Richard North, 01/02/2018  

It's got to the stage where it's getting impossible to offer any rational analysis of Brexit. The noise level is simply too high and there too many players in the game all contributing to that noise - from the House of Lords to the media and the general commentariat.

From that noise very little sense is emerging and, with the leaked impact report still dominating the headlines, we're in a situation where today's news is much the same as the day's before and the day before that. Nothing material changes.

The fact that Labour have extracted concessions from the government and the leaked "impact report" is now to be published (with or without redactions) is neither here nor there. Even if the party is claiming it is a "victory for transparency", it really doesn't tell us anything we didn't know already.

Oddly enough, the New Statesman seems to have summed up the situation with that suggestion that "yesterday took us another step through the Brexit looking glass".

I actually prefer the term "Brexit through the looking glass" but either way the point is made. We're going through something that isn't quite real. In fact, it isn't real at all. We're living in something totally surreal.

The New Statesman, though, points to something more sinister about the impact report, noting that, in this world, information is under the sole ownership of ministers. Parliament and the public are allowed to see only what Ministers decide, when they decide.

In the magazine's view, this isn't just a political argument. It is an attempt to downgrade the role of a representative democracy. In their eyes its only purpose is to be a cheerleader for the referendum result.

The incessant whingeing of the left, however, is just as tedious as the braying of the "ultras". None have any real answers so all that changes is the nature of the complaining. The government is still the government and it continues to make a complete mess of Brexit, no matter what anyone says.

Meanwhile, in what passes for the real world, the Commission continues to publish its "notice to stakeholder" series, spelling out the practical consequences of Brexit, this latest one dealing with customs rules and indirect taxation (VAT).

When the UK becomes a third country, the notice says, goods from the UK exported to the EU, and goods taken out of the EU for transport to the UK, are subject to customs supervision and may be subject to customs controls.

This implies, we are told, that customs formalities apply, declarations have to be lodged and customs authorities may require guarantees for potential or existing customs debts. Furthermore, goods coming from the UK into the EU will be subject to Union tariffs.

Then there is a piece of news of crucial importance to the ambitions of Mr Davis and the Conservative government. Much has been made of the use of the Authorised Economic Operator (AEO) system – the so-called "trusted trader" system, but the EU is saying that such authorisations will no longer be valid in the EU. They will no longer be recognised.

Further putting the boot in, UK goods incorporated in goods exported from the EU to third countries will no longer qualify as "EU content" for the purpose of the EU's Common Commercial Policy. This may mean that UK goods fall foul of rules of origin provisions.

There are then issues with VAT. Exports from the UK into the EU will immediately become liable for VAT the moment they enter the EU customs area. Anyone who wants to make use of special schemes or who supply telecommunications services, broadcasting services or electronic services to non-taxable persons in the EU, will have to be registered in a Member State of the EU.

When it comes to claiming VAT refunds, taxable persons in the UK buying goods and services or importing goods subject to VAT in an EU Member State of the EU can no longer file electronically. Refunds will be subject to reciprocal agreements, and UK companies carrying out taxable transactions in an EU Member State may have to designate a tax representative as the person liable for payment of the VAT.

Goods entering the EU from the UK or dispatched from the EU to the UK will respectively be treated as importation or exportation, with regard to general arrangements for excise duty.

The Excise Movement and Control System (EMCS) on its own will no longer be applicable to excise duty suspended movements of excise goods from the EU into the United Kingdom, but those movements will be treated as exports, where excise supervision ends at the place of exit from the EU.

Movements of excise goods to the United Kingdom will therefore require an export declaration as well as an electronic administrative document (e-AD). Movements of excise goods from the United Kingdom to the EU will have to be released from customs formalities before a movement under EMCS can begin.

And what all that means is that, subject to any transitional agreement, the full force of the EU's custom and VAT systems will hit UK traders.

In other news – just to add to the joy of Brexit – we learn that the EU is not prepared to allow Britain to maintain "passport" access to EU financial markets for its banks after Brexit. What the EU will allow "is nowhere close to the access one gets as a member state or through the EEA. There will be no passporting rights".

According to Michel Barnier, some British regulations could be treated as "equivalent" to the EU supervisory regime, giving some favourable access in some types of business – provided the UK does not change its legislation. Where there are gaps, banks may have to set up new EU subsidiaries, involving extra cost, including having to inject capital into those units.

There is the reality of Brexit which is further reinforced by a sombre piece in the Guardian on Britain and its pretensions to being a global trading power. The claims of British greatness and engagement, it says, are too often self-deceiving, and they were so long before Brexit. It continues:
But Brexit both reflects the self-deception and raises the stakes for the gulf between fact and what is all too often fantasy. There is no deeper vision of Britain's place there, and all too little realism either. It can't be easy, admittedly, to bestride the world while assuring the travelling press pack that you aren't a quitter.

The idea that Britain has become unusually active on the global trade front is itself a slippery one. May is beginning her second visit to China as prime minister. But Emmanuel Macron was there in January too, while Angela Merkel has made nine visits to China and counting. Germany exports five times as much to China as Britain does. The idea that Britain has somehow been liberated by the prospect of Brexit to seize pace-making status in the world is simply false.

In some respects Britain is not a global leader but a global laggard. Macron has only been president of France for eight months, but he has made six visits to Africa in that time. By contrast no British prime minister has set foot in any part of Africa since 2013. There is either no British diplomatic presence, or only a vestigial one, in some 16 African countries. Japan now has more embassies in Africa than Britain, and Germany more aid workers. How this all squares with a country that parades itself as open to the world – or as great – is hard to see.

There is more to thinking of the world than expanding our diplomatic effort. But more embassies, more diplomats and more people on the ground would at least be a start. In the past five years, however, the Foreign Office budget has been cut by 40 percent, at the very time the UK is leaving the EU. In Germany, by contrast, the equivalent budget has almost doubled. It now spends more than three times the British total.
And somehow, in this looking glass world, we are supposed to maintain a sense of optimism.

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