Brexit: the fantasy of the "no deal"

Wednesday 18 October 2017  

It is rather appropriate that David Davis, the serial fantasist, should yesterday by standing up in the House of Commons to defend another fantasy, the so-called "no deal" scenario.

The occasion was a statement to update the House on the fifth round of Brexit negotiations, when he also reviewed the progress of the five negotiation rounds to date. But it was Keir Starmer, Davis's shadow, who first raised the issue, declaring that we needed "to drop the nonsense about no deal". 

Starmer then added: "Only fantasists and fanatics talk up no deal. No deal is not good for the UK, is not good for the EU and is not what the Secretary of State wants, but he must now realise that the slow progress of these talks raises the risk of no deal".

Davis, typically, denied that he was "talking up no deal". "I cannot think of a time, a day, a moment when I have talked up no deal", he said. "We are in the middle of a negotiation, and we want to negotiate in good order and with good faith on both sides, but if we do not prepare for all outcomes, we will leave ourselves exposed to an impossible negotiation".

Then it was the turn of Peter Grant, the SNP for Glenrothes. "The Secretary of State assures us that he has never talked up no deal", he asserted, "but he has not talked it down, either". Thus, he said: "Other influential voices in his party talk up no deal all the time. The Prime Minister still has not withdrawn her claim that no deal is better than a bad deal. Rather than just not talking up no deal, will the Secretary of State absolutely rule out no deal today as the worst of all possible deals?"

When Neil Coyle, the "The hon. Member for Bermondsey and Old Southwark, from a sedentary position", charged that Davis was "talking up no deal", the Secretary of State reacted sharply. "No, I am not", he said. "I am dealing with scaremongering and I am knocking down scaremongering, so I think the answer there is no".

But it was then down to Anna Soubry to put the boot in. Did he (Davis) "agree that it is not just within this House where there is no majority for no deal, but that by their vote on 8 June the British people did not give this Government any mandate for no deal, because not only would it be bad for everybody in England, Wales and Scotland, but it would be particularly bad for our friends in Northern Ireland?"

And then it came. Davis retorted that the election "gave us a bigger mandate than it gave the Opposition", adding: "we are seeking to get a deal, as that is by far and away the best option. The maintenance of the option of no deal is both for negotiating reasons and for sensible security; any Government doing their job properly will do that".

How revealing that was. The "no deal" scenario is not real. It is being kept in reserve for "sensible security" but primarily for ""negotiating reasons". But, if it is a bluff – and that's what Davis is admitting it is – does he not realise that the EU negotiators will be just as aware of that as he is?

The issue, of course, is that no one who has done any serious analysis can be under any illusions that the "no deal" scenario is a non-starter. We are not the only ones to have suggested that, as a ploy, it is akin to Davis threatening to shoot himself if we don't get out own way.

Yet, even if Davis seems to be breaking out of his fantasy cycle, this new-found reality is apparently not shared by his ministerial colleague, Liam Fox. He recently told the BBC that there was no reason to fear the impact on the economy of no deal being agreed. It "would not be the Armageddon that people project", he said.

This is matched by the insouciance of John Redwood who insists that the UK will be "fine" if Britain walks away from Brussels without a deal.

Writing recently in The Sun, though, we see the shape of his pitch, extolling the advantages of Brexit and the options afforded by leaving, but never addressing the "day one" issues of how we continue trading with the EU after we have left.

We see the same myopia with the likes of the IEA, which adopts the same narrowly focused optimism without dwelling on the details.

Representing the IEA, we see Julian Jessop, chief economist and head of the IEA's Brexit Unit tell us that a "no deal" scenario does not have to be the "catastrophe" that many fear. "There would be", he writes, "some new barriers to trade with the EU, but these should be manageable". 

Leaving the Single Market and the Customs Union would, Jessop adds, "simply put the UK in the same position as other members of the World Trade Organisation (WTO) with whom the EU does not have a bespoke deal, such as the US and China".

One could scarcely do justice to the claim that the "new barriers" should be "manageable" but, like Redwood, Jessop offers no detail. Nor indeed does Roger Bootle, another "no deal" fantasist. These people never do.

One of the sustaining myth is that we already trade under WTO rules with the likes of China and the US (something also asserted by Redwood), which allows the Jessops of this world to ignore the reality that most nations have multiple trade-relevant agreement with the EU, even if they are not specifically free trade agreements.

Also underwriting the case is another lie, on which we remarked upon in May of this year when we noted Lee Rotherham argued that within the context of a "no deal", we could still make "separate agreements" to "remove specific, thematic or sectoral barriers, just as they are regularly done in EU bilaterals".

This has emerged into the full-blown concept of the "no-deal deal", where we somehow walk away from the Article 50 talks and yet still expect to conclude agreements with the EU on a host of other issues.

This is precisely the line taken by Jessop who concedes that "There are many other agreements that would also need to be renegotiated, including access to EU aviation markets, mutual recognition of pharmaceuticals, and cooperation with EU-led organisations such as Euratom".

These arrangements, he then argues, "do not depend on accepting the obligations of EU membership" and then – effectively contradicting himself about other countries trading under WTO rule, states that participants "already include plenty of countries which are not even in Europe, let alone the EU".

Thus, "no deal" on the Single Market or Customs Union, Jessop asserts, "would not therefore prevent the UK and the EU from continuing these (mutually beneficial) arrangements on essentially the same terms as today, based on agreements made separately from the Article 50 process".

So there you have it – the fundamental dishonesty writ large, where "no deal" is not actually no deal, and working under WTO rules is not working under WTO rules, but on a regime of additional agreements.

The idea of a "no deal" scenario, therefore, remains a fantasy, but it is also one which even its advocates cannot sustain without inventing a supplementary reality. In this world, having walked away from the EU, we return to Brussels whence the "colleagues" willingly sign up to a whole raft of agreements which previously they had refused to discuss.

Back in the real world, though, the negotiations are constrained by Article 50 and the European Council guidelines. Yesterday, we cautioned that the next indicator that we would get as to where we were going there would come with the General Affairs Council, which met yesterday in Luxembourg. And right on cue, we got the cue that there had been "insufficient progress" for the talks to proceed to phase two.

Thus, we have a situation where the advocates of the "no deal" scenario are refusing to engage with reality, arguing for something that they don't actually want, in the hope of getting something better which they can't actually get.

In taking this line, these people risk getting only that which they didn't want, which will turn out to be precisely the disaster which they say it won't be, because it isn't actually what they made it out to be and is what they say it isn't.

Locked into their fantasy world, these people cannot see the absurdity of their own positions, or the danger to which they are exposing us all. And, if we allow them free rein, they will bring us all down.

Richard North 18/10/2017 link

Brexit: playing the "queen"

Tuesday 17 October 2017  

Under normal circumstances, UK Prime Ministers do not go dashing off to Brussels at a drop of a hat to have dinner with the Commission President. And in days of yore, it would never happened at all. Can you imagine Thatcher "leaving on a jet plane" to see Delors all in a rush? She would have summoned him to London and expected him to turn up.

Thatcher notwithstanding, given that Mrs May has done the unspeakable, we may safely assume that these are not normal circumstances, especially in the light of the post-dinner statement which, to say the very least, lacks transparency.

In fact, the whole thing is more than a bit bizarre. After all the drama, it seems, they had a "constructive exchange on current European and global challenges", including discussing "their common interest in preserving the Iran nuclear deal and their work on strengthening the security of citizens in Europe, notably on the fight against terrorism".

I really have trouble believing, though, that Mrs May went to the trouble of making an unscheduled stop in Brussels, then to talk about the Iran nuclear deal and "strengthening the security of citizens in Europe".

Nor, in respect of the Article 50 negotiations, does it seem credible that Mrs May and President Juncker "agreed that these issues are discussed in the framework agreed between the EU27 and the United Kingdom, as set out in Article 50 of the Treaty on European Union". Mrs May really didn't go all the way to Brussels to find that out.

That left the pair to review the progress made in the Article 50 negotiations so far, leading to what appears to be the only substantive agreement, that "these efforts should accelerate over the months to come".

Even if that's all there is on offer, I suppose we should be vaguely comforted by the final observation in the joint statement, which told us that the working dinner, which apparently only lasted two hours, "took place in a constructive and friendly atmosphere".

However, one has to note that no one is claiming that the talks themselves were "constructive and friendly", and I would not be the first to have had a blazing row in a location famed for its friendly atmosphere. In this case, the text allows for the tensions to be very close to the surface.

What would have been concentrating minds, though, is that today is the meeting of the General Affairs Council in Luxembourg. This is the body comprising Member State foreign ministers which traditionally settles the agendas for the European Council meetings.

In this case, it is the Friday meet of the European Council, meeting as 27, which is going to decide on the next moves for the Brexit negotiations, so it would have been vital to have set the tone for the General Affairs Council if there was any chance of influencing matters.

That said, although we have seen frenetic activity on the part of Mrs May, having placed calls with Angela Merkel, French president, Emmanuel Macron, and the Irish taoiseach, Leo Varadkar, there are no indications that sentiment is moving in the direction of the UK government.

In this context, EU "diplomats" are widely cited, reiterating the same point we've been hearing endlessly from Barnier, that the UK has not made "sufficient progress" to allow the talks to move on.

This, in itself, makes one wonder why the Prime Minister was deployed in Brussels. Looking at the move in chess terms, it is the equivalent of bringing the queen into play – something which one often reserves until she can have decisive effect. Certainly, one does not risk the queen for a pawn – which is rather what seems to have been done here.

In those terms, the "queen" seems to have been played without measurable effect – which opens Mrs May up to ridicule and even humiliation if this eleventh-hour intervention is seen to have achieved nothing of consequence. And, once she has intervened, the cupboard is bare. There is nothing else to bring into play.

It is possible, though, that there might have been another agenda being worked. It might be that Mrs May is keen to face Juncker – and Michel Barnier, who was also at the dinner, alongside his opposite number, David Davis – in order to convey to them personally that there are no further concessions on offer, so there is no point manoeuvring for more.

This would be a direct way of saying that, if agreement can't be reached in October, then holding over to December is not going to get the "colleagues" a better deal. The message might have been "settle now" or face the prospect of the talks collapsing later.

Nevertheless, with nothing further to go on, the real reasons for this meeting, and the actual outcome, will remain obscure – for a short while at least. The first clue that anything has been achieved might come from today's General Affairs Council, but it may also spell the end for Mrs May's ambitions.

Her high risk strategy could, therefore, have another objective. Her willingness to go to Brussels and put the UK case directly to Juncker might be part of the wider attempt to demonstrate that she has gone the extra mile, positioning the Commission as being responsible for the blockage. Played out to a domestic audience, this would be used to legitimise a walk-out later in the talks.

One way or another, we might know a little more by the end of the day, but it will take until Friday before we're fully appraised of the situation. I'm still not prepared to rule out the possibility that Mrs May is planning a high-profile walk-out, perhaps in response to the Friday Council, in which case this dinner will most certainly have been a preparatory step.

Richard North 17/10/2017 link

Brexit: a failure to understand

Monday 16 October 2017  

"Why is 'no deal' such a big deal for UK-EU trade?", asks Tommy Stubbington, economics correspondent of The Sunday Times in an article (no paywall) warning us that: "A hard Brexit with longer customs checks could cause traffic chaos".

This is supposed to be an "explainer", telling us mere mortals why a "no deal" is such a bad idea, but we are also dealing with witless hacks, the very same who made such a complete mess of trying to explain what a customs union was, and its effect on UK trade.

It would be too much to ask, therefore, that a mere Sunday Times journalist could begin to get it right and, in this at least, we not disappointed. Like the rest of those in his business, we find he hasn't got a clue.

According to Stubbington, the reason why we are likely to face gridlock is because "about 70 percent of EU trade enters or leaves Britain in the back of a lorry, unlike the containers of goods that arrive from farther afield".

Actually, it's closer to 60 percent but if we let that aside, we are led to believe that the problem, as we supposedly adopt WTO rules, is a combination of the speed of throughput and the upsurge in customs "paperwork" which will need to be processed.

The reason why these mythical WTO rules currently seem to work is supposedly because, at the moment, they apply to container goods (lo-lo) rather that ro-ro. Containers arriving at a port such as Southampton have typically been at sea for days or even weeks, Stubbington says, and that is time that can be used to get customs paperwork in order. But lorries passing through Dover are stopped for an average of just two minutes for border checks. If that waiting time doubled, while paperwork is checked, the result would be 17-mile tailbacks across Kent.

The trouble here is that we're taking about far more than 17-mile tailbacks. The most likely outcome is a near-complete seizure of the trade system. Stubbington's big problem, though, is that he has been talking to "experts" – the two of choice being James Hookham of the Freight Transport Association (TFA) and Joe Owen at the Institute for Government.

This is one of the major weaknesses of the fourth estate. Instead of doing their own research – and then using experts to guide and explain – they use them as sources, even though oral testimony is notoriously unreliable. But the defect is compounded by the choice of "expert" being made on the basis of familiarity and prestige, rather than actual knowledge.

For instance, when I spoke to the FTA, they were not even aware that a large proportion of the freight passing through to France would have to be presented to Border Inspection Posts. Still less were they aware that there is a massive shortfall in capacity, and that there is no BIP in Dover, to where the bulk of cargoes are routed.

As for Joe Owen, his only claim to fame (and supposed expertise) is the production of an inadequate report on customs policy, his previous experience having been in "digital government and departmental transformation research".

Upon these two unlikely props, however, Stubbington bases his evaluation of a complex issue, where he starts under the false impression – gained from "advocates of a clean break from Brussels" - that WTO rules already govern the majority of world trade, and close to half of Britain's".

Thus, the framing we get from this Sunday Times hack is that: "If goods headed for New York or Hong Kong are already subject to lengthy customs checks, why is it such a headache to apply the same system to shipments bound for Calais or Rotterdam?"

To say that this framing is crass is an understatement. In fact, the bulk of goods shipped from destinations such as China and the United States into the UK do not undergo "lengthy customs checks" on arrival at the UK. Many of the goods routed through "trusted traders" can be shipped out of the docks almost immediately they have been unloaded, with minimal formalities.

The issue is not WTO rules at all. In addition to the basic WTO framework, countries have concluded multiple agreements with the EU, and especially customs cooperation agreements based on the World Customs Organisation (WCO) template. It is these deals, which transcend WTO rules, that enable a relatively free flow of goods through the ports.

As for the UK and Brexit, if we leave without a deal, we will have torn up all the agreements between the UK and the EU and failed to replace them. That is the issue. It is not the difference between countries which have no deals with the EU and are trading under WTO rules. There is not a single major developed economy which trades with the EU on this basis.

The problem thus will arise because, when the UK leaves the EU it becomes a third country, subject to the full regime of all the laws applicable to third countries, without the mediating effect of administrative agreements easing the flow of trade. It will only have the WTO to rely on, and that is not anything like sufficient.

Yet still, Stubbington is going on about the "fivefold increase in the number of declarations" which have to be processed by HM Customs. "The government estimates that there will be an additional 200 million customs declarations after Brexit, up from 55 million at present", he bleats, as if this really mattered.

Nor is it particularly relevant to write of HMRC needing to hire "several thousand" new officials if it subjected EU trade to the same checks as non-EU trade. This is according to "expert" Owen who also suggests that "extra specialists who check everything from animal health to rare art would have to be found".

Time and time again, however, I've pointed out that the main choke points are the other side of the Channel as UK exporters seek entry for goods into the markets of EU/EEA members. And there, sector by sector, there will be endless problems, many of which we have already rehearsed.

If we play a little game of "compare and contrast", imagine an established US chemical manufacturer selling goods into the EU. In order to operate, the company will have appointed in the territory of one of the EU Member States an "only representative" as required by the REACH regulation, and then secured registration of all those products which will be exported.

What gets this company access to EU markets, therefore, is not WTO rules but compliance with specific EU legal requirements, as applied to "third countries".

Now compare that with a UK chemical company on the day after Brexit without a deal. The UK government not having made covering arrangements, this company will find that its existing chemical registrations are no longer valid. Anything produced in the UK under the authority of those registrations will be refused entry. The company will have to appoint its own "only representative" and go through the necessary procedures before its products will be accepted for free circulation within the Single Market.

The point – which will apply to so many other products, from foodstuffs to parts for lifts and escalators which a company might already have installed – is that established third country suppliers will already have the systems in place which allow them to trade. The UK, having broken out of the EU acquis and walked away without a deal, will be starting from scratch.

Before any sector-specific issues are considered though, the UK will have to negotiate with the EU a comprehensive customs cooperation agreement, which will include mutual recognition of each other's Authorised Economic Operators (AEOs). The UK will also need a Mutual Recognition Agreement (MRA) on conformity assessment, without which none of its testing certificates will be recognised and no end of products will have to be tested at the border.

Having walked away, though, one cannot see how the EU would be in a position to make any agreements. Here, "no deal" means "no deal". You cannot tell the EU we're not having an Article 50 settlement and then come crawling back to discuss customs cooperation and mutual recognition of conformity testing. We will find ourselves presented with just the same issues our negotiators have walked away from.

But, with that, it would be wholly wrong just to pick on Tommy Stubbington. He is by no means alone. His colleague in arms, Henry Zeffman, a "political reporter" writes a dreadful piece headed: " Splendid isolation or madness? What hard Brexit means", an event which has him looking "at the consequences across all areas of life" of a "no deal" Brexit.

Following an embarrassingly superficial exposition in the effect on ports, Zeffman supposedly deals with medicines, telling us that there "would be huge issues for pharmaceutical companies based in the UK, which would not be able to have their products licensed for use elsewhere in the bloc".

This, of course, is the least of their problems for the moment as all the existing products, where market authorisations are held by UK companies, will no longer be released for free circulation within EEA territories. The companies will have to go to the enormous expense of transferring market authorisations to EU-based entities, until which time there will be no exports.

However, when we get to "Farming, food and fisheries", at least the message seems to be getting through – in part. Zeffman writes:
Animal products can be exported from a country with which the EU does not have an agreement at only specific inspection points. The two most accessible from British ports are Le Havre and Dunkirk, but they would need major upgrades to check products at present exported from the UK.
Regular readers, though, will notice the error: animal products from any third country – irrespective of any trade agreements with the EU – have to be submitted to "specific inspection points". And, as it stands, it might take several years for the facilities to become available.

Crucially, though, Zeffman writes: "There would not be food shortages, but there would be huge ramifications for the pricing and availability of different foodstuffs". And that is somewhat optimistic. It neglects the point that, if the UK maintains its current third country inspection regime, after Brexit, it will have to apply the same regime to EU imports – to avoid falling foul of WTO non-discrimination rules.

Without the facilities to do so – which could take some years to build - there most certainly will be a shortfall in the goods coming from the EU. Whether we can make up the losses is an open question but the best guess is that there will be substantial food shortages in the short- to medium-term.

In this, what all these people are missing is the dynamic which is going to bring trade to a halt, and have us going hungry. And it is not as if this is an unknown quantity – in August last year, changes to the security system at the French ports led to massive queues on the roads to Dover.

The reason we are going to see the problem if there is no deal is that many of the products which are currently freely sold to the EU Member States will no longer qualify for entry. In anticipation of this (and in any event in respect of animals and food products), there will have to be a high level of inspection of vehicles arriving at EU Member State ports.

Then, as the traffic slows in the ports, the very limited waiting areas will fill up and the ports (including the Channel Tunnel terminal) will seize up. This means that the transports (ferries and trains) will be unable to discharge their loads. And it is at that point that, on the other side of the Channel, things will also start to slow down. With no transports, waiting areas will fill and, as the ports become congested, the queues will start to build up.

This has nothing to do with the WTO and its rules. Exporters seeking entry of their products to EU Member States must apply EU rules. And, in many instances, the UK as a newly created "third country" will simply not have the paperwork in place.

Should negotiations continue, there will doubtless be interim arrangements that can be agreed which will ease the problems – although not eliminate them. But the "no deal" scenario is "sudden death". No organisation can take the shock of the complete abolition of all the systems in force and keep running. If we drop out of the EU without a deal, trade will slow to a mere trickle – if, indeed, any continues.

And yet, for all their resources, their access to so-called "experts" and the availability of all the information one could possibly need, the media can't work this out.

No more so than the idiot Grayling, who suggests that farmers should "grow more food" in the event of supply interruptions, does the media have any touch with reality. Both seem incapable of working out from basic principles the likely outcome of a "no deal" Brexit.

One can imagine that, if we do drop out without a deal – and that looks increasingly likely – it will all come as such a shock to media and politicians alike. But saying "I told you so", will not be enough. To avoid real suffering, somehow we need to get through to these stupid people, before it is too late.

Richard North 16/10/2017 link

Brexit: to crash and burn

Sunday 15 October 2017  

In this week's column, Booker resorts to quoting Dr Samuel Johnson. "Nothing more wonderfully concentrates a man's mind", the Doctor observed, "than knowing that he is to be hanged in a fortnight".

It is true that Christmas is a little more than a fortnight away, but with speculation that the Brexit talks might collapse by then, and Theresa May talking about leaving without a deal, it seems that the proximity of disaster is having a similar effect.

This is seen in the emergence of ever more people who know what they are talking about. They are coming out of the woodwork to warn that this could face us with an unthinkable catastrophe.

The seeds of that catastrophe were sown back in January when Mrs May first sprung on us that she wanted us not just to leave the EU single market, but also the wider European Economic Area, which could have given us, outside the EU, much the same "frictionless" access to that market that we have now.

But what she and her more recklessly bull-headed colleagues had chosen instead was that we should become what the EU classes as a "third country", making it inevitable that entry to our largest export market would face a maze of "non-tariff barriers" and time-consuming border inspections.

Amongst those that Booker identifies as beginning to sound the alarm, we have the chief executive of the UK Chamber of Shipping. He warns that the collapse of talks could overnight bring to a halt the ferry service that carries 12,000 trucks a day from Dover across the Channel.

Another alarm is raised by the head of the British Airline Pilots Association who warns that "UK airlines could find that they have to stop flying". The effect on "the entire UK aviation sector", which employs more than a million people, would be "devastating".

An equally devastating prospect was painted by a report from the European Fresh Produce Association, representing the growers who supply annually to the UK 3.1 million tonnes of fresh fruit and vegetables, worth about €4 billion. Meanwhile, the chief executive of the British Retail Consortium predicted we can expect empty shelves in our supermarkets.

All this and very much more is what Booker has been trying to explain ever since that fateful day last January. And at the top of the political tree, the only minister who seems to have a glimmering of what is bearing down on us is Philip Hammond. And his reward is to be screamed at for being "treacherous" and a "saboteur".

Yet this was after his paper on customs arrangements pointed out that we will need several years and hundreds of millions of pounds just to put into place our own border controls – in accordance with international rules – without mentioning the billions of euros we will expect our continental and Irish neighbours to spend on setting up theirs.

The ostrich-like behaviour, Booker asserts, is the price we are paying for having spent 44 years enmeshed in a system that our politicians never really tried to understand is that they may now have to learn about it in the hardest and most damaging way possible. But their likely response will simply be to blame those dreadful foreigners for being so "difficult".

If only, our man laments, they could have taken on board the realities of what we are facing in a more clued-up and grown-up fashion. Then, perhaps the catastrophe they are heading us for really could and should have been avoided.

Yet, to look once again at the comments on the column (something which, these days, I try to avoid), we see many of the same, familiar names, lambasting Booker for being a "remainer", dismissing his piece in often quite insulting terms. And to support their diatribes, we often see a cascade of ignorance which hasn't changed since the very start.

All of this makes the so-called debate on Brexit utterly tedious. Against the ardent, "hard Brexit" polemicists, we make no more progress than is the UK in its Brexit talks – and for much the same reason. There is an almost complete lack of empathy combined with an obstinate refusal to confront even the most basic of facts.

Thus do we hear trotted out time and time again the false assertion that the EU doesn't have trade deals with the likes of China and US and that, since we already supposedly deal with them on WTO terms, sliding out of the EU without a deal holds no fears for them.

There is absolutely no point in challenging the errors and false assumptions on the Booker comments. The very same people who are peddling their wares have been doing so for months, despite repeated correction. They are totally oblivious to the facts.

Nonetheless, in the absence of rationality, all these people are doing is producing noise. The real game is going on elsewhere – mostly in Brussels, where the decisions are going to be made without assistance from the Sunday Telegraph commentariat.

Insofar as there is any meaningful activity this side of the Channel, we may be seeing the re-emergence of the remainer caucus in the Westminster Parliament, which might be beginning to flex its muscles once again.

This is the view of the Observer, which reports that "a powerful cross-party group of MPs is drawing up plans that would make it impossible for Theresa May to allow Britain to crash out of the EU without a deal in 2019".

Predictably, we're looking at the "usual suspects" including Kenneth Clarke and several Conservative ex-ministers, together with prominent Labour, SNP, Liberal Democrat and Green MPs. The idea is to give Parliament the ability to veto, or prevent by other legal means, a "bad deal" or "no deal" outcome.

The mechanism is the EU withdrawal Bill, to which several hundred amendments have been tabled. One of those is from former cabinet minister Dominic Grieve who, together with nine other Tory MPs and members of all the other main parties, had tabled an amendment saying any final deal must be approved by an entirely separate act of Parliament.

If passed, says the Observer, this would give the majority of MPs who favour a soft Brexit the binding vote on the final outcome they have been seeking. That would amount to the ability to reject any "cliff-edge" option.

For my money, I doubt whether this or any of the other high-profile amendments will succeed, including one tabled by Clarke and the former Labour minister Chris Leslie. This requires Mrs May's "plan" for a two-year transition period after Brexit to be written into the withdrawal Bill, without which – supposedly - exit from the EU should not be allowed to happen.

There is something in the claim that a sense of crisis is engulfing the government, with whips fearing a series of Conservative rebellions and defeats over the Bill. Ministers have thus been forced to postpone the committee stage of the legislation, which was due to start this week.

Predictably, though, this will have no effect whatsoever on the "Ultras", one of which (at the very least) is expected to break cover and call for the suspension of Brexit negotiations until the EU agrees that trade talks can begin. This line already has much support in the country and the first out of the traps is more or less guaranteed a slot in a Sunday politics programme, as the media salivate at the prospect of more Tory splits.

However, while David Davis is trotting off to Brussels tomorrow for unscheduled talks – the nature of which have not been disclosed - as expected, elements of the media are beginning to review the consequences of a "no deal" scenario, starting with the much rehearsed fate of the airline industry.

While the focus is very much still on tariffs, there is a recognition that we will be seeing a return to customs checks, with the consequential effect of a hard border between Northern Ireland and the Irish Republic. Nevertheless, the detail is pretty thin and it's quite evident that journalists are out of their depth.

Mostly, though, the papers are staying within their comfort zone, devoting far more time and space to the Westminster soap opera. High on the list is the dumping of Hammond, the prospect of a reshuffle and the endless speculation about a possible replacement for Theresa May.

For most normal people, this simply adds to the tedium, leaving us to count down to Friday when the European Council, meeting as 27, deliver their verdict. Since there is nothing new expected there either, Brexit-watching becomes a treadmill where events blur, one into the other to create a perpetual groundhog day.

Yesterday, I spent some time completing an Airfix model of the DUKW – something I first built when I was about 10. Today, I think I'll have a bash at building the IGB "Otter" armoured car, although I may build the Heller AMX-13 first, as a "quickie". It's getting so bad that a boyhood hobby is once again proving more interesting than what passes for the real world.

Richard North 15/10/2017 link

Brexit: the war on words

Saturday 14 October 2017  

On multiple occasions, from her Lancaster House speech on 17 January to the present day, Prime Minister Theresa May has made it very clear that she would prefer "no deal" to a "bad deal", in terms of an Article 50 withdrawal agreement.

Despite that, Mrs May has never been specific in defining what constitutes a "bad deal". One must assume, therefore, that any assessment will be made on a case-by-case basis, reacting to whatever is on the table at the time a decision must be made.

As to what constitutes "no deal", this might be taken at face value to mean no agreement of any kind. The outcome wold be that the UK would allow the Article 50 two-year period to expire, whence the EU treaties would cease to apply. This is often called the WTO option, whereby post-exit relations are determined by reference to the GATT/WTO agreements.

Yet it is also the case where Mrs May has been no more specific about what she takes "no deal" to mean than she has in defining a "bad deal". There is some possibility that she could see it as a way of discontinuing the current negotiations and starting an entirely new round, seeking only to secure a very basic trade agreement. Others argue that the "no deal" is "no deal on trade" but a deal on other points, making it a "no-deal deal".

Another possibility is that the "no deal" option is not real. Merely, it is a negotiating ploy, used as leverage to secure a progression to the so-called "phase two", where the EU can be brought to discuss transitional (or implementation) arrangements, and the "deep and special partnership" that will serve as the long-term basis for future relations with the EU.

Through all this, though, we have the general reassurance from Mrs May that the UK is seeking a "good deal" – what is now her "deep and special partnership". But, as with her "no deal" and her "bad deal", she is no more specific about what her "good deal" might be.

Nearly sixteen months after the referendum, therefore, we have an aura of uncertainty. And that uncertainty spreads further. Mrs May talks of her "implementation period" while the Commission talks of the "transition period" while, in fact, the term "interim" might be better applied.

Even (or especially), the Finanical Times can't keep up with the Prime Minister, having her urging fellow EU leaders to open talks on a Brexit transition deal, despite her preference for "implementation". Not only are words given new meanings, dissimilar words become synonyms.

Before we even get there, the UK is being required to show that there has been "sufficient progress" in the talks before moving to phase two but complains that the level of sufficiency required has never been defined.

Yet we have a situation where the outcome of Brexit may be a "deal", although we don't know what it will be, or we might end up with a "no deal", or a "no-deal deal" and no one knows what that means either. And certainly, no one knows what must be done to achieve either.

Even the timeline is uncertain. Mrs May thinks we can secure her "deep and special partnership", while the Commission is merely talking about "scoping" – making it quite clear that there is no chance of securing an agreement before we leave.

Standing back from this, we are entrapped in the debate of the insane. The one thing we're not short of is commentary. From the lowest to the highest, everybody has an opinion. And everybody seems content to accept the terminology at face value, without seeking clarification or further depth.

In short, no-one actually knows what they're talking about or, to be more precise, people are talking about the same things using different vocabulary and meaning different things, or even the same things described with different words.

This is no way to conduct one of the most important political debates since the war. There is no clarity, no comprehension, no continuity – and no progress, however that is defined.

But now we hear that Hammond has turned this into a "war of words" and described Brussels as the "enemy", while M. Juncker has told a group of students at Luxembourg University that any gratitude for the UK's military defence of the continent did not exempt it from paying its dues, insisting: "Now they have to pay".

This makes a bizarre situation even more bizarre, where personal enmities and prejudices overlay the discussions, blurring the issues even further and making clarity even more elusive.

And, for all that, there is some clarity in that, next week, we confidently expect the European Council to refuse to move to phase two, putting in train further rounds of meetings where the English language will be brutally tortured.

Where we go from there, I honestly don't know. If we can't even agree on what words to use and what words mean, and can't even rely on the various factions to apply honesty in their dealings, it does not seem possible to have meaningful negotiations. Mrs May is asking for something that cannot exist, while the EU is demanding some things that the UK cannot deliver – and neither side will offer any clarity as to what they really want.

Such would suggest that, in time, the negotiations must collapse – and one wonders whether the current manoeuvres are simply blame transference, each party seeking to ensure that they are not left standing when the music stops.

If we are going to progress, we are going to need a sudden outbreak of honesty. Those who argue for "no deal" need to start telling people exactly what it involved, and not hiding behind empty fictions. Mrs May needs to come to terms with the fact that she is not going to get her "deep and special partnership" by March 2019, and the EU will need to realise that the political constraints which are handicapping the UK government must be factored into the negotiations.

At this late stage, though, I'm moving towards the idea that there is nothing salvageable from the current negotiations. If our people cannot even agree on common words and common meanings – and agree on the basic facts - our team would be better employed riding round Trafalgar Square on tricycles bedecked with flags, rather than talking to their counterparts in Brussels.

Richard North 14/10/2017 link

Brexit: kicking the can down the road

Friday 13 October 2017  

It was actually on Tuesday, when Donald Tusk raised the possibility that talks on phase one of the Article 50 settlement could continue through into December, thus allowing - as we observed - for the possibility of the December European Council re-examining the decision on whether the talks could progress into phase two.

By that time it was already clear that the fifth round of the Brexit talks in Brussels wasn't going to achieve anything. It thus came as absolutely no surprise when Barnier addressed the concluding press conference and declared: "I am not in a position, as things stand at present, to propose to the European Council next week to open discussions on the future relationship".

The only mild surprise is that he was so unequivocal, not in any way hedging his bets. There had, after all, been attempts by the UK to appeal direct to the Council over his head, in the hope that the Member States would over-ride their own chief negotiator and instruct him to move to phase two.

In fact David Davis, in his own press conference address alongside M. Barnier, asserted that "substantial progress" had been made, and looked to the October European Council, hoping that the Member States would "recognise the progress we have made, and take a step forward in the spirit of the Prime Minister's Florence speech".

All the same, M. Barnier must be pretty confident that he has the full support of the Member States, and have no fears that they will break ranks. Thus, he was able to say that "with a political will, decisive advances are within our reach in the next two months", adding: "We are going with David Davis to fix several negotiation meetings by the end of the year". That leaves the way open for the December Council to make the final decision.

Inevitably, the media homed in on the money story, mostly reporting that the talks were "deadlocked", repeating with zest the very word that Barnier himself had used in respect of the final settlement.

The hang-up, according to Barnier, is that while Theresa May in her speech in Florence affirmed that the UK would honour its commitments made as a member of the Union, the negotiating team was not prepared to specify which particular commitments it was prepared to honour. Consequently, there had been no negotiations on this subject. The parties had to content themselves with "technical discussions".

Despite this, Davis remains buoyant - perhaps unrealistically so. He argued that these technical discussions were "an important step", declaring: "When the time comes, we will be able to reach a political agreement quickly and simply".

Barnier's words on the financial settlement, however, may have partly responsible for misleading the media. Always keen to miss the point, it has presented the talks as being stalled over the money, without mentioning that the other two phase one issues haven't been settled either.

For sure, the parties seem to be edging to an agreement on expat civil rights, and that movement of people across the Irish border is more or less settled, with the terms of the Common Travel Area (CTA) being carried over into the Brexit settlement.

However, even though the BBC's self-important political editor, Laura Kuenssberg, managed to offer an analysis which completely omitted any reference to Ireland, the trade issues and the Irish border are very far from being settled.

Oddly, although the Commission offers a version of the Barnier address, as delivered, when it comes to the Irish question, it omits almost a full sentence, which can actually be found in the BBC report.

The Commission version tells us that the EU negotiating team had "continued our intensive work on mapping out areas of cooperation that operate on a North South basis on the island of Ireland", but then it leaves out Barnier's observation that, "There is more work to do in order to build a full picture of the challenges to north-south cooperation", which result from the UK and therefore Northern Ireland leaving the EU legal framework.

The omission is curious, but cannot be ignored. This suggests that the parties are so far apart that they have not even got to the stage of listing the issues they are prepared to disagree about. In other words, there has been no progress at all on this vital issue.

That then leaves two more negotiating rounds (with the possibility of an extra session being thrown in) to resolve an intractable problem that has seen no movement so far in five rounds. It seems hard to accept that the border question, which is so politically sensitive to the Conservatives, should be resolved in just two months, allowing the December Council to give the go-ahead to move to phase two.

The thing is that the hacks do not understand the issues here, while the Kuenssberg's of this world regard the detail as "boring" and "nerdy". They prefer to stay in the more familiar territory of personality politics, reporting on the Brussels talks as an extension of the Westminster soap opera, but with a few foreign actors.

While they obsess about the cash settlement, though, the Irish problem will fester unresolved, ready to block the entire talks on points of detail that the media refuse to spend any time on. They, like many of the politicians, are going to be caught out simply because the EU is about detail. You cannot get away with the cavalier "biff-bam" treatment which so often dominates the reporting of UK politics.

It is this lack of attention to detail which allows pompous idiots such as Nigel Lawson to blather about the WTO option as if it was a fashion accessory, arguing that "it's a perfectly acceptable solution", because "we already do far more trade with rest of world than rest of EU" and the great bulk of that trade is on WTO terms".

Such a stupid statement should be ripped apart by even a half-sentient media commentator but, as the idiocy is trotted out, one after the other they sit there nodding gormlessly as if the jabbering idiot was actually talking sense. And therein lies the core of the problem. Unless or until the political classes and their media handmaidens come to terms with the devastating consequences of a "no deal" Brexit, they will continue to treat such stupidity as a rational alternative to a negotiated settlement.

Such is the incompetence of both commentators and media that, when the Chancellor tentatively raised the prospect of an interruption of air traffic, post-Brexit, he was screamed at by the idiot Lawson and accused of "sabotage". Yet this demented diatribe was treated by the media as a rational contribution to the Brexit debate, while some Conservative MPs demanded Hammond's sacking.

Not to be left out in the race to reach the Nobel laureate equivalent in the stupidity stakes, the Daily Telegraph then argued for the Prime Minister to be accompanied by her sociopathic Foreign Minister when she goes to Brussels next week – heedless of the offence that would cause.

Meanwhile, courtesy of Reuters we get to see a draft of the European Council statement of the 27, on Brexit. In a clear snub to UK aspirations, the Council will reject the "invitation" to over-rule their chief negotiator and instead call for continued negotiations "in order to be able to move to the second phase of the negotiations as soon as possible".

As regard the Irish question, it notes the "major challenge" that the UK's withdrawal represents. It reminds us of the need to avoid a hard border, and therefore expects the UK "to present and commit to flexible and imaginative solutions called for by the unique situation of Ireland".

With the ball firmly in the UK's court, it then confirms what we expected. At its next session in December, the European Council "will reassess the state of progress in the negotiations with a view to determining whether sufficient progress has been achieved".

If this near mythical state of "sufficient progress" has been achieved, and only then, it will it "adopt additional guidelines in relation to the framework for the future relationship and on possible transitional arrangements".

Even then, on the transitional arrangements, it adds the rider that they should be " in the interest of the Union and live up to the conditions and core principles of the guidelines of 29 April 2017". That, of course, means accepting the continued jurisdiction of the ECJ, something which is going to be politically very difficult for Mrs May to accept.

The one small concession given is that, in order to be ready for any phase two talks on transition, the Council "together with the Union negotiator" is willing to "start internal preparatory discussions". But that is going to be a two-edged sword, as it gives the EU the political initiative and puts the UK on the back foot.

Overall though, after much labour, the net outcome of all this activity is simply to delay the determination of whether the talks will continue, kicking the can down the road from October to December. Undoubtedly, then, there will be a price to pay. If agreement can't be reached by December, I am taking the view (for the moment) that the talks will be over.

Richard North 13/10/2017 link

Brexit: on the edge of a major crisis

Thursday 12 October 2017  

"Planes could be banned from flying between Britain and Europe if we don't strike a trade deal with the EU, Philip Hammond claimed today". This is reported by The Sun after the Chancellor's appearance before the Treasury Committee yesterday, when he warned that all air traffic could "theoretically" stop the day after Brexit.

This is at last a high-level, if grudging, acknowledgement of something I actually reported on this blog in July 2014, under the title, "Brexit: grounding the UK airline fleet". I then posted a further report in January 2017, giving further and better particulars of a consequence of a "no deal" Brexit.

The 40-month delay between my report and the Chancellor's admission to the Treasury select committee is about typical of the lag between the public pronouncements of ministers and this blog, with many of the potential consequences set out in further detail earlier in this year, including one on air traffic management, which has scarcely been considered publicly by politicians or the legacy media.

This time round, Mr Hammond added, in respect of grounded airlines, "that no one 'seriously believes' such an outcome is likely to unfold", yet this is exactly the outcome if Mrs May takes us out of the European Union without a formal exit agreement.

Essentially, permission to fly in the airspace of "third countries", to land at their airports and to use their facilities is brokered internationally on behalf of the UK and other "community airlines" by the Commission and formalised in treaty agreements. Separately, UK airlines acquire rights in the territories of EU Member States by virtue of EU law.

Because of this, commercial access both to EU/EEA airspace and to third countries for UK registered airlines ceases to apply the moment we leave the EU unless replacement agreements are in place – something which is not going to happen if we leave without an exit deal. The thing the media and most others get wrong, however, is that British airlines will not be "banned" as such. Essentially, all but a tiny number of commercial flights are undertaken in controlled airspace, which no aircraft can enter without filing a flight plan. And without a destination or overflying rights, flight plans cannot be filed. Thus, UK commercial aircraft will not even be able to take off.

This is but one example of the potential harm occasioned by leaving the EU without a formal agreement. We have pointed out many more, from the damaging effects on Formula 1 to horse racing and even the hazardous area equipment market.

A crucial area of concern is the resumption of border checks on British goods entering the Single Market area, so much so that in July last year I was talking to the self-same Treasury Committee that Mr Hammond has so recently addressed, warning them of the effects of conformity assessment. I advanced the idea that, the day after we leave the EU, Operation Stack would go into effect in Kent and. By the end of the week, the M1 slow lane would be turned into a lorry park.

Despite the strong research base and my scrupulous attention to detail – and the fact that I expose my work to critical appraisal on a daily basis - there have been some who have accused me of exaggeration. But, with this intervention by Hammond, we are beginning to glimpse fragments of the truth leaking out from official channels. And each time we see the mask slip, it simply confirms what a number of us have been saying for many, many months.

What is remarkable though is the seeming determination of the legacy media to downplay the effects of a "no deal" exit. This, from the BBC is a classic example, purporting - with the arrogance typical of the state broadcaster – to give us a "reality check", telling us what "no deal" would look like.

As weak as dish-water, all it will commit to is a worst case scenario "that could mean that planes would be grounded temporarily, and drugs could not be imported". But no sooner is that thought lodged, then we are encouraged to bask in the "hope … that common sense would prevail". Some kind of interim arrangements would be made to keep things moving, the BBC declares: "It would be in the interests of neither the UK nor the EU for chaos to ensue".

This reflects my observation yesterday, where the implications of a "no deal" exit are so catastrophic that people simply cannot deal with them. They skirt round the potential consequences and either pretend they will not happen or that a last-minute solution will be found.

There also seems to me an effect akin to Stockholm Syndrome, where trade bodies and businesses are reluctant openly to spell out the consequences of a "no deal", for fear of upsetting their political masters and thereby reducing the access, influence and status.

Many trade associations sell themselves to their own members by boasting of access to and their good relations with relevant ministers and their departments, not mentioning the price paid for the access.

Slowly, though, the conspiracy of silence – if that's what it is – is breaking down. More and more voices are being heard, warning that Brexit might not be the "walk in the park" that the likes of David Davis would have us believe.

In that context, a reader recently referred me to this report on the impact of Brexit on the European fruit and vegetable industry. The industry itself is very far from being glamorous and is unlikely to attract the attention of the Chancellor and thus find itself reported widely in the legacy media.

Yet, what the European Fresh Produce Association (Freshfel) – which published the report – has to say is devastating. The EU, it says, is a significant net-exporter to the U.K with a trade flow of 3.1 million tonnes of fresh fruit and vegetables, worth about €4 billion annually. Next to animal protein, the sector will be most affected by the potential changes Brexit may bring.

Hampered by a shortage of data, Freshfel estimate the potential impact by giving the simple example of Spain which is annually sending 55,000 containers to Dover, with close to 6000 containers in each of the peak months of December/January.

Currently, the system works well, with no controls conducted at the point of entry. But the introduction of official control procedures and customs clearance, "will challenge the transport conditions and shelf life of the product. Given the logistical constraints and a presumed lack of capacity and preparedness in the ports itself, the arrival of fruit and vegetables might be delayed and the quality substantially affected. The report says:
The port of Dover as well as the port of Rotterdam and the Eurostar-connection starting from Calais are very critical bottlenecks of EU-UK fruit and vegetable trade. Dover and other channel harbours is a very narrow transit port with a lack of parking and storage facilities. With newly introduced border controls, including identity check, consignment check and customs clearance, as well as potential backlogs, the sector is strongly worried on the potential delays and waiting times, which could be harmful to the quality of the product.
With no confidence that electronic systems can be introduced in time, or fully integrated, the sector is concerned at the potential explosion of paperwork. Each container from Spain at Dover might need up to 20 different phytosanitary certificates given the mixed consignments, as well as certification of origins for each of the product. And, bearing in mind that there are no inspection facilities at Dover, this could present an impenetrable barrier.

Spanish growers, of course, would be badly affected but the loss of 6,000 container loads in the peak months to the UK market would have an effect far greater than the lettuce shortage experienced last February when bad weather damaged crops, cutting yields by 25 percent.

In a country which imports an estimated 50 percent of its vegetables and 90 percent of its fruit (although much of that from non-EU locations), we could be seeing prolonged shortages and significant price rises, before the market stabilised and adjusted to the new conditions.

What this example does is yet again demonstrate that, when you look at anything more than the superficial, multiple sectors will be badly affected and trade will be seriously disrupted. And in the Freshfel example, this applies – as do so many others - even without a "no deal" Brexit.

As the evidence mounts, we see that even a managed Brexit will create significant problems. To depart with no deal would be catastrophic. The only way this could be at all acceptable to the public at large is by keeping people firmly in the dark, which is precisely what the legacy media and the politicians are doing.

However, evidence from this blog and others – in terms of increasing traffic – suggests that people are waking up to the potential consequences. And they need to do so. Our politicians – by act or default – are selling us down the river while the media sits idly by, failing to do its job.

Claims of scaremongering and the resurrection of "Project Fear" need to be sharply dismissed. We are on the edge of a major crisis which is gathering pace with each passing day. It's becoming a choice between calling our politicians to account or going hungry. I know what I would prefer.

Richard North 12/10/2017 link

Brexit: playing with fire

Wednesday 11 October 2017  

As people begin to absorb the implications of Mrs May's Commons statement, it is clear that the UK Prime Minister is taking a path which inevitably leads to a "no deal" – if only by default.

It is also becoming clear that her stance is having little impact on the Commission, evident from the Commission's responses so far – and the lack of them. And this is a view endorsed by which detects no indication that the EU27 are worried by a precipitate British departure. notes that Michel Barnier has spent the last five months of negotiations repeating the EU's offer and watching the U.K. government creep closer to it. But he hasn't felt the need to shift his own position in any significant way. And nor, in my view, is he likely to between now and the 20th October, when he is due to report to the European Council meeting as 27.

On that basis, discussion about the merits (or otherwise) of Mrs May's implementation period are largely moot. We must reconcile ourselves to the near certainty that the October meeting of the European Council is not going to agree to progress to phase two of the talks.

That leaves the possibility of two further rounds of talks with M. Barnier's team before returning to the Council in December when, again, the 27 have the opportunity to judge whether there has been sufficient progress for them to allow the talks to continue.

Earlier, I pondered on the possibility that the Council might be reluctant in December to break away from its schedule to afford yet more time to Brexit. But, we learned from Donald Tusk yesterday that if there is no further progress then, both sides might need to move into an emergency footing to address the consequences of failing to reach a deal.

What Tusk has actually done, therefore, is extend the life of the talks by two months. Otherwise, the general feeling might have been that the October session was going to be "sudden death", marking the end of the process. After that, there would be no point in holding further talks.

On the other hand, this stay of execution has its price. If the UK has not by December offered constructive proposals on the phase one issues, then the talks will effectively be at an end. It truly will be all over by Christmas.

As it stands, there are no indications that Mrs May is prepared to put anything more on the table to resolve the phase one logjam. She is still treating her Florence speech as her final "offer" and has expressed her "confidence" that she will get her way in October.

However, it is all but impossible to predict what effect a rejection by the European Council might have on Mrs May, and on political sentiment generally – especially if it is known that we have another bite of the cherry in December. Political allies (or even enemies) may intervene to prevent her walking until all avenues have been exhausted.

Where we go if both sides agree to abandon talks is then another of those imponderables – near-impossible to predict. But, without them being specific, it appears that EU negotiators have stepped up contingency planning for a breakdown in talks.

For the moment, though, Tusk is simply acknowledging that the UK government is preparing for a "no deal" scenario, while denying that the EU is doing likewise. "We are negotiating in good faith", he says, "and we still hope that the so-called 'sufficient progress' will be possible by December".

It is there that his hint of a final break comes. "If it turns out that the talks continue at a slow pace, and that 'sufficient progress' hasn't been reached, then – together with our UK friends – we will have to think about where we are heading", he says.

In fact, if nothing is agreed by the December Council, the perilously short time allowance leaves little chance of agreeing anything substantive. The best that might be hoped for is a basic customs agreement, which will allow a limited flow of goods to and from the continent.

Certainly, the idea of concluding a full-blown "transition" or interim agreement does not seem to be a workable proposition. Given the wording of Article 50, there is no provision for extending the acquis after the UK has withdrawn. Selectively to re-apply elements of the treaties would require a completely new treaty, outside the scope of the Art 50 withdrawal agreement.

The most logical way forward is for the UK to ask for an extension of the negotiating period but, since that has been ruled out, we are left with the cumbersome and time-consuming process of negotiating a bridging treaty to keep us in the game. And such is the lack of thought that has been given to this that it is not even certain that a short-term preferential trade agreement is permissible under EU rules.

Even under the cover of a trade agreement, though, the UK will find that its "third country" status will not exempt goods from customs and other checks when they are exported to EU Member States. And, as I explained in yesterday's piece, throwing money at the problem this side of the border will not address choke points on the EU's external borders.

But now, it appears, Chancellor Philip Hammond is not even prepared to spend any money on a "no deal" exit. It would be irresponsible, he says, to spend taxpayers' money on this. We will only spend it when it’s responsible to do so.

The effect of this is more serious than Hammond might think. In order to accommodate UK goods, collectively the EU Member States will need to commit several hundred million euros to upgrading infrastructures at sea ports and airports, and along the land border with Northern Ireland.

This expenditure will be required with or without a trade deal but making arrangements within a "no deal" scenario will probably be that much harder. And if the UK Chancellor is not prepared to spend any money, it will be hard to argue that his counterparts in EU Member States should open their coffers to deal with a situation that is not of their making.

As time progresses, therefore, we are accumulating at an alarming rate a number of problems to which there are no solutions in the time available. That leaves the two sides to work on what are being called "emergency arrangements". Under such a regime, we are probably looking at imposing limits on the amount of traffic that can use the Channel ports, with the issue of permits to allow essential goods to be transported.

It does not seem possible in the 21st Century, with all the sophisticated systems and resources available, that we are seriously considering what amounts to the rationing of road access and a system of state authorisation before vehicles are allowed to travel to Continental ports. Not since the Second World War will movement have been so restricted.

Perhaps it is the seeming implausibility of such developments which are hampering the negotiation process. Neither side can fully comprehend the degree to which logistics will be disrupted. Hence, warnings of a complete collapse of trade are simply not believed.

On that basis, we seem to have Conservative politicians (in particular) who are convinced that, on Brexit day, officials on the EU side of the border will be instructed to wave UK traffic past the checkpoints, without formality. Suggestions that the full panoply of border checks will be applied are regarded as scaremongering or a bluff.

By way of a reality check, though, yesterday the suggestion by the Prime Minister that a Brexit "no deal"’ was now an option brought BALPA General Secretary Brian Strutton out of the woodwork to say that the entire UK aviation sector which employs nearly a million people and carries more than 250 million passengers per annum would be devastated by a Brexit "no deal".

"UK airlines could find they have to stop flying", he says, "it's that serious. And this would impact passengers long before March 2019 because airlines couldn't sell advance tickets and, frankly, would passengers risk buying them?" Strutton continues:
It is utter madness for anyone to think that a Brexit "no deal" would be anything but a total disaster for our world leading UK aviation sector and beyond. After all, without air cargo we will not be able to export or import freely. The entire industry has said that we have to see evidence of the post-Brexit plan for aviation now if we are to avert a catastrophic crisis of confidence.
Then, with their feet planted firmly on the ground, British retailers have reiterated their warning that the UK faces "gaps on shelves" if the country does not reach a new post-Brexit deal on trade and customs with the EU.

The British Retail Consortium (BRC) has responded to Theresa May's trade plans with a warning that without a robust new deal with the EU, UK shoppers "will be hit with reduced availability of affordable goods with almost immediate effect". CEO of the BRC Helen Dickinson writes:
The UK's future trade policy is the most significant aspect of the Brexit negotiations for consumers. ... Annual customs declarations would jump from 55 to 250 million and with four million trucks crossing the border between the UK and EU each year, new red tape, border controls and checks would mean delays at ports of up to two to three days for some products. Businesses and consumers would face higher costs, gaps on shelves and product shortages.
This is not scaremongering – and nor is the picture we have used. Sophisticated though they may be, modern logistic systems are extraordinarily fragile. Brexit involves tearing up the rule books and rewriting them around completely different systems. You do not have to be an expert to know that this means trouble.

Mrs May and her colleagues are playing with fire.

Richard North 11/10/2017 link

Brexit: setting us up for a "no deal"

Tuesday 10 October 2017  

The Brexit negotiations currently are in crisis, stalled over what are called the "phase one" issues, where the Commission is insisting on seeing "sufficient progress" before it will recommend to the European Council that the talks can move on to phase two. Only then can there be discussions on a trade deal and what Mrs May calls an "implementation period".

To break the logjam, the Commission needs to see the UK team in Brussels this week come up with "concrete proposals" on expat civil rights, the financial settlement and on the Irish border question. Only then will Michel Barnier be able to attend of European Council sitting as 27, on 20 October, and advise them that it is safe to progress to the second phase.

In response to this clearly and repeatedly expressed scenario, Theresa May has decided, in the most dismissive of ways, simply to ignore it. Instead, via a statement to the House of Commons yesterday, with her chief negotiator by her side, she appealed over the head of Barnier, speaking to the 27 in the hope that they will decide to authorise phase two talks, regardless of the lack of progress.

Mr Speaker, she said, "a new, deep and special partnership between a sovereign United Kingdom and a strong and successful European Union is our ambition and our offer to our European friends". And the wording here is absolutely crucial. The "colleagues" are expecting an offer – but on phase one issues but they are actually getting an "offer" to engage on phase two matters – her "deep and special partnership".

Then, to make it plain what she expects from the 27, she declares: "Achieving that partnership will require leadership and flexibility, not just from us but from our friends, the 27 nations of the EU". And, to that, she adds: "as we look forward to the next stage, the ball is in their court. But I am optimistic it will receive a positive response".

The sub-text is unmistakable. Despite the 27 convening on the 20th to assess whether or not sufficient progress has been made with phase one, she is demanding that they abandon their plans and move to phase two regardless. And, from the new talks, she expects "a positive response".

The reason she thinks the "colleagues" should do this is because she believes that, "what we are seeking is not just the best possible deal for us", but also "that will also be the best possible deal for our European friends too".

But we then find, by way of a peroration, that she is also setting up her alibi to explain away failure. "By approaching these negotiations in a constructive way – in a spirit of friendship and co-operation and with our sights firmly set on the future", Mrs May says, "I believe we can prove the doomsayers wrong".

By staking this claim. if the phase two talks fail – thereby proving the doomsayers right – it will be the fault of the "colleagues". The Prime Minister has made a "generous" offer, so the failure is down to the other side not approaching the negotiations in a constructive way – "in a spirit of friendship and co-operation and with our sights firmly set on the future".

Having thus set out her stall, Mrs May then declares that, while she believes "it is profoundly in all our interests for the negotiations to succeed", it is "also our responsibility as a government to prepare for every eventuality. So that is exactly what we are doing".

This is the veiled threat, seized upon by the media that the government is preparing for a "no deal". The message to the 27 is clear: give us our "new, deep and special partnership" or we walk. May has delivered a "velvet" or, as I called it, the "passive aggression" ultimatum.

In exactly the opposite style of Mafia, who famously make offers that people cannot refuse, the Prime Minister has made the "colleagues" an offer they cannot possibly accept. But, by refusing it - which they must - they will be cast as the villains.

As for that "new, deep and special partnership" to which the "colleagues" are then supposed to agree, we see the first instalment of this in a Treasury White Paper published late yesterday, after Mrs May had finished speaking.

Headed "Customs Bill: legislating for the UK's customs, VAT and excise regime", this "sets out the government's approach to legislating for a future customs regime, and to creating a framework that supports intra-European trade".

What emerges from this is that the government has fully understood the implications of leaving the EU and the Single Market on cross-border trade with the EU, and the potential for disruption. To avoid this disruption, it wants to embed within the "new, deep and special partnership", a "new customs partnership", which it hopes to negotiate with the EU.

To suggest that the authors might be deluded, though, is being far too generous. Having been lectured mercilessly by the "colleagues" for attempting to have their cake and eat it, the proposal here seeks to do precisely that, offering "innovative approaches that could support UK-EU trade outside of a customs union arrangement, while still removing the need for customs processes at the border".

Without stating as much, the government, in deciding to leave the Single Market – the major benefit of which is "frictionless trade" with no customs processes at the borders" – has come up with a regime that replicates exactly the major benefit of the Single Market, without assuming the responsibilities of participation.

To achieve this miracle, the UK would apply the same tariffs as the EU, and provide the same treatment for rules of origin for those goods arriving in the UK and destined for the EU. Then, by mirroring the EU's customs approach at its external border, the UK could ensure that all goods entering the EU via the UK have paid the correct EU duties.

This, the White Paper authors assert, "would remove the need for the UK and the EU to introduce customs processes between them, so that goods moving between the UK and the EU would be treated as they are now for customs purposes".

If one reads carefully into the text, though, one sees that the authors are not thinking in terms of the Single Market. They are seeking to replicate the conditions of the Customs Union, wrongly assuming that, with the harmonisation of tariffs and rules of origin, the border checks disappear.

Bizarrely, the Government does recognise that "there are additional border activities undertaken as part of official controls which, while vital to the UK's trade, safety and security, are not directly related to the collection of customs duty".

These, we are told, include the regulation of cross-border movements of large sums of cash, tackling counterfeit goods, detecting firearms, explosives and narcotics, disclosure of information to other government departments for non-tax purposes and certain non-tax import and export controls, such as animal, public and plant health checks.

In fact, under the latest version of the Union Customs Code, these (and the all-important conformity checks on imported manufactured goods, about which it says nothing) – less the animal, etc., checks which remain separate - constitute the unified "release for free circulation" procedure. They are an integral part of the customs system.

These supposedly additional issues are the non-tariff barriers which become the main basis for border checks, and will be the main sources of delay and disruption. Yet they are not to be covered in the Customs Bill. 

Yet all we get is that the government "will set out proposals in relation to these other areas in due course". Once again, we're back in the "apart from that, how did you enjoy the play, Mrs Lincoln", territory. In publishing a White Paper that seeks to avoid disruption and delay at the borders, the Government omits those very aspects which will be primarily responsible for the disruption and delay.

What is more, the Government admits that the scheme proposed constitutes "an innovative and untested approach" which "would need to be discussed further with the EU and businesses". Thus, the Customs Bill "cannot be drafted specifically to provide for the implementation of this outcome".

With that, one gets an incredible feeling of disconnect. This is only one part of the "new, deep and special partnership". Of the rest we have no detail, apart from an incoherent treatise on trade, also published yesterday. Yet it is quite evident that Mrs May believes we can conclude her "new, deep and special partnership" by the time we leave the EU.

Thus, if the "new customs partnership" is delusional, the pursuit of a final agreement has to be considered doubly so – except that it will never come to pass. Hours before Mrs May delivered her statement, Commission spokesman Margaritis Schinas told a regular briefing that there was "a clear sequencing" to the talks and "there has been so far no solution found on step one, which is the divorce proceedings". The ball was "entirely in the UK court".

With David Davis sitting alongside Mrs May during her Commons statement, when he should have been in Brussels talking to Barnier, one can only conclude that the UK is not taking the fifth round of talks seriously. In similar manner, it seems very unlikely that the European Council next week will take Mrs May's "offer" very seriously.

Slowly, inexorably, we are drifting to the end game where a "no deal" seems inevitable. The 20th October is set to be a historic turning point and has the potential to be marked down in the history books as the day Brexit fell apart.

Richard North 10/10/2017 link

Brexit: overtaken by madness

Monday 9 October 2017  

I remarked in an earlier piece that it required no great insight to realise that Mrs May had essentially given up on the Brexit negotiations. Unable to take any initiative that would break the impasse in Brussels without mortally offending one or other of the factions in her party, the indications have been that she is frozen into immobility.

Latterly, though, we have The Times (no paywall) tell us that the Prime Minister is today to use a statement to the House of Commons to warn European leaders that the UK will make no more concessions on Brexit until they compromise on opening trade and transition talks.

Mrs May will, we are informed, tell other Member States that "the ball is in their court", thus implicitly warning of the risk of talks breaking down. She will call for both sides to be constructive and "prove the doomsayers wrong".

Senior government sources, The Times report continues, have said the prime minister's statement makes clear that she has "offered what we were going to offer" in her speech in Florence. It is now up to the EU leaders to decide whether sufficient progress had been made to move the talks on at next week's European Council meeting.

This stance is not incompatible with the first. This is not a serious attempt to negotiate: the "colleagues" have already dismissed the Florence speech as not constituting a negotiating position, Therefore, Mrs May (or her advisers) must know that the EU negotiating team cannot respond positively to her statement.

This means we are drifting inexorably towards a "no deal" Brexit – not the result of any conscious action but a default option arising because no one knew how to stop it, or is prepared to take the necessary steps to engage constructively with the EU. We end up with the worst of all possible worlds, the "accidental Brexit" which no-one ever wanted.

One might have thought that the very prospect of such an outcome might serve to concentrate minds and provoke a flurry of focused activity, aimed at preventing something which will undoubtedly prove economically (and politically) disastrous. But such is the unreal state into which UK politics have descended that no serious moves are being made to head off the disaster.

Instead, we read in the Telegraph the claim that Mrs May "has decided to commit billions of pounds on preparing Britain to leave the European Union without a deal".

This is supposed to be a ploy to save her premiership as the spending, which will be "unlocked" in the new year if no progress is made with Brussels, is intended to send a signal to pro-Brexit MPs that she is serious about regaining the upper hand in the negotiations.

The cash, we are told, will be spent on new technology to speed up customs checks at the borders "if the UK has to revert to a World Trade Organisation tariff system, and a range of other measures". And, we learn, the Government is already working on plans to deal with air traffic control and migration in the event of a "hard Brexit".

However, if we are to take this at face value, the ploy appears not to be a serious attempt to deal with the consequences of a "no deal" Brexit. In truth, no amount of money thrown at this problem will have anything but a marginal effect on it. Once we walk away from the EU, the solutions no longer lie in our hands.

Instead, this fits in with an utterly mad idea expressed in a Telegraph editorial.

The political embarrassments of the conference season, allied to several errors made by the Government over the past year, says this newspaper, mean that many in the EU think Britain is weakened – that Brussels can just sabotage the talks and that Britain will ultimately take whatever it is given.

To this, in the mind of the editorial writer, "there is an obvious answer to this crisis: the UK must make it crystal clear that it is prepared to walk away without a deal".

Readers might be comforted to learn that this "should absolutely not be our primary objective". The residual sanity left in Telegraph towers does at least acknowledge that a no deal Brexit "would be very costly, for us and the rest of Europe". "But anyone with any experience of business", it goes on to say, "will tell you that the best way to win a negotiation is to have a serious fallback option".

Sadly, this preposterous idea seems to have taken root at the highest levels of government, without the realisation that we are not dealing with a business negotiation, but with arrangements between the UK and 27 other nation states, represented by the European Union, as to our post-Brexit relations.

Right from the very start, there have been those who have seen these negotiations in terms of bartering for a cut-price Turkish carpet in a souk, whence the "walk-away" strategy is entirely valid. There is always another seller with whom one can do business.

In this case, though, it is inconceivable that a mature, developed nation should not have a complex of relationships with its neighbours, spanning a vast range of issues, with formal agreements which establish rights, obligations and procedures. And, inasmuch as the Brexit talks are about restoring such agreements after the fracture of our withdrawal, failure is not an option. We cannot walk away without an agreement.

Despite that, the children in the Telegraph assert that it is "maddening that while the Government insists it has been preparing for a no deal outcome, it hasn’t been spending serious money to do so". Britain doesn't want to abandon the Brexit talks, say these children, "but, if it is seriously prepared to do so, the threat of walking strengthens our hand". Crucially, they say:
… it would also focus minds in Europe. If Britain has done too little to prepare, the EU has done next to nothing. They too would have massive problems with their financial systems and they too would face queues of lorries waiting to go to take goods across the Channel. Several member states would suffer more as a share of GDP from a no deal Brexit than we would.
Outside the purview of the Telegraph, though, we have a report from the Irish broadcaster, RTE, which tells of an internal report by the Revenue Commissioners which has "spelled out the enormous physical and economic impact Brexit will impose upon both Ireland's customs infrastructure, and on the tens of thousands of companies who trade with the UK".

This as yet unpublished report, we are told, sets out in stark detail the vast increase in paperwork, human resources and physical space requirements at ports and airports. And, in a devastating rejection of the fantasies of Tory politicians, it declares that an open border between Northern Ireland and the Republic will be impossible from a customs perspective.

It is interesting that the Irish Revenue Commissioners began exploring the potential impact on the customs interface between Ireland and the UK, a full year before the referendum. Then, of course, our own people should have been doing the same, but they didn't.

In terms of scale, 91,000 Irish companies trade with the UK. After Brexit, their customs declarations will create an eight-fold increase in paperwork volume. There will be special permits, extra investment, more paperwork and potential delays. Ports and airports will need extra infrastructure, such as temporary storage facilities for customs clearance. The Revenue itself will need a big increase in staffing levels.

For traders, the report says, the administrative and fiscal burden cannot be underestimated. Even the Ploughing Championships will be hit, since heavy equipment brought over from the UK will need to be declared under a Temporary Importation Procedure. Extra staff will be needed for the Irish postal service, An Post to manage customs checks on parcels coming in from the UK. Even smaller regional airports will now need customs infrastructure.

The report goes on to says that every day 13,000 commercial vehicles cross the Irish border and thus, a completely open border is not possible from a customs perspective. It would be naive to believe a unique arrangement can be found.

Something you simply do not see in UK references is then stated with utmost clarity: "Once negotiations are completed ... the UK will become a third country for customs purposes and the associated formalities will become unavoidable". And, of course, not only will this affect Ireland as the only EU country to have a land border with the UK, it will affect all other Member States.

Looking at this aspect, if the UK Government is beginning to acknowledge that billions must be invested in customs services to keep trade flowing (albeit not as freely as when we were in the EU), then it follows that other Member States, and especially France, Belgium, Holland and the others which have direct shipping links, must do likewise.

Addressing the myth that technology in any way provides an answer, the Report explores certain hi-tech options. There could, it says, be e-flow style number plate recognition allowing goods vehicles to move without having to stop in cases where a pre-departure/arrival declaration has been lodged and green-routed.

A vehicle could be identified by the ANPR system associated with a particular pre-declared consignment and signalled as to whether clearance has been provided. However, it says:
For a system of this nature to work with maximum effectiveness it would require an interface between both countries' electronic systems and it is unclear whether any such system could be commissioned and installed in the time available. A detailed analysis of the cost/benefit and the associated technical challenges is required before the practicality of such a regime can be evaluated.

Regardless of any efficiency arising from an ANPR system, the inevitability of certain consignments being routed other than green and goods or documents having to be examined would still require investment in suitable facilities at all designated crossing points.
To return to unreality, we had yesterday Justice Minister Dominic Raab being asked by the BBC why there was no visible sign of preparations for no deal - such as the recruitment of more customs officers and more infrastructure at ports.

This buffoon responded by saying that the planning "goes on", but: "What we don't do is run around advertising it demonstrably. Why? Because we want to send the right, positive tone to our EU partners. So we don't go talking about what happens if we end up with no deal, but quietly, assiduously, those preparations will be in place".

Once again, we see this naïve parochialism, where any thinking – such that it is – stops at our border. Not a single synapse is employed to consider what might be happening on the other side of the Channel where, as far as we can ascertain, no preparations at all are being made for Brexit.

On reading the lengthy extract from the Irish Revenue report, it is absolutely clear that a "no deal" Brexit is a non-starter. No matter how many billions the UK Treasury might throw at the problem, this is not going to resolved the deep-rooted problems that come with "third country" status. If the UK persists in following its current non-strategy in Brexit talks, we are headed for disaster.

The Dominic Raab nostrum, therefore, is one of utter foolishness. Commission officials, and especially M. Barnier, will have a very good idea of what a "no deal" Brexit involves. Using it as a negotiating ploy is akin to telling the EU, "give us what we want or we'll shoot ourselves".

One can scarcely believe just how badly these negotiations are being managed, and how dangerously exposed we are. Yet, as the UK negotiating team travel to Brussels today, we see no sign of any acknowledgement that the talks are on the brink of irrevocable failure - not least as Mr Davis is, apparently, not even bothering to turn up until Thursday.

If there is no breakthrough at this week's talks – and none is expected – and the October European Council refuses to move to phase two, the next realistic chance of the matter again being considered is in the March Council. For all that could then be achieved before the deadline, we might just as well disband our negotiating team.

Such is evident from the article written by Bernard Jenkin in the Guardian today, which charts our descent into madness. As long as there are people close to power who believe that a "no deal" Brexit is an option, we are doomed.

Richard North 09/10/2017 link

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