Richard North, 10/11/2017  
 


"We do not accept rules and rights being challenged", was the uncompromising message delivered to the UK by Michel Barnier yesterday. He was speaking at a conference organised by the appropriately-named Italian newspaper Il Messaggero, addressing the theme: "Obliged to grow - Europe after Brexit", in what was seen as a direct warning not to push the Union too far.

In a speech delivered in his native French, Barnier referred directly to the call by US Secretary of Commerce Wilbur Ross "to diverge with Europe to better converge towards others - towards less regulation, environmental, sanitary, food, probably also financial, fiscal and social".

This, he said, left him wondering. "The United Kingdom has chosen to leave the European Union. Will he also want to move away from the European model? That's another question", he ruminated.

Earlier in the speech, he had set out three key areas which must be settled "to conclude an ambitious partnership with the United Kingdom", not only on trade but also for mutual safety and defence.

The first area was the need to agree on "the orderly withdrawal of the United Kingdom". This had to be dealt-with before starting the discussion on our future relationship and a possible transition period. And, as to the nature of that "orderly withdrawal", this had been "very clear from the start":
At the moment of separation that the British wanted, we must guarantee the rights of European citizens in the United Kingdom and the UK in the EU. We must be fair to taxpayers. And we must find a way to maintain stability, dialogue in Ireland. This is the condition of trust between the British and the Union. Trust that we absolutely need.
The moment of true clarification was approaching, which then brought us to the second key area. In order properly to prepare for our future relationship, he said, we must all understand and explain objectively what it means to leave the European Union, the Internal Market and the Customs Union. Furthermore, said Barnier: "These choices have consequences":
You cannot be half in the single market and half out. We cannot want to put an end to the free movement of people while maintaining the free movement of goods, services or capital through a system of general equivalences. We cannot want to leave the internal market and continue to enact the rules. We cannot leave the Customs Union but want to benefit from a free trade with the European Union.
Interestingly, Barnier then went on largely to reinforce the points I made in my Monday piece where I referred to the Single Market as a regulatory union.

"This Single Market, which is our main economic asset", he said, "is a set of laws, rules, standards chosen in common - and the United Kingdom knows them well since, for 44 years, we have been deciding them together - and we respect them together, with common institutions and jurisdiction".

There we have it: " a set of laws, rules, standards chosen in common", together with "common institutions and jurisdiction". This was clearly something which Legatum didn't understand. The three go together: laws, common institutions and jurisdiction. Take away any one part (and fail to replicate it, as in the EEA), and there is no Single Market.

And, to make to quite clear to the UK, and a government which seems to be having difficulty coming to terms with these fundamentals, Barnier added that there was no reason for the Single Market to be weakened by the departure of a Member State.

This brought the Union's chief negotiator to his third key area. "There is no future partnership without a common game rule. There will be no close commercial relationship without level playing field", he said, then declaring: "This rule of the game is not so easy to build since, for the first time in a negotiation with a third country, it will be more a matter of controlling regulatory divergences than of encouraging convergence".

That brings us back to the Legatum stupidity, where their inane "trade commission" imagines we can decide our own rules, diverging from the EU Single Market acquis and still secure access to the markets of the EU Member States.

And here we have no less a person than Michel Barnier saying "no way", only to have Simon Nixon for The Times telling us that "Legatum's latest report … is worth taking seriously, not just because it will be taken seriously by ministers but because it makes some important points".

When you see the level of crass stupidity produced by Legatum then applauded by brainless Times commentators, you wonder if there is any hope for us as a nation – especially as it is the case that many at a senior level in government endorse the institute's views.

But Barnier is having none of it. After his reference to Wilbur Ross, he says: "There is behind this European regulatory framework the fundamental societal choices we hold: the social market economy, the protection of health, food security, fair and efficient financial regulation".

Speaking in Rome where the original EEC treaty was signed, founding the "European model", he went on to declare: "we will not accept that this regulatory framework is questioned with the rights attached to it for the citizens, for the consumers, for the environment, for businesses, for communities. We hold and we will defend it".

He then concluded: "Of course, the UK stays in Europe. But it is up to the British to tell us whether they still adhere to the European model. Their answer is important because it directs the discussion on our future partnership and the conditions of its ratification".

This is fighting talk and the sooner the UK government realises it the better. We have had endless prattle from both ministers and the chatterati, blathering about trading outside the Single Market and the degree of access to which they aspire, and none of them get it.

Speaking personally, I'm more than tired of them – and especially the self-appointed (and self-important) claque of economists and lawyers (to say nothing of the broadcasters) who see fit from their lofty heights consistently to misinform us.

From my stance, as a food safety officer and then consultant, acting as advisor to three trade bodies for over a decade, and then with my stint in the European Parliament, followed by my writing with Christopher Booker on regulation, I know a little about enforcement, an amount about the EU, and a fair deal about EU (and international) regulation. But, unless you are one of the gilded claque, you don't get a look in. Prestige trounces content, every time.

But month after month, turning into years, these fatuous prattlers can't even grasp the basics. For all their airs and graces and self-assumed importance, none of them have any real grounding in what the Single Market is. None of them them have any idea of how it works in practice. They are still, like Legatum, littering the field with "rookie" mistakes.

But, as Barnier says, the moment of true clarification is approaching, whence these amateurs will no longer be able to fake it. They are going to be hit squarely between the eyes with a dose of reality. It will have them gasping for breath.

In that context, in my piece yesterday, I advanced the idea that the UK could lose in the first year of Brexit close to £400 billion in GDP – a fall of around 20 percent. By contrast, we see in City AM a report citing Oxford Economics which has a "no deal" Brexit wiping off £16 billion from the UK GDP by 2020.

That is actually less than one percent, although its actual report posits a worst case scenario of 3.9 percent loss of GDP. That, in itself is substantial, a yearly accumulating loss of £75 billion. In one year, that far exceeds the total of £60 billion we may have to pay to the EU for a "soft" exit.

None of these people, though, put two and two together – they seem incapable of joining the dots. For example, here we have Chris Sturman, Chief Executive of the Food Storage and Distribution Federation, warning delegates at the Food and Drink Business UK Conference in Coventry that the UK's food supply chain "is facing huge disruption" post-Brexit.

Sturman says, "Europe has complex supply chains and at the moment, there is no clear plan from Government and shippers will need time to adjust to a new reality". He adds: "For every hour of delay at customs, there is a £15,000 cost to road haulage and that is not sustainable. We also need to note that most trucks in the UK's supply chain come from Europe, not the other way around so if they can't get into Britain, they can go elsewhere".

With 14,000 trucks crossing the channel there every day, any delays to crossing could result in costly delays and disruption the UK's food supply chain, with 28 percent of the UK's food supply currently coming from the EU.

The point here is that Sturman is not talking about subtle changes to trading patterns, measurable only by economists using advanced modelling techniques. He talks of "huge disruption", which will be felt by every sector of the economy – not just the food trade.

Then we have Conway, for Sky News reporting the views of George Thissen, chairman of Scabal - one of Europe's most renowned tailor and clothmakers. Their mill in Huddersfield is one of their main status symbols and "they will fall victim to whatever Brexit we throw at them". A hard Brexit, Thissen says, could mean their goods could "be stuck for days, even weeks in customs". He adds: "We deliver next-day to all our customers, so that potentially could have dramatic consequences".

As regards pharmaceuticals, we are told that more than 2,600 drugs have some stage of manufacture in Britain and 45 million patient packs are supplied from the UK to other European countries each month. Another 37 million flow in the opposite direction.

Brexit threatens the free flow of these goods. Unsurprisingly, therefore, the European Federation of Pharmaceutical Industries and Associations (Efpia) says a survey of its members shows that 45 percent of companies expect trade delays if Britain and Europe fell back onto WTO rules after Brexit. Most probably, it will happen even with a deal.

Then you have the carmakers. Some of Britain's largest have warned that the complexity of new customs checks after the UK leaves the EU could cost the industry tens of millions of pounds. Honda says that changes to non-tariff barriers would potentially have "a greater impact than tariffs" on manufacturers, and would add "tens of millions of pounds" to annual running costs.

Nor is it just physical goods that would be affected. Car loans are big business. Ford Credit Europe is essentially a bank offering loans to car buyers, and like other banks relies on its ability to operate throughout Europe on the UK's membership of the EU and the so-called "passport" to operate throughout the bloc.

Ford Motor Company recently opened a new headquarters in Manchester, serving eleven markets across Europe. But, it says, "A loss of access to the single market would also affect our UK-headquartered captive finance arm, Ford Credit Europe". It adds: "This currently operates a branch network across the single market on the basis of an EU Capital Requirements Directive passport for the provision of banking services. Outside the EU and the EEA, FCE as a UK-regulated bank will lose access to the passporting regime as currently designed".

There can be no getting away from the fact that the "huge disruption" for the food distributors and the "dramatic consequences" for others must inevitably bring with them huge costs. Put it all together - join the dots - and it is not conceivable that a "no deal" Brexit could be limited to a four percent hit. That has to be cloud-cuckoo land. We stand to lose most, if not all, of our EU exports – which is over £200 billion. And that's just for starters, without the knock-on effects.

And while talk of a "no deal" – as a sought-after outcome – is receding, the talks in Brussels, conducted over yesterday and today, are not going well. The possibility of an accidental Brexit remains high, with the UK crashing out by default – simply because no one knew how to stop it.

Even then, it may not get to the crash and burn stage before the GDP starts to dip. Businesses are telling Mrs May that unless the UK commits to urgent action, companies could be forced to move some of their activities out of the UK – as is already happening.

The Guardian sets the tone here, reporting on a meeting of EU ambassadors on Wednesday evening, where the EU27 states told Barnier of their "disappointment and surprise" at the UK government's failure to offer any further details on the budget commitments it was willing to honour on the leaving the EU.

One senior EU diplomat retails that Barnier was "under a bit of pressure" by the member states to ensure discussions this week do not develop beyond the unpicking of the opening withdrawal issues. "The member states want to be careful. We are not going to swim into the UK's net", one of these famous anonymous sources says.

But, come what may, the government is going for a fixed date for Brexit – 11pm on 29 March 2019 - officially enshrined in the EU Withdrawal Bill, after the Government announced it was amending the key legislation to make the issue "crystal clear".

So far though, that is the only thing that is "crystal clear". To say the rest is murky is to redefine murk. We need a new word to describe the true state of the Brexit process. Depression and Brexit rolled into one gives us "debrexion". That sort of makes the point. Others may have better suggestions.






comments powered by Disqus













Brexit - the first year - New e-book by Richard North
Brexit - the first year - New e-book by Richard North
Buy Now





Log in


Sign THA
Think Defence





The Many, Not the Few