EU Referendum: Financial Times in denial

Saturday 30 April 2016  

A senior Financial Times journalist, who claims to have spent 40 years of his life "thinking and writing about the international economic order and particularly trade and finance" is denying that the EU is obliged to adopt standards from international bodies into its own legislation.

This is despite the journalist being shown Article 2.4 of the WTO Agreement on Technical Barriers to Trade, which states that: "Where technical regulations are required and relevant international standards exist or their completion is imminent, Members shall use them, or the relevant parts of them, as a basis for their technical regulations …".

Even though the EU is a party to this Agreement and thereby bound by it, the journalist – who cannot be named for legal reasons – claimed in an e-mail seen by this blog, "I really do know quite a bit about this. And I am telling you, you are just wrong. These international agreements are not delivered by God to Moses on Mount Sinai", he says.

Earlier, the same journalist, who claims to specialise in economics, had been given details of the WTO's Sanitary and Phytosanitary (SPS) Agreement, which contains similar provisions (Article 3.1). It requires members to "base their sanitary or phytosanitary measures on international standards, guidelines or recommendations, where they exist".

Neither of these provisions is voluntary or discretionary. Both use in their phrasing the word "shall", which clearly indicates that their requirements are mandatory. Despite this, the journalist remarked: "You seem to be arguing that somehow these international legal arrangements are dictated to the EU". He then insisted: "Nothing could be further from the truth".

As part of a package of additional material, the journalist had also been told of the 1991 Vienna and Dresden Agreements, made between the International Standards Organisation (ISO) and the European general standards organisation CEN, and the electrical standards-maker CENELEC and the International Electrotechnical Commission (IEC).

These afford primacy to the international organisations so that, where the produce technical standards, the European bodies – which produce many standards for adoption into EU law – are obliged to accept the international standards as their own.

These issues emerged in the first instance after the journalist had challenged the chart (illustrated above), taken from the Efta Bulletin of 2012, alongside the assertion made in Flexcit (p.198) that 80 percent of the EU's single market legislation falls with the ambit of international organisations.

The data used in the chart, which refer to the 2010 period, have since been updated. According to the EEA Lex website, the current total for the laws comprising the Single Market acquis now stands at 5,048.

Of these, the largest single category comprises: "Technical Regulations, Standards, Testing and Certification", with 1,681 legal acts, or 33.3 percent of the acquis. At an international levels, these will mostly be generated by the ISO or IEC, or standards-setting bodies such as Codex, the OIE and IPPC. They may even originate from the UNECE or one of the many bodies involved in financial services regulation.

Then there is the specific category of: "Veterinary and Phytosanitary Matters". This comprises 1,409 legal acts, or 27.9 percent of the acquis. At international level, such standards will often be generated by the "three sisters" at FAO level - Codex, the OIE and the IPPC.

"Transport" is another category. It weighs in at 491 legal acts, accounting for 9.7 percent of the acquis. Here is implemented a variety of regional and global instruments, including those promulgated by the International Civil Aviation Organisation (IACO), the International Maritime Organisation (IMO), and agreements under the aegis of UNECE. These include rules for the transport of dangerous goods and the construction and safety of motor vehicles.

A smaller but still substantial category is "Environment", which accounts for 275 legal acts, or 5.4 percent of the total. At global level, standards are driven by UN bodies such as UNEP, UNECE, by the UNFCCC and a number of stand-alone conventions, including Ramsar, Aarhus, the Berne Convention and many others.

There is also a category under the lengthy title of: "Electronic Communication, Audiovisual Services and Information Society". It adopts measures promulgated by the International Telecommunication Union (ITU), the World Administrative Telegraph and Telephone Conference (WATTC) and the International Telegraph and Telephone Consultative Committee (CCITT).

The category itself accounts for only a relatively modest 140 measures, or 2.8 percent of the acquis. Yet this is substantially more than "Financial Services", implementing such provisions as the Basel III package developed by the Basel Committee on the Supervision of Banking, and many other important measures from international bodies. With the allied category of "Free Movement of Capital", this accounts for 100 measures, or 2.0 percent of the acquis.

This brings us to 81.1 percent of the total Single Market acquis, bringing us over the 80 percent level which we suggested lay within the ambit of international organisations. But to this, though, we can also bring in the category of "Procurement".

Although it only adds 31 measures, or another 0.6 percent, it is an interesting area for inclusion. In it, we see elements from the United Nations Commission on International Trade Law and its model law on public procurement and the WTO Agreement on Public Procurement. These "inform" the EU's Public Procurement Strategy which in turn feeds though to the Single Market acquis and the EEA.

All of this does not mean, and nor have we ever suggested, that 80 percent-plus of the Single Market acquis derives from regional or global international organisations. Simply, as labelled on the tin, the legislative categories identified (and more) fall within the ambit of international organisations, those categories covering the larger proportion of the acquis

From this, the direction of travel is clear. As the march of globalisation continues, the acquis itself will become more fully globalised. The European Union is on its way to becoming a law-taker, the middleman rather than the primary producer, ceding its legislative functions to global bodies. 

Whether Financial Times journalists can deal with that reality is neither here nor there. They can howl it down but globalisation is a fact, and it's writing the EU's redundancy notice. There is a global Single Market in the making, and we need to be part of it.

Richard North 30/04/2016 link

EU Referendum: wilful stupidity

Friday 29 April 2016  

Economists for Brexit have published a pamphlet with a briefing from each economist covering areas including regulation, trade, jobs and investment, immigration, the City, EU budget, EU funding and a comprehensive post-Brexit economic forecast.

Offering us his wisdom on the options for Brexit and trade is Patrick Minford, Professor of Economics at Cardiff University and former economics advisor to Margaret Thatcher. He asks, in a rhetorical fashion: "What would be the effect of simply 'walking away' from the EU?"

We should think of it, he writes, as abolishing the 1972 European Communities Act, not negotiating any new agreements with the EU or anyone else, and putting up no UK trade barriers at all. His detailed model calculations then show we would receive a welfare gain of four percent of GDP and consumer prices would fall eight percent.

From anyone else, this would doubtless be treated as the ravings of a lunatic, but this is not a lunatic. It is Minford, former advisor to Thatcher, and the doyen of the "free trade" claque which hovers around the IEA in London. Within the "bubble", he is treated with something akin to reverence.

Nonetheless, what's on offer from Minford and his associates is nothing short of lunatic. His scenario is based on what he calls his "Liverpool" or "Computable General equilibrium" (CGE) economic model. It is based on the assumption that when the UK leaves the EU, it abandons the EU's protected economy and reverts to world prices for both its exports and its imports.

The unilateral removal of all tariffs enables us to buy goods and services at "world prices". This supposedly gives us the eight percent drop in consumer prices. On the other hand, though, our exporters are no longer servicing a protected market and are forced to sell at world prices.

In this scenario, many of our manufacturing enterprises would no longer be competitive and would fall by the wayside. However, Minford would have it that the UK would make up for the loss of production by switching into higher value services. This miraculously produces a nation-wide productivity gain, which supposedly lifts GDP by the four percent he predicts.

The point to make here is that Minford is not pushing for Brexit, so much as what he calls "Breset", amounting to a complete – almost revolutionary – restructuring (or "re-set") of the UK productive economy. This, according to Minford, means that "Brexit is a shock – a good shock". He concedes that there may be some "short-term uncertainty", but reassures us that this "can be handled".

Yet this is all on the basis of a model that is, according to the Financial Times, by no means reliable. The four percent gain in GDP is pure speculation, relying entirely on the assumption that the UK manufacturing sector can smoothly transition from production to services, with the workforce redeployed and acquiring new skills.

From there, if it is at all possible, it gets worse. Asking what other trade agreements would be needed, Minford's advice is "none". We already sell all our non-EU exports and all our exports of services around the world under WTO rules, he says. "That accounts for about 70 percent of all our exports. Now the other 30 percent, to the EU, would join in".

Minford, however, is mistaken in assuming that the bulk of our trade is conducted under WTO rules. He makes the common error of believing in a non-existent binary structure for world trade. This is one in which international trade is regulated either via the mechanism of the preferential trade agreement (also known as the free trade agreement) or solely under WTO rules. In his book, there is nothing in between.

The truth is very different, as we point out in an earlier post: there are all manner of trade agreements, bilateral, plurilateral and multilateral, lying outside the WTO framework. These create complex networks of trade relations. So prevalent and important are these, it can be said that there is not a single advanced economy in the world that relies exclusively on WTO rules.

That Minford would have us rely on the WTO creates a gap in his scenario of monumental proportions. Should we simply "walk away" from the EU, as he proposes, a range of non-tariff barriers – both regulatory and procedural – would take immediate effect. These would bring UK exports to the EU almost to a complete halt. By any measure, the WTO option would be a disaster.

As if this wasn't bad enough, Minford fails to recognise that the relationship with the EU is far more than one of trading partners. We engage in a huge range of shared enterprises – from research to air traffic control, and many other things – the continuation of which must be assured through negotiation prior to our formal withdrawal.

In this lies extreme peril. Far from "walking away" from the EU, the UK would be obliged to undertake a complex series of negotiations. Yet, under the Article 50 regime, negotiations are initially limited to a two year period, which can only be extended by unanimity. But not only would it be unwise for the UK to seek an extension – as the price demanded might be unacceptably high - Reuters yesterday was indicating that there was no appetite for granting any extension.

Yet, without we well-crafted exit plan, with substantial concessions to put on the table to expedite negotiations, it is extremely unlikely that any settlement could be concluded within the time period. Confirmed by Reuters, this means that Britain could be cut adrift without any preferential relationship with its biggest trade partner.

In fact, it is being suggested that the initial negotiation period would only be sufficient to allow us to deal with issues such as residual EU budget payments to and from Britain, the pensions of British EU civil servants and relocation of EU agencies based in the UK. On 1 July 2018, or thereabouts, Britain would become a "third country" in EU parlance.

What is so terribly dangerous is that people such as Minford seems completely unaware as to what that would entail. In one of his other publications, Minford talks about it being "highly unlikely" that the EU would raise trade and regulatory barriers against UK exporters in such an event.

What he does not understand is that the EU wouldn't "raise" these barriers, as such. They apply automatically to any "third country". Obeying the very WTO rules about which he is so keen, the EU could not apply a preferential regime to the UK. To do so would discriminate against others – something not permitted by those rules.

Additionally, the EU itself is facing an existential threat, in the Brexit could become the trigger for other member states to leave, thereby triggering a collapse of the Community – and especially so if any country can get a better deal outside the EU than in.

Under such circumstances, what Minford is proposing is potentially catastrophic - exactly the opposite of what we need in a referendum campaign. Where there is a crying need to de-risk Brexit in order to reassure voters that leaving is a safe option, he seems to be going out of his way to maximise risk and increase uncertainty.

This is unacceptable. Academics have no business being unaware of the consequences of their proposals. And someone relying on the prestige of his academic position and title has no excuse for not knowing the specifics of trade agreements, and their relevance to our exit options.

It is said of us all that ignorance of the law is no defence (in the commission of a crime). Similarly, ignorance of key issues in an academic promulgating exit scenarios is no excuse for getting it wrong. Minford should be applying academic rigour to his work. His failure to do so is more than just mere error. It is wilful stupidity.

Richard North 29/04/2016 link

EU Referendum: trapped in their own inconsistencies

Thursday 28 April 2016  

Watching Arron Banks and Richard Tice in front of the Treasury Committee yesterday, one wonders what point there is in perpetrating this parade of mutual ignorance – apart from the limited entertainment value.

No more so does this apply when Banks was challenged by Chris Philp, Conservative member for Croydon South on the "regulatory burden" of EU membership, whence we get a dissection of the same tired memes that have been churned over by generations of eurosceptics, with much noise and almost no understanding.

Leading into the subject, Philp asks Banks to estimate the cost of this "burden", whence he elicits the response that that this is "unknown". "What I do know", Banks avers, is that if you attempt to harmonise all products and services across the EU and legislate for that, I would be a "very large number".

Banks then points out that, if we export to the United States of America, we have to follow their rules, same with Japan, so the European regulation is an "added burden" that is put on us because it affects all businesses not just the businesses that export into Europe, which is just "not that many".

Richard Tice then pops up with the "classic" Open Europe study and offers the sum of £33 billion a year for the top 100 most expensive regulations. This is just what Philp is waiting for, the cue for his party trick of showing that he had read the website and seen the figure there.

He then goes on to say that Open Europe has revised its work and come to the (stunning) conclusion that, when we leave the EU, we would keep many of these regulations, so the costs would continue to apply. By some measure, it comes to the conclusion that the "maximum conceivable" saving is £24 billion.

Tice, however, still thinks that this is a massive sum, that can be saved by the "95 percent of businesses" that don't export to the EU and probably have no intentions of exporting to the EU.

Philp then latches on to the EU's Capital Requirements Directive (CRD), which is counted as a cost in the £33 billion, and remarks that the UK government has "voluntarily chosen" to impose higher capital requirements on banks than is required under EU regulation. Withdrawing from the EU would make no difference to the burden of capital requirements legislation.

We thus see Philps having completely fluffed to point. As we all know (and was pointed out in the previous Treasury session with Cummings), the CRD is implementing Basel III, which is of global origin (and application). With or without the EU, we would still be applying this regulation.

Here, though, Banks and Tice are compromised (as was Cummings). Having followed the idle Muppets from Open Europe instead of doing their own research, they have already attributed the cost of the CRD to the wicked EU. It is thus difficult to switch horses in mid-stream and then argue that the cost is not attributable to the EU after all.

In this case, however, Banks completely blows it, arguing that the (extra) capital requirement is not a regulatory cost. We then have to have a short intermission while Banks is given a "Banking 101", to bring him up to speed on financial services regulation.

That then leaves Tice to parade his own ignorance, arguing that leaving the EU would bring the legislation back within our control, to decide what the capital requirements would be. The international dimension, it appears, has completely passed him by.

Moving on to environmental and climate change legislation (to which Open Europe attributes a recurring annual cost of £3.4 billion), Philps again notes that the UK has chosen to go beyond what the EU requires – although he neglects to note that this is implementing the Climate Change Act. But he does refer to the Paris agreement, which is, of course, a global accord. Rightly, therefore, Philps asserts that there would be no savings should we leave the EU.

At this point, I must refer to Open Europe's first intervention in this field, back in October 2013, when I wrote a blogpost pointing all this out, and much more. The OE work was then spurious and, well over two years later, we have an obscure politician pointing this out to self-appointed leaders of the "leave" campaign.

This is actually stuff I've raised personally with Banks – and indeed I also told Cummings at some length. But such is the determination to exploit the "regulation card", that the information goes in one ear and out the other. These people are simply incapable of registering the reality.

Oblivious to this, however, at this point in the Committee proceedings, Banks intervenes to suggest that Philps has raised a "very interesting point". Dimly remembering the North briefings, Banks tells the committee that a lot of the regulation now is "on a world basis" rather than a European basis. "So in fact", intones Banks, "the European Union is a wholly unnecessary middle man in the whole process".

What you're talking about, Banks tells Philps, is the regulations for banking are made "pretty much on an international, global basis and implemented by the European Union or the Bank of England". Again he repeats that the EU is a "middle man" in what is the implementation of a lot of global rules.

Says Philps in response, "if that view is correct" (and he believes it to be so), "then withdrawing from the European Union … would not deliver these amazing cost savings".

Banks is now comprehensively caught out, and can only respond by extending his display of ignorance. "These are high level things, discussed on an international basis", he says, "but we're talking about regulations imposed on small and medium-sized businesses", which has "nothing to do with any of the stuff you've just mentioned'.

Sailing clear over his head, therefore, are the effects of Codex Alimentarius, the OIE, the IPPC, UNECE and the other bodies which make up the bulk of the single market regulation, right down to the percentage of sugar that must be present in a preserve before it can be called jam.

Putting all these together, it is very much the case that, as Philps avers, that much of the regulatory costs attributed to the EU come from elsewhere. The cost-savings are illusory. But, while half recognising this, Banks and his sidekick Tice simply haven't connected the dots.

If, as Banks quite rightly says, the EU is a "middle man" implementing global regulation, then he can't have his cake and eat it. He cannot attribute the cost of this regulation to the EU, which is precisely what he has been doing – along with many others in the leave campaign.

Here, then, we see the campaign trapped in its own inconsistencies. On the one hand, we have a huge regulatory burden from EU law and, on the other hand, this is global regulation and not attributable to the EU. Which is it to be?

Richard North 28/04/2016 link

EU Referendum: leavers in denial

Thursday 28 April 2016  

Before going any further on this, I need to say that there is no intention on my part to give up. I intend to fight to the bitter end, and fight to win. And nor in any way do I concede that we are losing the battle. The EU referendum is still very much winnable.

That said, one can concede that the ever-more bizarre conduct of Vote Leave is causing serious concern. In particular, its refusal to offer a coherent exit plan is not backed by any intelligent argument which would support their stance.

Our best understanding of the situation is that Vote Leave does not wish to commit to a specific plan on the basis of arguments offered by Dominic Cummings in June of last year. "There is much to be gained by swerving the whole issue", he wrote - in a statement that has turned out to be the guiding principle of the official "leave" campaign.

The fatal weakness of "swerving the whole issue", however, is that if the leave campaign does not commit to a specific plan, they leave a vacuum for the naysayers to fill with any number of possibilities. And since these are not concerned with promoting the "leave" agenda, the scenarios presented will always be less than attractive.

Storming into this category comes yesterday's report from the OECD which paints a distinctly unflattering picture of a post-Brexit UK.

Specifically, the OECD sees the UK leaving without gaining unrestricted access to the Single Market and preferential access to 53 non-EU markets. It asserts that UK trade would be initially be governed by WTO rules, leading to higher tariffs for goods and to other barriers in accessing the Single Market, notably for financial services.

In their scenario, bilateral UK-EU trade would contract and by 2020, these effects could shave off over three percentage points of UK GDP, representing costs equivalent to £2,200 per household. Not until 2023 would a free trade agreement with the EU be concluded, similar to the one between the EU and Canada. It would provide a partial offset for UK trade but the costs of accessing the Single Market would still be higher than they are now.

The UK would also continue to face additional barriers on third-country markets to which preferential access was lost as a result of EU exit. Negotiating new trade treaties would take time. Longer term, therefore, Brexit would continue to generate substantial structural changes in the economy, reflecting the new relationship with the EU and new policies over 2024-30.

There are more details, many more, but they don't really matter. The point is that the scenarios on offer from the OECD are so far distant from what we suggest in Flexcit that, had this plan been officially on the table, we could have blown the OECD out of the water. We would simply say that the organisation did not represent anything we had suggested or could endorse.

That is the point that completely contradicts the Cummings "strategy". To counter spurious exit plans, dressed up as disaster movies, we need to have our own plan. To have one completely wrecks the current opposition game. Their substitute plans can no longer purport to represent anything other than attempts to sabotage the "leave" agenda.

At that point, however, the alternative Cummings thesis cuts in. And plan that the leavers produce, he says, becomes the target for all comers. He is worried that, as in the Scottish referendum, defects will be exposed which will destroy the leave case and wreck the campaign.

The weakness here is that Cummings had constructed this scenario before he had read Flexcit, and with a less than perfect knowledge of the EU. This is a man, after all, who asserts that the Commission tells us that the Single Market comprises the euro and the Schengen area, and that there still is in force a Clinical Trials directive.

What he hasn't factored in is that the process of globalisation is making the EU redundant. This makes Flexcit, with its highly developed globalisation agenda, a cast-iron plan that sets an impossible task for the remainers. They cannot deny that globalisation is happening, they cannot deny that global bodies are taking over the legislative agenda and they cannot deny that the EU is progressively ceding its powers to those global bodies.

Furthermore, they cannot fight is their own logic. If getting rid of 28 sets of regulations and replacing it with one is the justification for the European Single Market, then the advantages of replacing 160-odd sets of regulations with one, to develop a Global Single Market cannot be denied.

The barrier to Flexcit, therefore, is not the "remain" camp, but the "leavers". It is they who are wedded to the idea of getting rid of all the troublesome regulation. It is they who are failing to recognise that it is coming not from the EU but from the distant and largely anonymous globalisers - that by embracing global regulation we render the EU superfluous to requirements. Thus, it is leavers in denial who are creating the problem.

Nor indeed is this the extent of their denial. Their rejection of the need to retain for a temporary period the freedom of movement that comes with keeping the EEA as an interim option is also holding us back. Never mind that, as the globalisation agenda eventually leads to the abolition of the EEA, the institutionalised freedom of movement is also abolished. They can't think that far ahead.

And nor can the likes of Cummings cope with the inherent simplicity of a plan that can set out all the necessary detail in just over 400 pages. Back last June, the man was suggesting that "the sheer complexity of leaving would involve endless questions of detail that cannot be answered in such a plan even were it to be 20,000 pages long". And the longer it was, he wrote, "the more errors are likely".

But, if we adopt an already existing template, in the form of the EEA, and then repatriate the acquis, there is no need to restate the detail. And there need be no concern about introducing errors. We simply take on that which already is. The 20,000 pages already exists. There is no need to rewrite them. 

On that basis, the few arguments that Vote Leave ever had against adopting a coherent exit plan fall by the wayside. Yet the very reasons for having an exit plan are getting stronger by the day. We see this in the OECD report, and this is by no means the last we will see of this tactic.

In my view, therefore, we are at a turning point in the campaign. If we are to win, Vote Leave must listen to its critics, concede it was wrong and move rapidly to publish a coherent exit plan - and then stand by it. If it does not, I don't see how we can win.

We perhaps have a window of two, maybe at the most three weeks for Vote Leave to deliver a sensible exit plan. If they do not, we will in any event be pushing Flexcit for all we are worth and such is its strength that maybe we could just about prevail on our own.

Frankly though, I would prefer to avoid the Kasserine Pass scenario where we have to fight through our own side to get at the enemy. We haven't got the time or the energy to defeat Vote Leave as well as the remains. We would prefer to win with them, rather than have them undermining our efforts.

Richard North 28/04/2016 link

EU Referendum: an intellectual quagmire

Wednesday 27 April 2016  

With less than two calendar months to go before polling day, it is nothing less than alarming to find that fundamental questions relating to Brexit are so far from being settled by Vote Leave that we're not even past first base.

This disturbing insight comes to us via Breitbart London, which has a copy of a letter from Bernard Jenkin MP, Vote Leave director.

Dated 21 April and addressed to a constituent, it rejects the use of Article 50 in the event that we vote for Brexit. Instead, Jenkin argues for negotiating with all the other 27 member states at government-to-government level. The result, he says, "could take the form of a new treaty, which would mean the UK would not need to resort to Article 50".

In the event that there is no agreement, Jenkin adds, "the UK Parliament can pass its own legislation to suspend the application of the EU treaties, but it would be preferable to do this after an agreement with the other EU member states has been reached".

Here, one would like to think that Mr Jenkin is applying the considered weight of legal advice and political experience, coming to a sound conclusion based on the facts on the ground, with due regard for EU treaty and international law.

However, there is no evidence that there is any legal weight behind these scenarios and nor is it possible to adduce any circumstances where they might realistically be applied.

In the first instance, Jenkin is making the same error (although perhaps unwittingly) that Mr Cameron has made in agreeing his supposed treaty. He has neglected the provisions of Article 61 of the Vienna Convention on the Law of Treaties, and the dictum res inter alios acta vel iudicata, aliis nec nocet nec prodocet, where two or more people cannot agree amongst each other to establish an obligation for a third party who was not involved in the agreement.

What these amounts to is that the member states, even if they agreed to carry out negotiations (which seems unlikely), would be acting inter-governmentally (which Jenkin acknowledges), which means they could not bind the European Union – which has its own, separate legal identity – to the terms of any agreement.

The inescapable bottom line, therefore, is that, if there is to be an exit settlement, the negotiations have to be with the EU. And that means working within the constraints of Article 50.

Jenkin, however, hasn't finished. In the event that the member states won't deal (which, of course, they can't), he would have Parliament pass its own legislation to suspend the application of the EU treaties.

Assuming the government would be mad enough to do this and that a Parliamentary majority could be gained, this would amount to a unilateral abrogation of the Treaties. The consequences of this would be so disastrous that one struggles to believe that an MP could even propose it.

What we have to take from this, therefore, is that the Jenkin scenarios are non-starters. There is no practical or legal alternative to Article 50. Yet, despite what should be an unarguable issue, and one settled long ago, Jenkin is not on his own. We have Gove, Lawson and Cummings all coming together to reject the Article.

Behind this, one suspects that Vote Leave officials are aware that the initial two-year duration of Article 50 negotiations makes agreement on a comprehensive free trade agreement impossible. David Cameron's jibes about the seven years taken to agree the Canada deal (which still hasn't been ratified) have hit home.

To get a deal inside the two-year period is going to require compromise – which Vote Leave cannot afford to give, as they haven't thought through the implications. Thus, to get them off the hook on which they have impaled themselves, they are constructing ever more phantasmagorical scenarios to release them from the reliance on Article 50.

Sadly, these are not the actions of adults. We are seeing an almost childish level of naïvety from a group of people who are demonstrating an increasing inability to deal with reality – all of which is creating an intellectual quagmire at the heart of the leave campaign that prevents it even beginning to present a coherent exit plan.

What is terrifying, though, is that this naivety is shared by most of the political class and, if their current work is any guide, the House of Commons Foreign Affairs Committee.

In an extraordinary shoddy and superficial report published yesterday, laughingly under the title: "Implications of the referendum on EU membership for the UK's role in the world", the MPs manage to offer an analysis of the "day after a vote to leave…" that would shame a reasonably bright fifth-former.

Recognising that two-year period immediately after the referendum would present "challenges", they then manage to elide the Norway and Swiss options, treating them as if they were essentially the same.

In exchange for access to the single market, the MPs say, "both the EEA states and Switzerland must pay into the EU budget and adopt a large proportion of EU law - including free movement of people - but they have no say in how those laws are made".

If this is as far as they have got, then the learning curve hasn't even started to lift off the horizontal, leading to a monumental parade of ignorance as they pontificate that: "From a UK perspective, these models would thus bring few benefits in terms of repatriating sovereignty over law-making and immigration, while still imposing many of the costs associated with the status quo".

Yet, having already recognised the "challenge" of the two-year period, they then go on to say that, "rather than following these existing templates, the UK ought therefore to opt to pursue a bespoke arrangement, including a comprehensive Free Trade Agreement (FTA)…".

Amazingly, bringing ignorance to new heights, they actually tell us that:
Detailed and possibly lengthy negotiations between the UK and the remainder of the EU would be required in order to achieve a deeper settlement than the terms of the European Free Trade Association (EFTA), which offers tariff-free trade on goods but - crucially, from a UK perspective - excludes services.
Seemingly, they are unaware that EFTA does not actually have a trade relationship with the EU. The deals are between the three EFTA states, Norway, Iceland and Liechtenstein, as in the EEA Agreement, and between Switzerland and the EU, agreements that were concluded outside the framework of EFTA.

Nevertheless, they conclude that "it is difficult to predict with certainty the type and terms of the new relationship between the UK and EU after a decision to withdraw".

In their view, "it cannot be assumed that the UK would retain full or partial access to the single market if it left the EU, or that it would wish to do so given the restrictions and costs that such an arrangement could potentially incur".

However, it is probable that, "due to the strong economic imperative, the UK and EU would seek to negotiate some form of trade deal as quickly as possible in the light of the political climate".

Then, we are informed that: "the Government should recognise the probability of no mutual interest deal being concluded within the two-year notice period. If no deal could be concluded within the two-year notice period, the UK would move to standard WTO relationship terms and would then need to decide which of the 6,987 directly-applicable EU Regulations would need to be replaced by UK law".

And then, in a text that should be engraved on a brass plaque to mark the nadir of political intelligence in the Commons, the MPs gravely intone:
It is, however, a reasonable assumption that in the medium term a suitable mutual interest deal would be concluded. It is possible that the transition process could be fully co-operative and disruption minimised, but this would depend on how well EU countries respond to a perceived rebuff by the British electorate. As time heals, mutual interest will progressively trump any short-term hurt feelings and both the climate for, and interest in, agreement in the mutual interest would improve.
We are actually paying good money for this extruded verbal material, to achieve nothing but a further attestation of the capacity of our elected representatives to waste time and money.

Whether by MPs or the official campaign, we are so badly served in this referendum that the issues have been submerged in that self-same quagmire. Not for nothing does Mr Brexit argue that the political game playing and personality politics of the referendum campaign is snatching the goal away from us.

When this is all done and dusted, he says, there needs to be a reckoning. We could not even begin to disagree.

Richard North 27/04/2016 link

EU Referendum: downers and uppers

Tuesday 26 April 2016  

Owen Paterson yesterday delivered a speech on the Future of Europe, telling us that the aim behind the European Union is, and always has been, to achieve by a series of stealthy, incremental steps, the creation of a United States of Europe, with a single, supreme government in Brussels, to match the power of Washington and the United States.

This is a well documented vision. It is embedded in the idea that, in order to prevent the peoples of Europe slaughtering each other, its nations must be abolished and replaced by a single, federal structure to ensure that the horrors of 1914-1945 would never be repeated. However, we have reached a point in this process of integration where, the Eurozone is about to become a new country.

Said Paterson, you may not like the EU you have got now but you will like the new one even less as it seeks to overcome the fatal flaw in the eurozone.

The fragile Club Med economies cannot create wealth at the rate at which they joined the euro. This has had tragic consequences for a whole generation of young people. Thus, the EU must be able to transfer money to them from the wealth-creating areas such as southern Germany and Southern Holland. And, for that, there has to be a central budget, a tax raising capability and a central economic government.

This is a very clear direction of travel. With unaccustomed honesty and candour the European establishment in 2013 drew up a draft treaty, produced by the Spinelli Group. Then, on 22 June 2015 it published the Five Presidents' report on completing Economic and Monetary Union. This strategy was confirmed again in the Commission President's State of the European Union Report in September 2015, with the promise of a White Paper in the Spring of 2017.

Therefore, it is not a question of whether, but of when these changes are made. In short, the Five Presidents’ Report sets out an action plan for pooling sovereignty in the 19 Eurozone countries based on economic, financial, banking, fiscal, and capital markets union – with all of these unions taking place at once. This plan is underway now to finally move to "political union" at the latest by 2025. From then on, the EU will be new country, one which we cannot possibly join.

Despite this, Theresa May is arguing that we should stay in the EU. Her one concession is to leave the European Convention on Human Rights (ECHR), thereby exposing an inherent contradiction.

Currently, the ECHR is incorporated into the EU acquis by the Charter of Fundamental Rights, which is binding on EU institutions and enforced by the ECJ. On that basis, the only way completely to get clear of the ECHR is to leave the EU entirely. Mrs May is on the wrong side.

Another one on the wrong side is Dominic Raab. This man is supposedly a "leave" campaigner, yet is arguing that we could need a visa "or some other kind of check" to travel to continental Europe after Brexit.

He says the issue would be a matter for post-withdrawal negotiations with the EU, but could not be ruled out if Britain wanted more secure borders.

This reveals an inherent incoherence in the official "leave" campaign which fails to understand that freedom of movement pre-dates the EU. That, post-Brexit, we would need visas to travel to France and other European countries is doubtless unacceptable to the majority. The idea could be a deal breaker.

But the incoherence gets worse as Michael Gove in The Times comes up with something truly bizarre – even for Vote Leave.

After we vote to leave, he says, "we will need to discuss new arrangements between Britain and the EU". At that point, he argues, "The other countries will know that until a deal which suits us is reached we still retain a veto over their plans. So that gives us all the cards".

What he seems to have in mind is a weary variation of the Thatcher "handbag" ploy, where the UK attains its preferred deal by threatening to withhold consent for a new treaty.

This was precisely what David Cameron had in mind in the 2013 Bloomberg speech. But it didn't work then and it won't work now. Hugo Dixon suggests in the Telegraph that the EU would gang up against us, but there is an even more brutal fact than that.

Simply, the UK is caught in the two-year Article 50 period, in which it must either come to an agreement or seek the unanimous consent of the "colleagues" for extra time.

Says Dixon, it is politically fanciful to suppose that we could vote to leave and then sit in European meetings year after year trying to sabotage our partners' efforts. Once we had triggered Article 50, our backs would be against the wall and not until Brexit was complete would the EU begin the process of agreeing a new treaty, when the UK no longer had a vote, much less a veto.

After all the years we have been considering Brexit, therefore, it seems that the so-called "big hitters" are only now beginning to think of how to approach the issue, and going through all the tired old arguments, without beginning to address the real world problems. They are fumbling the pass, both sides totally out of their depths.

One bright point to emerge, though, is that Mr Obama's intervention seems to have been counter-productive. It seems 29 percent are less likely to vote for "remain", up 12 percent on the figure before the President intervened, against 22 percent more likely, down three percent. The majority, 49 percent, are unchanged.

Another small glimmer is that King's College has withdrawn an invitation to Alexander (aka Boris) Johnson from him to speak at the College – the right thing for almost certainly the wrong reasons. But any reduction in the opportunities this man gets to speak publicly can only be a good thing. 

We need to be grateful for those small mercies, however they come to us.

Richard North 26/04/2016 link

EU Referendum: EU-US trade deals galore

Monday 25 April 2016  

000a EUtrade-025 US.jpg

"The EU has never yet, in its history, had a trade deal with America", wrote Charles Moore in the Telegraph this weekend.

A more cautious person might, before writing such an unequivocal statement, have consulted the Europa website to check its veracity. And there is the Treaties Office Database which boasts an advanced search facility. If you search by "country" (United States of America) and "nature of agreement" (trade agreement), the database will list 23 agreements (screen grab above- click to enlarge).

If you do a new search, this time on the separate category of "Agreement for trade and cooperation", you will come up with a further eight agreements. In particular, you will find the 1976 Framework Agreement for commercial and economic cooperation between the European Communities and Canada.

This is described as a "non-preferential agreement" and was the very first formal agreement of its kind between the EEC and an industrialised third country, under which the parties committed "to develop and diversify their reciprocal commercial exchanges and to foster economic co-operation".

Now continue your search, this time under the category "Agreement on Customs Matters", an issue which is intimately trade-related, and you will find another four agreements. And there is also the vital "parallel agreement" concerning "the establishing of global technical regulations for wheeled vehicles, equipment and parts which can be fitted and/or be used on wheeled vehicles". This is the one brokered through UNECE WP.29.

Then we also see three agreements under the category "Agreement on internal market matters". These are the massively important WIPO Treaties (2) and the Trademark Law Treaty.

By my reckoning, that makes 38 EU-US "trade deals", of which at least 20 are bilateral. Others may get different results. The database at the time of writing was undergoing "enhancements and updates”, with a warning to expect "discrepancies in the site's behaviour". I will revisit the site when it is back fully functional.

If you are of a mind, however, you can visit the equivalent US sites which – to me, don't seem as well organised – where the relationships will be confirmed. One for instance notes, through the fog of misinformation, that the State Department claims "significant trade and investment relations" (below).

Then, just looking through the list of trade deals in for on 2013, one sees no less than 22 agreements on trade and commerce, including the 1996 Agreement "for the conclusion of negotiations between the European Community and the United States under Article XXIV:6, with annexes and exchanges of letters".

Currently, of great interest is the 2015 Cooperation Agreement between the United States Department of Commerce and The European Commission Directorate-General for Internal Market, Industry, Entrepreneurship and SMEs on Clusters, which goes alongside the Cooperation Arrangement on Small and Medium-Sized Enterprises.

All these data are more than adequate to demonstrate that Mr Moore's assertion about the EU not having a trade deal with America is not rooted in fact. The reality is that the two blocs are bound by an intricate network of bilateral and multilateral deals, all of which are administered jointly by The Transatlantic Council, described as the "primary plenary forum for economic dialogue between the United States and the European Union".

As a result of this, the transatlantic economy supports an estimated 15 million jobs. The EU and the United States are each other's leading partners by trade volume (imports plus exports). Every day, the EU and the US trade goods and services worth $2.7 billion. In 2012, bilateral trade in goods alone was worth $650 billion.

It thus ill-behoves the likes of Moore – and the many in the "leave" camp – to parade that myth that EU and the US, and British trade with America has effectively grown organically with "no trade deal". Simply to walk away from the EU without replicating the network of agreements with the US would cause significant perturbation to trade flows.

However, where multilateral agreements pertain, we are parties to them in our own name and can rely on continuity with little more than the formal diplomatic mechanism of an "exchange of letters". Similarly, with the agreement of the United States, we can rely on the presumption of continuity for the carry-over of bilateral deals.

What we should not do is adopt the head-in-the-sand attitude, fuelled by the profound level of ignorance that we are seeing – and pretend that trade with the US will continue unchanged after Brexit, unless we take active steps to make it happen.

But, from recognising that there are trade deals already in place also stems the longer-term solution to US-UK trade relations. The arrangement of most interest is the US participation in UNECE, especially in WP.29 on motor vehicle standards.

This covers not only vehicles themselves by their components and, in 2012 we saw a Global Technical Regulation (GTR) on passenger vehicle tyres. Harmonisation of standards on this single product was estimated to boost global trade by $40 billion, providing a mechanism for trade liberalisation that has eluded US-EU negotiators engaged in TTIP negotiations.

Although in 2014 the US abstained from the vote to adopt the standard, work is in progress to modify the standard to make it more US-friendly, thus demonstrating that UNECE is a realistic forum for ongoing trade negotiations.

Arguably, sector-specific – i.e., "unbundled" - agreements have far more chance of success than the "big bang" TTIP-style negotiations. Global agreement on just Regulation 0 has the potential to save billions, even though most people have never heard of it. And in that case, the UK – as a full member of UNECE – can be part of ongoing trade dialogue with the US, even (or especially) when it is outside the EU framework.

Being at the back of the queue – as Mr Obama would have it – when there is no bus scheduled is no different to any other position. No one is going anywhere. To be a full member of UNECE, with the possibility of expanding its role into other sectors, is far more promising. And that facility for expansion already exists through WP.6, in which the US takes an active part.

In short, therefore, we need to recognise that there is already a significant network of trade deals between the EU and the US. In that network also lies the answer to ongoing US-UK relations, which would make TTIP redundant and afford better chances of successful trade.

Thus, since Mr Obama's queue is going nowhere, we're better off making our own arrangements outside the EU.

Richard North 25/04/2016 link

EU Referendum: first week down, second to go

Monday 25 April 2016  

It says a great deal for the dereliction of the official leave campaign that we have Alexander (aka Boris) Johnson still bleating about this referendum being our last chance "to take back control – of £350m a week (and use some of that cash to deliver a seven-day NHS)".

This £350m figure is completely discredited and even many of the apparatchiks dutifully toeing the line don't actually believe it. But not one of them has the courage to confront Dominic Cummings, author of this stupidity.

It doubtless this, amongst other things, that has Simon Heffer asking: "Whose side is Vote Leave really on?" He refers to Cummings at the Treasury in terms of his "bizarre performance", which "left some of us wondering whether he was on day release from a secure facility".

Dan Hodges, now in the Mail also offers his penn'orth, suggesting that this is not a debate between two competing but mature visions of Britain's place in the world. "It is a debate between adults and children", he says.

To support his view, he cites the insensitive Mr Banks who claimed that a £4,300 cost per household of Brexit it represented "a bargain", Michael Gove who seemed to be offering Albania as an alternative vision for Britain, Nigel Farage raging that Barack Obama was the most "anti-British" president in history and Johnson branding him the "part-Kenyan" president.

Advocates of Brexit, he says, opted to base their entire referendum strategy on the claim Britain would be able to swiftly re-negotiate a series of unilateral trade deals with the rest of the world, yet, "it doesn't seem to have occurred to them the rest of the world might have something to say about it as well".

Unsurprisingly, therefore, we had the Telegraph on Saturday telling us that "the Leave campaign desperately needs to up its game".

"The EU referendum will be won by courting undecided voters in the centre ground", it says, "and Mr Obama' s intervention may well have an impact on their thinking". It goes on to say: "The Leave campaign can complain about 'project fear' as much as it likes, and with some legitimacy, but that does not change the fact that many voters see reasons to fear a future outside the EU".

To win them over, the newspaper thus concludes, "Leave has to show that a prosperous alternative is possible. They need to turn an intellectual proposition into a coherent, detailed plan".

That, of course, should have been the position two years ago, when we could have dominated the debate and pre-empted much of the "remain" propaganda. But that still doesn't stop the likes of Charles Moore imbibing the Cummings Kool Aid, arguing that "leave" is not entitled to have a plan.

This is on the basis that the Cabinet Secretary, Sir Jeremy Heywood, would use every possible source of official "information" to tear it apart, and the "leave" campaigners would start quarrelling with one another.

It says a great deal for Mr Moore's perspicacity that, without a plan, "leave" is being attacked for not having a plan, which campaigners are already quarrelling with one another, because they don't have a plan. In the quarrelling stakes, we even have Mr Farage complain that the campaign has "fundamental problems, even though he has carefully avoided devoting any energies to planning a strategy.

In Mr Farage's view, on problems is that it appears that the Leave campaign is just the Conservative Cabinet ministers. We've got to be appealing to a broader group of people than just the Tory electorate", he says. Farage also accuses Vote Leave of excluding him from their campaign – something that was always going to happen. He joins a growing club of "the excluded".

The second problem, he says, is that "if we debate economics and trade we can go round in circles for weeks, and the public will be none the wiser at the end of it". Instead, he feels, we should be talking about the fact we have an open door to 508 million people.

On this, it seems that Gove is preparing to go full kipper, arguing that Britain will be subject to a migration "free-for-all" as the next wave of EU expansion hands millions more people the right to move here. The NHS faces an "unquantifiable strain" if Britain remains in the EU.

Yet ceding the economic ground is seen as a fatal strategic error. Focusing on immigration will never generate enough support for them, says the "remain" campaign – something with which ComRes would agree. It has 47 percent thinking that the economy will most influence their referendum votes, as opposed to 24 percent who put immigration in the top slot.

Bluntly, as the train-wrecks mount, the only really good news is Andrew Stuttaford. He agrees that the "leave" campaign is not in a position to determine how Britain's departure from the EU would be negotiated, but it does need to show that there are Brexit routes and that they can be navigated in a safe and straightforward way.

"Many undecided voters are unwilling to take the risk (as they see it) of leaving the EU, a risk that the remainers are, naturally enough, playing up", Stuttaford says. To that end, "Brexiteers need to explain why those risks are far less than the undecideds now fear, and a pretty good way to do it is—smelling salts—a plan. Brexiteers need to demonstrate not only why Brexit, but how".

As it happens, Stuttaford thinks that the best way to go is some variant of the "Norway option" via membership of the European Economic Area (EEA). "That's a step that initially would change little (and thus would not alarm the nervous) but over time would make all the difference, to which effect, he points people in this direction".

There is another bit of good news though. Owen Paterson is giving a speech at 11.30 this morning, at 10 Carlton House Terrace. Entrance is free to anyone who wants to attend. Some of the points may be familiar to EU Referendum readers.

Note least, Mr Paterson will tell his audience that special status David Cameron "won" in his renegotiation as a sham. If we remain, we get the worst of both worlds – stuck inside the EU but with scant influence. And we will still be on the hook for future bailouts of the ailing single currency.

With that, in campaigning terms, we can only hope that things will get better. They can hardly be worse – last week was the week of the "remains". They got to wear the tee-shirt.

Richard North 25/04/2016 link

EU Referendum: a reply to Mr Obama

Sunday 24 April 2016  

We hold these truths to be self-evident, that all men are created equal, that they are endowed by their Creator with certain unalienable Rights, that among these are Life, Liberty and the pursuit of Happiness. That to secure these rights, Governments are instituted among Men, deriving their just powers from the consent of the governed.

That whenever any Form of Government becomes destructive of these ends, it is the Right of the People to alter or to abolish it, and to institute new Government, laying its foundation on such principles and organizing its powers in such form, as to them shall seem most likely to effect their Safety and Happiness.

Prudence, indeed, will dictate that Governments long established should not be changed for light and transient causes; and accordingly all experience hath shewn, that mankind are more disposed to suffer, while evils are sufferable, than to right themselves by abolishing the forms to which they are accustomed.

But when a long train of abuses and usurpations, pursuing invariably the same Object evinces a design to reduce them under absolute Despotism, it is their right, it is their duty, to throw off such Government, and to provide new Guards for their future security.

And that's why, Mr Obama, we're having a referendum.

Richard North 24/04/2016 link

EU Referendum: thank you all

Sunday 24 April 2016  

Terrific day in London. My thanks to everybody for your assistance and support, and especially Booker, Niall Warry, Dot, Mark Sutherland and the entire Creative Hub team, and the staff at ROSL.

Normal service will be resumed tomorrow. In the meantime, here's Booker.

Richard North 24/04/2016 link

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