Brexit: completely over their heads

Thursday 23 February 2017  

One of the more irritating mantras of the "hard" Brexiteers, defending their stupidity on the "WTO option", is their false claim that countries such as the United States, Australia and China all trade with the EU on WTO terms – on which basis, they aver, such an arrangement should be perfectly adequate for the UK.

This, though, is a mix of ignorance fortified by arrogance – ignorance of the fact that all of these countries have multiple agreements on trade with the EU, and arrogance of the people pushing their canard, in refusing to check their facts.

We saw this in April of last year when the self-important Charles Moore decided to misinform his readers with the deluded claim that: "The EU has never yet, in its history, had a trade deal with America".

It's very much Moore's style to waft around the high and mighty, sharing gossip and prejudice, looking down his patrician nose at informed sources from the lower orders. Thus, although I had sent him Flexcit in June 2015, whence he wrote to me saying, "I look forward to studying this", he obviously never did. He preferred his own ignorance.

A more cautious person, I wrote at the time, might have consulted the Europa website to check the veracity of the "no deals" claim. Because there, on the Treaties Office Database, are lists of trade agreements between the US and the EU, 38 in all, of which at least 20 are bilateral.

Now, ten months after an unrepentant Moore ignored my attempts to correct him, we have Ivan Rogers telling the Brexit committee something they should already have known – and is their duty to know, insofar as we pay them to keep themselves properly informed.

Said Rogers to these ignoramuses, "although the EU and the US do not have a free trade agreements, they do have agreements covering trade". There are 20-plus agreements, he said, adding that no major economy traded with the EU solely on World Trade Organisation terms. The Guardian recorded him saying:
No other major player trades with the EU on pure WTO-only terms. It is not true that the Americans do, or the Australians or the Canadians or the Israelis or the Swiss. They strike preferential trade deals where they can. But they also strike more minor equivalence agreements, financial services equivalence agreements, veterinary equivalence agreements, mutual conformity of assessment agreements. The EU has mutual conformity of assessment agreements with the US, with Canada, with Israel, with Switzerland, with Australia, with New Zealand, and more I think.
The determination of the Brexit zombies to buy into the "WTO option", though, is all part of their justification for rejecting the Efta/EEA solution. They reason – if it can be called reason – that if other countries can survive and prosper under a WTO regime, then there is no need to go any further. But Rogers wasn't letting them off that hook either. He told the MPs:
If you had an abrupt cliff edge with real world consequences, you've seen what Mark Carney [governor of the Bank of England] has said about the financial stability risks to the eurozone of an abrupt cliff edge. There are other consequences in other sectors which would make it an insane thing to do.

All I was pointing out was that this is a very legalistic body that we are dealing with and they will say you have transformed yourselves overnight from having been a member of this body to a third country outside the body and in the absence of a new legal agreement everything falls away.

We all know that that's nuts in the real world, because why would you want to stop UK planes flying into European airports on day [one]. We know that this is insanity, but that doesn't mean - we know that stopping carcasses and consignments and saying "your slaughterhouses are no longer approved", we may know that that is a nonsense in the real world. Sadly, that does not stop it necessarily happening.
This is something I was writing four years ago, when I said:
As the law stands, the UK is part of the Single Market. Outwith the EU and the EEA, however, the UK becomes, as far as EU law is concerned, a "third country". And imports from third countries must to subject to a raft of inspections, documentation and physical checks at member state ports (including airports) before they are allowed entry.
That, we need to emphasise, was four years ago. More recently, we pointed out that this was not something the EU did to us, but a status the UK assumed by choosing to withdraw from the EU and the Single Market.

You must imagine, I wrote, a medieval walled city, inside which the traders happily do business – with the public and between themselves – secure within the fortifications. When a trader (unhappy with the rules and regulations) decides to move his stall outside the walls, he cannot then complain that he is no longer able to trade freely with the people still inside.

Yet such is the total lack of comprehension of the Daily Mail that it reports Ivan Rogers as saying: "the EU leaders would be 'insane' to push Britain out of the EU without a deal but they might do it anyway".

Rogers, of course, was referring to the "walk away" option, where even the intellectually challenged Financial Times managed to understand that it was our own government that saw World Trade Organisation rules "as an obvious alternative to negotiating a free-trade agreement with the EU" – and was wrong to do so.

But what we're getting is a taste of how the zombies are going to rationalise their own failure – blaming their inability to craft a workable settlement on the supposed intransigence of the EU negotiators.

The Mail, though, was not alone in being out of its depth. John Crace of the Guardian observed that most of the stuff Ivan Rogers offered to MPs on the Brexit committee "went completely over their heads".

These are people who are four years behind the curve, and only because they've been lapped so many times do they look, briefly, as if they are in the lead. Thus, when John Whittingdale, a decent enough cove, tried to argue the point about regulatory convergence making a deal easier, Rogers shot him down in flames.

If anything, convergence makes things harder. "It's not about what happens on Brexit Day plus one", Rogers said. "It's about what happens further down the line. Because if we were intending to leave everything exactly the same there would have been no point in leaving".

This is the point we've been making, where the EU will want assurances – and some evidence to back it up – that we intend to maintain convergence, and will ensure that there is a system of market surveillance and enforcement in place to ensure a high level compliance. Additionally, the EU will want a bankable promise that we intend in implement new regulation.

That much detail, though, is down the line. Rogers had opened his commentary by telling MPs that the "Brussels beltway" view was that it could be the early- mid 2020s before we have a ratified deep and comprehensive free trade agreement.

To me, it seems that what happens in between us leaving and the agreement coming into force is the million dollar question. Moreover, by its very nature, it seems impossible to determine a "bespoke" transitional agreement until we know what the end game is.

However, Rogers was "on the stand" for nearly two-and-a-half hours and, while I've watched the TV session, I need to read the transcript before I can do full justice to the evidence.

But what we can already gain from it, as an overall theme, is that we're all flying blind. Anyone who tries to predict how the talks will be structured, said Rogers, is being "foolish". It may be past summer before we even know what it is we will be arguing about.

For the moment, I'll leave it with the Independent which has Rogers saying that the consequences of the UK securing no deal and relying on WTO rules would be "nuts" and like falling off the "cliff edge" into a "legal void".

It then cites Liberal Democrat MP Alistair Carmichael, who sits on the Brexit Committee, having him say: "It's clear no free trade deal with the EU could ever be better than remaining in the single market". But, as for no deal, well, that's just "nuts".

Richard North 23/02/2017 link

Brexit: maritime surveillance

Wednesday 22 February 2017  

To assert that the UK is a maritime nation is something of a cliché, but since our nation is an island and depends on seaborne goods for our survival, it can also be said to be true.

Amongst other things, that would imply that the UK needs a maritime policy, or a series of policies covering matters maritime which collectively add up to a maritime policy. Putting all those policies together, one might even call it an Integrated Maritime Policy (IMP), except for the fact that the EU has got there first.

Its fingerprints on this issue can be seen as early as September 1991, which brought the first formal intervention of the Commission into the domain, with COM (91) 335 entitled "New Challenges for Maritime Industries".

In this document, the Commission defined the framework in which a coherent approach to the maritime industries should be implemented, those industries including shipping, shipbuilding, the service sector, marine equipment and the "resources .of the sea" industry, including fishing.

The following year, 1992, saw a milestone in the development of EU policy, in Council Regulation (EEC) No 3577/92, applying the principle of freedom to provide services to maritime transport within Member States (maritime cabotage).

As from 1 January 1993, freedom to provide maritime transport services within a Member State (maritime cabotage) applied to all Community shipowners who had their ships registered in, and flying the flag of a Member State. This was regarded as an important element in completing the Single Market, ensuring the freedom to provide services.

Demonstrating continued activity, the Commission 1993 published COM 93/66 on proposals for a "Common Policy on Safe Seas". In an 81-page document, it set out an a "proposed action programme for enhancing safety in maritime transport".

The year 1995 then saw a major piece of legislation in the policy domain in the form of Council Directive 95/21/EC, the so-called Port-State directive, obediently transposed by the UK Government into domestic law the Merchant Shipping (Port State Control) Regulations 1995.

The next year, in March 1996, the Commission then published COM (96) 81 final, betraying much grander ambitions with the heading: "Towards a new maritime strategy", addressing "the problems of the competitiveness of EC shipping".

Alongside this came COM (96) 84 final on "Shaping Europe's Maritime Future", in which the commission investigated the structure and situation of "the European maritime industries" and outlined "which policy elements and initiatives it considered suitable to contribute to their industrial competitiveness".

These communications invoked a response in the form of a Council Resolution on 24 March 1997, endorsing the new strategy. The Commission had been given a green light by the Member States.

In addition to these high level policy issues, though, we also saw the drumbeat of routine legislation, implementing provisions agreed at global level through the International Maritime Organisation (IMO) and other bodies. An example of this came in 2001, with the passing of Directive 2001/96/EC, "establishing harmonised requirements and procedures for the safe loading and unloading of bulk carriers". This put into effect the recently agreed IMO Code of Practice known as "the BLUCode". Such measures would have been adopted by the UK, irrespective of EU involvement.

What then gave EU policy development a considerable boost was the sinking of the oil tanker Erika in December 1999, releasing thousands of tons of oil, polluting miles of the Brittany coast. It took just twelve months for the Commission to respond with COM(2000)802 final with a series of measures which included the establishment of a European Maritime Safety Agency (EMSA).

This got the go-ahead in 2002, with Regulation (EC) No 1406/2002, together with Directive 2002/59/EC establishing a Community vessel traffic monitoring and information system. Its purpose was to enhance the safety of efficiency of maritime traffic, "improving the response of authorities to incidents, accidents or potentially dangerous situations at sea, including search and rescue operations, and contributing to a better prevention and detection of pollution by ships".

When EMSA became operational in 2003, it was decided that it take responsibility for setting-up and operating the new vessel traffic and monitoring system, which would be called SafeSeaNet. Setting-up commenced in October 2004 and the system became fully operational in 2009.

Before even EMSA had ordered the office furniture, though, EU maritime policy ambitions got a further boost when, on 19 November 2002, the Liberian tanker MV Prestige sunk off the coast of northwestern Spain, releasing over 20 million US gallons of oil into the sea, polluting stretches of the Spanish, Portuguese and French coastlines.

By now, though, the EU was planning its strategic objectives to the end of the decade, which the commission published in COM(2005) 12 final, declaring that there was "a particular need for an all-embracing maritime policy aimed at developing a thriving maritime economy and the full potential of sea-based activity in an environmentally sustainable manner".

This spawned in 2006, COM(2006) 275 final (with Annex), a Green Paper entitled: "Towards a future Maritime Policy for the Union. This was: "A European vision for the oceans and seas". With "sustainable development" high up on the agenda, the aim was "to launch a debate about a future Maritime Policy for the EU that treats the oceans and seas in a holistic way".

The year 2007 them saw the publication of COM(2007) 575 final offering: "An Integrated Maritime Policy for the European Union". This, said the Commission, "lays the foundation for the governance framework and cross-sectoral tools necessary for an EU Integrated Maritime Policy and sets out the main actions that the Commission will pursue during the course of this mandate".

Since then, the Commission has been actively pursuing the development of maritime policy. Building on what was then 16 years of policy activism, it has since initiated a number of schemes, growing the institutional and legislative framework, a process which continue up to the point that the UK leaves the EU and beyond.

Immediately post-Brexit, a newly independent UK will have been removed from the policy-making sphere in maritime matters for nearly thirty years and, although it has been an active member of the IMO, will be struggling to make up for lost time.

On the face of it therefore, as a short-cut to a working policy, maritime regulation would be an obvious candidate for repatriation via the Great Repeal Bill (after its Royal Assent). This, if the Government's theory stands up, means that "the same rules and laws will apply on the day after we leave the EU as they did before".

However, as we pointed out yesterday (and many times before) simply adopting EU regulations concerning maritime policy isn't going to work. The EU instruments are devoted to setting up EU structures and systems which are not easily (or at all) transportable to a UK legislative environment. We need to be building up our own policies, and then devising the legislation and other instruments to put them into effect.

We cannot use EU law, designed to put into effect European policies throughout the EEA, to implement policies applicable specifically and exclusively to the UK. To try to do so is like using spanners to carve wood.

To illustrate this, we can look at just one of the EU's initiatives, the "Common Information Sharing Environment" (CISE), the practical embodiment of one aspect of the 2007 policy proposal. This was to:
take steps towards a more interoperable surveillance system to bring together existing monitoring and tracking systems used for maritime safety and security, protection of the marine environment, fisheries control, control of external borders and other law enforcement activities.
The parameters were set out in more detail in late 2009, via COM(2009)538 final. Headed, "Towards the integration of maritime surveillance: A common information sharing environment for the EU maritime domain", its aim was to develop a surveillance programme that would generate situational awareness of activities at sea "impacting on maritime safety and security, border control, the marine environment, fisheries control, trade and economic interests of the European Union as well as general law enforcement and defence so as to facilitate sound decision making".

There was, the Commission asserted, a clear need to share maritime surveillance information. Different sectoral authorities dealing with monitoring and surveillance of actions at sea gathered data and operational information so as to establish the best possible maritime awareness picture for their own use.

But, for many user communities, this picture did not include complementary information gathered by other sectoral users due to the lack of mutual exchange.

With undeniable logic, therefore, the Commission argued that developing the necessary means to allow for such data and information exchange "should enhance the different users' awareness picture". Such enhanced pictures, it said, "will increase the efficiency of Member States' authorities and improve cost effectiveness".

The objective of the programme, therefore, was to set out guiding principles for the development of a common information sharing environment and to launch a process towards its establishment. The accompanying staff working document then set out a complex of measures to be taken at European level, to make the system work.

Already that year, though, there had been published Directive 2009/17/EC, amending Directive 2002/59/EC establishing a Community vessel monitoring and information system. This highly technical measure was to re-emerge two years later, when the Commission complained that the UK had not fully implemented the Directive (along with eight other States which had not implemented it at all).

Then, in 2010, the Commission published a "roadmap" setting out the functional requirements for what it was now calling the "Common Information Sharing Environment" (CISE) for the surveillance of the "EU maritime domain". It stressed the passive nature of the project, declaring that "Integrated Maritime Surveillance" was about "providing authorities interested or active in maritime surveillance with ways to exchange information and data".

In June 2014, however, the surveillance programme became part of the EU's Maritime Security Strategy (EUMSS), thus acquiring an identifiable military dimension. The primary objective was to provide a common framework for relevant authorities at national and European levels to ensure coherent development of their specific policies and a European response to maritime threats and risks.

A secondary aim was "to protect EU's strategic maritime interests and identify options to do so". It thus significantly strengthened the link between internal and external security aspects of the maritime policy of the EU and civil and military cooperation.

In a joint communication from the European Commission and the High Representative for external affairs, the tasks of the EUMSS were set out. It was required to ensure an optimal response to threats, support the relevant authorities and agencies at all levels in their efforts to enhance the efficiency of maritime security and to facilitate cross-sectoral and cross-border cooperation among maritime security stakeholders.

The strategy was thus intended to position the EU as a credible, reliable and effective partner in the global maritime domain, ready and able to take on its international responsibilities.

As with the surveillance programme, great stress was placed on a cost-efficient approach to maritime security. The EU's maritime security is largely organised around national systems and sector-specific approaches that potentially render operations more expensive and less efficient. Maritime operations should be made more efficient by improving cross-sectoral cooperation, enabling better communication between national and EU-systems, creating effective civil-military interfaces and by translating results from research and technological development into policy.

By July 2014, a month after the announcement on the Maritime Security Strategy, the Commission was in a position to set out further views on the surveillance programme, having Maria Damanaki, Commissioner for Maritime Affairs and Fisheries, argue that savings of €400 million per year could be made through increased cooperation and sharing of data.

Sharing such information was vital to avoiding duplication of effort. About 40 percent of information was collected several times and 40-80 percent of information was not shared amongst the interested users.

In pursuit of its plans, the Commission set out eight further steps required to give shape to the CISE, and to bring systems to fruition, culminating by 2018 in the launch of a review process to assess the feasibility of implementation and the need for further action.

Even then, the Commission was at pains to emphasise that ensuring the effective surveillance of waters under their sovereignty and jurisdiction, and on the high seas if relevant, remained the responsibility of Member States. The operational exchange of maritime surveillance information between national authorities also remained with Member States. The role of EU agencies was to "facilitate and support this process". We are told:
Maritime CISE is a voluntary collaborative process in the European Union seeking to further enhance and promote relevant information sharing between authorities involved in maritime surveillance. It is not replacing or duplicating but building on existing information exchange and sharing systems and platforms. Its ultimate aim is to increase the efficiency, quality, responsiveness and coordination of surveillance operations in the European maritime domain and to promote innovation, for the prosperity and security of the EU and its citizens.
Untypically, therefore, the Commission averred that "the operational aspects of such information exchange" needed to be "decentralised to a large extent to national authorities in line with the principle of subsidiarity". On this basis, CISE as a project seems largely benign, and the timescale is such that it could be coming into effect around the same time that Brexit takes effect.

On paper, (as expressed in 2014), the UK Government supports the initiative, aiming to play "a leading role" in developing it. As part of the Brexit negotiations, therefore – and the internal policy discussions which will inform them – the UK will have to decide whether it wants to continue with this programme. In the context, the Great Repeal Bill is an irrelevance. This is a policy rather than a legislative issue.

The generality of the maritime policy is, of course, another matter, but much will depend on the UK attitude to the surveillance programme and related matters before Mrs May goes to Brussels. So far, the silence is deafening, but this is more than just a loose end. Before the Brexit negotiations are finished, we must know the UK position, and how it will relate to EU plans.

Richard North 22/02/2017 link

Brexit: tales of the Raj

Tuesday 21 February 2017  

In Flexcit, we readily acknowledge that repatriation of EU laws must be part of the Brexit package.

We point to post-independence experience in Ireland and India for precedents, where each administration simply adopted laws made while their countries were under British control, and carried on with them unchanged, until they had time and resources to bring out new laws.

Even then, the process can be somewhat protracted, with a report in 2014 that India was still going through its statute book, weeding out archaic laws stemming from the Raj.

However, our enthusiasm for the process was conditional on the adoption of the Efta/EEA option, where the EEA has an institutional and legal framework which enables the Single Market acquis to function in a coherent manner.

That would account for over 20 percent of the acquis communautaire, with much of the rest being discarded as unwanted. The most significant tranches of law that would have to be dealt with outside the EEA framework would be the CFP and CAP acquis but even these could be brought into the EEA via country-specific protocols and annexes, buying us time to develop unique policies applicable to the UK.

As the Government seems to have turned its face against this option, it is instead relying on the Great Repeal Bill to facilitate legislative continuity and to avoid huge gaps appearing in the statute book.

However, as is becoming increasingly apparent, simply re-enacting Brussels laws – in the way that British colonial law was treated - is not proving as easy as was imagined. The problem lies in the way the different sets of laws have been conceived and applied.

When the UK produced laws for India and the other colonies, they were most often produced by the Viceroy/governor general in India, and by governors in other territories. At state or subordinate level, you would also have law-making powers, by lieutenant-governors or some such. Even though they were made under British rule, they were still local laws, specific to the territories to which they applied.

There is an Indian example here, in the notorious Criminal Tribes Act 1871. As can be seen, it was made by the Governor General (Viceroy) in Council and, rather than Royal Assent, was given the assent of the Governor General. And that's the interesting thing: most of the laws were made in India specifically for Indians.

Here is another example, this one from New Zealand, the Land Registration Act 1841. There is a difference in style, as this is enacted by "His Excellency the Governor of New Zealand, with the advice and consent of the Legislative Council thereof". But it is a New Zealand Act, dealing with New Zealand issues.

Even when laws were produced by Westminster, they largely dealt with specific issues in the territories to which they were addressed. The classic was the Government of India Act 1935 which, at 341 pages, was said to be the longest Act (British) of Parliament ever enacted by that time. It had 321 sections and 10 schedules. But it was a decentralised system, even when the law was made in London. And then it was done on a much smaller scale.

In India, for instance, the Crown took over rule only in 1858 and between then and 1947, when independence was granted, Westminster only passed 196 Acts concerning the sub-continent. The 1935 Act granted a large measure of autonomy to the country and ended the system of diarchy introduced by the Government of India Act, 1919.

With the EU, though, not only is the scale of legislation different with about 20,000 laws currently in force, it is also a rigidly centralised legislature intent on creating EU systems.

Unlike the British Empire, law-making is centralised, with the right of proposal reserved for the European Commission in Brussels. The completed law is then administered by the European Commission in Brussels, backed up by a single court in Luxembourg.

Even India had considerable judicial independence, with its own High Courts, created by the Indian High Courts Act of 1861, with its own chief justice. Latterly, by authority of the Foreign Judgments (Reciprocal Enforcement) Act, 1933, we were to recognise and enforce (where relevant) its judgements in the UK.

In the centralised EU system, though, EU law imposes a common system on all Member States which have to work together as part of a whole. When a Regulation is "done in Brussels" and enters into force, it applies immediately to all 28 Member States, having direct effect without any intervention from national legislatures.

The law that applies in one Member State simultaneously applies in all others. It is system-wide law aimed with the aim of integrating the Member States into a single administrative body.

That was never the case in Commonwealth and Empire. Law was made for each of the territories. Thus, law made for Australia would not apply to India, nor to South Africa - there was no Empire law, as such, a single body of law made in London which would apply to the UK and then equally and simultaneously to the rest of Empire.

Thus, when it comes to the Great Repeal Bill, the Government is gong to have great difficulty in separating out the functional aspects of the law and those dealing with the establishment of the EU systems, which are worked into the law. It will need to keep the one and remove the other. And that's not as easy as it looks.

We've seen this with fishing, where the core regulation does not just regulate fishermen but also sets up the Common Fisheries Policy, empowering the European Commission to perform certain functions, and imposing the duty of co-operation on (multiple) Member States.

Had the fisheries policy been written on the lines of Indian colonial legislation, it would have been framed by a "governor" based in London but appointed by Brussels, yet would have applied solely to UK waters. That we could have adopted, pro-temp, until we had something better. But Regulation 1380/2013, as it stands, is unusable without very substantial amendment.

More recently, we've seen exactly the same type of problem with the Lift Directive. This is also dual-purpose regulation Not only does it legislate for lift safety, it is one of the "New Legislative Framework" package which sets up a Brussels-based system of control over a wide range of products. As such, once again, it empowers the Commission and places cooperative duties on Member States.

We've been though many other examples, from chemical regulation to Air Traffic Management, and there are many more to come. But even now, it is evident that Government has vastly under-estimated the complexities of repatriation, and is not at all geared up to dealing with the problem.

The original proposal to adopt the Efta/EEA option as an interim solution to a staged process was intended to avoid problems such as these, but we have seen Davis, May and the others, blunder into a "plane crash Brexit", eyes wide shut.

They've committed themselves to something that is virtually impossible to achieve in the time, and don't even understand the scale of the mess they've landed themselves in.

Richard North 21/02/2017 link

Brexit: it's not about the prices

Monday 20 February 2017  

If the remainers have to put up with being undermined by Tony Blair, they at least have the consolation that leavers have to suffer the crass behaviour of the "Leave Means Leave" and their attempts to bring about a "plane crash" Brexit.

Clearly not having caught up with the idea that we have won the referendum though, they are still fighting the battle. And their latest stunt is to have The Sun announce: "Brexit to chop food bills", while having Owen Paterson claiming in the Sunday Telegraph that: "Brexit will cut shopping bills by £300 a year".

The real detail comes in The Sun, though, where the graphic (above) illustrates a number of foods and beverages, each with the current "EU price" and the supposed lower "new price" that we will be paying after Brexit.

For a start, the prices are meaningless. The figure "EU price" for 250gm of butter, for instance, is cited at £1.50, while the "new price" is £1.10. Yet, go to the Morrisons website and the price is £1.08 – without having to wait to leave. The "EU price" of 300gm of bacon is £2.00, against a "new price" of £1.86, but Morrisons offers £1.84 a pack, or two for £3.00.

Fresh prawns are also on the list. The "EU price" for 165gm is £3.00, with the "new price" at £2.64. This time, Tesco comes to the rescue, with £2.25 for 250gm, equivalent to £1.49 for 165gm. In all three of these cases, shopping around delivers more benefits than Brexit.

That is not the case, though, with bananas. For a bunch of five (notionally one kilo), the "EU price" is 65p. The "new price" is 55p, giving a differential of ten pence. Yet, such is price volatility of this commodity, that Tesco wants 80p.

The reason for the 10p discrepancy, we are told, is that after Brexit a tariff on non-EU goods will no longer apply. Cumulatively, removing tariffs could save us "up to £300" on the annual shopping for a family.

But saving ten pence on a bunch of bananas it not something we want to do – not when you understand the story which goes back to the "banana wars" and the decision in 2009 when the EU agreed to cut tariffs to €114/tonne by 2017. That works out (at current exchange rates) at 9.8p per kilo.

The point is that the tariff only applies to MFN bananas (mostly Latin American) – about two-thirds of our imports. Bananas from African, Caribbean and Pacific (ACP) countries come into the EU tariff-free. Yet, on the supermarket shelves, there is rarely any price differential.

The reason for that is, as Joanna Blythman explains, that Latin American bananas are cheaper to produce. But this is not for any good reason. They are typically grown on huge plantations owned by transnational fruit exporting companies, or their satellites. Writes Blythman:
the natural landscape will have been flattened to allow for intensive banana cultivation stretching as far as the eye can see. These vast acreages are heavily treated with pesticides, usually by aerial spraying. This is why, in Latin America, the banana is often referred to as "the chemical fruit".

The workers generally live either in lamentable shanty accommodation on site or are bussed in great distances to work a long and punishing day. Paid piece rates, they have to work themselves into the ground to make a living wage.
ACP bananas, on the other hand, tend to be grown by artisan farmers. The communities which depend on them – mainly in the Caribbean – are fragile, and lack resilience. The tariffs offset the worst effects of a historical dependence that needs more time to remedy.

In this context, even those opposed to tariffs would agree that their precipitate removal would do incalculable harm. It would not be in the UK interest to remove them for the time being – and nor would it be wise to settle on a defined end point.

That said, as Blythman also wrote, the current price of bananas is scandalously low. Retail prices bear little relation to the cost of production, and are more a reflection on supermarket purchasing power.

In 2014, you could buy a kilo of bananas for about 68p. Back in 2002 that same bunch would have cost £1.08, 59 percent more. If banana price inflation had kept up with the pace of Mars bars, the fruit would have cost £2.60 a kilo in 2014. Two years later, The Sun has the price at 65p.

It yesterday's price of 80p holds, it will represents an overdue price adjustment which needs to go much further before sustainable prices are being paid. To argue that, because of Brexit, we will see – or want to see - cheaper bananas is beyond absurd.

Never let it be said, though, that the Leave Means Leave can't outdo its own stupidity. For this, it picks up on the featured product: lamb chops. These it will have us buy for an "EU price" of £5.00, while the "new price" is £3.35.

In my survey, the Asda price was £6.00. Tesco came in at £5.50. But the post-Brexit price will be nowhere near £3.35. To get this fictional price, we can see what Leave Means Leave has done. They've applied the third country tariff rate which currently stands at 12.8 percent plus €311.80 per 100 kilos. That is roughly equivalent to a 50 percent tariff. Deduct that from £5.00 and you get your £3.35 (rounded down).

The thing is, nobody pays this. The countries which export to the EU all have tariff-free quotas. This includes New Zealand, with the largest, at 228,254 tonnes annually – which goes mainly to the UK. Supply exceeds demand, so the quota is unfilled unfilled each year, with New Zealand only taking up 76 percent of its allowance in 2015. Non-quota lamb is so uncompetitive that virtually all sheep meat is sold through the quota.

What that amounts to is that almost all the lamb sold on the UK market, which is over 90 percent self-sufficient, is quota-free. Post Brexit, prices would only drop if exports to the EU were blocked, diverting export product to the home market and triggering a collapse.

Clearly, this would only be temporary, but the effect on UK farming - and the countryside, which relies on its "living lawnmowers" to keep vegetation in check – would be drastic and long-lasting. A short-term consumer gain is hardly a welcome benefit, and not one to attribute to Brexit.

Moving on from lamb, we next find that the "EU price" for lettuce is £1.25, while the post-Brexit price would be £1.12. The question here is why would there be any saving? And the answer is: there isn't. Leave Means Leave have played the same trick that they used with lamb.

They have taken a 10.4 percent tariff and applied it to total sales. But roughly 55 percent of fresh vegetable consumption is home produced and tariff-free. Of the imports, over 80 percent come from EU Member States, mainly Spain and the Netherlands. They are also tariff-free.

What is more, most supplies from the rest of the world are currently tariff-free. Thus, the vast majority of fresh vegetables (over 95 percent) attract no tariff at all. The difference, pre- and post-Brexit is hardly measurable – there are no savings to be had.

If post-Brexit, we impose tariffs on EU produce, prices might actually go up 4-5 percent. But that notwithstanding, after the recent shortage of lettuces when prices soared, levels have now stabilised. A head lettuce can be bought from Tesco for 40p.

Incidentally, we see a similar tariff dynamic with bacon. We are 55 percent self-sufficient in pig meat (which includes bacon and cured products). The balance is imported mainly from Denmark and Holland. Additional supplies come from Germany, Ireland, France, Spain, Belgium and Poland – all of it tariff-free. Since we pay virtually nothing now, there is virtually nothing to save, post-Brexit.

It would now be tedious to go though the whole list, just to illustrate how untenable the claim is. But it's intriguing to see the "EU price" for 200gm of carrots reported at 90p, and the "new price" at 78p, when you can have 1Kg from Aldi for 43p, the equivalent 200gm price being 9p. Leaving the EU suddenly doesn't look so terribly exciting, if you're only doing it for the money.

Some of the entries in any case look rather silly. We are told to consider that the "EU price" of a 75cl bottle of white wine is £5.75, which will drop, post-Brexit to £5.54. But since we pay no tariffs on wines from EU Member States, there will be no difference (one assumes) if we keep buying wines from that source.

Tariffs on wines, when levied, are charged as a rate per hectolitre. The standard plonk is charged at £117.72 per hl – roughly equivalent to 16p a bottle. The strongest wines can go up to 28p. Theoretically, for many non-EU brands, tariffs will be dropped post-Brexit. Amongst other things, it is reported, that means Brexit will bring flood of cheap Aussie wine to the UK.

However, one can already acquire a tolerable Australian Chardonnay from Asda for £1.75 a bottle. Even if 16p was shaved of the import price, we would probably see no difference on the supermarket shelves. The cost saving would be absorbed.

Nevertheless, we're told that a 75cl Prosecco bottle has an "EU price" of £7.00. Post-Brexit, it is supposed to drop to £6.80. But once again, a notional tariff is being deducted, despite the fact that we're not paying anything on an Italian sparkling wine with GI status.

This, of course, is the product that the foreign secretary picked on when he said that Italy would sell less to the UK if the EU did not allow Britain to remain in the Single Market. But if we don't want to stay in the Single Market, one presumes there will certainly be no drop in price, post Brexit.

That notwithstanding, while Leave Means Leave might want us to pay £7.00 a bottle, Sainsbury's are selling it at the equivalent of £6.00.

Summing up, the saving from Brexit are being over-stated, and what little can be saved is only a fraction of what most households could save by shopping around. Leave Means Leave's strawberries, with an "EU price" for 400gm of £2.75 and £2.44 "new price", can be bought from Sainsbury's at £2.00. Morrisons sell for the same price, or two packs for £3.00. And the list goes on.

If you can't afford the luxury of branded products, you can go own-label. A 500gm pack of ketchup costs £1.75. The "new price" is £1.57. But 550gm of Tesco brand ketchup will set you back 63p. Alternatively, you can bulk up. A 2.5Kg bag of washed Maris Piper potatoes costs £2.00. Unwashed, the unit price halves, when bought in quantities of 12.5Kg.

That apart, shoppers will tell you that prices are going up across the board. Furthermore, pack sizes are shrinking, concealing the scale of the increases. Tiny savings from tariffs are dwarfed by the loss in the value of sterling. It really is not sensible to make such claims about minuscule tariff savings when the overall price trend is upwards and everyone knows it. More to the point, we did not vote for Brexit because we wanted to save a few pence on the food bill.

In the real world, the survival of the farming industry is much more important. And there is something Leave Means Leave needs to get stuck into. It has been learned that the government has commissioned no research in the past six months to inform agricultural policy once the UK leaves the EU. It hasn't a clue where it is going, or what it needs to achieve.

Messing about with stories about non-existent savings, therefore, is an unwelcome distraction, a waste of everybody's time when the main issues are being missed.

Richard North 20/02/2017 link

Booker: shut outside the EU fortress

Sunday 19 February 2017  

"I don't normally respond to hostile points made about this column on our letters page", writes Booker in this week's column. "But one example last week repeated a fundamental misconception so widely shared – not least by our politicians – that it merits an answer".

"Booker must stop saying", its author sternly enjoined, "that when we leave the EU we may not have access to its market. Everyone can sell or buy into Europe at any time... the market is open to all and always will be. Markets are not made by governments, they are made by buyers and sellers".

This view is so comprehensively wrong on every count, says Booker, that this week he is this week focusing on just one further important example, so far not mentioned, of what we are risking with Theresa May's decision that, on leaving the EU, we should leave not only its single market but also the wider European Economic Area (EEA), which would allow us to continue trading with the EU as we do now.

The whole point about the EU market is precisely that it is a market "made by government". It is like a fortress against the outside world, made up of a vast thicket of laws, regulations and procedures, all of which must be followed.

Picking up on the point I made on 6 February, Booker tells us that, if we choose to leave that fortress, we will find its drawbridge has been raised against us, making it very much more complicated to enter.

The particular example he gives is what will happen to all those thousands of British businesses that share in our £9 billion-a-year food exports to the EU. Once we leave, Britain becomes what it calls a "third country"; and all our animal-related products, deemed because of potential diseases to be "high risk", will then have to face the new set of rules that apply to any other "third country".

Apart from many other requirements, such as the need for Britain to be officially recognised as an "approved country", and for every food-related business to be subject to new EU inspections, the live animals, dairy products, eggs, fish and processed foods now carried smoothly to the Continent in trucks through Calais will have to be diverted to a "Border Inspection Post" (BIP), for a mass of new checks and inspections that could take days.

An additional problem is that the nearest BIP at Dunkirk is so small (despite a recent upgrade) that a much larger one will have to be built. To handle UK traffic, it would require facilities for hundreds of new officials and a vast waiting area for those queuing for inspection; all at a cost of tens of millions of euros, which the French would understandably expect Britain to pay.

For all those Welsh farmers who depend on selling lambs to the EU – where we currently export 385,000 sheep and 34,000 live cattle a year – or those cheesemakers and other businesses that export perishable goods requiring refrigeration.

This, says Booker, will pose immense practical problems; as will also be faced on the border between the north and south of Ireland, where some foods involved in processing can end up criss-crossing the border five times before they are ready to be sold.

Politicians may wave all this aside as just something else to be "sorted out in the negotiations". But the rules are the rules. They have no more idea of how tricky it may be to resolve this problem than they have so far shown any sign of recognising that it exists at all.

At the moment the movement of all this trade into the EU is, as Mrs May describes it, "frictionless". But if we leave the fortress on the terms she seems to be proposing, she has no idea how far this may involve not just the lifting of its drawbridge, but lowering a mighty portcullis as well.

Of course, if she had the sense to keep us in the EEA, none of these problems would arise. But, by relying on her "Brexiteer" advisers, she may be facing rather stonier faces across that negotiating table than she has yet begun to imagine.

As we see, though, the Irish are waking up to the implications of a hard border, but not so commenters on the Booker columns. In and amongst the ritual jibes that Booker has become a "remoaner", there is no evidence of even a scintilla of understanding of the position in which we will find ourselves, making the comments a no-go area for sentient beings.

This itself is not a unique phenomenon – the comments on the Telegraph are generally a vile place to be – but it does indicate how a self-selecting minority of "brexiteers" have simply stopped thinking (if they ever actually started).

Generally speaking, though, it is not even worth trying to engage – no amount of argument, or resort to evidence – will penetrate the bovine stupidity of this claque. The worry is, though, that so many of the sentiments expressed seem to be shared by the Government, and even endorsed by Mrs May.

In the end, though, reality will take its toll. From being a fully paid-up member of the European Union, the UK will in due course revert to the status of a "third country". If we are fortunate, and against all the odds, the Government will negotiate a tolerable exit settlement, but things are not going to be the same as before (and neither would we want them to be). However, since Mrs May, in rejecting the Efta-EEA option, appears to have turned her face against the most effective means of managing our transition from EU member to independent state, the road is going to be far bumpier and more difficult than it needs to be.

All we can do, and will continue to do, is point out the pitfalls. This is not done out of any intent to suggest that we should not leave the EU – merely, it is common sense on a difficult road to mark out the hazards, better to enable us to deal with them.

For those, however, who regard roadsigns as a form of betrayal, theirs is the precipitous path over the cliff edge. The outrageous thing out it is that these idiots seem intent on taking us over with them.

Richard North 19/02/2017 link

Brexit: heavy lifting

Saturday 18 February 2017  

With at least 20,000 laws to be changed in Britain, says European Commission President Jean-Claude Juncker, he believes it will take longer than two years to agree on all the arrangements for Britain to leave the European Union.

That is roughly the number of legal instruments in the acquis communautaire but I'm sure that the official response would be (if there was one), that the Great Repeal Bill would sort all this out. With a single Act of Parliament, the intention is, to quote the White Paper, to convert the acquis into domestic law.

We need constantly to remind ourselves of this, and the Government's belied that "wherever practical and appropriate", the same rules and laws will apply on the day after we leave the EU as they did before.

What is very far from clear, though, is how this will work in detail, not only in respect of EU Regulations, which have direct effect, but also in terms of Directives. Although transposed into UK law, increasingly the resultant domestic law is interlinked with EU law, to which it refers directly, relying on the originating directives for their legal authority, plus multiple regulations which are quoted in the directives.

This has been mentioned briefly in a recent briefing note from the Westminster Parliament, which underlines just how difficult it is going to be to cover all eventualities in a single legislative act. An extremely good example of the difficulties involved comes with Directive 2014/33/EU on the harmonisation of the laws of the Member States relating to lifts and safety components for lifts.

This is an important directive as it regulates a major industry which, globally was estimated to be worth €48 billion in 2015, of which the UK accounted for at least £1 billion, making it yet another sector that is significantly bigger than the fishing industry.

The big players in the UK market are Fujitec UK, Kone GB, Otis UK and Ireland, Schindler UK and ThyssenKrupp Elevator UK. For the steel giant ThyssenKrupp, its elevator business is currently one of its most profitable ventures, regarded as the gem of its operations, in which it is the world leader.

This is a business that directly impacts on billions of people, with Otis alone estimating that the equivalent of the entire world's population travel on their lifts, escalators and moving walkways every nine days. The structure is interesting, as only 36 percent of its value comes from new installations and 16 percent from modernisation projects. The largest single contributor (48 percent) is routine maintenance.

The value of the business can be seen from the European Commission intervention in 2007, when it fined the Otis, Kone, Schindler and ThyssenKrupp groups €992 million for operating cartels for the installation and maintenance of lifts and escalators in Belgium, Germany, Luxembourg and the Netherlands. These were the largest ever fines imposed by the Commission for cartel violations.

Obviously, the product (both at the construction phase and during operations and maintenance) is safety critical, so one would expect it to be heavily regulated, which indeed it is.

Rather than using a detailed, prescriptive regulation, though, the EU has chosen to adopt the mechanism of a directive, implementing the "goods package" adopted in 2008. This is part of a package of proposals aligning ten product directives to Decision No 768/2008/EC establishing a common framework for the marketing of products.

The essence of this "New Legislative Framework" directive is that it relies on a matrix of standards produced by the European standardisation bodies, conformity with which is deemed to satisfy the legal requirements. Hence, we have a list comprising multiple standards, which effectively comprise part of the regulatory system.

And also, as is typical of this type of legislation, we have extensive reliance on notified bodies, and cross-references to EU Regulations, which form part of what amounts to a legislative package.

Now, these are the areas (or some of them) where we start to get into trouble as the directive is transposed into UK law by the 56-page The Lifts Regulations 2016 which then applies to relevant enterprises in the UK.

In the normal course of things, that should be the end of the directive. It has become part of UK law, so we can file away the original and forget all about it. But, with this, and the rest of the "New Legislative Framework" package, this is no longer the case. Whole tranches of the Directive still apply, and must be read with the UK regulations.

A key example here is in the conformity assessment of a lift, where reference is made to a "model lift" that has undergone an "EU-type examination", the details of which are set out in Part B of Annex IV to the Directive. Since the Annex is not reproduced in the Regulations, yet form part of them, for the UK law to be implemented post-Brexit, the Directive (or its relevant parts) must remain in force.

Possibly, in producing the Great Repeal Bill, the Parliamentary draftsmen can come up with a clever form of words that will cover any gaps. There is already something of that in the header block to the Regulations, where its states:
These Regulations make provision for a purpose mentioned in section 2(2) of the European Communities Act 1972 and it appears to the Secretary of State that it is expedient for certain references to provisions of EU instruments to be construed as references to those provisions as amended from time to time.
Since the ECA will be repealed, this text will no longer take effect. Instead, there might, for instance, be a phrase which says (to the effect of), "where in any UK Act or Regulations, reference is made to EU legislation, upon which the Act or Regulations rely for their effect, the relevant parts of that legislation shall apply as if it was part of the UK law which refers to them".

Doubtless, the clever lawyers employed by the Government will come up with something neater than that, and also something which cross-references to the Great Repeal Bill. But at least my attempt illustrates that short-cuts might be available, saving the trouble of writing every single EU reference into UK law.

Of course, this will only apply for as long as the EU legislation is in force. If it is modified or repealed, there could be some gaps opening up, which could only increase with time.

Such a device might also cover the references to the "harmonised standards", on which the EU law applied. In the UK regulations, these are defined by reference to point 1(c) of Article 2 of Regulation (EU) 1025/2012 on European standardisation. Since the Great Repeal Bill is expected to re-enact precisely this sort of Regulation into UK law, there should not be any difficulty with this.

However, where there will be difficulty is in the "safety components" for lifts, which are listed in Annex III of the Directive but also Schedule 3 of the Regulations. These are manufactured separately and have to be tested separately by notified bodies.

Because of the wording of the Regulation, and its definition of a notified body, the regime applying to these components will suffice for lifts installed in the UK. But the UK notified bodies will not be recognised in the post-Brexit EU/EEA, so it will not be possible to export British-approved component to EEA members. Nor will it be possible to apply CE marking.

A core part of the regulatory process, though, are the procedures for issuing "EU declarations of conformity", to which there are 36 references, and to which Schedule 5 is devoted. Self-evidently, UK notified bodies are no longer authorised to make such declarations, as they are not recognised by the EU. Therefore, all references to the EU in the context will have to be removed.

Once you start looking in that direction, though, all sorts of anomalies creep in. For instance, we see the definition of an "importer" as a person who is "established in the EU" and "places a safety component for lifts from a third country on the EU market". By that definition, someone importing a safety component into the UK would not be an importer. Clearly, this definition will have to be re-written.

Similarly, the term "make available on the market", currently defined as "the supply of a safety component for lifts for distribution, consumption or use on the EU market", will have to be changed.

In other areas, it is not so simple. Regulation 66 refers to an "EU safeguard procedure", which is triggered by another Member State, initiating the procedure set out under Article 38 of the Directive.

This, obviously, can no longer apply, once the UK has left the EU. Neither can the Regulation impose duties on the Secretary of State to inform the European Commission and other Member States of any measures taken. Nor will the Commission be particularly interested in any objections that the Secretary of State may have to the measure taken by a Member State initiating the procedure. There is no point, therefore, in leaving such a requirement standing.

A far more major problem arises, however, with "RAMS", a reference to Regulation (EC) 765/2008 "setting out the requirements for accreditation and market surveillance relating to the marketing of products".

The Directive, and thus the regulations require market surveillance to be carried out in accordance with this regulation, which in turn imposes multiple duties on Members States to cooperate with other Member States, and to provide assistance and information to the European Commission.

This is part of the EEA-wide system of market surveillance, in which the UK can no longer partake (unless there is mutual agreement to that effect, negotiated in the Article 50/FTA talks). Unless there was such an agreement (and in any event), the references to RAMs would have to be removed. But with that, there would be no functional enforcement, so such provisions will have to be written into the Regulations, de novo.

And all of this is an incomplete record of the changes that will need to be made – beyond, I rather feel, the scope of any Great Repeal Act.

The odd thing about this is that, although there are presented some problems for the lift industry, the trade body, the Lift and Escalator Industry Association, has been silent on the issue of Brexit. I can find no statement from it, before or after the referendum.

United Technologies, the owners of Otis Lifts, warned prior to the referendum that leaving the EU "would create years of uncertainty, jeopardising investment and jobs". But, since then, the company has stated that it does not believe that Brexit "will impact businesses in the near term".

In the longer term, it will most certainly impact, but mostly those companies which manufacture components for export to the EU. The Government has a substantial problem in sorting out the regulatory code, and it may need to devote some time in the negotiations to mutual recognition of conformity assessment, and recognition of notified bodies, specifically with relation to applying CE marking.

A potentially bigger problem presents in setting up a new market surveillance system, once we have drawn away from the EU system. But, since that problem spans multiple sectors, we'll leave that for another post.

Richard North 18/02/2017 link

Brexit: geographical indications

Friday 17 February 2017  

I am beginning to wonder whether Mr Davis's approach of looking at different sectors in order to structure the Brexit negotiations is the right way to go about things. It certainly cannot define the full extent of his considerations.

The obvious example comes with the post on the "standards industry". There are two ways of looking at this. Either the BSI and other "notified bodies" may be treated as an industrial/commercial sector in its own right (thus addressing the producer interest), or the focus can be on the bigger picture, looking at the UK approach to the harmonisation of standards across a wide range of activities.

In making that distinction, one can immediately see the potential for conflict: what the BSI would regard as the preferred outcome would not necessarily be in the national interest. For the greater good, it may be necessary to sacrifice a sector that has a higher economic yield than the fishing industry.

Another example which comes leaping into the consciousness is the issue of "geographical indications" (GIs), after press coverage of a European Parliament report expressing fears that British companies could "violate protections" given to the names of thousands of European products – such as parma ham and champagne – while still retaining protection for products such as West Country farmhouse Cheddar.

This general issue was something that was raised by Mr Cameron during the referendum campaign – then in the context that the UK would be the loser. How times change.

Nevertheless, GIs are most certainly an issue – they are big business, covering 2,768 products. Independent studies valued total sales at €54.3 billion in 2010 (wholesale value), with extra-EU exports at €11.5 billion. UK production was valued at €5.5 billion. The total value premium of EU27 GIs was estimated at €29.8 billion (the premium that a GI can expect from the market, compared to similar non-GI products).

Furthermore, according to the World Intellectual Property Organisation, protection makes economic sense. Given the global competitive environment characterised by declining agricultural commodity prices, traditional and/or quality products with a strong cultural link add value and give producers the opportunity to move away from commodity markets into more lucrative niche markets.

Thus, the protection of GIs will need to be included in any Article 50/free trade negotiations, although they can be dealt with in any one of several different was – or simultaneously under multiple heads.

In that most GIs cover food and agricultural products, an agreement could be thrashed out within a framework of talks on the food industry. However, there is talk of expanding the GI concept to cover other areas. Internationally, protection has been applied to Montecristi hats (Ecuador), Swiss watches, Pochampally Ikat tie-and-dye sari (India) and Longquan Porcelain (China).

If for the purpose of the talks GIs are to be divorced from the food industry, they can be slotted into the much wider category of "intellectual property". As we have seen, this forms a major part of any modern comprehensive free trade agreement. In the Ukraine DCFTA, for instance, there are nearly 50 references. A whole chapter is devoted to the issue (Chapter 9), which runs to many pages.

But what the text of the Ukraine agreement shows is that the concept depends on much more than the EU treaties for its base. We see immediately a reference to the WTO Agreement on Trade-related Aspects of Intellectual Property Rights (the "TRIPS Agreement"), which demonstrates that there is a major international element involved.

In fact, such are the global dimensions that the EU scheme is only the tip of an iceberg, with the World Intellectual Property Organization (WIPO) administering GIs at a global level.

At a national level, protection has been an issue for several centuries: the delimitation and regulation of the "Port" wine started in 1756. But the global scheme relies on an expanding network of treaties and agreements that started with the 1883 Paris Convention on the Protection of Industrial Property.

The list includes the 1891 Madrid Agreement and the Protocol on the International Registration of Trademarks; and the Lisbon Agreement for Protection of Appellations of Origin and their International Registration of 1958.

It is these agreements which laid the foundation for the 1995 WTO TRIPS Agreement. Part of the Doha round, the WTO intervention opened the way for other trading nations to protect their own traditional products and brands, to the same level enjoyed by European enterprises.

Formal EU intervention started fairly late, with Council Regulation (EEC) 2081/92 "on the protection of geographical indications and designations of origin for agricultural products and foodstuffs". This has now been replaced by Council Regulation (EC) No 510/2006.

There is specific legislation for wine, currently Council Regulation (EC) No 479/2008 "on the common organisation of the market in wine". Spirit drinks are covered by Regulation (EC) 110/2008.

Enforcement and related matters are dealt with by Commission Regulation (EC) 607/2009, "laying down certain detailed rules for the implementation of Council Regulation (EC) No 479/2008 as regards protected designations of origin and geographical indications, traditional terms, labelling and presentation of certain wine sector products".

As we reported earlier, though, when we discussed Mr Cameron's contribution to the debate, the EU scheme is not confined to produce from EU Member States. It also applies to third countries.

Applicants from outside the EU can register their products with their national authorities, which then pass on the details to the EU, where they are then – after due process – recognised as protected. In May 2011, four Chinese agricultural products received protected status in the EU, bringing the total to five, with another five going through the system.

In a reciprocal move, the Chinese authorities set in motion the recognition process for "ten celebrated European products". These were: Grana Padano; Prosciutto di Parma; Roquefort; Pruneaux d'Agen/Pruneaux d'Agen mi-cuits; Priego de Cordóba; Sierra Mágina; Comté; White Stilton Cheese/Blue Stilton Cheese; Scottish Farmed Salmon and West Country Farmhouse Cheddar.

More recently, an agreement has been reached with Iceland, an Efta/EEA member, which means that the full list of the EU's protected agricultural products and foodstuffs "will enjoy in Iceland the same level of protection as in the EU market".

However, the concern of the European Parliament, according to the Guardian is not the making of agreements but the possibility that the UK could break them.

Within Regulation 510/2006, there does not seem to be any provision for reciprocity so that – it is asserted - even if the UK failed to recognise GIs from EU Member States, its GIs would remain valid in EU Member State territory. Even worse, it is suggested, the UK "could, for example, rename some English sparking wine as English champagne, or ham as English parma ham".

Yet, this highly restrictive view is hardly realistic. The UK is leaving the EU but it will still be party to the mix of international treaties, including the Paris Convention and the Madrid Agreement, plus protocol, as well as the WTO TRIPS Agreement, which would require enforcement.

As regards EU legislation, it is not the case, as claimed that EU law takes effect in the UK without any national implementation. It also requires an enforcement framework.

In UK terms, geographical indications, and their related "protected designation of origin" (PDO) and "traditional speciality guaranteed" (TSG) are protected names. False use of a protected name is an offence under the The Food Labelling Regulations 1996, which are progressively being replaced by the The Food Information Regulations 2014.

These Regulations implement Regulation (EU) No 1169/2011 which in turn implements Council Regulation (EC) No 510/2006, thereby providing a convoluted but nevertheless intact chain of enforcement. On this basis, neither EU Member States nor the EU have much to fear that their GIs will be misused, post-Brexit provided, of course, Mrs May doesn't exercise her "walk-away" option, and allow the EU Regulations to lapse.

As regards the Great Repeal Bill, the complexity of these EU Regulations, their multiple cross-referrals and the sheer number of the references make covering all the bases a draftsman's nightmare. If there are no legal loopholes in the end result, it will be a minor miracle.

Nonetheless, there are the international treaty provisions to fall back on, and even then there are some gaps and differences in interpretation, especially as between the EU and the United States. These differences tend to magnify the gaps (and are preventing further progress on TRIPS). Whatever can be applied, though, does – as indicated previously – require enforcement. And there do not appear to be any domestic law implementing treaty provisions, although certain trademark provisions may apply.

To avoid any misunderstandings or ambiguities, though, the EU and UK might be best advised to conclude a mutual agreement on GIs, perhaps embedded in any free trade agreement concluded. The Ukraine DCFTA would provide an adequate model. This will then require its own enforcement framework in domestic law.

Arguably, when negotiating the specific GI provisions, the balance of advantage might lie with the UK, in that it is in a position to exclude EU products by amending UK law. In terms of the bigger picture, the EU might easily craft retaliatory actions which would serve neither party.

And, whatever is agreed, there are other battles to be fought. Between the EU and the United States, the major differences of view as to the application of GIs will require the UK to take a position in deciding which side to support. This is a matter for the future but such considerations may also cast a long shadow over the Brexit negotiations.

This issue, ostensibly simple, is extraordinarily complex, with billions at stake. It may well run and run.

Richard North 17/02/2017 link

Brexit: breaking up is hard to do

Thursday 16 February 2017  

As an observation, and most decidedly not a complaint, we note once again that as the blog delves deeper in the detail of Brexit, comments decrease – as do the number of visitors. This is not surprising. Apart from the nerds, people simply don't concern themselves in the details of governance and associated matters that do not directly affect their lives or interests.

But in there lies a warning. Seeking to extricate ourselves from the European Union is like draining the catchment reservoir in flooded valley, prior to removing a dam that is no longer needed. As the waters recede, the shells of long-discarded buildings are revealed, along with the rotting stumps of forgotten forests, all to become a permanent feature of the landscape once more.

So it is that issues which have long been hidden below the surface of the Brussels regulatory machine, ignored by UK regulators and businesses alike, are now becoming visible again and have to be dealt with. One of those issues – and a major one at that – is the formulation of technical standards for a wide range of goods and services, used to underpin legislation and as a marketing tool to reassure customers as to the quality of the products they are buying.

In post-war UK, the dominant standard was the British Standards Institute (BSI), its "kitemark" a familiar adornment on the labels of high street goods. This built on the work of the world's very first standards institute which, as the Engineering Standards Committee founded in London in 1901, took upon itself the task of standardising steel tramways as its first endeavour.

With the accession of the UK to the (then) EEC and the later advent of the Single Market, however, the British Standard was to give way to the European CE marking, a development about which the BSI is remarkably coy in its official hagiography.

In fact, despite losing revenue formerly gained from the development of standards, the BSI did rather well out of our membership, becoming "our man in Europe", representing the UK interest on European standards bodies (CEN and CENELEC, now combined as CENELEC) as the official National Standards Body.

Formalising the relationship with a Memorandum of Understanding with the Government, the BSI gets a generous subsidy from the taxpayer, currently £4 million in 2015-16, down from £7 million in 2006-7. Additionally, it gets handsome annual payments from the EU (nearly €7 million in 2014), for "services rendered".

The government subsidies have given the BSI space to reinvent itself as a testing house and an EU-approved "notified body" for 13 separate regulations. And now, with the fees flowing in and the revenue from overseas acquisitions, in 2016 it reported record profits of £35.4 million on a turnover of £331 million.

For a modern, services orientated Britain, the BSI and other such "notified bodies" are precisely the sort of businesses the Government wants. Operating out of its headquarters in Chiswick, the BSI has 3,500 employees and maintains 76 offices worldwide, reaching 80,000 clients across 182 countries.

In purely value terms, the "standards industry" is worth far more than the half-billion or so delivered by the fishing industry, creating high-value white-collar jobs, dominating a growing sector with high export potential.

However, with Brexit on the horizon, two substantial clouds are looming, with more than enough potential to rain on BSI's parade. The first is specific to the BSI as the UK representative on CENELEC, from which it profits so handsomely – and from which participation it gains both intelligence and prestige. At the moment, the organisation is maintaining a stiff upper lip, declaring after the referendum that it is "business as usual".

Over the coming months and during the transition period that will follow the triggering of Article 50, it says, we will be working with UK government and other parties as appropriate, such as the European institutions, and CENELEC, regarding our role in the development of European standards. It is BSI's ambition, it adds - "on behalf of UK stakeholders for the UK", of course - to continue to participate in the European standards system as a full member of CEN and CENELEC post-Brexit.

At first sight, it looks as if the BSI's ambition is not at all unreasonable. Although CEN and CENELEC are European institutions, closely related to the EU, EU membership is not a requirement for full membership. Currently, the 34 members include Turkey, Serbia and Macedonia, as well as three Efta states.

However, the current guidance on membership criteria sets six main points with which a candidate organisation must comply. Then, crucially, a candidate must have the "capability of becoming a member of EU or EFTA".

This leads to three additional criteria, the first one of which states that there must be a "Europe Agreement" (or equivalent) between EU/EFTA and the candidate country, specifying a transitional period for accession to EU/EFTA. Normally, it states, "an application for full membership can be considered only if target dates for accession to the EU/EFTA have been established".

What we then have are the Internal Regulations which state that CEN/ELEC is a European Standardization Organization, operating within the framework of EU Regulation 1025/2012 "whose members are joint-producers and disseminators of market-driven European Standards".

Within Regulation 1025/2012 is defined the role of the National Standardisation Body – the role taken by the BSI – making the collective bodies responsible to the European Commission, and imposing duties on Member States in relation to these bodies. It is hard therefore, to see how the BSI could operate effectively (or at all) within CENELEC without the UK also being an EU Member State (or at least an Efta/EEA member).

What the BSI can't avoid is that, post-Brexit, there will have been a change in its legal status - and not, as far as it is concerned - for the better. This is dealt with in the CEN Statute (Article 10) which states that any national Member "will be regarded as having resigned" if, inter alia, they "lose their qualification as a separate legal entity" or "no longer fulfil the conditions required in order to be a national member".

In all cases, a ruling is made by the General Assembly, against which there is no appeal. Nor, indeed, can CENELEC turn a blind eye. Responding to a request in 2008 from the European Council, CENELEC set up a Working Group on Membership Criteria to keep conformity with membership criteria under review, which means that the BSI's new status will come under formal review and trigger action.

Nevertheless, this did not stop Scott Steedman, Director of Standards at the BSI, writing to committee members after the Referendum, stating that, "for the foreseeable future we see no change to BSI's status and obligations as a full member of CEN and CENELEC". 

Posted by a member, the letter asserts the BSI's "ambition" that the UK should continue to participate in the European Standardization System as a full member of CEN and CENELEC. But Steedman then goes on to say: "We consider that this is a likely outcome of the forthcoming negotiations between the UK and the EU".

It is hard, though, to see how Steedman can be right, although the issue is discussed more widely here. At the very least, he is being wildly optimistic. All that BSI might actually aspire to is a partnership agreement, which confers no voting rights. Our experts would be afforded only "observer" status on technical committees.

For a UK perspective, though, full CENELEC membership it is hardly in accordance with the spirit of Brexit. The issue here is that CENELEC, when instructed by the European Commission via a set procedure, is required to produce harmonising standards and, once adopted, all the nation bodies must withdraw their own. Retaining full membership would keep open a back door, by which the EU could continue to impose its standards on the UK.

Whether or not BSI continues as a full member of CENELEC, therefore, needs to be a political decision – in the first instance by the UK Government. Then, it would require CENELEC to change its own rules, which would have to be negotiated. Doubtless, the European Commission would have the last word.

This, then, presents another series of policy decisions to be made by Mr Davis and his department, and ultimately by Mrs May. But there is then the issue of "notified bodies", which must also be addressed at a policy level.

Essentially, for existing UK bodies to continue certifying EU standards, the UK Government will have to negotiate a comprehensive Mutual Recognition Agreement (MRA) on conformity assessment, along the lines agreed with Switzerland. EU attitudes would probably be influence by our commitment (or otherwise) to CENELEC.

Alternatively, as we saw yesterday, the UK could decide to abandon the European system altogether, and throw its weight behind global standard-setting organisations, in particular ISO and IEC, seeking to work on the basis of equivalence.

In the short-term, that approach would cause major disruption in the "standards industry", with a significant cost element and even job losses. Refusal of the Commission to play ball would leave some sectors with considerable extra costs in seeking approval from EU standards bodies. Divergence would add to costs, as manufacturers have to gear up to a dual standard environment.

Either way, significant input from Government is going to be needed, adding to the realisation articulated by one commentator that breaking up is hard to do.

Richard North 16/02/2017 link

Brexit: a potentially explosive issue

Wednesday 15 February 2017  

On 5 September last year, David Davis told us that his officials, supported by officials across Government, were carrying out a programme of sectoral and regulatory analysis, which will identify the key factors for British businesses and the labour force that will affect our negotiations with the EU.

At that point, he said, they were looking in detail at over 50 sectors and cross-cutting regulatory issues, a statement he was to modify on 2 February this year, when he claimed that the number of sectors covered had grown to 58.

On this blog, though, we've recently looked at 20 sectors and can see hundreds more that need to be considered, if the department for the UK's exit from the EU is only covering 58, then we're in serious trouble. One of those sectors which Secretary of State might have missed is the growing market for the very specialist equipment used in potentially explosive atmospheres, the so-called "hazardous area equipment" market.

Worth $8.3 billion globally (2013), with Europe taking nearly 35-40 percent of the overall market (about £2 billion annually), it's not exactly going to set the world on fire (to coin a phrase), but it does support a number of high value businesses.

The sector is certainly significant enough to have attracted specific regulation from the EU, currently as Directive 2014/34/EU "on the harmonisation of the laws of the Member States relating to equipment and protective systems intended for use in potentially explosive atmospheres", repealing and replacing Directive 94/9/EC. This is the so-called ATEX Directive, from the French, "ATmospheres EXplosibles".

Currently the Directive has been transposed into UK law as the Equipment and Protective Systems Intended for Use in Potentially Explosive Atmospheres Regulations 2016, coming into force on 8 December 2016. This means they form part of the UK statute book and will not need to be re-enacted by the Great Repeal Bill. Despite that, they may need substantial amendment, depending on the outcome of the Article 50 and free trade agreement talks.

Not least of the problems will be that key parts of the Regulations deal with the setting up of Notified Bodies which must carry out conformity assessment and certify product compliance, without which the products cannot be sold in EU Member States.

However, for the purpose of this EU law, Notified Bodies must be "established under the national law of a Member State and have legal personality" (Article 21). On Brexit, the UK will no longer be a Member State and the existing UK bodies will no longer be able to certify ATEX products for circulation in EU Member State territories.

When it comes to export, the UK Government thus has a choice of two immediate options. In the first instance, it can seek, as has the Swiss Government, a Mutual Recognition Agreement on conformity assessment, alongside a formal agreement to maintain regulatory convergence – achieved by keeping the 2016 Regulations in force and by undertaking to enact future Union legislation. That way, UK Notifying Bodies could continue to certify ATEX products.

As an alternative, the Government can advise UK manufacturers that want to continue selling into the EU to seek certification from listed Notified Bodies currently established in the territories of other Member States.

That may involve little change, as some UK Notified Bodies have subsidiaries or sister organisations already established in other Member States. Much of the work can be done by the UK organisations acting as sub-contractors, under the direction and authority of the EU recognised bodies. There are, though, eight UK Notified Bodies, which also provide other services. Delisting could damage their commercial standing and their ability if attract business in a very competitive field.

As to products which have already been certified by UK bodies, there are differences in view as to whether these can remain in use in other EU Member States after Brexit.

In Article 27(2) of the ATEX Directive, we see that, where the Notified Body has ceased its activity, "the notifying Member State shall take appropriate steps to ensure that the files of that body are either processed by another Notified Body or kept available for the responsible notifying and market surveillance authorities at their request".

In the case of Brexit, UK Notified Bodies are forced to cease activity because they are no longer established under the law of a Member State. But, in a development that has not been anticipated by the Directive, the notifying Member State ceases to exist.

Therefore, the EU has no power over the UK and cannot require it to ensure that files are processed or kept available. It could then be argued that there is a technical breach of Article 38.1(e)-(h), in which case under Article 38(2), any of the post-Brexit Member States can "restrict or prohibit the product being made available on the market", and even "ensure that it is recalled or withdrawn from the market".

I am not going to argue one way or another whether this might transpire, although Ian Rippin, UK Managing Director of the CSA Group (a major Notifying Body) seems prepared to concede that certification remains valid only up to the point where we leave.

Whatever the small print, it takes little imagination to work out that, if an EU Member State in the aftermath of Brexit took action against British-certified products, the European Commission (or even the ECJ for that matter) might not consider as its first priority rushing to the defence of UK interests.

As for Mr Davis and his officials, they would do well to put this matter firmly on their agenda (if it isn't already there). Amongst other things, there should be seeking from the "colleagues" a declaration of continuity for this and other legacy certification, to remove any uncertainty.

This, one might say, would defuse what could otherwise become a highly explosive issue, one which would have nothing to do with the chemical make-up of the atmosphere. A small but valuable business could otherwise be at risk.

That notwithstanding, for the future, the UK government could elect to take a bolder approach for the longer term. As we see in this article, written by a Professor Dr Thorsten Arnhold, a "German European", the EU is not the only player in town.

More and more, Arnhold says, manufacturers and users are gravitating to global standards – in this instance the Geneva-based International Electrotechnical Commission (IEC) and its IECEx system, which has global reach.

As Chairman of IECEx, Arnhold might be a tad biased, but he does make the point that the ATEX market is already global business, serving the petroleum and gas industries (its major customers) which is not interested in a plethora or regional standards.

As long as there is a recognised global standard, Both the traditional ATEX and even more the new edition of ATEX bring little additional value to the manufacturer nor to the process industry as the customer. Says Arnhold, "once useful, they are increasingly seen as a necessary evil for the industry".

Taking a cue from this, the UK could reject slavish conformity with EU law and instead adopt the IECEx standards, with their conformity assessment systems. It could then negotiate mutual recognition of standards, based on the doctrine of equivalence.

What is particularly interesting here is that IECEx has been working closely with UNECE and its WP.6, adopting its Common Regulatory Objective system. Through this, it has produced a Common Regulatory Framework for Equipment Used in Environments with an Explosive Atmosphere, which links to the IECEx standards, giving them an enforcement framework.

In many respects, this is pioneering work and it affords the UK, post-Brexit, the opportunity to forge a new direction for regulatory harmonisation, breaking free of the Brussels-centric law machine and creating an independent structure for future standards setting.

This could prove doubly necessary as the ATEX Directive is part of a package with includes Directive 1999/92/EC, "on minimum requirements for improving the safety and health protection of workers potentially at risk from explosive atmospheres", which has been transposed into UK law as The Dangerous Substances and Explosive Atmospheres Regulations 2002.

These, for the moment, look as if they could stay on the statute book relatively unchanged as they do not have a direct and immediate effect on the certification of goods for export.

Their relevance, though, is that the Directive on which the Regulations are based is one of the many measures which constitute "a practical step towards the achievement of the social dimension of the internal market". As such, the EU may put continued conformity on the table as part of "conditionality" it will require for agreeing a comprehensive free trade agreement.

This brings in the whole ambit of health and safety legislation which could add unwelcome complications to negotiations, with the ATEX Directive as the spearhead – thus pointing up the complex inter-relationships between apparently discrete legislative categories.

In particular, this one, relatively arcane area of EU law could have massive implications for the Brexit talks, not least in defining the post-Brexit standards-setting model, to be used for trade purposes.

One thing is for sure, it certainly needs to be on Mr Davis's list of 58 sectors and, if it isn't, that list should quickly grow to 59. But then, as we observed, that list should already be in the hundreds, which is going to make cramming them all in to a two-year negotiating period a rather interesting (some might say impossible) exercise.

Richard North 15/02/2017 link

Brexit: fraud-busting could slow the pace

Tuesday 14 February 2017  

As we point out in Flexcit, and Pete points out more recently on his own blog, those who gain most from trade liberalisation are often criminals, exploiting the system to sell counterfeit goods.

One of the major growth areas in this respect is pharmaceutical fraud, where – as Pete tells us, there is a global epidemic. It has got so bad that US pharmaceutical giant Pfizer has found that 69 of its products were falsified in 107 countries in 2014, up from 29 products in 75 countries in 2008 - a doubling of the problem in six years.

Over 700,000 deaths per annum from malaria and TB have been attributed to falsified medicines and the Center for Medicine in the Public Interest in the United States estimated that counterfeits cost the global economy around US$75 billion in 2010.

As one might expect, there is an EU dimension to this and, inevitably, within that, implications for Brexit as controls have been tightened in an attempt to reduce fraud. One on the initiatives came in 2011 when the EU passed Directive 2011/62/EU amending Directive 2001/83/EC on the Community code relating to medicinal products for human use, as regards the prevention of the entry into the legal supply chain of falsified medicinal products.

This created a new layer of control to a category of product called the API (Active Pharmaceutical Ingredient), thereby covering not only finished medicines but to their primary ingredients.

Then, in 2013, along came Commission Implementing Decision 2013/51/EU on the assessment of a third country's regulatory framework applicable to active substances of medicinal products for human use and of the respective control and enforcement activities pursuant to Article 111b of Directive 2001/83/EC.

The length of the title is compensated for by the brevity of the law, running to a mere one page. And, as the title sets out, the Decision specifies how third countries are to be assessed to determine whether their regulatory frameworks applicable to active substances exported to the Union "ensure a level of protection of public health equivalent to that of the Union".

What the Union is saying, therefore, is that in order to export APIs to EU Member States, legislation and controls in third countries must be at least as stringent as those prevailing inside the EU. Furthermore, before being allowed to export, they must be checked out by the Commission before being included on a list of approved countries.

We are familiar with this type of control, seeing it with meat and meat products, and with racehorses and other live animals. Before even being allowed to export, a third country must apply for approval and wait to be included on the relevant list.

For APIs, we are helpfully advised that there is no "application form". After Brexit, the UK will have to submit its request to be included in the list of equivalent third countries "in accordance with Article 111b(1) of Directive 2001/83/EC" by way of a letter addressed to the Director-General of DG SANTE. An electronic copy also has to e-mailed to Brussels. The fax machines seem to have been junked.

Needless to say, just a simple letter is not enough. It must be accompanied by a considerable amount of documentation and information, including information on empowerment of authorities, supervision, authorisation/licensing/registration and inspection of API sites.

For the UK, that should not present too many problems, as we already have regulatory convergence, and can pass muster on all the regulatory requirements – especially if all the relevant EU legislation not already adopted is re-enacted via the Great Repeal Bill.

But, as with other sectors, regulatory convergence is only the start. A formal assessment must be made, based on what is known as the JAP checklist. Ironically, it is produced by the European Medicines Agency, currently based in London.

Then, in what could be a humiliating experience, there will have to be an on-site audit of the third country's regulatory system, unless a mutual recognition agreement ("MRA") is in place that covers the manufacturing of APIs. This will have to be a high priority for UK negotiators, who may want to embed such an agreement in the larger free trade agreement.

What we will also have to do is negotiate a transitional arrangement as the time taken for dealing with the request is "several months". We do not want to find ourselves with a gap after Brexit day, when we cannot export because we are waiting for approval.

This takes on an extra urgency when the "several months" in some instances may prove to be optimistic. For sure, Switzerland managed it quite quickly, submitting its application on 4 April 2012 and getting approved on 23 November of the same year.

Israel submitted on 3 September 2014 but didn't get approved until 2 July 2015 while Australia started on 18 September 2012 and got approved on 25 April 2013, beating Israel by one month. Even the United States took six months while South Korea, with its shiny new free trade agreement, applied on 22 January 2015 and is still waiting. Worse still is New Zealand which applied on 26 June 2013. Its application is "on hold", pending clarification of the scope of the existing MRA.

Once the country is approved, it doesn't stop there. The "competent authority" of each approved country must attest in respect of each active substance that they have been manufactured in compliance with standards of good manufacturing practices (GMP) at least equivalent to the GMP of the EU.

The manufacturing standards in the EU for active substances are those of the International Conference for Harmonisation – ICH Q7. This compliance must be confirmed in writing by the competent authority, on a standard EU form. Once in the grip of the EU, a mere letter is no longer good enough.

Post-Brexit, though, we can at least retain the illusion of control by applying our own domestic standards for medicines produced exclusively for the UK market. However, given the international nature of the drugs industry, it is unlikely than many manufacturers will want to work with two-tier standards, especially as any product made to a relaxed standard will undoubtedly be considered inferior.

As to the cause of all this – pharmaceutical fraud – there is perhaps some small comfort to be had in knowing that the EU's current anti-fraud strategy was devised by the European Medicines Agency in 2014, with an action plan that ran to the end of 2016.

By the time we see the next plan, it will be from a different location, as the Agency moves its headquarters. But then, as an independent nation, we can produce our very own fraud plan, in between waiting for EU officials to inspect our manufacturing plants.

We need not, however, be too cynical about all this. In the longer term, we can engage with WHO and its IMPACT initiative, launched in 2006. This is a global menace and a global, outward-looking UK could be just what is needed.

Richard North 14/02/2017 link

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