Booker: those dangerous Ultras

Sunday 26 March 2017  

Slowly, the pieces are falling into place, so much so that Booker in this week's column, offering two Brexit-related stories, one on those dangerous Ultras and the other on the possible effects of Brexit on Formula One (pictured).

Starting the first story, he reflects that when future historians come to analyse how Britain chose to leave the EU, nothing may intrigue them more than the way Theresa May was influenced by a small, well-organised group of Tory backbenchers, including Michael Gove, Iain Duncan-Smith, Owen Paterson and Steve Baker.

It was, he says, these "Ultra-Brexiteers" making up the "European Research Group" who persuaded her that we should leave the single market, the customs union and the European Economic Area, to go instead for a unique "free-trade deal". And if we do not get what we want, we can just walk away, in the belief that "no deal is better than a bad deal".

Two weeks ago, under the heading "The hidden disaster in Mrs May's Brexit plan", Booker warned that this could lead to consequences of which the Ultras seem wholly unaware. Last week this was confirmed by Michel Barnier, the head of the EU's own negotiating team.

He not only emphasised that the talks could not even begin without Britain agreeing to pay over the years ahead up to £60 billion for ongoing financial commitments we have already agreed to.

He then spelled out the consequences of leaving the electronically-based system which currently allows 12,000 British trucks a day to enter the rest of the EU with no delays. As Barnier put it, we would "ineluctably" be faced with a whole thicket of "binding border controls" which would soon lead to "queues of trucks at Dover".

In fact Barnier tactfully did not give the full picture here, by suggesting that this might only happen if we walked away to rely just on "WTO rules". EU law is clear that there can be no "free trade deal" which would allow us to remain in that electronic system which spares us border controls, because this is only open to countries in the EU and the European Economic Area we have decided to leave.

In other words, those who talked Mrs May into taking this course don't begin to realise the scale of what this would lead us to. But they have somehow kidded themselves into believing that this is what 52 percent of the British people voted for.

The irony is that there is no argument we have heard more often over the years than that what we were told we were joining back in 1973 was just a "Common Market", a trading arrangement.

That is what people wanted to go back to, without all the political stuff that came later. If it had been honestly explained last summer that leaving the EU would mean not just saying goodbye to all the political stuff but also the sight of trucks backing up from Dover to London, and thousands of exporters finding it impossible to continue trading with the EU at all, a hefty majority would have voted to Remain.

But that was not what the Vote Leave campaign (now transformed into the European Research Group) ever told us. Because, as their deliberately vague and lamentably ill-informed efforts last summer showed, they had very little idea of what they were talking about.

And here's the rub. Booker – like many of us – has found that many who voted to leave the EU had not done so because they had been convinced by the childishly dodgy arguments put forward by Vote Leave (such as that ludicrous slogan on the bus about giving £350 million a week to the NHS).

Rather, they had done so for their own more or less well informed reasons. But it is now these self-same Ultras who have Mrs May's ear as she heads off this week to trigger Article 50. When those future historians come to analyse the story, it is not only their role which will intrigue them. They will, concludes Booker in this article, also be chronicling the catastrophic shambles that was the result.

This, though, is only part one. In his second Brexit-related story, asks: "Will Brexit bring spell doom for Britain's F1 success story?"

As a new Formula One season opens today in Australia, he writes, another of the countless problems Theresa May's advisers won't have told her about is the devastating effect their Brexit strategy is likely to have not just on Formula One itself but on one of Britain's world-beating industries.

Not everyone may be aware just what a dominant position Britain enjoys in motor racing. Seven of the ten teams currently competing in Formula One (including Mercedes) are based in England. Since 2005 all but one of the world champions has driven a car designed, engineered and built in this country.

Each team employs hundreds of highly-skilled workers and 41,500 other businesses depend on them. The whole industry earns for Britain £9 billion a year. But what will happen when we leave the customs union?

This season, six Grands Prix are on the continent, each requiring the speediest transfer from the UK of 45 HGVs, carrying cars, spares and a mass of equipment. The moment we are excluded from the electronic system which allows them to travel without delays, they will face border controls.

For occasions when there is only a week between back-to-back Grands Prix, such time-consuming procedures will make these transfers barely possible. For the trucks which carry food to entertain sponsors at lavish "hospitality" events it will be even worse.

Under the law, they will have to divert to an EU Border Inspection Post, to wait perhaps for days. The F1 teams may not yet have woken up to the problems Mrs May is choosing to land them with. But they may have reluctantly to conclude that one of Britain's most successful industries will have to leave these shores.

Once more, of course, neither of these stories are news to readers, although it was The Times which broke the story on the behaviour of the Tory "Ultras" and their grip on Mrs May.

Predictably, in the hands of Booker, this attracts the litany of adverse comments on the on-line versions. Mostly, though, these seems to be largely the same people as last week and the week before – tortured souls who have nothing better else to do with their time than vent their spleens in response to Booker not telling them what they want to hear.

Yet. after Booker wrote his piece which referred to the effect of Brexit on horse racing, a number of other newspapers followed in his wake. It will be interesting to see whether others follow his F1 story and whether they are able to make a decent fist of it.

By mid-week, when Mrs May despatches her Article 50 notification, the focus will be on what she has said to the "colleagues" which, we understand is merely to be a rehash of her twelve-points speech. And if that is the case, the fun won't really start until the end of next month, when we get the response.

In the meantime, all we can do is analyse and report on the events, as we see them – and largely ignore the adverse comments. Largely, they are repetitious to the point of tedium, so that is no great hardship. By now, we've seen it all before.

Richard North 26/03/2017 link

Brexit: The Great Deception

Saturday 25 March 2017  

When the "colleagues" needed to regroup after the shock of the EU Referendum, they went scurrying off to the Italian island of Ventotene to lay flowers at the tomb of Altiero Spinelli, long considered to be one of the founding fathers of European unity following World War II.

Ventotene, of course, was the prison island where Spinelli wrote his famous Ventotene Manifesto in which he set out his vision for a "European Federation". But, as to how that should come about, we need look no further than this passage in his Manifesto:
During the revolutionary crisis, this movement will have the task of organising and guiding progressive forces, using all the popular bodies which form spontaneously, incandescent melting pots in which the revolutionary masses are mixed, not for the creation of plebiscites, but rather waiting to be guided.

It derives its vision and certainty of what must be done from the knowledge that it represents the deepest needs of modern society and not from any previous recognition by popular will, as yet non-existent. In this way it issues the basic guidelines of the new order, the first social discipline directed to the unformed masses. By this dictatorship of the revolutionary party a new State will be formed, and around this State new, genuine democracy will grow.
In other words, as we wrote in The Great Deception, "the people" were not to be involved in the construction of this new state. Popular assent would be sought only when the project was all but complete. At that moment their "crowning dream" would be the calling of a "constituent assembly", to "decide upon the constitution they want".

The drawing up of the constitution would be the final act in the emergence of the "United States of Europe". Only then, within the framework of the new state which had been brought into being, would "democracy" be permitted to resume.

Fast forward now to Jean-Claude Juncker, President of the European Commission, writing in the Guardian on the eve of the 60th anniversary, who sees fit to tell us that:
European integration was always a project created by the people, for the people. It was a movement carried by a generation who came together to proclaim: "Never again!"
That this was "always a project created by the people" is beyond the pale. It is a blatant lie. And it is times like these that one is reminded why we invested so much in the campaign to leave the EU. Not for nothing did we call our book The Great Deception: the whole history of le projet is one based on deceit, where even the official hagiography is false.

So ingrained has it become though that the perpetrators, like Juncker, actually believe their own propaganda. He is no doubt convinced that the EU (and the institutions that came before it) were indeed "created by the people" - he has bought into the deception.

Confronted with this, there is no point in arguing, no point in engaging. The intellectual corruption is so deep that it is not possible to root it out. The narrative is locked in and beyond change.

We see something similar with Denis MacShane writing in the Independent, repeating the same old canard about Britain's original refusal to join the Six in setting up the EEC. He asserts:
The planning meeting for the Treaty of Rome took place on Messina in 1956. Again the British prime minister was absent. Instead, a Board of Trade official was sent, who told the Europeans present at the creation of what is now the EU: "Gentlemen, you are trying to negotiate something you will never be able to negotiate. But if negotiated, it will not be ratified. And if ratified it will not work". Thus spake Britannia.
The account is pure fiction, not least because there was no British representative at the Messina meeting which, in any case, took place in 1955. MacShane is referring to the proceedings of the Spaak Committee held in Brussels, and a steering committee meeting held on 7 November 1955. It was at this meeting that a Board of Trade official, Russell Bretherton, made a pre-planned announcement that Britain was to withdraw from the talks on the common market.

The way in which he communicated this has become a legendary episode in the history of Britain's relations with "Europe", subject to the most bizarre historical disagreement.

Booker and I review this episode in detail in The Great Deception and, on the basis of official documents, found that there was never any question of the UK joining the EEC. The decision had already been made, well before Bretherton gave official notice.

In fact, there was never any expectation at the time that the UK would join. Writing in his own memoirs, Spaak himself refers to a memorandum dated 19 December 1955, addressed to the German government. It declared that "…it is our view that Britain cannot join such a project". The lurid accounts of the UK "walking out" are invention.

This, though, typifies the entire UK experience – myth, deception, obfuscation and invention. When we did finally join the EEC, Heath was fully aware of what integration with "Europe" entailed. Shortly after Parliament approved Britain's entry, word came from Paris that Pompidou was proposing that member states should make a solemn agreement to "move irrevocably to economic and monetary union by 1980".

In the 1995 BBC documentary The Poisoned Chalice, Sir Roy Denman, present at the time, recalled the foreign secretary, Douglas Home, looking askance at this news. He said to Heath: "The House isn't going to like this". "But that", Denman recalled Heath replying, "is what it's all about".

When Heath himself was asked in 1995 by the BBC whether he could really have said such a thing, he made no attempt to deny it. His only response, after an unsmiling pause, was, "well, that's what it was about".

As we progressed through the years, however, the Conservative Party went into denial. It developed its own narrative, settling on the line that we had joined a trading bloc which somehow has lost its way and got sidetracked into pursuing its ambitions of political integration. This allowed yet another myth to prevail that, if only the politics could be detached from the trade, our relations with "Europe" could be stabilised.

Bizarrely, now that we have decided to leave, the hard core Tory "Ultras" want to ditch trade as well and break off relations with the EU completely. The old narrative has lost its force and we are in the grip of a new obsession.

That makes the BBC documentary title so apt: The Poisoned Chalice. Everything touched by le projet becomes poisoned, distorted and perverted. It is destroying our politics and corrupting our national life.

Diplomatically, Mrs May's has elected not to attend today's anniversary celebrations in Rome. That is one thing she has got right. She is better off out of it. We are all better off out of it. Nothing good has ever come from our participation in the The Great Deception. Mr Juncker has done us the great favour of reminding us why we had to leave.

Richard North 25/03/2017 link

Brexit: trading (not) under WTO rules

Friday 24 March 2017  

In an extraordinarily botched effort, even by his standards, Michael Burrage has again produced a Civitas report, this one purporting to show that, for the UK in the forthcoming Brexit negotiations, "it's quite OK to walk away" from a deal. Trading under WTO rules, he asserts, "is an acceptable solution for the UK".

To reach this astonishing conclusion, Burrage has to undergo quite remarkable intellectual contortions, comparing the export performance of countries with bilateral deals to those which, he says, trade only under WTO rules.

The point, of course, is that his selection criterion for the supposed countries trading under WTO rules is flawed. Burrage assumes that any country that does not have what he calls a "bilateral trade treaty" with the EU (and he identifies 111 of them) necessarily trade only under WTO rules.

Manifestly, this is not true, and at two levels. Firstly, Burrage is imprecise in his use of terminology, referring to the term "bilateral trade treaty" when he actually means "regional trade agreement", specific types of trade treaties which parties notify to the WTO. Such treaties involve the reduction of tariffs and quotas and must encompass "substantially all trade".

Secondly, Burrage is working on the false assumption that such trade treaties are a binary issue – that in terms of trade, countries either enjoy regional trade agreements or they have no agreements at all and therefore trade only under WTO rules. In other words, Burrage posits an "all or nothing" scenario.

In fact, according to the EU treaty database, the EU has concluded 928 bilateral and 263 multilateral agreements with countries throughout the world, making 1,191 in total. Of these, 440 are trade agreements or deal with trade-related matters.

Many of these trade or trade-related agreements cover countries which, Burrage asserts, trade with the EU only under WTO rules. One example of this is Brazil which in 1992 signed the Framework Agreement for Cooperation between the European Economic Community and the Federative Republic of Brazil, an agreement which came into force in 1995 with "infinite" duration.

Its objective is to expand and diversify trade between the parties and to step up cooperation in trade, economic matters, science and technology and financial matters.

Described as "very flexible and pragmatic", it replaced the 1982 Agreement, extending cooperation to new areas (social matters, health and intellectual property), providing for broader economic cooperation with the aim of fostering trade to the maximum extent and of promoting industrial cooperation.

It works through an ongoing Joint Committee, composed of representatives of the EC and of the Brazilian government, which has the task of ensuring the proper functioning of the Agreement and of coordinating activities in relation to the aims of the Agreement.

That agreement, though, does not stand alone. Development co-operation issues are dealt with at both the bilateral EU-Brazil and the biregional EU-Mercosur levels. In January 2004 the EC and Brazil also signed an Agreement for scientific and technological cooperation to develop and facilitate cooperative activities in areas of common interest. The EU's political dialogue with Brazil mainly takes place through EU-Mercosur institutional mechanisms.

In addition, Brazil and the EU engage in multilateral fora such as the UN, the EU-Latin America and Caribbean Summit process, and the Rio Group, while the EU also offers tariff and quota concessions on certain products.

What we see here typifies the type of arrangement the EU has with many countries - a composite of specific bilateral treaties, reinforced by some trading concessions, all working alongside multilateral agreements. In all, Brasil has 13 bilateral agreements and 51 multilateral agreements with the EU, making 64 in all – most of which lie outside the WTO and include such organisations as the United Nations and the World Customs Organisation (WCO).

Not by any measure or in any way can Brazil rightly be said to trade with the EU only under WTO rules – yet that is precisely what Burrage claims to be the case.

Further, he makes similar claims with other countries, including the United States, which has 38 EU-US "trade deals", of which at least 20 are bilateral, and China, which has multiple agreements with the EU - 65 over term, including 13 bilateral agreements, ranging from trade and economic co-operation to customs co-operation. None of these are of the simple, tariff reduction variety.

In his 178-page document, therefore, Burrage fails completely to support his thesis. On the basis of the evidence he provides, he cannot rightly argue that the UK will prosper if it trades only under WTO rules with the EU, because the examples he offers do not represent countries which trade only under WTO rules.

This is a man, incidentally, who claims of Flexcit, that we assume that the Single Market has been of very great benefit to the UK economy and then suggests that, if we "really hoped to make a convincing case against trading with the EU under WTO rules", then we "should have examined the countries that have been doing just that over the 23 years of the Single Market".

Perhaps we might have done so, except that there is no developed economy on the planet which trades with the EU only under WTO rules. And that makes Burrage's thesis totally misplaced and completely meaningless. This rather stupid man has proved nothing other than his complete inability to conduct serious research.

In that respect, Pete treats this charlatan with more respect than he deserves, giving him the courtesy of dissecting and analysing his arguments. But this is such low-grade dross that it should not detain any casual reader more than nanoseconds. Civitas should be thoroughly ashamed for adding its name to it – assuming they have the wit to realise what a mess they have spawned.

Speaking of dross, though, we also have Jonathan Portes over on the Guardian, also asserting that "we already trade under WTO rules with the US". Portes is professor of economics and public policy at King's College London, and a senior fellow of the UK in a Changing Europe programme – and thus provides more than adequate confirmation of the fact that "professor" is a job description, not a qualification.

He now adds his own brand of stupidity to that of Matt Ridley, Liam Halligan and many more, including Michael Burrage, none of whom seem to have the brains they were born with.

Such is the obsession of these people with the fictional WTO status, though, that one might be inclined to take a conspiratorial view of their activities – all of them popping up in what looks like a concerted attempt to lodge the WTO option in the minds of the public as a sensible answer to Brexit.

The emergence of the highly organised right wing Tory "Ultras" may have something to do with this, and it has been suggested that they need to clear the decks of any encumbrances with the EU in order to pave the way to closer ties with the United States.

Whatever their motivation, they have a stronger grip on Mrs May than is healthy and, with their distorted claims and cavalier approach to evidence, are poisoning the Brexit debate.

Nevertheless, so convinced are they of their own rectitude that they actually believe their own propaganda. They have lost sight, therefore, of the danger to their own Party if they get their way with the WTO option and trash the economy.

Burrage, who seems to think that Booker writes for The Daily Telegraph - such is his attention to detail – thinks this far-fetched, and accuses Booker of adopting a "hysterical tone".

But since neither he nor any of his WTO Option cronies have been able to make a credible case for their obsession, we have good cause to be worried. And if these people are so desperate to misrepresent the facts, we must be on to something.

Richard North 24/03/2017 link

Brexit: the order of things

Thursday 23 March 2017  

I guess we're going to see a lot of Michel Barnier over the next few years – unless the European Council exerts itself next month and decides on someone else to lead the Brexit negotiations for the EU.

For the moment, though, he's in full flow, speaking at the plenary session of the European Committee of the Regions on: "The conditions for successful negotiation with the United Kingdom".

What grabbed the headlines before attention turned to events at Westminster were his comments on "queues of trucks at Dover", cast by the Financial Times as having Barnier warn of "queues and shortages if Brexit talks fail" and fleshed out by Deutsche Welle with his warning that:
… the absence of a deal could lead to long queues of trucks at British port city Dover, disruption of flights to and from the UK and a shortage of nuclear fuel for Britain's nuclear power plants.
Whether it was intentional, or just bad drafting, though, it cannot have been correct to state that "the reintroduction of binding customs controls, which would ineluctably slow down our trade and generate queues of trucks at Dover" is [exclusively] a consequence of an "absence of an agreement".

Come what may, with the advent of Brexit, we will see "the reintroduction of binding customs controls", the effect of which – as Barnier correctly observes - would "ineluctably" slow down our trade and generate queues of trucks at Dover.

"Ineluctably" is an interesting word for Barnier to use, more so when English is not his first language, although there is a direct parallel in French: "inéluctablement". Both mean the same thing: unable to be resisted or avoided; inescapable. One could also use the word inevitable.

The only real issue in this context is how bad the effects are going to be. Even at best, delays of a few hours will become the norm. But the worst case – and entirely tenable – scenario is that trade through Dover (and the Channel Tunnel) will grind to a halt as customs systems collapse under the sheer weight of traffic.

The interesting thing though is that Barnier can see it as a problem. It was quite evident to us in June 2015, a full year before the referendum, when we were warning Dominic Cummings, even as he was scheming to pervert the "leave" campaign and build the arguments on a platform of lies.

The result, though, is clear enough to Barnier. The United Kingdom, he says, has opted to leave the internal market and the customs union. It will be a third country in two years. And, in making this choice, the UK will find itself mechanically in a less favourable position than a Member State of the Union. Nor will it be able to participate in the Single Market.

This sets the seal on our future trading relations – and we can't say we weren't warned. The vulnerability of Dover to delays brought about by border checks is well known – reported on by the Home Affairs Committee in December 2014.

MPs and ministers can have no excuse for assuming things will run smoothly, and especially not journalists, even if the idiot Halligan is still prattling about the UK being "fine" if no EU deal is struck and we instead use WTO rules.

By coincidence yesterday, we also saw publication by the Lords EU Committee on the effect of Brexit on trade in non-financial services, tucked into which we see an observation that WTO rules would not "ensure the free flow of data".

In the body of the report, it refers to the Data Protection Directive 95/46/EC stipulates that the processing of personal data within the EU is subject to standards of transparency, "legitimate purpose" and proportionality.

Those who collect and process personal data ("data controllers") must protect it from misuse and must respect the rights of those who provide their personal data (‘data subjects’), for example by gaining their consent.

In 2016, the report goes on to say, a major overhaul of the Directive was agreed, and the General Data Protection Regulation 2016/679/EU (GDPR) will replace the Directive from 25 May 2018. Under the GDPR, it says, EU citizens' personal data may only be transferred to a third country if very stringent rules are applied and the Commission has decided that it will ensure an adequate level of protection.

However, there are two sets of EU legislation, the other being Directive (EU) 2016/680. As it stands, the UK has not transposed the Directive and, in the turmoil surrounding Brexit, there are no firm indications that it will.

There must be questions, therefore, as to whether the UK's existing domestic data protection regime will be considered "adequate" by the Commission, or whether it will even have the resource or the political will to make a rapid determination. Left on the back burner, several years after Brexit could elapse before the UK was judged compliant, if at all.

In the interim, this would mean that the UK would not be allowed access to EU databases which held personal data on "EU citizens", which would include customs systems. Without full and active cooperation, on the basis of a negotiated deal on joint customs operations, the UK could be forced to revert to paper-based systems for customs clearance.

Given the implications of this, doubtless the Article 50 negotiations will be focused on crafting an early, and comprehensive agreement. But if we walk away with no deal, then talk of "serious consequences" becomes a grotesque understatement. Be under no illusions, the effects would be catastrophic.

For good reason, therefore, Barnier declares that "this scenario of a non-agreement, a no deal , is not ours". He tells us: "We want an agreement. We want to succeed. Success not against the British, but with them". On behalf of the 27 and with the whole team around me, has says that "we want to reach an agreement on an orderly withdrawal from the United Kingdom and to prepare the way for a new partnership".

That said, Barnier is then setting his own "conditions of this success", at the heart of which is an uncompromising demand that the UK honours its financial commitments to the EU. "When a country leaves the Union, there is no punishment", he says. "There is no price to pay to leave. But we must settle the accounts".

Given the rhetoric from Mrs May and her ministers, to say nothing of the statements from the "Ultras", this is shaping up to be the rock on which any possibility of an agreement founders.

One hardly even needs to read between the lines to see this, as Barnier also declares as a condition for success the need "to do things in order and put them into perspective".

"The challenge", he says, "is to build a new relationship between the EU and the UK on a solid foundation". He adds: "This implies putting things in order: first, finding an agreement on the principles of an orderly withdrawal from the United Kingdom, and then discussing, with confidence, our future relationship".

As clear as he can be, Barnier is saying that the money question must be settled first, without which settlement there can be no discussion on the future relationship.

Taking an entirely pragmatic view, the potential cost of a "no deal" catastrophe is potentially so huge – amounting to hundreds of billions – that any amount the "colleagues" may demand is by comparison modest. We should pay up and be done with it.

"Team Brexit", though, seems trapped by its own rhetoric and, having convinced itself that the "WTO Option" is tenable, lacks that all-important sense of peril that will dissuade it from taking a leap over the edge of the cliff.

Against that, they will find Barnier deciding to "be firm, without being naïve". He is going to "put things in order and put them into perspective" and only then will we "be able to engage on a solid basis the discussion of our future relationship".

This is a more than adequate sign of how difficult the talks are going to be. Mrs May clearly doesn't have the measure of them, and the "Ultras" are away with the fayries. And if they got a dose of reality from the EU's soon-to-be chief negotiator, they show no signs of understanding what they've been told.

Richard North 23/03/2017 link

Brexit: Formula One on the brink?

Wednesday 22 March 2017  

This weekend coming, days before Mrs May drops her bombshell on Brussels, there is an event of far more importance to many of the estimated 420 million fans who will follow it – the 2017 Australian Grand Prix.

This will kick off the 68th Formula One World Championship, a motor racing championship for Formula One cars which is recognized by the sport's governing body, the FIA, as the highest class of competition for open-wheel racing cars.

Ten teams are scheduled to compete in twenty Grands Prix - starting in Australia on 26 March and ending in Abu Dhabi on 26 November – spending between them just short of $3 billion.

And although it is an international sport, with the organising company valued at around $8 billion, all the teams are based in Europe (or have forward bases on the continent) and – making it something of a success story of the UK - seven have bases in England. Between 2005 and 2015 every single world champion (bar one) drove a car which was designed, engineered and built in Britain.

The teams themselves employ hundreds of skilled workers and indirectly employ thousands more in an estimated 4,500 related businesses, creating high value engineering and technology spin-offs, with many applications.

They support a cluster of high-performance engineering firms concentrated in an area of the Midlands and outer south east - nicknamed "Motorsport Valley"'. These have enjoyed sustained growth since 2009 and achieved an all-time high annual turnover of £9 billion in 2012, employing 41,000 people in the supply of world-class engineering products and motorsport services.

In March 2019, just before the UK leaves the EU, one assumes that the Australian Grand Prix may just have bee completed, and 70th season will be under way. But whether the majority of the teams will still be based in England is anyone's guess. Possibly, it will be so destabilised by Brexit that the teams will be forced to move out of the UK in order to stay within the EU.

That's the thing about Brexit. In evaluating its impact, it's easy to make generalisations and draw from them conclusions which seem to have merit. But this is about the EU, and the EU is about detail.

In terms of industry and commerce, some sectors may do well out of Brexit and others may be permanently damaged. But that's a generalisation. Some businesses within damaged sectors may survive and even prosper. Some businesses will suffer, even though their sectors will escape largely unscathed.

For other sectors and businesses, there's no way of knowing. There are too many imponderables. They may do well. They may struggle. They may collapse. It all depends on what happens during the negotiations.

As regards Formula One racing, it takes little imagination to pinpoint the areas of vulnerability, identified in this article. It describes "a week from hell" in the 2016 season, as the logistic teams faced the "back-to-back" schedule of Austrian Grand Prix followed by British Grand Prix.

These back-to-backs are nothing new in Formula One, we are told, but this one was described as a "killer" because of the distance involved, almost 1,000 miles, and the very fine margins on time as a result. Any delays crossing the Channel, it was feared, could have had a knock-on effect on the British Grand Prix.

The logistics of the business are quite remarkable, involving a fleet of six Boeing 747 freighters, with a total load capacity of 720 metric tons operated by logistic partners DHL for the long-distance "fly-aways". They are backed up by 35 containers sent by sea months in advance with the heavy and bulky items.

For the European venues, though, the trucks take over, each team operating its own liveried fleet. And in the most challenging transfer, from Austria to the UK venue in Silverstone, there is no margin for error for the 300 or so HGVs, which make up the F1 convoy, heading for Calais and the Channel ferry crossing.

In the narrative describing the transfer, concern is expressed about delays at Calais. These has been experienced through the migrant crisis, with every hour lost felt at the other end. There are no contingencies in the even of French unions striking, which has happened a lot recently with air traffic control and railways in the country, nor for French customs to introduce any delays to the system.

Last year, Formula One was collectively holding its breath for the trucks appear safely on the other side of the Channel in time for the Silverstone build to begin. That time, they were lucky.

In 2019, however, there will be another complication – the UK will no longer be in the Single Market. Irrespective of what deal we manage to bring home from Brussels, there will be border controls at the ports, with customs and other checks. There will doubtless be delays, which will put the tightly organised - and highly fragile - timetables at risk.

Additionally, because free movement of goods will no longer apply, the UK-based teams will no longer be able to move their vehicles and equipment freely across the Channel. For customs purposes, they will be treated as temporary imports, for which special rules apply.

Fortunately, there is an international system for dealing with such contingencies, implementing the Istanbul Convention on Temporary Admission via the World Customs Organisation. This is the ATA Carnet system, for the equipment, and the CPD Carnet for the vehicles. These allow for the temporary import into the EU – and to other countries in which Formula One events are held. However, they add costs to the system and, of more concern, time.

The European circuits are under much greater time pressure than the "fly-aways", with their "back-to-back " events, and much more equipment is moved, including the prestigious team " motorhomes ", each requiring eight or more trucks to move them.

Each Formula 1 team transports roughly 50-60 tons of equipment per race. The teams are completely self-sufficient – they bring their own water bottles, refrigerators, cabling and even their own power generators and their food supplies in refrigerated vehicles.

For an ATA Carnet, every item must be listed on the official form and, while a single carnet is valid for a year, once completed, they cannot be changed. But loads vary so much between races that new applications are often needed every time convoys take to the road. And, there's the rub. While loading goes on almost to the minute of departure – not a problem in the Single Market – applications for Carnets must be lodged 2-3 days before travel.

Nor does the Carnet remove the need for customs formalities set out in the Commission Implementation Regulation. These include documentation checks and verification inspections, to ensure than all equipment is listed, and checks when they leave the country to make sure they carnet-holders take out everything they brought in. Such checks cannot avoid adding delays to the transport process which, currently, enjoys free movement without customs control.

Once the material has been allowed to enter under the temporary admission procedures, bizarre "red tape" provisions apply. For instance, once imported it must be re-exported within a variable time frame (down to three months in some circumstances). That is not a problem for Formula One, running events lasting only days, except that nothing imported can be disposed of locally, without giving five day's notice and getting written permission.

Then, specifically, import of "consumables" is not permitted under the carnet system, while imports under the normal import system would require most foodstuffs to be routed via a Border Inspection Post. This effectively means that the lavish hospitality services supplied at EU venues, including the provision of gourmet meals for VIPs, can no longer be serviced from a UK base after Brexit.

The point at which the cumulative loss of flexibility makes it more attractive, and even necessary, to move operations away from the UK will obviously be influenced by commercial factors, but if there are added complications, such as requiring visas and work permits for skilled personnel, tariffs on imported components, and onerous rules of origin, the balance of advantage will shift.

In a highly competitive and extremely mobile industry, French, Italian, German and Spanish enterprises would be keen to take the business. And with the whole of Formula One built on mobility, it could pack its bags and be gone in a weekend.

The killer is likely to be customs delays – at their greatest if the UK opts for the "no deal" scenario and decides to work exclusively under WTO rules. Yet, despite this, we see the build-up of an insidious campaign to convince the public that this option would be acceptable. The idea of us working to "WTO rules" is becoming locked into Whitehall as an unswerving mantra, driving out sentient thought.

Rarely, if ever, are the full consequences fully spelt out – and we see Tory MPs such as Marcus Fysh clearly demonstrate that they have no idea what is involved. Yet thinking has never been their strong suit - theirs is the churn out the mantra. 

Formula One, though, is clearly vulnerable and on several counts. Mobility is the lifeblood of an industry which is dedicated to speed. Any loss of mobility or flexibility in operations would be terminal. And as the backbone of a £9 billion UK industry, its relocation could cost us dear. And it is only one of many industries at risk to the ideologues who form the "Ultra" tendency in Brexit politics.

Even with a comprehensive free trade agreement – if it is actually possible to conclude one in the time – we are going to find trading with our EU former partners much more difficult. With the WTO option, it will be inestimably more difficult – little short of economic suicide. These people would have us leaping over the cliff-edge with a song on our lips, singing their praises as our bodies thud onto the rocks below. 

Those who promote this course of action are going to have a lot of explaining to do when high value jobs and industries up-anchor and move out. The billions will soon add up and, collectively, under the aegis of the WTO option, they will spell out not a recession but a full-blown depression.

And that, as they say in the business, is a racing certainty.

Richard North 22/03/2017 link

Brexit: an unknown destination

Tuesday 21 March 2017  

The one good thing about Mrs May finally letting it be known when she is to invoke Article 50 is that it puts to bed all those who advanced at great and tiresome lengths the view that we did not need the Article and could proceed immediately to the leaving stage by repealing the European Communities Act.

This goes back to July 2012 when Booker was calling for Mr Cameron to pursue Article 50, only to run into a storm of hostile commentary – not dissimilar to what he's currently getting.

Pitched into battle we saw the likes of Idris Francis and Ashley Mote lambasting Booker, calling Article 50 a "trap" and warning of dire consequences if it was ever invoked.

Some readers had the Eurogendarmerie storming the British Isles while Torquil Erikson told us that "any and every EU regulation and directive which has been passed into UK law would be nit-picked over and reinforced with threats of fines and prosecution".

"Any interim activity planned by the British government", he said, "would be examined microscopically for any apparent unlawful activity, and again policed with threats. It would be a logistical and administrative nightmare for the then UK government".

At the top of the dung heap was Gerard Batten, speaking for Ukip, then as now, arguing that Article 50 should not be used.

We can take some small comfort from the fact that these voices will no longer be heard, but there will be no apologies offers or admission of error. That never happens in eurosceptic land. Different voices take up different themes and the noise continues.

From the Prime Minister, however, rather than noise, we get clichés. "I am very clear", she says, "that I want to ensure we get the best possible deal for the United Kingdom that works for everyone across the United Kingdom and all parts of the UK when we enter these negotiation".

"I have set out my objectives", she declares: "These include getting a good free trade deal. They include putting issues like continuing working together on issues like security at the core of what we are doing. We are going to be out there, negotiating hard, delivering on what the British people voted for".

What we don't get is any sense of how she intends to achieve this, up against Commission President, Jean-Claude Juncker, who has a message for us. "Britain's example", he says, "will make everyone else realise that it's not worth leaving".

This has the tabloid media spitting with indignation at Juncker's "boast", but a more sanguine assessment might be that the President, unlike the Prime Minister, has weighed up the odds of the UK walking away with a successful deal, and has concluded that they are not favourable.

If we are to believe the odious Guido the "Ultras" themselves are not rating our chances very highly, while a "government source" puts the likelihood of the UK having to adopt the WTO option at 50-50.

If that is the case, the Government ministers have no-one to blame but themselves. It would take very little skill and even less research to cut through the rhetoric and acknowledge that concluding a "good free trade deal" inside the 18 months being set aside for the talks - on top of all the other issues that have to be settled – is extremely unlikely.

All one can do is watch the Government define its own nemesis as it lurches forward into an impossible position from which there is no escape.

Sadly, though, it appears we are going to be none the wiser in just over a week when the Prime Minister sends her Article 50 notification to Brussels. We are told to expect (contrary to the advice of Ivan Rogers) only a short letter, possibly extending to two pages at most, doing nothing more than reiterating the Government's general objectives.

If that is the case, it will be a mistake, handing the initiative to the "colleagues", who will then have no constraints in crafting their response. And if, as expected, the they couch it as a series of demands, leading with the presentation of a substantial claim for financial compensation, then we can pretty much assume that we're in for a rough ride.

Mrs May has seriously dropped the ball on this, having failed to manage public expectations in a battle she cannot win. Come what may, the UK is going to have to pay a substantial sum to the EU, and make ongoing financial commitments, if it is to stay in the game. Yet, she has allowed the assumption that she will be standing firm, setting herself up for a fall.

Some theorise that, in the expectation of failure, Mrs May is looking more to the process of blame deflection than she is a successful outcome to the negotiations, in which case an unwavering stance from the "colleagues" will play into her hands, allowing the "unreasonable" EU to be cast a the villain.

Juncker is already halfway there, according to (Bild am Sonntag via Reuters), having said that Juncker said Britain would need to get used to being treated as a non-member. "Half memberships and cherry-picking aren't possible", he says: "In Europe you eat what's on the table or you don't sit at the table".

That latter phrase is being taken as an indication that the EU will be immovable on the financial issue, in which case we are already heading for the WTO option and economic catastrophe.

Would-be chief negotiator Michael Barnier certainly seems to be preparing for the worst, instructing the EU-27 that they have to start preparing now for future customs controls.

To extent to which Mrs May's "Team Brexit" is prepared for this is going to be the acid test. The precursor to many a free trade deal – as in 1997 with the EU and the Republic of Korea – is a customs agreement. It thus stands to reason that this issue will be high up on the work programme. How it is presented and the progress made may give us a strong clue as to how the technical negotiations will proceed.

As it stands, though, on 29 March 2019, we look to be leaving the EU – in good time for the Euro-elections, thus making sure that the current crop of UK MEPs is the last. In one fell swoop, Ukip loses most of its power base.

Such things, though, are mere trivia compared to the momentous events afoot. The phoney war is nearly over and we are about to enter a new phase. No one knows exactly how this is going to pan out, as we are navigating uncharted waters. But, at least, we will shortly be able to count down to our unknown destination.

Richard North 21/03/2017 link

Brexit: all the wrong people

Monday 20 March 2017  

If a man is known by the company he keeps, and the same applies to political movements, then we have a real problem, manifest in having John Major and Tony Blair in the same weekend supporting the "soft Brexit" agenda. This is not good news.

It is even worse when they are ostensibly talking sense, as with Blair who told Andrew Marr yesterday:
…one of the things I’ve done in the last few months is talked to a range of people and if it's permissible still to talk to experts, a range of experts particularly on the trade issue, I didn't understand how complicated this is going to be. If they're going to try and deliver exactly the same benefits as we have now in the single market and customs union, this is an endeavour of unparalleled complexity and what people explain to me is that normally in trade negotiations you're talking about how you liberalise trade, right. This is about how you de-liberalise over 40 years of complex trading arrangements.
Then we have John Major who offers this unarguable if unpalatable observation:
The 48 percent who voted Remain have as big a stake in our future as the 52 percent who voted Leave: they, and especially parliamentarians, have a right – indeed a duty – to express their views. No one can, or should, be silenced. That being so, it is time for the minority of "Ultra Brexiteers" – those who believe in a complete break from Europe – to stop shouting down anyone with an opposing view. It is not only unattractive but profoundly undemocratic and totally un-British. What is most striking is that, amid all the noise they make, they comprehensively fail to address any argument put to them.
Either of these quotes could be ignored if it was not for the behaviour of these "Ultra Brexiteers" or "Ultras", pursuing their "clean break" from the EU, to replace it with their free-wheeling, free-trading, low-tax, low-regulation, privatised vision of government.

The thing is, when people voted to leave the EU, that's what they voted for. But there is an element on the Tory right which takes Brexit as a license to pursue its own political agenda. And one just has to view the newspaper comment threads to see John Major's description of the "unattractive … profoundly undemocratic and totally un-British" suppression of dissenting views. A new intolerance is abroad, making politics a very ugly place.

But having Blair and Major "on-side" doesn't help. It serves only to polarise and already dangerously polarised debate and gives the "Ultras" their rationale. If we are known by our friends, we are also known (and defined) by our enemies.

Blair, for instance, talks about the "tragedy" of Brexit, thereby cementing in the supposition that those who argue for a sensible, measured approach to leaving the EU are tarred with the "remainer" brush. By this means, Johnny-come-latelys, fresh on the Brexit bandwagon, have the unmitigated gall to call Booker a "remainer".

Week after week on the comments on his column, we see the same litany of unpleasantness, effectively disputing his right to question any aspect of the management of Brexit. Uniquely, it seems, this area of public policy is off-limits. To question the Government's handling of one of the most important political events since the war is taken is taken as opposition to our leaving.

Such is the surreal nature of these developments that old enemies take on the mantle of "friend", so I end up watching Pascal Lamy and nodding with approval at the things he says (or, at least, some of them). "There is no easy negotiation – by definition", he says. "Otherwise it would not be a negotiation".

Dismissing the idea of the "colleagues" punishing the UK for leaving as "total crap" – said so quickly that it hardly registered with people in the room, he warned that the negotiations were "inevitably going to be hard". Yet, when we warn of the same, without needing the likes of Lamy or anyone else to tell us, we attract approbation for former allies which used to be reserved for the most unremitting europhiles.

It comes to a pretty pass, therefore, when the most intelligent review of the Lamy speech comes from Larry Elliott in the Guardian, with the Telegraph having become the repository of half-wits and zealots. It has become the Ultras' gazette, making Jonathan Freedland look sane.

Elliott describes the "battle-scarred" Lamy as having no illusions about the difficulties of the negotiations, recalling his "nice metaphor" for the likely complexity of the talks: separating an egg from an omelette.

Lamy categorises the issues facing the negotiators into three groups: things that will be simple; things that will be more complex; and things that will be really complex. And some of the things that appear to be the most simple will, in the event prove to be the most complex and the most difficult to resolve. And, as Lamy says, "complexity in negotiations means time".

This, however, has become an area where everybody is the "expert". People who have spent their entire careers not talking about the EU are now, in their own eyes, the great authorities on all things Brexit, with no problem so difficult that it cannot be easily solved with that magic ingredient, "political will".

We also get the barrack-room lawyers (some of them in government services) who latch on to a fragment of the argument and expand it out of all proportion, with the zeal of a Messiah paving the way to a new paradise.

This we see in some aimless chatter about a Plan B, where an interim arrangement can be conjured out of thin air, to overcome the grip of an impossible timescale.

Gradually, it is dawning, that the two years allocated is nowhere near sufficient to reach a conclusion, so we have Lamy talking about a "continuation clause" in the agreement, to be referred to more diplomatically as a "transitional agreement" in front of the British.

The clue though, is in Lamy's term, suggesting that, if we cannot make the break in two years, then we have to continue with the current arrangements (ten years is suggested), until a final deal is settled. And that is almost certainly going to require some oversight by the ECJ, while putting us in the position of having to accept everything thrown at us for those ten years, with the proverbial "no say" in the formulation of new rules.

Paradoxically, probably the only way absolutely to ensure a clean break from the EU is the Efta/EEA route – the very option that the Ultras have refused to take.

And then, from a position of the most profound ignorance, born of the new intolerance which would put the Puritans to shame when it comes to the treatment of "heresy", they would have us adopt the WTO option as a rational alternative to a negotiated settlement.

Then brings us full circle for, in the lexicon of the Ultras, to warn of the dangers of this route is secretly to support staying in the EU – alongside our "allies" John Major and Tony Blair. The WTO option is the new religion, and anyone opposed is a "heretic". The fact that all the wrong people oppose it simply proves the point.

Richard North 20/03/2017 link

Booker: walking into the elephant trap

Sunday 19 March 2017  

What is truly terrifying, as the days tick away to Theresa May's triggering of Article 50, writes Booker, is how little those in charge have any grasp of what they will be facing.

In fact, trying to understand how little those people know is in itself a gigantic task. In an attempt to piece together their mindset, I stumbled across a piece from Brexit Central which seems to capture the essence of the vacuum.

This is from Patrick de Pelet (formerly a divisional head with Kleinwort Benson and a Group Director of Dresdner Kleinwort), who argues that a free trade agreement can amount to our current relationship stripped of what he calls the "six components": the Single Market; the Customs Union; free movement of people; payments for access to the single market; jurisdiction of the European Court of Justice and the application of EU regulations, other than to actual trade between the two countries.

Given the scale of the UK market for EU exports, he says, it is self evident that it is to the overwhelming advantage of the EU to continue to trade tariff free with the UK. He adds:
This can be readily achieved by agreement that on the day following Brexit, all trade, including trade in services, continues seamlessly, stripped of the six components. At a stroke the EU will have put in place its most important FTA, without the need for any complex, long drawn out negotiation. There would be no cliff edge and all uncertainty would be removed. The reality is that the UK-EU free trade agreement is already in place and merely has to be renewed.
There lies the core fantasy. After Brexit, the EU can just decide to trade with us on the same basis that it did before, without the "six components", and without the need for any substantial negotiation.

What's missing here is any recognition that the UK, on leaving the EU, becomes a "third country" with its status defined in EU law. Having of its own volition, ceased to be a member state, any rights of access to Member State markets will cease. We must then negotiate new access, starting from scratch.

Thus does Booker pick up the story, telling us that, by deciding to leave the Single Market and the European Economic Area, we are seemingly left with only two options. Either we can negotiate a unique "free trade deal" or we can just walk out, on the basis, in Mrs May’s words, that "no deal is better than a bad deal".

Last week, when David Davis, our minister for "exiting the European Union", met a committee of MPs, the headlines centred on his admission that he still hadn't asked his officials to produce any estimate of the cost of the "no deal" option.

However, he did at least concede that our financial services would lose their "passporting" rights to continue operating in the EU, that we would lose our EU health cards and drop out of the EU-US "open skies" agreement.

But he also admitted that "trading delays" were "potentially as big a problem as tariffs" (although the MPs, obsessed with tariffs, failed to follow up on what this could involve). Davis hoped we might be given an extension of the "electronic, light-touch customs checks" that allow 10,000 of our trucks a day to move goods anywhere in the EU without border controls.

What he still doesn't seem have grasped is that the moment we leave the EU (and the European Economic Area) without a deal, automatically to become a "third country", we are automatically excluded from EU electronic databases, on which international customs system rely. And in the absence of a data sharing facility, we would have to revert to paper-based systems and inspection procedures which could soon have lorries backing up from Dover to London and beyond.

Davis did, in passing, mention the need for "phytosanitary" (plant health) checks, but not the rules for veterinary inspection of our exports of live animals and "animal products", including cheese and eggs, which would now have to be diverted to an EU "Border Inspection Post". The nearest, at Dunkirk, is so small that it would require massive expansion, and an army of new inspectors, with trucks waiting days for clearance.

Davis blithely hoped that we can somehow secure "mitigation" of all the rules and customs procedures which are the very essence of the EU (although it is hard to imagine how we could negotiate "mitigation" through a deal we walk away from). But what beggars belief further is the idea that we could negotiate all this and far more in just two years.

His ally, Lord Ridley, tried to come to his aid in The Times by assuring us that trade deals can all be agreed in a matter of months. But he didn't seem aware, for instance, that talks about a trade deal between the EU and South Korea, far less complex than that we will be asking for, began in 1993 and the latest agreement didn't come into force, with 1,400 pages of documents, until 2011.

As for the fond belief that, without any deal, we could continue to trade with the EU just "under WTO rules" – those still suggesting this are clearly unaware that not a single developed country trades under this arrangements.

The EU treaty database shows that it alone has no fewer than 880 bilateral trading arrangements, covering almost every country in the world, including 20 with the US and 67 with China; all of which we would drop out of by leaving the EU.

The horrifying fact is that our politicians are heading for these negotiations without any real idea of what a mighty elephant trap awaits them – which could have been avoided if only we had been clued-up enough to leave the EU but remain in the European Economic Area. Alas, Booker concludes, we have preferred the elephant trap.

And that is certainly the case with Liam Halligan in the Telegraph, who declares that: "Trading under World Trade Organisation rules after Brexit would be no hardship".

And, in common with the Viscount Ridley, he declares that: "The EU and US trade under WTO rules, as do the US and China and the EU and China. Most of the trade conducted across the globe is under WTO rules".

Bizarrely, from the security of his own little bubble where he so eagerly parades his ignorance, he then goes on to assert: "That is the reality – even if much of the UK's political and media class is determined not to grasp it".

There does not seem to be a way of countering this depth of ignorance, so deep that the man believes himself to be a purveyor of "reality", despite being factually incorrect. The mantra is so firmly embedded in his psyche that it barely seems possible that it can be rooted out.

But then, this is no longer about facts – it seems to have become a religion, in which case Halligan is professing his faith. How strange though that a national newspaper is so imbued with this mythology that fact-checking has become a thing of the past.

Our newspapers now have more in common that with religious tracts, as they become divorced entirely from the events in the real world that they claim to report.

Leaving the EU, in the eyes of the zealots – and a distressing number of journalists - has now become a creed which requires adherence to a nihilistic code, where acolytes are bound by their articles of faith to pursue the destruction of the UK economy, while asserting that it is all in our better interests.

Civil wars have broken out over less.

Richard North 19/03/2017 link

Brexit: a matter of timing

Saturday 18 March 2017  

A little while back, I published a blogpost about the EU-South Korea FTA, a pivotal agreement in the contemporary world trading system, as the first example of the "new generation" of free trade agreements.

Not least of its distinguishing features was it length, running to 1,432 pages, reflecting the subjects covered and the complexity of the deal. But the agreement took on an extra dimension when Matt Ridley chose in his Times column to compare it with the Australia–South Korea FTA.

Of this, he made two specific claims, now subject to an IPSO complaint. The first was that it was agreed in a shorter period of time than the EU version, and the second was that it concentrated on "trade" and thereby was "considerably simpler in respect of standards, regulations, etc, than those the EU has been trying to agree".

Unlike the EU treaty though, which is published in a single coherent document, the Australian version is split between 48 separate files, each of which have to be opened and a .pdf file downloaded before the page length can be determined.

Yesterday, I carried out this tedious exercise and did the count. With 23 Chapters, 21 Annexes and three Roman numeral annexes, together with side letters and schedules, it comes to 1,827 pages – nearly 400 pages longer than the EU version.

As to the timing, we reported earlier that, although Ridley implies it took six months to negotiate, we found that the process started with a feasibility study in April 2008. The deal was signed in April 2014 – not six months, but six years after negotiations had started.

By contrast, negotiations on the EU-South Korea FTA started in 2006 and the final agreement entered into force on 1 July 2011. In Flexcit, however, I pointed out that the current trading agreement was accompanied by a broader-ranging 64-page framework agreement on political cooperation.

What was particularly significant, though, was that the negotiations that had led to the agreements were only the last stage of a process which had started in 1993, with negotiations on a customs cooperation agreement. But, in strictly comparable terms – like-for-like with the Australian deal, it took five years. Effectively, the Australian deal took longer to negotiate, even though it did not include the deal on political cooperation.

As regards its content, we see chapters on such things as Customs Administration and Trade Facilitation; Technical Barriers to Trade; Rules of Origin and Origin Procedures; Cross-Border Trade in Services; and Audiovisual Co-Production. This is in every way comparable with the EU trade treaty, including the comprehensive dispute settlement procedures.

The same goes for the China deal. In November 2014, it was described by Australian Trade Minister Andrew Robb as: "by far the most comprehensive and ambitious agreement that China has struck with any country in the developed world".

The take-home point here is that modern trade deals are complex affairs, covering a wide range of issues. There are no short cuts and they are always going to involve long and complex negotiations. In the Australian-China deal, one of the key sticking points had been investment thresholds, limiting the ability of state-owned Chinese enterprises to buy farmland in Australia.

A review of the agreements shows that the issue of regulatory harmonisation was by no means central. One of the main obstacles to an agreement with South Korea had been its insistence on investor-state dispute settlement provisions, following the legal dispute over plain packaging with tobacco giant Philip Morris. Thus, the UK expectations that a swift agreement with the EU can be reached, purely on the basis of notional regulatory convergence, is entirely unrealistic.

Much as the "hard brexiteers" would wish otherwise therefore – to say nothing of the Government – there are no reasonable grounds for expecting a trade agreement to be reached within two years. No amount of fantasising or manipulation by the likes of Matt Ridley will make any difference to that.

In actuality, only by resorting to distortions and self-delusion can any case be made for achieving a trade deal within a two year period, other than one involving a craven surrender which would leave us considerably worse off than we are now. Even Lamy's estimate looks generous.

That then leaves us with the idea of a transitional deal, but we are no further in our pursuit of clarity than we are with other issues. A Government which continuously tells us that it is possible to reach a deal in two years is not one that can be relied upon to craft a workable interim solution.

When we add to this the latest intelligence, that the EU will seek a resolution to the financial issues before moving on, things start to look extremely grim. But still we get idiots such as Jacob Rees Mogg prattling about the merits of the WTO option, insisting that countries such as China and the United States work exclusively under WTO rules.

We have reached a situation, though, where facts no longer seem to have relevance. When people like Rees Mogg, and Ridley, Peter Lilley, John Mills, John Redwood and many others, are confronted with facts that contradict their beliefs, or pose obstacles to their desired solutions, they simply ignore them. 

In other respects, we see either an inability to tease out the facts, or a culpable ignorance, where people do not seek out facts they might not want to hear. It is instructive, in this context, that when I gave evidence to the Treasury Select Committee, Rees Mogg was present but did not ask me a single question.

When you have people who are ignorant because they prefer it that way, wilfully ignoring good evidence because they don't like what they are hearing, it changes the dynamics of the debate. It's no longer a question of the best arguments. It becomes an issue of who can should the loudest, who has best access to the media, or who has the most "prestige".

Nevertheless, facts are still facts, and one fact is that we've comprehensively caught out Matt Ridley. His "shorter" Australia-South Korea deal is actually longer then the EU equivalent and, on a like-for-like basis, took longer to negotiate. When it comes to timing of any trade deal we might agree with the EU, Ridley hasn't got case. His answer, doubtless, will be to shout louder and ignore the facts from low-born upstarts.

But one might recall that this is the man who eventually admitted to a "catastrophic black mark" when describing his leadership of the failed Northern Rock Bank.

And this is the man who is telling us that we can do a trade deal inside two years – all on the basis of a "conversation" with an Australian politician. Such predictions are no more safe with Ridley than were the unfortunate depositors of Northern Rock.

Richard North 18/03/2017 link

Brexit: "horribly complex and costly"

Friday 17 March 2017  

Pascal Lamy, former EU trade commissioner and one time head of the WTO, has been talking to the press.

On the prospects for a comprehensive free trade agreement, he says that it would take five or six years to negotiate, requiring a transitional arrangement to cover the gap between implementation and the end of the two-year Article 50 period ends.

He also suggests that the administrative task facing the government a "costly and complex" to achieve and that even the "greatest" Brexit deal would impose costs on the UK economy.

"In trade", he says, "there is no way switching from an internal market to any other regime, including the best, will not be costly". But, he adds, without a trade deal, Britain would have to fall back on the WTO trade terms. "The resort to WTO", he says, "would be worse than an agreement".

And that - following Royal Assent for the withdrawal Bill, giving Mrs May permission to invoke Article 50 – really is the crunch, as it always has been. We face the prospect of a catastrophic "no deal" scenario or the possibility of an unachievable free trade agreement.

The response from Mrs May's official spokesman, though, is that the prime minister remains "convinced we can get a good deal within a two year time frame - nothpolticiing has changed".

Certainly, nothing has changed – for years. We have long since known that neither the so-called WTO option nor the free trade option were viable.

Yet, adding vacuity to blind optimism, we have Brexit under-minster telling the Freight Transport Association that the Government is pursuing "a bold and ambitious Free Trade Agreement that allows cross-border trade to be as frictionless as possible".

"We want", he says, "to have a new, mutually beneficial customs agreement with the EU that supports these objectives. But we have a completely open mind on how they will be achieved".

And that last sentence is the killer line: "we have a completely open mind on how they will be achieved". Translated, it means the Government doesn't have the first idea of how it's going to conclude its agreement. Our negotiators are going to go "over the top", straight into the machine guns, with no other plan than to keep marching forwards, stepping over the bodies of fallen comrades.

And there is absolutely no good reason to expect the "colleagues" to help us out. As I point out in my formal complaint to IPSO, about Matt Ridley's Times piece, they are going to be able to restrict entry to their markets, without fear of contravening WTO anti-discrimination rules. On the other hand, we cannot erect barriers against EU-originated produce without also imposing similar restrictions on goods from the rest of the world.

It will be interesting to see how this affects our trade with the EU on cars and automotive parts. Volume shipments through dedicated ports, with their own terminals, are hardly going to be affected by the imposition of customs controls, while manufacturers can reclaim duties paid on imported components which go into vehicles which are subsequently exported.

Equally, cars built on the continent using parts supplied from the UK with also be able to rebate duties paid when they are sold here, reducing the overall amount of duty that would be paid. And considering that the duty on cars is paid on the wholesale price, end customers will only be paying a fraction of the posted 10 percent.

On foodstuffs, much is also being said about punitive tariffs on certain products, but these are rarely paid. Almost all these products have duty-free or low-tariff quotas, so the actual amounts paid will be minimal.

All round, it will be the non-tariff barriers (NTBs) which will do the damage – but mostly in ways our politicians haven't begun to appreciate. Even (or especially) Mrs May is still imbued with the idea that regulatory convergence is the be all and end all of NTBs.

Meanwhile, Lamy thinks it will be ten years or so before the UK will know whether there is any cash benefit from leaving the EU. Oddly enough, though, for all our pessimism about the outcome, we are already enjoying some benefits from Brexit – the politicians are on the rack and, for the first time in decades, they can't blame Brussels for their failures (although they will try).

Given that increased political accountability is one of the main aims of Brexit, and that this brings improved governance, then the actual gains may be quicker in coming then many expect. However, while we may subscribe to the idea that there is no gain without pain, many of us are asking whether to is necessary to suffer so much pain for what gains that actually accrue.

If Lamy is right about the economic lag being in the order of ten years (two electoral cycles), one of the effects could be to render the Conservatives unelectable – if not now, in future elections.

A severe, immediate fall-out, though, is the one thing perhaps which could see Corbyn's Labour Party elected to office. Lamy, therefore, needs to be wrong, although on trade matters, his experience will most likely carry the day.

Richard North 17/03/2017 link

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