?", he asks. Such is the task now before us. Otherwise, having opened Pandora's box, we shall see all those Trojan horses running rings around us – in a way that may cause us to look back on June 2016 as the opportunity we didn't deserve.

Richard North 26/06/2016 link

EU Referendum: so it's out then!


Guest post by Pete North
Well, we've done it. Defying all of my expectations. Firstly, I want to get some things out of the way. Though I was wrong about the result I think the Vote Leave campaign was dismal. I believe it is responsible for this being a slim victory and not a landslide. Those ideas put forth by the leave camp have been wholly disgusting and factually incorrect. I do want to leave the EU but I do not seek the Britain as envisaged by the Tory right, the Labour left or Ukip. Thankfully, reality stands in the way of that.

As campaigner and contributing editor at The Leave Alliance, you should know this. The official Leave campaign was one widely opposed and we never wanted the likes of Boris Johnson or Farage. These are not informed men and they have no idea what they are talking about. Our ethos at TLA was to make a liberal case for leaving the EU, seeking not to dodge the political realities.

To that end, we produced a comprehensive Brexit plan which is rumoured to be required reading in the civil service. We make the case that leaving the EU in a single bound is impossible as it is damaging both to the EU and the UK. And so our recommended path is similar to that of Norway whereby we retain single market membership and freedom of movement.

The funding for the official Vote Leave campaign dries up today and that malign entity will be dismantled. What Ukip says will no longer be relevant. This is now a decision for the adults.

The majority of MPs are opposed to leaving the EU and so they absolutely will not support any moves to leave the EEA as well and so there are democratic safeguards in place to ensure extreme measures are not taken. 

We are meeting on Tuesday to discuss future direction. The proposal will be to continue making the case for Flexcit and for Efta membership under the banner of TLA. It sees us as close allies of the EU but not subordinate to it, which I believe is best for the UK. It retains most of the advantages of the EU without requiring a political merger and gives us control of key policy. I think it is the right move.

This is not about hostility to Europeans or Europe. This is hostility to our political class who continued to commit us to further subordination without public consent. One way or another, Britain will remain a liberal and tolerant nation. We are simply choosing a different mode for our relations with Europe. 

The EU is based on a dogmatic principle of supranationalism. We are departing from that to a more multilateral mode both in Efta and the WTO. This is not the end of the world and I can assure you Ukip and the likes will not get their way. We know this because they only scored 14% at the general election. There are more of us than there are of them.

As a committed leaver for all of my adult life I detest Ukip and what they stand for. And so do our thousands of supporters. I believe this is the right move because the question is now resolved, we can reboot British politics, redesign British governance and move on from a 40 year quarrel. Politics will be far healthier for it at the end of this process.

In the meantime, nothing happens immediately, there is no need for alarm. Brexit is a process, not an event and we will see in due course that the propaganda spouted by the remain campaign was a gross distortion of the facts. 

Though if you wish to guarantee Britain remains a liberal and tolerant country, it will require of you that you maintain current levels of political particpation and speak up for what you believe in. We have been disengaged for far too long which is why we are even here in the first place.

There will be more to discuss and this blog will continue as normal and I expect there is more work to be done. Meanwhile, enjoy the party. You have earned it.

Pete also blogs here, on Pete North's political blog.

Pete North 24/06/2016 link

EU Referendum: spilling the beans on cucumbers


When on 19 May Jeremy Paxman opened his programme on "Who Really Rules Us?", declaring that: "Everywhere you look, the European Union is telling us what to do", he chose to illustrate his point by brandishing a cucumber and regaling us with details of Commission Regulation (EEC) No 1677/88.

The very least you would think the BBC might be able to trail in the wake of Huffington Post and revisit its own ignorance. Having made such a meal of the "cucumber regulation, it should now broadcast a report on the blog by UNECE's executive secretary, Christian Friis Bach.

Headed, "Cucumbers: Blame the UN", Bach writes that, as the UK referendum on Brexit approaches, he feels "obliged to stand forward and confess" – something which the BBC is clearly unable to do. The European Union, he says, is often criticized for dealing with ridiculous things such as the shape of cucumbers: banning the curved ones and imposing straight ones on farmers and consumers alike. But, he adds: "this story is wrong for three reasons".

The first and foremost of these reasons is not the European Union that has developed the current standard for cucumbers. It is the UN or to be more specific Bach's organization, the United Nations Economic Commission for Europe (UNECE).

In fact, he says, the European Union does not have a specific cucumber standard but traders can refer to the UNECE standard to meet the EU's general marketing requirements. Therefore, "don't blame the EU, blame us".

The second reason Bach puts in that the standard does not force all cucumbers to be equally straight. It is correct that an Extra Class or Class I cucumber can only bend 1 centimetre for each 10 centimetres. But a Class II cucumber can actually bend 2 centimetres for each 10 centimetres. There are straight cucumbers and not so straight cucumbers.

But the third and most important reason for why the story is wrong, is because these agricultural standards are very useful and widely used. The standards not only facilitate trade, they also help producers get a better price for better quality.

Traders in the UK can buy cucumbers from Spain or Morocco, or any other country by simply referring to the standard. They will then be able to compare prices, knowing exactly what they will get. There is no need to travel all the way to where the cucumbers are grown to inspect them.

The quality is defined by the standard. So, if you order Class I cucumbers, you will get Class I cucumbers. This is trade facilitation at its best. And the producers of Class I cucumbers, wherever they might be, will get the premium for a Class I cucumber.

But, says Bach, you could argue, why do they have to be straight? What about all the curved cucumbers that are then wasted? Should we not fight food waste?

Bach readily concedes that we should do this. But, he says, this is also part of the logic behind the cucumber standard. Very curved cucumbers are difficult to store in boxes and, when transported, they bump into each other and end up with bruises, especially when travelling longer distances.

This means that they will get soft spots and start rotting before even arriving at the supermarket and will have to be thrown away. Moreover, many cucumbers are processed by machines, and, if they are very curved, they will get stuck in the machine and have to be thrown away.

Finally, experience shows that consumers tend to choose straight cucumbers, so even if the curved ones make it to the shop, some of them will probably be wasted anyway.

It is therefore, Bach says, better to sell and eat curved cucumbers locally in the producing countries. Curved cucumbers are just as delicious as straight ones but not every cucumber is meant to travel and end up in a supermarket. Curved ones can be sold directly by local farms or on local markets or, if no longer edible, they can be collected and used as animal feed or turned into compost.

On that basis, Bach asserts that the cucumber standard is a good standard. And the world needs significantly more cooperation on standards of all kinds, be it in the UN or in the EU. And even if you do not agree, he concludes, then remember if you hear the cucumber critique: do not blame the EU. Credit the UN.

And with this sentiment, we completely agree. Without the predictability that a uniform and enforceable standard gives buyers, trade in cucumbers and the many other products covered by UNECE standards would be far more costly and difficult. Those standards are as important to traders as AAA standards are to battery dealers.

Unfortunately, with the willing complicity of the media, such standards have come to represent the very essence of pettifogging regulation, with the flatulent man-child Alexander (aka Boris) Johnson capitalising on the collective ignorance of the "leavers", poking "fun" at things he clearly doesn't understand.

Through this stupidity, though, he and his ilk have failed to capitalise on one of the most potent weapons available to the "leave" campaign – the globalisation of standards.

The very fact that standards essentially to the conduct of trade are no longer made by the EU but by regional bodies such as UNECE, and global bodies such as Codex, means that we no longer need the EU to drive the development of a European single market.

Right now, a global market is in the making, and as long as we're in the EU, we have no votes at the "top tables". They are no longer in Brussels, but in Geneva, Rome, Paris, Washington, Vancouver, and in cities throughout the world. The cucumber standard is produced in Geneva, but the illustrated brochure is prepared by the OECD in Paris (illustrated).

The "killer point" for the "leave" campaign is that countries like Norway have a vote – but we do not. We have 1/28th of a "common position", which we are obliged to follow. In campaign terms, we've lost a phenomenally important debating point, merely so that "Boris" can indulge his obsession on "bent banana" rules.

Interestingly, I was writing about UNECE and cucumber standards on this blog in June 2014, but our high and mighty "eurosceptic aristocracy" have been far too grand to take notice - or even understand the implications of what I've been writing. Many of them seem to cultivate and take a perverse pride in their own ignorance.

But here we are, with one day to go before polling day and I'm writing about the failure of the "leave" campaign to deploy its resources properly, while no less than the executive secretary of UNECE spills the beans on cucumbers.

Alongside Pete, though, we are aware that such issues are highly sensitive and careless discussion on them might well see another MP slain. When it comes to cucumbers, though, such passions are inevitable.

Nevertheless, win or lose, when it comes to the "debriefing" on this campaign, we won't have to look very far for reasons to explain its poor performance.

Richard North 22/06/2016 link

EU Referendum: Brexit – a state of transition


If leave wins, Britain's partners are likely to offer just three options: the Norwegian model of the European Economic Area (EEA); the Canadian model of a free trade agreement (FTA); and the rules of the World Trade Organisation (WTO). The EU doesn't want to give the UK bilateral treaties (like Switzerland), a customs union (like Turkey) or bespoke arrangements.

Charles Grant, Director of the Centre for European Reform
Years down the line, after thousands of hours of discussion and millions of words written on the subject, when it comes to our options for leaving the EU, one of the country's supposed leading Europhile think tanks is stuck in tramlines, like the car illustrated above - able to go in one direction only. Having established its basic, simplistic options, it has been able to develop.

Where Grant and many others like him fail is in their insistence of looking for an immediate settlement as the first hit. They evidently imagine that we will go to the negotiating tables in Brussels with our end game in sight, seeking to achieve it in the space of the two years allowed in the initial negotiating period allowed by Article 50.

This myopia is all the more remarkable when set against the history of European political integration. The original scope of the Coal and Steel Community, established by treaty in 1950, is very different from that embraced by the Treaty of Rome in 1957. And, 49 years on from that Treaty, the Communities have evolved almost out of all recognition, to become something very different from what was first created.

Yet people like Grant, who writes in The Times alongside colleagues John Springford and Simon Tilford, of their leaden visions, would not seem to allow the United Kingdom the same degree of fluidity and flexibility in ordering their affairs.

Despite being content to allow the European Union to evolve over more than half a Century, they expect a departing UK to rush immediately to a "final solution". Moreover, it is required to do so within a time limit of two years, heedless of the fact that it took the authors of the Lisbon Treaty the best part of eight years to get their creation cranking into action.

With such blinkered vision, we find the same limited set of options on offer, with different casts of characters chewing over the same narrow options. There are only marginal differences between the players. They are all basically trapped in the same unchanging narrative.

Through this means, there has been much discourse about continuing our EEA membership – which would allow us to leave the EU yet remain in the Single Market. This is seen as an attractive option, although it is also seen as of limited attractiveness to some segments of "leave” fraternity, as it would appear to require continued adoption of free movement of people.

If, however, we walk away from this claustrophobic argument where the parameters have been set by our enemies, and take a loftier stance, the horizons expand exponentially.

What we do is separate Brexit into its separate components. Firstly, we have to deal with the politico-legal problem of leaving the EU. Then we have to come up with a measured agreement which will enable us to continue working with the European Union. Thirdly, we need to consider our longer term future.

Never, on the basis of minimal public discourse and a complete absence of government involvement should we even be considering a settlement, negotiated under the artificial constraints of Article 50, to be a one-time deal that will last us for perpetuity. Anything we come up with is going to be an interim deal. Then we look at transitional arrangements.

The moment these points are conceded, everything changes. We need no longer be locked into prolonged and tedious discussions on the relative merits of different options – their advantages and disadvantages. As refugees no more turn their noses up at tents as temporary shelter, we as a nation can afford to look at an interim solution in an entirely different light.

With that in mind, does it really matter that the EEA option is far from ideal? In its alter ego as the "Norway option" it is hated by Norwegian Europhiles because they want to be in the European Union. It is detested by the No2EU campaign because they want a looser, free trade agreement. But, as a halfway house, easing our transition from full EU member to independent state, it has some merit.

The next point we have to deal with is the problem of naming of names. It seems we must have the Norway option (or even a Norwegian model), a Swiss option, a Canadian option, a Turkish option or even, as some have been accused of embracing, an Albanian option.

What no one seems to want to cope with is that the ultimate solution is "none of the above". It's not "options" we want, but solutions. And the solutions we eventually evolve are going to be uniquely British solutions – even if it takes some time to get there.

In fact, we will never get there. From 1950 to the present day, the European Union is work in progress. If it ever gets to be a United States of Europe, it will still be work in progress – just as the United States of America is in a state of constant flux, constantly evolving. Final solutions are for children and demagogues.

In the life of nations, adults commit not to a destination but to the journey – the process, not the outcome. As did none of the founding fathers of the independent United States see the fruits of their endeavours, none of us will ever live to see the final outcome. We can only hope to pass on something of value to our children.

Therefore, it is process that matters. Process is everything. Parliament is not an end state – a museum – but a process. Democracy is not a book or a dry set of rules, but a process. Hence leaving the EU is a process. Once we have departed, the separation and then parallel development will become processes – ever changing and ever-evolving.

Where that will take us, no one knows. The brave visionaries of the 1940s – our parents and grandparents (and for some, great-grandparents) - had no more idea of where there ideas would lead, than we can have when we put in place processes that will lead to our continued life as an independent nation.

However, what we do know is that, as a member of the European Union, we are tapped in an organisation which has as its declared ambition the creation of a United States of Europe and which regards the idea of an independent Britain as an anathema.

That really is the crunch. On Thursday, we will be choosing between a destination and a process: the certainty of a United States of Europe, and goodbye to liberty, or the process of democracy which will take us anywhere our people decide.

And if this means making concessions and compromises to get there, accepting interim solutions and transitional arrangements, so what? Rome wasn't built in a day – and neither will be a free United Kingdom.

Richard North 20/06/2016 link

EU Referendum: Flexcit – not as we know it, Jim


The purpose of Flexcit is to give reassurance to undecided voters, by showing that leaving the EU can be a safe, measured process. It need not have any economic fall-out.

As such, this exit plan does not seek to instruct government. It does not pretend to be actionable policy. It simply conveys a structured argument that says that, if it so desired, the Government can make leaving the EU relatively painless and ultimately very profitable. There is no "leap in the dark".

However, after Vote Leave peremptorily rejected this plan, and after Arron Banks took it on board and then distanced himself from it, it was never going to be easy to get it in front of the public. This is made more difficult by the legacy media's determination to ignore it.

Thus, we really appreciate attempts by supporters to bring Flexcit to the forefront, and have done our best to make the plan accessible. But anything which ends up with Flexcit being misrepresented or distorted, does not do us any favours. The crucial thing is that the plan is a package. It stands or falls as a whole. It is more than one part.

Problematically, though, we are seeing particular aspects of the plan being over-emphasised by the Telegraph in its recent article (above). Doing this and neglecting other parts is to present something which easily be knocked down by our critics. This straw man approach then allows those critics to claim they have demolished the plan, defeating the purpose of our developing it in the first place.

That this is the case has been partly aided by Roland Smith of the Adam Smith Institute. The Telegraph has him discussing a "staged exit from the EU" which appears to be Flexcit but is not. 

Smith initially presented a liberal case for leaving the EU on the Adam Smith website, with a move back into Efta and the EEA", part of a staged process. This was fair enough but, in a series of steps culminating in the Telegraph article, Flexcit has become more and more closely associated with the Norway option.

The point here, of course, is that Flexcit, very specifically, is NOT the Norway option. Phase One of our plan gives three choices, of which Norway is only one. There are two fallbacks, each devised to allow for the eventuality that Britain might fail to rejoin Efta – a prerequisite of the Norway option – or that it might be blocked from continued participation in the EEA.

With no reference to the fallbacks, the Telegraph mistakenly asserts that there is a "larger risk to the Flexcit plan", coming in the form of potential international opposition. Britain's re-entry into EFTA. This we are told "would require the unanimous approval of its existing members". And then, having secured that membership, the UK would "need all 27 of the EU's remaining nations to sign off on it entering the EEA".

Our concern here is that we have gone to extraordinary lengths to avoid our plan being dismissed on these grounds. Failure to join either Efta or the EEA may be a risk to the Norway option, but it is not a problem for Flexcit. If the worst happens, we simply move on to one of the fallbacks – their availability being an absolutely integral part of the plan.

Dwelling on the issue of "entering the EEA", it should be said that the argument has progressed, and in leaps and bounds. Here, the specific point is that the UK is already in the EEA. Thus, it is not a question of "entering the EEA" but of whether we can continue as part of it, having transitioned from the EU to Efta. This issue is discussed at length in Flexcit.

Latterly, we see the transition as one of treaty continuity. The 27 EU Member States (and the three Efta states) can agree that our participation can continue, by consensus. There is no need for each Member State to sign off on the process, making life a whole lot easier.

Further, we are in a much stronger position than might at first appear. The EEA Agreement as between the EU and Efta states relies on the participation of the Efta states. Without their participation, there is no agreement. If the EU refused to agree an orderly transition, the Efta states could pull out, collapsing the agreement and putting the EU's neighbourhood policy in disarray.

That would also have some disadvantages for the Efta states, but they would be able to measure these against the advantage of being part of the world's fourth-largest trade bloc. It would be a matter of who blinks first.

On this issue alone, then, the Telegraph seriously misrepresents Flexcit. But the error is then compounded by speculation that "France could put up a fight". Smith is cited as saying: "There are a number of people in the French political establishment, who would try to dig in and just not do anything", then suggesting that: "Paris could attempt to block a deal outright". But it could not. We have the fallbacks which will prevent this from happening

Failing to mention this, the Telegraph then speculates that, "if opposition proved insurmountable, Westminster would need a backup plan". Ignoring the fact that Flexcit has not one but two backups, we then get a dissertation on the "clean break" option, doing without any trade deal, and instead relying on the WTO option. This is exactly what we wanted to avoid. It creates uncertainty rather than resolving it.

Earlier, we see the Efta/EEA option described as one which, "would result in powers over agriculture, fishing, justice, security, and others being returned to the UK". These alone will "be enough to be getting on with, bearing in mind that we have spent 43 years outsourcing all our capacity in these areas".

Again, this understates the nature of Flexcit. While we will actually be repatriating most of the non-EEA acquis, we have to bear in mind that agricultural products – as well as fisheries products – form a major part of our trade with the EU. Therefore, to maintain regulatory convergence and support equivalence, we will need pro temp to attach both the CAP and the CFP to the EEA, with a country-specific protocol.

With other programmes and continued participation in number of EU agencies, this makes for an EEA-plus solution. It is a "British solution" not the Norway option.

Another area of error is the detail on Liechtenstein in relation to restrictions on free movement, which the Telegraph manages to get spectacularly wrong. Brussels, we are told, granted the principality special status in 1994 under Protocol 15 in the EEA agreement, allowing it to limit the number of new residents for a period of four years. And now, we are told, this agreement remains in place today, and is reviewed on a rolling five-year basis.

In fact, Protocol 15 only dealt with transitional arrangements. As we point out here and here, the current exemption from freedom of movement provisions arises first from Liechtenstein's unilateral use of Article 112 and then from a negotiated agreement, set out in Annex VIII.

Thus, Brussels didn't "grant" Liechtenstein any special status. The principality leveraged its position on the back of Article 112. It owes nothing to the largesse of Brussels – and the arrangement, involving as it does a treaty change, is permanent.

To weaken our case, by getting details wrong, does us no good at all. We are up against formidable and unprincipled enemies, who already have the ear of government and the BBC. Our greatest strengths are accuracy and meticulous attention to detail. We cannot afford to be associated with these errors - that hands the game to our enemies.

Richard North 20/06/2016 link

EU Referendum: will Vote Leave blunders cost us?


Written before the media incontinence over the murder of Jo Cox took hold, Booker writes in his column today of the only two speeches he has made in this entire referendum campaign - one of them here.

In both, he quoted that startling passage from Margaret Thatcher's last book in 2003 where she wrote: "That such an unnecessary and irrational project as building a European super-state was ever embarked on will seem in future years to be perhaps the greatest folly of the modern era. And that Britain, with her traditional strengths and global destiny, should ever have become part of it, will appear a political error of the first magnitude".

Back in 1975, we may recall, when Mrs Thatcher had just become Tory leader, she played a very prominent role in the campaign to keep us in the Common Market. But after 11 years as prime minister, at "the heart of Europe", she had completely reversed her view. This was because she had come to realise that everything she had originally been told about the real nature and purpose of the "European project" was wrong.

She had come to understand that its only real agenda in all it did was to work towards "ever closer union", under a form of governance like nothing the world had seen before. The purpose was to weld all Europe together under a government that was "supranational", never intended to be in any sense accountable or democratic and was based on gradually removing from the member states any important power to govern themselves.

So much further has this process now gone since Mrs Thatcher's time, so enmeshed has our own government become in that vast supranational system, that to extricate ourselves from it would be extraordinarily complex and difficult.

Nevertheless, the silliest decision of our official Vote Leave campaign, says Booker, has been to turn its back on any practical exit plan that would allow us to continue trading with the single market just as freely as we do now.

This would be perfectly possible if we joined countries like Norway, in the European Economic Area (EEA), where we would actually, as an independent nation, have more say in deciding that market's rules than we have as just one country of 28. This alone could have knocked on the head virtually every one of the scare stories on which Project Fear has based its campaign to remain.

Vote Leave rejected this course of action because joining the EEA would mean accepting the EU's freedom of movement rules. But however this week's vote goes, it is not in itself going to solve the immigration issue. And what Vote Leave doesn't seem to realise is that, on the precedent of little Liechtenstein, we could even, in the EEA, achieve a considerable degree of opt-out from that freedom of movement.

The way Vote Leave has chosen to fight this campaign has been just as embarrassingly ill-judged as the "remainers'" Project Fear. Of course, finding a practical way to extricate ourselves would be stupendously difficult. But given intelligence and real political will, it could be done.

If, having voted to leave – for all the sensible reasons which Vote Leave is not grown-up enough to appreciate – we could manage to pull ourselves together again as a self-respecting nation, it could certainly be done.

For those who fear that "leap in the dark" and are thinking of making a reluctant vote to remain, Booker suggests that this same fear may well carry the day. But in a few years time, when the next treaty makes the European Union look a very different and even more alarming prospect than it does today, at least having voted to Leave will enable them to say "we chose right in 2016".

What the outcome will be, of course, it remains to be seen. And it is too early to judge whether the media treatment of Jo Cox will have any significant impact. But, if the response of the Swedish public to the Anna Lindh murder is any guide, then we will see sense prevail.

It would have been that much easier, however, if Vote Leave had adopted Flexcit right at the beginning, instead of its last minute conversion to a shoddy parody of a plan. Perhaps if that had happened, the focus might have been more on the issues than the personalities.

If because of that we do lose, I can see an interesting dynamic emerging where Vote Leave seek to use the treatment of the Jo Cox murder as an alibi for its own incompetence. Needless to say, it will be the first to claim the credit if we win, despite having done everything possible to sabotage the campaign.

However, a common refrain for no end of people is their disgust at both official campaigns, leaving them to make up their minds in spite of what they hear and see, not because of it. More generally, we hope this is also the response to the emotional incontinence pouring from the print and broadcast media.

Win or lose, however, I suspect that politics will never be the same again. This referendum has lifted the lid on British politics and a lot of people have looked inside and have been appalled by what they have seen. There will be no possibility of putting the lid back on and continuing as before. Business as usual is not an option.

Richard North 19/06/2016 link

EU Referendum: immigration and the "British option"


In what is finally a realisation that their voters are none too keen on their embrace of unrestricted immigration, senior Labour politicians from Tom Watson to Yvette Cooper are urging reform of the EU's free movement rules.

Watson, Labour's deputy leader, says the rules would have to be re-examined given the scale of discontent about migration, not just in the UK but across Europe.

Firmly lodged on fantasy island, though, Watson argues that the UK should "reform the rules from inside the EU", using the UK presidency in 2017 to put the issue on the agenda.

Helpfully, the Guardian tells us that EU leaders blocked any changes to the principle of free movement during David Cameron's attempt at EU reforms, with Merkel (amongst others), saying it was "non-negotiable".

However, completely ignoring the lessons from this experience – and what must have dawned on even the thickest of the very thick, that EU "reform" is not a proposition – Watson is saying: "I think it's very likely that a Labour government would want to reform the European Union".

Surely, at some point, there must come an end to the delusions of Westminster politicians, which each party successively pledging "reforms" and then failing at the first hurdles. With Cameron having so spectacularly failed, one wonders what sort of fairy dust Watson is sprinkling if he thinks Labour can do any better.

But, what is emerging from our current investigations is that, while membership of the EU affords little opportunities for change, Efta state members of the EEA have far more flexibility than we imagined.

As to Liechtenstein, this is a country which we have identified as having been able to suspend the full application of freedom of movement, instead applying a modest quota system for migrants, while also participating fully in the Single Market.

It has since emerged that these arrangements have been reviewed twice since the were formalised in 1999, most recently last year, in 2015, when it was concluded that there was no need to alter the current rules. The provisions on the so-called "sectoral adaptations" could remain unchanged.

This means that Liechtenstein has been operating its arrangements for 17 years and there is no suggestion that it should be discontinued. Nor does it matter that Liechtenstein is a micro-state. It is still a fully-fledged contracting party within the terms of the EEA Agreement. Therefore, what applies to one legally can apply to any or all.

And nor is Liechtenstein alone in exempting itself from EEA provisions. As Mary Ellen Synon reminds us, in 2008 Iceland, despite being bound by the EEA Agreement to guarantee freedom of movement of capital, unilaterally invoked safeguard measures and put capital controls in place following the banking crisis.

Iceland could stop the free movement of capital because of Article 112 of the EEA Agreement and that key word, "unilaterally".

How different this is in the event of an EU Member State wishing to employ the so-called "emergency brake". It is required to ask the European Commission to take action on its behalf, leaving David Cameron with his pathetic restriction on migrants' benefits, only after months of high-level negotiation. Tiny Liechtenstein and Iceland – with a population the size of a London Borough – are more powerful in this instance than the mighty United Kingdom.

Safeguard measures, therefore, are turning out to be the best-kept secret of this campaign.

Recently, we saw a YouGov poll commissioned by the Adam Smith Institute which found 54 percent of respondent would support the Norway option, compared to just 25 percent opposed. Some 57 percent thought the government should at least consider such an option.

The irony here is that this enthusiasm for the "Norway Option" is expressed without any specific reference to the safeguard measures, and with respondents being completely unaware even of the concept of "sectoral adaptations", much less the recent history of Liechtenstein in suspending the operation of freedom of movement provisions.

Nor indeed is "Norway Option" representative of Flexcit, or what might be available with a fully negotiated Article 50 settlement. Not least, the UK is going to have to continue operating the CAP and the CFP for the time being, and these will have to be worked into the UK version of the EEA Agreement.

What helps here is the flexibility of this agreement which can accommodate country-specific amendments without changing the fundamental nature of the Agreement. With UK-specific protocols and Annexes, including its own "sectoral adaptations", this will end up being the "British option", tailored to its particular needs.

This does not make it a bespoke agreement, so much as EEA-plus. The point about taking on board the core EEA agreement is that it reduces the number of issues that must be negotiated, giving us a better chance of completing the Article 50 negotiations within the two-year timescale.

Those readers who have followed the accession negotiations for British entry to the EEC, with the first tranche from 1961 to 1963, and then again from 1970 to 1972, will know how the talks were bogged down with the most intricate technical detail, so tedious that after a while, the media stopped reporting it.

In Flexcit, we discuss how the negotiations on agriculture will have to deal with the quota allocations for beef and other commodities. And since the farming subsidy allocation agreed with the WTO is held on behalf of Member States by the Commission, the UK will have to negotiate with the Commission a release of part of its allocation, so that we can fund our famers.

These points, the re-allocation of landing slots for civil aircraft, route permissions and much else that would potentially be voided by Brexit, together with expat rights – including access to medical services – and participation in EU programmes, from space to slaughterhouse monitoring, will all have to be addressed. And then there will doubtless be prolonged and tortuous discussions on the financial settlement.

Fortunately, the EEA Agreement has proved to be a flexible and durable instrument but, even with its adoption, completion of negotiations within the two year timetable will be extremely difficult. Without it, where every detail has to be settled anew, agreement in the time will be impossible.

However, at least there is light at the end of the tunnel in respect of immigration, if we can agree "sectoral adaptations" to the mutual satisfaction of all parties.

But on that note alone, it should be noted that it took Liechtenstein from 1995 to the end of 1999 to resolve the issues – a full five years. And we have only two years to complete a far more ambitious package – the "British option". You can see why the like of Cameron don't want the hassle which, to me, is one of the better reasons we have for leaving the EU.

Richard North 15/06/2016 link

EU Referendum: immigration – more flexibility than thought


As the arguments on the immigration grind on, we see shadow foreign secretary Hilary Benn trying to up the ante, declaring that Brexit "would not put a stop to high levels of immigration of foreign workers". They would "still be needed to care for Britain's ageing population and staff the NHS", he says.

This, however, is missing the point. None but the most extreme are suggesting a complete block on immigration. The Vote Leave proposal on the table is an Australian-style points system, aimed at restoring UK control over the number of migrants permitted to take up work in this country.

Calling it a "points system", though, is a misnomer. Of the migrants admitted to Australia, only 23 percent come under the points system. Control is exerted by reference to an arbitrary quota, set annually – currently at 190,000. It is, by any measure, a quota system.

Now, if Benn is missing the point, and Vote Leave are getting it wrong, we have been vastly understating the options available to us if we leave the EU and exercise the Efta/EEA option. From our recent research, it now looks as if there is a precedent for participating in the Single Market while operating a quota system.

Up to press, we've been projecting a binary choice. We can have participation in the Single Market or we can reject freedom of movement (FoM). We can't do both, albeit that we can implement a unilateral "emergency brake" on immigration, under exceptional circumstances, invoking the "safeguard measures" under Article 112 of the EEA Agreement.

In Flexcit (p.126) we report that these measures had been invoked by EEA member Liechtenstein. Initially, though, that effect was achieved when it joined, through an addendum to the EEA Agreement. This was Protocol 15, which allowed the country to impose "quantitative limitations" on immigration until 1 January 1998.

What happened then was that, in 1995, the EEA Joint Committee - part of the formal consultation structure set up under the agreement - concluded that the situation at the end of the transition period "might justify the taking of safeguard measures by Liechtenstein as provided for in Article 112 of the EEA Agreement".

In Decision No 1/95 of 10 March 1995 it asked the Contracting Parties to "endeavour to find a solution which allows Liechtenstein to avoid having recourse to safeguard measures".

No such solution was found so, in 1997 just before the end of the transitional period, Liechtenstein unilaterally invoked the safeguard measures, thereby continuing to keep the existing immigration restrictions in place when the transitional period ended. There were further attempts to resolve the situation in 1998 which were unsuccessful.  

On 17 December 1999, the EEA Joint Committee decided that the "specific geographical situation of Liechtenstein" still justified "the maintenance of certain conditions on the right of taking up residence in that country". But in order to resolve the situation, it came up with the proposal for a longer-term solution which it set out in Decision No 191/99. This innovative solution allowed Liechtenstein to introduce a quota system controlling the number of workers allowed to enter the country.

The arrangement was given formal status by an amendment to Annex VIII of the EEA Agreement, setting out what were called "sectoral adaptations". This is cross-referred to Annex V on free movement of workers.

The decision provided for a new transitional period until 31 December 2006, and allowed for the new measures to apply subject to a review "every five years, for the first time before May 2009". After reviews in 2009 and in 2015, it was concluded that there was no need to alter the current rules. The provisions on the Sectoral Adaptations could remain unchanged.

Under the current arrangement, in 2011 there were 598 applications for permanent residence from economically active people. Liechtenstein issued 41 residence permits. Half of the total available are decided by a lottery which is held twice a year.

The numbers involved are, of course, small beer. But Liechtenstein is a tiny country. What matters though is that a precedent has been set within the framework of the EEA Agreement. It is possible to suspend freedom of movement in respect of a single country and replace it with a quota system for an indefinite period. It matters not that Liechtenstein is a micro-state. It is a fully-fledged contracting party within the terms of the EEA Agreement. What applies to one legally can apply to any or all.

And, totally contrary to the claims of Open Europe, the arrangement is effectively permanent. For Liechtenstein, it is in its seventeenth year.

Whatever the EU might declare in terms of freedom of movement being "non-negotiable" for EU members, therefore, it has conceded that it is negotiable for Efta/EEA states. And if the Sectoral Adaptations avenue was closed to us, the alternative for the UK as an Efta/EEA state would be unilaterally invoke Article 112, as did Liechtenstein. We could then apply our own controls.

Either way, it is undeniable that there are options within the framework of the EEA Agreement. If tiny Liechtenstein, with a population of 37,000 spread over an area of 61 square miles – less than half the area of the Isle of Wight – can manage it, we should be able to do something like the same deal.

On this basis, there should be no barrier to the "leave" campaign adopting the Efta/EEA option as part of a broader Flexcit plan, resolving immigration and participation in the Single Market. This has the potential to be not just a temporary "fix" but a permanent solution.

Richard North 14/06/2016 link

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