Brexit: in thrall to the poundshop demagogue

Monday 22 April 2019  

In a scarcely reported interview, only fragments of which are reaching the English language media, we see Jean-Claude Juncker urging the UK "not to waste time" in preparing for Brexit.

But what was most interesting was his comment that, whatever transpires, the exit will have negative consequences, warning that there will be no single market-based solution. "As I see it", he added, "the British side bears a hundred percent of the responsibility for this".

Juncker also warns that the EU cannot keep on putting off the withdrawal date indefinitely. Unsurprisingly, he believes that the best solution would be for the British to adopt the Withdrawal Agreement during the extra time that has been agreed, but he is clearly not optimistic.

In his view, the UK still runs the risk of leaving the EU without a deal, and the institutions and Member States are continuing to make preparations for that eventuality. They are not alone. We are told that British companies are already making plans to stockpile for a no-deal Brexit on 31 October. They are concerned that the timing could affect the Christmas market, a period when many companies make the bulk of their profits.

The significance of Juncker's comments is that the gloves are coming off. In what may be a sign of things to come, there is no attempt at diplomacy when it comes to apportioning blame. The UK is firmly in the frame, with the EU distancing itself from the outcome.

I have already speculated that this might happen, with the EU gradually ramping up its propaganda to put the responsibility for a no-deal Brexit firmly in the UK's camp. This would be in preparation for cutting the UK adrift on 31 October, when the European Council refuses to grant another Article 50 extension.

It needs no skill in reading between the lines, therefore, to adduce that the UK government in particular – and the nation in general – needs to be focusing on the only thing left which can stave off either a no-deal Brexit or a revocation. That is, as Juncker says, adoption of the Withdrawal Agreement, which will require parliamentary ratification some time before the end of October.

Mrs May, apparently, is still pinning her hopes on an accord with Labour, and remains hopeful that she can pull off a deal in time to avoid holding "unwanted" European elections on 23 May.

But, if the prime minister is concentrating on the main event, she must be one of the few people in the country who is. The bulk of the electorate, with the active encouragement of the legacy media, is expending its energies on the political equivalent of a second childhood, as it obsesses over the runners in those elections.

That gives rise to a typically mad intervention from Liam Fox who is seriously asserting that there will be adverse consequences if the EU "forces" the UK to hold European elections.

Willing as I am to attribute all sorts of evils to the European Union, in fairness one cannot reasonably argue that the UK fulfilling its treaty obligations equates to being forced to do anything by the EU. But then, there is "reasonable" and there is Mr Fox. The two have never been known to impact on each other.

However, there is a small point in what Fox has to say, in that he predicts that the EU could end up with "50 angry and disruptive MEPs" when the parliament reconvenes in July. He is doubtless exaggerating but nonetheless, a small number of MEPs could possibly do some damage when it comes to approving a new president of the Commission and the individual commissioners.

In fact, the scope is probably less than imagined. The European Parliament (EP) groups have already made their nominations under the Spitzenkandidaten procedure and it is now up to the European Council to choose its preferred candidate – having regard to the outcome of the EP elections which have yet to be held.

There is still a significant degree of disagreement over the validity of the Spitzenkandidaten procedure but, if the EP is given its head and gets to decide on the nominee, it is marginally possible that twenty or so UK dissidents will affect the vote. This is especially the case as Labour will be expected to do well, while nationalist votes might erode the EPP vote.

But, if this does substantially alter the political balance, amongst the 751 MEPs who will comprise the parliament as long as the Brits are still in place, then the European Council might exert its right to its "autonomous competence" to nominate the candidate, which the parliament might then allow to pass. Currently, Manfred Weber is the EPP's favourite, as Juncker is not standing for a second term, although Euractiv has suggested that antitrust Commissioner Margrethe Vestager is the clear overall favourite.

Whatever the outcome, the key date is 1 November, when the new Commission president is expected to take office, and it is then that the EU may be looking for a clean sweep. It will want the UK to make up its mind whether it comes back into the fold, as a fully committed member, or gets out of town. Thus, 31 October is shaping up to be make or break.

Given that the UK abandoning Brexit actually solves nothing, and for the Conservatives probably represents electoral annihilation – as does a no-deal Brexit – one might have thought that the Tories might be rallying behind the prime minister, purely out of self-preservation as a party.

Many Tories, though, are said to be flocking to Farage's Brexit party. And although many false comparisons have been made between the party and the Nazis, it is valid to note the similarities between Farage and Hitler, in terms of their employment of demagogic skills.

Common in both men is the absence of clear policies to address the issues besetting their nations, while both highlighted their favoured scapegoats as cause of all the ills. In Hitler's case, it was the Jews. Farage, at least, is more diverse, variously blaming the EU, immigrants, the Conservatives and, latterly, the "two-party system".

This September will mark the 80th anniversary of the conflict that was to be called the Second World War, but even with that distance in time, Hitler's rise to power and his grip on the German nation remain objects of fascination.

With that comes the unspoken (and sometimes not so unspoken) sense of superiority that the British did not succumb to the allure of Fascism, even though we had a British pretender in the form of Oswald Mosley and his Blackshirts.

Perhaps Mosley's great mistake was to adopt the uniform and mannerisms of his continental counterparts, turning him into a somewhat absurd figure. Had he worn a double-breasted suit or a blazer, and relied on boyish charm and self-deprecating humour, he might have found that the stolid English were also an easy target for the demagogue.

Certainly, there is no excuse for this mindless rush to partake in a meaningless contest, supporting a man who has nothing but a record of dismal failure in his personal strategies to remove us from the EU, and who has been largely silent since the referendum as to what course of action we should take.

Followers of his empty rhetoric, when they regain their senses, might better understand why Germany took the path it did, and how easy it is for nations to be led astray.

That said, I don't believe that Farage (or his Goering equivalent) has the wherewithal or the intent to mount the equivalent of burning down the Reichstag, to justify bringing him to power. But then the situation is hardly the same as 1933 Germany.

With a no-deal Brexit still the default scenario, all Farage has to do is muddy the waters, enough for Mrs May to take fright and abandon any further attempts to bring the Withdrawal Agreement before the Commons. He then gets his no-deal, with a win-win option, whereby he gains another five years in a lucrative job if we don't leave the EU.

Eventually, there must come a limit to the degree to which we can blame our politicians for our misfortunes. But if we haven't the wit as a nation to see through the beguiling tricks of a poundshop demagogue, then we will arrive at the point where, collectively, we deserve what we get.

Richard North 22/04/2019 link

Brexit: ye of little say

Sunday 21 April 2019  

One of the most misleading mantras to find its way into the general Brexit discourse is the assertion that, outside the warm embrace of the European Union, the poor, impoverished and weakened United Kingdom will have "no say" in the making of the rules which govern international trading.

To make such a statement, unequivocally – i.e., without any qualification – simply transforms it into a meaningless slogan, useful for the gullible but really a hopeless waste of time when it comes to understanding how the global system works.

Crucially, though, the real issue is not the balance of power between the EU and the UK. This is something we addressed in formulating The Harrogate Agenda (THA). In actuality, powers in the hands of either Brussels and London represent an unhealthy degree of centralisation that puts law-making outside the reach of ordinary people.

Yet, even in pursuit of the most perfect form of democracy – whatever that might be – I would not aver that ordinary people should have the power to make laws. The process of law-making requires specialist skills and capabilities that rest, rightly, with dedicated legislatures. Rather, ordinary people should be able to approve the laws made on their behalf.

The interesting thing here is the necessary use of the plural form, "legislatures". In no democratic society or system could one countenance a single legislature. A guiding principle should be one of diversity, a multi-tiered system with laws being made at the lowest level practicable.

But that begets another, and quite obvious, principle – that law will necessarily be multi-tiered. There will be laws which quite naturally apply at international, national and local level – or even a multiplicity of local levels, from region, district and parish.

In this, one of difficulties we face is in defining the boundaries, much of which relates to the degree of mobility within society. A classic example is the weights and measures system. In more primitive societies, there would be multiple definitions of even basic measures, but as trading communities expanded it became more and more necessary to standardise over wider areas.

The advance of metric is a case in point, but it also points up some of the infelicities of standardisation. Opponents of its universal use would argue that there is no reason why there should not be a two-tier system, with traditional units used locally and in oral culture.

At this point, the definition of boundaries is one of the central issues – one at the heart of the Brexit debate. But it can be a false debate. In some respects, it doesn't really matter who makes the laws. Furthermore, the detail of those laws might be irrelevant. In some instances, it may be more important that there should be laws, and that they should be adopted universally.

An excellent example of this is GHS, the Globally Harmonised System of Classification and Labelling of Chemicals. Looking at it from the perspective of international traders in chemicals, none of them will dispute the need for hazard symbols on their packaging, and there is no cost implication in requiring them. They would have to be provided anyway.

What traders do need, however, is consistency and predictability. They want to be able to package their goods and dispatch them to customers anywhere in the world without finding them held up on some obscure dockside, because of non-compliance with some arbitrary local ordinance. A universal law gives them that – the law creates the freedom to trade.

This brings us to another important area. So much of our technical law, effectively, makes itself and is largely uncontroversial. In that context, I am fond of citing the legal definition of jam, and the requirement for a minimum sugar content. This, in fact, is defined by the laws of nature – more specifically microbiology. The sugar content is defined by the level required to suppress fungal growth.

As it happens, the jam "law" was defined by Codex Alimentarius, only to be adopted by the EU and then to be translated into UK law. But, as I have pointed out many times, we would have adopted a very similar law even had we not joined the EU. And, when we finally leave the EU, we will keep this law and many like it.

In terms of technical law – effectively, our international trading rules – largely, these will continue to be made in much the same way that they are at the moment, by global bodies of various description. Where they go through the process of being adopted by the EU before being applied downstream, there is little flexibility to change them through the legislative system.

After many years of deliberation through the global system – with inputs from a huge variety of sources – when a standard arrives in Brussels, it is turned into a COM(final) by the Commission and is then presented to the European Parliament and the Council of the European Union (Council of Ministers).

In the parliament, there is a great deal of grandstanding when it comes to amendments, but very few of these survive and most are rejected by the Commission. Some minor changes, seen as improvements, will be accepted. But, if the parliament pushes its luck, the Commission will "pull" the law and resubmit it at a later date.

As regards the Council, by far the bulk of the laws going through the system are agreed between officials to become "A points" which are approved automatically by ministers without discussion or a vote. The few that get past this level are largely QMV, and are rarely opposed, being agreed by consensus.

In effect, once a proposal for a law reaches the Commission, it is largely cast in stone. From thereon, there are all sorts of rituals in place to give the impression of debate, but in truth, no one really has a "say". The die is already cast.

In my view, this really doesn't matter. Again, I've said many times that I'm not going to be manning the barricades over the percentage of sugar in jam, or the many other technical standards to which we are bound. We are, I rather feel, looking in the wrong place.

So very often in the process of law-making, at whatever level, we make laws without any real idea of the consequences. Most of the time, that isn't a problem because there are few adverse side effects, or those effects are tolerable.

What does matter – again in my view – is when unacceptable consequences materialise and there is a need to change the law, or mitigate its effects. In an intergovernmental system, that is quite possible.

In most systems, a nation can simply opt out, accepting the consequences of that decision. But, in the supranational system of international governance that defines the European Union, that is not possible, The system is change-proof, guarded by the Commission – the guardian of the treaties. And that is why our membership of the EU is so objectionable.

That said, many of the international laws to which we are already bound are not likely to change in the foreseeable future. The fact that we had "no say" in them when they were made is of little importance. We've lived with them for many years so we can afford a few more years.

The day before the referendum, I wrote a piece entitled "correcting an historic mistake", in which I suggested that Brexit would not mean us leaving "Europe" – nor even travelling in a markedly different direction.

To that effect, I conjured up an image of multiple trains travelling on roughly parallel tracks. Each would be free to travel at its own speed and to stop at stations of their choice. Some may share the same destination, others may not. Still more may share part of the journey, diverging only as they travel on to reach their final destinations.

In an ideal world, the day after Brexit should be no different from the day before we left the EU. Initially travelling down parallel tracks, only gradually would our paths diverge. And even then, as we share many values and objectives, in many policy areas our divergencies may only be slight.

As we get used to this, we can build on our strengths and project our voice onto the international stage. But it is never going to be the case that we are going to dictate the international laws which define global trading. And it is hard to lament the loss of "say" when we had very little in the first place.

What we will need to do is find out – and for many, for the first time – how the international system actually works and how best to influence it. That - much to the chagrin of many Europhiles whose knowledge of the system is embarrassingly slender – does not involve throwing one's weight about in the couloirs of Brussels.

Rather, it requires a more nuanced approach which some of our neighbours have mastered better than have we. We can bleat about "no say" but our lack of voice will be the least of our problems. First, we must learn what we need to say, to whom and how.

Richard North 21/04/2019 link

Brexit: of elephants and straws

Saturday 20 April 2019  

One of the moves of great genius perpetrated by the European Union is the adoption of Value Added Tax (VAT), a system so flawed that it has proved an absolute boon to criminals, costing the economies of EU Member States, over time, hundreds of billions of euros.

VAT fraud is so prevalent that it is estimated that over €150 billion is lost annually, with €50 billion attributable to cross-border fraud – an occupation so lucrative that it has spawned its own vocabulary.

The variant at the top of the current top-ten list is known as Missing Trader Intra-Community (MTIC) fraud. Last year, helpfully, Jari Liukku - a Europol official - told us that, "MTIC Fraud remains one of the most significant transnational frauds targeting all Member States".

Liukku went on to tell us that "staggering sums of money are being taken directly from the citizens of the European Union by organised crime groups", with the inevitable consequence that they are "depriving us all of essential services and infrastructure such as security, health, education or justice".

This is real money that is stolen: MTIC fraud is not a victimless crime. And, to deal with what is by definition an international cross-border offence, requires a coordinated approach between Member State police services, customs administrations and tax authorities. Nevertheless, says Liukku, "despite the various efforts made, the threat of MTIC fraud remains significant".

And of all the groups anticipating Brexit – and especially a no-deal Brexit - there are probably none more enthusiastic than VAT fraudsters, who stand to benefit by the breakdown of cross-border cooperation, to the tune of billions, to add to riches already acquired. Nor, by any means is this just a problem for the EU. The UK is likely to be particularly vulnerable, with the Irish border playing a star role.

Imagine if you will, a UK trading company in this brave new, post-Brexit world, at the start of an interesting adventure. It decides to import into the UK from the Far-East a container-load of consumer goods, with a landed value (known as the cost, insurance, and freight (CIF) price) of – for the purposes of this example - £200,000.

Let us assume (for convenience's sake) that there are no tariffs to pay. On entry to the country, though, there will still be a VAT liability, at 20 percent. At some time, therefore, the trading company will have to pay £40,000 – which it can then recover from its own customers.

This goes all the way down the line with the final customers copping the bill. And, if with profit margins and other add-ons, the final price of the consignment has risen to £400,000 (net of VAT), the tax man is going to get a neat £80,000.

In this case, though, the trading company has decided to re-export these goods to the Republic of Ireland. Assuming there are transit agreements in place, that means the sealed container can pass through the British port without the goods attracting any VAT liability. That liability will only be incurred by the Irish importer, once the goods have crossed the border into the Republic.

However, when it comes to this particular consignment, the truck carrying the goods makes an "unscheduled" stop in a discreet location, where the contents are removed. These may later be re-exported, having acquired a different identity, or sold on VAT-free on the UK market, through multiple outlets in the black and grey economies, so defrauding the revenue.

In this example, the container will be left empty and the truck will continue its journey, arriving in Northern Ireland via the Belfast ferry. It will then cross the land border into the Republic and, for the purposes of this adventure, "disappear".

Given that the UK decides to honour its GFA obligations and allow free passage across its border without checks, fraudsters will be able to rely on their trucks crossing into the Republic unmolested. They may be picked up by cameras as they travel south, and will be seen – as expected – crossing the border, out of UK jurisdiction.

Should such events have occurred before Brexit, the Irish tax authorities would have been notified of the transit of these goods, from the British port to the Republic. At some point, they will be expected to appear on the Irish system, attracting a VAT liability, data which will be forwarded to the UK authorities.

If, as in this case, goods haven't been physically transported to Ireland and remain in England, the missing consignment will raise red flags in the system. The authorities will start investigations which, in the fullness of time, might lead to fraud being detected.

Even then, the system is under extraordinary stress, and the UK has a patchy record for detecting fraud. In March 2017, a major fraud was highlighted by the EU's anti-fraud office, Olaf, where HMRC had displayed what was claimed to be "continuous negligence" in the handling of Chinese textile and shoe imports. The UK may end up having to pay €2.7 billion back to the EU, to compensate for loss of revenue.

And if this happened while we were in the EU, the system will be even more stretched in a post-Brexit world. Here, the UK will no longer be part of the EU's VAT system, and neither will it be a full participant in the EU's data-sharing networks. In the Irish situation, once consignments cross the border into the Republic, they will be "lost" to the UK authorities, and no further information as to their treatment can be expected as of right.

Yet, the scenario discussed in this article is only the most basic type of fraud, illustrating only the most general of dynamics. More usually, there are multiple layers of complexity. Then, opportunities multiply exponentially once you start factoring in the cross-border VAT rebate system. Perpetrators are highly sophisticated: they  work through networks of shell companies, across several borders, with the proceeds laundered in many different ways so as to avoid attention and evade the normal safeguards. 

After Brexit, for the UK even to begin to deal with this sort of crime, one of two things has to happen. The most effective and least obtrusive will be a comprehensive agreement with the EU – of which the Republic of Ireland will remain part – on VAT and data sharing. The aim will be to ensure that the cross-border VAT system runs much as it does today.

At this point, one has to observe that the EU has not entered into this type of agreement with any other third country – not even the Efta States. Nor will it as long as they lie outside the direct jurisdiction of the Commission and the ECJ. And that is why – in part – there are still checks on the border between Norway and Sweden, and on the Swiss border with EU Member States.

There lies the crucial issue. It is all very well talking about technological systems for monitoring traffic across the Irish (or any) border but, for these systems to work, there has to be perfect cooperation between the authorities on each side of the border, with harmonised systems and free sharing of data. And all this ceases to happen after Brexit, unless there are very serious, unprecedented cooperation agreements – which are unlikely ever to be agreed (at least in the short- to medium-term).

That, inevitably, will require us to adopt the second option: "Plan B". To detect and deter fraud, a high level of physical intervention will be essential. There is absolutely no getting around this - a requirement for a hard border, with trucks being stopped, paperwork checked and loads examined.

The theory that this can all be dealt with by remote monitoring and paperwork audits – the basis of "Max Fac" - is absurd. These sort of systems work on the assumption that traders are honest, and that there is a high level of cross-border cooperation.

But there will not be seamless cooperation and a proportion of traders are devious, and highly skilled criminals. With the riches at stake, they have become an extraordinarily sophisticated element within organised crime – an industry with the highest growth rate in the world. Without intensive border checks, the UK doesn't have a chance.

The same will also go for the EU Member States. Once the UK drops out of the EU's formal VAT system, it potentially becomes a back-door into the Union, with endless opportunities for sophisticated fraud. It would be naïve, therefore, to expect EU Member States to operate soft borders with the UK. Even if they tried, the European Commission would quickly step in and require the imposition of controls.

Largely, though, the entire VAT issue has become something of an "elephant in the room" in the Brexit debate. One only sees sporadic articles in the legacy media, and a smattering in the specialist press. The government has been suspiciously quiet, and largely uninformative, while the "ultra" MPs of the ERG remain firmly embedded in la-la land.

One has to remember, though, that the borders with the EU are multi-faceted. They are customs borders, they are borders between regulatory areas, and they are also tax borders. Even if we come to an agreement on tariffs with the EU, that does not in any way assure frictionless trade if we have a hard tax border, with the issue of VAT unresolved.

The single ray of hope in all this is that the EU has much to lose from the UK dropping out of the VAT system, so it may well be disposed to discussing cooperative arrangements. But, with the best will in the world, the very complexity means that negotiations will take time, and may well require uncomfortable concessions from the UK.

The degree to which the EU will accept continued UK participation in the system may also depend on the nature of the broader relationship. An Efta/EEA member will doubtless be afforded more concessions than if the UK was simply seeking a free trade agreement. But, to make things work, we need to go further than any Efta State has managed.

From an elephant in the room, VAT could be transformed into a straw that breaks a camel's back.

Richard North 20/04/2019 link

Brexit: a different bus

Friday 19 April 2019  

As we all struggle to find solutions to Brexit, it is rather ironic – the extent of being bizarre - that so many should be turning to a man who bears much of the responsibility for the current mess.

The best chance of there ever being a smooth Brexit – however forlorn the hope might have been – rested not on the referendum campaign (or its immediate aftermath) but in the years leading up to it. Long before it got to a vote, the Eurosceptic movement needed to have agreed what we were, at the turn of the century, calling an "exit and survival plan".

As the leader of the then only dedicated anti-EU party, Nigel Farage was perhaps the only man who could have fostered the development of a plan and united the disparate factions behind it. Instead, he blocked any progress in that direction and settled on a strategy based on building a base of MPs in Westminster, with himself at the head.

His idea was that the pressure exerted by Ukip MPs would create such stresses in the Parliamentary Conservative Party that it would split. The larger number, he believed, would join Ukip, building a majority that could form a government to take us out of the EU.

In this fantasy, there was no need for an exit plan. His new government would have the civil service, which would do as instructed and work up the detail. All Farage's party had to do was win enough elections and the problem was solved.

Well, we all know how that worked out. Despite multiple attempts, Farage never got near winning a seat in the Commons, much less populating the green seats with his own. He didn't even manage to keep control of his own party, allowing it to be seized from him, ending up in the hands of the dire Gerard Batten. Its record 24 MEPs dwindling to a mere four.

Now the resurgent demagogue has created a new party, over which he has almost total control, untroubled by such inconvenient things as a democracy. And yet, Lewis Goodhall, the political correspondent for Sky News, describes him as a man who "cannot be faulted for his appreciation of strategy".

Despite that, the "electric" Mr Farage is a one-trick pony, capable of delivering only a single core speech. With its variations, it may be enough to impress the untutored but, after the third or fourth time of hearing, the underlying emptiness becomes all too apparent. And, as a man whose appreciation of strategy can't be faulted, he opposed a referendum. His strategy, and everything else he touches beyond personal enrichment, has been an unremitting failure.

Currently, he favours a no-deal Brexit – another example of his strategic acumen (not). Presumably, he believes that his latest strategy of "winning" an unnecessary and irrelevant election is a way to exert pressure on Mrs May to achieve that end. Once again, we see the limits of his thinking, where his only game is to force the Conservatives into taking action, to uncertain effect.

If that was the whole extent of our options, we would be in far more serious trouble than we could possibly imagine. But if there is salvation to be had, it is more likely to lie in a careful study of our situation and in an evaluation of the broader options.

Bringing it down to its basics, the essence of our problem, I would aver, is that the Brexit process is beyond the capacity of our political system to implement, and it has neither the desire nor the incentive to seek enduring solutions. The logical response to that – or, at least, the first element – might be to break the process down into bite-sized chunks that the system can handle, or to hand the job over to bodies which are better equipped to perform the functions involved in the process.

Working along those lines, it seems reasonable to argue that, if the majority of MPs (and much of government) do not have the capacity to evaluate the merits of competing Brexit plans, or even work out whether any particular plan will satisfy stated objectives, it is pointless offering the collective any plans to study.

By avoiding this trap, we would be accepting that parliament is not a planning body and neither is it capable of evaluating plans. We would thus cease to expect it to do things for which it was not designed, and for which it is manifestly not capable. By the same token, asking for indicative votes seems an obvious waste of time.

In the past, we used to refer the evaluation of public policy to such bodies as Royal Commissions. Commissions, in particular, could examine topics for some years, gathering evidence and assessing various alternatives, before coming up with detailed recommendations to guide governments in the choices they made.

Yet, despite the importance of Brexit, and the hugely damaging consequences of getting it wrong, I do not recall seeing any formal inquiry of any great weight, that has assessed our options and made recommendations. To a very great extent, our government and public institutions – and the rest of us – are flying blind.

Such is the complexity of the Brexit process that, in an earlier piece, I suggested that, before we went any further with the EU, we needed a series of scoping meetings. These would enable us to decide what is possible to achieve from our negotiations on a future relationship.

Before we even get there, though, we need as a nation to decide where we want to go. That decision `must be informed by factual analysis and a clear understanding of what is actually possible, together with an appreciation of what our negotiating partners might accept.

Even now, that in itself might be too much to ask of a divided nation that has not fully come to terms with the prospect of leaving. As long as we have active campaigns aimed at reversing the referendum result, it seems hardly likely that we can get down to the task of discussing the best way to leave.

That, it would seem, is the heart of the problem. It isn't just the establishment which isn't up to the job. We have an unfocused nation which is not only too easily distracted from the task at hand – mainly because it hasn't fully decided that this is a task it wants to undertake.

To resolve this, there are those who still hanker after another referendum. But it would be wrong to assert that we are, as a nation, any better informed about Brexit than we were during the last referendum campaign.

Where we can seriously entertain a discussion about the value of a customs union in facilitating frictionless trade, all we have is evidence of monumental ignorance. Those who want a re-run on the basis that we now know more about the issue clearly haven't been following the debate for the past three years. If we are to be judged as incapable of reaching a knowledge-based decision in June 2016, we are no better equipped now.

On the other hand, a general election is no more suitable a platform for a national debate than is a referendum – and it would be an abuse of process. General elections are for choosing our governments, not for settling contentious issues. For that, supposedly, we have referendums – we are back full circle.

Therefore, I begin to warm to the idea of putting the Brexit process "on hold", in order to refer it to an independent review body such as a Royal Commission. And since six months would hardly be enough time for it to conclude its work, we would also need to ask the EU for extra time.

One important limitation of this idea, though, relates to the composition of the inquiry body. The great and the good who would normally comprise the panel are, in the main, the very people who have made such a hash of the process so far. And if the panel took evidence from the same "prestigious" witnesses that have polluted select committees and the like, we would be no further forward, no matter how long it was given to perform its task.

On that basis, the idea of an independent inquiry begins to look considerably less attractive, which means that we might have to look elsewhere for our solutions. But, actually, we may not have to look too far. Breaking out of the box, we could be thinking not of one inquiry body but two. One would shadow the other, each with slightly different terms of reference and composition. If one explored the arguments, the other might deliberately set out to challenge received wisdom.

This was the stratagem recommended by Irving Janis in his book on groupthink, where the creation of competing (or complementary) bodies to examine the same issues reduced the danger of a single mindset emerging and remaining unchallenged. Such a multiple-group structure was, apparently, used by the Truman administration in developing the Marshall Plan, so it is hardly a new or untried idea.

To those who would cavil at the extra time this would take, we could offer the aphorism that, if you act in haste you will repent at leisure. There cannot be any rational objection to taking a few years to unravel a process which has taken the UK 47 years to develop.

As much to the point, almost exactly two years ago, I was writing of Alan S Milward and his book, The Rise and Fall of a National Strategy, 1945-63. The point which emerged from it was that governments in general find it difficult to change strategies quickly. Progressing from opposition to UK entanglement in European political integration to support for membership of the EEC took 18 years.

What we are now seeing, I then wrote, is the inevitable consequence of a forced change, for which the government is unprepared, where the speed of change is beyond its ability to accommodate.

I would sooner give the government time to adjust, rather than lose the chance of Brexit altogether, or risk ending up with a bodged outcome which takes decades to repair. If Brexit is to succeed, the process must be properly informed and the issues must be fully discussed and understood, not just by our legislators but also by the public at large.

Effectively, we need a different bus with a better message. And if that takes a couple more years, it is worth the wait.

Richard North 19/04/2019 link

Brexit: a task too far

Thursday 18 April 2019  

It was in December 1962 that Dean Acheson remarked that Great Britain had lost an empire and had not yet found a role. Yet, just over a year earlier in July 1961, the British cabinet had already agreed to join the EEC, marking a shift in national strategy that would eventually define Britain's new role as an active member of the European Community. Even as he spoke, therefore, Acheson was out of date.

Revisiting the current turmoil in British politics, and the demonstrable inability of the government to make rational decisions about leaving what is now the European Union, one could argue that the original decision in 1961, to make an application to join, was the last time a British government made a rational decision.

In its own terms, it was far more than a decision to join a treaty organisation. It was, in effect, an acknowledgement by the government that we no longer had the capability of running our own affairs – or the will to do so.

After the progressive dismantling of the empire, and our humiliation at Suez – one of the defining points in the creation of the European Union, our political elites had lost the will to govern and had decided to hand over the responsibility to Brussels.

But I'm coming to the view that the loss of will came much earlier, possibly around the time of the General Strike in 1926, but alongside the emergence of the Labour Party as a powerful political force representing the working class.

In my thesis, our ruling elite never came to terms with the idea of sharing power with the "great unwashed". The writing was on the wall before the Second World War, and the need to bribe the population with promises of a welfare state and a national health service, in order to keep them in the fight against Germany, underlined how much power had been lost.

These social initiatives were in fact, pursued by Labour while Winston Churchill concentrated on winning the war. Ironically, even in 1940 when things looked at their blackest for the UK, there were people at high level in the British government working on plans for a liberated Europe.

Perversely, there was nothing like the same intensity of planning for a post-war UK. Churchill actually prohibited discussion in Cabinet of what were known as "war aims", demanding that the focus was entirely on winning the war. Only then was he prepared to talk about peace. The effect of that was that Europe was better prepared for peace than was the UK.

The Labour landslide in 1945 further illustrated how much power was slipping out of the hands of the aristocracy. Not being used to the plebs having a say in government, the elites were always uncomfortable with the idea of democracy. And when the concept of a supranational EEC emerged, this served as the ultimate defence measure, putting government outside the reach of the people.

Now, so well-established is the relationship that there is a huge constituency which genuinely thinks that Brussels does a better job than national governments. It does not want self-government. And that constituency includes many of the people who would be called upon to govern when we leave the EU. Thus, it stands to reason that they are never going to be enthusiastic about working up a plan to do something they don't want to do.

Underlying that is a national trait which seems to drive much of our political behaviour. This is the tendency towards negativity, where the first response to any political initiative is reject it. As a nation, we have lost any idea of national purpose, and don't want to be troubled by ideas which require us to step outside our comfort zone. We have become an extremely selfish nation, where there is no concept of the national good.

As a result, we have become ungovernable except, perversely, by a distant, unresponsive, autocratic body. Brussels can rule us because it invokes a feeling of powerlessness, so the other character trait kicks in, an ovine submission to authority. When push comes to shove, we meekly do as we are told.

But then, if we were ever to govern ourselves, we must have some idea of what we want to be as a nation, and how to go about it. If we can't be bothered to define such issues, it ceases to matter very much who governs us. After all, it matters not what types of screwdrivers there are in the toolbox when there are no plans to use any tools.

So much then for a thesis which essentially argues that our elites are happy with the idea of a remote, unaccountable government in Brussels. This, to them, is preferable to having the people determine their own fate. It also embraces one of the most powerful secrets in government – that the process of governance, in the main, is intensely boring, while at the same time demanding great skill and endless amounts of time.

If Brussels does nothing else, it relieves our politicians of the tedium of making many of our laws, and assumes much of the routine burden of administration, leaving them with time on their hands for the theatre of politics and the all-consuming tasks of getting re-elected. It cannot have escaped the attention of our MPs that, outside the EU, they will once again have to start working for their livings.

Much the same goes for the media. There used to be a time when the national newspapers employed specialist correspondents, who really were specialists – in dull subjects such as local government and agriculture. The best of these really did know their subjects and could write with authority, informing the debate and identifying the true motives of government.

Now that much of this activity has gone to Brussels, it becomes "foreign affairs". News on the latest developments on farming and fishing compete for space with developments in Zimbabwe or China, written up by bored correspondents who have little knowledge of the subjects they have to cover, dealing with uninterested editors who want soap opera episodes rather than detail of how we are governed.

In short, the EU is the establishment's dream option. It isolates government from the people, rendering it safe from interference, and neutralises it as a subject, relieving the politico-media nexus of the responsibility of dealing with it.

It can hardly be surprising, therefore, that government doesn't have a plan for Brexit. In just short of fifty years, the scope and complexity of government has multiplied to a staggering extent, but the political classes have been spared the trauma of having to keep up-to-date. Brussels has seamlessly taken up the load, to the extent that few politicians now have anything but the vaguest idea of what it actually does.

To ask those self-same politicians to come up with ideas of how we replace Brussels would first require them to catch up on the events of the last half-century and learn something of what is done, and how things work. Even without time pressure, that would be a huge task. It is one for which most MPs are sorely ill-equipped.

In truth, Brussels activities also embrace areas about which there is little public interest. And what often characterises Eurosceptics is not how much they know of the EU, but how little. All they know, and all they need to know, is how much they hate Brussels. They "want our country back", without the first idea of what that entails.

Those who demand that parliament should make our own laws really have not the slightest conception of what laws are actually made or needed, and show absolutely no interest in finding out. And that goes for both sides of the divide, with the Europhile Roy Jenkins once grandly declaring that he avoided the detail of European integration and focused only on les grandes lignes.

At another level, Brussels has served as the barrier – or filter - between our national legislature and the process of globalisation. We deal with Brussels, and Brussels deals with the global bodies, so silently and effectively that much of the global governance which increasingly dominates our lives remains invisible at the national level.

Thus, when dealing with the implications of Brexit, our MPs not only have to do a crash course in the workings of Brussels, they have to learn about the multiplicity of global bodies that define our legislation and foreign relations, and the very often opaque workings of their diverse systems.

As for the media, if Brussels is a closed book, the chances of journalists getting up to speed on the role of global institutions is next to zero. They retreat behind a wall of silence and pretend that the problem doesn't exist.

And all of this simply reinforces a broader thesis that what I call the "information establishment" isn't up to the job. Be it the politicians, the media, the academics or think tanks, the trade associations or the sector specialists, none of them have covered themselves in glory. Their grasp of the issues, even at this stage in the proceedings, remains lamentable.

Brexit, for all these groups, in the manner of the bridge at Arnhem, is a task too far. We are asking our establishment to do something which is beyond its capabilities, a task for which it has no desire nor incentive to assume.

Richard North 18/04/2019 link

Brexit: magical thinking

Wednesday 17 April 2019  

There are plenty of pundits who talk about trade, but what passes for debate is conducted at a wholly superficial level. And, when the MP collective seems permanently locked into "Brexit 101" - with its obsession with customs unions – there is little hope of improvement.

On that basis, there seems very little that we can expect of Brexit in the near future. We are not going to see a collective epiphany, with hundreds of MPs suddenly developing a profound understanding of what is needed to secure a stable and workable withdrawal.

Speaking in the European Parliament in Strasbourg yesterday, Donald Tusk observed that the long extension, amongst other things, gave us the extra time to rethink Brexit, if that was "the wish of the British people".

There is more than simply a "rethink" on Brexit to consider though. As Tusk also said, all the options are still on the table – except, it would seem, devising an effective plan.

The strange thing about not having a plan, though, is that the need for one doesn't miraculously go away. With a complex thing such as Brexit, the process might have started, that doesn't mean we do not need one any more. If anything, as the process develops and the complexities multiply, the need for a plan intensifies and becomes more urgent.

But the political system with which we have been saddled not only seems incapable of planning, it seems unable to recognise that a plan is needed. And for that, there are many possible explanations but one which to shuffle to the top is the idea that a single way forward that any government proposed would simply make it a target.

As recent proceedings in parliament have shown, it is easier to be opposed to everything than it is to stand up for a single positive. Thus, for any government, a programme of constructive ambiguity is undoubtedly the safest course.

This, of course, has its historic parallels. The Eurosceptic movement, for as long as it has existed, has been united only by its hatred of the European Union and its predecessors. And the one assured way of fracturing that fragile unity would be to ask the various factions to support a single post-exit strategy.

By contrast, the "Europeans" have the easier run of it. All they have to do is favour the single, amorphous concept of a united Europe. They don't have to know anything about the entity which represents that promise and, as we have seen – even on these blog comments - there are huge variations in the understanding of what the EU actually is.

As the EU already exists, it doesn’t need anything from its acolytes except their blind support. No one in the Union is asking its supporters to devise a way forward. That way is pre-ordained, devised by Monnet and his colleague, Arthur Salter. Before that, there were any number of competing visions for uniting Europe, but with the single Monnet plan, these have all fallen away.

By contrast, for a complex state such as the United Kingdom, the very idea of a single vision is hardly a practical proposition. The last time there was a semblance of national unity was during the Second World War, and that lasted barely long enough to see the major protagonists vanquished.

Even then, the victor did not (immediately) get to enjoy the spoils. Winston Churchill was deposed in an electoral landslide, leaving a socialist government to offer its own vision of a brave new world, only for this to founder in a matter of years, its agenda to become a bone of contention over the decades.

Now, we are at the threshold of something which has some parallels to the situation in which we found ourselves before the 1945 general election. Without drawing too much from the analogy (no-one but the fanatical end of the Eurosceptic movement would equate the EU with any of the Axis powers), we have just vanquished a major "enemy" and must now find a new path in an uncertain world.

Looking at this rationally, it seems just as unrealistic expecting a sudden outbreak of national unity, with the nation rallying behind a single vision of the future. This is especially unlikely as - unlike 1945 – there are not even competing visions to fall behind, with one coming (temporarily) on top. Anyhow, of those dismal ideas on offer, I don't think that the call to join a "permanent customs union" is going to unite the nation.

One of the main sticking points between the Conservatives and Labour, back in 1945, was nationalisation and, while this was largely settled during the Thatcher regime, it still remains highly political, regaining a head of steam over the lacklustre performance of the railways.

Therefore, much as we need a plan for Brexit, with the nation uniting behind it, this is not going to happen. Even if the system was capable of generating a plan which had a scintilla of credibility, the majority would oppose it. In this nation of ours, the idea of a national plan is neither a practical nor political reality.

That, I suppose, leaves us to do what we always end up doing – muddling through. Based on a limited electoral cycle, buoyed by a legacy media with the memory span of a hamster in a coma, we have politicians who think and act for the present, following short-term solutions to get us past the current crisis, and safely on to the next.

Despite denials, it looks as if the May/Corbyn talks are breaking down, with accusations that all Labour is interested in doing is destroying the Tories - not that they need any help in that endeavour. The next "cunning plan" from Team May then seems to be another series of indicative votes, using a new formula that requires the MP collective to pick a single option instead of rejecting them all.

How this is to be tied into getting the Commons to ratify the Withdrawal Agreement – for the fourth time of asking – has yet to be specified, but if the miracle happens, the day afterwards, under the terms of the current extension, we are out of the EU and into the transition period.

This, of course, is not going to solve anything because any possible combination of a "comprehensive free trade agreement" is unlikely to stop the backstop kicking in. This means that we will not have seen the end of political turmoil. All we will have achieved is to kick the no-deal can a little further down the road.

In the more likely event that parliament once again refuses to ratify the Withdrawal Agreement, we presumably go through the charade of the European elections, which will provide a tremendous distraction from the grown-up task of planning an escape route. And, with the advent of June, we begin to look towards a summer of indolence, drifting into autumn, with plenty of noise but nothing at all resolved.

What I expect to happen, though, is that the EU will step up its rhetoric, positioning itself as the innocent victim of Brexit, and focusing the leaving process as a decision to be made by the UK. Come October, in the absence of any other developments, one might imagine that the EU will make it very clear that there is no possibility of an extension. The choice will be to leave without a deal, or revoke.

Gone are the days when there was any possibility of venturing a prediction. So volatile are our politics at the moment that, by October, we cannot be assured that Mrs May will still be in office, or that there will even be a Conservative government. Our politicians are just mad – and selfish – enough to risk a general election which, on current poll results, would bring us a Labour government, but could just as easily bring us a hung parliament.

With that, there is any amount of self-delusion – both at a political and national level – that will allow us to convince ourselves that muddling through is the right way to go. After all, one favoured national myth is that the last politician who had a national plan ended up committing suicide in a bunker in Berlin.

Sadly, though, anyone who thinks that we can come out of such a process unharmed, and without suffering considerable political damage and reputational loss, is in the land of the fayries. This is truly magical thinking. And here, perhaps, lies our only chance of salvation. There could just be enough people around who realise the damage we're doing to ourselves, and force matters to a head.

The trouble is, under our current system, I don't see a mechanism where ordinary people can force the issue. Despite our politicians having elected to use Brexit as their party political plaything, there is no direct means, short of revolution, that enables us to intervene.

In that, there has to be a lesson. After a referendum that required decisive action from our government, we have been consigned to the role of unwilling spectators of a political process that has quite obviously ceased to function. And still there are those who believe that the answer to this is to create yet more political parties to add to the train wrecks that we already have.

Now that is truly magical thinking.

Richard North 17/04/2019 link

Brexit: deals within deals

Tuesday 16 April 2019  

Rather nicely on cue, after yesterday's piece on the historic preference of the EU for multilateralism in its approach to global trade, now switching to the pursuit of bilateral agreements, we see a press release on the opening of negotiations between the EU and the US, on two separate trade agreements.

This new initiative follows on from the failure of TTIP, the talks on which collapsed in 2016. After 14 rounds of talks, neither party had agreed on a single common chapter out of the 27 being deliberated.

What is particularly striking about the new talks, though – after the vast sweep of TTIP – is their drastically limited scope. There are only two heads, the first on the elimination of tariffs for industrial goods and the second on conformity assessment, the latter extending the existing MRA covering telecommunications equipment, electromagnetic compatibility, electrical safety, recreational craft, pharmaceutical GMP and medical devices, plus marine equipment.

As to the elimination of tariffs, it is interesting to note that the scope is being confined to industrial goods – excluding automobiles - thus avoiding the contentious agricultural chapter which brought the Doha Round to a premature halt.

It is also interesting to note that these talks stem from a meeting between Jean-Claude Juncker and Donald Trump in the White House last June. In their joint statement, they pledged to work towards zero tariffs, zero non-tariff barriers, and zero subsidies on non-auto industrial goods.

They also pledged to work to reduce barriers and increase trade in services, chemicals, pharmaceuticals, medical products, as well as soybeans. These areas, however, do not seem to have been included in the current talks.

The delay of nearly a year between announcing an intent to negotiate, and the next procedural step – in this case, the approval of the Commission's negotiating mandate – is indicative of the general tempo of international trade talks. But in fact, talks on tariffs have been going on "forever", with EEC-USA relations taking up a considerable part of the Tokyo Round of the GATT talks in 1979, especially in the chemicals sector.

Forty years later, we see many of the same items on the agenda, the difference being that this time we are looking at bilateral talks, as opposed to the multilateral trade negotiations under the aegis of GATT.

But, while tariffs is one part of the talks, extending the Mutual Recognition Agreements on Conformity Assessment is the other, underlining the importance of such agreements in facilitating the flow of trade between the parties. Yet, even though these MRAs are clearly trade agreements, there is still a wide constituency in the UK which argues that trade between the US and the EU (of which the UK is part), has been undertaken only under WTO rules.

Yet, as I reported almost exactly three years ago, before the EU referendum, there were something like 38 EU-US "trade deals", of which at least 20 were bilateral.

Some limited recognition of this came in February this year, when Liam Fox announced a continuity deal with the US, where the parties agreed to continue the existing MRAs negotiated by the EU. At last there was some media coverage of deals in existence, gainsaying the WTO argument.

Now, there is almost a sense of triumphalism in the EU as it has been able to announce that it is going further than the UK in trade deals with the US – an unspoken reproach to those in the leave constituency who thought the UK could do better outside the EU.

Adding fat to the fire, we have Nancy Pelosi, the US House of Representatives speaker, on a visit to London, warning that there would be "no chance whatsoever" of a US-UK trade deal if the Northern Ireland peace agreement was weakened by Brexit.

Although any trade deal would in the first instance be negotiated with the US executive and approved by the president, in the US system trade deals have to be ratified by Congress. And it is because of that, the Democrat Pelosi asserts that any deal would be "a non-starter". 

She says she has told Theresa May, her de facto deputy David Lidington, Conservative pro-Brexit hardliners and Jeremy Corbyn during their meetings and conversations while in London that there would be no trade deal if Brexit undermined the 1998 Good Friday Agreement. "To all of them, we made it clear: don't even think about that", she said.

This is another dimension of the impasse over the Irish backstop, where Ireland is beginning to mobilise support in the United States, which has a strong historical affinity with Ireland. A hard border in Ireland which put the peace process at risk might, therefore, invoke active hostility from the United States, which could have considerable political implications.

Little of this, however, seems to be getting through to the UK legacy media, in a situation where both the newspapers and the broadcasters continue to obsess about possible leadership changes, and the prospects for the European elections, and even a general election. At the time of writing, coverage of the EU announcement on US trade had been sparse, and there had also been minimal references to the Pelosi intervention. Parochialism and displacement activity rule supreme.

Thus, yesterday, when I reintroduced the theme of IRC, it was unsurprising that there was so little recognition of it. People prefer to talk about the things of which they know something about and in trade terms, free trade deals represent the limit of general knowledge.

In this context, not only does IRC have the handicap of being virtually unknown, it also falls between the Europhiles, who dislike it because it provides a partial solution to the UK's need for an independent trade policy, and the Eurosceptics with their obsession with "fwee twade" and their hatred of anything that they didn't actually invent.

Then you have the Muppet tendency in the think tanks, represented most recently by the IfG, with the publication of a 48-page report. This takes us down the well-worn path of negotiating a future relationship with the EU, dwelling on the minutiae of administrative details, without in any way discussing the range of deals, and the different types of arrangements that we might consider.

The one thing it does do is point out that we will be extremely pressed for time, something we were stressing in Flexcit, nearly five years ago. Even with an extension to the transitional period, the UK will be hard-pushed to conclude the necessary agreements before we cut the ties.

Yet, on Sunday, I remarked that I had estimated that the Brexit process might take twenty years, pointing out how little we have achieved in three years. Where the EU and US now have talks spanning forty years just on the issue of reducing tariffs, a mere twenty years looks remarkably compact.

Thus, we come back to the same issue. Given the paucity of knowledge amongst our political classes, the venality and triviality of the media, and an almost total lack of vision coming from the think tanks and trade wonks, there is no way we are going to conclude anything usable within a decade – or two.

It is absolutely pointless embarking on a journey when we have no idea of the destination, the route to be taken or even the means of transportation. Until we have had that debate, we cannot take a first step with any confidence. But before we even have any debate, we must learn anew what it takes to conduct a serious public discussion, avoiding the grandstanding, the polemics and the hyperbole.

Until then, the best we can hope for is some glorious fudge, and the result isn't going to be pretty.

Richard North 16/04/2019 link

Brexit: using freedom

Monday 15 April 2019  

When all is said and done, probably our biggest mistake in approaching the EU referendum was in failing to realise the extent to which our system of government had deteriorated. Thus, we had not appreciated that it would not be capable of meeting the challenge of managing the Brexit process.

The failure, in part – but only in part – came about because of the profound ignorance of most of our politicians and their media fellow-travellers, who have neither the knowledge needed to forge a workable Brexit settlement nor, it seems, the capability to learn.

That too we under-estimated. We were aware that many politicians were not the sharpest knives in the drawer, but it would have required a huge leap of faith to have believed that almost the entire collective would have difficulty in coming to terms with as basic a concept as a customs union.

After all, the concept has been with us for more than a century and been part of our system of government for 47 years, since we joined the EEC. But then, since any real discussion of the process of European political integration has been excised from the UK political discourse, I suppose we should have known that politicians were not going to be up to speed on EU matters.

Nevertheless, it still comes as a shock to find that, nearly three years into the Brexit process, the "debate" between the two main parties – such that it is – is dominated by something so basic as whether, on leaving, we should agree a customs union with the EU, with the two sides arguing about the effect this might have on our ability to conduct an independent trade policy.

Yet, I have seen arguments that suggest that, if this is what it takes to get Labour on board and thus get the Withdrawal Agreement through parliament, then the government should concede the point so that we can move on.

However, from what David Lidington was telling Andrew Marr yesterday, that is not going to happen. Talks are to carry on this week but Lidington is looking for "compromise on both sides". If that doesn't work, he says, then the government will put a set of options before parliament, with a system for making a choice. Then parliament will actually have to come to a preferred option rather than voting against everything.

That, in itself will be novel, but it doesn't get us past the situation where the government will be putting a series of options to parliament which, if implemented after we leave the EU, will not provide a sound basis for a working relationship and certainly will not prevent the Irish backstop kicking in.

We are therefore, caught in a weird fantasy world where opposing parties are battling over issues which have no relevance to the matter at hand and, even if resolved, will contribute next to nothing to a stable, post-Brexit environment.

Even now we can see the absurdity of the respective positions, with Marr challenging Lidington about adopting a common external tariff, only to get the predictable mantra that the government is seeking to get the benefits of the customs union – no tariffs, no quotas and no rules of origin – yet still have the flexibility to pursue an independent trade policy with other third countries.

We've long given up on the idea that Marr might be capable of pursuing a robust, informed line of questioning, but if he had got anywhere towards mastering his subject, he would not have left the matter there.

Specifically, for the UK to avoid rules of origin, the UK would either have to adopt the EU's common external tariff, or it would have to commit to a unilateral harmonisation of its own tariffs, through adoption of the EU's WTO tariff schedules – which is what it is already doing. But either route will limit its flexibility to conduct an entirely independent trade policy, as we could not reach trade agreements with third countries which settled on more favourable tariff agreements.

But what has not been properly explored is that, even beyond tariff levels, the UK will need to maintain a high degree of regulatory alignment with the EU, over product standards and other matters, applying those regulations to its imports from other third countries. This in turn will further limit its ability to secure independent trade deals as the UK will not be able to deviate from the EU single market acquis, even if we have not formally adopted the rules.

In short, therefore, the whole idea of pursuing an independent trade policy – at least in the immediate aftermath of leaving the EU (after the expiry of any transition period) – is a chimera. Our flexibility will be minimal. Furthermore, even if we were able to secure our own terms, it is unlikely that we would get better deals than we have already.

The government thus has got itself into a bind, arguing with Labour over things that really don't matter, in a situation which I've suggested is analogous to two bald men fighting over a comb. We achieve nothing even if Labour backs off completely and concedes all of the government's points.

This, of course, is where we have been badly let down by the Conservative dogma on "fwee twade" – as Pete puts it - and the mantras of the trade wonks who like nothing better than to immerse themselves in the technical minutiae of trade deals, while completely missing the big picture.

One of the myths that pervades this discussion is the canard that the EU is not very good at signing up trade deals, citing its relatively poor performance over the last decades, compared with other trading nations.

Any serious student of this issue, however, will understand that the EU's slowness – until relatively recently – in forging new bilateral trade deals stems from its long-term commitment to the multilateral trading system and its preference for working within the ambit of the WTO, the UN and others.

A search through the Europa website using the keywords "multilateral" and "trade" will yield dozens of papers attesting to this commitment, and it was only the failure of the Doha WTO round in 2006, under the watch of Peter Mandelson, that triggered a change in emphasis. Only then was it conceded that the multilateral movement has stalled.

Then, the primary cause of failure was the disagreement between the US and EU over agricultural subsidies, but it remains the case that some of the biggest gains to be made in international trade rest not in bilateral deals between nations – or blocs – but in global deals, mainly in the areas of regulatory alignment or mutual recognition.

With that, in a beneficial way, we have seen the emergence of plurilateral agreements, skirting the dramas of the global talk-fests, allowing agreements to be made between small groups of countries which can then gradually be expanded to include other interested parties.

We have also seen the emergence of non-state actors, such as the Basel Committee on Banking Supervision, and the ISO, with its revolutionary Vienna and Dresden Agreements. Then there is the steady but unspectacular growth of UN organisations such as UNECE, the efforts of which are quietly transforming international trade, with barely any recognition or understanding by national legislators.

Yet, the very mention of organisations such as UNECE is enough to bring the sneering classes out in high-dudgeon, ready to defend their turf, often from a position of maximum prejudice and minimal knowledge. This is despite its pioneering work on WP.29 and automotive regulation and the ground-breaking WP.6, working alongside the OECD on regulatory cooperation and standardisation.

These areas are fertile territory for a major trading nation such as the UK. By forging alliances with other independent states, we could establish a role as the "honest broker" – or some such – standing in between the giant trading blocs of the EU and US, much as the Cairns Group sought to do during the Doha Round.

One can see little progress, however, when we have domestic politicians hung up on the centuries-old concept of the customs union, to whom the very concept of IRC is completely foreign.

When the trade wonks and the media are equally stuck in a rut and the trade policy debate is bogged down in the tired concept of expanding bilateral trade agreement, it is unlikely that we will be in a position to benefit from the new-found freedom that Brexit is supposed to give us.

In my days working with the poultry industry, I came across groups dedicated to releasing battery hens and reintroducing them to the open range. To their consternation, they found that one of the first things the birds did on release from their cages was to try to get back in them, where there was food, warmth and security.

The released birds thus had to be gradually introduced to their freedom and be taught how to exploit it. It would seem that the UK must be treated in a similar way, especially as there are so many who would prefer the secure embrace of Mother Europe. But there is an exciting world of opportunity out there, if only MPs knew what it was, and how to use it.

Richard North 15/04/2019 link

Brexit: abandoning ship?

Sunday 14 April 2019  

Any hope that the political-media nexus will take advantage of the six-month reprieve and actually focus of the technical issues of Brexit is fast dissipating. Media attention, evidently with the enthusiastic support of the politicians, is focused almost entirely on elections and leadership challenges, while the public seems to be retreating from the issue at warp speed.

The public response hardly seems surprising. The term "groundhog day" seems too weak a description for what is happening in a debate where we seem to be going round in circles. No issue ever seems to be settled and no claim is so crass that its advocates cannot repeat it, ad nauseum at every opportunity, no matter how many times it has been rebutted.

A classic example of this "cracked record" phenomenon came in Saturday's Telegraph, effectively pushing Sajid Javid's plan for a "digital border", which is said to be able to dispense with the Irish backstop.

In the narrative offered by the newspaper, the doughty home secretary commissioned his Border Force officials to work up a plan using Swiss-style technology to manage trade and tariffs and so avoid a hard border in Ireland. But, when the work was submitted to HMRC, allies of Mr Javid claimed, officials were "incredibly dismissive of it and were not interested".

It turns out that this is another resuscitation of the failed "Max Fac" idea, the so-called "zombie plan" – reflecting the number of times it has been put down, yet still rises from the dead. That it has been rejected by the grown-ups is hardly surprising. No other country in the world has managed to develop a technological solution to its border management, which avoids the need for checks at the border.

However, no one should be under any illusions that this is a serious or even genuine plan. With Matthew Elliott, former chief executive of Vote Leave, backing him, this is an opening shot for the as-yet undeclared Tory leadership campaign which is now the main concern of the parliamentary party. Brexit is now far down the list of priorities, as the battle to take over No. 10 gets under way.

On the other hand, the May/Corbyn talks seem to be going nowhere – although they are not officially dead yet. But, since the only substantive thing to come out of them seems to be a customs union – which solves nothing – we can no more look to them for our salvation than we can expect Mr Javid to ride to our rescue.

With that, and the substantial number of leavers committed to a no-deal Brexit, there seems to be no workable Brexit scenario on the horizon which has major backers in the political system. Effectively, at the heart of the Brexit debate is a huge vacuum, with nothing to grab the imagination of the public. We either have Mrs May's Withdrawal Agreement, served cold, or nothing very much at all.

Under such circumstances, it is easy to get caught up in the speculation about a new Tory leader, the possibility of a general election or the line-up for the European elections – which still might not happen. Few people have studied the Withdrawal Agreement (all 585 pages of it), so there is next to no informed debate about how to fashion our future relationship with the EU, so as to avoid the backstop kicking in.

To all intents and purposes, with parliament having closed down for the holidays, Brexit has been abandoned, now serving only as a backdrop to our domestic politics. Even the European elections, if they happen, will be seen more as an opinion poll on the state of the parties, rather than any expression of choice as to who we want to represent us in Brussels.

On that basis, not only has Mrs May failed to deliver Brexit, she has sucked all the energy and life out of it, leaving us tired, dispirited and enervated. There is no enthusiasm for Brexit, not least because none of us knows what the final outcome is likely to be or where it will take us.

Whatever else, when I voted to leave the European Union, I certainly did not vote for a scenario that would have us bound to the Union by membership of the Single Market and the Customs Union.

Continuation of the EEA Agreement would, of course, have been perfectly acceptable, as this agreement was devised as an alternative to membership of the EU, for Efta states which wanted a close trading relationship with the EU but wanted to avoid political integration.

Not the least of the attractions of the EEA Agreement is that membership can be ended, with little formality, with one year's notice. It was always my intention that we should then work towards improving the agreement, turning it into a genuine trade partnership rather than the current, subordinate relationship, where the EU holds the high ground in framing new laws (even if they are of international origin).

Personally, I think that the arguments for this arrangement have been so badly handled, most recently by the advocates of the Common Market 2.0 plan, that there is very little chance of us being able to adopt the Efta/EEA option.

Even to this day, advocates fail to understand that there is no single EEA Agreement which covers all Efta States, but a series of adaptations to suit each Efta member – adaptations which have grown over the years. Nor have they understood that the Agreement covers limited ground and would leave many gaps in our relationship with the EU, which would either have to be filled by sectoral adaptations or bilateral treaties, or both.

If only we had some grown-ups in the political system, and the media, that could point up the complexity of such a task, and the obvious inference that it would take many years to conclude a comprehensive, workable agreement with the EU.

As my own understanding of this has grown, I have also concluded that the arrangement we would be looking for would be so advanced – in relation to anything the EU had agreed with any other third country - that we could not assume that the EU would even consider such an arrangement.

Three potential sticking points, of immediate concern, would be the need for a deep and comprehensive treaty on VAT, a comprehensive data protection agreement, and a level of participation in the EU's agencies which goes far beyond anything granted to an existing third country.

It is my view, therefore, that before we could even begin to get down to detailed negotiations with the EU, we would need a series of scoping meetings, with periods for reflection and debate. That process alone might take years.

Currently, with the debate totally stalled, unable to progress beyond the Withdrawal Agreement, the lack of forward-looking discussion gives rise to immense pessimism. It has taken us nearly three years to get to the stage of not finalising a withdrawal agreement. How much longer might it take to reach a national consensus on our future relationship?

There are those, as a result, who would see in this an argument for revoking the Article 50 notification and calling the whole thing off. But since the EU is already thinking about launching a new treaty process, this would solve nothing. It would only be a matter of time before we would be confronting another referendum, this one to ratify the new treaty. And if the nation refused to allow it, where would this place the UK?

By far the better solution is to recognise that the genie is out of the bottle, and then to acknowledge that we are totally unprepared for leaving. In the absence of the Efta/EEA option, all we can do is ask for an extended transitional period, to take the pressure off those who are looking for an acceptable resolution.

Right at the beginning, I was estimating that the Brexit process might take twenty years. Given how little we have achieved in three years, who is to say that that is wrong, or in any way exaggerated? To accept that we were in this for the long-haul would do much to re-frame the debate.

As it is, with the politicians and media taking every opportunity to avoid an adult debate, Brexit looks increasingly like a stricken ship whose captain has given the order to abandon ship. Unless Brexit is then to assume the status of a new age Flying Dutchman, doomed forever to sail the oceans of political discontent, we need to do something pretty radical. Manning the lifeboats is not a solution.

Richard North 14/04/2019 link

Brexit: eyes wide shut

Saturday 13 April 2019  

If, as is indeed the case, the UK now has limited time to make a more informed judgment about what happens next, before we leave the EU in October, MPs could hardly make better use of their time than by reading Pascal Lamy's words in yesterday's Guardian.

Under the heading, "Staying in a customs union after Brexit won't resolve the Irish border issue", Lamy gets to grips with precisely the issues I was laying out in yesterday's piece, bringing a necessary corrective to the stupidity and ignorance we are experiencing in parliament and elsewhere. Referring to Labour's obsession with staying in a customs union, he tells us:
We should all remember that from 1957 to 1993, the European Economic Community was a customs union with internal borders. They were removed only when enough evidence of harmonisation or mutual recognition of regulations was there. The single market without borders is about regulatory homogeneity. Leaving the single market reintroduces a border – the thickness of which depends on the degree of regulatory divergence. The customs union is about the common external tariff. The single market is about common regulations.
Lamy goes on to say that "staying only in a customs union" would not be enough to solve the Irish border question. In just one example he cites, if the UK remains in the customs union with the same common external tariff but imports chlorinated poultry from the US, there has to be a border, because the EU does not accept the marketing of chlorinated poultry. This is a rule of the single market.

Nevertheless, one should not take everything Lamy says as gospel. Even the high and the mighty are capable of error – introduced in this case when he avers that the EU "is unlikely to accept a request from the UK that it should have a say over the EU's trade agreements".

That is fair enough, but then he asserts that Article 207 of the Lisbon treaty makes clear that the common commercial policy is exclusive to the EU's direction. It may be a small point, but it doesn't. Article 207 TFEU sets up the basis of the CCP (separate from the Customs Union, but linked with it in Art 206), but it is Article 3 TFEU which makes it an exclusive competence of the Union.

But with this being the case, the EU cannot have a situation where Member States vest their policy-making powers in the Commission, only then to have the EU share with the UK the decisions which shape the policy. This would be awarding the departing member greater powers than it had while it was in the EU – something the EU has said it will not allow.

But Lamy then goes too far by saying that Turkey, which is in a partial customs union with the EU, "has to follow EU trade agreements with third countries but has no say on them", implying that this is a function of the customs union.

In fact, the Turkish agreement is much more than a customs union. It requires Turkey to "incorporate into its internal legal order the Community instruments relating to the removal of technical barriers to trade", and to adopt elements of the EU's commercial policy, and its competition rules.

Even then, Turkey does have a limited ability to forge its own trade deals with third countries although if it wanders too far, it bumps into Article 45 of its agreement with the EU, which requires that:
In the framework of the application of trade policy measures towards third countries, the Parties shall endeavour, through exchange of information and consultation, to seek possibilities for coordinating their action when the circumstances and international obligations of both Parties allow.
This is on top of Article 12 which states that Turkey, in relation to other third countries, has to "apply provisions and implementing measures which are substantially similar to those of the Community's commercial policy", albeit that these are limited to a specified set of regulations.

Then we also have Article 16, which states that, "With a view to harmonizing its commercial policy with that of the Community, Turkey shall align itself progressively with the preferential customs regime of the Community within five years as from the date of entry into force of this Decision".

Thus do we find the Turkish government itself stating that: "Under the Customs Union, Turkey shall align its commercial policy with the EU’s Common Commercial Policy".

If one was to be pedantic – which one must be to understand fully the legal implications – it would be more correct to say that the "Customs Union" goes way beyond the strict technical definition set out by GATT/WTO and is close to a comprehensive free trade agreement, with substantive add-ons which reflect its role as a pre-accession instrument.

According to Lamy though, using Turkey as his example, he declares that the reality is that in a customs union, "all the power would rest with the EU, with the UK as a follower". But that is more than a little dubious as an assertion. If a customs union agreement was kept to the very minimum technical requirements, the EU's power would be limited to setting the common external tariff.

Even then, this is something we should seek to avoid. A customs union with the EU would be a bilateral treaty, with all that that entails. Harmonising external tariffs by adopting the EU's WTO schedules, which would have the same effect, would be a unilateral decision which would allow us much more flexibility and control - especially as the EU might make changes in the future which we might not want to follow.

However, it doesn't stop there. Sabine Weyand – Barnier's deputy – used to work for Lamy, and she intervened on Twitter to assert that a customs union would contribute to a solution and would be major bonus for UK manufacturing in avoiding rules of origin.

It is here that we get to the division of interests between the EU and the UK. Obviously, the EU would be happy to have the UK more tightly under control by having it tied to a Customs Union, but whatever benefits the UK might gain from that arrangement could be achieved by other means – without the baggage. As far as the UK is concerned, the Customs Union is an unnecessary solution looking for a non-existent problem.

But Weyand can't seem to leave it there. Her first tweet of the day (yesterday) was to retweet a Commission video extolling the virtues of the EU's Customs Union which, it says, saves you money and time, and protects you, your business and our environment.

In less than two minutes though, the film manages to elide aspects of the Customs Union with the Union Customs Code, the Single Market, Border Security, plant health and even firearms exports. In a confused jumble, the authors have ladled in multiple, disparate policies which have nothing to do with the Customs Union.

This isn't the first time that the Commission has done this, and with other of its more technical works adhering to a high level of factual accuracy, one suspects that this isn't deliberate. After all, the advent of the Single Market in 1992 is 27 years ago now, before the time when many people in the Commission – even at mid-rank level – started work. And most of them hadn't even left school, when just the Customs Union was in force.

What we are seeing – as elsewhere – is a loss of people who were actually involved in the events, coupled with a faulty institutional memory which isn't coping with the influx of new people. Thus, we end up with flawed, sloppy work – not direct lies, as the intent to deceive is not there, but misrepresentation all the same. Perhaps, though, if Commission officials can't get it right, we can hardly wonder that MPs have such a poor grip of the basics.

Certainly, in this game, you need a high level of knowledge, not only to understand the issues, but to be able to detect the many misrepresentations that plague this debate.

Lamy, for instance, concludes his piece by saying that, "Being in a customs union might be better than not being in a customs union". But, to be fair to him, he adds that "it would come with very real downsides too", declaring, "it is important that these are also considered".

And it is there that we find the words that open this piece. It is Lamy who says that the UK now has limited time to make a more informed judgement about what happens next. But then he says: "Whatever it decides, it should do so with its eyes wide open. Otherwise, we could all soon find ourselves back on the cliff edge".

Yet, it seems unlikely that these words will be heeded. The tragedy is that our MPs seem incapable of making informed decisions, simply because they have lost the capacity to inform themselves. From eyes wide open, they blunder around in their Westminster bubble, eyes wide shut.

Richard North 13/04/2019 link

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