Brexit: breaking out of the inner circle

Wednesday 24 May 2017  

During the height of the Troubles in Northern Ireland, I recall some serious discussion about whether there should be a complete block on high profile publicity on bomb outrages – on the basis that to afford them front page headlines and huge media coverage was to give the terrorists exactly what they wanted.

Something of that argument carries over into the dreadful incident in Manchester, late on Monday, the news of the incident and its aftermath driving other news out of the media, with even general election coverage suspended.

The essence of terrorism is that it is a grotesque form of attention-seeking. If we let them, this murderous freak in Manchester and his co-conspirators are going to have more effect on the outcome of Brexit than a thousand or more pundits and politicians, simply by virtue of their closing down the public debate.

These people seek to disrupt our way of life, to create an atmosphere of tension and crisis and to distort and channel our politics, all so that we should conform with their agendas. Therefore, an essential response to terrorism is to attempt, as far as is possible, to carry on as normal.

But, as Pete remarks, media incontinence and the inability to focus on more than one subject at a time, means that Brexit will be buried even further. Already, in this election, this pivotal issue is woefully neglected and the media need little excuse to chase after issues that are easier and more rewarding to report.

Unwittingly, therefore, the media is doing the terrorists' bidding, something that we are unwise to allow. Thus, we must, with due respect and deference to the dead and injured, press on with an issue which is vital to the long-term prosperity of the UK, an issue which will shape our politics for generations to come.

Right up front in this department is the extraordinary mess Mrs May seems to be making of her election manifesto, and the apparent U-turn over the so-called "dementia tax". The elements of this have enormous relevance to Brexit.

To help understand this, we can go to The Times (behind the paywall) and a piece headed: "May's flaws are now exposed for all to see". Here, we see Rachel Sylvester write:
Mrs May, prizing loyalty over knowledge, relied instead on her small, close-knit team of advisers who appear to have failed to understand the basic issue. Even the cabinet was not consulted on this critical policy, which was reportedly inserted into the manifesto at the last minute by Nick Timothy, the prime minister's chief of staff.
Sylvester then goes on to say: "None of this bodes well for difficult Brexit negotiations that will require flexibility and empathy as well as determination if she returns to Downing Street".

"The problem", she says, "is that it's part of a pattern. Only a few weeks ago the prime minister had to abandon the key budget announcement about a rise in national insurance for self-employed workers because she and her team had apparently failed to spot that it clashed with a manifesto commitment made by David Cameron".

The complaint is one of "tunnel vision in No 10" that prevented political perception. At the Home Office, where Mrs May also relied on her inner circle, says Sylvester, "she ignored all appeals by her cabinet colleagues to take students out of the net migration target, despite the damage the policy was doing to universities".

Even though she repeatedly missed the pledge to bring the number of immigrants down to the tens of thousands, she stubbornly insisted on repeating it in her own manifesto.

In the view of the Times columnist, looking inwards not outwards makes for bad policy and ineffective government. The Tory manifesto, she says, is starting to unravel. The prime minister needs to learn to listen to those beyond her core team if she wins on 8 June or she will quickly see her premiership doing the same.

Unfortunately, Brexit is a central part of the manifesto and, as other policy areas seem to be unravelling, Mrs May seems to be hardening her approach to Brexit, relying on what she thinks is a popular policy to salvage her tarnished reputation.

In so doing, she is supported by the Brexit cult within the Conservative Party which, as Pete remarks, is in the process of convincing itself hat there is no cliff edge. And like Mrs May's own political process, they seek to do this through obfuscation and denial, building up an elaborate belief system based on a number of self-deceptions.

The latest manifestation of this is in Conservative Home where the spectacularly moronic Christopher Howarth joins his fellow Tory Boys in a thoroughly dishonest attempt to support the WTO option. Howarth, of course, is Steve Baker's gofer and the researcher for the European Research Group, that group of Tory "Ultras" dedicated to pursuing a "hard" Brexit.

Thus does Howarth argue that: "The US trades with the EU under WTO terms, but that does not mean that the US has no agreements with the EU", thereby completely misrepresenting the WTO option. Necessarily, as we've pointed out on numerous occasions, not least here, The WTO option arises from unilateral action taken by the UK. The moment you broker side-agreements to supplement the basic WTO rules, you are no longer dealing with the WTO option. The unilateral becomes bilateral.

But this is how you win arguments in Tory land. You change the definition of the terms, to give them your own unique meaning which happens to suit your personal requirements. By that means, adopting the WTO option does not involve driving over the cliff edge, because you've just redefined it.

Exactly the same game was played by Lee Rotherham, who asserted that: "What people forget is that what are referred to as 'WTO terms' are accompanied by a range of other agreements that build on them and further facilitate trade".

By such sleight of hand, it is possible to win any argument, demonstrating also why it is fruitless arguing with a Tory. They live in that alternate universe alongside Mrs May, the presence of which so frustrated Jean-Claude Juncker. This is a universe where black is white and the unilateral "WTO option" is miraculously converted into a series of bilateral agreements.

Unfortunately for Mrs May, should such arguments be taken to Brussels, they will be tested under hostile conditions, outside the warm, comforting embrace of Conservative Home, where the arguments are won before writers even put fingers to keyboards.

In this very different reality, the argument is not necessarily going to be any better but it is not going to buy into the cloying conformity that binds the Tory clique. The UK's "Team Brexit" is going to be fighting for its life and, with arguments that find such an easy resting place in CH, it is going to lose.

If we're to avoid a plane crash Brexit, Mrs May is going to have to realise that she cannot rely on her "inner circle". She will have to break free from the grip of inbred Tory stupidity and listen to something that has a half-life of more than nanoseconds outside the closeted environment of the Torygraph, the Daily Mail and CH.

Failing that, she will deliver a plane crash Brexit and, with that – as Sylvester warns - she will quickly see her premiership unravel.

Richard North 24/05/2017 link

Brexit: no cash, no agreement

Tuesday 23 May 2017  

You can tell that yesterday's General Affairs Council was really important. The rows of empty seats at the press conference (pictured) gave adequate testimony to that.

It was only, after all, a Council meeting that - according to the press release - adopted a decision authorising the opening of Brexit negotiations with the UK and formally nominated the Commission as EU negotiator. The Council also adopted the  negotiating directives for the first phase of the talks.

There were only two questions from reporters, one from The Times and the other from The Guardian, both addressed in English to Michel Barnier. Pointedly, he replied in French, telling the near-empty room that "no deal" was "not my option".

In an implied rebuke to David Davis, he suggested that those who were prepared to entertain a "no deal" option should explain what the consequences would be, then reminding the audience that it had been the UK's choice the leave the EU. His team was merely responding to the UK request to organise an orderly withdrawal.

Earlier, as indicated, the Council had adopted unanimously the decision authorising negotiations and the accompanying annex.

The latter has been formalised as the negotiating directives, running to 46 numbered paragraphs and 18 pages of text. Apparently unchanged from the original annex, these set out in detail the objectives of the withdrawal agreement and related matters, effectively drawing up the battle lines for the forthcoming talks.

Given less prominence than it merited when it was originally published as a result of the intervention by Mrs May accusing Brussels of trying to sabotage her election campaign, the republished document is also being glossed over. In a sign of things to come, the directives are being treated as "technical steps and therefore of little interest to the general readership.

This begins to mirror the experience of negotiators in the UK entry talks of 1970-1972, where journalists became "so thoroughly bored with the multiplicity of highly technical subjects" that they were "ready to be content with fairly superficial information".

Forty-five years later, the threshold of boredom is considerably lower, to the extent that only where personality politics briefly intrude is there any coverage at all. This even applies to the fabulous Financial Times, which considers itself the fount of all knowledge when it comes to things EU.

Thus, the actual importance of a document cannot be measured by the media coverage afforded to it, and never more so than with these negotiating directives. They will dominate the first few months of the talks and may well decide whether or not they are successful. They are of the highest importance imaginable.

Crucially, the directives open with the statement that "the main objective of the Agreement is to ensure an orderly withdrawal of the United Kingdom from the European Union and from the European Atomic Energy Community".

Tying this in with Barnier's statements, what seems to comes over is that the "colleagues" are making the best of a bad job. They have nothing to gain from Brexit – they didn't ask for it and they don't want it. Yet they are prepared to work with the UK towards the common objective of an "orderly withdrawal".

Here, we have to recognise that an important part of the art of negotiation is empathy – understanding the other side's point of view and appreciating what they need to take from the talks. And, whether we agree or not, the EU sees itself as the injured party and nurses something of a sense of grievance. On that basis, to set out as their primary objective the task of organising an orderly withdrawal could be cast as a considerable concession.

Obviously, the EU throughout these talks needs to protect its own position, but it is also suggesting that it is prepared to be flexible. The negotiating directives, the "colleagues" say, may be amended and supplemented as necessary throughout the negotiations, in particular to reflect the European Council guidelines as they evolve. On the face of it, that does not strike one as a dogmatic position, suggesting that there is scope for negotiation.  

Moving on to paragraph 8, we see the withdrawal date set "at the latest" on 30 March 2019 at 00:00 Brussels time, unless the European Council, in agreement with the United Kingdom, unanimously decides to extend this period. It then notes, as a matter of fact that: "The United Kingdom will become a third country from the withdrawal date".

This sets the parameters for the outcome and in that simple phrase, "a third country", the status of this country's position is clearly defined. Short of the UK completely changing its own position, and deciding to seek continued participation in the EEA, this is an unalterable status.

Elsewhere, we see many references to the UK simply joining with all the other non-EU countries in the world to become a third country, with the assertion that these other countries manage their own relations with the EU from that stance. The UK should, therefore, have no great difficulties.

What none of these critics acknowledge, though, is that the EU's other trading partners have had decades to establish and stabilise their arrangements with Brussels. The UK is tearing up the rule book and must start again from scratch. It starting point will be that it must carve out its own unique relationship, or trade barriers will proliferate and our economy will suffer.

However, the negotiating directives make it perfectly clear that, first, they must "settle the disentanglement of the United Kingdom from the Union and from all the rights and obligations the United Kingdom derives from commitments undertaken as a Member State".

This is the EU's main priority and appears to be not unreasonable. That, after all, it the purpose of the Brexit process and as much in the interests of the UK as the EU.

And that, of course, brings us to the crunch point. The present set of directives is intended only for the first phase of the negotiations – effectively the clear-up phase. In with this, the European Council has prioritised the issues with which we are now so familiar. Other matters not covered by this set of negotiating directives, such as services, will be part of subsequent sets of negotiating directives.

As to those priorities, details are given of the financial settlement. It will include issues resulting from the MFF (the RAL) as well as those related to the European Investment Bank (EIB), the European Development Fund (EDF) and the European Central Bank (ECB). This, says the directives, should ensure that both the Union and the United Kingdom respect the obligations resulting from the whole period of the United Kingdom membership in the Union.

Here, things start to tighten up. The settlement will not only cover obligations resulting from the MFFs, but "liabilities including pensions and contingent liabilities and any other obligations deriving from a basic act within the meaning of Article 54 of the Financial Regulation .

Now one starts to get the sense that the EU is in "kitchen sink" territory, seeking to extract every last penny (or cent) it can milk from the process. And such a sense is strengthened by the assertion "that the United Kingdom should fully cover the specific costs related to the withdrawal process such as the relocation of the agencies or other Union bodies".

The flexibility we have seen earlier has now dissipated, and the UK seems to be over a barrel. Paragraph 30 states – with no room for equivocation – that the Article 50 agreement should contain a calculation of all obligations that the UK has to honour in order to settle its financial obligations toward the Union budget, all institutions or bodies established by the Treaties, and other issues with a financial impact. 

The calculated obligations, we are told, may be subject to limited future technical adjustments but then a schedule of payments is to be made by the United Kingdom and the practical modalities for making these payments.

One does not have read between any lines here. The EU is making statement of principle – that there will be no agreement without "a calculation of all obligations that the UK has to honour" and a schedule of payments from the UK. These really are the battle lines. Mr Davis doesn't have to walk away. He just needs to refuse to accept paragraph 30, which effectively states: "no cash, no agreement".

Everything may rest on the figure – which we won't know for some time – although it doesn't look as if the EU is going to settle for petty cash. We might well have to steel ourselves to the idea that these talks are not going to progress very far.

But we did say it's the money stupid, and these negotiating directives confirm this to be the case. We either pays the money, or we takes our choice. And neither way looks particularly attractive. Then, no one ever said Brexit was going to be pretty.

Richard North 23/05/2017 link

Brexit: stop playing games

Monday 22 May 2017  

I am really getting a sick of Mr Davis and his silly posturing over the Brexit negotiations.

Without doubt, we are in the run-up to the most complex political process since the war, but Davis and his crew are treating it is if they are bargain-hunting in a souk. They seem to be under the impression that they can walk into the talks in Brussels, slap down an "offer" and, when the "colleagues" deliver their counter offers, they threaten to walk out if they don't get their undisclosed "red lines".

The expectation is that the other side will "cave in" and give them what they want, and then everyone goes home happy.

This sort of pastiche, though, is almost childlike in its simplicity, and could not be further from reality. Brexit is not a bartering process and there is no walk-away option. What we are dealing with here is indeed a process – but it is a very complicated process that requires the parties to engage fully in prolonged technical discussions. 

They will need to deal with an excruciating level of detail, the outcomes (plural) of which will form the basis of ongoing political and economic relationships between sophisticated nations.

The reason there cannot be a walk-away option is because, short of war, there is no way neighbouring countries can break off relations and isolate themselves from each other, refusing any form of technical or administrative cooperation.

As it stands, the cooperation between the UK and the other 27 EU Member States (and the Efta/EEA states) is bound up in the EU and EEA treaties, alongside multiple subordinate agreements and arrangements which depend for their functioning on the treaty instruments and associated structures.

Should the UK "walk away" from the Article 50 talks, we know that the outcome is that, on the second anniversary of the notification, the treaties cease to have an effect and we're out on our own. All the complex, sophisticated relationships built up over decades, some of them carried over from before we joined the EEC, will fall apart.

This is the point that our Muppets really don't get. To walk away is an absolute. We don't walk away from those bits of those negotiations we don't like, and keep going with the other bits. If we allow the treaties to end without a replacement deal, there is nothing – a vacuum, a void.

Thus, for the UK to "walk away" from the EU, if not tantamount to a declaration of war, is the closest thing to it. Only when nations go to war is there an almost complete cessation of formal relations – and even then it is never absolute. Even during the Second World War, the UK government had multiple lines of communication with Nazi Germany. In some ways, we would be worse off than we were in 1940.

As of today, the General Affairs Council (comprising the foreign ministers from the 27 Member States) agrees the negotiating guidelines framed by Michel Barnier, and formally appoints the Commission as the EU's negotiator. It also agrees to the ad hoc working group headed by Barnier.

This locks in the EU's mandate and gives the chief negotiator no flexibility of his own. He has no scope to change the terms and cannot respond to Davis's bluster, other than by reporting back to the General Affairs Council and asking for a revised mandate. If Davis walks out, then all Barnier will be able do in the short-term is bid him bon voyage.

That said, the media are making such a deal about the €100 billion "divorce bill" that it is gaining a life of its own. Necessarily, in stoking up the angst, the media has been relying on anonymous sources. Not throughout this whole imbroglio has there been any recourse to named source – not a single one. In all the hundreds of thousands of words put to this story, there is not one single, solitary name to put to it – not one.

By contrast, we have Barnier stating that no figure exists. There is no figure on the table – there is not even the methodology established by which a figure can be established. That is to be the subject of negotiations.

However, Davis seems to be content not only latch on to this fictional figure as his walk-out trigger, he rejects also the negotiation structure that forms an integral part of Barnier's mandate, while accusing the "Eurocrats" of having "axes to grind", and the Member States of "posturing, incoherence and failing to tell the truth".

Completely oblivious to the fatuity of his position, he tells us: "We don't need to just look like we can walk away, we need to be able to walk away. Under the circumstances, if that was necessary, we would be in a position to do it". Credible threat, this isn't – bluster it is.

Back in the terror of unnamed sources, though , we get a "senior Brussels negotiator" predicting that when Davis scrutinised the EU's demands he would walk out of his first meeting with the EU point man, Michel Barnier.

This anonymous official then adds: "I would like to see the UK delegation's faces when they sit down for the first meeting. I think they will walk away immediately. Which is dangerous, because once you walk away, you need a major concession to come back to the table and we are simply not able to provide any".

But this again sounds like more media bullshit. Even if the outcome sounds plausible, I cannot see Barnier allowing make-or-break issues to dominate the first set of talks, which will be exploratory in nature.

On can only hope that what we're getting from Davis is pre-election hyperbole, and that the "colleagues" see it for what it is, and make the necessary allowances. The problem is, though, that the more strident Davis gets, cultivating his "knuckleduster" image, the harder it is going to be for him to row back after the election.

There should therefore be a message for those lunatic fringe "Ultras" who are positively salivating at the prospect of crisis and an early breakdown of the talks. Whatever the EU suffers, the damage to the UK will be incomparably greater. The "walk away" option is an illusion that can bring us nothing but harm, and lacks even a scintilla of credibility.

We require a completely different approach to the sort of bull-at-a-gate scenario that's being talked about. It's about time our politicians and the media grew up, and started treating these negotiations seriously – not just a game to be played for the entertainment of idle hacks.

Richard North 22/05/2017 link

Brexit: business fears

Sunday 21 May 2017  

Pete, in his recent blogpost features the self-important Chris Grey, who happens to ask exactly the questions many of have been asking, and for some time.

For instance, he asks in respect of Brexit: where is the detailed discussion of different options and their consequences, to which he adds several more: What exactly does the government's White Paper Brexit plan, endorsed in the Tory manifesto, mean? Is "no deal better than a bad deal"? How would a "bad deal" be defined? What does a "no deal" scenario look like?

What Grey finds most extraordinary of all, though, is the lack of discussion on the costs of the Brexit plan. Every single other policy, from whatever party, is relentlessly scrutinised for affordability, he says, but not this one. "How will this or that spending pledge be paid for? ", he asks.

So obvious are such issues that similar thoughts have even occurred to Telegraph columnist Juliet Samuel. She notes – as others have done before her – that anyone hoping for a detailed picture of Brexit the Mrs May's manifesto will be disappointed. Our Prime Minister has stuck resolutely to her favoured strategy: reveal as little as possible and maintain maximum room for manoeuvre.

This leads Samuel to the equally obvious conclusion that it's impossible to know what the Brexit negotiations will bring. "The government", she writes, "is determined not to show its hand any sooner than it has to", adding: "If that leaves EU negotiators in the dark it also, unfortunately, leaves voters in the same place".

And much the same sentiments have occurred to Booker who, in this week's column also records that the Conservative manifesto told us nothing new about the Government's Brexit plans, other than repeating the promise of a "smooth, orderly" withdrawal.

Scarcely a day now goes by, he adds, without further signs of how difficult this may be to achieve, reinforced by Angela Merkel who told a G20 trade union conference last week that it would be up to the British to work for a settlement that would cause "the fewest possible distortions" to trade.

But it is not only the pundits who are reacting to the strange political vacuum represented by Mrs May's moribund manifesto. Last week also, as Booker records, there was a "startling report" from the international body representing all those firms whose products are dependent on components imported from other countries.

This was a survey of 2011 UK and European supply chain managers by the Chartered Institute of Procurement and Supply (CIPS). It found that, thanks to our decision to leave the Single Market, almost half the European firms reliant on British suppliers are so fearful of the new "customs procedures and regulatory hurdles" this will bring that they are already arranging to source those products on the continent.

Of British firms reliant on parts imported from Europe, 32 percent are likewise looking for alternative suppliers in the UK (of all cars made in Britain only 41 percent of their components are currently sourced in the UK). As the institute's president put it, "the separation of Britain from Europe is well under way".

This, in its own way, constitutes a vote of no confidence in the Prime Minister – one shared by many enterprises in the City of London, where international banks, such as JP Morgan, are quietly making preparations to move part of their operations to the continent.

But, says Booker, businesses have only been waking up to all these potential problems since January, when Theresa May announced the reversal of her earlier insistence that Britain would remain "within" the European market.

By choosing instead to leave the Single Market, Mrs May is opting to have the UK become what EU rules classify as "a third country". This status makes it inevitable that we are caught by all those new "customs procedures and regulatory hurdles" which so many businesses in Britain and Europe are now contemplating with such concern.

This is why we learnt last week from the Frankfurter Allgemeine Zeitung of a warning from the council of advisers to Germany's economics ministry that there is "little chance of a sufficiently deep agreement being concluded by the planned exit date of 2019".

The only way to "minimise disruption", they say, would be for Britain to join Norway in the European Free Trade Area, an option which Mrs May has already ruled out.

And gradually, the consequences of that decision are coming clearer. In Ireland, for instance, the sharpest cry of alarm yet went up last week from its racing industry, worth £1 billion a year, which depends heavily on its freedom to move 200 horses a week to race in Britain and back again.

Its spokeswoman recalled that last year Cheltenham had 19 Irish-trained winners, along with a third of those at Royal Ascot. She fears that new controls requiring "valuable horses to remain in horse boxes for prolonged periods at border checkpoints" would, on welfare grounds alone, make it difficult for this to continue. But Britain, she said, had so far shown no sign of needing to address this problem at all.

Much of all this concern has only arisen, of course, because of the huge cloud of uncertainty over what Britain will actually be seeking when the talks begin in Brussels next month.

It is one thing to offer bland assurances that we are hoping for a "smooth, orderly" withdrawal. But for many the strain of waiting for the details on which their livelihoods depend is becoming hard to bear. More to the point, the potential damage from a "botched Brexit" is so great for some firms that they must take precautions in order to protect their operations.

Not all of this is necessarily bad. As this report indicates, the Swedish furniture retailer Ikea is considering making more products in the UK in order to help offset risks from importing goods.

That other companies are looking at this option is confirmed by CIPS and, depending on the volume of trade substitution, this type of arrangement could have a significant effect on offsetting export losses.

The thing here is that we have no way of knowing what the balance will be. This is the gift Mrs May has bestowed on the nation. Where there could have been clarity and purpose, we have confusion and uncertainty. Small wonder, business fears are increasing, as is the case with any sensible person trying to find a way forward.

Richard North 21/05/2017 link

Brexit: playing for high stakes

Saturday 20 May 2017  

Following the front-page euphoria in the Mail on Mrs May's election manifesto, it was rather amusing to see a Twitter comment to the effect that, if May announced slaughter of the firstborn right, the paper would describe it as a boon for overstretched parents.

Certainly, we've seen nothing unduly critical about the Brexit aspects from the media generally, much less the Mail in the wake of the manifesto publication. It took Chris Johns of the Irish Times, therefore, to note that the manifesto was "strong on economic illiteracy".

By and large, it is still the Irish who are making the running on Brexit news, with the Irish Times also in the frame, recording, amongst other things, the exploits of Taoiseach Enda Kenny.

He was in London yesterday addressing people at the Ireland Funds of Great Britain's City lunch, telling them that his Government would seek to protect the interests of Northern Ireland, warning that a hard Border was "unacceptable".

"My Government", he said, "has sought to protect the interests of the island as a whole in its extensive preparatory work on Brexit and will continue to advocate very strongly for Northern Ireland’s interests to be protected". But, he added, "it is important to recognise that the UK leaving the EU changes the context and presents very real challenges to us on the island of Ireland".

Meanwhile, the "fantasy land" we noted in our earlier piece is still very much in evidence. Under the title: "New Border: 'Cars being stopped and searched isn't going to happen'", this piece in the Irish times has a senior Irish revenue official saying border controls could be automated, allowing checks to be made "without customs points".

This is from Tony Buckley, the assistant secretary in charge of customs, who says the new plan will involve a type of self-assessment and audit regime, possibly with, for convenience reasons, service offices close to the border. But the regime can be automated and simplified and does not need customs points with Northern Ireland.

All this illustrates an absolute determination to play down the potential impact of Brexit, but also with an element of a straw man argument. For instance, no one is seriously expecting the Common Travel Area (CTA) to be junked, so the prospect of private cars being stopped and searched at the border was never really on the cards.

Buckley was asked if he envisaged a system such as the one that exists between Norway and Sweden, to which he responded that that border involved delays of approximately 15-20 minutes for trucks, adding: "We're looking at that in seconds".

Because a border would be being "built from nothing", Buckley said, there was an opportunity to use very sophisticated tracking and surveillance systems that satisfied the EU, managed the risk, and achieved the Government’s objective of a "very soft borer" (sic).

The new regime, he admitted, would probably give rise to temporary criminal and economic issues that would have to be dealt with. However, he said, overall Ireland has two big advantages in terms of dealing with the new situation. The Republic's trade with Northern Ireland is only two percent of all exports, and Ireland is an island at one end of the EU without another land border. If something comes into Ireland, it is in Ireland and that's it, he said.

Why this strikes as fantasy is that the border with Norway and Sweden is between a fully-fledged EU Member State and an Efta/EEA state, with an established agreement on customs cooperation. Nothing like this exists at any land border between an EU state and a third country. To suggest that the EU can (or will) instantly approve a system far in advance of anything that currently exists in the EEA is truly dreaming.

Not least, as Angela Merkel has recently reminded her own people, the European Union needs to guard against the U.K. gaining an economic edge by easing regulation when it leaves the bloc.

That apart, the real issue at the border is not private cars but commercial traffic: all such vehicles would have to be monitored. But the current Border has approximately 300 crossing points, with one million heavy and 1.3 million light-goods vehicles crossing each way each year.

An automated regulatory system would require automatic number recognition, with gantries at each crossing point. It would we totally unrealistic to expect all of 300 crossings to be kitted out. Some restrictions on the number of crossings would be inevitable.

Then, there will be a significant number of physical inspections, with the volume being constantly under-rated. Even if deferred inspection was allowed (and there is no reason why it should not be), the number of inspection points would be limited. A considerable amount of traffic would have to be diverted.

The crucial issue, though, is not the technology but the nature of the agreement between the EU and the UK. And with Theresa May still talking about a "no deal" scenario, that leaves the possibility of a hard border, with no concessions to speed up the flow of traffic.

As an aside, the implications of a hard border between North and South are so horrendous that one could hardly envisage any sane government allowing it. But if that is the case, it makes a mockery of Mrs May's "no deal" threat.

Despite this, we have Buckley and friends saying that parties moving goods across the border would have to lodge documents with the two customs authorities, which they would put into a computerised risk-assessment system, thereby facilitating rapid processing of clearance documents.

But the point we've made before is that any sharing of computer data will require the UK to conform with EU data protection rules – and then for electronic systems to be compatible. Neither is assured. Nor can it be assumed that the existing authorised economic operator system will necessarily carry over. This will depend on the outcome of negotiations and full conformity with data protection rules.

There is, however, no end to the Buckley fantasy. The practical difficulties of searching 40ft refrigerated trucks along the Border, he says, was not something anyone wanted to contemplate. "So let’s not do it", he declares – as if that was a solution.

Whether a facility such as a Border Control Post is on the border, or a few miles from it is neither here nor there. Being required to divert traffic through the BCP is the problem.

The bigger problem, though, seems to be the institutional ignorance and unwarranted optimism we're getting from officials. No one is going to suggest that the technical problems are not insoluble. Given the political will between the parties, a satisfactory arrangement will be concluded. But simply to pretend that these problems do not exist is the height of foolishness.

Nevertheless, there is one area where Buckley has it right. If Ireland fails to operate an adequate EU external border, he says, it could compromise Ireland's position in the EU market and maybe with the whole world, he says. "So we are playing for very high stakes".

Never were truer words said.

Richard North 20/05/2017 link

Brexit: forward together

Friday 19 May 2017  

With no sense of irony, Theresa May's Conservatives have chosen for their slogan to grace the front page of the party's 2017 manifesto, the phrase "forward together".

This self-same phrase, however, has historic cadences. It had been used in his "blood, toil, tears and sweat" speech by Winston Churchill on 13 May 1940 – in office for only three days - just after the German invasion of France and the Low Countries.

Latterly, it graced the famous propaganda poster (pictured above) showing Churchill against a bellicose background of fighter aircraft and tanks thundering across a plain, firing their guns at an unseen enemy.

At the time the poster was produced, a cynical pundit could have had a field day. The aircraft shown were early model Mk1 Hurricanes, still fitted with fixed, two-bladed wooden propellers. These delivered such poor performance that the fighters proved easy meat against Luftwaffe Messerschmitt Bf 109s.

As for the tanks pictured, these are Vickers Medium Mk IIs. Obsolete at the outbreak of war, they never saw service against the Germans as they were withdrawn from combat units by November 1939.

The "take home" message from the poster, therefore, could have been that, under a Conservative prime minister, you will be fed vacuous slogans, fitted up with obsolete kit and sent out to be slaughtered by a better-equipped enemy. How little, you might think, things have changed.

Certainly, in the vacuous slogans department, the current manifesto excels. It tells us that "we will enter the negotiations in a spirit of sincere cooperation" and we are "committed to getting the best deal for Britain". Then, the manifesto tells us: "We will make sure we have certainty and clarity over our future, control of our own laws, and a more unified, strengthened United Kingdom".

But, as far as "certainty and clarity" goes, all we get is that Theresa May's Conservatives "will deliver the best possible deal for Britain as we leave the European Union delivered by a smooth, orderly Brexit".

The only trouble is that her "smooth, orderly Brexit" displays all the characteristics of a Vickers Medium Tank. Had it been used in combat, its 8mm armour would have made it a death trap, while the best that can be said of its reliability was that it gave its crews plenty of experience in problem solving.

In seeking to convince us that Mrs May should lead us to the sunlit uplands, the prime minister is relying on her "twelve principles" laid out in her Lancaster House Speech. And in particular, she is taking us down the road towards a "new deep and special partnership with the European Union".

Such is the unreality of this document, though, that our prime minister believes it is necessary to agree the terms of this future partnership alongside our withdrawal. This is despite her having been told many times, and without equivocation by the "colleagues" that this is not possible. Barnier himself has stressed that there can be no concessions on a "phased approach".

But, not only does Mrs May disregard this advice, she also believes that it is possible to reach agreement on this "new deep and special partnership" within the two years allowed by Article 50. This much we know because this is stated in the manifesto.

The only problem is, as even the dreadful Laura Kuenssberg managed to notice, if you are looking for details in the manifesto on how Mrs May is going to perform this miracle, you are going to be disappointed. What is more, even on this day of days when Mrs May has paraded her beliefs in front of the world, Mr Barnier has been reciprocating with candour of his own.

The chief negotiator, it appears, has told commission president, Jean-Claude Juncker, and other senior officials that the so-called "divorce bill" element could collapse the talks. The essence of this is that, if the EU insists on sticking to a phased approach, the talks cannot progress beyond this first hurdle.

Barnier senses that hopes of coming to an agreement on the first phase by the end of the year are "over-optimistic", but if there is no compromise on the phasing, then the talks simply have nowhere to go.

If we now turn to Mrs May's manifesto, we find that she concedes that the negotiations "will undoubtedly be tough", and continues to believe that "no deal is better than a bad deal for the UK". The stage is set for precisely the collapse that Barnier fears.

Behind all this, though, is that beguilingly simple and incontrovertible premise – one that Mrs May consistently evades. This inescapable truth is that impossible means impossible. Negotiating a "new deep and special partnership" along the lines that Mrs May wants (or any other lines) is simply not possible.

From there, we have to face facts. Not even the dimmest of creatures could fail to understand that, with negotiations of this complexity, a full agreement within two years cannot happen. Gradually, therefore, discussion has been shifting to the prospect of a transitional deal and a means of buying time for a full settlement.

But what is absent from this manifesto – completely absent – is any mention of transition. It simply isn't there. Mrs May has set out an all-or-nothing scenario of a deal in two years or she walks away.

What, in effect, this manifesto has done, therefore, is pave the way for what Mr Barnier fears (as do so many of us) - a disorderly exit. Mrs May has made it perfectly clear that that this is on the cards. It is written into the manifesto, by act and omission. This election gives her that mandate, if she chooses to exercise it.

Hidden in plain sight, that is the true message of this manifesto. Mrs May has awarded herself a blame-free license to fail. Having set herself the impossible task of securing her "deep and special partnership", she has engineered the implied permission of the electorate to walk when she fails to get it.

To that extent, the "colleagues" are being outflanked. Doubtless, they believe they are negotiating with a rational entity, a government that actually wants a deal. But the confirmation that they are not is too obvious to be ignored. On the one hands, they could not have made it clearer that they intend to follow their "phased approach" to the negotiations. On the other, Mrs May now makes it just as clear that she rejects this approach.

In between, there is no room for compromise. The stage has been set where both parties have stated positions so distinct and so separate that, for there to be progress, one or other of the parties has to cave in and agree to an unconditional surrender.

Once the negotiating guidelines had been approved by the European Council, this locked in the "colleagues" to their position. The EU negotiators have no mandate to give Mrs May what she is demanding. Now, with this manifesto, Mrs May has locked the British government into an equally rigid position – assuming the Conservatives win the election, which is something of a foregone conclusion.

Nevertheless, one still hopes that this is pre-negotiation posturing – that concessions will be made and that the parties will settle down to a mutually acceptable position. But, if that really is the case, then Mrs May has made it very difficult for her new government to give any ground in the post-election period, without seriously damaging her own credibility.

Thus, if we take this manifesto at face value, it is as much a suicide note as facing the German hordes in a Vickers Medium Tank or a Hurricane with a wooden propeller. "Forward together" Mrs May wants us to go, but the direction she wants seems to be straight over the cliff.

Richard North 19/05/2017 link

Brexit bullshit

Thursday 18 May 2017  

In a classic example of the power of prestige, the BBC is quoting the head of Ireland's customs authority, who is stating that [only] up to eight percent of freight crossing the border will have to be subject to checks after Brexit.

This is Revenue Commissioner Liam Irwin who has been giving evidence to the Irish parliament's finance committee, whence he said that the authorities would try to minimise customs controls but they are required under EU law. On that basis, he argues that this would mean checks on 6-8 percent of freight, mainly on documents but with a "small number" of physical inspections.

Furthermore, Irwin says, checks would not happen at the border but at "trade facilitation posts" which would be "10 or 15 kilometres back from the border". He adds that there would also be some form of random, or risk-based, customs checks carried out by mobile units.

In the Commissioner's view, customs declarations would be made electronically and most transactions would be immediately approved. There would not be a return to a pre-1992 situation when there were customs posts at the border.

Bizarrely, the man then goes on to admit that Irish customs authorities are not currently in "any form of discussion" with the UK, which rather negates his earlier comments. At best, these could only be considered aspirational, dependent on the nature of the agreements on customs cooperation between the UK and the EU.

Not least, when it comes to customs declarations, the ability process these depend intrinsically on the degree of cross-border exchange of data which, in turn, will depend on UK conformity with EU data protection rules. This is currently open to question.

Then, Mr Irwin seems to be neglecting entirely the problem of conformity assessment, to which extent he must be presuming that the UK and the EU will be able to conclude a mutual recognition agreement (MRA). Without such an agreement, one would expect physical inspections (and specialist testing) of goods coming into Ireland from the North vastly to exceed a mere eight percent.

And this, of course, does not take into account the cross-border movement of livestock, agricultural goods and foodstuffs, which must be subject to veterinary or phytosanitary checks before they can even be submitted for customs clearance. For live animals, inspection rates can be 100 percent, while the rate might vary from 10-50 percent for the physical inspection of foodstuffs.

There is a way round this – what amounts to the "Swiss option". But this would require the UK to comply fully with EU animal health and food law, and all other relevant law, as well as carrying out full EU-style checks on imports from third countries.

For these sectors, the net effect would be the same as if the UK had never left the EU, with the proviso that the "fax law" jibe would come true. The UK would have to comply with EU law, with no direct input in its making – notwithstanding that many of the standards underwriting the law originate at global level.

What precisely businesses will have to plan for, therefore, depends on the level of agreement between the UK and the EU – nothing of which can be taken for granted. When it came to Irwin's presentation, it was perhaps just as well that Sinn Féin's Pearse Doherty questioned whether talk of an invisible border was "fantasy land stuff" as nowhere in Europe had such arrangements.

Despite that, Michel Barnier was in the European Parliament yesterday for a debate on Brexit, when he urged businesses to "move fast" to prepare for Brexit in under two years. They should not count, he says, on long transition periods to cushion the impact of Britain leaving the European Union.

"We might be working on transitional measures post-Brexit, on a phasing-out period and a phasing-in towards the new relationship, but the real transition period is now, before exit", he said. "I would like to recommend all economic players, all economic operators, to make use of this period, so that the day of this exit, probably March 2019, is as orderly as possible".

However, notwithstanding my earlier piece, this report would have it that very few have made firm decisions, and cannot until they see what kind of new trading relationship can be agreed. Putting clothes on that assertion, we see a report which tells us that 98 percent of Irish companies have no plan in place to deal with the consequences of Brexit.

This sort of finding is very much in accord with my experience working for trade bodies. Invariably, when new regulations were introduced, business owners would leave it until the last possible minute before taking steps to comply.

There is every reason to believe that we will see the something of the same dynamic with Brexit. Most will delay taking action but those who do act – such as BNP Paribas, the latest bank to announce that it is moving staff out of London - will assume the worst.

Such companies cannot be faulted. There is a good business case for assuming the worst, especially when confronted with the sort of institutional ignorance and unwarranted optimism exhibited by the likes of Irwin. His claims seem to be much of the same order as assurances on Singapore's safety after the Japanese invasion of the Malay Peninsula.

The unwarranted optimism looks even thinner when one sees this survey conducted by Deloitte, which suggests that very nearly half of German enterprises support the idea of completely excluding the UK from the EU Single Market if it does not adhere to the four freedoms.

Nor is this by any means the first time we have seen such sentiment, which reinforces the premise that Germany is not going to roll over and demand an easy ride for the UK just so that we will continue buying BMWs.

If this needed any more emphasis, we need go no further than Angela Merkel who was addressing a G20 trade union event in Berlin yesterday. She took the opportunity to remind us that everything from just-in-time auto supply chains to the free movement of workers and even their pet cats and dogs will be thrown into question by Brexit.

While Britain would be free to change rules to its own advantage after leaving, she said, the EU would have to take steps to preserve a level playing field. "If the British government ends the free movement of people, that will have its price", she said.

"That's not malice", she added. "(One) cannot expect to have all the good sides and then say there will be an upper limit of 100,000 or 200,000 EU citizens, no more, or just researchers, but please nobody else. This will not work".

The fact that so many areas of policy have for decades operated under EU rules meant that the disruption following Brexit could extend into wholly unexpected parts, she warned. "Currently, the 250,000 pets, cats and dogs that travel from Britain to the continent or the other way around each year are managed within an EU framework," she said. "Now they'll need veterinary certificates - things we don't even remember".

So, in Berlin if not Dublin - the penny is finally dropping: border controls mean more than just customs checks. Belatedly, the Financial Times is waking up to the impact Brexit will have on food safety, albeit addressing only a fraction of the issues we rehearsed in January. Give the paper another year and it might start to catch up, whence the rest of the legacy media can copy its errors.

It was, after all, the Financial Times which invented the €100 billion "divorce bill", only now to have Barnier confront Nigel Farage in the European Parliament after the former Ukip leader claimed that Brussels was trying to "bully" Britain by seeking this amount.

Dismissing the allegation that it was a "ludicrous ransom", Barnier pointed the simple truth that has evaded Farage and most of the legacy media: "There is no figure for a financial settlement between Britain and the European Union yet", he declared.

Said Barnier, such a figure "can only be established once both sides agree on a common methodology of calculations, taking into account the date of exit". The amount will depend on the methodology we adopt and the actual date of the UK's exit. It is not (me) who will set a figure", he added.

Returning to the vexed question of trade, it isn't only the Germans who are going to be playing hardball – not that this was ever the case. The Irish Times is gloomily recording that a prominent French farm leader has lobbed a proverbial grenade into the upcoming Brexit negotiations by calling for the re-establishment of a hard Border between Northern Ireland and the Republic.

This is Christophe Hillairet, a council member of Copa, Europe's largest farm organisation. He expressed fears that the UK would sign agreements to import food from Commonwealth countries after Brexit.

Raising the prospect of the internal border becoming a back door into the single Market, Hillairet warned that the only way to stop these imports finding their way into the Republic and the wider EU was for strict border controls to be reintroduced.

"Ireland is a big problem but for the French farmer we will need to have a hard Border between the North and the Republic as otherwise we will have a lot of products that will cross from North to South. That would be very dangerous for our producers", he told the Agra Europe website.

That once again strikes at Irwin's "fantasy land stuff", not made any better by a timid and dismally unimaginative report from the Institute of Government. While it recognises that free trade areas are "just one tool for boosting trade" and "other options may be much more effective in achieving trade policy objectives", it fails to offer any serious detail on those "other options".

Cutting through the bullshit bonanza, though, is the Frankfurter Allgemeine Zeitung which has the Scientific Advisory Council of the Federal Ministry of Economic Affairs writing to economy minister Brigitte Zypries warning that the Brexit process risks "unnecessary damage to economic relations".

The Council concedes that the mutual economic contacts are so important that it is necessary to conclude a "deep and comprehensive free trade agreement" but considers that the conclusion of such a treaty "will hardly be possible" by the planned exit date in 2019.

The Council's economists, therefore, advise Zypries to push for an intermediate step towards a free trade agreement, seeking to ensure that London joins Efta in parallel with Brexit. This, they say, would minimise disruption.

Interestingly, this follows an unrelated intervention by Liechtenstein's foreign minister Aurelia Frick, who is telling us that Iceland, Liechtenstein, and Norway could be part of the EU's deal with the UK after it leaves the EU.

"Solutions to soften the landing should be available to us", she said ahead of a meeting with Michel Barnier, who then promised that he would keep Efta/EEA States not only informed but consulted about the Brexit negotiations.

The UK has not yet triggered a clause in the EEA treaty, notifying the EU that it intends to leave the EEA. If it neglects this formal obligation, the clause will likely be triggered by the EU, said Dag Werno Hotler, deputy secretary general of Efta (notwithstanding that there is no expulsion clause).

Frick and her colleague, Norway's EU minister Frank Bakke Jensen, said they were "open-minded" about the UK re-joining Efta. "But the initiative would have to come from the UK. For the moment, the question is not on the table", the ministers said.

Once again, therefore, there is rustling in the undergrowth. Cut through the media bullshit and the colossal ignorance afflicting the establishment and there is sense to be had.

Richard North 18/05/2017 link

Brexit: the ECJ on Singapore

Wednesday 17 May 2017  

We get a bizarre "take" from at least two newspapers on the ECJ's Singapore "opinion" – the Guardian and the Telegraph - an odd couple if ever there was one.

Both argue that, although it has found that the EU-Singapore trade deal is a mixed agreement and must therefore be ratified by all Member States, the Court has made it easier for the UK to conclude a trade agreement with the EU.

The logic is that, in delivering its opinion, the Court has reaffirmed the point that the Commission has exclusive competence when it comes to agreeing trade deals. This means that, if the UK concludes a post-Brexit trade deal with the EU, it will not require ratification by individual Member States.

But this was never in dispute. The only matter before the Court was whether it was valid for Commission to conclude the Singapore agreement. In the event, it was the opinion of the Court that this was a mixed agreement, so it would require ratification. The full opinion is here.

It was the Commission itself which, in 2013, had asked the Court for its opinion, and it is said to have hoped to avoid the potentially gruelling process of getting ratification from all Member States. This hope was effectively dashed in December 2016 when Advocate General Sharpston delivered her opinion, which has been largely confirmed by the final ruling.

Nevertheless, some take heart from the fact that the treaty was found to be "mixed" only on a very limited number of grounds – two to be precise – the field of non-direct foreign investment ("portfolio" investments made without any intention to influence the management and control of an undertaking) and the regime governing dispute settlement between investors and States.

But the other "take home" point is that even when only a very small part of a treaty is not exclusive competence, the whole treaty has to be ratified by Member States. This is, effectively, an all-or-nothing situation.

Another view comes from Euractiv, which suggests that, in terms of its effect on the Brexit negotiations, the opinion has not worsened the UK's chances of securing a trade deal once it has left the EU.

The European Council, it says, can provisionally apply FTAs with shared competences, which it has done with CETA. There is, theoretically, no legal limit on how long this interim period can go on for. The WTO's predecessor, the GATT, was applied this way for decades.

However, the site then goes on to point out that any eventual EU-UK deal could also be split into exclusive and shared competences, keeping the elements separate. This could speed up the process for the trade elements, leaving only the shared competences to be ratified by Member States.

That, though, is hardly a practical solution as it is very hard to see how there could be a workable trade agreement without a dispute settlement mechanism. And it is precisely that (one of two) that took the Singapore deal outside the competence of the Commission. As the ECJ affirms, any regime, which removes disputes from the jurisdiction of the courts of the Member States, cannot be established without Member State consent.

One way or another, therefore, the ECJ's opinion changes very little. There are work-arounds but, at some time, a complete deal is going to require Member State ratification for all or part of the provisions before the whole agreement can take effect.

In short, therefore, there is nothing particular to get excited about – especially as there is not going to be an immediate trade deal. Any question of ratification is way down the line. In the interim, we will be relying on an transitional agreement to keep trade going.

About this most of the pundits are entirely silent. Yet, in all probability, a transitional agreement will require modifications to the EU treaties, taking the form of a secession treaty. This will most definitely need the unanimous approval of all 27 Member States and the UK, and then ratification by all 28 countries. In the UK, there will have to be Parliamentary approval.

Since there has been next to no discussion about a secession treaty – it not yet having been "discovered" by bubble denizens – there is also no talk of the possibility of one or more Member States holding a referendum on it. But it would be hugely ironic if our own Government, having refused a referendum had to wait, say, for the results of a French poll before it could implement Brexit.

That aside, this episode is entirely typical of the way the Brexit debate is being skewed. We have the legacy media obsessing over this ECJ opinion, when the actual impact on Brexit will be minimal. Yet, on the other hand, it fails completely to appreciate that there are bigger, more immediate issues to deal with.

Basically, no one in government has yet publicly disclosed how a transitional agreement will apply, how long it will take to negotiate or even what precise form it will take. It is only a matter of surmise that a secession treaty will be needed. There may be other ways of achieving a stop-gap solution, not least a variation on the EEA Agreement.

But, for as long as the UK is looking for a bespoke trade deal and it is accepted that this cannot be concluded until Brexit has taken effect, some form of transitional agreement will have to be in place to coincide with our leaving the EU. It will be the only thing standing between us and chaos.

Richard North 17/05/2017 link

Brexit: uncertainty the enemy

Tuesday 16 May 2017  

In an intelligent piece which goes to prove that not all legacy media articles are written by juvenile imbeciles, Marcus Leroux in The Times writes a disturbing account of how "almost half" of European businesses with British suppliers are looking for replacements elsewhere in the EU.

This stands to reason when one looks at the potential problems associated with Brexit, and the quite obvious lack of grasp displayed by politicians as to the consequences of dropping out of the Single Market.

The original information comes from the Chartered Institute of Procurement and Supply (CIPS) which has surveyed more than 2,000 supply chain managers, finding that the "separation from Europe is already well under way".

Understandably, since the UK Government is not giving credible assurances that post-Brexit supply chains will be maintained, 46 percent of managers are expecting a greater proportion of the supply chain to be sourced from outside Britain. Some 28 percent say that they intend to source all their supplies from the mainland.

Putting this in focus, Gerry Walsh, the group CEO of CIPS, says: "Diplomats either side of the table have barely decided on their negotiating principles and already supply chain managers are deep into their preparations for Brexit". He adds: "Both European and British businesses will be ready to reroute their supply chains in 2019 if trade negotiations fail, and are not wasting time to see what happens".

Quite simply, managers cannot afford to wait to see what the Article 50 settlement brings before taking action. It would irresponsible of them to do so. Nor can they rely on bland, non-specific assurances from the politicians about getting the "best deal". They must take whatever action is necessary to protect their operations from the potential impact of tariffs, customs procedures and regulatory hurdles.

And this is what we are seeing - insurance against a "hard Brexit", with CIPS saying that European businesses are in the process of "reshoring" their supply chains within the Single Market. On this side of the channel, 32 percent of businesses which currently rely on suppliers in the EU-27 are looking for replacements within the UK.

Effectively, this demonstrates a lack of confidence in the Government's Brexit strategy, which is hardly surprising. Beyond generalities, Mrs May and her ministerial team have nothing to offer, and are not been able to give any bankable assurances.

Even then, businesses do not seem fully to have grasped the nature of the challenges facing them. Rather than focusing on the extensive non-tariff barriers that will hinder their operations, both mainland European and British supply chain managers believe that the main priority for negotiations should be keeping tariffs and quotas to a minimum.

However, even here, they are expecting negotiators to face serious hurdles. Thirty-nine percent of supply managers think the UK has a weak negotiating position, 36 percent believe there is a lack of time and 33 percent are concerned that there is a dearth of supply chain expertise and knowledge in the UK upon which to draw.

Pessimism is also apparent when it comes to managing the financial costs of Brexit. More than a third (36 percent) of managers plan to respond by pushing supplier costs lower, but 11 percent felt that parts of their operations would no longer be viable. Worldwide, 67 percent of respondents felt that the uncertainty surrounding international trade agreements were making long-term plans difficult to confirm.

Above all else, it seems that uncertainty is the killer. In the absence of clear direction from the politicians, businesses cannot afford to sit back and hope for a favourable outcome. Contingency planning is essential. What appears to be the case from this survey, though, is managers are working on a worst case scenario basis, and are making arrangements accordingly.

This means that businesses are disregarding promises of securing a "good deal" at the end of the negotiations. As with the banks such as J P Morgan, which are already making alternative provisions, businesses have to make their decisions before final agreements are reached, and before the nature of any deal is known.

Without clarity and certainty of direction, they have to assume the worst. Perversely, therefore, a sub-optimal but predictable outcome would have been better than the prospect of a more favourable deal coming at the end of a protracted period of negotiation, the nature of which is unknown and where there are no guarantees of delivery.

This, then, points to a major flaw in the Government's Brexit response. Mrs May's promise of (unspecified) jam tomorrow, in the form of a "bold and ambitious" free trade agreement, might in the long run produce desirable results. But since no one can be sure, she would have been better advised to go for a modest but more predictable outcome.

As it stands, the penalties to which businesses are exposed could be so severe that they could threaten their survival. Businesses must, therefore, take pre-emptive measures to safeguard themselves, even if those measures prove unnecessary in the longer term.

Without putting too fine a point on it, had Mrs May kept to her original promise of continued participation in the Single Market, and made determined efforts to pursue the Efta/EEA option, uncertainty would be less of an issue.

Rather than helping, though, rhetoric from the likes of David Davis, giving every appearance of relishing the prospect of battles to come, is adding to the sense that we are venturing into unknown territory. That will remain until we are able to see the final outcome of the negotiations.

Between then and now, the indications are that other businesses will follow the example of supply chain managers and the trail blazed by the banks. Airline companies are already setting up satellite operating companies abroad, haulage companies may well have to do the same in order to continue enjoying cabotage privileges, and chemical and pharmaceutical manufacturers will almost certainly have to relocate some of their operations.

What is currently a trickle could, over the next year or so swell to become a torrent, as firms decide that relying on political assurances is simply too great a risk. From being an offshore hub serving the whole of mainland Europe, the UK could quickly revert to the status of an isolated island, serviced from the mainland.

Where the greatest concern should lie is that many of the business decisions taken over the next year will have long-term effects and could be hard to reverse. To avoid long-term damage, the Government must make business confidence its absolute priority, to which effect it needs to be far more open about its intentions.

If Government itself cannot come clean, it can have no cause for complaint if business makes its own decisions in its own best interests.

Richard North 16/05/2017 link

Brexit: voting a vacuum

Monday 15 May 2017  

A newspaper which parades on its front page the semi-literate ramblings of a pop star on the subject of Brexit really deserves to fail.

But the speed with which the coprophagic tendencies of the rest of the media kicked in tells us a great deal about more about the Fourth Estate than it does the subject. Largely unable to offer any intelligent comment, it reverts to its normal diet of trivia.

The closest to we get to sense – and then only at some distance – is a comment in the Mail Online, which remarked that: "In an intervention absolutely no one was waiting for, renowned politico and One Direction band member Harry Styles revealed that he would be voting for 'whoever is against Brexit' in the General Election". 

That, believe it or not, is what passes for news, for which the great legacy media demands our admiration – and payment.  

Speaking to a (self-described) former journalist recently, we shared views on the dumbing down of the journalist trade. This was a journalist who found an editor admitting to employing two writers "because they are the only people at the paper who can remember anything that happened before 2005".

These are the people on whom we are supposed to rely for our information, unless of course it is politicians who are scarcely, if at all, better informed – and about as mature.

An example of that "maturity" comes from David Davis, doing the usual Sunday TV studio rounds to keep idle hacks entertained.

Speaking to the insufferable Robert Peston, he declared that Britain and the EU are on a "collision course" over the timetable for Brexit negotiations and details over a deal on citizens' rights. The Government, he says, does not accept Brussels' insistence that the "divorce bill" and the Irish border issue should be included in the first stage of talks.

Davis also disputes the EU's wish for the ECJ to have a role in adjudicating over the rights of EU citizens in the UK after Brexit.

According to Davis, there would most likely be a "row" over the summer when it came to sequencing talks, but he nevertheless rejected the idea Britain would have to wait to start negotiations on a trade deal. "We want to see everything packaged up together, and that's what we're going to do", Davis said.

This positions the Brexit firmly in familiar territory for the media, which likes nothing better than the biff-bam narrative – saving it having to do any serious analysis. And meanwhile, the election drones on, the ultimate biff-bam contest which, in this case, will yield nothing but more of the same.

It is ironic, therefore, that one of the "go to" authorities on the current cyber -attack is Europol, with Rob Wainwright - its British-born director – telling us that his agency has recorded more than 200,000 victims in 150 countries. Russia and the UK are amongst the worst-hit countries.

This at one underlines the need for international cooperation but, at the same time, demonstrates that such cooperation needs to extend way beyond the borders of Europe. It is interesting, therefore, to see Europol working with the FBI in the United States, seeking to track down those exploiting a vulnerability in US-originated Microsoft Windows software, first identified by the US National Security Agency.

Whether or not this moves the Brexit debate along is too early to tell, although given the limited abilities of the politico-media nexus, it is unlikely that we will see any intelligent suggestions from that quarter.

Wolfgang Münchau in the Financial Times is doing his best to shift the debate, arguing for a new "plan B" to be produced by UK negotiators. This, he says, should focus on demonstrating to the "colleagues" that the UK does intend to leave, disabusing them of the illusions that the UK can be prevailed upon to change its mind.

If EU negotiators believe that Brexit may not happen, he argues, why offer the UK a good deal? They may even think that a lousy deal could become a self-fulfilling prophesy. They might think that the harder they negotiate, the bigger they can make the Brexit bill and the greater the chances of the UK not leaving.

His recommendation to the UK government would be to liberate their EU counterparts from those lingering doubts, the so-called "plan B" which the UK could adopt in the event of there being a no deal.

The thesis here is that a sudden Brexit could unbalance the EU, which would suddenly realise that its manufacturing companies would be among the biggest losers. The highly complex supply chains into which they have invested would become worthless overnight.

European industry, says Münchau, can cope with a hard Brexit, but not a sudden one. The EU will also find that a large percentage of financial contracts will all of a sudden no longer be subject to EU law - hardly something that is conducive to financial stability in the eurozone. Thus, he ventures, it is only once the EU begins to calculate the costs of a sudden Brexit that these negotiations will start in earnest.

Much of this is the same old, same old game playing, but where Münchau's idea has some small merit is where he asserts that any plan "needs to be fleshed out - with costings, timetables, legal and technical analyses, enough detail to roll out the programme if and when it was needed".

Here we collide with an inescapable truth. Unless, or until the UK government comes up with its own clear ideas for Brexit, we are always going to be at the mercy of the EU and the whims of 27 Member States who have no real ideas of what a post-Brexit environment should look like.

This is something we can take home from Barnier's recent visit to Ireland, where it became evident that he was not exactly brimming with ideas about how to make Brexit work.

Nor is it reasonable to expect the "colleagues" to be the innovators in an enterprise that has been brought about by the UK and is being played out primarily to suit the needs of the UK. If we don't have any clear ideas of what we want, we can hardly complain if the EU's attempts to fill the vacuum don't meet with our approval.

And this is where the election campaign is proving to be a colossal disappointment. Although it is Styled as the "Brexit election", local Tory leaflets refer only to "making a success of Brexit" while highlighting the dangers of allowing Corbyn to carry out the negotiations.

This, squeezed between the media's facile obsession with "slebs" and the vacuity of our politicians, we are no closer to knowing what our masters have in store for us than we ever did.

We are, in effect, being asked to vote for a vacuum, a "strong and stable leadership" whose main claim to fame is that it isn't Jeremy Corbin. And while that might be good enough to satisfy a majority of the UK electorate, it is almost certain that that alone will not impress the "colleagues".

What is on offer is not good enough and, as it stands, we're being taken for fools.

Richard North 15/05/2017 link

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