Brexit: between rocks and a hard places

Thursday 21 September 2017  

We've written extensively about the Irish question and Brexit and can add little more to the overall discussion, other to remind ourselves that the most promising practical option for the border is likely to be politically unacceptable to the DUP.

Confirmation of that came during a visit to Ireland by Guy Verhofstadt, which has had the DUP's MEP Diane Dodds reject the idea of a special arrangement, allowing Northern Ireland to stay in the customs union or single market.

While stressing that the DUP wanted a "seamless border", Dodds said: "We will not countenance a solution that makes us different from other parts of the United Kingdom".

There is a work-around to this, though. An arrangements can be made which can make the border between Ireland and Northern Ireland disappear, without having to give it a specific label. Any agreement can then be formalised and given treaty status as bilateral agreement between the UK and the EU.

But the re-emergence of this issue on the eve of Mrs May's Florence speech underlines the fact that the Irish question is one of the sticking points in part one of the Brexit negotiations.

Although much of the media would like to focus solely on the money (as, no doubt, would the politicians), a solution here must be part of the package before the EU will allow the talks to move on to discuss trade and related issues.

Generally speaking, neither the media nor the politicians like talking about Ireland. They regard it as an irritant and a distraction, preferring to discuss more weighty issues closer to home – like what the Foreign Secretary had for breakfast, or some such.

Thus, on this side of the Irish Sea, we do not see any serious attempt to explore solution – with most of the momentum (predictably) coming from Dublin.

When we add to that an almost pathological determination of the commentariat, - including MPs such as Owen Paterson and John Redwood, buoyed by the idiot Andrew Lilico – to discount the effects of leaving the Single Market, we find Mrs May in a position where there is no pressure on her to reverse previous policy statements and rethink her position on continued membership of the EEA.

Nothing of recent events, in fact, indicates that Mrs May will reconsider her position on the Single Market. As far as we are aware, it is still her intention to give notice to quit the EEA. She seems content to follow the path of a Canadian-style deal.

This is the favoured option of the "Ultras", but none of them seem to realise that even the most comprehensive of trade deals is but a pale shadow of the EEA Agreement.

But then the "Ultras" are also entirely comfortable with the prospect of a "no deal" walk-away option. That latter idea may have sufficient traction for it to be attractive to Mrs May, especially as she is being assured that it will so shock the EU that it will cave in under the pressure and give her all she wants – albeit at the last minute.

Yet, as we had cause to remind people, yet again, the consequences of leaving just the Single Market are so troublesome that it is difficult to see how we can deal with them.

And, right on cue, the Guardian has weighed in with a piece about the potential consequences of Brexit on commercial aviation. Semi-literate at best (relying on a US source never leads to coherence on EU issues), it nevertheless highlights the perils to which the industry is exposed.

As before, though, there is not a single newspaper – nor other media organ – that has been able to convey the damage to the economy that would be caused by an ill-considered exit from the EU. And no one in the London establishment, not politicians, academics, think tanks or anyone else, has even got close to describing the chaos that will result from the "no deal" scenario.

If Mrs May had any real understanding of precisely what was at risk, she would taking the greatest care to avoid it but everything we see seems to point to her taking an almost reckless approach to the negotiations.

To an extent, this is borne out by latest speculation, which seems to confirm that the Prime Minister is determined to sideline the Commission negotiators and appeal directly to Member States leaders.

This emerged after comments made in New York, when Mrs May stated while in the UN general assembly that: "What I'll be doing on Friday is setting out where we are and looking ahead at negotiations".

She added: " The negotiations are structured within the EU so, of course, the Council has delegated with a mandate to the Commission, and the Commission has appointed Michel Barnier. But the decision will always be one that will be taken by the leaders".

This, incidentally, was after Mrs May had met Dutch premier Mark Rutte, Italy's Paulo Gentoloni and France's Emmanuel Macron in the margins of the UN General Assembly. We have no information on what was discussed, and nor even whether Brexit was even raised.

If Mrs May is truly planning to break away from the Brussels talks, that will leaves us in an irrecoverable position. It comes to something when getting us into such a position seems to be a sought-after objective. While we should be seeing the Prime Minister focusing on the issues that will mitigate the effects of Brexit, we are instead seeing a succession of steps that will ensure that negotiations cannot progress in any meaningful way.

As it is, the UK is akin to a worker who has just received a lethal dose of radiation. With no immediate symptoms and no outward signs of the event, for a short period he can pretend nothing has happened. Tragically, though, he is already dead. It is just a matter of time.

On that basis, even the best we can expect from Florence isn't very much. So many mistakes have been made, and so many wrong turns, that it would need all the skills of a remarkable statesman just to salvage anything from the wreckage of the UK's Brexit policy.

Mrs May, however, is not even a statesman. She clearly has no grasp of the bigger picture and, if she slams the door on the EEA, the game truly will be over. The disaster capitalists will have their way.

As far as I see it, therefore, Florence can be little more than an exercise in blame avoidance – the greater part of which is transferring the blame to the EU for the eventual failure of the talks. One expects her to set up a series of scenarios which make her look reasonable, and unbalance the EU.

The EU, on the other hand, can neutralise this ploy – at least partially – by reacting quickly to reject any ultimatum that Mrs May might give. Perhaps it might even issue one of its own, pointing out, yet again, that until the Phase One issues are addressed, there can be no progress.

That would open the way for the Labour conference to charge that the talks are set for failure. This would put Mrs May on the defensive in front of her own faithful, still lacking a strategy for breaking the deadlock. If she goes so far as to offer €20 billion and still fails, she could be in serious trouble with her own party.

From there, we can't describe Mrs May as between a rock and a hard place. We have to use plurals. There are so many constraints on her actions that she seems to have no room whatsoever for manoeuvre. But then, she is author of her own misfortune. The great pity is that we are forced to share it with her.

Richard North 21/09/2017 link

Brexit: the fog of ignorance

Wednesday 20 September 2017  

I wonder if I'm alone in being bored out of my skull with the Foreign Secretary's resignation soap opera. One just wishes he would get on with it, except that he has decided not to resign and is now to accompany the Prime Minister to Florence.

There may be a deeper meaning to that although I've completely lost interest. Only two things of significance have emerged over the last 24 hours. One is that Mrs May is to hold a special Cabinet meeting on Thursday to acquaint her colleagues with the contents of the speech. The other is that she met Donald Tusk at the UN yesterday and the pair agreed to meet in London on Tuesday.

In that latter development, who invited whom to have a discussion may be significant. But we are not given that information. But the fact of the meeting does suggest that Mrs May is not going to stage an immediate walk-away when she goes to Florence – not that we ever thought she would.

On the other hand, the Financial Times has gained information which might indicate that the Prime Minister will be taking a conciliatory approach in her speech.

It is saying that the newly-transferred Oliver Robbins has been in touch with his counterparts in several Member State capitals, offering to fill the post-Brexit EU budget hole with a contribution of at least €20 billion – even if others say this is "pure speculation".

According to the FT, this money is to match the budget deficit that would otherwise arise from the UK's withdrawal, covering the period from 2019 to the end of the MFF period in 2020. But, if that is the case, it does not settle the Reste à liquider commitment and cannot constitute a final financial settlement.

It seems to be the case that the sum on offer will cover a notional UK transition period, evoking a response from an EU diplomat that, although it is something to talk about, "this is not where the landing zone is". Another is said to have remarked that, "transition payments do not cancel the bill".

Despite this, there is a possibility that Mrs May believes the payment will be accepted as a reasonable compromise, upon which basis she will be framing an ultimatum. Nothing so far, including the Tusk meeting, rules this out as the current UK strategy.

That apart, Johnson has managed to drive much of the technical debate on Brexit out of the media – although not entirely. We've seen a concerted effort from the disaster capitalists and their allies to rubbish the EEA option, with Minford talking up what he calls "Canada-plus", arguing for free trade agreements all round, and walking away from the EU if it won't agree to one on our terms.

This has the BBC Newsnight's Chris Cook questioning whether the Government is serious on opting for a no-deal scenario. In the absence of any preparations, he says, the government is not currently behaving like it is plausible.

To that effect, Cook offers "a small list of the stuff in ports we need to have sorted in March 2019 if we are to walk away from a negotiation". This includes buying actual space in ports for immigration officers, customs facilities and sanitary checks to make sure imported food meets whatever standards we set. Dover, he says, should be humming - soon, at least - with bulldozers and cement mixers as we prepare for a new world with an independent customs policy.

Typical of Newsnight, though, which made such a pig's ear of safeguard measures and Liechtenstein, all Cook manages to do is parade the ignorance that pervades his unit. He says there have been estimates of a need for 3,000 to 5,000 extra customs officers to cope with the extra traffic inherit in Brexit, but he does not understand that these and the other things he lists will be required whether we have a deal or not. Even with a free trade agreement, we will still be a "third country", where these requirements will apply.

Not content with messing that up though, Cook demonstrates his further ignorance when he informs us that "Defra will also need to increase staffing and capacity at ports, to allow for the testing of agricultural products and livestock entering the country". We will, he says, "need new border agents. All these people need recruiting and training".

The point here, of course, is that port health functions are mainly discharged by local authorities – although some plant health stuff is done by the Forestry Commission. Defra is not directly involved. But then, you wouldn't expect a BBC staffer actually to know what he's talking about, much less understand how government services work.

At least, though, the man is able to extend his horizons beyond the UK shores as he observes that if our farmers are going to keep selling into Europe, we need west European states to have capacity to perform the checks on our produce - which they currently lack.

Some of that preparation, he adds, "is actually stuff which we might need to do anyway for whenever transition ends", but he fails to recognise that some of that "stuff" has to be done by continental authorities – and will probably be required even during what passes for Mrs May's idea of a transition process, and which will take years to prepare.

Once again, therefore – and at all levels – we're seeing politicians and the media simply failing to grasp the complexities and nuances of Brexit. Such is the state of art, though, that the London chatterati will actually applaud Cook as being well-informed.

Yet another example of this pervasive ignorance is the arrogant Andrew Lilico who on Twitter argues that: "Certain folk like to make themselves seem clever by pretending certain issues are beyond a solution when they're not". Using air routes as an example, he asserts that "most of the world flies planes to and from the EU despite having not FTA (free trade agreement)".

But, he says, "we have special arrangements". And, in Mr Lilico's fog of ignorance, the EU would "find it mutually advantageous to continue those special air route arrangements" or we would "shift to the sort of arrangements most of the world has with the EU". He then presumes that we "can carry on with current arrangements until we've decided on new ones".

We actually dealt with this issue in January but Lilico is far too clever and important to read a mere lowly blog. But had he descended to our level, he would have found that the EU has exclusive competence on airline access deals and has brokered airline agreements in its name, on behalf of all Member States.

Thus, unlike the rest of the world, we do not have our own airline agreements. We have a deal only by virtue of our membership of the EU, being designated a "Community Air Carrier" by virtue of Regulation (EC) 1008/2008. When we leave the EU we drop out of the agreements. Even re-enacting the Regulation via the EU Withdrawal Bill (when passed) will have no effect. We cannot legislate to require the EU to recognise us as a Community Air Carrier.

We will thus have to negotiate entirely new agreements – both with the EU and the rest of the world. There are no "current arrangements" we can carry on with because we will have removed ourselves from their scope by virtue of leaving the EU.

For sure, we can do an access deal with the EU as part of our withdrawal settlement – if we ever get round to negotiating it and do not walk away without a deal. But the rest of the world will have to wait until we have left and have restored our negotiating autonomy.

This is foreign territory to Lilico. One wonders if he's ever read an EU Regulation. But since he hasn't got to grips with the issues, he patronises his audience. So many of them do that: if we don't agree with them, it's because we're not clever like wot they are. It is us who don't understand the issues. That is the proper order of things. The master race cannot be wrong - especially when challenged by mere plebs.

Thus, in his own mind, Lilico invents a scenario where the EU decides to impose a blockade to stop UK airlines flying. And this, he decides, is "silly". And if it's silly, it can't possibly happen. This is absolutely classic. You see a lot of academics doing the same thing. Confronted with something they can't cope with, they brand it as "silly", so justifying their retreat from reality.

But there won't be a blockade. The restrictions will be self-imposed. All airliners must fly in controlled airspace but it is illegal to enter controlled airspace without first filing a flight plan.  Since they do not have guaranteed destinations, as they lack open skies permissions, the airlines cannot file. Without them, they cannot take off - there is no need for a blockade.

All in all, pervading the entire debate are commentators such as Lilico. It's not just that they have no idea what is going to hit us when we leave. They can't even conceptualise the problems. As I have remarked before, they simply do not have the intellectual architecture. It is so beyond their capability to imagine that they are left to construct their own private fantasies which have nothing to do with a reality they can't understand.

But when government too is in the same fog of ignorance, we are in deep trouble. Mrs May needs to know that she can't go to Florence and buy off the "colleagues" with a €20 billion "bribe". Without a full financial settlement, without resolving the Irish question and without dealing with the expats' civil rights, the "colleagues" are not going to budge.

Furthermore, she is not going to be able to sideline the Commission and seek negotiations directly with the Member States, looking to exploit "wedge issues" which will give the UK an advantage. If she thinks that is a worthwhile strategy, she really doesn't know the EU at all.

Thus, Mrs May's fog of ignorance alone is enough to bring us all down. Add the rest and the cause begins to look hopeless.

Richard North 20/09/2017 link

Brexit: coup and counter coup

Tuesday 19 September 2017  

One of the stories the gutless legacy media simply hasn't dared tell is the way the Legatum Institute has taken over MixBrex, in what effectively amounts to a palace coup. Having the help of inside man Steve Baker and Crawford Falconer in the Department of International Trade has also helped them plant their own agenda, directed mainly at killing the EEA option.

For Oliver Robbins, head of the Brexit negotiating team, then to be transferred out of MinBrex, beyond the reach of Legatum, is not a coincidence. Initially, it was reported that he was to work in Downing Street with the Prime Minister. But he actually goes to the less tainted atmosphere of the Cabinet Office in a move that some are calling a counter coup.

Despite the claims though, this is not Mrs May tightening her grip over the Brexit talks. No Prime Minister is directly responsible for the deployment of civil servants, not even at senior levels. This is a battle between departments. Politicians' blood has yet to be spilled.

On the other hand, Mrs May's dismissive treatment of Foreign Secretary Johnson is her own play, carried out at a political level. Less popular in the country at large than he thinks, he is said to have "slit his own throat" with his ill-judged intervention in the Telegraph last Saturday. He is now beyond the help of even his most influential friends.

Johnson, however, is unrepentent. He is convinced that "nobody ever beats the EU in a negotiation" and expects the "Brussels élite" to succeed in grinding down the Prime Minister, forcing her to accept "bad terms".

This, apparently, is why he is pushing for a hard line and no concessions on the financial settlement. A close confidante says of him, "He always makes a point of saying 'no deal is better than a bad deal’ because he thinks it will be what we have to do". Johnson's view is that: "They [the EU] want to punish us", something which, to him, "has now come abundantly clear from the negotiations so far".

Meanwhile, Cummings has stuck his oar in. Although almost single-handedly having screwed up the leave campaign with his refusal to adopt an exit plan, he now has the unmitigated nerve to accuse the Government of making an "historic, unforgivable blunder" by triggering Article 50 without a plan.

This is being happily retailed by a gullible media which is either ignorant of, or indifferent to, what is really going on. But then, actually to do their jobs properly they need to do something more than sit on their backsides and read Twitter posts.

Nevertheless, the BBC's village idiot, Nick Robinson takes the Cummings tweets as evidence of a "Brexit civil war" in the Tory Party – a variation on the perennial "Tory splits" narrative that has sustained political correspondents for generations. The hacks are now so locked into this narrative that they cannot see anything beyond it.

As always, though, there are more shades of grey than in Erika Mitchell's first book, with Mrs May standing loftily above the fray, occupying that other galaxy that Juncker so presciently observed.

But, if from that lofty (and isolated) height, she no longer has a grip on events, for the first time in a very long time she has managed to impose a total block on leakages from No.10. Not the slightest hints of the substantive content of her Florence speech have made it into the public domain.

This is to a very great extent a reflection of the Prime Minister's insistence on working exclusively within her tiny "inner circle" and not consulting beyond it. There are so few people in the loop that any leak would be instantly detected, bringing down a wrath that is terrible even to contemplate.

For all that, the very fact that Mrs May is keeping the contents of her speech so secret sends its own message. Whatever she intends to say is going to be controversial and will have few friends. An early leak could enable her opponents to muster their forces and render any plan stillborn – before she even gets a chance to announce it.

But the other certainty is that she will have the Conservative conference in her sights. She needs to walk away from Manchester as the hero of the hour, the applause ringing in her ears and the length of the standing ovation breaking new records. Nothing short of that will save her political career.

This suggests that she is looking to be the Brussels-killer, making a stand against the demons. That leads one to expect a "take-it-or-leave it" offer, backed by a stern threat of a walk-away unless she gets everything she demands. In that scenario, it will be softened by a few carefully-crafted concessions, which might include a promise of cash – hints of which brought the sociopath Johnson into the fray.

Whatever Mrs May intends to do, though, could well remain unknown right to the point of delivery. Her primary purpose, though, is to get her out of Manchester and still in command of the Party. If she gives Brussels an ultimatum, it will not expire until she gets back to London, leaving her to hope that it is not rejected immediately, or in the next round of Brexit talks.

As for the speech, there will, at least, be one pleasant change: we will see the media reporting it after it has been delivered, instead of days before. And without it having been comprehensively previewed, there might be something for the Sundays to chew on as well.

The nature of the precise bombshell Mrs May delivers – and the direction in which it is lobbed – will then dictate how the factions line up and who goes to war with whom. Unable to see beyond its self-imposed binary narrative, the media will miss – or misinterpret – most of the fight, but we can see several parties joining the fray.

One of those will be an uneasy coalition of "remainers" under the loose guidance of the Lib-Dems. As noise-makers, they will get considerable media attention. Vince Cable is set to launch a scathing attack on "infantile" ministers behaving like dictators over Brexit, accusing the Government of descending into a "full scale school riot" over in-fighting. That is buying him a few headlines. 

Once Cable has finished, it will be Corbyn's turn. But Labour's pitch is too incoherent to make any significant impact on the battlefield, leaving the centre stage to Mrs May. If she has thrown the "Ultras" a meaty bone, they will be expecting her to deliver on her ultimatum and walk away from the Brexit talks.

But there is another "big beast" in the game ready to dominate the ground. This is Hammond, mustering the Treasury, with power so mighty that it is akin to a state within a state. Only he really has the ability to depose the Prime Minister and make a credible leadership bid. A walk-away option might be enough to push him into making his move.

Below the radar, though – and invisible to the media – is the Civil Service. Fractured and politicised on functional rather than party political lines, it is nevertheless a player in its own right.

An isolated May – dependent entirely on her inner circle – cannot match the breadth and reach of an élite which sees as its task the salvation of the nation. It can make things happen, or not happen, which could tilt the balance sufficiently to decide the winner.

For a long time, we have been convinced that the referendum would prove to be a catalyst of change, but no one could ever have predicted how drastic those changes might be. This has the potential to rip apart the entire fabric of our politics, with devastating effect on society.

However, if the UK political classes cannot resolve the situation Fabian Zuleeg, Chief Executive and Chief Economist at the European Policy Centre (EPC) suggests that the EU could take a hand.

First, to ease the negotiations, it should break with the principle that the UK must come up with the solutions as it has created the problem. It should help the UK by fully defining the different scenarios and options: the content of a withdrawal agreement, the nature of a transition period, the options for the final relationship – a trade deal versus staying in the Single Market and Customs Union.

Essentially, he says, the EU-27 should set out how off-the-shelf solutions like the EEA could be adapted to the UK. With these details on the table, it should become clearer for the UK what the trade-offs are and it would ensure that the options, if approved by the UK, are implementable.

Second, the EU should protect itself from the blame game. The most effective way is to make a grand gesture: to unilaterally guarantee the rights of UK citizens currently residing in the EU. This would show that the European Union is not willing to put political interests over the well-being of citizens, not using them as pawns in the negotiating game.

Finally, Zuleeg says, the EU must prepare for the worst-case scenario. No deal is economically nonsensical but politically possible, maybe even likely for some. There must be contingency planning to minimise the impact on the EU-27 if the UK chooses to throw itself over the cliff edge.

This would entail looking at how to deal with assets and liabilities, what legal mechanisms in private, European and international law would be available and how the EU would diplomatically engage with third countries and international organisations.

Most likely though, the situation is too far gone even for that. What is happening none of us bargained for when we voted to leave the EU. It was not what any of us expected. Yet, none of us is in control, so the game will have to play out. And, if the worst happens, vive la revolution.

Richard North 19/09/2017 link

Brexit: timewasting from Johnson

Monday 18 September 2017  

I am very reluctant to waste time on the controversy over Foreign Secretary Johnson's latest effluvia. His contributions, as far as I am concerned, are always unwelcome and never helpful.

However, in the manner of the canary down the mine, he does serve the function of stupidity detector, flagging up the intellectual poverty of the media which publishes his verbiage and those commentators who applaud it.

In the latter category, there is no particular shortage. One such is Cathy Newman, a Channel 4 News's presenter, who trilled on Twitter, "Whether you voted leave or remain, there's no denying @Telegraph @BorisJohnson article is well-argued & optimistic".

You might get away with asserting that Johnson was optimistic – but only in the manner of the boy who stood upon the burning deck, whence all but he had fled. It is very easy to be optimistic when, as is clearly the case with the Foreign Secretary, you don't have the first idea of what is going on.

But it is stretching the bounds of credulity for anyone to suggest that anything Johnson produced by way of a "10-point plan for a successful Brexit " was in any way "well-argued".

Not least, he is reactivating the "£350 million a week" lie and then simply claiming that "Brexit will be a success". He writes: "This country will succeed in our new national enterprise, and will succeed mightily", this being one of his ten points that will make Brexit successful.

For Newman to suggest that this is "well-argued" is to say more about her than Johnson, as indeed does Andrew Grimson's commentary in the Mail say more about him. He calls Johnson a "warrior" and describes his article as a "brilliant piece of rhetoric".

As one might expect, Rees-Mogg has labelled Johnson "brilliant" and Farage has "heaped praise" on him, declaring him, the "first pure Brexit voice from the cabinet in a long time".

The thing is, we need time-wasting interventions from the likes of Johnson like the proverbial hole in the head. The issue on the table at the moment (as it has been ever since the referendum) is how we negotiate a timely exit from the EU without trashing the economy.

In other words, rather than rehearsing the reasons why we should leave the EU, as Johnson seems intent on doing – yet again - we need to be concerned about how we do it. And, while it is always helpful (and indeed necessary) to have a vision for a post-exit UK, we really do need some ideas of how any of the glowing visions offered can be achieved.

What really doesn't help is Johnson adding to his "£350 million lie" with another blatant untruth as he tells us that, before the referendum, "we all agreed on what leaving the EU logically must entail: leaving the customs union and the single market, leaving the penumbra of the European Court of Justice; taking back control of our borders, cash, laws".

So far from the truth is the claim that we all agreed to leave the Single Market that Oliver Norgrove, a former Vote Leave staffer recently wrote that the campaign did not ever present to the electorate a plan for Brexit, and did not advocate leaving the Single Market. It could never claim that the referendum gave anyone a mandate on this matter.

At least the Financial Times has managed to steer clear of the adulation, remarking that Mr Johnson's contribution to the debate is at best facile, at worst dishonest while the Independent speculates that one of his aims is to stop Mrs May going too far in Florence in offering to pay for access to the single market.

If that is the case, far from being an optimistic appraisal of our post-Brexit prospects, this is a wrecking agenda cloaked in the rhetoric of optimism, giving it wholly negative characteristics. Vague on most aspects in his Telegraph article, Johnson is only ever really specific when he is talking down the Single Market.

Even then, not even his critics have got the full measure of Johnson, even if the Independent gets the closest, suggesting that his efforts are not as the Telegraph billed them, "a positive and bold vision for Brexit", but a sign of weakness and desperation.

The crucial issue here is that this facile, vain man is a distraction. The obsession the media have for him means that every time he airs his stupid opinions, he becomes a distraction. Even at the best of times, the media needs little excuse to fritter away its time and energies and Johnson provides them with yet another opportunity to draw the debate away from the important issues.

But with Mrs May shortly on her way to Florence to deliver a speech which could be the turning point in the negotiations, attempts to close down her options in pursuit of an agenda for which he has no mandate is an abuse of his position as a cabinet minister.

Still, Johnson is no stranger to abusing his position. As Brussels correspondent for the Telegraph, that was his stock in trade with his inventions and lies. In nothing else, the man is acting in character.

That he was once a journalist and still has not been disowned by his former colleagues brings shame to that trade – and shows them up for what they really are. Even The Times, the editor of which once fired Johnson for fabricating a quote, has lost its ability to call a spade a spade.

There were some important truths in what Mr Johnson had to say, it opines, one of which is that, having embarked on Brexit, "the only way we will make a success of it is with an optimistic vision of this country and its place in the world". As a newspaper, it claims to have espoused such a vision, of an "open and outward-looking Brexit". The Foreign Secretary, it adds, "has caught that mood".

On Brexit, it goes on to say, "our glum prime minister is in danger of falling into a similar trap that she encountered in the June election, of not really convincing anybody". It tells us: "She may not agree with everything Mr Johnson says and she will no doubt question his motives. But many in her party and the country will prefer to laugh with the sinner, not cry with the saints".

Bluntly, though, anyone attracted to the facile message that Johnson has managed to cobble together would deserve every bit of the shambles that will hit us unless Mrs May can get her act together. And nothing Johnson has done has in any way helped the Prime Minister towards a stable Brexit settlement.

Assuming Mrs May is receptive to and capable of taking advice, she needs to be told that the designated chief negotiator is making a pig's ear of his task and, left to his own devices, will have us crashing out of the EU with no deal – a prospect, she needs to be told, would be a disaster for the UK.

Too many people, whether driven by ignorance or stupidity, or both, remain keen to gamble with the idea of a no deal, even somehow convincing themselves that a walk-away position would allow us to continue trading with the EU on much the same basis as currently.

There are now only a few days before Mrs May possibly puts this position to the test, and brings the UK crashing down – destroying the Conservative Party in the process.

A responsible media and a grown-up commentariat would have been making the best of time available and rehearsing the issues that the Prime Minister must address in her Florence speech. Instead, as always, they have allowed themselves to be distracted by a "back-seat driver" and are wasting valuable time.

We could thus do with a lot less of Mr Johnson's "vision" and a lot more hard reality about how we are going to achieve Brexit without a disaster. At this stage, optimism is for fools. There is no sound basis for it. Only the tightest grip of reality is going to get us out of this mess.

Richard North 18/09/2017 link

Brexit: a series of imponderables

Sunday 17 September 2017  

Picking up on Juncker's state of the European Union address, Booker writes in this week's column that, if ever there was a reason why Britain should leave the EU, it was that blueprint for its future laid out by Juncker, in his speech.

The moment Britain leaves, he proposed, the EU must take a further giant leap forward to becoming a single state, with a single president, completely controlling the financial affairs of the countries making it up, which will all have to join the euro.

In fact, writes Booker, there is so little new about this plan that in essence it is merely fulfilling a blueprint first sketched out 84 years ago, in a book called The United States of Europe. It was written by a close ally of Jean Monnet, the man who years later was to do more than anyone else to shape the details of what would eventually become the EU.

The only difference was that, by the Fifties, Monnet realised that their dream could not be realised overnight. It should, therefore, be assembled stealthily, bit by bit, without for a long time declaring its real goal. And they should begin by pretending that it was just an economic arrangement, a "Common Market"; which was why, when Booker and I first unearthed this story, we called our book The Great Deception.

Nevertheless, however pleased we may be to be no longer a part of it, it is little comfort to contemplate what a mess we are making of leaving it. Ever more people are recognising the consequences of our choice to become what the EU calls a "third country", facing much of our £230 billion a year export trade to the EU with crippling border controls.

Even Philip Hammond told MPs last week that to leave without a deal threatens an end to the traffic which currently rolls "frictionlessly" across the Channel from Dover.

The Irish are waxing even more apocalyptic over the realisation that there is no possible practical solution to the “devastating” problems which will arise between them and the UK. Three thousand delegates to the National Food and Drink conference last week heard one speaker after another warning that in 2019 their trade with Britain could collapse.

To build and staff the facilities needed to check loads coming across the frontiers from Britain and Northern Ireland will take years (the same applies to our trade with the continent). The real problem, said the director of an EU-wide trade association, is that the EU "is negotiating with people who haven't done their homework".

This, Booker concludes, looks alarmingly like the epitaph for one of the greatest catastrophes we have ever walked into, with both our eyes and our minds firmly shut.

Interestingly, these words are written in the week leading to the Prime Minister's intended speech in Florence – so closely guarded that next to nothing of it is being leaked. Possibly, it is the case that Mrs May herself doesn't yet know what she intends to say.

We can be fairly well assured, though, that on the eve of the Labour Party conference, she will not want to be giving any hostages to fortune. And when she goes in front of her own conference the following week, she will be fighting for her political life.

These two key elements must surely be influencing the tenor of the speech but one might expect that the dominant influence is the need to break the negotiating logjam in Brussels. That, at least, is the logical inference.

However, ever since her Lancaster House speech, we've been aware that logic has not been the driving force behind Mrs May's actions. It would be unwise, therefore, to assume that the purpose of the speech is anything that we would recognise or regard as logical.

Earlier on, we were getting intimations that Mrs May was poised to pull the plug on the Brussels talks and invoke the "nuclear option" walking away without a deal. This would have been on the basis that her advisors are convinced that EU negotiators are bluffing, and will be prepared to give the UK the deal we want if only we hold our nerve.

More recently, there have been straws in the wind that have suggested that the game plan is to give formal notice of the intention to withdraw from the EEA and then to invite the governments of Efta and the other EU Member States to join with the UK in an all-nation conference with the view to reforming the EEA Agreement – thereby taking the trade discussions outside the ambit of the EU negotiators.

This in part explains Florence as the venue. It takes her outside the Franco-German "motor of integration" but puts her in the territory of one of the original Six and in the country most likely to be sympathetic to an appeal for direct talks.

Should this be acceptable, that would then just leave the "housekeeping" issues to be dealt with in Brussels, with Mrs May being prepared to sugar the pill by offering cash up-front on the financial settlement, sufficient to allow the existing talks to be kick-started. The fourth round in September would then enable the Commission to make progress in settling the outstanding issues, sufficient to give a positive report to the European Council in October.

Nevertheless, even if this is informed speculation, it is still speculation. We cannot claim to know what Mrs May has in mind. Outside her notorious inner circle, no one has any firm idea of what may come to pass. Worryingly though, the Prime Minister has been consulting with our joke Foreign Secretary Johnson, although it is near impossible to determine what effect that might have in the light of his incoherent intervention in the Telegraph, where he published his "10-point plan" for Brexit, laughingly called a "bold vision" by some of his more moronic supporters.

Even more worrying is that recently Mrs May had a private session with Patrick Minford, doyen of the "Ultras" and High Priest of the "walk-away" doctrine. This can only reinforce our concerns that that option is still on the table.

Brussels officials are already warning that they have low expectations of the speech and if in pursuit of her domestic political agenda Mrs May goes for a crowd-pleaser, the game will be over.

For a start, it seems unlikely to the point of near-certainty that Member States would not entertain the idea of cutting out the Commission and negotiating directly with the UK. And then, unless Mrs May is prepared directly to address the Phase One "housekeeping" issues, and put forward concrete proposals, the Commission talks won't be going anywhere either.

Here - whatever the rumours might be – it hardly seems plausible that Mrs May will concede post-Brexit payments to the EU, much less allow ECJ oversight over expat rights or even a "one-Ireland" solution to the Irish border problem. Labour would have a field day and she would be eviscerated by the Right in her own party.

We are left, therefore, with a series of imponderables to which there are no obvious answers. But, for all the delusional rhetoric pouring out of some quarters of the legacy media, there are no short cuts. Either Mrs May delivers the goods on Friday or we are precipitated into a crisis of unprecedented severity.

Richard North 17/09/2017 link

Brexit: determinedly Anglo-centric

Saturday 16 September 2017  

Nicky Morgan in her debut appearance as chair of the Treasury Committee, replacing Andrew Tyrie, does not seem to have tightened the committee's grip on the proceedings or managed any great improvement in the quality of the questioning.

This was the case with last Thursday's hearing which had three old hands from HMRC, Jon Thompson, Chief Executive, Jim Harra, Director General, Customer Strategy, and Nick Lodge, Director General Transformation, blagging their way through the session.

On Brexit, it was Thompson and Harra who got away with belching out a dense smokescreen of unmitigated extruded verbal material (EVM). But this was entirely the committee's fault. The MPs did not have the first idea of what questions to ask, and what to expect when they got answers.

Supposedly, the session was about the preparedness of the UK customs service (HMRC) for Brexit, but it should have been about border control – which is far more than just customs.

Jon Thompson gave a clue here, saying that three-quarters of the border interventions at Felixstowe were by Suffolk Coastal District Council, on port health issues. Their officers opened the majority of containers, and Thompson thought that this was in some way related to EU requirements.

This information sailed over the heads of the assembled MPs, unremarked upon. Border control is about customs – people in blue uniforms with gold stripes on their sleeves asking travellers if they have anything to declare. Everybody knows that.

But actually, even customs control isn't just about HMRC. The official system is essentially a partnership between the service at the departing port and the one at the receiving end. How well the goods flow (and revenue evaders are detected) depends on the relations between the two, and how well they work together.

Once Brexit comes, however, we will have torn up the exiting customs agreements with EU Member States, and the Efta/EEA states. So, what matters first is what sort of customs agreement will be finalised to take their place when we finally leave the EU.

However, when it comes to that, neither of our brave Excise officers was of any help at all – and nor could they be. Said Harra, in a statement of the bleedin' obvious: "Negotiations on the future partnership have not yet started". And that means there is no way of knowing what the outcome might be.

To give Nicky Morgan her due, she did try to tease more out of the man, asking him what "confidence" he had in the planning of customs authorities in other EU countries. She wanted to know if Harra and his merry men were "having conversations with counterparts across the EU" - particularly France.

Since he could hardly say anything else (and retain any credibility) Harra admitted that the actions of EU customs services, or the lack of them, were "a significant concern". We do have regular dealings with our counterparts in all the member states, he said, "but when it comes to post-Brexit arrangements, all the Member States have been clear that that is a matter for the Commission and the Commission's negotiating team to deal with".

And therein lies one of the most serious problems we have encountered (so far) with Brexit. since nothing at all is happening. "We are not having significant discussions with other customs authorities in the EU about what their arrangements will be post-Brexit", said Harra. He then added: "Clearly, just as there is a task for the UK to deliver, there'll be a task for them as well and I think more insight into their preparedness would be very useful to us, but we don't currently have it".

So, putting this together, we have the other half of the official system which is making no preparations that we know of, leaving the post-Brexit arrangements for the Commission do decide, with "our" team having no useful insight into their degree of preparedness.

We then get Jon Thompson, any many deviations and discussions about other issues. Coming back to the point. The major concern of the HMRC, he says, is the "closed loop system" of Dover to Calais. This is the area where he and his colleagues are focusing the most.

Harra was later to admit that there would be additional burdens on the other side of the Channel and, reinforcing our fears, Thompson pointed out that the situation on the other side of the Channel was "more problematic".

Here is much talk about "Operation Stack" on this side of the Channel, he said, but there is a risk that you could end up with the French equivalent, because you can't get through Calais to get to Dover. While everyone is trying to leave Dover, you can't get in so we need to make sure the system is balanced - it only takes two hours for everything to stop, he added.

Once again, this provoked no great reaction from the assembled MPs who then went on to talk about whether there was a need for additional infrastructure for HMRC. The idea was dismissed. HMRC didn't need it, although it was "perfectly possible that other government departments need additional infrastructure".

It was there that the comment about the activities of Suffolk Coastal came in – the officials of which are actually implementing the EU's "official controls". And it was left hanging that they might need additional infrastructure.

Such is the determined Anglo-centricity of the Committee though that not one MP thought to put two and two together, and suggest that, if additional infrastructure might be needed this side of the channel, what about the other side? The question went unanswered.

One thing that struck me though was Harra's admission that the current electronic customs system at Dover lacked an "inventory link" which meant that there was no way of tying together customs declarations with the trucks that were carrying the goods. That required paper processing at the port.

But if we do not have that information electronically, that means we can't transmit it to the French, which means that they will also have to check vehicle paperwork manually, adding to delays.

The thing here though is that, from Brexit day onwards, trucks carrying foodstuffs of animal origin will have to be identified and then passed on to Dunkirk or – for the most part – returned to Dover. There simply isn't the capacity to handle them.

Then the more detailed screening will start. There will be a high probability that any vehicle carrying chemicals – to which the REACH Regulation applies - will be carrying goods which have not been registered in accordance with EU law, having been registered by a UK-based company.

Thus, any vehicle carrying chemicals – and that can include things like cleaning agents, adhesives, industrial solvents, paints, corrosion treatments and much else – will have to be checked and registrations verified. Full ingredient lists will have to be obtained and, in many instances, physical inspections will have to be made.

Any truck carrying medicines, medical equipment, or medical devices, will have to be checked. Those carrying consignments of machinery – and even things such as household lawnmowers – will have to be checked, to ensure that valid test certificates are in place.

Vehicles and vehicle parts will also need to be checked. Any that rely on UK approvals may have to be refused entry, and returned to Dover. Aircraft parts will likewise need to be checked.

Then, if there has been no deal, the loads on British-registered trucks will have to be transhipped, as British vehicles will not be allowed through, as the operators' licences will not be valid. Nor, or course, will the driving licences, or the drivers' certificates of professional competence.

Bearing in mind the limited space at Calais, there will be no room for the bulk of the inspections, and with the number of truck being held for inspection or return will quickly overwhelm the facilities. Mr Lodge's two hours delay will be seen as an impossible pipe dream.

And it is then that we will see Operation Stack. If the vehicles and loads cannot be cleared out of Calais port, that means that inbound ferries will not be able to offload. And if they can't offload, they can't return for new loads. And so the system grinds to a halt.

But nobody sitting though that Committee session would get any real idea that this was the most likely consequence of Brexit – deal or no deal. The real damage is done by Mrs May's determination leave the Single Market. That is what is going to cause gridlock.

But the MPs didn't want to know. And they will never notice the chaos until it happens. They are in another universe.

Richard North 16/09/2017 link

Brexit: leaving the Passport Union

Friday 15 September 2017  

Third country nationals (i.e., those persons from outside the EEA) intending to travel to the UK must have valid passports or identity cards. And they must be valid for the entire length of their intended stay.

As regards the EU, we are all – whether we like it or not – EU citizens. That guarantees freedom of movement as a treaty right, so we can enter EU (and EEA) states with a minimum of formalities. But, from Brexit onwards, we ourselves become third country nationals in respect of the EEA member states. We will no longer have a right of entry.

In leaving the EU, though, we drop out of something else, the nature of which is rarely discussed, mainly because it is so much of the fabric of our membership that it has been lost in the mists of time. The thing we lose is our membership of the Passport Union agreed at the European Council of December 1974 - shortly after we had joined the EEC.

This was implemented by the non-binding Council Resolution of 23 June 1981 and updated by the Council Resolution of 10 July 1995 which establish a uniform format for the passports of Member States.

When we drop out of the EU, therefore, it isn't just the Customs Union that goes. It is also the  Passport Union. We become citizens of a "third country", reliant now on so-called Paris Conference on Passports and Customs Controls for the basis of document recognition. But, while that establishes uniform standards for international passports, it does not remove from individual states the right to set their own conditions for which documents they recognise.

In EU terms, to facilitate the entry of third country citizens to the EU, the passport issuing countries must appear on a permitted list, currently established by Decision No 1105/2011/EU, with a list of the recognised documents in respect of each country. Details can be accessed through a dedicated Council Website. An example of the actual list here, with the Schengen list here. The list is routinely updated by a Commission Implementing decision.

For a person from a third country to be able to enter the European Union without complications, the country that issued their travel documents must appear on this list. As Decision 1105/2011 helpfully states, "a Member State's failure to notify its position with regard to a travel document may cause problems to holders of that travel document".

The list itself records the individual permissions from the Member States and documents that are recognised – with the relevant conditions. If a country is not on this list, there is no validated evidence that any entry documents are valid – hence the likelihood of there being "problems".

Currently, the UK is not on that list. It cannot be because it is not a "third country". As long as it is in the EU, it is covered by a similar list available for download from the Council website which identifies EU Member States (and the Efta Members, which include Switzerland). But, from midnight of the 29 March 2019, the UK no longer qualifies to be on that list.

Whether the "third country" list will be updated immediately I simply do not know. But, since the list comprises the summation of the decisions made by the individual Member States as to what they will and will not accept, each state will have to make its own decisions and convey them to the Commission. The Commission will have to amend the list, showing the UK as a third country, with all the relevant details. 

What this all boils down to is that, from the 30 March 2019, the UK will for the purposes of issuing travel documents become a new state. This will require formal decisions from each of the EEA states as to which UK documents they will accept as being valid travel documents.

But it doesn't stop there. Since we have lost freedom of movement, there is also the question of whether the states will require visas, and under what conditions – which again must be notified to the Commission.

What is very clear from all this is that document recognition is not automatic, and that is further complicated by the fact that an online database containing specimens of all valid travel documents must be maintained "to facilitate the examination of a given travel document by border control authorities and consular staff". Obviously, if specimens have not been lodged, holders of the travel documents for which specimens are missing may also have problems.

There are, of course, few recent instances where an entirely new country comes into being but for the UK becoming newly independent of the EU, that is the administrative effect of leaving. Sorting out travel documents and their recognition by other countries is one of those administrative details that must quickly be resolved. We also need to look at transitional arrangements, where existing passports continue to be recognised.

Clearly, this must be the preferred option for the UK. We do not want a situation where a new-style UK passport has to come into force on 30 March 2019 and every passport holder has to obtain a new passport before they can travel to an EEA state.

Also, we do not want a situation where, on day one, the formalities have not been completed. This could lead, as a worst case scenario, to UK passport-holders being refused entry to all EEA states until the situation has been regularised.

No doubt, the administrative requirements will be discussed by our Brexit negotiators with their counterparts in Brussels. Then the governments of each of the individual Member States can be contacted to ensure that the relevant decisions are made, the Commission list is updated in good time and UK documents (new and old) continue to be recognised.

There is, however, room for concern. Talks related to freedom of movement are still stalled over expats and their civil rights. So far, recognition of travel documents has not even been tabled, far less discussed and agreed.

Nor can we assume that talks will necessarily be smooth, or that their rapid conclusion can be guaranteed. Within the range of documents that can be issued are refugee travel documents, repatriation certificates and certificates of return – any of which may relate to the movement of asylum seekers (past and present). That EU Member States might demand elements of conditionality in return for free access to UK passport holders cannot be ruled out.

Furthermore, we cannot assume that all the relevant issues will be raised and resolved in good time. The possibility of the UK walking away from the talks continues to be raised and has not officially been ruled out. With Mrs May shortly on her way to Florence, no-one is currently willing to state what she is going to say. We have to live with the prospect that a "no deal" scenario is still on the cards.

It would appear that if the UK does walk away from the talks without a deal, for purely administrative reasons none of our passports will be valid for the EEA on Brexit day and for some time thereafter. Furthermore, since similar administrative issues might arise with other countries – not least the United States – we could find ourselves excluded from other countries for an indefinite period.

Fortunately, every cloud has a silver lining. In that event, we will not have to worry about international flights from the UK being grounded, since none of us will have passports that will permit us to travel. We may even stop worrying about flying to distant places and learn to love Skype conference calls.

Richard North 15/09/2017 link

Brexit: of dreams and nightmares

Thursday 14 September 2017  

One of the really good things about Brexit is that Juncker's state of the union speech yesterday was the last but one that we'll have to pay any attention to. We have the 2018 version to come but, before we get to the speech of the following year, we'll be out.

We know that is the case because President Juncker told us so. "On 29 March 2019", he said, "the United Kingdom will leave the European Union. This will be a very sad and tragic moment. We will always regret it. But we have to respect the will of the British people".

Despite the tone of his speech which, if anything, reaffirmed my view that getting out was the right thing to do, Juncker also thinks that we will regret leaving.

Nevertheless, there is an outside chance that, by the time we reach that point, our own government will have made such a mess of the Brexit process that it will have gone back to the European Council to plead for extra time. There is just a possibility, therefore, that we won't have left the EU on the appointed say.

This, though, looks increasingly unlikely. The current mood music suggests that the "colleagues" will be pleased to see us go. There will be no appetite for an extension which keeps us in the European Union past 29 March 2019, especially as a few weeks after our projected leaving date there are the European Parliament elections. The last thing the "colleagues" want is the complication of a new batch of UK MEPs.

We will have our own problems to deal with by then and if Mrs May has really taken us out of the EEA/Single Market, they are going to be so serious that we will be totally absorbed in them. We won't have the time or inclination to take much interest in what is going on in the European Union. It us with more or less out of academic interest, therefore, that we note that Juncker aims to set up what some mean-minded spirits might call a celebratory meeting – he calls it a Special Summit – on the first full day of Brexit, the 30 March 2019.

This, he wants in "the beautiful ancient city of Sibiu", or Hermannstadt as Juncker knows it. It should, he says, "be the moment we come together to take the decisions needed for a more united, stronger and democratic Europe".

That is something a certainly won't miss – the continuing assertion that "Europe" is to be made more "democratic". If only these people could be honest with themselves, and recognise that the structure of the European Union was deliberately designed to be "democracy resistant", keeping elected politicians out of the loop so that the damage the cause can be contained.

Anyhow, as we hand control (of a sort) back to our own elected politicians - and discover that they have made such a mess of Brexit that nothing in our trade system works any more - at least we will have the small comfort of knowing that the "colleagues" are all in one place, when we need to get in touch with them.

One wonders, though, whether Juncker is putting them just about as far away as possible from us, just to make it more difficult for us to complain to them about their part in the mess we will be experiencing. More likely, it's just a coincidence as Romania will be the country holding the EU's infamous rotating presidency in the first half of 2019. That's another thing we want to worry about.

But the main thing we won't have to worry about is the predictable calls for more integration and reducing the powers of Member States. When it comes to "important single market questions", for instance, Juncker wants decisions in the Council to be taken more often and more easily by qualified majority – with the equal involvement of the European Parliament.

For that, the man says, no treaty change will be needed. Courtesy of the Lisbon Treaty, there are the so-called "passerelle clauses" which permit moves from unanimity to qualified majority voting in certain areas – if all Heads of State or Government agree to do so.

Juncker is also "strongly in favour" of moving to qualified majority voting for decisions on the common consolidated corporate tax base, on VAT, on fair taxes for the digital industry and on the financial transaction tax. Europe has to be able to act quicker and more decisively.

Another thing he wants is "a stronger Economic and Monetary Union". The euro area, he says, is more resilient now than in years past and we now have the European Stabilisation Mechanism (ESM). He believes the ESM should now progressively graduate into a European Monetary Fund and be firmly anchored in "our Union". The Commission, he says, "will make concrete proposals for this in December".

Very much in new treaty territory, we are then told of the need for a European Minister of Economy and Finance. This will be a European Minister who "promotes and supports structural reforms in our Member States" and will "build on the work the Commission has been doing since 2015" with its Structural Reform Support Service. He or she should also preside the Eurogroup.

Juncker wants being a full member of the euro area, the Banking Union and the Schengen area to become "the norm for all EU Member States". And his new treaty, in time, will shore up "the foundations of our Economic and Monetary Union so that we can defend our single currency in good times and bad, without having to call on external help".

Other thing over which he enthuses is an EU "stronger in fighting terrorism", to which effect he's calling for a European intelligence unit that ensures data concerning terrorists and foreign fighters are automatically shared among intelligence services and with the police. And he sees a strong case for tasking the new European Public Prosecutor with prosecuting cross-border terrorist crimes.

There is a nice little bombshell for us as well. "More democracy means more efficiency", Juncker says , clearly having no experience of actual democracy – one of the least efficient forms of government ever invented.

Europe, he says, would function better if we were to merge the Presidents of the European Commission and the European Council. It would be "easier to understand if one captain was steering the ship" and a single President would "better reflect the true nature of our European Union as both a Union of States and a Union of citizens".

If we were still committed to membership of the EU, all this would be going down like a bowl of cold sick – yet another Commission attempt to take greater control and advance the process of integration, We would be seeing eruptions from all quarters and ritual assurances from government that there were "red lines" that would never to be crossed. At least we are spared this.

But on Brexit day, Mr Juncker wants Europeans to "wake up to a Union where we all stand by our values". And eventually, when the UK is no longer in the way and the "colleagues" have their new treaty, it will be a Europe …
… where we managed to agree on a strong pillar of social standards, where profits will be taxed where they were made. Where terrorists have no loopholes to exploit. Where we have agreed on a proper European Defence Union. Where a single President leads the work of the Commission and the European Council, having been elected after a democratic Europe-wide election campaign.
Europe, he says, was not made to stand still. It must never do so. Helmut Kohl and Jacques Delors had taught him that Europe only moves forward when it is bold. The single market, Schengen and the single currency were all written off as pipe dreams before they happened. And yet these three ambitious projects are now a reality.

On Brexit day, though, we will have no need to worry about such things. In fact, we'll have other preoccupations, such as watching over-excited television reporters squeaking with surprise at the growing queues of trucks (and private vehicles) outside Dover. Thus, Junker can have his little dreams. We will have a nightmare to attend to.

Richard North 14/09/2017 link

Brexit: playtime's over

Wednesday 13 September 2017  

What we saw yesterday, from my analysis of the Institute for Government's report on "Customs", is that there are people at (or close to) the top of the information chain who simply don't know what they are talking about.

But it also illustrates other tendencies which tend to kick in when facing insoluble problems. If one ignores some of the key factors that make a particular problem insoluble, or redefines the problem in such a way that constraints disappear, then all of a sudden one can find answers which previously could not exist.

This is where IfG went with the Border Inspection Post problem. As we have defined it, it is insoluble. There simply isn't enough capacity in the Channel ports to handle UK consignments after Brexit. And there isn't enough time to install that capacity by Brexit day, even if we started now. Since no attempts is being made to remedy the capacity shortfall, there is not the slightest chance of seeing "frictionless" trade in the sectors affected, after Brexit.

However, if you ignore the "official controls" that regulate the movement of such goods, and instead use the Union Customs Code (which actually doesn't apply), you can invent a solution that couldn't otherwise exist, in the form of pre-export clearance.

As long as the likes of the IfG can do this, and the media fails to call out the fantasists, then we can soldier on in a fog of ignorance, pretending that things aren't as bad as they actually are and that, when Brexit finally arrives, we can continue trading much as we did before.

Unfortunately, where the IfG goes, others follow - and some may even be leading the way in the fantasy stakes. That much is evident from the Legatum Institute paper on Northern Ireland.

By way of background, we have recently had Michel Barnier speaking on the subject, declaring in no uncertain terms that, "The solution for the border issue will need to be unique. It cannot preconfigure the future relationship between the European Union and the UK. It will require both sides to be flexible and creative".

But what he then saw in the UK position paper on Ireland and Northern Ireland worried him. The UK, he said, wanted the EU to suspend the application of its laws, its Customs Union and its Single Market at what will be a new external border of the EU. And it wanted to use Ireland as a kind of test case for the future EU-UK customs relations.

"This", said Barnier, "will not happen", adding: "Creativity and flexibility cannot be at the expense of the integrity of the Single Market and the Customs Union. This would not be fair for Ireland and it would not be fair for the European Union".

With that unequivocal position in mind, we return to the Legatum Institute. It offers its own interpretation of "the challenge" facing us. Despite the talk of an "invisible" border and the UK position paper arguing for "avoiding a hard border", the Institute only wants to make sure that Brexit "will not lead to an unnecessary hardening of the border between NI and ROI".

It then goes on to say that the challenges posed by the border "mirror those that must be resolved between the UK and EU". It also considers that: "The problem presented requires solutions that can be deployed between the UK and the rest of the EU, and could become a model for other border arrangements around the world".

In other words, the very thing that Barnier declares "will not happen" is precisely that which the Institute suggests could happen while also arguing for an all-UK solution rather than the "unique" solution that the Commission has specified must happen.

In quantum terms, this leaves the IfG trailing in the fantasy stakes. In Legatum, we have a think tank going out of its way to suggest options which have already been unequivocally ruled out by the EU's chief negotiator. This simply cannot be considered rational behaviour – unless, of course, there is another agenda at play.

Truly, though, the Legatum Institute is in the land of the fayries. It is not just addressing the Irish question, or even Brexit. It is developing an advanced case of megalomania, seeking to create "a prototype for ensuring smooth, low friction border between nations" which will not only solve the problems for Ireland and Britain, but "can serve as a prototype for ensuring smooth borders around the world".

"Much has been made", says Legatum, "of potential special arrangements between ROI and NI", but it believes that, "any settlement will be determined by the wider agreement between the UK and EU". This creates, it avers, "an opportunity to deploy the kinds of solutions in the Irish context that would also work in the UK-EU".

Not content with this, we are also told that the situation presents "an opportunity in the UK-EU negotiations to seize the initiative and discuss the future trade relationship now, as we cannot discuss the issues between the ROI and NI without discussing the future relationship between the UK and the EU".

This is a special kind of madness. Once again, the very thing that the Commission has said it will not do – discussing the future relationship between the UK and the EU, in the contest of the Irish border – is the very thing Legatum is suggesting we should do.

To follow the Legatum route, therefore, would simply ensure a failure of the Brexit Article 50 negotiations, triggering a "no deal" scenario, which could well be what Legatum's sponsors really want. We really need to go no further with this madness.

However, there is a section in the report which touches on the same ground dealt with by the IfG, where there is a discussion on the cross-border trade in food and live animals. Legatum's solution here, is innovative – to say the least.

Not for Legatum is there the fiction of pre-export clearance. Instead, it advocates the use of the WTO Agreement on Sanitary and Phyto-sanitary measures (SPS Agreement) to put pressure on the EU to agree suitable mutual recognition provisions on the date of Brexit.

Article 4 of the SPS Agreement, says Legatum, provides that members should recognise each other's regulations, even where they are not technically identical. Thus, it says, even, if the UK chooses to adopt different food safety standards after March 2019, the SPS Agreement gives the UK the right to take legal action to ensure that it is able to continue exporting to EU member states, provided that the purpose of the regulation (maintaining effective food standards) is secured.

Here, we can see a different fantasy being played out. The Institute is confusing the terms "mutual recognition" and "equivalence", treating them as if they are the same things. They are not. And Article 4, to which it refers, does not mention mutual recognition. It refers to "equivalence" and requires that the exporting state "objectively demonstrates to the importing Member that its measures achieve the importing Member's appropriate level of sanitary or phytosanitary protection".

For sure, there is then a provision that requires WTO members to "enter into consultations with the aim of achieving bilateral and multilateral agreements", but these are on the recognition of the equivalence of specified sanitary or phytosanitary measures.

Legatum, therefore, is being unrealistic in arguing that the SPS Agreement gives the UK the right to take legal action against the EU, should the UK choose to adopt different food safety standards. It would be for the UK to demonstrate its "equivalence" to the EU.

As much to the point, though, Article 4 requires that "reasonable access shall be given, upon request, to the importing Member for inspection, testing and other relevant procedures", which thus legitimises the EU's prior approval system. The UK cannot, come what may, demand access for its goods, simply on the basis of notional equivalence.

Article 3 then requires Members to "base their sanitary or phytosanitary measures on international standards, guidelines or recommendations, where they exist". The EU's standards are Codex compliant and the very existence of such international standards would enable the UK to be excluded from EU markets if it deviated from those standards.

If we then look at Annex C of the SPS Agreement, we see provision for control and inspection of imported foods, with the proviso that procedures must be carried out "in no less favourable manner for imported products than for like domestic products".

As I explain here, internal controls on foodstuffs in the EU are just as rigorous as those applied to imports. But, while controls are applied internally at the points of production and during distribution and marketing, the EU has no jurisdiction over the production of food within third country territories so it compensates by applying controls on imports at its external borders.

Its indifference to real world considerations, though, tends to confirm that Legatum is working to a different agenda. And we got more than a hint of that the day before yesterday, in The Times and the Independent.

In those papers, we saw Crawford Falconer, a former member of the Legatum's "special trade commission", backing a paper produced by the Institute last year. What makes this interesting is that the New-Zealand-born Falconer was last month appointed chief trade negotiation adviser to Liam Fox's Department for International Trade, and now has considerable influence in Whitehall.

What amounts to Legatum's Brexit template wants us to leave the EEA in order to negotiate a series of free trade agreements with a "Prosperity Zone": nations which include Australia, New Zealand, Singapore, Canada, US and possibly Mexico and Switzerland. Access to UK markets will be offered in exchange for commitments to regulatory reforms, especially in the service sectors, potentially enabling the UK economy to make substantial gains.

And the person following this agenda is Mrs May. She is now expected to give formal notice to leave the EEA in her speech due within the next two weeks. In anticipation of this, the EU has announced it is postponing next week's scheduled round of talks with the UK, while they wait to see what she has on offer.

Sources are suggesting that Mrs May might abandon the UK's attempt to agree a comprehensive FTA and instead by-pass the Commission by calling for direct talks with EEA members. The target would be a replacement EEA deal, under a different name, focusing on services and shorn of unrestricted freedom of movement.

Things can change very rapidly but anything close to this would confirm that the Legatum Institute is shaping Brexit, bringing it closer to the agenda of its New-Zealand-born sponsor, multi-billionaire Christopher Chandler.

Someone clearly not in the loop is Philip Hammond who, yesterday, warned the Economic Affairs Committee that UK ports could be plunged into chaos if the country crashes out of the EU without a deal which kept customs arrangements similar to those in place now.

"Anyone who's visited Dover", he said, will know that it "operates as a flow-through port". Current volumes of trade "could not accommodated if goods had to be held for inspection", even just minutes. This "would still impede the operation of the port".

Roll-on, roll-off traffic at Dover, Hammond said, "is predicated on trucks rolling off a ferry immediately, out of the port and the ferry reloading and departing pretty rapidly – Ryanair style turnaround times. Anything that caused delay in vehicles exiting the port, delay in vehicles offloading, would cause significant disruption to patterns of movement".

Work, he said, was under way on contingency arrangements to try to maintain smooth operations even if the UK crashed out of the EU without a deal. But, he admitted, "We have had less engagement than we would like with customs counterparts in our immediate neighbours at the technical level, both to discuss possible deal scenario challenges and no deal scenario challenges".

Clearly, we're not going to get a customs deal and, on current form, it doesn't even look as if Mrs May will try for one. Thus, it's beginning to look as if playtime is over. On 30 March 2019, it isn't quite going to look like the picture I've used. But soon afterwards, it may feel like it.

Richard North 13/09/2017 link

Brexit: a serious lack of urgency

Tuesday 12 September 2017  

As we slide closer to the abyss called Brexit, we face a crisis of unknown proportions, the cost of which could be measured in hundreds of billions of pounds over the next decade or so, depending on how badly the process is handled.

At the epicentre of the crisis is our relationship with the EU, where the ability to continue trading will be determined to a very great extent by the border controls in place once Brexit takes effect. Onerous and inflexible controls have the potential over the short-term so seriously to disrupt trade that we could see a period where there is scarcely any movement of goods to and from the continent via the main Channel ports, with serious long-term damage to trading levels.

Where we are also seeing a lack of engagement by government and a sense of drift, with no signs of leadership from the May administration, the main impetus for change and direction must come from outside government. In such occasions, it is not unusual for think tanks to take a lead.

Away from the sterility of the Westminster debate on the Withdrawal Bill, therefore, the publication yesterday by the Institute for Government (IfG) of a report, entitled: "Implementing Brexit: Customs" was potentially of some importance.

A well-focused and properly framed report from such a prestigious institution could have revitalised this flagging but nonetheless important corner of the debate and provoked the Government into taking urgent action. Alas, though, whatever expectations there might have been, they have not been realised.

The report's problems are in part illustrated by its title which, to say the least, is unfortunate. Focused on "customs", it fails to convey adequately (or at all) that the problems we are confronting are not confined to customs per se, but to the wider issue of border controls as they affect the trade in goods, post Brexit.

The EU system of border controls does include customs but - not properly appreciated by many – it also encompasses separate and distinct "official controls" dealing with live animals, foods, plants and related goods, including timber products. These are the so-called sanitary and phytosanitary controls.

These goods that come under this category comprise a significant part of EU-UK trade. The border controls applied to them, separately from customs, will have a significant impact on the UK and its EU trading partners in the aftermath of Brexit.

Yet, running throughout the IfG report is a fundamental failure to understand the impact of these separate controls. In my view, this failure, together with other important omissions which I will discuss, seriously diminishes the impact of the report. That is a pity as the IfG is one of the better think-tanks and is one that is attempting to explain Brexit issues in a dispassionate manner.

Without nit-picking on the detail, we can see the problems with the report emerging early on, with the summary telling us that:
…responsibility for different elements of the customs process sits right across the public sector. From HM Revenue and Customs (HMRC) to the Horticultural Marketing Inspectorate, from Border Force to over 100 port health authorities across the country, day-one delivery depends on a very large, disparate group all working closely and effectively.
This, as readers of this blog will know, is plainly wrong. The port health system in this country – run by local authorities – works to the EU's "official control" regime and is entirely independent of the customs system. The same goes for the systems in the other 27 EU Member States.

This error is repeated in the body of the report, where the Institute (page 8) tells us that: "What we call customs goes beyond simply the collection of tariffs on goods as they are traded. It involves enforcement of a wider set of rules and regulations that determines what can be traded and how it is treated by authorities". Then, set out in a table (Table 1) is a list of Customs controls which wrongly includes: "Environment and health: Phytosanitary, veterinary and hygiene controls".

The report goes on to say that with falling tariffs and higher volumes of trade, focus has shifted from revenue generation and towards security, regulations and standards.

Governments, we are told, are focused on the careful management of what is going in and out of their country – preventing smuggling, making sure that animals aren't carrying diseases, checking that food is safe to eat, ensuring that chemicals are properly handled and car parts aren't faulty and, crucially, making sure that their domestic traders aren't being unfairly undercut.

These rules and regulations, it rightly says, are just as important as duties and taxes being collected (if not more so).

We then begin to get a sense of how intrusive have become the "rules on agri-food" as currently applied in the UK. Between 20 and 50 percent of shipments of beef and lamb imported from outside the EU, we are told, must be checked by a food safety agency at the border.

We are also told that "the UK is party to agreements such as the one between the EU and New Zealand, which exempts most checks". The EU–NZ deal only requires two percent of lamb shipments to be sampled at random. "Which shipments are randomly sampled", the report claims, "is determined by HMRC and relayed to freight services agencies at ports and airports via CHIEF (the computerised customs declaration service).

Tellingly, there is no source attributed to this claim. But then it is hard to see how one could be a valid reference. The claim is fiction. According to EU guidelines, prior notification of the physical arrival of the products on the EU territory must be provided to the border inspection post where the goods will arrive, using the Common Veterinary Entry Document (CVED). This is sent directly to the "competent authority" at the point of entry. HMRC is not involved in this process.

Once we leave the EU, we have to deal with the problem that the UK will become a "third country". And, as specified by Regulation (EC) No 882/2004, no third country can export food of animal origin to the EU unless it is on the list of approved countries.

Under normal circumstances, only a third country can apply to be on the list of approved third countries, which puts the UK in an interesting Catch 22 situation. In order to export to the EU after Brexit, it must be on the approved list. But it can't apply to be on the list until it has left the EU. And, given that approval is not automatic, there could be a time lapse of weeks or – more likely – several months - when exports mat not be possible.

As for the reverse flow, the Institute tells us that, currently, 70 percent of the UK's food imports by value come from the EU. At the moment, these are not subject to checks. Following Brexit, the UK could unilaterally continue allowing EU goods to enter the UK without regulatory checks, on the basis of trust. To do so would be within the UK's gift as an independent nation.

However, without a trade deal in place, there is an argument – which the Institute does quite neatly rehearse – that it must dismantle the checks on all other food imports or fall foul of WTO anti-discrimination rules.

On the other hand, if we have to inspect all EU food imports, says the IfG, this "will place substantial new burdens on the UK's border operations". In particular, we are told, shipments of agri-food which require a Border Inspection Post (BIP) for checks and – unlike most other goods – cannot generally be cleared inland due to the risks of spreading pests and diseases while in transit.

What I find lacking here, though, is the flat, neutral tone of the discussion. There is no possible way that the UK system could handle the increased inspection burden. There simply isn't the capacity, either in terms of the facilities or the trained staff. It takes three years to train a qualified food inspector, and probably longer to build the extra BIPs.

If we decided – which the IfG says is a possibility – to forego the checks, and face down any WTO complaints from our other trading partners, then there other issues, to which the Institute does not refer. To what extent, one needs to ask, can the UK rely on the good faith of EU Member States to ensure that food exports to the UK will be maintained to the requisite standards? How will we be able to tell if some traders start using us to offload the rubbish that they could not sell on their own domestic markets?

Now we come to an area not directly related to the food issues, amounting to one of those important omission that I referred to earlier, which fatally weakens the report. This comes in page 20 (and subsequently), where we are told that our ports could "grind to a halt".

I actually take no great issue with the thrust of the section, in terms of the predicted outcomes. We see rehearsed the familiar litany, whereby the total number of customs declarations will undergo a five-fold increase and there will be an increase in customs checks. Movements will rapidly grind to a halt as vehicles back up waiting to be processed by customs authorities.

Where I take exception to the narrative is the assertion that the adverse outcomes are all predicated on a "no deal" scenario. What the IfG fails to do is come to terms with the fact that so many of the effects it reports will occur whether there is a deal or not. As with so many others, the Institute simply don't seem to be able to come to grips with our coming status as a "third country".

There's the rub. On Brexit day and thereafter, the UK has moved outside the EU's external border. Irrespective of whether we have a free trade agreement with the EU, all exports to the Union will have to be declared and routine checks will be made at the point of entry.

As we are intending to be outside the Single Market, there will also be other complications which will affect the movement of a wide range of products. Medicines which have been manufactured in the UK under market authorisations held by UK companies, will no longer be permitted entry. The same applies to chemicals, to aviation components, to some types of machinery, to vehicles, and many other products.

Unless businesses have been given plenty of information and advance warning, it is almost inevitable that there will be problems and misunderstandings at the new border, with the potential for endless delays. Yet nothing of this is conveyed by the Institute report.

But the failure doesn't stop there. In a major breakdown of understanding, as we get into recommendation territory, the Institute optimistically asserts that that there is "one alternative to border checkpoints".

We could, it says, "carry out investigations and compliance audits at the source of production rather than at the border". For instance, conducting onsite veterinary controls of cattle and sheep going for slaughter could allow them to be pre-cleared electronically, avoiding the need for testing and checks at the border. This is not true.

To compound its mistake, the Institute calls in aid the Union Customs Code which permits pre-clearance for imports. But, the Customs Code does not apply to sanitary checks. And under the official controls regime which actually does apply (see Article 23), pre-export checks do not remove the need for import controls. They simply reduce the frequency of those controls – as in the case of New Zealand lamb. 

Elsewhere in this blog, many times, I have written of the serious lack of BIP capacity in EU Member States, to the extent that, when and if we are able to resume animal-based food exports, there won't be sufficient facilities to inspect the consignments we send. If vehicles delivering loads are not intercepted before they leave the UK, they will be held up in continental ports awaiting veterinary clearance that will never come.

In a fine turn of phrase, the Institute calls this not a "cliff edge" but a canyon. We descend one steep wall and then have to climb the other. The main report author, Joe Owen, tells the Financial Times that the scale of disruption is not something the British side will be able to control easily.

The UK, he says, is working hard to get its border arrangements ready. "But", he adds, "unless Calais, Dunkirk, Rotterdam or other European ports are also ready for Brexit, British exporters will face significant disruption to their supply chains". Bluntly, this is a bizarre description. Faced with an almost total collapse of cross-Channel trade, all Owen can manage is the anodyne "significant disruption".

What is even more bizarre though is the action the Institute recommends to head off this "disruption". The Government, it says, "should undertake detailed bilateral engagement activities with authorities in France, the Republic of Ireland, the Netherlands and other EU member states to ensure that both sides of the UK–EU border are prepared for Brexit".

And that's it. That's all you get. Confronted with a looming crisis of monumental proportions and a Government that is unable yet to tell us what kind of agreement we are aiming for, with not even the hint of a draft agreement in place and no sign that EU negotiators are willing even to discuss trade, all the IfG can do is recommend "bilateral engagement activities" with our main European trading partners.

It would have us ask these nations to commit unknown amounts of money to deal with an unknown settlement against an unknown timetable, handing an unknown level of traffic delivering goods under terms which – you guessed it – are unknown. And that is considered to be a rational recommendation, as proposed by a top London think tank.

If nothing else, this illustrates the parlous state that the Brexit process has reached, where we are rapidly descending into a state of crisis. But, given that is the case, you would expect alarm bells to be ringing, with calls for immediate measures.

Instead,. for its headline issue, the Institute chooses to highlight the potential costs of one part of the system. On the basis that there could be 200 million customs declarations, and a typical broker charge of £45 for making a single declaration on behalf of a client, it calculates a nominal total of £9 billion incurred by the trade as a cost to business.

This is an entirely fictional sum as most shippers make their own declarations. Ironically, the sum annually is not very different from what we pay as a nation in net EU contributions. But all this spurious calculation does is distract from the already weak findings in the report.

As to its general thrust, the IfG has seriously understated the gravity of the situation. A well-meaning attempt at neutrality downplays what are very serious dangers at a time when a damning critique would have been entirely appropriate. Polite diplomacy is valueless: we are way past diplomacy.

Consequently the report is a damp squib when we needed a stick of dynamite with a burning fuse. If there is one thing we have learned, moderate opinions in immoderate times cannot punch through the noise. Unless IfG is prepared to take a more critical stance, its efforts will be forgotten within hours of publication.

And if it is not making an impact on the most important political issue of the century that this country faces, what is the point of its spending £4.4 million (in its last year of operation)?

Richard North 12/09/2017 link

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