Richard North, 08/08/2018  
 


With the prospect of a "no deal" exit from the EU being taken more seriously, we are starting to see a number of newspapers attempting to predict what the UK would look like in the event of us "crashing out" of the EU.

With the best will in the world, though, there are too many variables to anticipate, which remove any certainty. The precise outcome will depend on the assumptions made, the degree to which known factors are accounted for, and then the mitigation - both pre-emptive and reactive – undertaken by government, business and even individuals.

As far as variables go, there is probably no more volatile a situation than our food supply, with the more lurid commentators suggesting that we could run out of food within days (or certainly weeks), with the very real prospect of rationing to avoid starvation.

Yet, in this one area, mitigation is a practical proposition. Furthermore, given the destructive effect food shortages would have on the maintenance of law and order – with food riots, looting and civil disobedience – it is my view that the government would take any and every effective measure it could to ensure that food supplies are maintained (even if costs of some commodities do increase).

Largely, as we see from this article in the Telegraph - where James Rothwell writes a rather lame "explainer" headed: "What does a 'no deal Brexit' mean - and how would it affect the daily life of Britons?" – the media doesn't have a clue.

Here, Rothwell actually errs on the side of suggesting rather vague "magic wand" solutions, having noted that Mrs May says voters "should feel reassured", as the government plans to stockpile food.

On the basis that the government is set to hire an extra 1,000 customs officers to deal with extra checks, he argues that, "if large numbers of staff are hired, alternative supply chains are put in place and any outstanding legal issues are addressed - all in time for March 2019 - then the adverse effects could be mitigated".

However, no one with any sense is going to accept that the government (or even commercial enterprises) will be able to stockpile food, other than for a few very basic commodities. And nor is rationing a workable idea. There simply isn't time to set up a scheme, and nor would it be possible – barring the imposition of draconian emergency powers – to exercise sufficient control over the food chain to make it work.

Furthermore, no amount of UK border staff are going to make any difference. As I have pointed out so many times – latterly endorsed by the Road Haulage Association – the problems will arise in the continental ports, over which we have no direct control.

Looking at possible scenarios – which is not at all difficult, as we know most of the operating parameters and how they will be affected by Brexit – we can be fairly well assured that, if we control (i.e., limit) the amount of goods presented to ports for clearance in EU Member States, then the flow of imported food will be unaffected. Health checks in the UK can be waived (temporarily at least), invoking the WTO national security exemption (Article XXI (b)(iii)).

The price we will have to pay for this is a massive reduction of goods exported to EU Member States – which may be to an extent mitigated by stockpiling goods on the continent (and in non-EU states) to keep customers supplied after Brexit.

But bearing in mind that the export of live animals and products of animal origin to EU Member States will be prohibited in the event of a "no deal" Brexit, we can expect a glut of certain commodities as they find their way onto the domestic market, and even a price crash. This dynamic will, however, drive many producers out of business, leading to shortages in the longer term.

If there is any likelihood of food shortages, the most probable cause will be panic buying. This has the capability of stripping supermarket shelves bare, even when there are no actual shortages. The government may need to impose emergency limits on the amounts of specific commodities any one individual can buy, and even make hoarding them a criminal offence.

In the absence of government action, the supermarkets may voluntarily impose their own limits, which could have the effect of damping down demand.

There is then the matter of medicines, where some pundits are also suggesting that shortages may occur. In this sector, though, stockpiling is a realistic proposition. Perversely, EU Member States are at greater risk, as medicines produced under the control of UK establishments (even if they are manufactured in EU Member States) may not be authorised for sale in any of the EU states.

Of all the headline issues that may become apparent, post Brexit, is aviation. Once we drop out of European Common Aviation Area (ECAA) and the aviation safety acquis, administered by EASA, the effects on UK aviation will be widespread and profound.

Rothwell, for the Telegraph relies on the view of chancellor Philip Hammond, who said: "It is theoretically conceivable in a no-deal scenario that there will be no air traffic moving between the UK and EU on 29 March 2019. But I don't think anybody seriously believes that is where we will get to".

For my part, it is extremely difficult to see how the legal issues in civil aviation can be resolved without intensive negotiations and a complex raft of agreements. In the event of a "no deal" Brexit, therefore, some disruption is inevitable and the odds favour a complete shut-down, even if only for a matter of days while emergency agreements are stitched together – allowing limited UK services.

The approach to aviation, however, typifies the way many pundits handle a "no deal" Brexit. Many of the consequences are so extreme that disbelief sets in. As with Hammond, the view is taken that because they are so extreme, they cannot be allowed to happen and therefore, that they won't happen.

Nevertheless, I think we must prepare for the likelihood that the export of motor vehicles will cease. Even where manufacturers have been able to transfer type approvals to EU Member State regulators, production supervision arrangements will not be in place, rendering existing approvals invalid.

The same goes for any civil aviation products, including finished aircraft and assemblies such as Airbus wings and aircraft engines. One cannot simply offshore the regulatory approval here, because controls are embedded right throughout the design and manufacturing processes.

Across the board, the export of many manufactured goods will cease. This will apply where they require third party certification from "notified bodies" and have relied on certificates from UK bodies. These will no longer be valid. Chemicals which lack REACH approval will also be excluded from the European market.

Live animal export will, of course, be prohibited, but this will probably also apply to the movement of pet animals without quarantine, and the transport of racehorses direct to France and Ireland, without veterinary control and supervision. Also on the sporting front, Formula 1 racing will be badly affected.

Recently, we have learned that a substantial amount of recyclable domestic refuse is exported to EU Member States, particularly Poland. This will no longer be possible.

Once we get into this sort of detail though, the legacy media is nowhere to be seen. Their journalists lack the capability (or the motivation) to offer anything other than the most superficial of pictures.

The closest I've seen recently is oddly enough in the The Telegraph, where Jeremy Warner reports under the heading: "Let's be honest about a no-deal Brexit; it has nothing to offer but blood, toil, sweat and tears".

Denying that there problems related to a "no deal" Brexit is, he writes, "verging on the delusional". And although Warner's grasp of the detail is sketchy – as is understanding of the legal background to the application of non-tariff barriers, he does at least recognise that the EU makes it plain that Britain becomes a third country from the moment it exits. 

Without some form of dispensation, he writes (not appreciating that this is not possible in a "no deal" scenario), he warns that "all those myriad tariff and non-tariff barriers to trade immediately kick in". And although he thinks this "may be legalistic and irrational", this "is the law. There is almost no business that takes place outside a legal framework of this sort".

One example he offers is selling medical equipment in the EU, which requires a certificate – or Conformité Européene marking – to show required standards are met. These certificates, he notes, are pretty much automatic for EU members, and as it happens are substantially written here in the UK for the EU as a whole, but would cease to be valid for UK suppliers when Britain becomes a third country. UK certification authorities will no longer be recognised.

Even if the UK said it planned to remain fully compliant with the EU, including ECJ rulings on such matters, the EU could "if it wished to play hardball" either refuse such certificates or subject British medical equipment to vigorous border controls to ensure compliance". 

Wrongly, Warner asserts that "some countries – Switzerland, Australia and Turkey – enjoy mutual recognition with the EU on medical equipment standards" - which is not the case. The man is confusing recognition of standards with recognition of conformity assessment.  He is right, though, is saying that such recognition, "by definition" requires a deal to be struck. 

As to the WTO, so long as the EU can show it no more discriminates against the UK than any other third country, it would be within the rules. This, says Warner, will be easy enough in all the high value-added trade the UK does with the EU.

Here, he hasn't quite got it. The man does not seem to understand that the EU is obliged to impose these controls, in order to avoid discriminating against other third countries. Thus, he wrongly sees the EU approach as "vindictive, economically irrational and self-harming", even if he acknowledges that the EU "shows no sign of giving way" without fully understanding why.

To raise these points is not to succumb to Project Fear, Warner concludes – in a flash of honesty that is rare in the Telegraph. But what no newspaper (or broadcast media) has yet to do is fully confront the consequences.

Obviously, the government will do everything it can to take the high-profile issues off the front pages. But what they will not be able to avoid is the torrent of news about business shut-downs and job losses. With the loss of access also to the EU's trade deals, we are effectively looking at the collapse of the UK's export trade.

An unresolved, "no deal" scenario could, by the end of next year, have unemployment running into millions. This will be partially disguised by EU immigrants returning home but, while the government may be partially successful in keeping the queues of lorries off the roads, it will have less success in concealing the size of the dole queues.

That will be the ultimate "no deal" penalty and one which could be with us for a very long time.






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