Coronavirus: about time

Friday 7 August 2020  

It is about bloody time that someone "in authority" said this and, at long last, it is being said.

"The NHS will be inflicting pain, misery and risk of death on tens of thousands of patients if it again shuts down normal care when a second wave of Covid-19 hits". So say doctors' and surgeons' leaders. They add: Hospitals should not leave patients "stranded" by again suspending a wide range of diagnostic and treatment services.

"We cannot have a situation in which patients are unable to access diagnostic tests, clinic appointments and treatment which they urgently need and are simply left stranded", says Dr Chaand Nagpaul, chair of council at the British Medical Association (BMA).

He adds: "If someone needs care – for example for cancer, heart trouble, a breathing condition or a neurological problem – they must get it when they need it".

At last, then, serious people are urging "NHS bosses" not to use the same sweeping closures of services that were introduced in March to help hospitals cope with the huge influx of patients seriously ill with Covid.

"The NHS must never again be a Covid-only service. There is a duty to the thousands of patients waiting in need and in pain to make sure they can be treated", says Prof Neil Mortensen, president of the Royal College of Surgeons of England.

Given the scale of the problem, it is too late to say that this should never have happened first time round, but better late than never. As it stands, one million fewer patients underwent planned surgery in England in April, May and June.

Some 30,000 to 40,000 could not start cancer treatment as hospitals discharged thousands of patients and suspended many of their usual services to concentrate on treating those with Covid-19.

Unavailability of care, in tandem with patients’ reluctance to go into hospital, have been linked to the fact that in England 12,000 more people than usual have died of illness not linked to Covid in recent months, such as heart attacks.

One cancer expert, the Guardian says, has estimated that anywhere between 7,000 and 35,000 patients could die over the next year as a direct result of missing out on NHS care in recent months.

"The NHS had to stop almost all planned surgery at the beginning of the Covid crisis, and we just cannot let that happen again. Things will need to be done differently in the face of any further spike", Mortensen thus tells the newspaper.

Nagpaul adds: "While not publicised in the daily briefings, these [12,000] excess deaths are just as much a tragedy and loss to loved ones as those occurring from the virus".

If we dwell on that figure, and reflect on the recent events in Beirut, where the dead are numbered in their hundreds, there is real anger in the streets and those suspected of being responsible have been locked up.

And here we have twelve thousand dead – twelve thousand unnecessary deaths because bloated, over-paid and basically incompetent NHS planners and civil servants did not do their jobs properly, while the politicians in charge did not have the wits to intervene.

Only now are a few beginning to talk sense, calling for the sort of plans that should have been in place right at the beginning. Mortensen suggests that hospitals, should set up more "Covid-lite" sites to enable surgeons to resume common operations such as hip and knee replacements and cataract removals.

Nagpaul says more use should be made of the NHS's £400 million-a-month deal with private hospitals. The NHS should also look at using the seven Nightingale hospitals it created early in the pandemic as extra capacity for non-Covid care.

The NHS, we are told, is trying to arrange care for the large number of patients who missed out on care in recent months, many of whom are facing a long delay before they can get seen.

But, says the Guardian it could see its treatment waiting list soar if there is a repeat of the shutdown that NHS England chief executive Sir Simon Stevens (pictured) ordered in March.

But there is no could about it. Patients, already stuck on over-long waiting lists, have had their treatment peremptorily delayed, with no new dates and not the slightest indication when they might expect treatment. There is a total communications vacuum to the extent that the NHS might as well not exist. In functional terms, for many patients, it already has ceased to exist.

You don't have to be a rocket scientist to know this. All you have to be is a patient who has been well and truly abandoned by the system, while shitface ponces about on TV pumping iron and telling us to lose weight, giving £355 million to companies in Northern Ireland to help them complete their Brexit paperwork that he said would never have to be done.

Thus we have Nagpaul saying: "Aside from the individual distress, pain and potentially life-threatening impact that delaying care would have on individuals, there's a risk that increasing the backlog further would have a grave consequence for the NHS in the future".

"The knock-on of not addressing this now and delaying further care during a potential second wave could mean that we are constantly trying to catch up with the missed care", he says.

No shit, Sherlock! No f**king shit!

Needless to say, we have the apologists and the bureaucrats sticking their oars in. The NHS Confederation, which represents hospitals, has graciously acknowledged what it calls the service's "unprecedented pausing of normal care" involved "a terrible cost" for patients needing non-Covid care.

What a great pity they didn't think about that when they were setting up their contingency plans, when they allowed their obsession with flu to distort planning priorities.

Niall Dickson, the NHS Confederation chief executive, gobbles away in newspeak, saying: "The NHS can flex and will be there for patients again if there is a second wave. The challenge this time will be to run both Covid and non-Covid services in parallel as far as is possible".

The "challenge", he calls it. What does he call dying because the NHS has totally failed to perform?

We are told that hospitals "are working hard to clear the backlog that built up", but we also hear that there are wards empty and specialists unable to do their work because operating theatres and other facilities have been turned over to Covid.

And all Stevens can do is tell hospitals to get back to providing 80 percent of planned operations by September and 90 percent by October, in order – he says - to reduce the backlog as far as possible before a second wave hits.

Apart from the fact that this is easier said than done, does this facile little man not even realise that, pre-Covid, the NHS was not meeting its targets? Working at 80 percent, or even 90, isn't going to see the backlog reduce. It is going to increase – the numbers tempered only by those additional patients who die for want of treatment.

But then, we're only plebs, and what do plebs matter? As long as Sir Simon Bloody Stevens can keep trotting out his tractor production statistics, he will stay in post long enough to get a peerage from a grateful prime minister. He can then retire with a generous pension, and a few directorships in big pharma on the side.

Ours is not to question why. Ours is but to do and die, as quickly and silently as possible, doffing our caps politely as we expire.

Also published on Turbulent Times.

Richard North 07/08/2020 link

Politics: the essence of government

Thursday 6 August 2020  

It is interesting to see the numbers of articles in diverse newspapers attesting to the uselessness of the government's Covid-19 test and trace system, matched by those recounting how local authorities are taking up their own schemes to make up for the shortfalls.

But equally interesting is the government response, fronting Dido Harding to quote tractor production figures, asserting that the scheme is working well. Criticism is water off a duck's back. It has no impact whatsoever. This government does exactly what it pleases.

However, the refusal to countenance greater local authority responsibility in a systematic way seems to be more profound than just a wish to bolster private sector contractors and the next generation of quango queens. It suggests a wholesale antipathy towards local government, as a core value of the Johnson administration.

That much also is evident in the government's latest plan to butcher the local authority planning system, mistakenly paraded by The Times as a Johnsonian effort to "slash red tape".

The idea of deregulation is one that this administration seems to favour, although to treat it as an unalloyed good is a mistake. Most regulations were originally created for a purpose and to remove them without care can give rise to the very problems the regulations were intended to address.

I am absolutely sure that the very last thing on the minds of the tragic city of Beirut at the moment is the relaxation of health and safety law, especially that relating to the storage of explosive material. One might even suppose that there could be a general enthusiasm for more such law, more tightly enforced.

If this is something of an extreme example, it has to be said that, while such a major "accident" as has afflicted Beirut is rare, they do happen from time to time in poorly-regulated communities.

Yet the last time this country suffered a major industrial explosion which caused fatalities in the adjoining community was in 1974 at Flixborough in North Lincolnshire. That we have a raft of legislation specifically aimed at preventing such disasters, has doubtless contributed to our relative safety, one of which is based on EU Directive 96/82/EC of 4 July 2012, the so-called Seveso III Directive, taking its name from the Seveso disaster, which occurred in 1976 in Italy.

This has been transposed into the Control Of Major Accident Hazards Regulations 2015 (COMAH), currently enforced by the HSE, except – it has to be said - for the land-use planning requirements, which are implemented by local authorities.

These planning laws keep hazardous processes well-separated from residential and other vulnerable areas and, one presumes, would have prevented the storage of large quantities of explosive material in a situation similar to that which caused such terrible carnage in Beirut.

To that extent, we as a society can consider ourselves fortunate that we are protected by "red tape", even if it is of EU origin. Doubtless, if the Seveso suite of directives had not been promulgated, the UK government would have produced its own legislation.

By the same token, the obsession with the removal of "red tape" for the sake of it really isn't a good thing. For sure, you can expect a newspaper such as The Guardian to rail against the reduction in controls, which it does in this case, headlining its report: "England's planning reforms will create 'generation of slums'".

In its view, the "biggest shake-up of planning for decades" will dilute democratic oversight, choke off affordable housing and lead to the creation of slum dwellings. The move has already prompted "stinging criticism" from housing charities, planning officers and architects who have warned of a new generation of fast and substandard housing.

The Town and Country Planning Association (TCPA) has condemned the proposals as disruptive and rushed, saying that 90 percent of planning applications are currently approved. And, as there are already up to one million unbuilt permissions, more relaxed law isn't suddenly going to trigger a massive upsurge in housebuilding.

Bizarrely, for a government which is so keen on reducing red tape, this doesn't apply to the current obsession of Johnson's paramour – climate change. All houses built will have to be "carbon-neutral" by 2050, which means massively increasing building costs and rendering most of them uninhabitable as fresh air ventilation is banished.

For the moment, the proposals are at White Paper stage, which theoretically means that they are open to consultation. But given this government – and British governments generally – "consultation" tends to mean announcing what you are going to do, and then doing it regardless.

Given also the weakness of our current parliament and the inadequacies of most MPs – to say nothing of Johnson's inbuilt majority – we can expect no more than token discussion before the scheme is railroaded through to become the law of the land.

If ever there was a role for the Harrogate Agenda, this is it. Such profound changes should not be the plaything of a narrow group of ideologues but should have the direct approval of the majority of people affected by them, by way of a referendum. There should always be the option of calling a referendum for contentious laws, breaking the grip of the elective dictatorship that this country has become.

However, to have an effective planning system does require an effective (and democratic) local government, and even without these proposals, there are signs that this government is working towards the almost total abolition of local democracy.

This, in an almost Orwellian fashion, is being perpetrated under the guise of "devolution", where two-tier local authorities such as those in North Yorkshire are being amalgamated into the County Council to form one mega-authority of over 600,000 people.

There are in this world over sixty sovereign states with populations of less than 600,000, including Luxembourg, one of the founding members of the EEC, and a full member of the EU in its own right. Anybody who wants to assert that an authority with 600,000 residents is a local authority isn't right in the head.

We saw this with the recent partial Covid-19 "lockdown" in Bradford where, with no notice at all, we were instructed by the incumbent in Downing Street that we could no longer have visitors. By "Bradford", of course, he meant the Metropolitan District of Bradford – an abortion of an administrative area which encompasses a population of near half a million.

The thing is that, although I am forced to pay my council tax to this council, I don't live in Bradford, any more than do the people of Queensbury, Keighley, Bingley and Shipley. I live in an urban village called Wibsey to the south of the city, which actually predates Bradford as an independent settlement. The instruction was ignored.

To that extent, the foundation of democratic consent, and the respect for the law, rests with strong, healthy local government. Authority should not be seen as a remote, detached entity which hands down instructions and periodically demands large chunks of money. Destroy local government and you set down the path of destroying the very essence of government.

As with so many things, this government doesn't seem to have the first idea of what it is doing. In its own way, though, it could prove to be more destructive than the 2,700 tons of Ammonium Nitrate in Beirut Port. With its incompetence on Covid-19, it's already killed far more people.

Also published on Turbulent Times.

Richard North 06/08/2020 link

Brexit: keep trucking on

Wednesday 5 August 2020  

Nothing is final until it's final – especially with this government. But it does look as if the government is at last recognising what is about to happen to us once the transition period ends on 31 December, and is dealing with it in detail.

What this amounts to, in the first instance, is a reactivation of Operation Brock, which requires legislative amendments for enforcing traffic management plans "for outbound heavy commercial vehicles in Kent after the EU transition period". To that effect, the government has issued an open consultation.

The premise on which the consultation is based is fairly blunt. "After the EU transition period ends", the introduction tells us, "the EU will impose new controls on goods arriving from Great Britain potentially causing disruption to heavy commercial vehicles (HCV) traffic moving through the Port of Dover, Eurotunnel and the Short Straits Channel crossing".

Strictly speaking, of course, the EU will not impose "new" controls. Rather, as I pointed out, some time ago, the UK moves out of the regulatory framework (what Barnier calls the "ecosystem"), whence the controls which apply to all third countries.

One would not expect this government to understand the nuances of this position, and especially that it is largely self-imposed. But the die is cast. Operation Brock will live again.

Predictably, this has been picked up by segments of the media, although not so many. Up front is the Financial Times, which talks of trucks being stacked on the motorway in Kent if new checks cause tailbacks from 1 January.

Here, the paper rather seems to be reflecting the government's own words. It says that disruption at the cross-Channel ports at the end of the transition period "is not inevitable". Instead, it merely regards this as "a possibility for which a responsible government needs to prepare".

The Independent, however, takes a more creative view, with the headline, "Fears of dead chicks in lorries and 10 months of ports chaos detailed in new government document".

This picks up a "warning" in the consultation document that the emergency traffic measures are to last until the "end of October 2021" and then fantasises about day-old chicks dying by their thousands as "they cannot be fed in their vehicle, and delays risk dehydration and mortality".

In this, I rather feel the article authors have not read the consultation document. The whole purpose of the procedures set out in the document is to prevent vehicles even setting off for journeys to the ports unless the correct paperwork is in place, thus ensuring speedy clearance.

Specifically, in respect of the Port of Dover and Eurotunnel, the government is introducing the legislation to support the "Kent access permit" (KAP) system. This is tied into a Smart Freight (SF) Service, where HGV drivers will have to self-declare, via a web portal, if they have all the documentation they need to take goods across the "Short Straits".

Only if they are given a "green" or "amber" is a permit issued and, only with a "green" clearance can the goods be taken directly to the port without first going to an HMRC Office of Departure or a Third Party Authorised Consignor to complete customs processes.

All hauliers intending to use the ports have to use designated roads, and drivers who travel without permits, who fail to follow instructions or use non-designated roads, can be fined £300 for each offence.

For all that, we get the Independent's spectre of cute, fluffy chicks exported to the EU being left to die "unless they can be rushed through the chaos expected at UK ports next year", a prospect described as "horrifying” by Layla Moran, "a Liberal Democrat leadership candidate".

Why she should be given a cameo part in this drama isn't really (or at all) explained, but the most likely outcome is that shippers will not be allowed to move live animals or birds unless the documentation and necessary certification is already in place. These are the vehicles which will be given the "green" clearances and be able to make uninterrupted journeys to the ports.

If there are delays for these goods, it will be at the French end, where the Border Control Posts have insufficient capacity to handle the throughput. However, I suspect shippers will be testing out the system with a few trial loads before they commit themselves to a normal service.

Thus, it is the "amber" traffic which will have the delays on this side of the Channel, and there is no means of knowing the volume which may be caught. And that is the reason for Operation Brock, plus the add-ons.

Nevertheless, there also seem to be some reservations about traffic coming the other way. Operators delivering medicines after the end of the transition period are being advised by government to avoid the Channel ports "as a matter of priority", while medicine suppliers are being instructed to begin stockpiling again, by building up six weeks' worth of drugs.

These precautions are unrelated to Operation Brock as that affects outgoing traffic, and this is related to incoming goods. There is not expected to be any blockage of roads heading out of the ports, so we can only be dealing with customs clearances by the UK authorities or marketing authorisation issues.

The latter is an area of uncertainty and a number of drugs manufactured in EU Member States have as their market authorisation holders UK-registered firms. These authorisations will lapse on 31 December and, unless they have been transferred to EU domiciled entities, they can no longer be manufactured.

If this leads to a shortage of drugs in the UK (as well as elsewhere in Europe), it would not seem to be primarily be a distribution issue, so one wonders what the government isn't telling us.

It could be that the overall productivity of the transport fleet drops, that UK drivers may no longer be licensed to operate in EU Member States territories, and there may also be a shortage of ECMT (international road haulage) permits. But none of these problems, or even authorisation issues, relate specifically to the Channel ports.

Perhaps the oddest thing about all this, though, is the reaction of Chris Yarsley, policy manager at Logistics UK, formerly the Freight Transport Association. He expressed "disappointment" to see that the government "is expecting significant friction at the border with the EU", saying that the logistics industry had been given previous reassurances that friction would be minimised.

Apart from the fact that "minimised" is a rather ambiguous term that does not mean "removed" or "eliminated", there is something rather naïve about this response. I recall speaking to the FTA in the early days, and even then, they didn't seem to be of this world. Things don't seem to have improved.

Yarsley wants government's assistance "to ensure logistics vehicles can continue to move smoothly into and out of the EU". He says that "the current proposals leave too many questions unanswered and very little time available in which to identify and implement solutions to keep the country trading".

As regards logistics vehicles continuing to move "smoothly into and out of the EU", that ship has already sailed, so to speak. We kissed goodbye to that as soon as Mrs May decided we weren't going to follow down the Efta/EEA route. Border friction is going to be a fact of life, for the foreseeable future.

That said, the government is quite evidently going out of its way to ensure that congestion on the roads leading to Dover Port and Eurotunnel is managed, which is only what one would expect of it. But what happens when goods get to the other side of the Channel is, at the moment, unknown in detail. We are very soon going to find out.

Also published on Turbulent Times.

Richard North 05/08/2020 link

Brexit: chemical uncertainties

Tuesday 4 August 2020  

It was in her Mansion House speech on 2 March 2018 that Mrs May spoke on our future economic partnership with the European Union.

In that speech she told us that we will want to explore with the EU, the terms on which the UK could remain part of EU agencies, one of which was the European Chemicals Agency (ECHA), the body which implements REACH and other EU chemicals legislation.

For a prime minister to be that ill-informed was more than a little concerning, but ill-informed she was. As with most of the EU agencies (but not all), there is no provision for third countries to be part of ECHA.

As made absolutely clear in Regulation (EC) No 1907/2006, establishing the agency, the agency's mission was to service Member States, and only they can be full members. Once the UK left the EU, our membership lapsed.

There is a provision for Efta/EEA members to participate in the work of ECHA and, by virtue of EEA Joint Committee Decision No 25/2008, they can also participate in the Management Board, but they have no right to vote.

To achieve that status, the Efta/EEA states are required to adopt all the REACH legislation into their domestic law and thereby, when the Commission took authorisation decisions, the Efta States would "simultaneously and within 30 days of the Community Decision, take corresponding decisions", thus allowing the marketing of the chemicals authorised.

The only way a third country could get any kind of special treatment would be to implement REACH legislation into its own domestic law and then to build-in a recognition system into a free trade agreement. This is the path adopted by South Korea with its Korean REACH.

Even though the chemical industry seems to have deluded itself that there was an opportunity for continued collaboration, it should have known that the possibilities were extremely limited, and that Mrs May was talking nonsense.

Furthermore, whatever chances there might have been under the May administration to make provisions for the UK chemical industry within the EU, these evaporated once Johnson became prime minister.

Even now, though, the government is very vague on the post-transition and, so far, there does not seem to have been any formal notification of a new system.

Although existing REACH authorisations will continue to be recognised, UK companies will no longer be able to apply for authorisations, and existing authorisations will have to be transferred.

The complexities and uncertainties, however, have not stopped the Financial Times running a piece headed: "UK chemical industry warns of £1bn cost to duplicate EU regime".

This tells us that the safety registrations of the chemicals currently used in the UK - currently held in the REACH registration database run by the European Chemicals Agency in Helsinki - will need to be re-registered with a new UK equivalent.

There is a possibility though that the FT is jumping the gun. Defra, the responsible Ministry, has certainly admitted that it plans to have a replacement system ready, although it has produced no detailed (or any) information, other than to say that this will be ready by the end of the year.

Nevertheless, the FT is speculating that registering a single chemical in the new UK Reach database could cost up to £300,000 if companies are required to buy "letters of access" to use the vast banks of test data held by ECHA - information that is expensive to produce and often owned by third parties. Even then, additional testing may be required.

Steve Elliott, chief executive of the Chemical Industries Association, asserts that unless a data-sharing deal is done with Brussels the new system would add more than £1bn in costs to companies, just to duplicate existing registrations.

To make matters more complex, chemical business owners have still not seen the computer software that the Health and Safety Executive will use to collect the new UK registrations. There is concern that there could be considerable problems in getting hold of the registration data, which is held in commercial agreements.

This, of course, will not be a problem if the UK continues with its current position of recognising EU authorisations after the end of the transition period. Thus, the real problem at the moment, as one of the FT sources concedes is that the situation is unclear "and we're getting closer and closer to the time when Brexit is going to happen".

At the moment, I can't see how the UK government could even set up a scheme in the time available. And, from the moment a new scheme does start, it would take time for new registrations to be made, and authorisations to be processed. Thus, there must surely be a UK transition period, when the EU system continues to be recognised.

Presumably, it is possible that some provision might be made for the chemical industry in any "future relationship" agreement, which may explain why the government has been reticent to supply any details as to its intentions after the end of transition.

All we have to go on, for the moment, is a letter to MPs in May, from Rebecca Pow, the minister at the Department for Environment, Food and Rural Affairs overseeing the policy. She admits there will be "significant cost and burden to industry" in complying with UK Reach, but argues that the "benefits of having control of our own laws outweigh the costs".

That, says the FT, is not a view shared by Dani Loughran, managing director of Aston Chemicals in Aylesbury, a medium-sized business that imports and distributes chemicals used by some of the world's leading cosmetics brands.

Aston sells about a thousand different products, many of which the FT says will require a new UK registration. Thus, it asserts, the company and its suppliers may have to commission fresh testing to duplicate the Echa data.

Even without new testing, the company says, the basic cost of registering each chemical will be about £5,000, with the additional cost of "letters of access" varying from £33,000 for an emollient used in a face cream, for example, to £150,000 for a shea butter used as a base for sunscreen. In one case a letter of access cost nearly £300,000.

"Our EU competitors are licking their lips, and that is deeply frustrating", Ms Loughran says of the mounting costs. "We've spent 30 years growing from nothing, now all these barriers are being forced upon us". She adds: "It is enormously wasteful and uncompetitive for UK companies like us to have to spend time, money and resources to repeat all of these registrations for no additional benefit to anyone".

However, there are doubts that "UK Reach" would have the bureaucratic bandwidth to manage the new processes. ECHA employs 600 people with an annual budget of €110 million, compared with the £13 million a year budgeted for the UK version, including up to 50 staff.

Crucial to shrinking the new registration costs for UK companies — by up to 80 per cent according to Chemical Business Association chief Peter Newport — will be whether British negotiators can broker a data-sharing agreement between ECHA and the UK authorities to remove the need for the letters of access.

"Basically the EU has a pantry in Helsinki stuffed full of goodies, and we now want to populate the UK's new pantry with that data", Newport said, although he fears that the cost of UK registration risked making some chemicals commercially non-viable in the UK market, with knock-on effects for supply chains and UK jobs.

All this, though, does seem to be speculation. The point, therefore, is that an industry of this importance should not be in this position. Far from taking back control, the UK government seem to be losing control, and it is about time it got a grip.

Also published on Turbulent Times.

Richard North 04/08/2020 link

Brexit: freeports revisited

Monday 3 August 2020  

In a ministerial foreword to the recently completed consultation on freeports, the authors – led by Rishi Sunak - waxed almost lyrical.

In the Ancient World, they wrote, Greek and Roman ships – piled high with traders' wines and olive oils – found safe harbour in the Free Port of Delos, a small Greek island in the waters of the Aegean. Offering respite from import taxes in the hope of attracting the patronage of merchants, the Delosian model of a "Free Port" has rarely been out of use since.

They then go on to assert that this is because freeports still offer that same story of trade and prosperity across the modern world. From the UAE to the USA, China to California, global freeports support jobs, trade and investment. They serve, we are told, as humming hubs of high-quality manufacturing, titans of trans-shipment and warehouses for wealth-creating goods and services.

And, for that reason the government wants to recreate the best aspects of international freeports in a "brand-new, best-in-class, bespoke model", which they have out in their 48-page consultation document.

Interestingly, they set out four main benefits from using the freeport system. The first is "duty suspension", where no tariffs, import VAT or excise are to be paid on goods brought into a freeport from overseas until they leave the freeport and enter the UK's domestic market.

The next is what is called "duty inversion". If the duty on a finished product is lower than that on the component parts, a company could benefit by importing components duty free, manufacturing the final product in the freeport, and then paying the duty at the rate of the finished product when it enters the UK's domestic market.

The third possible advantage is duty exemption for re-exports. A company could import components duty-free, manufacture the final product in the freeport, and then pay no tariffs on the components when the final product is re-exported.

Finally, there are simplified customs procedures. In this context, we are told that the government intends to introduce streamlined procedures to enable businesses to access freeports.

However, by various mechanisms, some of which I discuss in this post, most of these advantages can be gained through administrative means, without taking on the disadvantages of the freeport system, arising from having to isolate the facilities and introduce enhanced perimeter security.

Specifically, a system of duty suspension already exists outside the framework of freeports, known as the Excise Movement and Control System (ECMS). Although applied to alcohol, tobacco and energy products, the monitoring and administration system could easily be applied to other sectors. Without having to go to the trouble of creating freeports.

Similarly, if the goods are brought into the country, but are to be re-exported, there is a temporary admission procedure which could be adopted, again without having to set up a freeport.

As for the simplification of customs procedures, this needs to be applied to all ports and, as this example shows, could yield considerable dividends. To focus solely on freeports would disadvantage the rest of the industry.

That then leaves the so-called "duty inversion", which is the subject of a front-page report in the Financial Times today, under the headline: "Freeport advantages for business are 'almost non-existent'". The sub-heading tells us: "Study suggests only 1% of UK imports by value could benefit from arbitrage opportunity".

Getting into the text, which adds meat to the headlines, we see the claim that government plans to build a network of ten freeports after the end of the Brexit transition period "are unlikely to have any material impact on the UK economy".

This relies on detailed data analysis by Sussex university's UK Trade Policy Observatory, which shows that duty savings are so small as to be "almost non-existent", thus providing "minimal" opportunity for businesses to take advantage of fundamental aspects of freeports.

The point raised by the analysis is that, in the United States, there are several hundred freeports, where they are known as foreign trade zones. However, they are so popular there because opportunities for tariff inversion, particularly in the automotive and petrochemicals sector, make them attractive. But, says UKTPO, that opportunity will not exist in the UK. Only around one percent of UK imports by value could benefit from the arbitrage opportunity.

"The fundamental thing is that the trade benefits of a freeport are almost non-existent", says Peter Holmes, a UKTPO fellow who co-authored the analysis. "The only benefit might be in some sort of enterprise or urban regeneration zone — but that has nothing to do with the 'port' aspect".

Delving deeper, UKTPO found that out of the 20 most imported inputs in the UK by value, accounting for around 40 percent of the UK's imports of intermediate goods, 12 were duty-free and none had a tariff of more than 4 percent.

They found that a tiny handful of sectors, including dog and cat food inputs, could offer a significant "wedge" between input and finished products, but in total these accounted for only 0.6 percent of UK imports of intermediates.

Looking at the potential tariff gap between inputs and finished products within the same sectors, the group found dairy products, starches and starch products, and animal feeds provided the greatest potential for duty savings in these sectors, but even these accounted for only 1.1 percent of total UK imports.

It would appear that the sectoral analyses to identify potential duty savings "all tell the same story", which means that introducing freeports into the UK is "unlikely to generate any significant benefits to businesses in terms of duty savings".

The FT report goes on to tell us that the lack of obvious trade benefits from freeports has led to recent warnings from industry and anti-fraud campaigners. They are concerned that the zones will encourage fraud or, if they just offered laxer regulation or planning laws, will simply displace business.

On this, the paper cites Adam Marshall, head of the British Chambers of Commerce. He sits on the government's freeport advisory panel, and has said that business was nervous that freeports would displace jobs, not create them.

Robert Palmer, the director of campaign group Tax Justice UK, has been more scathing, predicting the chancellor's freeport plans would amount to "a few glorified industrial parks on the edge of Tory target seats in the North and midlands".

Looking at the proposal in the round, that would be exacerbated by the displacement of resource, which could be better spent on upgrading the ports network as a whole – introducing systems such as the "single window" – and improving infrastructure, the limitations of which are often the cause of restricted growth.

It really is quite remarkable, therefore, that so much energy is going into a proposal which has so little merit and which is likely to yield such little benefit. But then, this does rather typify this government which, as Pete points out, is drifting us into failed state territory.

I suppose we can expect very little else from this government.

Also published on Turbulent Times.

Richard North 03/08/2020 link

Brexit: the Lisbon deception

Sunday 2 August 2020  

From last week, when I had just finished 2006, a week's of intensive work has brought me to the end of 2009, adding three years to the narrative and bringing the first of my new chapters to an end.

The last three years are a fascinating period, which saw the structured attempt to transform the rejected European Constitution into a "Reform Treaty", which then became the Lisbon Treaty, following which there was a near two-year battle to complete the ratification process.

The decision to transform the constitution into a treaty was heavily influenced by Angela Merkel, the sole reason being to circumvent the need for the referendums which had brought down the original constitution.

And, although the pretence was maintained, officially, there were plenty who were prepared to give the game away. For instance, European Parliament President, Hans-Gert Pöttering – who had been working with Merkel's triumvirate on the new treaty – in June 2007 told the Council of Europe in Strasbourg that while a proposed anthem and flag had been dropped, 'the substance of the constitution has been retained'.

He was later to claim in a letter to Giscard d'Estaing that the treaty had been designed to "keep the advances" of the old constitution "that we would not have dared present directly".

In July, before the new treaty draft had even been published, Jean-Claude Juncker, then Luxembourg's premier, spoke to the Belgian edition of Le Soir. He said he supported public debate on the treaty - except in Britain.

"'I am astonished at those who are afraid of the people: one can always explain that what is in the interest of Europe is in the interests of our countries", he said, adding: "Britain is different. Of course, there will be transfers of sovereignty. But would I be intelligent to draw the attention of public opinion to this fact?"

But it was former Italian prime minister, Giuliano Amato who offered the most entertaining exposé. Of the new treaty, he said, "EU leaders had decided that the document should be 'unreadable'".

On that basis, the UK prime minister could go to the Commons and say "Look, you see, it's absolutely unreadable, it's the typical Brussels treaty, nothing new, no need for a referendum'. On the other hand, he said, "Should you succeed in understanding it there might be some reason for a referendum, because it would mean that there is something new".

By some, this was put down as a "playful observation", but its truth was evident when the full 287-page version of the treaty was finally published on 3 December 2007, by which time it had acquired its new title of the Treaty of Lisbon.

The new treaty was indeed "unreadable", comprising thousands of amendments rather than a finished version of a treaty. But once the current treaties had been amended by this text, there was no doubt that the end product was very little different from the original constitution.

So said the House of Commons European scrutiny committee in October 2007, which described it as "substantially equivalent". But the most powerful figure to attest as to the similarity was no-one other than Valéry Giscard d'Estaing, architect of the original constitution.

The difference, he said, was one of approach, rather than content. "In terms of content, the proposed institutional reforms – the only ones which mattered to the drafting Convention – are all to be found in the Treaty of Lisbon. They have merely been ordered differently and split up between previous treaties".

The cynical nature of this deception was carried through by all the EU Member State leaders, who resolutely refused to allow referendums. The only exception were the Irish, whose constitution required then to hold a poll.

But, on 12 June 2008, the Irish people rejected the treaty in their referendum by a margin of 53.4 to 46.6 percent. The turnout was 53.1 percent - higher than the two Nice treaty referendums. All but ten constituencies voted "No", with a total of 862,415 votes. Only 752,451 voted "Yes".

The result should not have come as a surprise. The more committed "No" voters had dominated the debate, while the "Yes" campaign had difficulty mobilising the potentially large but lukewarm segment of the pro-EU electorate.

The week before the vote, an Irish Times poll has given the "No" campaigners a lead of 35-30 percent. Yet one thing thought to be in favour of the "Yes" campaign was that no one knew exactly what was in the treaty.

Ireland's Commissioner Charlie McCreevy estimated that, at best, 250 of Ireland's 4.2 million citizens had read the complete text.. Not only did he admit that he had not read the treaty, making do with a summary, he said that 'no sane, sensible person' would read it either. To him, it was a "tidying up exercise". This was a claim that was to be repeated many times, by all manner of treaty apologists.

Barroso, said he believed the treaty was still 'alive', but was immediately contradicted by Luxembourg's prime minister, Jean-Claude Juncker – the longest serving leader in the EU - who said the result meant it could not enter into force in January 2009 as planned.

Irish prime minister, Brian Cowen, admitted the vote had been a 'potential setback' for Europe. He refused to answer questions about the treaty, and specifically whether he thought it was now dead. "We have to absorb what happened. There is no quick fix but the government will respect the wishes of the Irish people", he said.

Nevertheless, after the immediate, shock reactions, the default response did not take long to emerge. "The Irish will have to vote again", Sarkozy declared. There were ritual protests and "quiet fury", but that was the "European" way. Less than one percent of the EU's 490 million people would not be allowed to interfere with the dream.

Part of the ritual would be to demonstrate that the "Noes" did not understand what they had voted for, against the presumption that "Yes" voters had perfect knowledge. This was something we were to see again in the UK 2016 Referendum.

The "ignorance" was duly established in early September via an opinion poll conducted for the Irish Government. A total of 42 percent of "No" voters obligingly cited a lack of knowledge or understanding of what they were voting on.

Some 33 percent thought European army conscription was part of the treaty, while 34 percent believed they would lose control over the country's abortion policy. An earlier European Commission poll indicated that almost three-quarters of people had mistakenly believed the treaty could be easily renegotiated.

With that established, on 3 October 2009, Irish voters obediently trotted through their polling stations to give the treaty a resounding 67 percent "Yes". Turnout was 58 percent. By then, Europe was embroiled in the global financial crisis and many saw this as a primary reason for the turnaround. Predictably, Barroso said it was a "great day for Europe".

The last two hold-outs were the Polish and the Czech presidents, who quickly fell into line and the Lisbon Treaty entered into force on 1 December 2009. The "colleagues" had got their treaty, but the biggest loser was David Cameron.

Having given a "cast-iron guarantee" that he would provide a referendum on the treaty, it had come into force before the election and he had been able to form a government. Cameron thus had to explain that the Lisbon Treaty was no longer a Treaty. It was being incorporated into the law of the European Union. "We cannot hold a referendum and magically the treaty disappears, any more than we could hold a referendum to stop the sun rising in the morning", he said.

By way of compensation, Cameron promised that a Conservative government would guarantee a referendum if there is any attempt to transfer further powers from Britain to the EU, and he pledged a renegotiation aimed at repatriating some powers. Neither was enough. It was to cost him a majority in the 2010 election.

But that is another story.

Also published on Turbulent Times.

Richard North 02/08/2020 link

Politics: beyond comment

Saturday 1 August 2020  

On seeing some of the names on the honours list, one wonders whether this government can sink any lower.

Unfortunately, the answer to that is probably yes, but it also brings into high profile the need completely to rethink the House of Lords. It is probably beyond reform and should, therefore, be abolished completely, to be replaced by something closer to a senate.

Any such upper house must be substantially smaller than at present. With near 830 members, the bloated size of this legislature is obscene. And something really must be done to prevent politicians abusing it the way they are doing. I'm not even sure an elected house is the answer. We might give sortition a chance – possibly with the lottery drawn from those who have a specified range of qualifications and/or experience.

However, there is absolutely no chance of this happening under the current administration which clearly has not the slightest concern for the opinion of the nation. Where the prime minister can promote cronies and seriously weird people such as Claire Fox, normal forms of restraint have clearly ceased to function.

For the most part, though, I suspect that the news will be treated with indifference. This is what we expect from that shabby lot in London – that's what they do. One can only imagine the contempt they must feel for ordinary mortals. But, increasingly, they are losing respect and support – even if hard-core loyalists will be unaffected.

When this comes at the same time as the unannounced partial lockdown in the North, signifying another level of mismanagement in the Covid-19 epidemic, I am entirely unconvinced that the government has a handle on this crisis, or that its central management of local outbreaks is contributing anything of value.

For the moment, though, the papers are content to retail lockdown stories, most of them uncritical – although there are some stories conveying the concerns of people caught up in the lockdowns. I wonder this time, though, whether compliance rates will be as high as previously, and whether we start seeing open disobedience.

It is certainly the case that I am not inclined to take advice or instruction from as tawdry a man as this prime minister, but then he never had much credibility as far as I was concerned. What is different is that any residual credibility attached to the office has also gone. This is a figure who attracts contempt, which increases by the day – if that is possible.

The problem is that there are only so many times one can say what amounts to the same thing, and the limited opinion polls would suggest that the prime minister still has a loyal, unwavering following. Sentiment can and does change, but people have to find out for themselves, and make up their own minds. To an extent, we're limited by the slowest ships in the convoy.

I'm disinclined, therefore, to flog a dead horse, offering further analysis of why this government should not be in office – not least, because we have nothing credible with which to replace it. The time will come – it always does – when there will be change. I can only hope that it is sooner rather than later.

In the way of things, though, no lasting political change seems to happen without a strong element of campaigning. I think we have to ask ourselves whether it is safe to sit passively and wait for change to happen or whether we should be more proactive in rooting out this decay in the body politic.

Richard North 01/08/2020 link

Brexit: balanced and fairer trade

Friday 31 July 2020  

The plot thickens, turning an arcane point of detail into what could turn out to be the game-changer … or wrecker for the entire "future relationship" deal.

As we left it yesterday, we had what tonycl thought could be a "quite unexceptionable" statement from Commissioner Phil Hogan about state aid provisions. This is the one where the EU wants the UK to set out in detail its state aid regime.

But, if that, from one perspective, is "unexceptional", the Downing Street mob disagree. And, yesterday, we had David Collins, professor of international law at City University, who comes into bat for them in today's Telegraph.

Collins's view is that the nature of our post-Brexit state aid regime is none of Brussels' business. It has never been clear, he writes, why the EU insists on tying the UK to its state aid regime as a condition for a conventional Free Trade Agreement (FTA).

His argument, on this, is that the EU should be satisfied by the existing international regime to control distortions resulting from government support for the private sector. The relevant international rules, he says, are the WTO's Agreement on Subsidies and Countervailing Measures (SCM).

The EU state aid rules, he says, are appropriate for governments which are members of the EU's Single Market and for which unfair state assistance could be harmful to competition within that market. But once the UK left the EU, it became a foreign country and therefore outside of the EU’s Single Market.

Therefore, he concludes that international rules should be able to deal with any trade-distorting subsidies which the UK may seek to use to the detriment of EU companies or indeed those from anywhere else. The UK is bound by the SCM as a member of the WTO and will remain so after 31 December 2020 irrespective of a whether an FTA with the EU is signed.

He asserts that, unlike the EU's stringent state aid regime, the WTO's SCM prohibits various forms of governmental support to private entities which affect international trade. Those subsidies which do not have adverse trade effects are allowed. If governmental assistance to a private company within the UK ends up creating a distortion in the UK's domestic market, that’s its own problem.

That leaves Collins to make the point that, provided that there are no external effects (i.e. trade effects), why should the EU care how the UK's internal market functions? This, he says, is why Dominic Cummings' plan for a light touch subsidies regime for the UK, governed by an independent regulator without full enforcement powers, shouldn't be resisted by the EU. It is really none of their business.

However, Collins does concede that there is a strong argument to be made that the SCM in its current form is deficient. In fact, he says, a Joint Statement from the Trade Ministers of Japan, the US, and the EU made in January 2020 outlined ways in which WTO rules on subsidies could be strengthened.

It suggested that the range of prohibited subsidies under the SCM needs to be expanded to include things like unlimited guarantees and certain direct forgiveness of debt. The proposal also indicated that certain types of subsidies have such harmful effects that they warrant a reversal of the burden of proof so that the subsidizing country must demonstrate that there are no serious negative trade effects, rather than the injured country showing that there are.

The EU, US and Japan also complained that the SCM does not provide sufficient incentives for WTO Members to notify their subsidies, which may explain why the notification record for subsidies under the WTO regime has been poor. Concern was also expressed that the way to calculate the extent of subsidization is muddled, making appropriate anti-subsidy duties difficult to calibrate.

Lastly, Collins says, the definition of "public body" under the SCM was also thought to be somewhat vague, especially in light of state-controlled economies like China, necessitating further clarification.

On this basis, he argues that, rather than attempt to impose its own domestic state aid rules on the UK after it has left, it makes more sense for the UK and the EU to agree on a subsidies chapter in their FTA which reflects these concerns.

Indeed, he says, the UK-EU FTA represents an excellent opportunity for the UK and the EU to improve upon the multilateral trading system. This is one of the reasons that countries enter into FTAs in the first place, rather than trade on WTO terms. The EU and Japan included some of the improved subsidies features in the relevant chapter of their economic partnership agreement (the JEPA) last year.

Importantly, though, Collins argues, the EU did not force its state aid rules on Japan and there is no role for the European Court of Justice in enforcing these commitments. The UK's Draft EU FTA contains a subsidy chapter with some provisions on enhanced notification, but unfortunately little else.

Subsidies are an area where the UK should be prepared to concede more, perhaps along the lines of the reforms suggested by the EU, the US and Japan.

Additional material could be included, perhaps even commitments to restrict distortive investment incentives. As the WTO is a trade body, there are no rules on investment incentives in the SCM, nor under any other facet of international law. Some might argue that a stronger international regime for investment incentives is overdue.

Thus, contrary to the Hogan line, instead of lamenting state aid as a divisive issue which could bring a UK-EU FTA crashing down, subsidies should be viewed as an opportunity for the UK and the EU to cooperate.

Collins thinks that an enhanced subsidies chapter in the UK-EU FTA could even help set the WTO agenda for resolving some of the identified weaknesses of the SCM. It is not unrealistic to suggest that subsidies are an aspect of trade policy where the UK and the EU can join forces to effect positive change, demonstrating both unity and initiative at the global level.

The above amounts to virtually the full text of the Telegraph piece – which is pretty dense - and it certainly does present a view different to that which we are getting from Hogan. However, if we can take that as a full representation of the argument, it appears that Collins has not given us an entirely full picture.

One of the crucial issues is the reference to the Japanese trade agreement, settled last year, where some improved subsidies features have been included. But what Collins doesn't say here is that between the EU and Japan, SCM is unfinished business.

He refers to the Joint Statement made in January 2020, but this does much more than simply outline ways in which WTO rules on subsidies could be strengthened. The statement on 14 January that the three parties issued is setting out new rules which they wish to see adopted. These go far beyond the EU-Japan partnership agreement and, of course, also include the US.

What is probably highly relevant to the UK issue is that the parties agreed that for particularly harmful types of subsidies, such as excessively large subsidies, the burden of proof should be reversed: the subsidising WTO member must demonstrate that there are no serious negative trade or capacity effects and that there is effective transparency about the subsidy in question.

There are other tweaks, but the use of the word "transparency" is all important. The EU wants its trading partners to implement transparent state aid schemes, which is why Dominic Cummings' plan for a light touch subsidies regime for the UK doesn't cut it. For it to be "transparent", there must be certainty as to application, which means there must be a predictable, rules-based scheme.

Last year, the European Parliament looked at SCM and issued its own report, concluding that the EU approach is "fair and balanced", more so than the existing WTO scheme. Clearly, Japan and the US agree.

The parties were to take this to the 12th WTO Ministerial Conference in June 2020 in Nur-Sultan, but this was postponed because of Covid-19. Not a great deal was expected of the conference, but it does mean that SCM has been left hanging, for the moment.

As with so many other things, though, the EU will not want to harm the progress it has already made, by entering into arrangements that could conflict with agreements already made, especially when they are work in progress. And, it seems, that is what Collins (and Cummings) wants it to do.

Maybe Hogan does have a point, but it does seem bizarre that, with only months to go before the whole EU-UK negotiation shuts down, we are arguing about such arcane details, which are still nowhere near being resolved. Usually, such things do not end well.

Also published on Turbulent Times.

Richard North 31/07/2020 link

Brexit: of polluted vehicles

Thursday 30 July 2020  

Still working on The Great Deception, I've finally reached 2009 and am working up a narrative on which part of my current chapter will be based.

Each year starts with a blank sheet of paper – virtual in this case, as all the writing is done on-screen. The first thing I do is assemble a timeline. and the way I choose to work is the hard way. Initially, I pick a single newspaper (or broadcaster) archive and raid it for stories, copying and pasting them in chronological order – starting as close to 1 January as I can get, and finishing with the last story posted in December.

Interestingly, it doesn't matter which periodical I choose. There are always huge gaps in the timeline – even with my own blog, which is also a useful source. Some aspects of a particular event might be covered quite well. Sometimes there is nothing on them until the matter becomes high profile, and then it is dropped as quickly as it is picked up.

To get round this, after I have raided one title, I repeat the process with another, and another, and another. In all, I might visit a dozen or more different titles, and most often from several countries. The Irish press is good on some issues, the English-language German press is good on others, and then there are the news agencies, the US and the foreign language press.

Once I have got a basic timeline, I can overlay it with all manner of official and semi-official papers. The European Council presidency conclusions are always a good staple. Hansard records are very useful, and especially where figures such as prime ministers make statements for the record after specific events – such as IGCs and European Councils.

Then there are the official documents, such as White Papers, the European Commission COM finals (communications), speeches and press releases. Up until the end of Gordon Brown's tenure, I also have political biographies, and there are also the books about the big events such as the financial crisis and the referendum.

Gradually, I accumulate all these sources, layered one on the other. If I let it, a file for three months might run to 50,000 words or more, a year running to over 200,000 words. But, as I am assembling the sources, I am trimming them down, and merging them. All the time, I am cross-checking and trying to iron out inconsistencies and obvious inaccuracies.

In this particular case, with 2009, my target is to trim the narrative down to about 4,000 words. It will fit in a chapter covering the four years from 2006-2009 inclusive, and my budget for the whole period is 14,000 words. I wish I had Booker's freedom – he wrote 17,000 words on one year, but there is nevertheless a certain merit in working to a restricted length. It imposes a certain discipline.

Anyhow, the point of all this is that, for any one event – much less a sequence of events – it is fair to say that no single source will give you the full picture. In fact, to get anything like a comprehensive view, even multiple media sources will not give you what you need. Invariably, resort will have to be made to official documents and other non-media sources.

This, then, takes us further than the aphorism attributed to Mark Twain: "If you don't read the newspaper you are uninformed, if you do read the newspaper you are misinformed". In fact, this was probably concocted from multiple sources, in particular Thomas Jefferson, who made two relevant observations.

Firstly, in a letter complaining about misinformation in newspapers, he wrote:
Nothing can now be believed which is seen in a newspaper. Truth itself becomes suspicious by being put into that polluted vehicle. The real extent of this state of misinformation is known only to those who are in situations to confront facts within their knowledge with the lies of the day.
… then passing on his views about not reading a newspaper:
I will add, that the man who never looks into a newspaper is better informed than he who reads them; inasmuch as he who knows nothing is nearer to truth than he whose mind is filled with falsehoods & errors. He who reads nothing will still learn the great facts, and the details are all false.
All this, of course, doesn't necessarily suggest that the synthesis of "polluted" material is going to be wholly accurate. All we can possibly say is that, melded with possibly more reliable sources, it is the closest approximation to truth that one can manage. Even then, that truth can change as time passes and more sources become available, such as confidential government archives.

And what brought this to mind was my reading one article (online) from the Guardian yesterday, based on an interview with EU trade commissioner Phil Hogan.

Generally speaking, I regard uncorroborated oral testimony as the least reliable source of evidence, and when it comes only in the form of a newspaper interview, it can only be accepted with a great deal of care, and all the normal provisos.

However, if this "polluted vessel" is anywhere near close to the truth, there is some interesting material there. Hogan asserts that British negotiators in the current "future relationship" talks have only started to engage with the most contentious issues "in the last week or two", and then only after pressure from business groups.

He says there has been "a change of attitude" by Downing Street in July, when the denizens realised time was running out but that the talks were "not as advanced as we would like". But, despite intensive negotiations this month, common ground between the sides is yet to be found with about 12 weeks left before parliamentary ratification will need to be sought.

Hogan points out that there are "five or six" major issues standing in the way of a deal. One of the most pressing, he claims, are the rules this government is prepared to apply to state aid.

Actually, I read something in the Financial Times recently, which seemed to say something not dissimilar. Thus, we're either getting a coordinated attempt to misinform, or there is a germ of truth in what we're being told.

So far, it is being said, No 10 has refused to fulfil its "promise" to publish details of its state aid regime, leaving the details wide open. Hogan says officials in Brussels are getting nervous that too much is being left to the last moment.

The Brits, apparently, are claiming that it is not necessary for the EU to have sight of the new regime, as domestic legislation is no longer relevant to Brussels. But the EU wants a clearly defined code, otherwise it could give strategic exemptions from its own state aid regime, allowing Member States to subsidise European companies competing with British businesses.

We have been waiting for the last three months for the UK to come to the table in terms of meaningful negotiations, Hogan says, "And I actually say it's only in the last week or two that we have noticed that people are starting to engage on the UK side".

Meanwhile, Whitehall has been busy seeking new trade deals for the UK. We are told that an agreement with Japan is set to be announced within weeks. But it also seems to be the case that it will be less ambitious than had been hoped, leaving out treatment for British food exports.

Hogan then goes on to point out some of the difficulties we will have, negotiating on our own, but if we need to take what he says with some care, the same must apply to the UK government spokesman.

From that source we get: "The UK has engaged constructively on all issues throughout the negotiations. Unfortunately the EU's unusual approach has meant we have only been able to progress at the speed of the most difficult issues. Both sides will need to work energetically if we are going to get an agreement in September".

On balance, I think I might have difficulty with that even if it came under a confessional oath, and my immortal soul was at stake. And, the worst of it is that, in the last chapter I will write in TGD, I will have to use some of this stuff. Needs must, I suppose, but it would be nice to have less polluted vehicles.

Also published on Turbulent Times.

Richard North 30/07/2020 link

Brexit: here be dragons

Wednesday 29 July 2020  

For all its spiffing plans to create a "best in class" border, it seems that our government hasn't even got round to sorting out the one for Northern Ireland yet.

This has been picked up by The Independent, which is reporting that, six months after we formally left the EU, and a mere five months before the transition period ends, Northern Ireland customs rules are still not settled.

Furthermore, Northern Ireland minister Robin Walker says that government cannot be expected to provide businesses with all information it needs 'from day one'.

Walker defends this situation saying that the specifics of how goods moving between Northern Ireland and Great Britain will be treated have still not been agreed with the EU. The implementation of the Northern Ireland protocol is subject to negotiation by a "joint committee" between the EU and UK.

However, it seems that the problem is at least in part self-inflicted. The UK is arguing that it should not have to apply some customs controls it agreed to as part of the Withdrawal Agreement. Effectively, therefore, HMG seems to be pulling a fast one, expecting a back-door fix to an international treaty.

Walker has been talking to a House of Lords select committee, largely – as they tend to do – making statements of the bleedin' obvious. "I absolutely recognise that business will always want as much detail as possible as early as possible", he told the noble Lords, "and that this is a process where we cannot necessarily provide all the detail that everyone would like on day one".

And I'm sure a lot of people felt comforted by his statement that, "We do have to ensure that the voice of business is heard and fed into the process", with the proviso that, "we also have to make sure we don't give any misleading information in terms of things that haven't been fully bottomed out and agreed".

Where he was being somewhat economical with the actualité, though, is in failing to disclose that such things were agreed – have been agreed. The reason for the delay is that the UK has resiled on its agreement and is looking for a better, or different deal.

The point apparently at issue is exit declarations for Northern Irish goods going into Great Britain, which seem to have been caught up in the fine print of the EU's Customs Code, which will continue to apply to the province. The UK government doesn't think the declarations should be required, because it applies to trade within the UK's internal market.

However, this is part of the "fantastic" deal that prime minister Johnson so cleverly agreed – the one he had said earlier that no British prime minister would ever accept. But now officials are looking in detail at the small-print, they are not liking what they see. One suspects that this is not the last quirk which will show up.

There are also clues that the UK seems to want to go much further than ironing out complications with red tape. Discussion about the Northern Ireland protocol are running in parallel with the "future relationship talks", from which an agreement is supposed to come, to take effect by the end of the year.

Not a lot has been said about this, but if the UK really is trying to fold a renegotiation of the Northern Ireland Protocol into the current talks, then we could be in even bigger trouble than already indicated.

One can see why HMG is so concerned though – even if an element of thought might have been appropriate before Johnson agreed the deal. The Lord Kerr, who was one of the panel questioning Walker, is suggesting the red tape which will accompany sending goods from the mainland to the province may deter some companies from trading there – the name "Tesco" was mentioned.

It is all very well asking Walker about such things, though, but we're not hearing from the other side – the EU. If it insists on sticking to the letter of the agreement, and the UK government fails to implement it, then it is technically in breach. That could make life even more difficult for traders, both within Northern Ireland and the mainland.

Even as it stands, there can hardly be anyone (and certainly no-one serious) arguing that the uncertainty is helping business. And that is before the realities of the current Brexit scenario take effect.

Those "realities" have now been explored by the London School of Economics Centre for Economic Performance, which, in good academic style, has laboured long and hard to come up with the same answer that most everybody has been aware of for months.

Perhaps, without being too cynical, it is adding a few twists to our stock of knowledge, asserting that a Brexit hit is looming for sectors that have emerged relatively unscathed from the Covid-19 pandemic.

Certainly, there is nothing at all new about its more general finding that Brexit, alongside Covid-19, will deliver a "double shock" to the economy - whether Johnson secures a deal with the EU or not. I think we had already guessed that.

This time, though, the Centre for Economic Performance has put some figures on its guesses, using information from a monthly survey of Confederation of British Industry members.

I've replicated one of the charts above but, to be blunt, I don't entirely understand the figures (but see the James McLeish comment below). What they are supposedly showing are the changes in business volume, for different sectors, in the first column due to Covid (between April and June) and in the second the predicted Brexit changes.

In the April to June period, we've presumably seen some economic recovery, so don't see how retail trade should have declined 41.5 percent, and I don't see how any business can decline 123.7 percent, much less the rubber and plastics sector. One would have thought that a 100 percent decline was the maximum, bringing trade to zero.

What does come over is that, relative to Covid-19, the Brexit effect is modest, although I again have problems with this. I don't see how the Covid and Brexit effects can be so easily separated.

Not least, there must be some interplay – for instance, those sectors which have already been badly damaged and have shown limited recovery may be relatively untouched by Brexit (TransEnd) because the damage has already been sustained. Some of those businesses which recover best may be hardest hurt.

There also seems to me to be an element of superficiality here. Apportioning a 0.2 percent Brexit effect to the hotel and restaurant sector is probably an under-estimate. Traditionally, if the economy goes into recession, hospitality is hit first and hardest, as customers employed in other sectors suffer from reduced disposable incomes.

When all is said and done, though, these are just guesses. And when we're dealing with an unprecedented situation, made doubly complicated by the Covid-19 pandemic, figures produced by any modelling are more likely to be WAG than ROM, even if the LSE thinks its modelling is "state of the art".

However, the LSE report does urge that the government put in place an industrial strategy that reflects the cold reality of "being in a post-Brexit UK which is placed in a post-Covid world economy". This is one in which global trade shrinks – but it is also one where the domestic economy also shrinks.

That sort of change must be impossible to model, as the overall impact will reflect the outcome of millions of personal and thousands of corporate spending decisions, the nature of which at this stage are impossible to assess accurately.

On the old-style maps, before the world was properly charted, the edges of the known world were often marked with the legend "here be dragons". In economic terms, we are dealing with uncharted waters. And the dragons may be real.

Also published on Turbulent Times.

Richard North 29/07/2020 link

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