Brexit: deregulation

Monday 18 January 2021  

A piece in the Guardian should, if it is read properly, put to bed the complaints about "paperwork" and "red tape" relating to Brexit.

For sure, traders and shippers are having to get used to handling new forms of paperwork, with which many are unfamiliar, and failure correctly to complete the necessary papers is giving rise to delays and additional costs.

To some (limited) extent, however, the problems can rightly be put down to "teething troubles" and once there is a degree of familiarity and practice, recruitment has been improved and IT problems have been sorted, the system should settle down into an uncomfortable routine to become the new normal.

Undoubtedly, there is going to be continued grief until these issues are sorted but, as the Guardian intimates with its headline: "Shock Brexit charges are hurting us, say small British businesses", they are only part of the problem.

Clearly, the charges are also problematic, although the paper spoils the effect of its own headline with its sub-heading: "Levies to cover the increase in red tape, VAT and customs declarations are hitting trade to the European Union".

The point that should emerge is that while completing paperwork incurs costs, some of the costs (such as VAT) would arise even if we were inhabiting a form-free world.

In other respects, the paperwork is the least of the problems. For traders dealing in products of animal origin, for instance, the requirement to submit consignments to a border control post for physical inspection, and the payment of the associated fees, cannot be classed as "paperwork", while "red tape" hardly conveys the nature of the processes involved.

It seems though that the legacy media is unable to break out of its own self-imposed narrative, and will continue to trot out their generic "red tape" stories, even though the subject matter is diverse and wide-ranging.

Descriptions notwithstanding, there is good evidence to suggest that the cumulative effects of newly-applied border controls, and related issues, are building towards a perfect storm which is set to precipitate a major crisis in our trade with European Union Member States.

It seems vastly inappropriate at this juncture, therefore, that the government should be devoting limited "bandwidth" to the subject of deregulation, with the Telegraph reporting that Chancellor of the Exchequer Rishi Sunak is to chair a Whitehall taskforce "to lead bonfire of EU red tape".

This is to be a new "Better Regulation Committee", based in Downing Street, focusing on "cutting EU red tape for businesses", with the prime ministers saying that he wants the changes to allow the government "to seize opportunities in the UK as an independent nation".

Whatever the merits of this approach – and there are very few – it also sends an unfortunate signal to the EU, effectively declaring that regulatory divergence is an important and immediate priority of the Johnson administration.

This can only feed the developing trade crisis, as the level and intensity of border checks on goods imported into the EU (and the rest of the EEA) will depend to a very great extent on the degree to which the UK's regulatory standards match those of the EU.

Where, as is the case, there is a declared intent to move away from EU regulation, the inevitable consequence will be that customs authorities in the EU Member States (possibly with the encouragement of Brussels) will veer towards a more rigorous control regime than might otherwise have been the case.

As if that was not bad enough, one draws from the Telegraph piece the view that, even if reducing regulation was to be fostered, the government is going about the process in entirely the wrong way.

The report has it that Number 10 wants the new committee to "refresh the strategy on making better regulation outside the EU, review existing rules and cut red tape for businesses".

One of those anonymous sources then develops the theme, saying that: "With newfound control of our laws, reviewing and reforming regulation will be at the forefront of the Government's agenda to take advantage of opportunities outside of the EU".

Officials (also anonymous) are saying that the Committee will, "coordinate and drive through an ambitious programme of regulatory reform to over the parliament. It will push the boundaries, boost creative thinking and inject pace at the centre of the government".

Sunak himself is quoted, telling as: "Now that we have left the European Union, we have an opportunity to do things differently and this government is committed to making the most of the freedoms that Brexit affords us". He adds: "This isn't about lowering standards, but about raising our eyes to look to the future - making the most of new sectors, new thinking and new ways of working".

We are then told that the Committee will be backed by a unit of civil servants who will be charged with carrying out "a series of systematic deep dives... into EU-derived regulation to identify and implement agreed changes". By way (presumably) of reassurance, we are also told that "any reforms would not come at the expense of the UK's high standards in areas like workers' rights and the environment".

The reason for my distinct lack of enthusiasm is partly to do with the fact that we've been there before. Booker and I took part on several deregulation initiatives in the 90s, including Major's "deregulation offensive" lunched at the party conference in October 1992, when he appointed his trade and industry minister Michael Heseltine to "take responsibility for cutting through this burgeoning maze of regulation".

Famously, Major asserted that there was no one better "for hacking back the jungle", telling Heseltine: "Come on, Michael, out with your club, on with your loin cloth, swing into action".

Over the next four years, inspired by the gold-plating of EC directives, this was to remain a flagship policy. Yet during that time, when Major's government put its lengthy "Deregulation Bill" through Parliament, not a single regulation implementing a directive was changed.

The annual number of regulations issued, which only topped 3,000 for the first time in 1992, never dropped below that figure. Only at the end of the Bill's passage through Parliament did a junior minister in the House of Lords finally admit that it was always intended to exclude regulation stemming from the (then) EC.

From that, we could adduce that the major failing of the initiative was the failure to deal with "European" regulation, but it would be wrong to draw that conclusion for the present day. Since the early 90s, and continuously right up to the present, EU standards have been progressively replaced or augmented by international standards, even if they have still been labelled as EU laws.

Any attempt to cut back regulation, therefore, will quickly impinge on the "double coffin lid" phenomenon, where we will find that we will be in breach of our international commitments – more so as many of them are built into the TCA.

Crucially, though, what we (Booker and I) learned from previous attempts is that deregulation, per se can never work. What must be appreciated is that regulation is an instrument of policy, and policy is a response to a need, real or perceived.

To tackle "excessive" regulation, you have to address the "need" in the first place, and then modify the response with a more appropriate policy – from which new measures will naturally emerge. If you simply play around with the written word, you create a political vacuum which will act as a driver for more or replacement regulation, or simply act as a barrier to change.

For instance, if you look at the current tranche of financial services regulation, this is driven by the financial crash of 2009 and the need to prevent it happening again, where states, at great cost, had to bail out the banks.

Thus, you can't play around with the regulation, without first understanding why it came into being in the first place, and the functions it was intended to perform, looking at the bigger picture and deciding how best to secure policy objectives.

This is a subject to which we must inevitably return, not least as the current ideas have the makings of another Johnsonian train wreck – as if we didn't have enough already.

Also published on Turbulent Times.

Richard North 18/01/2021 link

Brexit: courses for horses

Sunday 17 January 2021  

There is no doubt that businesses have been badly served by their governments over Brexit – some worse than others, with the UK in the "world beating" league.

But there are also strong indications that there has been significant "head-in-the-sand" behaviour exhibited by some business leaders and their trade bodies, with entirely unrealistic expectations of the post-Brexit/transition period.

One of the sectors which would seem to be indulging in this behaviour is the horse-racing industry, to which I've referred recently as I try to puzzle out the impact of Brexit, in all its ramifications.

That I should even be in this position is in itself odd. In the UK, the industry is far more important than commercial fishing – which has attracted so much attention. The first time I wrote about it, I noted that it was worth £3.45 billion to the UK economy, employing (directly and indirectly) 85,000 people and underpinning a £12.6 billion gambling market. The figures may have changed with time, but they are roughly in the same order.

Given the value of the industry – to say nothing of its totemic importance and the undisputed view that the end of the transition period will make cross-border movement of horses, on which the industry relies, more complex administratively, more time consuming and more expensive - one might have thought that there would be prominent complaints and significant media coverage.

Even though movement bans and other Covid restrictions have muddied the waters, I nevertheless have to admit to being perplexed by the extraordinarily limited coverage on this issue, most of which has centred around the impact on the Irish end of the business.

When I last left the subject, concerns were being expressed by an Irish trainer that VAT would be payable on racehorses imported temporarily into the UK which, even though recoverable, would impose a serious financial burden on the industry.

Since then, however, fears on that score have eased, although we are seeing acknowledgements in RTE News that "transporting horses abroad has become more expensive due to Brexit and could impact on animal comfort and welfare".

This comes from Wicklow-based Ronan Rothwell, who breeds about 20 top show jumping horses a year, with around 70 percent being sold to the UK and the rest to Europe.

Rothwell has encountered problems recently with two young horses that are ready to be transported to Britain. "There is", he says, "now a time lag because a veterinary report needs to be lodged with the Department of Agriculture for permission for export. That takes around three days".

"There is also the expense of paper work, which we never had before. Using the land bridge with the UK [to get to Europe] is extortionately more expensive than it was before." The other option is to transport the horses directly to Europe from Rosslare to Cherbourg but the "sad reality" of an 18-hour journey at sea was that "the losers in all of this are the horses".

Nothing in this report, though, gets close to identifying the problems facing the racing fraternity, although we do get some more idea from a report in the Irish Independent.

However, like so many media reports, the focus is on "paperwork", with the headline declaring: "'Don't get caught out' - Irish trainers warned to have documents ready ahead of post-Brexit Cheltenham".

We do, though, get confirmation (not that it was needed, because it is in the TCA) that the race horses and other temporary imports will require ATA Carnets. Ciara Dillon, from BDO Ireland, one of Ireland's largest business advisory firms, is brought in to explain.

Her advice though, as recorded in the paper, is confused, as she talks about the options of the ATA Carnet or a "temporary admission procedure", despite that fact that the Carnet is a temporary admission procedure, and is the one identified in the TCA. Incidentally, the Carnet can also be used as a transit document, as is explained in the 674-page explanatory guide.

The whole situation is rather downplayed, as Dillon does not mention the cost of the carnets, nor the 40 percent financial guarantee which must be deposited, or the insurance in lieu of a bond.

Nothing is said of the fact that the Tripartite Agreement falls, that veterinary certificates must now be furnished, and that entry into Europe must be routed via Border Control Posts, where the horses must be subject to veterinary inspection. Commentators seem to have no idea of what is about to hit the industry.

However, RTE does give some intimation of troubles to come, pointing out that the BCP at Calais will only process three horses an hour for arrivals from the UK. On this, the broadcaster cites Deirdre Seale and her husband Roy, who run Seale Transport and ship around 60 horses a month to Europe and Scandinavia.

Recently, they embarked on a dry run to see if they could continue using the UK land bridge only to find they could not get through Calais. Mrs Seale said they then tried to use the Rosslare to Cherbourg route direct to Europe.

"We were all loaded up and ready to go on Thursday night, our veterinary certs were stamped. Then we got a call from Stena to say the ship was not certified to take horses", Mrs Seale said, calling it an "exhausting and draining" time for the equine sector.

"The Government does not know what it's like on the ground, we are front and centre on the world's stage when it comes to the equestrian industry", she adds. "But they don't seem to have perceived the difficulties. The government and the governing bodies of the industry should be making sure that we can still export.

Mrs Seale fears that: "We are going to be left marooned while everything happens on mainland Europe without us", reminding us that: "You are dealing with people's livelihoods".

There is a sort of phony war feel about this. The problems are there and they are being confirmed in practice, but no-one as yet is sounding the alarm bells in a way that we have seen with some other sectors.

Once the season gets under way, and the small-scale eventers are also affected, my guess is that the media will finally wake up to another aspect of "train-crash" Brexit, with no end of gifted hacks breathlessly "revealing" the problems which they are largely ignoring at the moment.

But, as with the meat industry, fishing and other sectors, these are no mere "teething troubles". Through the Tripartite Agreement, the racing industry and other eventers have effectively enjoyed free movement for thoroughbred horses, with minimal formalities. The new procedures will be slow, cumbersome and expensive, and are bound to impact heavily on the sector, particularly the small players.

Eventually, we will start to see horror stories for other sectors, as the media craving for novelty reasserts itself, as the Covid news starts to abate. As Pete wrote yesterday, there are choppy waters ahead.

Also published on Turbulent Times.

Richard North 17/01/2021 link

Brexit: going elsewhere

Saturday 16 January 2021  

Embodied in a headline from the BBC's Simon Jack – the businesses editor – is what looks like an example of fundamental intellectual laziness. It is one seen in many journalists reporting on post-Brexit events.

The headline itself reads: "Post-Brexit customs systems not fit for purpose, say meat exporters", a charge that is actually repeated in the body of Jack's story, where he says: "UK meat exporters have claimed post-Brexit customs systems are "not fit for purpose".

This might sound anodyne enough but the claim is attributed to Nick Allen, chief executive of the "British Meat Processor Association" (sic). But he of the processors (plural) association does not say that. He does not talk about the customs system but the "export health certification process" – an important distinction.

"Fundamentally", he says, in a direct quote cited by Jack, " this is not a system that was designed for a 24/7, just-in-time supply chain". It is, adds Allen, a "process was designed for moving containers of frozen meat around the world where you have a bit of leeway on time".

Where the laziness comes in is with Jack's reference to the "customs system", the automatic assumption that because the health certification is part of the border control system, it is part of the customs formalities. In his mind, "border controls" and "customs" are one and the same.

As it stands, though, the regime applied by the EU to imports of products of animal origin is not the responsibility of customs. As Jack would find if he looked it up on the Commission website, he would see that it is part of the vetrerinary border control system, entirely separate from the customs system with its own body of legislation.

However, people such as Allen rarely look up things. They waft through their privileged and over-paid lives assuming their own superior knowledge of such things is essentially correct, and are never reluctant to foist their ignorance on the nation at large.

In practical terms, of course, the distinction is of considerable importance. The system precedes customs controls, with the importer having to give advance notification of the arrival of a consignment, then following a procedure that even the Commission's best friends would agree is arcane and complex.

Indicative of the complexity of the system, when one follows the links on the Commission website, one is eventually lead to an official guidance document which, published in 2013, is actually out of date. The rules – known as "official controls" were substantially revised in 2017 and 2019.

Anyhow, the thrust of Nick Allen's complaints – further elaborated on and partially repeated – comes in additional quotes cited by Jack. Says Allen:
Fundamentally, this is not a system that was designed for a 24/7, just-in-time supply chain. The export health certification process was designed for moving containers of frozen meat around the world where you have a bit of leeway on time. No matter how much better we get at filling in the forms, it's really not fit for purpose. This is going back to the dark ages in terms of a process really, in this digital age.
Allen then adds: "It's going to be a problem for quite a time until we move forward and hopefully get a better digital system in place and can make it work a bit better, but until then, we've got to put up with all this paperwork and lorries arriving in Ireland with box files full of paper".

In actuality, though, Allen could not be more wrong. The original system goes back to Directive 64/433/EEC, one of the Commission's very first forays into food safety, and one which I remember well. It remained in force until 31 December 2005, when the food safety procedures were replaced by Directive 2004/41/EC.

As to the export procedures, though, the system has been augmented with TRACES, the Union's TRAde Control and Export System, and fully compatible with the EU's electronic customs systems, as part of the development of the "Single Window Project".

Allen's people, therefore, may have familiarity issues and a steep learning curve, but the system is as good as it gets, linking in with the Union Customs Code, which itself has only recently been updated and is still in the process of further updates.

The problems, therefore, are not the "paperwork" of the "red tape", terms to which idle hacks like Simon Jack are prone to resort. The real issues more complex and more far reaching.

In the first instance – as I've pointed out several times now – UK traders have to get used to a fundamental change in their status as a result of the UK leaving the Single Market. No longer can they export on their own accounts, loading goods in trucks and shipping them to their destinations for sale – the process known technically as placing in "free circulation".

Instead, an importer must be found, a "legal entity" (either a person or company) established in the EU, who must notify the veterinary authorities of impending consignments, and then (separately) make the necessary customs declarations. The UK trader, as the exporter, loses control of the process.

The agony starts long before the products are despatched from their points of origin, with each separate consignment having to be furnished with veterinary heath certificates, with all the products shipped bearing official "establishment numbers", which must be visible on labelling.

The loads must them be routed via the Border Control Posts, at the ports of entry, where there are three levels of checks. The first is of the documentation, the second is the "identity check", which means physically reconciling container or vehicle contents with the manifest. This can even require the opening of packaging and carrying out tests to confirm the products are as described.

The third level is the physical inspections of the meat, the standard levels being set at 20 percent of each load, although this may be increased at the discretion of the inspector. Supplementary checks may also be carried out, such as sampling for pesticide or veterinary medicine residues, or testing for the presence of microbial contaminants or parasites.

Only once these procedures are completed and the goods have been passed as satisfactory – and the inspection fees have been paid – can consignments be released to customs, for their clearance.

Paperwork apart, it is these procedures which are taking the time, with the formalities adding a day or more to delivery times, and injecting a huge level of uncertainty - and the extra costs which must be paid by the importers.

Understandably – as pointed out in Jack's report – buyers are losing patience and are looking for other solutions – sourcing from suppliers within the EU. These are not "teething troubles", and they will not "bed in" with time. The "official controls" process is inherent in the UK's change in status from EU member to a third country.

Traders will have to learn to live with "significant additional disruption", but also with the reality that their customers don't have to. They can go elsewhere and, from all the indications, that is precisely what they will do.

Also published on Turbulent Times.

Richard North 16/01/2021 link

Brexit: a bad deal is no better than no deal

Friday 15 January 2021  

Just a couple of weeks short of four years ago, I wrote this piece on the potential effects of Brexit on the horseracing industry, which Booker picked up in his column a few days later.

The industry itself seemed slow to react to the threat, but eventually set up the "Thoroughbred Industries Brexit Steering Group" (TIBSG) to liaise with government and to keep the industry informed about the cross-border movement of horses.

Like everyone else, it was stymied by the late conclusion of the TCA, and when the treaty was published, it more or less confirmed the worst fears – having made no specific concessions to allow the sport to proceed on the same basis as before.

There are some tax concessions in the treaty (Article CUSTMS.16 – p.85), but it would appear that temporary admission is to be made conditional on production of an ATA carnet (paragraph 3).

The situation has been confused by the application of Covid-19 restrictions, leading the British Horseracing Authority to issue a holding statement on Christmas Eve, which does not seem to have been updated.

This conveyed the advice of the TIBSG that no one should attempt to move horses for at least the first two weeks of January unless absolutely necessary. This was to allow time for agreements to be ratified and the new processes to be communicated to relevant officials here and in the EU.

Nonetheless, the group conceded that the process of moving horses would change significantly from the end of the transition period. It would be more complex administratively, more time consuming and was "likely to be more expensive".

The ease and informality of the Tripartite Agreement, easing movement between the UK, France and Ireland, has gone and, although "horse passports" are still recognised for thoroughbred horses, based on stub book details, much else has changed.

On top of residency and isolation requirements, horses have to be blood tested for certain diseases, an export health certificate will have to be obtained and signed by an official vet, formal notification of movement has to be given and entry must be via a Border Control Post, where veterinary inspection (for a fee) is compulsory. But it does not stop there.

Today's Racing Post (no link) suggests that horses sent from Ireland to the UK for racing will face potentially "colossal" VAT charges. Although these will be refundable, the payments are expected to take months to process, placing a huge financial burden on racing teams.

Already, there is some doubt as to whether some of the "big name" Irish horses will make it to the Cheltenham Festival. This could have a devastating effect on the Festival as horses trained in Ireland account for nearly 40 percent of the runners.

However, the problems are by no means confined to the "high end" of the horse world. As the BBC reports, a show jumping trainer has said that Brexit has stopped her taking horses to Europe to compete in events.

This is Rachael Williams, from East Yorkshire, who says there had been delays and confusion over the new requirements for taking live animals to the continent. She says she would usually travel to Europe around ten times a year, taking three riders and six horses to various competitions.

"We were told that if you were jumping internationally and if you had your horses registered with the Dutch federation, passport and things like that, you would get better travel and it would just simply be the same - and it is not", she says. "We haven't had a good Brexit deal at all, in fact we've had no deal".

Williams, though, isn't the only one making that discovery. A complacent livestock industry is finally being jolted into accepting reality, finding that "excessive" vet checks and paperwork are hitting meat exports to the EU.

And here we go again. About this, I wrote in January 2017, setting out in great detail precisely what was involved. Yet now the National Pig Association (NPA) is complaining that delays caused by what it claims are "excessive checks and paperwork" are making UK shipments unattractive to buyers in the EU, forcing processors to reject shipments and cancel future orders.

One load was held at Calais for 20 hours while inspectors carried out checks. The pigmeat was then rejected on finally reaching its destination in Germany because its quality had deteriorated. And still, the NPA warns that the full overall impact of the new rules is yet to be felt, as UK export volumes remain lower than normal for the time of year.

Processors have reported a number of issues. For instance, the administrative burden of health certificates means that vets are struggling to meet the demand. One processors took nine hours to prepare paperwork for a single shipment to the EU last week. paperwork for a 15 tonne shipment bound for the Netherlands required 12 stamps in three languages, in duplicate, or 72 stamps in all.

Furthermore, since inspectors are required to check labels on each box in consignments, pallets have to be offloaded and broken apart to be examined. And, as if this was not bad enough, Eurotunnel needs to process 500 lorries an hour but has the veterinary capacity for only 150 an hour, causing further delays.

NPA chief executive Zoe Davies complains of "bureaucracy overload" but she does not help herself by displaying her own profound ignorance. She concedes that the "we always knew it [Brexit] would mean more red tape, checks and delays", but she then complains that "there is a political element, too".

About 30 percent of all UK consignments to the EU were being checked, she says, but this is far more than for many other third country exporters to the EU. For New Zealand, she says, the figure is one percent.

What she clearly doesn't understand is that New Zealand negotiated a special deal with the EU, something which our "fantastic" negotiators didn't bother to do, despite Johnson claiming that there were no non-tariff barriers – having not read the treaty he signed.

Instead we have Davies prattling that: "It is clear that the EU Commission wishes to make Brexit as painful and as messy as possible to prevent any other country from following suit, so we have very little hope of improving things". She is calling on the government to act.

However, she is not likely to get much comfort from that sources, with the ineffably stupid George Eustice telling Scottish fishermen that their problems are down to "teething troubles".

With the Mail dismissing measures as "Europe's petty revenge", while trade sources are blundering around in a fog of their own ignorance, it looks to be some time before business gets to grips with Barnier's "new normal". With little help from the media or politicians, they are having to find out the hard way the real meaning of non-tariff barriers, as one in ten trucks are being turned back at the border.

While Mrs May famously told us that "no deal" was better that a "bad deal", as Rachael Williams is finding, a bad deal is no better than no deal.

Also published on Turbulent Times.

Richard North 15/01/2021 link

Brexit: a certain lack of preparation

Thursday 14 January 2021  

Largely, on fishing, I held my own counsel during the "future relationship" negotiations, but my general stance matched my view on remaining in the Single Market at the end of the transition period: sudden change was undesirable and there was nothing to be gained from immediate withdrawal from the Common Fisheries Policy.

That is not to say that I had suddenly fallen in love with the CFP, any more than I had come to revere the Single Market. The point cannot be emphasised enough: whatever the demerits of continuing to participate in EU policies for a period, the penalties of sudden change were greater.

And so it has turned out to be, no more so than with the fishing industry. Such is the crisis that has developed that the Guardian is now reporting that fresh seafood exports from Scotland to the EU are to be halted until 18 January - now extended a further five days.

Yet, it is unlikely that such a short hiatus – even when extended - will have much effect. Export firms point to delays regarding health certificates, issues with the IT system interface between exporters and local authorities, and incorrect or missing customs documentation from customers.

So fundamental are these problems that a break of a few days won't do much to help and there are fears that, unless the issues are resolved, the trade – which is said to be worth more than £1 billion to Scottish businesses – will collapse.

All this has been brought about by the hard line adopted by the UK government in the trade negotiations, with the doctrinaire insistence on taking over fishing quota that the industry was not capable of exploiting, while failing to broker a deal which would safeguard the interests of businesses reliant on exporting.

The British government stance has been driven by a notional attachment to the concept of "sovereignty" – equating this with control of our fishing grounds. There is thus a failure to recognise that to negotiate a transitional period, where the status quo holds, in return for concessions on access to the Single Market, is in itself a sovereign act.

Without preferential access to the EU market, it should not have come as any surprise to the industry that the standard conditions applied to the export of fisheries products into the EU would apply. Furthermore, since the UK government had long-signalled that it had no intention of seeking concessions, the industry had plenty of time to prepare for the inevitable.

Fishing for Leave, however, argues that what is happening to Scots seafood shipments is "nothing to do with Brexit". It blames the "Remain establishment" which, it avers, has had four years to prepare, but has not bothered, spending its energies instead on "thwarting Brexit".

And yet, having tracked the progression of the Brexit process since the day of the referendum, I cannot recall the fishing industry cogently – or at all – calling for post-Brexit preparations to deal with non-preferential access. This is despite that, until almost the last moment, the emphasis was on a "no deal" Transend, which would have entailed precisely that situation.

Nevertheless, it cannot be said that the fishing industry is alone in its lack of preparation – or foresight. We see, for instance, complaints from the supermarkets – addressed to the House of Commons Brexit Committee – that the TCA is "pretty much unworkable" for their businesses.

We are told that Andrew Opie, director of the British Retail Consortium (BRC), was scathing of the government's last-minute delivery of the deal, which he said had resulted on shortages on supermarket shelves in Northern Ireland. The lack of notice, he claims, has left supermarkets scrambling to deal with mountains of "impenetrable" administration. 

Yet, once again, we have a situation which was all too predictable. The government has made no secret of its intention to secure a no-tariff, no-quota deal and has specifically excluded any deal on preferential access to the Single Market which removes the layers of non-tariff barriers.

As for the Northern Ireland position, that was effectively settled with the conclusion of the Withdrawal Agreement, which was signed the day before we left the EU at the end of January 2020.

The post-transition situation, therefore, in respect of both Northern Ireland and the rest of the UK, has been entirely predictable - so much so that we have had little difficulty spelling out on this blog the various difficulties which would be encountered, deal or no deal.

On the other hand, when it comes to the supermarket chains, we are not talking about hole-in-the corner operations with limited resources. These are wealthy, powerful businesses, with easy access to government, and bestowed with enormous resources and influence.

Despite all these advantages though, we see their representatives whingeing to MPs about their woes, with Ian Wright, director of the Food & Drink Federation, saying that suppliers remained "clueless" about some of the practical implications of the trade deal.

Wright, like many of his colleagues, asserts that: "The biggest problem was that the deal was agreed very, very late". But the substance of the industry complaints cover ground unaffected by the deal, which were going to arise, irrespective of the nature of the deal actually agreed.

Illustrating the difficulties faced, Wright cites one multinational company that found customs checks and certifications on a mixed consignment of goods to the EU, "would previously have taken three hours to complete now takes five days".

This is, of course, the "groupage" problem, which I wrote about in March 2017 - nearly four years ago – again in April 2018, and many times subsequently. Behind the scenes, I have been talking privately to captains of industry, sometimes with Booker before he died, attempting to warn them of the difficulties they faced.

Some might also remember that in 2016, I also gave evidence to the Treasury Select Committee warning of the perils of dropping out of the Single Market.

When it comes currently to the Road Haulage Association, we see it being "shocked at the impact the new customs arrangements are having on the supply chain between GB and NI". Yet I recall briefing a senior official on the impact of the SPS provisions, shortly after the referendum. Since, with the settlement of the Withdrawal Agreement, these were to apply to NI traffic, the RHA has absolutely no business being "shocked".

One can, of course, blame government (or successive governments) for the botch they have made of the Brexit process, and Johnson for his exaggerated (and untruthful) claims made about his deal, but it is not unreasonable to say that industry representatives have, in the main, been naïve and complacent.

The media also plays a part in this. Their reluctance (or inability) to spell out in detail the problems we would encounter have contributed to the lack of awareness and the complacency that goes with it.

Sadly, though, business complacency is not a unique phenomenon. Having worked in trade associations for part of my professional life, my job was to warn members of upcoming regulation and the problems they might present. This I did diligently, only to find in many instances when the regulations came into force, we were inundated with complaints by members that they hadn't been warned.

With the late Peter Troy, who was a keen activist in the Federation of Small Businesses, I addressed many federation meetings, only to meet that same wall of indifference and complacency. Businesses, in many respects, are their own worst enemies.

Sadly, many of the problems they face are now insurmountable, or without economically viable solutions. While Gove blathers about "mitigation", Barnier is telling us how it is. Many of the new regulatory frictions hampering cross-Channel trade will be impossible to smooth over, he says. They are the inevitable consequences of Johnson's Brexit.

The way to deal with them was to head them off at the pass. Business should have been active in ensuring that government, the media and the public were made aware of the consequences of the actions being proposed.

For now, though, their complacency is going to cost them dear. More to the point, it is going to cost us dear, for the idle and the naïve are not going to eat into their generous "compensation" and pension packages just because they have failed to see what was coming. Consequences are for "little people", and there are going to be plenty of those in the near future.

Also published on Turbulent Times.

Richard North 14/01/2021 link

Brexit: counting the costs

Wednesday 13 January 2021  

One senses that the legacy media is having real trouble following the post-Brexit developments, judging from the paucity of reports and their general sameness. Covid-19, however, continues to dominate the news cycle, and the US presidency soap opera also continues to distract, with some Americans demanding "1 MP each", which seems a bit excessive, especially as they don't call their assembly a parliament.

The big problem with Brexit-related issues is that there is no visual "hook" to provide television appeal, from which the print media can take their cues. Unlike the pre-Christmas border crisis, with dramatic pictures of parked lorries to keep viewers and readers entertained, the media have only scenes of deserted ports and near-empty motorways. They can only be used so many times, before their novelty begins to pall.

The Times, however, is doing its best to expand the range of stories (following in the wake of the Telegraph), with the headline: " Consumers to foot bill as freight costs surge".

This tells us that the cost of shipping goods from Europe to the UK has risen sharply, with the average cost per load from Germany to the UK having risen 26 percent in the first week of 2021 compared with the average for the third quarter of last year. Shipping loads from France has risen by 39 percent on average.

The paper cites Stephan Sieber, chief executive of Transporeon, which tracks freight flows. He says: "There is a strong possibility that some of these price increases will stay around. I can tell you with quite a lot of certainty that this is not just seasonality".

Others question whether the upwards trend will hold when traffic levels return to normal, if indeed there is such a thing as "normal" any more. There may, of course, be a level of opportunism by freight companies, exploiting the uncertainty, in which case the levels currently experienced could subside.

This may especially be the case as costs for Italian loads had increased only by a relatively modest 9 percent, while Polish operators had only hiked charges by 1 per cent. Competition in the industry is still strong.

Nevertheless, with the delays induced by border checks, and with inspection and other fees, plus rising administration expenses, shipping costs are bound to increase. And, if there is a permanent drop in cross-Channel traffic, Eurotunnel, the ferry operators and the port authorities on both sides of the water, will be raising their charges in order to make up for lost revenue.

What is uncertain at this point is whether the drop in cross-Channel traffic, sustained since the new year, will be permanent. If it is, there will be another side-effect, as just-in-time supply chains are disrupted. We may already be seeing signs of this, as Ford has substantially increased the prices of two of its most popular models for 2021.

However, for the moment, Ford is claiming that the rise is due to additional tariffs on components built outside the UK and EU – some of its components are sourced in the US. But if that is a factor for this company, it may have an effect on other products.

For all that, even the mighty Society of Motor Manufacturers and Traders is not sure exactly how things are going to pan out. CEO Mike Hawes says his team "await the details to ensure this deal works for all automotive good and technologies, including specifics on rules of origin and future regulatory co-operation".

On the regulatory front, the automotive industry will have it easier than some industries, as the UK will continue to build to common standards, based on UNECE WP.29 regulations. Even if there is uncertainty about the supervisory functions (whether these can be undertaken by the UK regulator), the industry is spared the cost of running parallel regulatory regimes.

That is not the case for the chemical industry. Not only does it face the prospect of having to conform to separate EU and UK regulations, it is facing significant problems dealing with the fallout from Brexit.

According to a report from the Helsinki-based European Chemicals Agency (ECHA), of the nearly 100,000 REACH registrations in the UK, transfers in only 80 percent of cases were started or completed by the end of the transition period on 31 December 2020.

Where the transfer has been initiated, EU "successors", who will hold the registrations as "only representatives" on behalf of UK producers, will have to complete the procedural steps and accept the transfers by 31 March 2021. If the process is not complete by then, the transfer will be cancelled, and the registration revoked.

For approximately 3 percent of the UK registrations, though, transfer to the EU was not initiated by the end of 2020. This means that the registrations, amounting to 2,900 in number, are now void and will be revoked. The registrants will no longer be able to legally place their substances on the EU market.

This alone represents a significant loss in asset value, reflecting lower income as the products are no longer cleared for sale throughout Europe. But since many RoW nations also use REACH as their standard-setter, global trading opportunities will also be reduced. Whether other countries will accept UK REACH remains to be seen.

Of other sectors, the plight of the Scottish fishing industry has been well-recorded, with the Independent recording that fish prices are "collapsing" by as much as 80 percent, due to what it calls "Brexit bureaucracy". Apart from the immediate losses, it is feared that the loss of buyers may be permanent – something we've previously addressed.

The fishing settlement, hailed as a victory by Johnson, is turning out to be a "catastrophe" for the sector, where the trade barriers which the prime minister said didn't exist are preventing fishermen reaching their traditional customers, with no alternatives in sight.

From the look of it, the turn or agriculture has yet to come. There is some relief that a tariff and quota-free deal has been negotiated, although this may be short-lived.

The full impact of the border SPS regime has yet to be experienced, and livestock producers may yet find that it is very difficult to place their products on the European market and, even where they are successful, transactional costs will have escalated.

For the moment, though, there seems to be something of a head-in-the-sand attitude, with many farmers being led to believe that it will be business as usual, as domestic prices hold firm.

How far the Northern Ireland situation will continue to impact is also up in the air. Disaster stories tend to have a long tail, as they are passed down the media chain from nationals to locals, via the regional, still appearing days after they were originated.

Thus, while UK-wide shortages in supermarkets are being reported, the situation is said to be especially difficult in the province.

On the other hand, the Belfast Telegraph is claiming that fresh food supply lines "back to 95 percent of normal trade", which suggests that some of the more recent reports in the English press are somewhat overcooked.

Despite that, everywhere we look, we see costs escalating, with very little compensatory effects for the moment. And, on the other hand, there are suggestions that the EU will be less badly impacted than initially expected.

Less surprising is that the BBC is surprised by some of the consequences of Brexit. Despite dribbling out a succession of Janet & John "explainers", it will be amongst the last to know what it going on.

Also published on Turbulent Times.

Richard North 13/01/2021 link

Brexit: carnet carnage

Tuesday 12 January 2021  

Yesterday was the day we'd been led to expect the first real signs of disruption at the Channel ports, as trade picked up after the Christmas break and the hiatus while shippers assessed the lie of the land.

As it happened, traffic was thin and twitter commenters were posting video feed of the Eurotunnel freight terminal showing a remarkable lack of lorries. This left frustrated lorry-watchers with little to report, leaving the might of the legacy media to focus on ham sandwiches confiscated by Dutch border officials.

Helpfully, the Guardian published a photograph of a ham and cheese sandwich for its many readers with learning difficulties, their journos no doubt chortling at the report of the Dutch official telling a bemused driver, "Welcome to Brexit, Sir".

That, it appears, is the level at which the legacy media are going to play post-Brexit stories, seasoned by the usual hand-wringing over "paperwork" which typifies this ITN report, illustrated by the visual cliché of empty supermarket shelves.

Elsewhere, when the Guardian had to illustrate another of its Brexit-related stories, it ended up using a frame of Dover harbour from 4 January – eight days ago.

The only thing marginally of interest in that report, covering a survey by the Federation of Small Businesses (FSB) on business prospects. In this, just over a quarter believed exports to the EU would fall, with just 16 percent believing they would increase.

Illustrating the limited perception of the nature of the problems facing exporters, 47 percent of firms cited "customs delays" as the biggest risk. As yet, it seems, the concept of non-tariff barriers, which are keeping loads from being dispatched in the first place, has not yet impinged on the collective consciousness.

With this, it is becoming increasingly apparent (not that it wasn't before), that the "Brexit effect" is going to be a slow burn, with different sectors affected in their own ways, with the pace of the impact highly variable.

Fishing, obviously, has been first out of the stocks but the best and earliest reports are coming from the trade press, as in this article from Undercurrent News, which gave an early intimation of how the sector is facing the long-term threat of loss of EU buyers.

Another crisis waiting in the wings is international motorsport – and Britain's ability to compete in European circuits. A small sign of the impending troubles is reported yesterday by the trade magazine, Autosport.

This passes on a statement from British motorsport's governing body, Motorsport UK, which has outlined "the fees and process involved in transporting cars and equipment to Europe following the end of the Brexit transition period".

UK drivers and teams aiming to compete in Europe will now have to apply for an ATA Carnet - an international customs document – in order to transport cars or equipment temporarily to within the EU, paying a fee of £240 plus VAT for the processing of each carnet.

They must also pay a premium of 40 percent of the value of cars being shipped, which is refundable when the vehicles come back to the UK, or a non-refundable insurance premium to cover the 40 percent. This can cost as much as £624 for each £100,000 of cover.

However, as I wrote back in March 2017, applying for carnets is only the start of the problems confronting motorsports.

For an ATA Carnet, every item must be listed on the official form and, while a single carnet is valid for a year, once completed, they cannot be changed. Where there are multiple venues, loads vary so much that new applications are often needed for every event.

And, in the highly competitive environment of motor racing, while loading often goes on almost to the minute of departure – not a problem in the Single Market – to be on the safe side, applications for Carnets must be lodged 2-3 days before travel.

Nor does the Carnet remove the need for customs formalities. These include documentation checks and verification inspections, to ensure than all equipment is listed, and checks when they leave the country to make sure the carnet-holders take out everything they brought in. Such checks cannot avoid adding delays to the transport process which, currently, enjoys free movement without customs control.

Once the material has been allowed to enter under the temporary admission procedures, bizarre "red tape" provisions apply. For instance, once imported it must be re-exported within a variable time frame (down to three months in some circumstances). Furthermore, nothing imported on the carnet can be disposed of locally, without giving five days' notice and getting written permission.

Then, specifically, import of "consumables" is not permitted under the carnet system, so oil, fuel and lubricants, as well as tyres in some cases, must be obtained locally.

Any foodstuffs, including stocks held in mobile kitchens, cannot be included in the carnet, and have to be routed via a Border Control Post, after the issue of veterinary inspection certificates before departure.

This effectively means that the lavish hospitality services sometime supplied at racing venues – especially in F1 - including the provision of gourmet meals for VIPs prepared in central kitchens, can no longer be serviced from a UK base.

Nor is it just motorsport which is going to be affected in this way. Music gigs have already been mentioned in this context, but show-jumping, cycle touring, film-making, exhibitions and many other activities – sporting and non-sporting will be caught in the net.

In terms of motorsport, a number of UK-based championships and series organisers have opted to either not have any European trips during 2021 or delay them to later in the year. Part of this is to do with Covid-19, but the uncertainty surrounding Brexit has been a contributing factor.

For many operations, the added costs and complexities will doubtless reduce the opportunities to participate in European events and industries supporting these activities may also be threatened.

When, perhaps, the legacy media can get its head round the complexity of carnets, and what they entail, it might be able to tear itself away from on-the-spot reports about ham sandwiches and report on an issue which is going to have a long-standing impact.

Returning to yesterday's report about Starmer, he should be aware that this is another aspect of Johnson's deal that can never be made to work. Carnet carnage is going to be a feature of post-Brexit Britain, unless or until something better can be devised, if that is even possible.

Also published on Turbulent Times.

Richard North 12/01/2021 link

Brexit: associating with failure

Monday 11 January 2021  

Although we are already hearing multiple tales of woe from truckers and others trying to make sense of Johnson's "comprehensive Canada-style free trade deal between the UK and the EU", it is generally acknowledged that these are just the start. Much worse is to come.

And yet, this is the very same deal, of which Johnson on Christmas Eve was saying that it meant "certainty" for businesses, "because there will be no palisade of tariffs on 1 Jan, and there will be no non-tariff barriers to trade".

Instead, Johnson assured the country, "there will be a giant free trade zone of which we will at once be a member", with the deal offering "a new stability and a new certainty".

For all that, as we are only ten days into the new year, it was a little unfair for Andrew Marr on his show yesterday to ask Keir Starmer whether there was "any aspect of the Brexit deal" that, as prime minister, he "would reopen, revisit and try to renegotiate".

Simply, even for those of us who have spent some time studying the deal, it is far too early to assess the full measure of the train-wreck bequeathed to us by Johnson, distinguishing between early teething troubles, which will settle down with time, and those issues which represent fundamental change, to the detriment of businesses and, ultimately, the whole of the United Kingdom.

It was probably incautious of Starmer, therefore, to rule out any possibility of a "major renegotiation". After four years of negotiation, he said, "we've arrived at a Treaty and now we’ve got to make that Treaty work".

He asserted that the deal was "thin" and wasn't what the government promised, but he argued that it was better than no deal. Thus, he said, we needed "to make it work". If a Labour government comes in at the next election, he said, "we will inherit that treaty and the British people will expect us to make it work and the EU 27 will expect us to make it work. And I enter it in that spirit".

We need hardly to be reminded, though, that we are only just over a year into the electoral cycle and there is potentially the best part of four years to go before we have another general election – less if the fixed-term Act is abolished a Johnson reverts to tradition timing and we have an election in May 2024.

But even with the passage of just over three years, that will be more than enough time to assess the workings of the TCA, and its more egregious weaknesses. By 2024, therefore, it would be possible to come up with some ideas of where changes are most necessary, and to devise a plan on which to base a renegotiation.

It is not as if such a stratagem is without precedent. On 1 January 1973, Ted Heath took as into the Common Market and, by February 1974 – only just over a year later – Wilson narrowly won a general election on a pledge to renegotiate our terms of entry.

This pledge survived the October election, which Wilson called to strengthen his position, and we ended up with the referendum in 1975 on the EEC, less than 30 months after we had joined.

On that basis, it would be perfectly reasonable for Starmer to have told Marr that he would keep the functioning of Johnson's TCA under review and then to assess its defects before the next election, with a view to considering whether it was in the best interest of the nation to call for a renegotiation.

In so doing, he need not have committed himself to action, but he would at least have left his options open. As it is, having voted for the treaty in the first place and now pledging to "make it work" if elected, Starmer is effectively taking joint ownership of the TCA. If he inherits it after the election, warts and all, he becomes sole proprietor and takes full responsibility for it.

On reflection, to call this "incautious" is perhaps too kind. Already, we know enough of this treaty to surmise that its effects are going to be devastating. We will not so much be working with it, as suffering from it and, by the elapse of four years, one can easily imagine a build-up of pressure for "reform".

Starmer, though, has made no secret of his desire to put "Europe" to bed and concentrate on domestic issues. But, if he thinks that the treaty is going to settle down into a working arrangement and "Brexit" is going disappear from the political agenda, then he is making a serious misjudgement.

Specifically, although Covid-19 is dominating the agenda at the moment, we must assume that even with this inept government, the vaccination programme will be the end of the year be exerting some effect. By the late spring of 2022, it is not unreasonable to expect that the worst will be over.

By May 2024, although memories will be fresh and the economic impact will still be with us, there is a reasonable scenario that allows us to expect that coronavirus will be behind us and a post-epidemic normality (whatever that is) will be beginning to assert itself.

Nature, of course, is always ready with surprises, and it remains possible that we could still be struggling with an epidemic, the virus having undergone further, significant mutations. In that case, Johnson's TCA – however bad it turns out to be – might be the least of our problems.

Taking a reasonably optimistic view of the progression of the epidemic though, we see a scenario that, as the impact of Covid-19 diminishes, the awareness of the TCA will increase – commensurate with the cumulative effect of its adverse impacts.

And it is here that Starmer's judgement is probably at its least sound. Assuming that his party comes into office in 2024 (his words to Marr), he has set himself an impossible task: "to make sure that the treaty works". He says:
I think pretending to the British public that somehow after four years of negotiation the Treaty that’s just been secured is going to be up for grabs and that the EU are going to start saying let’s start all over again. That is not realistic, that is not going to happen.
However, his problems will come well before any election, when – in fairly short order – it becomes increasingly evident that Johnson has not just delivered a "thin" treaty, but one which is largely unworkable.

The Northern Ireland situation may stabilise, but it is not going to get much better. The "wet" border is a political reality and, as the full range of checks take effect, trade flows between the province and the mainland will remain difficult and costs will escalate. The pressure will bring the two parts of the island together, and the drive for political unity is bound to intensify, accelerating the beak-up of the union.

As regards our overall relationship with the EU, the rules of origin are here to stay, and will have profound, long-term effects. It brings to an end the "distribution hub" model of business – buying-in cheap goods from low-labour countries and selling them throughout the Single Market, at a substantial mark-up. That alone will have a significant impact on the profitability of British commerce.

At the borders, the full SPS regime has yet fully to take effect, but we will start seeing some of the impact this coming week and in the weeks following. By the time the penny has dropped, it will finally be understood that the entry price of British goods – expressed in terms of delay and additional costs – has rendered British trade uncompetitive. It will shrink to a fraction of its former level, a fate which is already apparent with the fishing industry.

We have yet to see the impact of the failure to negotiate a mutual recognition agreement on conformity assessment, although the idiot Johnson states that "the concepts of uniformity and harmonisation are banished in favour of mutual respect and mutual recognition and free trade".

This is not to be, and once the French and other customs start insisting on conformity with EU law being demonstrated at the borders, the flow of manufactured will slow to a glacial pace and costs will escalate. The effect is likely to be permanent, as British exporters will be unable to guarantee either costs or delivery times.

Services, of course, are largely history and while the "equivalence" issue on financial services has yet to be settled, we have no reason to expect a favourable outcome. Again, we must anticipate drastic shrinkage of trade.

Yet these are only the headline issues. Many more will emerge in the weeks and months to come, some of which we will not have expected and which will come as an unpleasant surprise.

But all this will point in one direction – an increasingly urgent need to renegotiate a deal which has the potential to do massive damage to the UK's economy, the effect of which will be to interrupt our recovery from the Covid-19 epidemic.

This, most likely, will put Starmer on the back foot. The longer he tries to ignore the damage and the attempts to make the unworkable work, the more he will be associated with Johnson's failure. It is not entirely untoward to suppose that, if the Tories have the sense to ditch Johnson before 2024, this could cost Starmer the election – irony indeed to see a Labour leader broken on the wheel of "Europe".

Also published on Turbulent Times.

Richard North 11/01/2021 link

Brexit: a forlorn endeavour

Sunday 10 January 2021  

As provisions of the TCA begin to bite, with potentially catastrophic effects on Britain's exports, the question inevitably arises as to whether prime minister Johnson actually read the treaty he signed or, if he did, whether he understood any of it.

That question takes on additional force with the publication in The Sunday Telegraph of an article headed: "'Operation Bleach' to scrub EU from the statute book" which reports on how officials "have been tasked with leafing through regulations and statutory instruments covering the UK's 40 year membership of the EU".

The idea of officials "leafing" through the statute book strikes one as being a tad casual, not really conveying the thrust of article which tells us that Johnson "has secretly ordered civil servants to strip references to the European Union from tens of thousands of laws".

The intention is to stop Labour reversing Brexit after the next general election in a plan known by some in Whitehall as "Operation Bleach", ensuring that Brexit is cemented in UK law and cannot be easily unwound by a future government.

With this, if there was any doubt about Johnson's degree of comprehension of what he has signed, I think we can be reasonably confident that he really doesn't have the first idea of what he has put his name to.

One only has to explore the inner reaches of the TCA to find, as I did, that the Agreement locks the UK into conformity with a wide range of international standards, shared by the European Union.

Thus, although we will no longer be adopting EU regulation by name, these international agreements will keep us in lockstep with the EU, to the extent that the bulk of our laws will continue to mirror the EU's acquis.

On this basis, it hardly makes sense to expend the resource excising the EU's name from our law books, if the content essentially remains the same, with very little discretion afforded to us, as to the substantive changes we can make.

And yet, there still remains within the realms of the Brexiteer orthodoxy that the end of the transition period, TCA notwithstanding, now gives the UK a licence to forge our own, independent statute book, all on the premise on "taking back control".

Prominent in promoting this fallacy is Daniel Hannan, who recently graced the site Conservative Home with the idea that the government could "stimulate growth" by reducing regulatory barriers, a process achieved in part by disapplying EU laws.

One of the instruments he singled out for destruction was the EU's Alternative Investment Fund Managers Directive (AIFMD), introduced in the wake of the 2009 financial crisis in the form of Directive 2011/61/EU on 8 June 2011.

When we look in detail at this Directive though, we see that it originated from the April 2009 G20 summit in London, where national leaders agreed that the "wild west" of hedge funds should be regulated, with fund managers registered and required to disclose appropriate information on an ongoing basis to supervisors or regulators.

This was reaffirmed in June 2010 at the G20 summit in Toronto when the national leaders committed to accelerate the implementation of strong measures to improve transparency and regulatory oversight of hedge funds "in an internationally consistent and non-discriminatory way".

The basis of the regulatory scheme was provided in June 2009 in a report by the International Organization of Securities Commissions (OICU-IOSCO). Based in Madrid, Spain and founded in 1983, this is the international body that brings together the world's securities regulators and is recognised as the global standard setter for the securities sector.

Working to a Memorandum of Understanding produced in May 2002, it brings together the regulatory authorities of its 129 members, including the UK's Financial Conduct Authority. The European Commission is an associate member, although its European Securities and Markets Authority is a member of the IOSCO Board, as is the UK's FCA.

It has to be said, therefore, that the AIFMD is the product of an international endeavour, incorporated into UK law as the Alternative Investment Fund Managers Regulations 2013, implementing Directive 2011/61/EU, and Regulation (EU) No 231/2013 supplementing AIFMD, as well as other EU Regulations.

Post-Brexit, the law has been given the status of "Retained Law", amended to bring it into conformity with UK independence by the European Union (Withdrawal) Act 2018, to emerge with a modified title as: The Alternative Investment Fund Managers (Amendment etc.) (EU Exit) Regulations 2019.

The new format keeps the essence of the original laws, but enables it to operate effectively in the new regulatory environment "arising from the withdrawal of the United Kingdom from the European Union", removing the requirement of the FCA to report to the European Securities and Markets Authority.

With that, there is absolutely no question of the law being removed from the statute book. But, since the revised Regulations make the EU links very clear, one presumes that these – together with other financial regulations – will be candidates for Johnson's "Operation Bleach".

However, no amount of cosmetic manipulation will change the fact that this law is a permanent feature of the UK's statute book and, doubtless, it will be updated in accordance with IOSCO recommendations, to keep the UK in line with international norms – alongside the EU which will be doing the same thing.

What the likes of Hannan clearly don't realise is that, with or without the EU, we would have adopted a version of this law anyway. As the House of Lords European Union Committee reported in February 2015:
… it is likely that the UK would have implemented the vast bulk of the financial sector regulatory framework had it acted unilaterally, not least because it was closely engaged in the development of the international standards from which much EU legislation derives.
It maybe the case, though, that there is the case for divergences on other laws. Hannan also mentions the Temporary Workers’ Directive, the REACH Directive, the End of Life Vehicles Directive, the droit de suite rules and other regulations that hurt London’s fine arts market, chunks of MiFID II, GDPR, and the bans on GM.

Financial regulation apart, which is here to stay, the UK has already committed to a "UK REACH", which is likely to cause serious damage to the UK's chemical industry, requiring it to adopt parallel regulatory regimes so that it can continue its lucrative exports to the EU.

There may be a case for changes to the Temporary Workers’ Directive, although that might get us into trouble with the EU's LPF requirements, but it is unlikely that the End of Life Vehicles Directive will be significantly changed. The latter remains on the statute book.

Interestingly, the Artists Resale Right regulations of 2006, implementing the EU's droit de suite rules, also remain, and the indications are that they will not be changed, as they implement (in part) the Berne Convention for the Protection of Literary and Artistic Works, as amended in 1979.

Ironically, under the WTO Agreement on Trade-Related Aspects of Intellectual Property Rights (the TRIPS Agreement), even those not party to the Berne Convention must comply with its substantive law provisions, so the "double coffin lid" lives to haunt the British government.

One way or the other, we are a long way from seeing the last of EU legal influences. Airbrushing the label out of existence is something of a forlorn endeavour.

Also published on Turbulent Times.

Richard North 10/01/2021 link

Brexit: a sense of unease

Saturday 9 January 2021  

Yesterday, carried over into today, marked the point at which the legacy media stepped aside from their lorry-watching – in expectation of huge queues – and started to report on the slow-motion train wreck emerging from the end of the transition period.

One of the first pieces I spotted yesterday was from the Guardian (widely used because of the absence of a paywall), which recounted the trials and tribulations of truck driver, Roger White.

Mr White arrived in France at 2.30pm on Tuesday with a truckload of hard cheese from Somerset. Before Brexit, the Guardian says (although it means the end of the transition period), he would have rolled off the Eurotunnel train and carried on up the A16 to Belgium, unloading his wares a few hours later at his ultimate destination in Utrecht.

But, we were told, 24 hours after setting foot on European soil, the 69-year-old driver from Yeovil was still sitting in his cab in the Eurotunnel compound in Calais after being asked to reverse into a special unloading bay at a newly built border control post for sanitary and phytosanitary checks (SPS) checks on food. "I’ve been here since yesterday afternoon and I am stuck here until God knows when. I have to wait until I am cleared to go", he said.

White, according to the paper, knew there was trouble ahead when he drove off the shuttle and the electronic display assigned him the orange lane instead of the green, indicating he would be subjected to an inspection by authorities. Remarkably, he comments: "I think they are picking on the English trucks maybe", as there was nothing wrong with the cheese. "Just missing paperwork", he said.

One might sympathise with the plight of Mr White, but somewhere in the chain of events which led to him being delayed for 24 Hours in Calais lies an extraordinary level of stupidity in allowing a high-value cargo to be sent to France without – as White puts it – the necessary "paperwork".

After all, the moment Mrs May – back in January 2017 – decided we were no longer going to be part of the Single Market, it was a matter of certainty that the full SPS regime for products of animal origin was going to apply to UK exports to EU Member States.

I wrote about the regime in detail in January 2017, and although the piece was focused on the meat industry, it is very similar for all products of animal origin.

Since there are no exceptions for any third country – which the UK was to become – and the requirements were sketched out in the Commission's notice to stakeholders, there can be no excuse for despatching such a load without the required "paperwork".

Yet, it seems, Mr White has not been alone in his misfortune. The Telegraph - relying on "industry sources" – tell us that French officials have warned the majority of lorries arriving into the country from the UK with food products are not meeting "new" EU requirements around phytosanitary (SPS) controls.

Of course, these are not new requirements – just newly-applied to Great Britain (UK minus Northern Ireland). Thus, it is not as if UK vendors are having to deal with something totally new. Anyone familiar with shipping products of animal origin from a third country (such as Australia) to the EU should be able to advise. And, I believe, the UK government has an Australian personage on its staff.

But that has not stopped one industry insider telling the Telegraph that, "The French quite rightly are fed up with us". They are saying that "there is so much stuff coming in that is non-compliant with the paperwork that it can't continue".

Says this [anonymous] insider, "We need operational detail on exactly what is not working. This all boils down to the fact that we did not have properly tested systems in place before January and is absolutely predictable".

There is, apparently, a document which has been circulated to British hauliers, which lists five areas that [French] customs officials say are leading to disruption at the UK-France border.

These include hauliers failing to fill out a specific box in departure declarations, changing destinations at the last moment, failing to provide the correct notification for agrifoods and lacking the original export health certificates, as well as failing to organise an agent to handle SPS paperwork on arrival in France.

These are pretty fundamental failures and one wonders what companies and their trade associations have been doing since 2017 to prepare for the inevitable that was going to happen, deal or no deal, with the government having published guidance since November 2016.

Unsurprisingly, we are thus seeing Michael Gove warning businesses to brace for "significant disruption" at French ports, which have been ordered to "crack down" on lorries arriving from Britain with incorrect paperwork, as from Monday.

This comes as business leaders are complaining that "post-Brexit red tape" is already hampering the flow of trade across the Channel, eliciting a response from Gove, who says that the government would "redouble" its efforts to communicate changes to firms and hauliers.

He adds that the impact of new EU trading arrangements would be felt most firmly on the "Dover-Calais route", with figures released yesterday showing 700 lorries travelling through Kent had already been turned away at the border since 1 January.

The majority of these refusals, though, have been due to coronavirus testing issues rather than non-compliance. But the Cabinet Office says that heightened traffic in the coming days means that disruption is likely to intensify.

And in France, where officials are said to have shown leniency to hauliers arriving from the UK in recent days, it is claimed that port authorities, carriers and operators have been instructed to start turning back lorries if they are found to be non-compliant.

However, what might help in the short-term is a change in the terminology. The use of the phrase "red tape" somehow trivialises the issue, more so when we get The Times referring to the "fine print" and the "burden of extra paperwork".

The paperwork, in most respects, is only a part of the regime which includes rules for certification of products, conformity assessment, inspections, sampling and testing of goods.

These complex and rigorous formalities are the new normal and are very far from trivial. Exporters and shippers need to treat them seriously, and accept that compliance is now part of the cost of doing business in Europe. To dismiss them as "paperwork" or "bureaucracy" does not do justice to the scale of the problem confronting business. Nor is there any value in calling for pragmatism. Far from taking back control, we are no longer in control.

Sadly, for some, the cost will be too great, not helped at all by increased shipping costs which are combining with the hike in transactional costs to create a perfect storm.

For one computer manufacturer, for instance, it is claimed that, six months ago they could get a container of parts shipped to the UK for between £2-2.5k. A month ago it was £8k and yesterday they were quoted £16,500. One of their gaming PCs has gone from £1,599 to £1,849 in a month.

But, as with paperwork, costs (and delays) are only the tip of the iceberg. Scottish fishing is being particularly badly hit, with customers pulling out in their droves. Other customers cannot be serviced. Elsewhere, firms are simply relocating, as with the BASF Teeside plant where hundreds of jobs are to be lost as production moves to France. And they are not on their own.

Shortages and waste also contribute to the picture in a scenario which could last for years. Says Shane Brennan, chief executive of the Cold Chain Federation, which represents chilled transport and storage companies, there is a "growing problem and sense of unease" among its members.

Anyone seriously studying the situation will share that unease. This is only just starting and even now we cannot predict where this emerging crisis will take us.

Also published on Turbulent Times.

Richard North 09/01/2021 link

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