Brexit: EU support on immigration?


In her report to the Commons on the European Council last Monday, Prime Minister Theresa May found herself complaining about the tendency of MPs to reduce Brexit to "binary decisions between either being able to control immigration or having some sort of decent trade arrangements".

"That is not the case", she said: "We are going to be ambitious for what we obtain for the United Kingdom. That means a good trade deal as well as control of immigration".

And now, it would seem, there are stirrings in the brush which may indicate that Mrs May has a far stronger hand on controlling immigration than has been imagined, with allies who may be willing to support her when the chips are down.

The clue lies in a recent report in Hungary Today of a multi-national manpower survey, which had 57 percent of Hungarian employers having trouble filling positions.

Of this, 32 percent were struggling with a lack of applicants for the vacant positions while 31 percent complained of a shortage of skilled labour. Overall, the shortage of skilled labour in Hungary exceeded the global average by 17 percentage points.

Furthermore, there is no doubt as to the reason for this shortage. Hungarian employers are finding that they not only have to compete for skilled employees with domestic competitors but with employers from western Europe and other surrounding countries.

The most significant disadvantage in this competition is the low payment Hungarian companies offer, but there has been a reluctance to increase rates for fear of risk competitiveness. But now the shortage of skilled labour has increased so significantly that it, too, endangers competitiveness.

Thus, while Hungary may toe the line in public, when it comes to supporting the "colleagues" on concessions over freedom of movement, behind the scenes there may well be some support for restraints imposed by the UK after it leaves the EU.

Nor is Hungary alone. Only last year, we were being told that desperate Polish authorities were trying to encourage the hundreds of thousands of workers who moved to the UK to return home amid fears a brain drain is leaving the country short of talent.

With the UK having become the top destination for Polish emigrants, the Warsaw government had set up a Powroty (Returns) programme, and in 2015 launched an internet portal aimed at persuading back the army of well educated and skilled workers who had flocked to the UK. Officials feared they were losing much needed talent and are now trying to provide new opportunities for their expats if they return.

The same year, the Guardian was telling a joke about Bulgarians: three Bulgarian men, dressed in traditional Japanese costume and armed with swords, were walking down a street in Sofia. A passer-by asked them what they were doing. "We are the seven samurai and we want to make this country a better place", the men said. "Why are there only three of you then?", the passer-by asked, "The other four are all working abroad", they replied.

Written by Bulgarian Ivan Krastev, he went on two write that mass emigration of people, mostly aged between 25 and 50, had dramatically hurt the Bulgarian economy and its political system. Businesses were complaining about a shortage of qualified labour. Bulgaria's health system had been deprived of well-trained nurses who could earn several times more by taking care of a family in London than working at a low-paid local hospital.

More recently, we have seen an obscure protest party in Lithuania with just one MP in parliament storming to power in a shock general election victory after pledging to tackle the country's emigration crisis.

Hundreds of thousands of Lithuanians had been lured abroad by higher wages in an alarming "brain drain" that has seen the population plummet to less than 2.6 million It has lost more than 370,000 people - of which roughly half had gone to Britain - since the eastern European country joined the bloc in 2004.

But concern has been evident for more than five years with President Dalia Grybauskaite in 2011 telling the Irish Times: "We are a small nation, and we are losing the most active people between 25 and 40 years old after we have trained them and invested in their education. It is a huge loss".

With a declining population, emigration is now considered to be the most urgent national problem and it is thus unsurprising that the issue has gained so much political traction.

It is not only politics that might work in our favour, though. A crucial driver of migration has been the ability of workers here to send remittances home – worth €13.2 billion in intra-EU flows in 2014. But with the current weakness of the pound, this is becoming less attractive for migrants to Britain.

There is also some sense that economically, after years of recession, the EU-27 are turning the corner, with optimistic forecasts projected for the Autumn Economic Forecast, due in November.

Part of the reason for the rush of migrants to the UK is its relatively buoyant economy, with workers coming to this country instead of Germany and other traditionally high-employment areas. But if the relative balance between the UK and mainland economies changes, there could be commensurate changes to migrant flows.

This relationship is well-proven, with Norway reporting that foreign workers are leaving the country at record levels as the economy dips into recession. Some 3,500 Poles have left Norway, with net losses also experienced amongst migrant workers from Sweden, Lithuania and Germany.

All of this points to the distinct possibility that, when it comes to the Brexit settlement, the "colleagues" may be prepared to tone down their rhetoric and start talking sensibly about immigration quotas. Already, there might have been behind-the-scenes talks, which could explain Mrs May's optimism.

But then, as we have already indicated, freedom of movement always has been negotiable. And just now, the odds of a favourable outcome are looking better by the day.

Richard North 27/10/2016 link

Brexit: no deal would be a disaster


It has recently become painfully obvious, Booker writes, that one of the greatest hidden prices we have paid for our decades of political involvement with "Europe" is the extent to which, in those 40 years, our political class has switched off from trying to understand the immense complexities of the system of government we have increasingly been ruled by. 

Daily we hear and read politicians and commentators showing that they haven't begun to grasp the reality of what we are up against, as we try to disentangle ourselves from that labyrinthine system.

Understandable though it may be that Theresa May should keep her cards close to her chest – not least because she and her closest advisers are still on a sharp learning curve as to what "Brexit means Brexit" really means – our starting point must be the single clearest clue she has yet given as to the direction of her thinking.

Our aim on leaving the EU, she told the Tory conference, must be to retain "maximum possible access to the European market", while escaping subservience to the European Court of Justice (ECJ) and regaining some “control over immigration”.

This shows that she (and her Chancellor Philip Hammond) are fully aware of what they have been told by the City and many others: that dropping out of the single market would be incredibly damaging.

Just to rely, as some wishful thinkers are still urging, on those "WTO rules" which take no account of the regulatory "non-tariff barriers" which would deny us entry to that market, would be catastrophic.

Equally it rules out any idea that, in the two years available, we could somehow negotiate a bespoke free trade deal with the EU, when all precedent shows that this would take far too long and could only give us much less than that "maximum access" to the market Mrs May spoke of.

There really is only one way to achieve her stated aim. That is for Britain to remain in the wider European Economic Area (EEA) and apply to join Norway in the European Free Trade Association (Efta).

Those arguing that this would be little different from staying in the EU are clearly unaware that, of the 19,886 laws currently in force in the EU, Efta/EEA members have only to comply with 5,288, barely a quarter, almost all concerned with trade. Nor would we be under the jurisdiction of the ECJ (although Efta's own court does choose to shadow some ECJ rulings).

In addition, although much of our immigration has nothing to do with the EU, those countries do also have some right to limit migration from within the EU; and the power to negotiate independent trade deals with countries outside the EU, as Mrs May and her ministers want.

Furthermore, we must realise that, in those two years, our negotiations to leave the EU must cover many issues other than trade. Whatever deal we reach, it will need a "secession treaty" ratified by all other EU members, not dissimilar to the "accession treaties" negotiated by countries wishing to join them.

Look on the Europa website at the template for such treaties and they cover 35 separate policy areas, such as agriculture, fisheries, foreign policy and many more, of which only a handful relate to trade.

That as much as anything shows why we need to keep the trade aspects of our Brexit deal as simple as possible, to give enough time for discussion of all those other issues; or we risk the ultimate disaster whereby we drop out of the EU without any deal at all.

Richard North 23/10/2016 link

Brexit: customs cooperation


Continuing on from my earlier piece on the post-Brexit "membership" of the EU's Customs Union, I've been doing a little more delving – all part of the ongoing research for the Monograph on the Single Market.

The indications are that the current obsession with the Customs Union started with the Financial Times in July of this year, when the paper reported that Whitehall was "split" on whether the UK should leave the EU's Customs Union.

But from the narrative offered, it would appear that this is based on a misunderstanding as to what is covered by the Customs Union. And there is  not one element of confusion but two. Firstly, there is a failure properly to distinguish between the Customs Union and the Single Market (both give tariff-free movement of goods within the EU). Then, as significantly, there is a mix-up between two separate concepts: the Customs Union and customs cooperation. Many share this confusion, including the European Commission (click the "Customs Union" entry).

The matter can be cleared up by reference to the Consolidated Treaties. There it can be seen that the Customs Union is Chapter 1 of Title II (TEU) – Articles 30-32 – while customs cooperation is Chapter 2 – Article 33. The two are very separate, in treaty law and in practical terms.

The Customs Union actually pre-dates customs cooperation which was not originally part of the EEC. The original cooperation agreement came outwith the European treaties, in the Naples Convention of 1967. That means that the Customs Union was in place ten years before formal cooperation was introduced, and then not as part of the European treaties. Until the late 80s, goods travelling from one Member State to another still required customs clearance, even though internal tariffs had been abolished.

Despite this, we are told that leaving the Customs Union would create difficulties with "customs formalities", and delays at the ports. But these lie in the domain of customs cooperation and are nothing to do with leaving the Customs Union. Customs "formalities" are defined by the Union Customs Code (UCC), which relies on Article 33 (TEU) for its authority. In this context, the Customs Union is an irrelevance.

But, while I pointed out in my earlier piece that the UK cannot pick up the Customs Union without a treaty framework, neither can it adopt the EU's UCC. This is applicable specifically to EU Member States and cannot be adapted for non EU-members.

Nor indeed does the Customs Code have EEA relevance, so the Efta states – such as Norway - have their own customs codes. Then, through Protocol 10 and Protocol 11 of EEA Agreement, the Efta states agree mutual border inspection programmes with the EU, and commit to "mutual assistance" on customs matters.

These separate Protocols are not part of the Single Market acquis, as such, any more than they are part of the Customs Union. They are, in effect, stand-alone agreements, bolted onto the EEA agreement. They are much the same as Switzerland negotiated in 1997. Along with Japan and China, the United States, where they are not embedded in free trade agreements, most major countries have separate customs cooperation agreements with the EU. This even includes India.

The point here is that, if the UK does not continue its participation in the EEA, it will have to secure a customs cooperation agreement with the EU. This can either be a separate treaty, part of the Article 50 settlement, or embedded in a free trade agreement.

Without such an agreement, there are going to be serious problems. At the borders, the core element of the UCC is Regulation 46 which specified that customs controls, other than random checks, "shall primarily be based on risk analysis".

This comes down to risk management, applied to reduce the number of border inspections, so that only the high-risk consignments are targeted and checked. But, unless we have close cooperation with the EU, effective risk management by EU customs officials is not possible.

As the Commission's guide indicates, this relies on building a "risk profile" for exporters. And to build those, customs officials must have access to a continuous flow of information which comes to them via the electronic EU Customs Risk Management System (CRMS).

This is built into the Customs Risk Management Framework, of which we are currently part. If we drop out of it as a result of Brexit, there will be no means of developing a targeted inspection programme for our exports to the EU. Inevitably, the number inspections carried out by customs officials will have to increase, with all that that entails.

Brexit, then, is far more than just dealing with tariffs – despite the Economist and all the others which seem obsessed with only that facet of our relationship with the EU. The risk of a customs logjam, flowing from a breakdown in customs arrangements, is potentially a far greater problem.

That is not to say that problems cannot be solved by negotiation. But customs cooperation is another facet which will have to be built into the Article 50 negotiations. Continuation of existing arrangements will not be automatic and, in order for agreement to be reached, there will also have to be a commitment to upgrades and developments to ensure we maintain operational compatibility in the future.

Possibly, though, there is an unexpected get-out for the UK. The original Naples Convention of 1967 was updated to become the Convention on Mutual Assistance and Cooperation between Customs Administrations of 1997 – called the Naples II Convention.

Taking its legal base from the Maastricht Treaty (Article K.3) – which formally introduced customs cooperation into the European treaties - this seems to be still in force. As the UK is party to it, the text could form the basic of a post-Brexit agreement. With a presumption of continuity, it could even carry over into the post-Brexit era.

Whatever mechanism we do chose, though, there is an urgent need for some clarity in the debate. The Customs Union is not an option but, regardless of the shape of the Brexit settlement, we will need to define a comprehensive agreement on customs cooperation.

Richard North 22/10/2016 link

Brexit: confusion reigns


David Jones, Minister of State for Brexit, has told a House of Lords committee the UK's negotiating position may not be "totally crystallised" by next spring. The government was "at an early stage of the process", he said, and thinking was "developing".

But then, if this recent report in the Guardian (and a parallel report in the Mail) is any guide, this should not come as a surprise. The debate seems to be going backwards, sowing confusion in place of clarity, adding needless complications to an already complex issue.

For a start, these two newspapers don't seem to know whether they are coming or going. Both apparently report on work submitted to the Cabinet by the Treasury, the think-tank NIESR, and the Centre for Economic Performance at the London School of Economics, but both seem to have a different idea of what it involves.

The Mail, on the one hand, has the work focusing on "a Norway-style model where the UK exits the single market but stays inside the customs union", whereas the Guardian has it that we remain "inside the single market but outside the customs union".

The Guardian then confuses the issue still further by suggesting that a customs union sets common external tariffs – which is fair enough – but then, bizarrely, asserts it "does not require customs checks".

There, we seem to have the newspaper confusing itself as both the Single Market and the Customs Union have the effect of abolishing internal trade barriers. Customs unions, traditionally, deal with tariffs - removing tariffs between members and settling a common external tariff to third countries. The Single Market goes further, abolishing qualitative and quantitative barriers to trade, between members.

There is, however, a degree of overlap, in that a free trade area (of which the Single Market is an example) also abolishes internal tariffs (in whole or part), so the main residual function of the EU's Customs Union is to set the Common External Tarriff (CET). Both the Customs Union and the Single Market require customs checks at the external border.

Unfortunately we cannot check the original reports as these do not seem to have been published, but the issues they raise are not at all helpful. Rather, they add to the more general confusion about customs unions, which should perhaps not have been raised at all in this post-referendum period.

The point is that, when there is a discussion about whether the UK should remain inside the EU's customs union, this begs the question as to whether we can do this and still leave the EU. In all probablity, this is not possible. 

At issue is a rather stark problem. The EU's customs union is underwritten by a legal code which gains its authority from the EU treaties. To countries outside that treaty framework, it can have no direct effect - any more than US federal law can apply to other countries, turning an outside country into part of the United States customs area. 

There is a contrast here with the Single Market. That is also underwritten by a body of law, which gains its authority from the EU treaties. But there is also a parallel a treaty system in the EEA Agreement. Through this, the EU Single Market acquis can be transposed into EEA law and thereby apply to to non-EU members (as in the Efta states). Thus, it is possible for them to participate in the Single Market and not be a members of the EU. They do not obey EU law. They obey EEA law. 

As regards the EU's Customs Union, there is no parallel treaty system by which EU law can apply to countries outside the EU. Therefore, there is no mechanism by which non-EU members can adopt Customs Union law, and become active members of the Customs Union with a common customs area.

By all means, we can agree a separate customs union with the EU (once we have left the EU), as have Turkey, Andorra and San Marino. But these are customs unions between the EU and third countries. That is not the same as being part of the EU's customs union. Its customs union was embedded in the founding treaties and carries through to the current EU treaties (Article 28 TEU). 

Article 28 states: the European Union "shall comprise a customs union". The customs union is an integral part of the EU – with duties collected paid to the EU, which become part of its income. To be in the customs union, you have to sign up to the EU treaties. To add non-EU members would require in all probability the EU treaties to be amended. And it is hard to see that happening. It is hard to see how that could happen.

Furthermore, the Union Customs Code - which is the key executive instrument of the customs union - is also applicable only to Member States. There are 97 references to Member States in the Code, imposing rights, duties and obligations. The Code could not easily be made to apply to third countries: it would impose obligations which would have no legal force on parties outside the EU treaties.   

Nevertheless, if for the purposes of argument the Code was adapted to allow continued UK participation, it would still be judiciable by the ECJ and would remain so. Unlike the Single Market, there is no separate court for non-EU members, such as the Efta Court, to adjudicate on the specific body of law. If the UK wanted to stay in the customs union, it would have to accept ECJ jurisdiction, post-Brexit.

Doubtless, that would keep the UK so closely embedded in the EU institutions that it would be hard to argue that we had completely left the EU. Contrary to EEA membership – where Efta states are decidedly not in the EU – UK membership of the customs union might make it only a semi-detached member. It is unlikely that that could be taken as fulfilling the referendum mandate.

Yet, perversely, this whole issue has only emerged after the referendum. I certainly don't recall discussing the customs union during the campaign – certainly not in any depth – and had always regarded it as a non-starter. All it is doing now is adding to the confusion. The sooner it drops out of the discussion, the better. 

There is no real prospect of the UK remaining in the Customs Union, and neither would we want to.

Richard North 20/10/2016 link

Brexit: off the edge of a cliff


If he was a little brighter, Nick Clegg, he would already know that a "hard Brexit" was not on the cards. But then, he is a politician, and a Liberal-Democrat, so we can't expect too much of him.

Nor can we really complain that he didn't see the result of the referendum coming – after all, we didn't either. Had he done so though, he and his fellow remainers might have hedged their bets and been more cautious about rejecting the idea of the EEA as an interim option.

But now he's telling us that leaving the EU and taking the "soft Brexit" option of joining Norway as a member of EFTA, is a credible alternative after all. And it's much better then exiting without any alternative trading relationship in place and relying instead on WTO rules.

The most important decision of all, Clegg says, is whether to remain a member of the Single Market, where we benefit from zero tariffs and can help to shape the harmonised non-tariff rules that ensure that goods and services can flow smoothly across borders.

Clegg is unequivocal on this. "It is completely possible to be a member of the Single Market while standing outside the EU: Iceland, Lichtenstein and Norway all do so".

Sadly, though, instead of pushing for precisely that option, Clegg has decided on the "scare" route of telling us how awful a "hard Brexit" is, in this instance telling us how badly the food industry will be hit. And he tells a good enough tale although, being a politician briefed by prestigious people, he doesn't grasp the full horror of it all.

In his accompanying paper, he tells us that, at present, UK food and drink products are traded across borders with no forms or checks. Once we leave the EU, he says, products will have to go through customs checks at the EU border.

But exporters of products of animal origin (not only meat but also eggs, milk, honey, and gelatine products) will need to go through a number of additional steps.

They must register with the EU as a third country company, authorised to export animal products to the EU. They must apply for relevant import licences along with documentary proof of the product's country of origin. And they must apply and pay for costly export health certificates to show that the product meets EU public health standards.

When the shipment is ready, they must notify the relevant EU Border Inspection Post (BIP) in advance of the arrival of the goods. When the goods arrive, they must submit them for veterinary inspection and then, only at that point, after payment for the relevant checks, will the UK exporter receive an import certificate. If the consignment fails the checks, it is either returned or destroyed.

What he doesn't say very clearly is that these products may only enter the EU via a Border Inspection Post, which must be approved by the Commission's Food and Veterinary Office as having the necessary facilities to carry out inspections, to the requisite standard.

And here's the rub. Had he checked with the official list, he would have found that the major port for UK goods into France – the post of Calais – is not a registered BIP. The nearest is Dunkirk, and that only has the capacity for inspecting 5,000 consignments a year - and average of less than 15 per day.

Failing Dunkirk – which invested €2 million in its facilities - the nearest French alternatives are Le Havre or Brest, but it is unlikely that they will have much spare capacity. And to develop the capacity is going to take time and a great deal in capital investment. For a very long time, therefore, it will not be possible to export some types of food product to France.

But not only does Clegg understate the problems, much of what he does say is, in any event, going to be dismissed as a continuation of "project fear". Despite him correctly saying that two years isn't long enough to negotiate a free trade deal, already he has the lunatic fringe dismissing him as "delusional".

Clegg's intervention, therefore, is not terribly helpful. His attachment to the EEA-interim option is seen at a ploy to keep us in the EU, and there are enough stupid people out there who believe the Efta state members of the EEA are in the EU and subject to the jurisdiction of the ECJ.

Since Clegg is also pushing for a parliamentary vote on Article 50, his credentials are coming under further suspicion so, when he argues that a "hard Brexit" will bring turmoil, he simply isn't being believed by the extremists.

Not least, for a man who was quite happy to see our parliamentary democracy undermined by the EU, his latter-day conversion to the need for a greater role for parliament is a little hard to take. Thus, the chances are that the former Lib-Dem leader wouldn't be believed, no matter what he says. His latter-day conversion to the "Norway option" can only do harm.

A better stratagem, of course, would be to push for an attractive end game, swamping the negative of a "hard Brexit" with a positive. That much, though, would be beyond Clegg and his Europhile cohorts, which leaves it up to Mrs May and her Cabinet - turmoil notwithstanding.

Given probably, that there is little support for leaving the Single Market, that may not be as difficult a task as it sounds. Even now, there is everything to play for.

Richard North 18/10/2016 link

Brexit: listening to the silences


Nick Clegg, on the Marr Show yesterday argued that "There are countries outside the European Union, such as Norway, which do have greater powers of control over who comes in and out of their country, and yet they have full participation in the Single Market".

His view is, that if the United Kingdom played its cards right, it could continue to participate in the Single Market while doing a deal on freedom of movement - the best indication yet that the Liechtenstein/EEA solution in Monograph 1 is gaining traction.

This is even more the case when we have John Rentoul in the Independent directly citing the Monograph, stating:
Norway and the other countries in the EEA, the European Economic Area (Iceland and Liechtenstein), are allowed to take "safeguard measures" under articles 112 and 113 of the EEA Agreement, "if serious economic, societal or environmental difficulties of a sectorial or regional nature liable to persist are arising". EEA status, with this measure already triggered to limit immigration from the EU, has been suggested as a transitional arrangement for the UK when it leaves the EU, allowing it to remain in the single market while a permanent relationship is negotiated.
Even if he spoils it somewhere by saying: "I don't think the EU would agree to it", Mr Clegg seems to think otherwise.

And then, we see in the Telegraph the novel idea of the UK seeking the Efta/EEA option as an interim "quick fix". This is from economist Anton Muscatelli, who is not there yet on the detail, but at least they are beginning to get there.

We also get Lord Livingston, former minister of state for trade and investment, also arguing for an interim deal. "I know that trade deals aren't hard or complex", he writes. "They are extremely hard and very complex".

He then goes on to say: "They can be good, comprehensive or quick. However, they cannot be all three. The UK would suffer if it sacrificed the first two elements on the altar of a speedy exit from the EU trading system".

His interim deal, however, only last for three years, an interim agreement with the EU and he has not caught up with Clegg on the free movement issue. Nor, having discussed the idea of an interim option has the man come up with a credible end game – which is something the Government is going to have to work on.

But we do have the Financial Times which is telling us that Mrs May "has not ruled out making future payments to the EU to secure privileged access to the single market".

This is straight out of the Monograph 3 playbook, cutting through the public chatter on a "hard" Brexit, to give more substance to the idea that the Prime Minister is lining up a deal which will keep us trading with the EU on a sensible basis.

Several senior ministers have told the Financial Times that the cabinet is considering how Britain could carry on paying billions of pounds into the EU budget. "We would have to be careful how we explained it", said one minister. "But Theresa has been very careful not to rule it out". Another senior Tory said: "With Theresa, you have to listen carefully to the silences".

Keeping up contributions will allow the UK to keep in place vital access to EU markets for the City of London and other sectors, including maintaining "passporting" rights for UK financial services. It will also keep carmakers such as Nissan in the game, shielding them from the impact of leaving the EU.

It appears that these contributions are being considered during any "transitional period" between Brexit, expected in 2019, and the conclusion of any European free-trade deal, which could take many more years to agree. Says the FT: "The payments could extend even beyond that period".

With that, we get the obligatory "senior EU diplomat" who says that: "There will have to be a budgetary contribution through the transition", although Downing Street is refusing to be drawn on this, calling any debate on future budget contributions "minutiae".

Sooner or later, it is going to dawn on the series masses that the UK has, effectively, already guaranteed payments up to the end of 2020 – the end of the current Multi-annual Financial Framework (MFF). This is agreed at Head of State and Government level, and has the force of a contract. The EU would almost certainly demand compensatory payments, which would the run into the next MFF.

The big deal most certainly is going to be how to explain all this, but as the Observer reports, there are new alliances building, which support the more rational line.

Certainly, the "hard" Brexit rhetoric is getting more than a little tiresome, and the noisemakers intensify their efforts, but we can probably take a little comfort from the saying that "empty vessels make the most noise". They might care to note that happy little suggestion from a senior minister: "With Theresa, you have to listen carefully to the silences".

Richard North 17/10/2016 link

Brexit: case not made


I watched most of the Opposition day debate on parliamentary scrutiny of the Government's negotiating strategy for leaving the EU (link to follow) – led by opposition spokesman Kier Starmer.

It was an "excellent debate" according to David Jones, the Minister of State for Brexit, winding up for the government – with not a hint or irony anywhere in sight. Here was a parliament which as a collective had for 43 years supported UK membership in first the EEC, the EC and the EU, with a majority of both Houses still in favour.

Yet these born-again "democrats" are now waxing indignant about the Government's refusal to give them a vote on its negotiating strategy, prior to lodging its Article 50 notification with Brussels. We thus heard much talk of parliamentary sovereignty but, as Pete points out, the sovereignty is not theirs but ours.

In terms, it was a referendum that pushed the Government into leaving the EU. The deal is between the people and Government, with Parliament largely a bystander. And now Parliament wants to play a dominant role in determining how we should leave.

Apart from lacking the democratic credentials, however, MPs face another hurdle before they can lay claim to being champions of the people. As we have seen so many times before, scarcely any of the MPs in this debate gave any sign of really understanding the issues, or demonstrating sufficient depth of knowledge that would enable the insitution effectively to scrutinise the Government.

We had, for instance, Barry Gardiner, Labour MP for Brent North, telling us he was not in the habit of quoting the Daily Mail, but he went on to do so anyway, citing with approval an otherwise "misleading and confused editorial", which would have us believe:
… what the public voted for was simple: to regain control of our borders in order to end mass immigration; reclaim control of our laws; and stop sending billions of pounds to Brussels. None of this is possible inside the single market - which requires the free movement of workers.
Interestingly, Gardiner didn't complete the full quote, which added to this notional requirement: "full adherence to the diktats of the European Court of Justice and a vast annual membership fee".

Yet, on the basis of what he did quote, Gardiner suggested that, if the Government believes that, "the question must be asked why they will not admit that they have ruled out maintaining the access we currently enjoy to the single market".

It was left for David Jones in his winding up thus to say that: "we do not accept that there is a binary trade-off between border control and access to the single market for goods and services". We are, he said: "aiming for the best deal for Britain".

With no detail to support this assertion, though, the claim was left hanging – but it does point to the supposition that the Government believes freedom of movement is negotiable. A view floated by Philip Hammond is now becoming a consistent refrain.

In a debate where MPs were obsessed with the Single Market, though – mentioning it no less than 136 times – only one MP, Mike Wood (Dudley South) – mentioned the EEA by its initials.

Bill Cash, however, spelled it out in full, first arguing that we cannot both be in the single market and repeal the European Communities Act, "whose laws are part of the jurisdiction of the European Court of Justice".

Asked by Dominic Grieve about Norway, "a country that participates in the single market without being a member of the European Union", Cash argued that we could not remain in the Single Market because we would remain "within the jurisdiction of the European Court of Justice"- apparently unaware that the EEA has its own dispute process, centred around the Efta Court.

As to any controls on freedom of movement, this was left to Labour's Emma Reynolds, who had been talking to her constituents in Wolverhampton. But she wrongly informed us that: "within the European Economic Area Norway has an emergency brake on free movement", only then adding: "Lichtenstein has controls over it".

That is as near as we got to any discussion on the Liechtenstein/EEA solution, with the one MP who discussed it relying on "constituents" and getting the detail on Norway completely wrong – although she did manage to say: "there is a spectrum here; there is a space between no free movement and free movement in its entirety".

But then we had Stephen Timms, the Labour MP for East Ham, remarking that a number of speakers "in this very helpful, valuable debate" have suggested that the negotiations should aim, "on the one hand, for barrier-free access to the single market … and, on the other, for us to no longer apply the current free movement rules".

Timms went on to agree with this: it was "the objective we should be setting". And that was quite typical of the tenor of this "very helpful, valuable debate", one where no MP gave the slightest thought to why the House should be trusted but offered every reason why they should not.

It is ironic perhaps that we the people have an ally in government, standing between us an Parliament which would frustrate our wishes, given half a chance – or crash our economy.

The House was thus left to approve a resolution amended by Theresa May, which called on the Prime Minister to ensure that this House is able properly to scrutinise that plan for leaving the EU before Article 50 is invoked, but respected the decision of the people and did not undermine the negotiating position of the Government.

Parliament can scrutinise all it likes, but does not get to interfere with the conduct of the Article 50 negotiations. And that is the only safe way to proceed. The case for greater parliamentary intervention has not been made.

Richard North 13/10/2016 link

Brexit: not wanted on voyage


"We will seek to get the most open, barrier-free market that we can", said David Davis in the debate on yesterday's Commons statement. "That will be as good as a single market".

Needless to say, the only thing as "good" as the Single Market is the Single Market, but then Mr Davis didn't say "the". He said "a" – which is altogether a different thing.

Small wonder, according to the Independent, that British diplomats are urging European business leaders to ignore statements coming from senior UK government ministers on Brexit, relying only on statements issued by the cabinet committee, chaired by the Prime Minister. Those are the only ones to reflect the official UK policy.

That, of course, puts Fox, Johnson and Davis beyond the pale – and rightly so. But when it comes to the MPs as a whole, Matt once again gets it deliciously right, his female character telling her husband, "MPs should not have a say. They don't understand the complex issues and they vote for the wrong reasons".

From the responses in yesterday's exchanges, one didn't get the impression that there was even one MP in the House who demonstrated a grasp of the issues beyond kindergarten level, with nothing which would, in any way indicate an understanding of the nature of the Single Market.

The EU itself doesn't particularly help on this. On the Europa website, the definition refers to the Single Market as "one territory without any internal borders or other regulatory obstacles to the free movement of goods and services".

That, actually, is quite misleading, as the "one territory" implies a contiguous bloc, whereas from Greece to Iceland, and Scotland to Spain, there are multiple territories and, between some of them, quite distinct borders (as between Norway and Sweden, for instance).

The defining characteristic of the Single Market, though, is not territory, per se, so much as a group of nations which agree to be bound by a common regulatory code, with respect to trade and related matters. It is, in fact, a regulatory union, the benefit of which is that enterprises within its members are permitted to trade freely across borders with a minimum of restrictions.

Non members can, of course, trade with the group, but there is always a price to pay – either in tariffs or entry controls. The exact price varies, nation to nation, depending on the deal negotiated and the concessions agreed. But none of the deals – not a single one – gives exactly the same degree of freedom as full-blown members.

From this two crucial points emerge. Firstly, the degree of unrestricted trade must be negotiated. Secondly, whatever is agreed, short of full membership of the Single Market, the there will be more restrictions and controls than there are now.

Therein rests the crucial issue. As has so often been pointed out, the possibility of concluding a deal, de novo, to bring restrictions down to a tolerable level, within the two years afforded by Article 50 - on top of all the other issues that have to be settled - is precisely nil.

If, therefore, the Government was determined to finalise arrangements within the two year period, it is going to have to accept substantial layers of controls and restrictions of goods which, currently, are not borne by exporters. Some sectors are going to be more badly hit than others but almost all will be affected to some extent or another. And there will be an economic price to pay.

This is the reality – the inescapable reality that Government is going to confront. It either takes an interim deal, along the lines of EEA participation – with all that that entails, or it takes an economic hit. There are no other options on the table.

Yet here we are now, with MPs mouthing about wanting to have a say in the approval of the Government's negotiating stance. Says Anna Soubry, "We do want Parliament to debate… most notably whether we remain in the single market", telling the Today programme that there was a "grave danger" of the government drawing its own conclusions from the result of the referendum about the type of future relationship that Britons wanted with the EU.

While Sir Keir Starmer, Labour's new shadow Brexit minister, complains that the Government is "sidelining" Parliament, one might observe that it is sidelining itself. When you listen to them talk, there is not one that you would trust. Daily, we get better debates on the comments to this blog than we get in the House of Commons.

Lest we also forget, it has been Parliament which has approved every Community treaty put before it and, even to date, the majority in the House favour continued membership of the EU. We had no reason in the past to trust Parliament, and nothing any of the MPs currently has to offer suggests that we should trust them now.

They will get their say at the end of the process, when the Article 50 process has to be approved by Parliament, and they will have another chance if a secession treaty is agreed. Parliament will have to ratify that.

In the meantime, the less we hear from Parliament the better. An effective democratic institution requires of its members knowledge and understanding. Neither is present in the House in any abundance, so we have no need of another band of ignorati, second-guessing the decision of the people.

The MPs can line up in the lobbies, some time in 2019 and as long as they do as they are told – as they tend to do – we will be out of the European Union. Until then, they are not wanted on voyage.

Richard North 11/10/2016 link

Brexit: steering the safest course


"It needed the skills of an old-time Kremlinologist to decipher the various enigmatic, very carefully worded clues Theresa May gave us last week as to her thinking on Brexit". So writes Booker in his column today and, of course, he's right. There is an art to reading politicians' speeches, where context is vital and what is not said can be as important as the words actually delivered. 

Important speeches actually start off as written words, which are then debated, revised, re-written, tested, checked, and re-written many times. Thus to get the sense of them, you need to avoid the delivery. The words must be read, without the distraction of the theatrics.

But the context also matters. In this case, as Booker observes, Mrs May needed to throw a bone to her more rabid followers, so she promised a "Great Repeal" of the European Communities Act.

Needless to say, this was not to take effect until the negotiations had been completed, and a settlement agreed, so what was being offered was nothing new. This was simply a necessary procedural step, to make the formal break from the EU and set us on the path to independence.

Sensibly, Mrs May also committed to keeping much of the law we have been subjected to over the past 43 years in place, transforming it into UK law, while we gradually work through which bits of it can sensibly be replaced.

From the outset, that was always going to be a necessary step. EU law (or law with an EU label) governs so much of our lives that to repeal it immediately would leave dangerous gaps, preventing the proper functioning of the state. In this instance, it is better to have even bad law, than no law at all.

In reality though, a huge amount of that law stems from international bodies and is going to remain in force, come what may. And for much of the rest, the need to maintain what is known as "regulatory convergence" will require that we not only keep much of the EU acquis, but add to it as new EU laws come into being.

Effectively, therefore, Mrs May was doing nothing more than highlighting some of the expected procedural steps which go towards Brexit. But in the context, with all the razzmatazz of a Conference speech, the faithful – and the unthinking media – has to make something special of it.

As to the most sensitive of the subject, Mrs May very carefully avoided saying that we would once again "control our borders". Others used that phrase. But Mrs May didn't – even though most media sources insisted that she did.

What she actually said was that we would take steps to "control immigration", an altogether different thing. Not least, she is well aware that much of our immigration is determined by other international treaties that are not linked to our membership of the EU.

Then, taking account of what she didn't say, it is possible to take from the precise construction of Mrs May's words, the possibility that she will allow free movement of workers from EU Member State, while at the same time bringing down the overall numbers of immigrants coming to this country.

That the media – and so many of the pundits – chose to interpret Mrs May's carefully guarded phrasing as a commitment to abandon free movement is their affair. But try as you might, you will find no words uttered by Mrs May to that effect.

Then, she was equally careful in her reference to the UK becoming "an independent, sovereign country" to emphasise that everything we do must nevertheless remain "subject to international agreements and treaties with other countries".

This is almost Jesuitical in its ambiguity, allowing for a qualified sovereignty that isn't really sovereignty at all – not in the sense that the purists would want it.

Most interesting of all, however, were the clues Mrs May gave to her thinking on the crucial issue of our trade with the EU. Without openly giving away her negotiating stance, she was more careful than ever to insist that our Brexit agreement must continue "to involve free trade in goods and services" with the EU.

In terms of words, she ruled out the "Norway model" and the "Switzerland model", but that does not gainsay the inescapable logic that, if Britain wants to continue enjoying "free trade in goods and services" with the EU, this can only mean that, on leaving, we must in some way remain part of the wider European Economic Area (EEA), subject to Single Market rules.

Nothing Mrs May said, or didn't say, necessarily ruled out the UK opting for participation in the EEA. It doesn't have to be the "Norway model". After all, the thing about the EEA Agreement is its almost unique flexibility. The end result could so easily be styled the "British solution", with protocols and annexes tailored specifically to UK needs.

The outcome, though, is a matter is a matter of logic. Anything else would be far too complicated to negotiate in the time available. Anything short of the EEA – such as naively hoping to rely just on "WTO rules" – would result in precisely the disruption and chaos of which so many business interests, from the City of London to the owners of our largely foreign-owned motor industry, have been so firmly warning.

Unsurprisingly, therefore, we saw the CBI's Carolyn Fairbairn yesterday writing an open letter calling for the Government to deliver barrier free access to the Single Market.

She writes that leaving the EU without a preferential trade arrangement and defaulting to WTO rules "would have significant costs for British exporters and importers, as well as those in their supply chains". Every credible study that has been conducted, she says, has shown that this WTO option would do serious and lasting damage to the UK economy and those of our trading partners.

The letter is co-signed by Terry Scuoler of the EEF, Chris Southworth of the ICC and Julian David of techUK. They ask that the Government gives certainty to business by immediately ruling this option out under any circumstances.

Then, entirely supporting Booker, and reinforcing the point made so forcibly made in Flexcit, they say that there is a wealth of evidence to suggest EU negotiations will not be completed within the Article 50 two-year timeframe. Thus, they ask Government to secure agreement on a "transitional period".

Miraculously, according to the Economist, that involves an interim trade deal "through temporary membership of the European Economic Area".

Continuing as members of the EEA, writes Booker, would not only give us the kind of access to the single market that would dissuade Nissan and Jaguar Land Rover from moving their operations abroad, and those "passporting" rights for financial services which City firms are so fearful of losing. It would even give us some limited right to that "control over immigration" from the EU that Mrs May promises.

In other words, Booker concludes, if we have read the runes aright, the Prime Minister is steering the only course which could minimise our problems on getting extricated from what she described as the "supranational government" we have increasingly been ruled by for four decades.

At least last week she gave us some clue that she has begun to realise just what a complicated process this will be – but that she is determined to find the most sensible way to do it.

Richard North 09/10/2016 link

Brexit: in the EEA without Efta?


Professor George Yarrow, writing for the Regulatory Policy Institute, has recently (July) produced a 31-page briefing entitled Brexit and the Single Market , in which he proposes that the UK continues its participation in the EEA after it leaves the EU.

What makes the paper different is that Yarrow argues that the UK can continue that participation without necessarily being members of either the EU or Efta – and without having to re-apply when we leave the EU.

There is no explicit provision in the Agreement, he writes, for the UK to cease to be a Contracting Party other than by unilateral, voluntary withdrawal. Furthermore, he adds: the "commonly held assumption that only EU and Efta members can be Parties to the EEA Agreement – and hence that the UK has to be a member of one or other of these two organisations to be in the Single Market – is not well grounded …".

This is an intriguing assertion which, if it was to stand up, could transform the Brexit negotiations, releasing us from the potential hazards of being blocked either by Efta members in seeking to rejoin Efta, or by any of the Co0ntracting Parties in attempting to rejoin the EEA Agreement.

Sadly, though, it is difficult to accept that Prof. Yarrow is correct in his assertion, but it is worth rehearsing the arguments, to see where we actually stand.

Yarrow's key points, it would seem (he devotes a five-page Annex to it) relate to the wording of Article 126(1), which states:
The Agreement shall apply to the territories to which the Treaty establishing the European Economic Community is applied and under the conditions laid down in that Treaty, and to the territories of Iceland, the Principality of Liechtenstein and the Kingdom of Norway.
The first point to note, he says, is the "logical error". The deduction would be correct if the Article opened with the words "The Agreement shall only apply …". Without the word "only" there is nothing to indicate that the Agreement cannot also apply to countries that do not satisfy the conditions set out in Article 126(1).

A fortiori, he thus concludes, there is nothing to indicate that the Agreement ceases to apply to one of its own Contracting Parties which, by dint of circumstances, no longer satisfies one of the conditions specified.

However, much as one would like to accept this, there seems to me a slight problem with the general tenor of this argument, in the Brocard: Ubi lex voluit, dixit; ubi noluit, tacuit.

Broadly, this means that, if the law wishes to regulate on a specific matter, it does so. When it does not want to regulate on the matter in further detail, it remains silent. The effect of this principle is that an "excessively expansive interpretation" might perhaps go beyond the intention of the legislator (or treaty-makers). Thus, we should stick to the text of the law and draw no material consequences from the law's silence.

In short, one might argue that if the EEA Agreement was meant embrace members who were neither EU nor Efta members, then it would say so. That it is silent in the issue does not allow the inference that non-membership of either body is permitted.

As to what the treaty intended, Yarrow asserts that there is nothing in the rest of the Agreement’s text that provides a clear pointer to an intention that membership of either the EU or Efta was an essential characteristic for Contracting Parties.

Yet, what we must recognise is that recitals are an integral part of any treaty, and it is these that indicate the intentions of the parties. And in the EEA Agreement, we see reference to the high priority attached to "the privileged relationship between the European Community, its Member States and the EFTA States", clearly indicating the nature of the treaty.

But that is not all. To determine the precise nature of a treaty, reference is also made to what are known as the travaux préparatoires - the official records of the negotiations. Their relevance is given force by Article 32 of the Vienna Convention on the Law of Treaties (VCLT). This allows recourse to supplementary means of interpretation, "including the preparatory work of the treaty and the circumstances of its conclusion" as an aid to determining the aim of a treaty.

And, as the record shows, from the Efta summit in Vienna on 13 May 1977 to the Luxembourg Declaration of 1984 and beyond, there can be little question that the EEA Agreement was a treaty between EU Member States and Efta states.

I am open to counter argument on this, but by my reckoning, the EEA Agreement, as it stands, is not open to participation by states other than members either of the EU or Efta. If the UK is to remain a Contracting Party of the EEA when it drops out of the EU, it must rejoin the Efta, or fall foul of Article 60 of the VCLT.

That said, Yarrow's point about participation in the EEA without EU or Efta membership does deserve further consideration. It could be the defining point of a successful Brexit. 

Here, on the face of it, there is nothing to stop the Contracting Parties amending the EEA Agreement to allow participation by a non-aligned member (as would the UK become after Brexit). Institutional changes would have to be made, and the unanimous agreement of all parties would be required, but it could be done. 

To my mind – if it is feasible - that's better that the UK rejoining Efta. It begins to add substance to the idea of a "European Village". Efta could be left to the Nordic bloc – including Sweden, Finland and Denmark – and the Baltics, paving the way for the UK and the Republic of Ireland to join as a separate bloc.

Taking this idea further, we could see and expanded Visegrad Group peeling off from the EU and joining the EEA, and even the "Adriatics" comprising FYG and Greece, and the "Club Med", or the Iberians.

For the EU to survive, it is my view that it needs to do this – retreating back to the original Six (or even five if Italy splits off). A united Europe under the banner of a European village, trading and cooperating on an intergovernmental basis, was always a better idea than Monnet's supranationalism, and now Brexit is giving Europe an opportunity to correct a historic mistake.

Richard North 05/10/2016 link

Brexit: Mrs May rejects everything – and nothing


Yesterday, Mrs May told the Conservative conference (and thereby the nation) that we are going to leave the EU. "We are", she said, "going to be a fully-independent, sovereign country, a country that is no longer part of a political union with supranational institutions that can override national parliaments and courts".

She then went on to say that this means: "we are going, once more, to have the freedom to make our own decisions on a whole host of different matters, from how we label our food to the way in which we choose to control immigration".

How interesting it was that she had so very specifically singled out food labelling. Within the EU, this issue is mandated by the Codex Alimentarius Commission, specifically the General Code on Food Labelling, by which means it and the Member States meet their obligations under the World Trade Organisation Agreement on Sanitary and Phytosanitary Measures (SPS Agreement).

Outside the EU, the UK would still be a WTO member and subscribe to the SPS Agreement. In that event, we would still not be free to make our own decisions on how we label our food. We would be as much bound by Codex as we are now – unless of course Mrs May is going to take us out of the WTO as well, which I somehow doubt. And nor would we be free to make our own decisions on a host of other things – not if the UK is to uphold our international obligations across a whole range of issues.

One would have thought, therefore, Mrs May's advisors might have cautioned her to avoid giving such a blatant hostage to fortune – especially as most people are probably not terribly concerned with the precise origins of our food labelling code. They would probably not be too bothered about global standardisation in the interests of free trade across the planet.

From this apparent error, though, it is perhaps too early to draw conclusions apart from observing that, if the ignorance of how we are governed extends into Downing Street, we are in for an interesting time.

That much is all too evident, ironically, from Mrs May's complaint about "muddled thinking" in respect of the Government's vision of Britain after Brexit. Mrs May has a vision of a truly Global Britain, so one assumes that this includes the Codex Alimentarius Commission.

As much to the point, she tells us she wants to lay to rest the idea that there is a choice between "soft Brexit" and "hard Brexit". This line of argument, she says, in which "soft Brexit" amounts to some form of continued EU membership and "hard Brexit" is a conscious decision to reject trade with Europe – is simply a false dichotomy. And it is one that is too often propagated by people who, I am afraid to say, have still not accepted the result of the referendum.

One senses here something of a straw man. Any "soft Brexit" we have been talking about most definitely does not encompass continued EU membership. Have the same people who have been advising Mrs May about food labelling also been telling her what "soft Brexit" means, one wonders. Hers is the Brexit where we have the freedom to make our own decisions on a whole host of different matters, from how we label our food to the way in which we choose to control immigration.

The process we are about to begin, she says, is not about negotiating all of our sovereignty away again. She continues:
It is not going to be about any of those matters over which the country has just voted to regain control. It is not, therefore, a negotiation to establish a relationship anything like the one we have had for the last forty years or more. So it is not going to a "Norway model". It's not going to be a "Switzerland model". It is going to be an agreement between an independent, sovereign United Kingdom and the European Union.
Now this is really interesting. Earlier, Mrs May has told us about her "Great Repeal Bill", which will remove from the statute book – once and for all – the European Communities Act. But that is timed to take effect from the date upon which we formally leave the European Union - which we would expect anyway, as part of the Article 50 process.

On that date, she also commits the Government to converting the "acquis" into British law. Effectively, that means Mrs May is rejecting the WTO option. And then, in rejecting the "Norway model" and the "Switzerland model", she is apparently rejecting the idea of a multilateral and a bilateral agreement. In other words, she has closed down all possible options.

Then there appears to be a further contradiction. Mrs May comes up with the "small print", saying that, "When the Great Repeal Bill is given Royal Assent, Parliament will be free – subject to international agreements and treaties with other countries and the EU on matters such as trade – to amend, repeal and improve any law it chooses".

Please note this "small print" and remember it well: "Parliament will be free – subject to international agreements and treaties with other countries and the EU on matters such as trade – to amend, repeal and improve any law it chooses". In other words, we are not going to have the freedom to make our own decisions on a whole host of different matters, such as how we label our food. Perhaps Mrs May is getting some good advice after all.

By converting the acquis into British law, she says, we will give businesses and workers maximum certainty as we leave the European Union. "The same rules and laws will apply to them after Brexit as they did before". If this is not EEA membership, it's something very close to it.

Moving on, she refers to the "trade-off" between controlling immigration and trading with Europe. But that, she tells us, "is the wrong way of looking at things". We have voted to leave the European Union and become a fully-independent, sovereign country. We will do what independent, sovereign countries do. We will decide for ourselves how we control immigration.

With that, Mrs May tells us, "we will seek the best deal possible as we negotiate a new agreement with the European Union". She wants that deal "to reflect the kind of mature, cooperative relationship that close friends and allies enjoy". And she wants it "to include cooperation on law enforcement and counter-terrorism work". Then, crucially, she wants it "to involve free trade, in goods and services".

This again is interesting – a nuanced use of words. Her deal should "involve" free trade. That could mean a lot, or a whole lot of nothing.

Some clarification comes next, when we are told that the Prime Minister wants "to give British companies the maximum freedom to trade with and operate in the Single Market – and let European businesses do the same here". And how do we do that, one wonders. If this is not EEA membership, it's something very close to it.

Then comes another nuanced statement: "We are not leaving the European Union only to give up control of immigration again. And we are not leaving only to return to the jurisdiction of the European Court of Justice". The rhetoric on "controlling borders" is missing - she does not use the "b" word once in her speech. Instead, Mrs May talks about controlling immigration – an altogether different thing, and much more achievable.

As ever with international talks, Mrs May then concludes, "it will be a negotiation, it will require some give and take" but "this is going to be a deal that works for Britain".

To me, that is definitely not the WTO option. As to ruling out the "Norway model", well that isn't the EEA option. It was always a mistake to characterise this Brexit plan as the "Norway option". Used as a template, a suitably modified multilateral agreement under the aegis of the EEA Agreement could so easily become a "United Kingdom model". And if that is the case, it cannot possibly be the "Switzerland model".

This is either a very clever speech, or a very stupid one - or one that was fulfilling two conflicting roles. It had to send a message to the wider world, but it also had to press the right buttons for the faithful. The applause tells you it worked in that latter respect. Time will tell us what the message really was.

If it was a clever speech, it soared over the heads of the media and most of the pundits, distracting them from the actual agenda. And if that's what it's done, it might turn out to have been a very clever speech indeed.

Richard North 03/10/2016 link

Booker: stepping back from the cliff edge


Days after the Tory Right have made complete fools of themselves, writing themselves out of the Brexit script, Booker uses his column to explore the only way to arrange Brexit that "won't plunge us over the cliff".

Last week, as we awaited today's Brexit speech from Theresa May, he writes, it became clearer than ever just what a perilous path we are now treading.

On one hand we had a dismally woolly speech from Dr Liam Fox, the International Trade Secretary, showing that he has learnt no more about the real world than was evident in the referendum campaign. Babbling about all those wonderful "free-trade deals" he imagines winning, he mentioned the World Trade Organisation (WTO) 20 times and the EU’s single market only once.

On the other hand, we had the heads of Nissan UK, Jaguar Land Rover and other spokesmen for the motor industry (contributing 7 percent to our exports), the chief executive of Heathrow, one of our busiest ports of entry, the British Bankers' Association and even unnamed "Treasury officials" all piling in to warn that, if we leave the single market, the results in terms of hideous complexities, added costs and firms leaving Britain would be catastrophic.

There are essentially three options being proposed. Those "hard Brexiteers" like Dr Fox who imagine that we could somehow just rely on "WTO rules" clearly have no idea where this would leave us.

They talk about tariffs, as if these were the only problem about continuing to trade with the EU (easily our biggest trading partner), but these are now far less important than the vast thicket of regulatory "non-tariff barriers" such as customs procedures so complex that in practice they could shut us out of trading with the EU altogether. Indeed, worse still, the EU could continue selling to Britain, while its more than 1,000 points of customs entry would be all but closed to us.

Those who propose option two: that we could somehow, in just two years, negotiate a bespoke "one-off" trade deal with the EU, seem unaware that the many such deals between the EU and other "third countries" are so complex that none have taken less than seven years to negotiate, involving thousands of pages of agreed terms and procedures. And none would give us anything like the full access to the single market.

That is why those who have done their homework (including those businesses which would be most directly affected) have come to realise that the only interim arrangement that could conceivably work is that "soft Brexit" option whereby, on leaving the EU, we remain in the wider European Economic Area (EEA), where we are now, and apply to join the two richest countries per capita in Europe, Norway and Switzerland, in the European Free Trade Area (Efta).

This alone would enable us to continue trading with the single market on similar terms as we do now, without any of that catastrophic disruption that would be created by either of the first two options.

It would even give us some limited power, under the EEA Agreement, to control immigration from the rest of the EU. Furthermore, it would give us time to discuss all those other problems which need to be sorted out in just two years, such as what to do about agriculture, fisheries, our relationship with the EU's 27 agencies, and dozens more.

There is no doubt that if the advantages and disadvantages of these three options were properly explained to the British people, this is the one the vast majority would favour, including pretty well all the 48 percent who voted to remain last June.

Having been assured that ultimately the Prime Minister, Theresa May, will be in charge of our EU negotiations, Booker concludes, our one hope is that she will have taken properly expert advice, and not be heeding those naïve "hard Brexiteers" (doubtless likely to be in full voice at this week's Tory conference) whose vacuous wishful-thinking could only lead us to being pushed over a very high and nasty cliff.

Richard North 02/10/2016 link

Brexit: a "massive overhead for very little gain"


There are no experts in Brexit, as such. The issue covers such a wide range of subjects and disciplines that no single person can hope to gain any more than an overall appreciation of the details. Likewise, no one profession – especially not economists, lawyers or even trade specialists – can call the issue their own. And politicians, largely, seem amongst those groups least qualified to comment. 

Obviously, though, some individuals will have more to contribute than others, one of whom is John Holland-Kaye, Heathrow's chief executive. He is in the current edition of the Financial Times, warning that a decision by Britain to leave the EU's Customs Union would mean "adding massive overhead for very little gain" at the UK's ports and terminals. He thus urges the government to avoid imposing major new costs on business.

And while, from his comments, it is evident that Mr Holland-Kaye has a great deal to offer, I'm not entirely sure he is correct on focusing on the Customs Union. Much of what he has to say would seem to apply to the Single Market rather than the Customs Union. If that is the case, he would be by no means the first to confuse the two.

Certainly, confusion there is, with the Financial Times declaring that: "Ministers have not announced a decision on whether the UK should leave the customs union, which allows UK exporters to sell into the European Single Market without having to fill in forms or customs checks".

This is an absurd conflation of two different things. The Customs Union, of course, deals only with tariffs, removing tariff barriers between members, while imposing a common external tariff applicable to all third countries.

Crucially, the Single Market goes much further, covering a wide range of non-tariff barriers – as well as tariffs – so it would appear that the main issue is indeed the Single Market.

However, just to complicate things, in terms of having to filling in forms and customs checks, much of this depends on the AEO programme which is currently embedded in the Union Customs Code (UCC) and could therefore be regarded as part of the Customs Union.

However, since an AEO programme can be a stand-alone agreement, there is no need for it to be tied into the Customs Union and can just as well be attached to Single Market – as indeed it is for Norway via the EEA Agreement.

When Holland-Kaye gets into the detail, however, he is not wrong when he says that a decision to apply customs checks on goods passing between Britain and the EU "would be burdensome". It's when he then says that "an alternative to leaving the customs union probably needs to be found" that he confuses the issue.

Mixing the good with the bad, though, Holland-Kaye notes that customs checks and tariffs have to be applied for goods coming into the UK from China, when he says: "No one's going to want to be doing that for EU goods as well. That's adding massive overhead for very little gain".

Holland-Kaye then adds: "I've had no indication that there's an expectation that we will be putting up customs controls for goods coming in and out of the UK. Can you imagine operating something like the Euro[tunnel] if you had to suddenly build in all these checks in place? It would be completely unmanageable, which is why I think, pragmatically, [ministers] will find another way round it".

At the moment it is as easy to send a truckload of goods from London to Munich as it is from London to Manchester. But, we are told, "if the UK leaves the customs union, businesses will have to fill in additional documents and clear additional checks - in particular, to prove the origin of the goods - even if the UK strikes a favourable trade deal with the EU. Delivery companies say additional tax hurdles - such as paying VAT and duties - are particularly time-consuming".

Thus continues the confusion between "Customs Union" and "Single Market". But, essentially, this is about the Single Market.

To what extent additional checks will apply if we leave is not known, and we cannot know until the shape of the Brexit plan is clear. But it is certainly the case that, if the UK drops out of the Single Market and relies solely on the WTO option – without seeking a negotiated settlement - paperwork will multiply and the number of border checks will increase.

What is not understood fully by many of the pundits that have explored this issues, is that the decision as to whether to check consignments at the borders rest exclusively with Member State customs officials. The entire edifice of control rests on Article 46 of the Regulation (EU) No 952/2013 of the Union Customs Code, which defines customs controls as consisting of:
… examining goods, taking samples, verifying the accuracy and completeness of the information given in a declaration or notification and the existence, authenticity, accuracy and validity of documents, examining the accounts of economic operators and other records, inspecting means of transport, inspecting luggage and other goods carried by or on persons and carrying out official enquiries and other similar acts.
The Article goes on to say that the controls, other than random checks, "shall primarily be based on risk analysis" performed within "a common risk management framework, based upon the exchange of risk information and risk analysis results between customs administrations and establishing common risk criteria and standards, control measures and priority control areas".

The "take-home" point from this is that, if the UK is foolish enough to adopt the WTO option, it will be cutting itself off from the "common risk management framework" and all that goes with it. Member State customs authorities thereby will be entitled to take a pessimistic view when applying their risk analyses, stepping up physical checks to whatever levels they deem appropriate.

Yet, a study of US-bound container traffic indicated that if, routinely, as little as 1-2 percent of containers in a major overseas port were examined before loading, it would almost certainly overwhelm the inspection facility. Transfer that finding to, say, Calais, and only a modest increase in inspections could bring chaos.

At the UK end, we learn from the Financial Times that Treasury officials are exploring the possibility of widening customs facilities at the UK border, especially at Dover, where space is limited. This might involve recruiting hundreds, if not thousands, more customs officers to conduct border checks.

However, it is acknowledged that such "efficiency gains" would depend on EU destination countries co-operating and paying for similar upgrades of staff and capacity. France, as we know, has limited infrastructure to deal with the extra customs requirements. And European officials admit they are only just beginning to understand the scale of the Brexit challenge.

Apart from anything else, employing more customs officers would be especially costly for the UK government. The UK has a comparatively lean operation by EU standards, employing only 5,000 customs officers. Germany employs 35,218 and France 16,500, according the World Customs Organisation. An extra 5,000 officers could cost as much as £250 million every year. Additional costs could run to several billion pounds per year.

Yet still, confusion reigns. In a masterful blurring of the issues, the Financial Times asserts that senior Whitehall officials are convinced "ministers have little choice but to leave the customs union because remaining would leave Britain with little autonomy over trade".

If this bizarre analysis represents the actual thinking in Whitehall, we are in serious trouble. It would mean that those planning for Brexit haven't even touched first base.

Richard North 27/09/2016 link

Brexit: hard labour


In what is beginning to define the post-referendum battle, Chancellor Philip Hammond is arguing for maintaining the best possible access to the Single Market. He is also said by allies to be "open minded" on whether Britain should leave the EU customs union.

On the other hand, Foreign Secretary Johnson, Liam Fox and David Davis are said to want a "clean break". The Foreign Secretary has endorsed a new cross-party campaign called Change Britain calling for a "hard Brexit". Meanwhile, an unnamed official has the "three Brexiteers" calling this a "much bolder strategy". Philip Hammond is warning of the dangers of "going too far".

Anonymous briefing is now beginning to typify the coverage of this phase of Brexit, so we have to be content for further details from "a minister close to the cabinet negotiations". He (or she) says that while Mr Hammond is willing to make the case for some controls on EU migration he is "not afraid to highlight the risks to the economy of Brexit".

Ministerial colleagues say the Chancellor has the confidence of Theresa May and sets out his concerns about the impact of Brexit in "a very factual way".

However, another group called "Leave Means Leave" has emerged, backed by Tory MPs including Dominic Raab and Owen Paterson. The group is chaired by Richard Tice, a man who excels at wishful thinking, and is also pushing for a "hard Brexit", including leaving the Single Market and ending free movement.

This represents something of a turn round for Mr Paterson who, in his last major speech on the EU was saying that we need, therefore, to pick a proven, off-the-shelf plan. Our participation in the Single Market, he said, "is fundamental to protecting the UK's economic position", which brought us to "the only realistic option" – to stay within the EEA agreement.

The EEA, said Paterson, "is tailor made for this purpose and can be adopted by joining EFTA first. This becomes the 'Norway option'. We have already seen that Norway has more influence in international decision-making than we do as an EU Member State. Using the EEA ensures full access to the Single Market and provides immediate cover for leaving the political arrangements of the EU".

Now Paterson has joined the "lunatic fringe", arguing that Britain must "leave the world’s least successful economic zone – the single market". His group recommends that if no deal can be done the UK should leave the EU without a trade deal and rely on the WTO option while free trade deals are negotiated with other countries.

Predictably, John Mills is supporting the group. It is well within his comfort zone, churning out the usual mantras and arguing that "no deal is better than a bad deal". Yet, as always, these people never bother to set out the consequences of their preferred actions. They live in permanent denial.

Even then, that is not the end of it. Tice, Mills, Paterson, et al, it appears, will soon to be joined by Arron Banks who is expected to launch a grassroots pressure group to push for a hard Brexit. This, apparently, is inspired by Momentum, the Labour-supporting movement that backs Jeremy Corbyn's leadership.

One really does wonder what is it that makes the prospect of destroying our trade and crashing our economy so attractive, and why so many people are so anxious to waste their time (and ours) pursuing this futile path.

Fortunately, since Hammond has the confidence of Mrs May, so she is unlikely to be listening. Reality will be dictating the agenda, and no sane Prime Minister can preside over the something as ill-considered as a "hard Brexit".

For some, it is much easier to make silly noises but it is actually going to take a great deal of effort and intelligence to organise a successful Brexit. Hard labour, rather than a "hard Brexit" is called for, and despite the best efforts of the "lunatic fringe", that is what we're probably going to get.

Richard North 19/09/2016 link

Brexit: delusions on immigration


In a typically robust column, Booker takes on the immigration myths being perpetrated by the "lunatic fringe" brexiteers, under the headline: "If you think Brexit will bring us control of our borders, you are sadly deluded".

Anyone wanting evidence that the European Union is in a state of near-terminal crisis, he writes, should have listened to last week's "State of the Union" address by Jean-Claude Juncker, the Commission president.

Observing that "never before have I seen such little common ground between our Member States, so few areas where they are prepared to work together", Juncker had nothing to offer but dead platitudes. Nothing new. No trace of vision.

Indirectly, however, he did again point up the irony that the greatest obstacle to Britain finding a satisfactory way to extricate herself from this mess is now coming from the very people who were most vocal in campaigning to leave the EU: those hard-line "Brexiteers" who insist that we cannot remain in the EU single market because it is far more important that we should "take back control of our borders" to halt the tide of immigration.

The first problem with immigration is that it is too often discussed in grotesquely oversimplified terms. Of course some of it is socially unwelcome. But some of it is highly beneficial. The difficulty lies in sorting out which is which.

Even more relevant is that simply leaving the EU will not give us back "control over our borders" when much of the problem derives not from the EU at all but from our obligations under international treaties, such as the UN Convention on Refugees and the European Convention on Human Rights (ECHR).

By far the largest single component in UK immigration, 18 percent of it, mostly from Pakistan and the Indian sub-continent, derives originally from the right to "family reunion" enshrined in Article 8 of the ECHR.

The idea that we can "take back control of our borders" becomes even more fanciful when we consider the huge expansion of enforcement which would be needed to keep a bureaucratic eye on all the 37 million foreigners who enter Britain every year, the vast majority of whom, as tourists, students or on business, then leave again.

The only part of that immigration which could be affected by leaving the EU is that which takes place – much of it beneficial – under the EU's "freedom of movement of workers"; and to stop that, the more naive Brexiteers insist that we should sacrifice our right to continue trading in the single market, presenting us with massive problems of a different kind, which they seem determined not to recognise.

The ultimate irony is that the only sensible way in which we could legally exercise at least some control over migration from the EU is one which would also allow us to continue trading freely with the single market: by remaining in the European Economic Area (EEA) and joining Norway in the European Free Trade Area.

Although Norway has not chosen to exercise it, this would give us the right under Article 112 of the EEA treaty to claim partial exemption from the EU's "four freedoms"; and thus to impose some limit on migration from the EU we deem to be harmful.

This is the "safeguarding" principle, common in international treaties, which David Cameron asked for in his pitiful attempt at a "renegotiation" last February; and which was inevitably refused because it is not open to members of the EU. But it is available to members of the EEA outside the EU, who can unilaterally claim it without any need for negotiation; as, for different purposes, both Lichtenstein and Iceland have demonstrated.

So obsessed are our Brexiteers with their wishful-thinking alternatives to remaining in the single market – each as unworkable as the rest – that they are determined to close their eyes to the one solution which, to a great extent, could enable us both to have our cake and eat it. If they got their way we would not only lose the cake but be left with nothing to eat in return.

That is the riddle Theresa May and her more sensible advisers need to confront before invoking Article 50, to trigger negotiations unlikely to begin until after Germany and France have held next year's crucial elections.

Meanwhile the EU itself stumbles blindly forward into the dark, without any clearer idea of how to solve the ever more pressing problem of its own future than President Juncker was able to offer last Wednesday.

Richard North 18/09/2016 link

Brexit: an anti-suicide note from Booker


In the print copy, the headline of the Booker column is: "Why leaving the EU market would be suicidal".

This is about time. We need to be seeing robust headlines such as this, to cut through the cant and stupidity being projected by the "hard" Brexiteers. The longer their particular brand of confusion is allowed free rein, the more difficult it is going to be to get some sense into the debate.

Booker, at least, sees signs of realism beginning to emerge from the Brexit fog, with headlines such as "PM slaps down Davis on trade with the EU" and "May slaps down Boris on migrant point-system". On top of that, we see Fox being slapped down, while the Japanese government has delivered its own warning.

Nothing was more terrifying about the Vote Leave campaign, Booker writes, than the complete failure of its leading figures to grasp all the complexities facing us if we are to find a satisfactory formula for leaving the EU.

Even today we are still hearing from too many of these Brexiteers little more than ill-informed wishful thinking. Names such as Johnson, Redwood and Cash come to mind.

Even David Davis said last week that it was "improbable" that we would stay in the Single Market, because this would prevent us from "taking control of our borders" (another complex problem dependent on much more than just our membership of the EU, such as the European Convention on Human Rights).

But at least Davis has admitted that extricating ourselves from a system of government with which we have been enmeshed for 43 years is turning out to be more complicated than he had realised. More importantly, he has conceded that the central role in the negotiations will be played not by him and his fellow-Brexiteers but by our rather cannier Prime Minister, Theresa May.

If there is one thing on which more clued-up observers agree – as distinct from that strange new "lunatic fringe" alliance between too many senior Tories and Jeremy Corbyn – it is that, on leaving the EU, we must nevertheless remain in the Single Market.

In fact, leaving it would be far more disastrous than is generally realised, because one of the countless technicalities to which the lunatic fringe are oblivious is that in recent years there has been a revolution in the way international trade is organised.

Since the major disruption to trade caused by 9/11, a wholly new system has been emerging, under the auspices of the World Customs Organisation, designed both to improve security and to facilitate global trade.

To prevent crippling delays, cross-border traders sign up to become "Authorised Economic Operators" (AEOs). This enables them among other things to file all their necessary documentation electronically in advance. It also allows for "mutual recognition" between customs authorities, so that goods can simply be waved through at their destinations, instead of causing 20-mile tailbacks while they are inspected.

But Britain is only part of this global system by virtue of its membership of the EU, which as in all other trade matters, signed the agreements on our behalf. This was why that report from the Japanese foreign ministry warned that we cannot afford to drop out of the single market.

To negotiate separate AEO status in our own right would take far too long; which is why, yet again, by far the simplest and most practical solution is that we should remain, along with Norway and other non-EU countries, in the wider European Economic Area (EEA), thus allowing our AEO status to continue.

Not only would this give us continued access to the single market (with more influence, like Norway, over shaping its rules than we have now). It would also give us a unilateral right to exercise some limited control over immigration from the rest of the EU.

On the other hand, catastrophically, if we drop out of the single market and lose access to the AEO system, this could strike a devastating blow not just at our trade with the EU but with the rest of the world as well.

Of all these arcane technicalities, our lunatic fringe, with all their heady talk about those worldwide "free-trade deals", is – unlike the Japanese government – blissfully unaware.

But, thank heavens, it is Mrs May, not those casually ignorant Brexiteers, who will be in charge. And if she is properly advised by people who know what they are talking about, it is this kind of practical detail which should be at the top of her agenda.

That is where Booker leaves it, but the matter will not rest there. Over the next weeks and months, we will need to see some real leadership and a sense of direction. Too much time is being wasted by the "lunatic fringe" with their endless stupidity, their inability to entertain the necessary logic of Brexit and their blank refusal to engage.

These are the people who are breaking the rules of civilised discourse, and they've been slowing down progress for far too long. The process of leaving the EU is complicated and it is going to take all our skills and the best of our minds to navigate us to a successful conclusion.

We really do not need the distraction of the "lunatic fringe", who have nothing to contribute to the debate but noise. The reality of Brexit is that, for the time being, need to remain in the Single Market. That is the given – the baseline on which any Brexit settlement must be based.

This is not a game for the entertainment of stupid people and, from anyone who thinks different, we need a long period of silence. We already know their views and there is no value at all in hearing them repeated.

Richard North 11/09/2016 link

Brexit: a sterile debate


On 24 August, John Mills wrote to me complaining that he didn't seem to be able to get straight answers to some fairly simple questions. One of the points made was that, after the Norway referendum in 1972, it had taken "just under eight months for the Norwegians to negotiate a trade agreement with the EU".

What he didn't say was he had already raised a similar point in an unpublished draft of a pamphlet he was working on. Unknown to him, though, I'd already seen it. In it, Mills had written:
After Norway rejected EU membership in 1972, the Norwegians negotiated a trade deal with the EU in just under eight months. It might take rather longer than this 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.
From this and his later comment, it is pretty obvious that Mills believes that, if Norway and the EEC could finalise a treaty in "just under eight months", then it cannot be any great stretch for the UK to meet the two-year deadline on its Article 50 negotiations. However, my response was unequivocal:
The 1973 Norwegian trade agreement was 113 pages long, including schedules. The substantive treaty was six pages. It was a very basic treaty, dealing with a very limited range of products, concerning tariff reductions. The treaty was replaced in 1994 by the EEA Agreement. That took from 1984 to 1992 to agree. The way that treaty is structured is that each 'EEA relevant' EU law is added to the treaty as a treaty amendment. In approximate terms, that makes the Agreement, with Protocols and Annexes, about 50,000 pages.
No fair minded person could dispute these easily verifiable details, which effectively negates Mr Mills's argument. Yet, despite this, Mr Mills has exactly reproduced the passage in the draft, word for word, in the final version of his pamphlet which he has now published under the title "Healing The Wounds" – without, of course, any of the details furnished.

In his original draft, he had also asserted: "the EU does not have trade treaties in place with any of the major economies in the world such as China, Japan India, Australia or the USA".

Following my sight of the draft, I met Mr Mills over lunch in London, and explained to him that China and other countries such as Australia and the USA did have trade agreements with the EU, but structured in different ways from the conventional free trade agreements, notified to the WTO.

Previously, I had written about this in Monograph 2, which stated:
A similar exploration of China's status with the EU identifies multiple agreements - 65 over term, including 13 bilateral agreements, ranging from trade and economic co-operation to customs co-operation. None of these 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.
I had added more detail in Monograph 7, sent to Mr Mills on 17 August, which he said he had read.

Despite that, on 23 August, Mills wrote to me saying, "I – and I think lots of other people - still do not really understand why it is possible for China, the USA, Australia, Japan, etc., all to be able to sell product to the EU on WTO terms [i.e., without trade agreements] but it would be impossible for us to do so".

Yet again I explained the situation, writing that there was: "more to trade than the traditional Free Trade Agreement". For many reasons, I said, some nations (China, USA, etc) prefer to order their trade relations using forms of agreement different to the traditional Free Trade Agreement.

When it comes to China and the USA, the networks of trade agreements are complex and extensive, relying on the interaction between the bilateral and the multilateral, with constructive and imaginative use of coordinated unilateralism as an overlay. I thus stated:
It is the case, therefore, that none of these nations rely on the WTO option. For us to enjoy the same trading relationships with the EU as are enjoyed by the US and China, we would have to see replicated exactly the same complex combinations of unilateralism, bilateralism and multilateralism. Complex, they are and poorly understood, but that does not mean these arrangements do not exist. They do.
Mr Mills appeared to acknowledge this by then asking: "if we are prepared to come right out of the Single Market, why would we need to have any more complicated agreement than whatever subsists between the EU and China and the USA?"

To my mind, this is a man who has at last acknowledged that China and the USA do have trade deals with the EU. Yet, in the published version of his pamphlet, he keeps his original phrase unchanged: "the EU does not have trade treaties in place with any of the major economies in the world such as China, Japan, India, Australia or the USA".

Over the years, I have taken much criticism from diverse pundits, and get much advice as to how I should convey information to people. Yet, on this, I have been totally open and helpful. At my expense, I travelled to London to brief Mr Mills, I have written explanatory notes for him and answered his questions. This is how he responds.

Mr Mills, for all the information given and time expended, has not changed his position one iota. He claims genuinely to be interested in learning, asks questions, gets answers – and then ignores them. Even yesterday, in Comment Central, we find him asking, rhetorically, how long it would take to negotiate a free trade deal with the EU. He then writes:
When Norway decided not to join the EU in 1972, it took less than eight months for the Norwegians to negotiate a free trade deal with the EU. We need to aim for the same fast progress, to get the necessary arrangements in place within the two-year period allowed for in Article 50 of the Lisbon Treaty.
All of this underpins a fundamental dishonesty in his corner of the Brexit debate. Mills and his friends argue that we must drop out of the Single Market and negotiate a free trade agreement with the EU. For this to work, they pretend – contrary to all evidence – that such a deal can be negotiated inside two years.

Then, in the event of a failure to conclude an agreement, they then rely on the fallback of the WTO option, which they pretend is a tenable scenario – again contrary to all available evidence.

This is the Mills trick, spread right though his e-mail circulation list and beyond. But it is not a fair way of conducting a debate. And, in its denial of evidence, it is ultimately sterile. If this debate is to progress, we need more honesty than we are currently seeing.

Richard North 03/09/2016 link

Brexit: muddy waters


When the Prime Minister and her team met yesterday at Chequers, Mrs May confirmed that MPs will not be given a vote before her government triggers Article 50.

"There was a strong emphasis on pushing ahead to article 50 to lead Britain successfully out of the European Union – with no need for a parliamentary vote", Mrs May's spokeswoman said.

She then added: "Several cabinet members made it clear that we are leaving the EU but not leaving Europe, with a decisive view that the model we are seeking is one unique to the United Kingdom and not an off-the-shelf solution".

"This must mean controls on the numbers of people who come to Britain from Europe but also a positive outcome for those who wish to trade goods and services".

What precisely this means isn't at all clear. But Charles Grant thinks he knows. Immigration controls, in his view, means Britain's Brexit deal would not be along the lines of that used for Norway or Switzerland. Instead, he argues, it puts the UK on track for a Canada-style agreement, with free trade for manufactured goods but not necessarily for services.

"People have been assuming there will have to be restrictions on immigration of some sort, either an emergency brake, or an Australian-style points system for European workers", says Grant.

"Whatever system we go for it is going to be unacceptable to our partners if we want access to the single market", he adds. "We will only have limited access to the single market and have to content ourselves with a free trade agreement, which would not cover many of our key services sectors including financial services".

In its own way, this is no more coherent than what is coming out of May's office. The only difference is that Grant is probably maliciously trying to confuse the issues – although one can never discount his profound ignorance on a wide variety of subjects, something he shares with the politicians.

But either way, we are none the wiser – not that we expected to be. We're still in a phoney war period. Reality can't be far away but, clearly, it's not here yet.

Richard North 01/09/2016 link

Brexit: the power of prestige


If I tried really hard, I could be pretty insulted by this. Gerard Lyons, one of the subscribers on the John Mills list, picks up on Peter Lilley's comments on my Monographs, calling Lilley's input an "excellent critique" of the so-called Norway option. 

In this critique, sent to the entire Mills list, Mr Lilley writes, "I have great respect for Richard North. He does original research. It is thorough and well documented. On a range of issues he has been right and the conventional wisdom wrong. Moreover, he is not a closet Remainer trying to inveigle the UK back into the EU by the back door. So I am reluctant to take issue with him".

But four short paragraphs later, Lilley writes that he thinks: "the idea of exiting the EU via a period in the EEA is a mistake. The EEA was devised for countries whose governments wanted to join the EU but whose people were reluctant. It is an ante-room, not a departure lounge". That's it. That is the complete version of Lilley's "excellent critique" – three sentences.

Yet, apart from anything else, Lilley's claim that "the EEA was devised for countries whose governments wanted to join the EU but whose people were reluctant" is false. The history clearly says otherwise. Lilley is indulging in unfounded rhetoric. The EEA was originally constructed as an alternative to the EU.

This is the man, incidentally, who writes, "when politicians debate issues of which they have no experience they seize on any plausible argument which supports their case", then to parade his own ignorance.

Of course, it is entirely the case that some players have seen the EEA as a halfway house - but that is rather in the past. Switzerland, a potential EU member, didn't join the EEA. Norway and Iceland have formally withdrawn their applications. As a halfway house for those on their way in, the EEA has been a dismal failure.

But, by any logic, if the EEA can be a staging post for potential entrants, it can also be a home for countries like the UK on the way out. For that purpose, it is neither an ante-room nor a departure lounge. The analogy is inappropriate. The EEA is a multilateral treaty which affords Efta members participation in the EU's Single Market, without them having to be in the EU.

So, Lilley's "excellent critique" amounts to a personal opinion, based on a flawed appreciation of the EEA's history, and an inappropriate "ante-room" analogy. But these three sentences have more power and authority than anything I could ever produce.

Lyons claims to have read the Monographs (and an earlier version of Flexcit), but there is no equality of arms in his "bubble". The prejudice of a single "gatekeeper" carries far more more weight than the considered work of an expert researcher.

He thus prefers three ill-judged sentences to eight Monographs - thousands of words of careful analysis, supported by hundreds of references and a huge amount of evidence. So armed, Lyons is able to ignore the dangers of the WTO Option and dismiss trade barriers as if they did not exist. He does not need mere evidence when, like most of the Mills list, he can rely on his "gatekeeper", Peter Lilley, to tell him what to think.

In such matters, prestige trumps all. My original, "thorough and well documented" research is of no value compared with three sentences from the prestigious insider, Peter Lilley.

Having so easily dispensed with the tiresome detail, Lyons believes: "we should proceed based on leaving and trading under the World Trade Organisation (WTO)". The UK, says Lyons, "is already a member of the WTO and it is there to facilitate trade, not stop it. Outside the EU, we can trade freely under WTO rules and reduce import tariffs".

This is not ignorance speaking. It is blind arrogance - the arrogance of the bubble. It is a blunt refusal to entertain intelligent research in preference to the diktats of prestige, playing to the home crowd. The exchange with Mills has been a complete waste of time. My input has had not the slightest effect. 

As I remarked earlier such people are unreachable. We cannot communicate with them. They are a lost cause.

Richard North 30/08/2016 link

Brexit: the Mills file


Over three days earlier this weeks I have had a long and detailed exchange of e-mail correspondence with John Mills, chairman of Labour Leave, the exchange initiated by him. His main objective, according to his later e-mail, was to try to draw on my knowledge and experience to help those on his extensive e-mail list: "establish whether the Brexit negotiating position which I think most of us would favour is feasible".

This is a lengthy exchange, but I believe it to be an important illustration of the state of the debate in certain quarters. I have, therefore, reproduced it here in full for the public record, with John's permission. Initially, I had proposed making this anonymous, but Mr Mills preferred to be named. I have made minor corrections and improved the paragraph spacing, but otherwise it is unchanged apart from third party references, which have been obscured.

In the very near future, I will post a critical analysis of this exchange, which starts here:

22 August 2016

Dear Richard

In strict confidence, please find below an exchange of e-mails from influential people who, I am sure you will think, are taking much too simplistic a view about the process of disengaging ourselves from the EU.

All the same, I am sure they are right in saying that the more we can keep the negotiations simple, the better. What it seems to me we need out of all this is as short and clear a guide as possible to the simplest way as possible of achieving both of the following objectives, treated as alternatives, or why they cannot be achieved if there are compelling reasons why this is the case:
1. Your preferred choice of the UK being in the EEA, at least on a temporary basis, and thus with free trade with the EU, but out of the Single Market as far as possible. What realistically would we then be able to do about border control, payments to the EU and justiciable obligations generally?

2. Being completely outside the Single Market but with free trade with the EU at least on goods and hopefully on services, which is where I think most people in favour of Leave would like us to be - including me if it is achievable.
Would you be able to get a Monograph produced to cover these two options, cutting to the quick and keeping it as simple as possible? I think it would be greatly appreciated if you could do this.

Very best wishes,



22 August 2016


Look at an old Bakelite telephone from the 1940s and now look at an i-Phone. If simplicity was the ultimate objective, then we should scrap our i-Phones and return to those clunking black telephones, which we used to keep in the hall.

The thing is that, just as telecommunications have become more complex, so has governance (not least you need some pretty sophisticated international governance to run the telecommunications system). If you try to simplify, you lose functionality. If you look to simplify our exit negotiations, then we risk conceding issues which, had we fought for them, we would have got a better deal.

Essentially, there isn't a quick and simple way out. The EU project is nearly 70 years old, and the UK has been undergoing the process of political and economic integration for 43 years. The EU systems are intertwined with our own to such a huge extent that it is quite impossible to extract ourselves quickly without causing damage.

Thus, my central thesis is that we plan a phased withdrawal. We extract ourselves step-by-step, in much the same way we went in. And this is the reason for electing to go for the Efta/EEA option as a first step. It was treated as a half-way house for those countries wanting to join. In my view, it has equal utility as a half-way house for those wanting to leave. It is Phase 1 of a six-point programme.

To stay in the EEA is to stay in the Single Market. The EEA is the Single Market. But it takes us outside the EU and, therefore, outside the jurisdiction of the ECJ. We will have to pay some money to continue cooperating with the EU. But then international cooperation costs money.

As to the Single Market, I am getting exceedingly weary with the likes of XXXXXXX bleating about it. Since he was first involved, we've had the conclusion of the Uruguay Round, the formation of the WTO and a huge surge in globalisation.

There are now more international regulatory/standards bodies in existence on the planet than there ever have been in the history of mankind. The Single Market is being globalised - we need to be part of that. Far from withdrawing from it, we need to be extending it, completing the globalisation process and wresting control of the Single Market from Brussels. We need to take ownership and manage it on an intergovernmental basis.

In this context, "free trade" and the negotiation of a free trade agreement with the EU to cover the longer term is an irrelevance. FTAs are dinosaur agreements with no relevance to the 21st Century. Most of "your" people are locked in the last Century. We need to move on ... until we can, there is no progress.




23 August 2016

Dear Richard

Thanks for your e-mail. I understand your frustration but if the key people are going to be won round to your point of view they need to be persuaded to do so rather than just being told that whatever they think is wrong. I agree with you that there is not a simple and quick way out but, whatever the constraints may be, the quicker and the simpler our approach is, it seems to me the more successful it is likely to be.

I know you want a phased withdrawal and maybe that is what we will finish up by having but to get there the other options – involving a cleaner, earlier break - need to be considered. If they really are not feasible, clear persuasive arguments showing that this is the case need to be advanced. Is it possible for you to set these out?

Take the WTO option, for example. I know this is not an ideal outcome but is it really impossible to envisage it being implemented, given at least two years to put whatever administrative arrangements might be necessary in place?

If WTO is possible, it seems to me that this puts us in a much stronger position to negotiate the UK being outside the Single Market – and thus no longer bound by free movement of people, our current level of contributions and justiciable by the Luxemburg court – but with free trade on goods and some sort of deal on services.

This is what I think most people want. What, in your view, would stop this happening? Of course there would be difficulties along the way but what would be the game stoppers? Are there any which, with the best will in the world, simply could not be negotiated away?

Very best wishes,



23 August 2016


I think, before anything else, two things are needed: clarity, and (intellectual) honesty. Without both, it is not possible to have a sensible debate.

In terms of our exit, I have sketched out three broad options. These are the generally accepted "industry standard" if you like. No serious commentator disputes them, although some break down the primary categories into sub-divisions. The three options are: (1) the "unilateral" or WTO option; (2) the "bilateral" or Swiss Option; and (3) the Efta/EEA option.

In Monograph 2, I have defined the WTO Option. This is taken to be a scenario where, for whatever reason, the UK eschews any form of directly negotiated trading agreement with the EU and trades solely and exclusively within the framework set by the diverse WTO Agreements.

That is the baseline. The definition is distilled from countless papers and public pronouncements, and it the basis of my further analysis. If you change the definition (as was the effect of Mr XXXXX's comments), then the calculus changes. However, as I remarked, if you take the WTO framework as a baseline and then negotiate agreements around it, to make it more workable, it is no longer the WTO option. It becomes something different. It becomes a (weak) version of the "bilateral" or Swiss Option.

Sticking strictly to the definition, I have written Monograph 2, to demonstrate that the WTO option (as defined) is a non-starter. I am not alone arguing this, although I have perhaps written at greater length and with more clarity as to why this should be.

As regards persuading people, I am reminded of the homily: you can take a horse to water but you cannot make it drink. If like Mr XXXXX, you ignore my definition and change the framework of the discussion, then it is not possible to have a sensible argument - we end up with a debate over "chalk and cheese" that takes us nowhere.

Thus to reiterate. The WTO option (as defined) is a non-starter. Furthermore, we know already that HMG is not deliberately going to embrace it. The most likely (and probably only) scenario is that it happens by accident. My Monograph was written partly to warn people of the consequences, in the hope that this will help prevent it from happening.

Having thus completed that task, I see myself has having provided the water. I have led the horse to that water and invited him to drink. If that "horse" cares not to drink, then there is nothing I can do about it. The horse will die of thirst. Meanwhile, as I see it, I have much more water to dispense, and to more willing horses. I have neither the energy nor the inclination to waste my time on recalcitrant horses.

Very best



23 August 2016

Dear Richard

I am probably a good deal more sympathetic to your point of view than many other people on the circulation list which you have seen but I – and I think lots of other people - still do not really understand why it is possible for China, the USA, Australia, Japan, etc., all to be able to sell product to the EU on WTO terms but it would be impossible for us to do so. I am not saying that this is the ideal option. Nor am I suggesting that there would not be difficulties, for example over recognition of standards, which would need to be overcome. The issue is whether it would be possible. Can you help me?

Very best wishes,



23 August 2016


I've written multiple posts on the blog, and then summed up and cross-referenced the arguments in Monograph 2. I've further elaborated on the arguments in Monographs 5 and Monograph 7. The works separately and collectively point out that there is more to trade than the traditional Free Trade Agreement. For many reasons, some nations (China, USA, etc) prefer to order their trade relations using forms of agreement different to the traditional Free Trade Agreement.

When it comes to China and the USA, the networks of trade agreements are complex and extensive, relying on the interaction between the bilateral and the multilateral, with constructive and imaginative use of coordinated unilateralism as an overlay. This I have made especially clear in Monograph 7, to the extent of pointing out that the traditional FTA is obsolescent and largely redundant.

It is the case, therefore, that none of these nations rely on the WTO option. For us to enjoy the same trading relationships with the EU as are enjoyed by the US and China, we would have to see replicated exactly the same complex combinations of unilateralism, bilateralism and multilateralism. Complex, they are and poorly understood, but that does not mean these arrangements do not exist. They do.

If people do not want to entertain the notion that such arrangements do exist, and insist on arguing that the likes of China and the US trade under WTO rules, without the benefit of these complex trade agreements, then all I can do is refer them to the already published Monographs. If they are not prepared to invest the time reading them, then once again we are in "horse and water" territory.

The facts are that trade systems are extremely complex (and intricate) networks of different types of agreement, all of which - in their totality - interact to produce their current effects. They are not static, but very much dynamic, always changing and evolving.

One of the latest (although not entirely recent) changes is the inter-institutional agreement that does not, in the first instance, even involve national governments. Nevertheless, these are having a profound effect on the trading relations between nations, and have to be factored into the discussion as well.

Overall, understanding these systems requires an investment in time, and a willingness to set aside often dearly-held preconceptions. Most of what the current public debate is covering is twenty years old or more, with no recognition of how much the world has changed in the interim.

That said, we cannot have a sensible debate if those involved will not step out of their comfort zones and refuse to update their knowledge base. So far, I've written eight Monographs. The ninth is in production. People need to read them. They are based on extraordinarily detailed research and analysis by one of the best in the business.

If people don't read (and then seek to understand) the material I send them, I can’t help them. I can't help people who are intent on refusing help.

Very best



23 August 2016

Dear Richard

Thank you for your e-mail. I have carefully read all your Monographs and it is clear from the responses which I have received from other people on the distribution list that they have done so too. I understand also that for the UK to move to trading with the rest of the EU on WTO terms would not be anything like as simple as many people seem to imagine that it would be.

What I don’t understand is why it would be impossible. Clearly there are obstacles. What I - and I think many other people - would like to have is a list of what these obstacles are and what can or can't be done to overcome them. So far, I know that you have listed mutual recognition of standards and a variety of different protocols and agreement on detailed procedures which need to be observed. These do not appear to me to be impossible to deal with. Can you please let us know what else stands in the way? I really want to know!

Very best wishes,



23 August 2016


I have listed a number of obstacles - that's the subject of Monograph 5. Clearly, those obstacles can be overcome. That is what trade agreements are for. We overcome them by negotiating trade deals - issue, by issue, sector by sector. The point though is that the moment you start negotiating trade deals, you are no longer relying on the WTO option. You are moving into the "bilateral" option. You would no longer be trading on WTO terms.

In other words, it is impossible to trade under the WTO option, because of the huge barriers involved. The moment you start negotiating your way around the barriers, your WTO option ceases to be the WTO option and is transformed into a bilateral agreement(s).

Thus, what you are actually talking about is making a bilateral trade deal with the EU ... the so-called Swiss Option. The point then about bilateral deals is that they are as long as a piece of string. You have the Turkish deal at 55 pages and the Canadian deal at 1,598 pages. The precise nature of the obstacles depends on the scope of the agreement, and the degree of market access required.

However, we can add to this with a few other observations. Firstly, bespoke market access (bilateral) deals take a long time to finalise. It would be extremely optimistic to expect a comprehensive agreement to be concluded within five years. Since the chances of getting a time extension are slight - and there would be a political penalty to pay - the bilateral route is hazardous and uncertain. That leaves the off-the-shelf Efta/EEA option.

However, if we chose the bilateral route, there are certain basic components. Firstly, we will have to agree the scope of the agreement - the range of goods and services to be traded. Secondly, in terms of the goods and services traded, we will have to agree to match EU standards or come to an agreement on equivalence. Thirdly, we will have to come to an agreement on a verifiable system for ensuring regulatory convergence in maintained. Fourthly, we will have to agree a mutually acceptable agreement on conformity assessment. Fifth, we will have to harmonise customs procedures and/or agree on mutual recognition. Sixth, we will have to agree a market surveillance/complaints system, to monitor the functioning of the agreement. Seventh, there will have to be a dispute settlement procedure.

These are the bones of a trade agreement, none of which are dealt with in the WTO agreements. And that does not include the "peripherals" which in the UK-EU relationship, would be considerable.

Very best



23 August 2016

Dear Richard

Many thanks for your very helpful response. To make sure that I understand what you are saying, can I please ask you to answer some additional questions?

1. I understand that the UK would not be able to fall back on the WTO option without at least some co-operation from the other EU members. Would there, however, have to be any more co-operation than there is with, say, China or the USA? If so, which of the points enumerated in your penultimate paragraph applies to the Chinese and the Americans, with which we would also have to comply?

2. I understand why the deals between the EU and Turkey (which at 55 pages sounds quite short to me) and Canada involve relatively complicated agreements but, if we are prepared to come right out of the Single Market, why would we need to have any more complicated agreement than whatever subsists between the EU and China and the USA?

3. Accepting that we may well not get the passporting deal which the City wants – although I understand that this is going to be overtaken by the "equivalence" regime in 2018 – and that we will not get full access to the Single Market on services, what obstacles do you think there are which would prevent us having access to the EU market on the same sort of terms as China and the USA which we would be unlikely to be able to overcome given a two year negotiation period?

With many thanks for your patience, which I really appreciate. I am really trying to understand the position.

Very best wishes,



23 August 2016


We can't fall back on the WTO option - full stop. If we devise a trading arrangement in cooperation with the EU (not other members - it has to be directly with the EU) then it is not the WTO option. It becomes a bilateral agreement.

As to China, the USA, they have extensive but still limited trade with EU member states. We could copy the US relationship, but it would take time. The current arrangements have matured over time since 1993. However, even the Canadian agreement would not approach the level of agreement reached within the EEA, and Canada took seven years to negotiate.

We would still only have limited access to the EU's markets. The loss of access would be quite considerable. We export over £220bn to the EU each year, in goods and services, compared with less than £20bn goods and services to China.

What you have to appreciate with the EEA is that the individual texts of the Regulations, etc, are appended to the EEA Agreement, as amendments. Effectively, that makes the EEA Agreement about 50,000 pages long. That is what is needed to give full access to the EU's markets.

If we sought a comprehensive trade agreement with the EU, we might expect it to take five years or more.

Very best



24 August 2016

Dear Richard

I am in some difficulty because the e-mail above does not answer the questions which I put to you in the e-mail which I sent to you yesterday. I understand that, if some measure of co-operation is required by the other EU member states to make what would otherwise be the WTO option work, this entails some bilateralism.

What I don't understand is why you think that it would be impossible to get this organised within two years, if whatever had to be agreed was kept as simple as possible. Why is it possible for China, the USA, etc., to trade with the EU without being in the Single Market or the EEA, but not the UK?

Please let me have answers to these questions.

Very best wishes,



24 August 2016


What is so troublesome about this exchange is your seeming reluctance to abandon the notion of the WTO option as a working solution. Yet the WTO Option is a unilateral approach. That means that, if you adopt a bilateral approach, you cannot then argue that this is simply a way of making the WTO Option work, as you seem to be doing. We are talking about two different animals. For the life of me, I don't understand why you are having such difficulty with this idea.

You then ask me why a settlement which "entails some bilateralism" would be impossible to get organised within two years. The problem in giving you a simple answer to this is that you have already restricted the framing of the question. You talk about "some bilateralism", as if you could simply bolt-on a few additions to an agreement and call it a workable settlement. That cannot be the case.

If you want a high level of market access (far more than has the United States or China), then you have no option (short of adopting the Efta/EEA option) but to negotiate a comprehensive free trade agreement. In one of my previous e-mails, I set out the basic structure and requirements of such an agreement, comprising seven core points without taking into account the "peripherals".

Given the complexity of a comprehensive FTA, it should not require much imagination to realise that this will take some time. International agreements do take time. Based on current experience, it would be unreasonable to expect an agreement to be concluded in less than five years.

You then return to the premise that whatever is agreed should be "kept as simple as possible". Yet I have already addressed this issue. A settlement with the EU, undoing 43 years of economic and political integration, and forging an agreement which will give a similar level of market access to that which we currently enjoy, is not going to be simple. This will be one of the most detailed and complex negotiations ever undertaken with the EU. To expect it to be concluded inside two years is risible.

Turning to the next issue, you then ask "why it [is] possible for China, the USA, etc., to trade with the EU without being in the Single Market or the EEA, but not the UK?" Yet the answer to that has in part already been given, and you should have no trouble answering the point yourself. It is a question of the degree of access.

Within the Single Market, the UK has an unparalleled degree of access to the markets of EU Member States. China, the US and other countries have very limited access to EU markets. Volumes of trading may be high, but penetration is narrow. For instance, by far the bulk of Chinese exports to the EU is focused on in manufactured goods. The more complex and diverse economy of the UK exports a much wider range of goods and services, and needs much wider access to the European markets.

If you wish to restrict yourself to the limited degree of access enjoyed by the US and China, then the consequence would be a savage curtailment of trade. You would have some trade, but nothing like the £220bn in current levels of goods and services. That is the crunch point ... access is graduated. You can have partial, very limited access, right through to full access. If you want a "quick and simple" agreement, the price will be limited access.

Very best



24 August 2016

Dear Richard

Let me try once more to explain. The vast majority of the Brexit people who are on my mailing list would like us to be outside the Single Market, outside the EEA but with an agreement in place which leaves conditions for trade in both goods and services between the UK and the rest of the EU on the same basis as they are at the moment or as close as we can reasonably get to it.

They understand that there will be obstacles to getting this done and they therefore want to have an alternative available in case it proves impossible to get what might, for short, be called a free trade deal with the rest of the EU within the two year A.50 time frame. Having an alternative would be a way of putting pressure on the EU to get an agreement in place reasonably quickly and on reasonable terms.

We all know that you do not think this is the best way to proceed but it makes a big difference in terms of persuading people to your point of view if you are able to show that the alternative which nearly all of them favour is not just worse than your solution – on which there might well be a reasonable debate – but impossible.

The alternative would be to trade with the EU on WTO terms, accepting that this would involve at least some co-operation from the other EU members, so call it WTO+.

The key issue is then whether there are good reasons for believing that the WTO+ terms which the UK could reasonably be expected to negotiate would be different from and worse than those enjoyed by, say, China and the USA to such an extent that no reasonable person would go along with them It may well be the case that WTO+ terms would reduce the amount of trade the UK does with the EU – although presumably the reverse would also apply – and let us assume for the moment that this is a price which everyone would be prepared to pay.

My question to you, therefore, is not whether you think that WTO+ is a better option than staying in the EEA (we know you don’t think so) or whether it is better or worse than anything else (which may or may not be the case, and we know your views on this too) but whether it would be possible for the UK to have the same amount of access as China and the USA, and, if not, why not.

Please let me have answers on these points.

Many thanks



24 August 2016


I would like to have the exclusive franchise for Lunar Green Cheese, with a quota of 1000 tons a week, beamed down directly from the Sea of Tranquillity by a matter transporter.

The point, of course, is that that is not possible – any more than it is possible to settle a deal inside two years that has us "outside the Single Market, outside the EEA but with an agreement in place which leaves conditions for trade in both goods and services between the UK and the rest of the EU on the same basis as they are at the moment".

It is not that there are "obstacles to getting this done" – it is impossible. There is no case in the real world where we could negotiate this within a two-year time frame.

What you have to confront, therefore – if you want to stay outside the Single Market, outside the EEA, is a severely limited agreement which will probably give us a fraction of the access that we currently have. I am not even sure that it is possible to conclude a coherent agreement within that time frame.

The nearest equivalent is the timeframe for the EEA Agreement negotiations. The process formally started with the Luxembourg Declaration of 1984 and the Agreement was signed in 1992. It came into force in 1994. The Swiss Agreements took 16 years.

The point therefore, is you are asking the impossible. It is simply not possible to get an agreement in place "reasonably quickly and on reasonable terms". If you seek speed, then you have to concede access.

You then suggest that having an alternative would be a way of putting pressure on the EU. But it wouldn't put pressure on the EU. Why would it? How could it? It is for the UK to present its proposals – the EU will then respond. The pressure is on the UK, as the price of failure impacts on the UK not the EU.

However, "you tell me that the alternative would be to trade with the EU on WTO terms, accepting that this would involve at least some co-operation from the other EU members, so call it WTO+."

Yet, in my last e-mail I wrote to you saying that the WTO option was not an alternative. I've also stated that you can't simply bolt on bits to this option and expect it to work – and nor can you call it WTO+. That name is already taken. I've also explained why the China and US schemes would not work … we have different trade structures and need wider access.

As to your next point, I have also written about the issue of asymmetric discrimination. We can open our markets to EU products, but that does not mean to say that the EU can or will reciprocate.

Thus, you conclude with the question as to whether it would be possible for the UK to have the same amount of access as China and the USA, to which you have already had an answer. I doubt, ab initio, whether it would be possible to replicate the China arrangements or indeed the US arrangements – both of which have evolved over the last 20 years. And even if we could, they would not meet our needs. Our trade structure is different – we need different agreements.

To make a final point, I am not alone in this. No end of quite sensible people have said that leaving the EU will be a complex procedure. In fact, it is not only complex, but unique. Never before has something of this scale been attempted, and nothing even close has been considered within the insanely short timescale.

For that very reason, I came the conclusion that there are very few options left to us.

Very best



24 August 2016

Dear Richard

With the best will in the world, I just don't seem to be able to get straight answers from you to some fairly simple questions. Can I please try once more:
1. What obstacles would need to be overcome to enable us to trade with the EU on no worse terms than China or the USA, accepting that this may well leave us with less access to the EU markets than we have at the moment?

2. Which of these obstacles are so onerous and difficult that it would, in your view, be impossible to negotiate a settlement on them within a two year period?

3. After the Norway referendum in 1972, when there was a "no" vote, I am told that it took just under eight months for the Norwegians to negotiate a trade agreement with the EU. If the intention was to leave everything as it is as much as possible, but accepting that there are some things which might have to be left as loose ends for the time being, why do you think it would be not easy but impossible for a deal between the UK and the rest of the EU to be struck within two years – especially if there was a less attractive but realistic alternative for us to turn to, thus providing an incentive for everyone to come to a deal as quickly as possible. Even if we could not get an agreement on nearly everything, would it be impossible, in your view, for us to be able to secure one at least on major elements of our current trade with the EU, such as on motor vehicles.
I am not trying to trip you up or to persuade you to adopt objectives with which you disagree. I just need to understand what the problems are, what may be difficult but is not impossible and what really is impossible. I need this so that I can pass on to the mailing list clear and persuasive information which hopefully they will accept. Just telling people things are impossible – as opposed to being difficult - without explaining clearly why this is the case will just leave them unpersuaded. Please help me!

Very best wishes,



24 August 2016


I am not being difficult – the very reverse. I've answered your questions honestly, in depth. Let me repeat. 

1. What obstacles would need to be overcome to enable us to trade with the EU on no worse terms than China or the USA, accepting that this may well leave us with less access to the EU markets than we have at the moment?

As framed, this question is unanswerable. You are trying to compare chalk and cheese. The structure of the UK economy, and its trade composition, are very different to those of China and the US. Therefore, the terms on which China and the US trade with the EU are irrelevant to the UK. Even if we could replicate their complex deals (which is almost certainly not possible), they would be of little value to us.

2. Which of these obstacles are so onerous and difficult that it would, in your view, be impossible to negotiate a settlement on them within a two year period?

If you seek to negotiate a bilateral, comprehensive trade deal with the EU, it will demand that the negotiations conform to a basic structure. I've already set this out. For convenience, the elements are numbered below. We will have to:
(1) set out the scope of the agreement - the range of goods and services to be traded.
(2) agree to match EU standards or come to an agreement on equivalence.
(3) agree a verifiable system for ensuring regulatory convergence is maintained.
(4) agree a mutual recognition on conformity assessment.
(5) harmonise customs procedures and/or agree on mutual recognition.
(6) agree a market surveillance/complaints system, to monitor the functioning of the agreement.
(7) agree a dispute settlement procedure.
Potentially, each of these could be an obstacle. It is impossible to predict, up front, which might prove onerous. That is the nature of negotiations. Often, until you are face-to-face, you can have no idea of how the other side it going to react to your proposals. This is especially so when you are dealing simultaneously with 27 other countries, each of which many have their own agendas.

Obviously, though, the greater the scope that you aim for, the more difficult and protracted. The list of products for which you may seek access runs to over 900 pages.

You can seek an en bloc agreement, which is fine if the EU accepts that. If they wish to go through the list, line-by-line, you are going to be there forever. Alternatively, you can go for a de minimis list – but that means huge sacrifices in terms of access.

Agreeing to match standards should be straightforward, as we already have a high degree of convergence. But the system we agree for ensuring continued convergence is one of the most contentious areas, and extremely difficult to satisfy. This may limit the scope of the agreement.

Mutual recognition of conformity assessment is done product by product, sector by sector. The more products you include, the longer it takes. It could take several years.

Harmonisation of customs procedures should be relatively uncontentious, as long as the UK is prepared to conform with EU systems. Drafting is a long and complex job. I can't think of any developed country which has had to do it from scratch. We will have to – we can't use the EU's procedures because we are not a Customs Union.

Market surveillance is complex – and we have to buy into EU systems. The dispute procedure is one of the most complex and contentious areas of all.

All this, however, is just the basics. You have all the peripherals and then there is likely to be considerable conditionality. Until that is spelt out, you cannot even begin to estimate how we might respond.

3. After the Norway referendum in 1972, when there was a "no" vote, I am told that it took just under eight months for the Norwegians to negotiate a trade agreement with the EU.

The 1973 Norwegian trade agreement was 113 pages long, including schedules. The substantive treaty was six pages. It was a very basic treaty, dealing with a very limited range of products, concerning tariff reductions. The treaty was replaced in 1994 by the EEA Agreement. That took from 1984 to 1992 to agree. The way that treaty is structured is that each "EEA relevant" EU law is added to the treaty as a treaty amendment. In approximate terms, that makes the Agreement, with Protocols and Annexes, about 50,000 pages.

If the intention was to leave everything as it is as much as possible, but accepting that there are some things which might have to be left as loose ends for the time being, why do you think it would be not easy but impossible for a deal between the UK and the rest of the EU to be struck within two years – especially if there was a less attractive but realistic alternative for us to turn to, thus providing an incentive for everyone to come to a deal as quickly as possible.

I really do not understand that question.

Even if we could not get an agreement on nearly everything, would it be impossible, in your view, for us to be able to secure one at least on major elements of our current trade with the EU, such as on motor vehicles.

It would not be impossible, but it would be up to the EU to decide, on the basis of a proposal we put to it. The EU might, or might not, accept a limited deal. We can't know unless we ask them.

I am not trying to trip you up or to persuade you to adopt objectives with which you disagree. I just need to understand what the problems are, what may be difficult but is not impossible and what really is impossible. I need this so that I can pass on to the mailing list clear and persuasive information which hopefully they will accept. Just telling people things are impossible – as opposed to being difficult - without explaining clearly why this is the case will just leave them unpersuaded. Please help me!

I have not said anything is impossible, without explaining why. I have explained why the WTO option is impossible. I have explained why it is virtually impossible to agree a comprehensive bilateral deal within two years. We could seek a truncated deal, but we would not know how limited it would have to be until we had put our proposals to the EU and got their responses. The cost could be politically unacceptable.

Even the Efta/EEA agreement could be very tight, in two years. We could even find ourselves having to seek an extension of time.

This has to be the last communication on this. I've spent hours answering your questions, and we seem to be no further forward than when we started.




At the conclusion of the exchange, this was Mills's position:

1. Despite what Richard says, I just do not believe that it would be that difficult, within a two year period, to put in place whatever agreements were necessary over mutual recognition of procedures, etc., to enable the UK to trade with the EU at least on goods on no more disadvantageous terms than apply to, say, China and the USA. I accept that there may be more difficulty on some, although not all, services.

I cannot, therefore, see why the WTO option would be impossible to implement event though Richard may be right in saying, post Brexit, that the total volume of trade done between the UK and the rest of the EU would be lower than it would be without Brexit, but this would not necessarily be to our disadvantage, because of the very large trade deficit which we have with the EU.

2. I think that we have to accept that negotiating every detail of a free trade agreement with the EU with the UK outside the Single Market might be difficult within the two year Article 50 period, although perhaps not impossible if both sides were determined to keep as much as possible of existing arrangements in place. It might therefore be necessary to exclude some areas to enable most of what needs to be in place within two years.

3. I am sure that Richard is right in saying that a lot will depend on how helpful and co-operative both the UK and the EU are in the forthcoming negotiations. If both sides are determined to make the negotiations successful and mutually fruitful, this will obviously be a big help. If not, we need the WTO option as a fall-back to avoid the negotiations being dragged out to a point where we might be forced into a bad deal by time pressures and lack of progress.

I hope you will find these comments helpful. I would also like to thank Richard for the very large amount of time that he has put into providing information to us and for all the care and trouble he has taken in doing so. I am sorry if he feels upset about the fact that there are still differences between us.

Best wishes,

John Mills

Richard North 27/08/2016 link

Log in

Sign THA
Think Defence

The Many, Not the Few