Brexit: under the radar

13/07/2019  


In 1998, the EU and the US signed a broad Mutual Recognition Agreement, which included a Pharmaceutical Annex providing for anticipated and limited reliance on each other's Good Manufacturing Practices (GMP) inspections.

The year 2017 marked the entry into operation of the agreement, which entailed the EU and the US recognising inspections of manufacturing sites for human medicines conducted in their respective territories.

This agreement strengthened the reliance of the two blocs on each other's inspection expertise and resources. Initially it applied between the US Food and Drug Administration (FDA) and those EU Member States that the FDA had assessed.

This had been gradually extended to all EU countries and now the regulatory authorities in all 28 EU Member States have been recognised by the FDA. Meanwhile, the EU made the same determination about the FDA in June 2017.

This is according to a European Commission press release which now celebrates the unique milestone, with the FDA having completed the very last of the capability assessments of the 28 EU competent authorities, bringing Slovakia, the last outstanding EU Member State, into the fold.

This, says the press release, brings to fruition five years of close transatlantic cooperation, in a process that started nearly 20 years ago, indicative of the sort of timescale on which these agreements operate. Since May 2014, we are told, teams from the European Commission, EU national competent authorities, the European Medicines Agency (EMA) and the FDA have been auditing and assessing the respective supervisory systems.

As a result, the batch testing waiver will also start to apply. This means that the statutory "qualified persons" in EU pharmaceutical companies will be relieved of their tasks of carrying out quality control on products imported from the US, when carried out already in the United States.

This, of course, lies outside the framework of WTO Agreements and is one of dozens of detailed sectoral agreements which help facilitate trade between the US and the EU Member States – without which transatlantic trade would be a fraction of its current level.

The importance of the Agreement cannot be over-estimated. Together, Europe and the United States account for more than 80 percent of global sales of new medicines. The full implementation frees up resources in industry and in public authorities on both sides of the Atlantic, and substantially reduces the costs and complications of trading in pharmaceutical products.

Fortunately for the UK, it is included in the current deal and, on 14 February 2019, the UK and the United States signed a continuity deal which would keep the agreement in force, in respect of the UK, after it had left the EU. Ironically, the deal was signed by now ex-ambassador Sir Kim Darroch.

As reported at the time, this was further evidence that the EU Member States and the US do not operate under WTO rules, with the agreement facilitating around £7.7 billion of UK exports to the US annually - nearly 18 percent of total UK goods exports to the US.

This is despite quarter-wits such as James Delingpole and many others averring that "the vast majority of the UK's trade with countries outside the EU is done on WTO terms", compounding his own stupidity by telling us that "it would be illegal for the EU to impose punitive tariff barriers on the UK, much as it might like to" – "punitive" in this case meaning MFN tariffs.

However, it doesn't stop there. The pharmaceutical industry is a strategic sector in which EU-US regulatory cooperation is much more advanced than in most other sectors. And it is to be extended further. The MRA implementation work is now to continue with a view to expanding the operational scope to veterinary medicines, human vaccines and plasma-derived medicinal products.

Obviously, there are procedural and resource limitations which will dictate the speed with which the extensions will take effect. And while, in the UK-US Agreement there are update provisions, there is no specific (or any) guarantee that the UK will be on top of the list when it comes to arranging the pre-cursor assessments.

But even if the UK is eventually to benefit from enhanced regulatory cooperation in the pharmaceutical field, the EU has already stolen a march on the UK with a joint statement in June 2018 between Commission President Juncker and US President Donald Trump on entering a new phase of trade relations.

Some see this as a sort of slow-motion TTIP, where the parties have already started negotiations, against a pledge to work towards zero tariffs, zero non-tariff barriers, and zero subsidies on non-auto industrial goods.

Even with its continuity agreement with the US, therefore, the UK is going to be playing catch-up with the EU, which is already streets ahead in its negotiation strategy. And it cannot help that the UK will be starting afresh with a new ambassador leading our efforts by what is said to be a demoralised workforce, with overstretched departments working "at cross purposes".

It says something though that, even as of yesterday with the vacuous Johnson still prattling about tariffs, the European Commission itself says that, given the low average tariffs (under three percent), the key to unlocking the potential for US trade "lies in the tackling of non-tariff barriers (NTBs)".

Here, of course, the EU and the US have developed and continue to develop opportunities for regulatory cooperation – the key to reducing NTBs. The parties are engaged in a continuous dialogue through the Transatlantic Economic Council (TEC), which was set up in 2007 as part of a framework agreement – a formal trade cooperation treaty.

Nothing like this will exist between the UK and the US after Brexit, so before the detailed international work of regulatory cooperation can begin, the UK will have to negotiate something similar, setting up the appropriate bodies with the necessary staff and resources. This cannot happen overnight, and it then takes time to develop smooth working relations.

Already, the EU and the US, under the aegis of the TEC, have set up three subordinate forums: the Transatlantic Legislators' Dialogue; the Transatlantic Consumer Dialogue; and the Transatlantic Business Dialogue. They also facilitate formal consultations with civil society on both sides of the Atlantic.

Pundits tend to underestimate the importance (and value) of such arrangements, yet institutions such as the TEC are the main mechanisms by which continued, if unspectacular progress is assured.

And these days, with the EU-Mercosur agreement already attracting protests, it seems as if the days of the "big ticket" free trade deals could be drawing to a close.

Rather, we expect to see progress though technical, under-the-radar deals such as the now fully implemented pharmaceutical MRA. In a process known as unbundling, the parties negotiate separate, sectoral deals which, when finally linked, have the economic effects of a full-blown trade deal, without the histrionics and the build-up of opposition.

Through the three years of the Brexit debate, however, such aspects have scarcely been discussed, with the trade wonks largely obsessing about conventional deals – oblivious to the fact that the world is moving on.

In this context, the EU – in a thoroughly unspectacular way – is streets ahead of the UK. If anything the gap is set to widen after Brexit, with inexperienced British officials – and clueless consultants and advisers – stuck way down on the learning curve, barely understanding what is going on.

And, with the Oaf as the head of the UK government, things can only get worse.



Richard North 13/07/2019 link

Brexit: lacking in credibility

06/07/2019  


Events in Northern Ireland are taking shape, and not for the good. There is intense energy being expended to railroad the province's business community into accepting the findings of Shanker Singham's Interim Report from his Alternative Arrangements Commission (AAC), with Tory MP Greg Hands leading a charm offensive aimed at convincing businesses that the "alternative arrangements" are a credible substitute for the backstop, and can form the basis of a new plan.

What has clearly not registered on the mainland – and with the legacy media – is the extent to which both Tory leadership candidates are relying on this "snake oil" solution as the magic bullet to solve the Irish border issue, the strategy being to gain the acceptance of a baffled and harassed business community. It is being told that "alternative arrangements" are the best thing since the invention of sliced bread, even though it has expressed continued reservations over the viability of this scheme.

Latest into battle is the British Irish Chamber of Commerce which has published its own views following its attendance at a briefing by Prosperity UK, when the basics of the "alternative arrangements" were reviewed.

Confronted with a dense, 200-page report – the aim of which is to confuse and obscure – the Chamber was obviously at a disadvantage in trying to analyse something which has been given a largely easy ride by MPs, and which the legacy media have failed to dent. The "professionals" have sold the pass, and now it is being left for local business leaders to take up the slack, on an issue which should be at the centre of a huge national debate.

Nevertheless, the Chamber has raised a few technical points, starting with the proposal for a UK-Ireland SPS Zone, as it was acknowledged that this creates the biggest problem for any solution to be viable.

Unsurprisingly, Chamber members were concerned that the AAC was "over-simplifying the problem" and that there was "an over-reliance on goodwill and derogations from the EU". And right up-front this simply shows that the Chamber, under the combined weight of the BS, and the pressure to treat the AAC as if it was a responsible player, is almost completely out of its depth.

The Chamber is perfectly right in pointing out that problems are being over-simplified, but the assertion that is "an over-reliance on goodwill and derogations from the EU" is misplaced. Goodwill in the implementation of SPS rules is simply not an issue, while there are simply no "derogations" on which the AAC can rely.

As we have seen, the claimed exemptions on siting of remote Border Control Posts cannot apply to the Irish border, while the supposed permission to create mobile inspection units is pure fabrication.

One thing that did emerge, though, which has been given nothing like the attention it deserves – the issue of split loads of agri-food goods requiring different certificates and checks for transport. It was mentioned that one company trading across the border would need to have 35 vets on site every night to certify products under the proposed scenario.

The next concern raised on the impact of a UK-Ireland zone, where there was supposed to be "deemed equivalence" with the EU. This is one of Singham's obsessions – his stock "get out of jail free" card which is his answer to all and every regulatory issue. Whenever divergence is raised, his solution is that the EU should treat our different regulations as equivalent to theirs.

Chamber members rightly query whether such an equivalence would be granted. In fact, they say, any break between Irish regulations and those of the EU would likely result in increased checks and controls for Irish agricultural goods entering the EU market.

If there are any doubts about this, all Irish officials need to do is look at Canadian experience in the wake of CETA. As far as the EU is concerned, "equivalent" effectively means the same. This is no cheap access ticket into the EU's Single Market.

In fact, the whole issue of equivalence is a dangerous distraction. Endless times, M. Barnier has made it clear that we cannot enjoy the same rights and benefits of the Single Market once we are outside it. Any concession which allowed the UK equivalence would put it in a better position than members, affording it the rights of access without the obligations.

Other concerns raised were the potential for increased smuggling and the costs of implementation, with the Chamber worried that the proposed solutions would require significant investment from businesses in training staff, implementing new IT systems, securing customs guarantees or contracting external customs agents.

However, Singham's Alternative Arrangements had not been costed and it has been reported they could cost £13 billion annually. It should be noted, said the Chamber, that under the current backstop, businesses on the island of Ireland would see no increase in cost for cross-border trade as there would be no additional customs or regulatory requirements in this scenario.

This then brings us to the "tiered trusted trader programme", with concerns about how it would work in practice. Yet, to my mind, too much ground has been conceded on a scheme which is fundamentally flawed and provides no solution to the Irish border question.

In May last year, for instance, the Irish Independent had Carol Lynch, a partner in BDO Customs and International Trade, look at the difficulties in acquiring "trusted trader" status.

It is, she said, "a very comprehensive and time-consuming process", taking "six months to prepare an application and put in place the required procedures". Following the application, she said, "it can take another six months to actually obtain authorisation. Due to this you would need to start this process a year before you require authorisation".

There is the question of getting the EU to recognise UK schemes, normally done on the basis of mutual recognition. For the scheme to work on a cross-border basis into the Republic, the EU must accept our systems, all of which depend on the exchange of electronic data. Yet, for that to happen, the UK must gain the status of "data adequacy", under the EU's General Data Protection Regulation, something which is by no means automatic and is far from being assured.

This is something of an "elephant in the room", as we do not yet have a data adequacy agreement with the EU and there are no indications that one will be forthcoming. Yet, without free flow of information, a trusted trader scheme cannot work.

On a broader front, the Chamber has also noted the AAC's "over-reliance on MRAs (Mutual Recognition Agreement) with the EU based on deemed equivalence rather than alignment". The point has been raised that while the EU has included such arrangements in deals with Japan and Canada, it is less likely to do so with a significant economy in close geographic proximity such as the UK due to the unfair competitive advantage that may result for UK businesses.

It was also stated that any such MRAs are likely to have stringent "level playing field" measures (similar to those included in the backstop) on areas such as State Aid, Competition, Taxation, Environment, Labour and Social Protection. It was accepted that this is likely to be one of the more significant challenges for the UK in the negotiations of such a package.

What is missing from the AAC report, though – and from consideration by the Chamber – is a proper distinction between MRAs on conformity assessment and those on regulatory standards. While MRAs on conformity assessment are necessary and acceptable to the EU, mutual recognition of standards applies exclusively to Single Market members. It cannot apply to the Irish border.

As I have recently pointed out, this will leave as much as twenty percent of cross-border trade without the cover of agreed standards, requiring UK exports to conform with local rules at the point of entry into the market.

Many food and agriculture products rely currently on the mutual recognition principle. Post-Brexit we are faced with the prospect of many UK products traded across the Irish border having to comply with Irish regulatory standards. And not only does this raise regulatory complications, it has significant implications for the scale of cross-border checks. Where no EU harmonising standards exist for a product, Irish officials will have to check UK goods entering Ireland for conformity with relevant Irish law.

Yet, even without this, the British Irish Chamber's view of Singham's proposals is that, "no matter how genuine the initiative" (not), "they lack credibility in the reality of how all-island trade actually works". There is still a way to go, but this is a start. I shall be back.



Richard North 06/07/2019 link

Brexit: as good as it gets

25/06/2019  


Asked, in effect, during an interview by the BBC's Laura Kuenssberg why the EU would renegotiate the Withdrawal Agreement, despite having unequivocally declared it would not, Alexander Boris de Pfeffel Johnson, had this to say:
First of all, don't forget, that as I say they got the Brexit MEPs they don't particularly want. They want us out, they've got the incentive of the money. They've also got to understand, Laura, is what has changed and what will be so different is that the intellectual capital that had been invested in the whole backstop had really come from the UK side. We were committed to it. We actually helped to invent it. We were the authors of our own incarceration. Take that away. Change the approach of the UK negotiators and you have a very different outcome.
Taken on its own, this is gibberish. It lacks coherence and meaning. In order to understand what the man is saying one has to delve into other parts of the interview, and reconstruct his statements, assembling the bits in an attempt to work out what the man actually means. But, before we go there, Kuenssberg asks what happens if that isn't enough. Johnson replies:
… the other tool of negotiation that you should use, not only the incentives of getting this thing done, moving it over the line, getting the money across and all the rest, but you have the extra incentive of course that the UK will be ready to come out as you know on WTO terms.
This is the best the man can offer, in a soft-focus interview where he is in control and has every opportunity to state his case on Brexit. And still he can't make himself clear. But if – as we are forced to do – we dip into the rest of the interview, we can perhaps distil some of the clarity that we need, that Johnson is unable to deliver.

At least the first point is relatively clear. The European Parliament elections have sent them 29 "Brexit MEPs" that they don't [particularly] want. This, supposedly, provides an incentive for the EU to renegotiate the Withdrawal Agreement – presumably because it gets the UK "out", notwithstanding that a no-deal Brexit on 31 October achieves the same effect, without the EU having to do anything.

On that basis, I think we can safely dismiss this as a credible argument for a renegotiation. If we wanted to be kind, we could assume that this is just a make-weight, on which Johnson places no great reliance. But this brings us to the second point.

Re-ordering this somewhat, it would seem that the key to Johnson's argument is that the UK will be changing its approach to the backstop. For what he has in mind, though, we have to go elsewhere in the interview.

To recap separately, by way of background, the current joint EU/UK approach to avoiding a hard border between Northern Ireland and the Irish Republic is to keep both in a common customs area – with Northern Ireland obeying the rules of the customs union – while also maintaining cross-border regulatory conformity.

Johnson, however, wants to take a different approach. And for details of that, we must rely on what he calls "a very good report just today by Shanker Singham and many others looking at the modalities of how to do this".

This is something, Johnson tells Kuenssberg, "that had been worked on extensively for the last three years". There are, he says, "plenty of checks that you can do away from the border if you had to do them without any kind of hard infrastructure at the Northern Ireland frontier".

If we then look at this report (which Kuenssberg probably has not read), we see that Singham et al set out their stall in such a way as to preserve the right to regulatory divergence in the future, relying either on "deemed equivalence" or mutual recognition to allow "as near as possible frictionless trade between the UK (including NI) and the rest of the EU including IE".

This is absolutely classic Singham moonshine, but clothed in dense verbiage which conceals what would otherwise be a very obvious lack of understanding of how the EU Single Market works.

Recognising that, despite all their best efforts, some border checks would be necessary, the Singham "team" postulate that "mobile inspection units with associated technology" could be provided "to manage and perform inspections of goods and customs documentation at locations away from the border". And this would be supported by "intelligence-led market surveillance through the use of advanced analytics".

To all intents and purposes, this is MaxFac in taffeta, a scheme which – even if the EU could be prevailed upon to accept – could not, according to a leaked Home Office memo, be in place before 2030.

Contrary to this received wisdom, however, Singham et al believe what they are now calling "Alternative Arrangements" (in capitals) "should be up and running within three years". Relying on this absurd assertion, Johnson burbles:
Let me tell you, there are abundant, abundant technical fixes that can be introduced to make sure that you don't have to have checks at the border. That's the crucial thing. And everybody accepts that there are ways you can check for the rules of origin, there are ways you can check for compliance with EU goods and standards, of our goods standards.
It would thus be fair for us to deduce that the central point of Johnson's case for a renegotiation is the Singham et al report, which he expects the EU to entertain and accept, thereby dropping the backstop from the Withdrawal Agreement.

Resiling from the commitment to the financial settlement, he thinks "creative ambiguity about when and how that gets paid over" will bring the EU to the table whence, on the premise that the Singham et al report is a credible option, a new implementation (aka transition) period will be granted by the EU so that all the outstanding issues can be "tackled on the other side of 31 October", after we have left the EU.

And all this becomes possible because Mr Johnson is prepared to take the UK out of the EU "on WTO terms", this being the decisive point which will have the "colleagues" abandoning their commitment to the Withdrawal Agreement, and reopening negotiations. And these renegotiations, affording us the luxury of a backstop-free transition period, will be concluded (and ratified) by 31 October.

Perhaps the single thing that is most damning about this approach is that the EU has already made specific concessions on "alternative arrangements", as part of the Strasbourg Agreement of 11 March 2019, from which this joint statement emerged. In this, it was agreed that the UK and the EU would work to agree by 31 December 2020 that "alternative arrangements" could render the backstop unnecessary.

In that event, it was further agreed that a "specific negotiating track" would be established as part of the overall negotiations on the UK/EU future relationship, to "lead the analysis and development of these alternative arrangements", with "a view to assessing their potential to replace, in whole or in part, the backstop solution".

This is about as far as the EU is prepared to go, and for that to be implemented, the UK must first ratify the Withdrawal Agreement. It is not within the realm of practical politics that the EU can now be expected to prejudge the outcome of agreed joint deliberations and accept unreservedly the views of the Singham "team", on the basis of assurances by a new prime minister, thereby abandoning the backstop.

But that, in a nutshell – when one cuts through the burble about "positive energy" - is what Mr Johnson is proposing. And in best blackmailing style, it is backed up by a threat of withholding the financial settlement , plus a commitment to leaving under WTO rules if his demand is not met.

It does not take a genius, political or otherwise, to realise that this will not fly. So obvious is this that even the Financial Times understands it, citing a tweet from David Lidington at the weekend, stating: "Erm, the Implementation Period is actually part of the Withdrawal Agreement. It's in Part 4 of the Agreement, articles 126 to 132. No Deal exit = no Withdrawal Agreement = no Implementation Period".

Against his pledge to "come out of the EU at Halloween on 31 October", that can only mean one thing: under a Johnson premiership, we must face up to a no-deal Brexit.

Whether, of course, Johnson honours his pledge, when faced with the realities of an EU which stands by its oft-stated policy, is anyone's guess. This is a man on whose word no one can rely, pointed out by Max Hastings who cites an observation made in 1750 by a contemporary savant, Bishop Berkeley: "It is impossible that a man who is false to his friends and neighbours should be true to the public".

So, despite another fruit salad of verbiage from Johnson, we are no further forward. A better-prepared and more skilled interviewer might have brought this out, but then it is the BBC we're dealing with.

Even then, to get the full flavour of the interview, we had to rely on the transcript. Those who watched only the edited broadcast would have even greater difficulty following the thrust of the argument. But, in what passes for political debate, this is as good as it gets.



Richard North 25/06/2019 link

Brexit: ignoring the constraints

24/06/2019  


One can completely understand the legacy media homing in on the personality issues attendant on the Tory leadership contest. These remain in the comfort zones of the hackerati, and relieve them from the responsibility of addressing policy issues – which are quite clearly beyond their capability to deal with.

As good an example of this as any is the Liam Fox interview on the Marr show, where Fox is talking complete gibberish about Jeremy Hunt's plans for Brexit.

All one has to do is recognise a few key, unalterable elements. The first is that EU officials have made it abundantly clear, in terms that are beyond equivocation, that there will be no renegotiation of the Withdrawal Agreement.

The second, inexorably linked with the first, is that in the absence of either the parliamentary ratification of the Withdrawal Agreement, an agreed extension to the Article 50 period or the unilateral revocation of the Article 50 notification by the UK government, we drop out of the EU on 31 October without a deal.

Thirdly, the "colleagues" have also made it clear that they are not prepared to consider an Article 50 time extension for the purpose of reopening negotiations on the Withdrawal Agreement. This necessarily follows from their determination not to entertain renegotiation in the first place.

Once one factors in these elements, and treats them as unalterable, the consequence of planning to leave by 31 October – as set out by both leadership candidates – becomes abundantly clear.

Since neither will be seeking to re-present the Withdrawal Agreement to parliament for ratification, neither have indicated an intention to revoke the Article 50 notification or intend to seek a time extension, and since neither will be able to renegotiate the Withdrawal Agreement, it follows as night follows day that we will drop out of the EU on 31 October without a deal – regardless of who is chosen to become the new prime minister.

Yet, despite this, Jeremy Hunt (according to Dr Fox) seems convinced that the "colleagues" will entertain a renegotiation, while Alexander Boris de Pfeffel Johnson is dwelling in the outer reaches of Cloud Nine. From his own lips, he talks of disaggregating "the elements of the otherwise defunct Withdrawal Agreement".

Johnson would thus cherry-pick parts of the Withdrawal Agreement, reserving the payment of the £39 billion and then negotiating a Free Trade Agreement "in the implementation period", after we’ve come out on 31 October. Meanwhile, he is relying on GATT Article XXIV to deliver tariff-free trade with the EU.

This situation reminds me of a story my then best friend told me, many years ago just after he had graduated from university and got his first job with a firm which designed and installed air conditioning systems for office blocks.

He had encountered a situation familiar to anyone who has had the unenviable task of planning utilities for a building, where the architects – as they so often do – leave insufficient space for the essential functions.

These were the days when "blueprints" really were blueprints, and my friend found himself in a desperate meeting where, against an impossible deadline, all the designers had been called together to resolve a problem of where to put essential plant in a space that simply wasn't big enough to contain it.

Gazing at the blueprint, my friend told me he had a sudden moment of inspiration. He stabbed his finger on the plan at what appeared to be an unused area, which seemed more than sufficient to accommodate that plant. And, for a moment, he was the hero of the hour, until a kindly and more seasoned colleague pointed out that he had located the plant outside the building, suspended twenty floors above the adjoining street, resting on nothing but thin air.

Apart from that, my friend said later, his was a perfectly reasonable idea which actually solved the problem – an observation that has stayed with me for my entire working life. It doesn't matter how complex any problem might be, if you ignore the constraints, anything is possible. The insoluble ceases to be, and the difficulties simply melt away.

This, it seems, is what our leadership candidates are doing. Hunt, on the one hand, ignores the constraint concerning the renegotiation and assumes that, despite everything that has been said on the matter, he can waft over to Brussels and renegotiate the deal. And if you ignore the fact that the deal is not open to renegotiation, this is a perfectly reasonable stance.

As for Alexander Boris de Pfeffel Johnson, his determination to ignore the constraints is somewhat more extravagant. For a start, he assumes that elements of the Withdrawal Agreement can be disaggregated. They can't. The Agreement comes as a single, unalterable package – a question of all or nothing.

But Mr Johnson, apart from anything else, wants to take out the financial settlement – which immediately voids the Agreement. And without the Agreement, there is no "implementation period" giving the continuity that the UK needs while our future relationship with the EU is negotiated.

As for Article XXIV, if we were to enjoy the "implementation period", we wouldn't need it, which rather points to a discontinuity in the thought processes of Mr Johnson – something that does not really surprise.

In his discussion with Andrew Marr, however, Dr Fox points out that, if we leave the European Union without a deal, the EU will apply tariffs to the UK. "You can only have exemptions as described", he explains, "if you already have a trade agreement to go to. And clearly if we leave without a deal it's self-evident we don't have that agreement. So Article 24 doesn't hold in that circumstance".

Back in Muppet land, though, Iain Duncan Smith and David Campbell Bannerman have already conceded that point about Article XXIV, stating that:
… if the UK and EU go to the WTO jointly and say that we have agreed to move to a full and comprehensive Free Trade Agreement (what we term "SuperCanada" – that is better than the EU-Canada FTA) – that keeps tariffs at zero with no real change to other members, the WTO is happy to allow us a period of time to keep tariffs and quotas at preferential rates.
We can, this pair says, "keep tariffs at zero for as long as the two partners need to negotiate the full works: that comprehensive FTA. Legally this could be up to ten years, but most are two to three years to negotiate".

Yet, back in the real world, there could just be a few slight glitches. In this scenario, the UK has just walked away from the Withdrawal Agreement (and the political declaration that goes with it), thus refusing to pay the financial settlement.

This is at a time when the newly appointed Commission has just started work, with its own pressing priorities. Yet it is supposed that it will drop everything to draw up a proposal under Article 218 for trade negotiations with the UK, and present this to the European Council. The Council will then post-haste issue a mandate for the Commission then to conduct urgent talks with the UK to conclude in principle a free trade agreement.

With this concluded in record time, the Commission must then draw up an interim agreement, with a plan and detailed schedule, which must then be approved by the European Council and the European Parliament, before in turn being approved by the contracting parties of the EU, all so that the UK can trade tariff-free with the EU.

And since the original trade negotiations can't be conducted until the UK has left the EU, somehow all this is supposed to happen after 31 October, yet allow for tariff-free trade without a break.

Even should the EU be inclined to open up negotiations – and that cannot be taken for granted – it would be many months, if not years, before the EU was ready to put an interim plan on the table. As always, the Muppets are living in a parallel universe.

But then, if possible, it gets worse, with the pair asserting that services and standards, "will be a part of the future trade deal but will be along the lines of 'Mutual Recognition' of standards or 'enhanced equivalence', not on a harmonisation or rule-taking basis".

Yet mutual recognition, as I have already pointed out, is not a practical proposition, and neither is "enhanced equivalence". How can anyone possibly think that the EU will tolerate either from the UK, giving it an easier ride than its own Member States, from which it demands full harmonisation where applicable? The idea is absurd.

What we are seeing, therefore, is the political equivalent of suspending plant in thin air, twenty floors above street level. Both candidates are ignoring the constraints, fabricating fantasy solutions that simply cannot be implemented. That the media is not pointing this out tells its own story.



Richard North 24/06/2019 link

Brexit: mutually assured distraction

18/06/2019  


For my Sunday post I did a treatment on the no-deal scenario, an issue which has featured prominently in the ongoing leadership contest.

But, although prominent, in terms of its impact on the debate, the thing we lack is any serious discussion about the consequences, while the "ultras" and their apologists purposefully gloss over the detail, making out that no-deal is a tolerable option for the UK.

A good place to start, though, would be the advice given by the Department for Business, Energy & Industrial Strategy, and in particular its recently amended guidance note entitled: "Placing manufactured goods on the EU internal market if there's no Brexit deal".

However, a crucial thing about the entire Brexit debate is that so many of the important details reside in arcane technical repositories of this nature, which are generally meaningless unless you already know what you're looking for, or can place the information in its broader context.

The section to watch in the BEIS guidance comes under the sub-heading "Non-harmonised goods", where we learn of the distinction between harmonised goods – where there are EU regulations setting common standards – and the non-harmonised goods, where there are no formal EU-wide standards.

In this latter event, free circulation of goods under the aegis of the Single Market relies on the "mutual recognition principle", through which means any goods which can be legally sold in the producing country can be freely sold anywhere else in the EU, without having to apply local standards.

We should remind ourselves, however, that this principle was not initially part of Community law and was not part of the original Treaty of Rome. It emerged from a ruling from the much-maligned ECJ, in the now famous Cassis de Dijon case of 1979, cemented in by Case 113/80 of 1981.

And, while people like snake oil salesman Shanker Singham have been pushing this as the answer to all our woes when we leave the EU, anyone who thinks that this is an answer has been cruelly misled.

In fact, those UK businesses which currently rely on mutual recognition are going to be in for a very hard time. Simply put by BEIS, "after the UK leaves the EU the mutual recognition principle will not apply to UK non-harmonised goods placed on the EU internal market".

Thus, companies which currently produce goods in accordance with UK law and can – in theory - export them anywhere in the EU without the need to deal with any other regulatory system, will no longer be able to do so.

Post Brexit, UK companies will have to ensure that their goods not only comply with UK law, but also with the separate regulatory systems of the countries to which they export. This can only increase costs and can make export to some markets uneconomic.

Optimistically, BEIS suggests that they will have to meet the requirements of the first EU country to which they are exported but, in practice, they will have to conform with the rules of the Member States in which they are sold.

The products most affected are items such as childcare articles, clothing, textile and footwear, furniture, jewellery, sports accessories and firearms. But mutual recognition also applies to EU-regulated products, where elements are not covered by specific measures. Examples are foodstuffs (and especially manufactured foods) and food supplements, food contact materials, fertilising and construction products.

What makes this a big issue is the scale of the trade involved. The Commission estimates that non-harmonised sectors represent around 20 percent of the total value of market sales of manufacturing sectors (€1,158 billion out of €5,690 billion). Furthermore, around 87 percent of the enterprises operating within the sectors are micro enterprises (i.e. with less than 9 employees). Around 11 percent are small and medium enterprises (i.e., with a number of employees between 50 and 250).

In cash terms, for the period 2008–15, the average annual value of intra EU exports of non (or partially) harmonised products has been equal to €335 billion, which represents 18 percent of the value of intra-EU exports.

Unfortunately, the Commission does not break down the figures by nation, but if we assume that the UK roughly parallels the rest of the EU, then Brexit puts at risk something like 18 percent of our exports of manufactured goods to EU Member States, affecting a high proportion of micro enterprises and SMEs.

Clearly, Brexit will not automatically cut off this trade, but it will make life much more difficult for UK traders. And things can only get worse. The Commission has long acknowledged that the mutual recognition system does not work as well as it might. Traditionally, the EU has relied on a 2008 regulation but, to improve matters, this will shortly be replaced by Regulation (EU) 2019/515, which takes effect from 19 April 2020.

This new regulation aims substantially to improve the functioning of the mutual recognition system. Of special interest is an innovative appeals process which allows individual enterprises to sidestep refusals of national authorities to recognise their products.

Once the UK leaves the EU (if it ever does), we will be totally outside that system and unable to benefit from any of the measures aimed at facilitating intra-EU trade. That this places us at a competitive disadvantage scarcely requires saying, but we should also note that the scale of the disadvantage will increase with time, as the new regulation bites.

The worst of it is that, even should we subsequently agree a free trade agreement with the EU, there is no guarantee that the mutual recognition principle will be applied universally – or at all.

When I wrote a piece in October 2016 on mutual recognition of standards, I pointed out that even the EU-Canada Agreement only allowed for cooperation in this area on a case-by-case basis. There was no question of any blanket application of the principle.

Looking at the bigger picture, this is just one small element of our trading relationship put at risk by a no-deal Brexit. Had we sought to remain with the EEA, it would have been retained, incorporated into the Agreement by virtue of Annex II Part II (page 214), following EEA Joint Committee Decision No 126/2012 - with the exception of food and animal products. It is one of the many things the government has thrown away in rejecting the Efta/EEA option.

Sadly, this does not prevent the likes of Alexander Boris de Pfeffel Johnson making crass assumptions about gliding through a no-deal Brexit without suffering serious consequences.

There are those, for instance, who suggest that preparation for a no-deal can somehow reduce the impact, but how does any amount of preparation reduce the impact of being excluded from the mutual recognition system? The fact is that many companies which have built businesses which utilise the principle will find trade that much harder.

And while mutual recognition is only one of the many facets of the EU trading system where we will be locked out, the way the detail is glossed over tends to obscure the handicaps we face. Not for nothing does one have to urge attention to detail, while it obviously suits vacuous politicians (and the media) to avoid detail for the same reason.

Distracting people from the detail will only go so far. This "mutually assured distraction" will succeed only until we are confronted by the practical consequences. Then the serious questions will be asked – and there won't be any easy answers.



Richard North 18/06/2019 link

Brexit: on the brink of madness

09/06/2019  


For what it's worth, Mrs May is no longer leader of the Conservative Party, her resignation having taken effect last Friday.

And while the contest for her replacement as leader, and ultimately prime minister, doesn't formally kick off until Monday, it has already been running some weeks and – in the case of the "turd-giver" – some years.

It goes without saying that the Telegraph is pulling out all the stops to back its favourite son, with today's paper running a lengthy supportive article telling us that he has won over "top Eurosceptics" with a "clean, managed Brexit" pledge.

This magical "conversion" (as if they didn't already support him) apparently happened in a meeting with Eurosceptic grandees last week, when Johnson told them that Theresa May's deal was "dead". He thus gained the endorsement of Steve Baker who says he will now put his "complete faith" in Johnson rather than stand in the contest himself.

Priti Patel, the former International Development Secretary, has also decided to back Johnson, asserting that only he could "deliver Brexit and restore trust in politics". At least two grandees are preparing to follow suit, convinced that the "turd-giver" is best-placed to rescue the Conservative Party from the electoral obliteration they fear it faces if it fails to deliver Brexit.

As to Johnson's master plan, it seems that he has adopted the report published by Corporal Baker on 5 June, from which he has taken the title, to label his "pledge". It is claimed that the plan is backed by "a host of senior Brexiteers". This includes Esther McVey, a rival candidate, to whom one can add Gavin Williamson and Owen Paterson. But, no matter how many people support it, there can be no doubt that this plan is completely irrational.

A notable feature of the plan is that it argues that the UK should leave the EU without the Withdrawal Agreement. And, "without prejudice to the UK’s departure from the EU by 31 October", the UK "could consider proposals from the EU to revise the draft Withdrawal Agreement and Political Declaration to meet the criticisms made by Parliament".

Perhaps "irrational" is too gentle, too neutral a term. "Barking mad" might actually be more appropriate, as the Baker/Johnson "plan" relies on the EU delivering substantial post-exit revisions to the Withdrawal Agreement - despite Barnier, once again warning that the EU will never renegotiate the Agreement.

Furthermore, even if there was the slightest likelihood of the EU accepting any amendments – which there isn't – the changes suggested in the Baker/Johnson "plan" would be wholly unacceptable to the EU, not least because it incorporates some of the more unrealistic ideas from snake-oil salesman Shanker Singham, who has heavily influenced the draft.

For openers, the Baker/Johnson duo assert that the Government "must not consider the UK to be liable for the estimated £39 billion payable to the EU under the Agreement", with Johnson directly threatening to withhold the money, yet they want the EU immediately to agree to a "temporary trade deal".

Despite having been told that there will be no transitional period without the Withdrawal Agreement – of which the financial settlement is part - they then demand that "any transitional period" must be without the continuation of the European Communities Act, in whatever form.

Effectively, what they are seeking is Single Market access without any commitment to regulatory alignment and, just to emphasise this point, they demand that "mutual recognition should be provided for across all topics based on outcome equivalence".

This latter point is a particular obsession of Singham, which the EU will never allow. Yet, no matter how many times this particular piece of stupidity is knocked down, it pops back up like a Weeble, as if nothing had ever happened.

Collectively, this group of inadequates are retreating into their own private fantasy where, having decided that we should exit on 31 October on "WTO terms" – amounting to a no-deal Brexit – the EU will immediately agree a new deal. And this will be on far better terms than we have already been offered, conclusion of which would actually be an improvement on what any Member States currently enjoys.

If there was any justice – and sense – in the Brexit debate, the brink of madness should rule Johnson out of the leadership race before it officially starts. But, even then, he is not getting it all his own way. This weekend, he is under attack from allies of Dominic Raab, who are marking down the former foreign secretary as "a controversial face from the past", which the voters don't want as prime minister.

Raab's supporters cite a recent YouGov poll which found that more than half of those questioned (53 percent) thought Johnson would make a bad prime minister – more than for any other contender. As the same poll suggested that more voters (26 percent) saw him as a good potential PM – more than any of his rivals – this rather confirms his status as a Marmite politician. It makes a mockery of any idea that he is unifying figure.

Oddly enough, Rory Stewart claims to be the only contender with more positive than negative ratings, placed equal first with Johnson in the overall ratings.

Already, though, Johnson is attracting less favourable publicity, with Peter Oborne in the Mail taking a dim view of his prospects. However, critic-in-chief for the moment is Matthew Parris, who uses his column in The Times to declare that Johnson's premiership "will fall apart in a year".

Taking note of prevailing sentiment, he writes that, "colleagues know the party favourite is a lazy, untrustworthy do-nothing but seem determined to vote for him anyway". In detail, he says:
That he's a habitual liar, a cheat, a conspirator with a criminal pal to have an offending journalist's ribs broken, a cruel betrayer of the women he seduces, a politician who connived in a bid for a court order to suppress mention of a daughter he fathered, a do-nothing mayor of London and the worst foreign secretary in living memory… such truths are apparently already "priced in" to Mr Johnson. One just hopes the actual electorate are informed that his rascality is already "priced in" and they’re not to bother their little heads with such horrors.
It really does say something of contemporary politics that a prominent columnist in a leading national newspaper can write in such terms about the leading contender for the Tory leadership, without the slightest fear of a libel suit.

Parris's thesis is that Johnson could lose a vote of no confidence in the Commons as he headed for a no-deal Brexit but could (just) win a general election later in the year and come wobbling back, Weeble-like, into Downing Street before Christmas. But then Parris gives him less than a year in office. His colleagues, Parris says:
know he’s lazy. They know he's untrustworthy. They know how he tries to wing things for which he ought to prepare. They look at the £700,000 he has earned since he quit government, much of it on the national and international speaking circuit, and wonder. They know he ducks. They know he makes conflicting promises. They know he skates on thin ice.
"And in their hearts", he concludes, "they have no confidence in Boris. But they're scared. They think he may possess a kind of magic. The magic, my friends, will fade". Why though we have to go through this process of electing him in the first place is anyone's guess. The nation cannot afford the Johnson madness, or the elemental stupidity of his colleagues and supporters.



Richard North 09/06/2019 link

Brexit: deals within deals

16/04/2019  


Rather nicely on cue, after yesterday's piece on the historic preference of the EU for multilateralism in its approach to global trade, now switching to the pursuit of bilateral agreements, we see a press release on the opening of negotiations between the EU and the US, on two separate trade agreements.

This new initiative follows on from the failure of TTIP, the talks on which collapsed in 2016. After 14 rounds of talks, neither party had agreed on a single common chapter out of the 27 being deliberated.

What is particularly striking about the new talks, though – after the vast sweep of TTIP – is their drastically limited scope. There are only two heads, the first on the elimination of tariffs for industrial goods and the second on conformity assessment, the latter extending the existing MRA covering telecommunications equipment, electromagnetic compatibility, electrical safety, recreational craft, pharmaceutical GMP and medical devices, plus marine equipment.

As to the elimination of tariffs, it is interesting to note that the scope is being confined to industrial goods – excluding automobiles - thus avoiding the contentious agricultural chapter which brought the Doha Round to a premature halt.

It is also interesting to note that these talks stem from a meeting between Jean-Claude Juncker and Donald Trump in the White House last June. In their joint statement, they pledged to work towards zero tariffs, zero non-tariff barriers, and zero subsidies on non-auto industrial goods.

They also pledged to work to reduce barriers and increase trade in services, chemicals, pharmaceuticals, medical products, as well as soybeans. These areas, however, do not seem to have been included in the current talks.

The delay of nearly a year between announcing an intent to negotiate, and the next procedural step – in this case, the approval of the Commission's negotiating mandate – is indicative of the general tempo of international trade talks. But in fact, talks on tariffs have been going on "forever", with EEC-USA relations taking up a considerable part of the Tokyo Round of the GATT talks in 1979, especially in the chemicals sector.

Forty years later, we see many of the same items on the agenda, the difference being that this time we are looking at bilateral talks, as opposed to the multilateral trade negotiations under the aegis of GATT.

But, while tariffs is one part of the talks, extending the Mutual Recognition Agreements on Conformity Assessment is the other, underlining the importance of such agreements in facilitating the flow of trade between the parties. Yet, even though these MRAs are clearly trade agreements, there is still a wide constituency in the UK which argues that trade between the US and the EU (of which the UK is part), has been undertaken only under WTO rules.

Yet, as I reported almost exactly three years ago, before the EU referendum, there were something like 38 EU-US "trade deals", of which at least 20 were bilateral.

Some limited recognition of this came in February this year, when Liam Fox announced a continuity deal with the US, where the parties agreed to continue the existing MRAs negotiated by the EU. At last there was some media coverage of deals in existence, gainsaying the WTO argument.

Now, there is almost a sense of triumphalism in the EU as it has been able to announce that it is going further than the UK in trade deals with the US – an unspoken reproach to those in the leave constituency who thought the UK could do better outside the EU.

Adding fat to the fire, we have Nancy Pelosi, the US House of Representatives speaker, on a visit to London, warning that there would be "no chance whatsoever" of a US-UK trade deal if the Northern Ireland peace agreement was weakened by Brexit.

Although any trade deal would in the first instance be negotiated with the US executive and approved by the president, in the US system trade deals have to be ratified by Congress. And it is because of that, the Democrat Pelosi asserts that any deal would be "a non-starter". 

She says she has told Theresa May, her de facto deputy David Lidington, Conservative pro-Brexit hardliners and Jeremy Corbyn during their meetings and conversations while in London that there would be no trade deal if Brexit undermined the 1998 Good Friday Agreement. "To all of them, we made it clear: don't even think about that", she said.

This is another dimension of the impasse over the Irish backstop, where Ireland is beginning to mobilise support in the United States, which has a strong historical affinity with Ireland. A hard border in Ireland which put the peace process at risk might, therefore, invoke active hostility from the United States, which could have considerable political implications.

Little of this, however, seems to be getting through to the UK legacy media, in a situation where both the newspapers and the broadcasters continue to obsess about possible leadership changes, and the prospects for the European elections, and even a general election. At the time of writing, coverage of the EU announcement on US trade had been sparse, and there had also been minimal references to the Pelosi intervention. Parochialism and displacement activity rule supreme.

Thus, yesterday, when I reintroduced the theme of IRC, it was unsurprising that there was so little recognition of it. People prefer to talk about the things of which they know something about and in trade terms, free trade deals represent the limit of general knowledge.

In this context, not only does IRC have the handicap of being virtually unknown, it also falls between the Europhiles, who dislike it because it provides a partial solution to the UK's need for an independent trade policy, and the Eurosceptics with their obsession with "fwee twade" and their hatred of anything that they didn't actually invent.

Then you have the Muppet tendency in the think tanks, represented most recently by the IfG, with the publication of a 48-page report. This takes us down the well-worn path of negotiating a future relationship with the EU, dwelling on the minutiae of administrative details, without in any way discussing the range of deals, and the different types of arrangements that we might consider.

The one thing it does do is point out that we will be extremely pressed for time, something we were stressing in Flexcit, nearly five years ago. Even with an extension to the transitional period, the UK will be hard-pushed to conclude the necessary agreements before we cut the ties.

Yet, on Sunday, I remarked that I had estimated that the Brexit process might take twenty years, pointing out how little we have achieved in three years. Where the EU and US now have talks spanning forty years just on the issue of reducing tariffs, a mere twenty years looks remarkably compact.

Thus, we come back to the same issue. Given the paucity of knowledge amongst our political classes, the venality and triviality of the media, and an almost total lack of vision coming from the think tanks and trade wonks, there is no way we are going to conclude anything usable within a decade – or two.

It is absolutely pointless embarking on a journey when we have no idea of the destination, the route to be taken or even the means of transportation. Until we have had that debate, we cannot take a first step with any confidence. But before we even have any debate, we must learn anew what it takes to conduct a serious public discussion, avoiding the grandstanding, the polemics and the hyperbole.

Until then, the best we can hope for is some glorious fudge, and the result isn't going to be pretty.



Richard North 16/04/2019 link

Brexit: using freedom

15/04/2019  


When all is said and done, probably our biggest mistake in approaching the EU referendum was in failing to realise the extent to which our system of government had deteriorated. Thus, we had not appreciated that it would not be capable of meeting the challenge of managing the Brexit process.

The failure, in part – but only in part – came about because of the profound ignorance of most of our politicians and their media fellow-travellers, who have neither the knowledge needed to forge a workable Brexit settlement nor, it seems, the capability to learn.

That too we under-estimated. We were aware that many politicians were not the sharpest knives in the drawer, but it would have required a huge leap of faith to have believed that almost the entire collective would have difficulty in coming to terms with as basic a concept as a customs union.

After all, the concept has been with us for more than a century and been part of our system of government for 47 years, since we joined the EEC. But then, since any real discussion of the process of European political integration has been excised from the UK political discourse, I suppose we should have known that politicians were not going to be up to speed on EU matters.

Nevertheless, it still comes as a shock to find that, nearly three years into the Brexit process, the "debate" between the two main parties – such that it is – is dominated by something so basic as whether, on leaving, we should agree a customs union with the EU, with the two sides arguing about the effect this might have on our ability to conduct an independent trade policy.

Yet, I have seen arguments that suggest that, if this is what it takes to get Labour on board and thus get the Withdrawal Agreement through parliament, then the government should concede the point so that we can move on.

However, from what David Lidington was telling Andrew Marr yesterday, that is not going to happen. Talks are to carry on this week but Lidington is looking for "compromise on both sides". If that doesn't work, he says, then the government will put a set of options before parliament, with a system for making a choice. Then parliament will actually have to come to a preferred option rather than voting against everything.

That, in itself will be novel, but it doesn't get us past the situation where the government will be putting a series of options to parliament which, if implemented after we leave the EU, will not provide a sound basis for a working relationship and certainly will not prevent the Irish backstop kicking in.

We are therefore, caught in a weird fantasy world where opposing parties are battling over issues which have no relevance to the matter at hand and, even if resolved, will contribute next to nothing to a stable, post-Brexit environment.

Even now we can see the absurdity of the respective positions, with Marr challenging Lidington about adopting a common external tariff, only to get the predictable mantra that the government is seeking to get the benefits of the customs union – no tariffs, no quotas and no rules of origin – yet still have the flexibility to pursue an independent trade policy with other third countries.

We've long given up on the idea that Marr might be capable of pursuing a robust, informed line of questioning, but if he had got anywhere towards mastering his subject, he would not have left the matter there.

Specifically, for the UK to avoid rules of origin, the UK would either have to adopt the EU's common external tariff, or it would have to commit to a unilateral harmonisation of its own tariffs, through adoption of the EU's WTO tariff schedules – which is what it is already doing. But either route will limit its flexibility to conduct an entirely independent trade policy, as we could not reach trade agreements with third countries which settled on more favourable tariff agreements.

But what has not been properly explored is that, even beyond tariff levels, the UK will need to maintain a high degree of regulatory alignment with the EU, over product standards and other matters, applying those regulations to its imports from other third countries. This in turn will further limit its ability to secure independent trade deals as the UK will not be able to deviate from the EU single market acquis, even if we have not formally adopted the rules.

In short, therefore, the whole idea of pursuing an independent trade policy – at least in the immediate aftermath of leaving the EU (after the expiry of any transition period) – is a chimera. Our flexibility will be minimal. Furthermore, even if we were able to secure our own terms, it is unlikely that we would get better deals than we have already.

The government thus has got itself into a bind, arguing with Labour over things that really don't matter, in a situation which I've suggested is analogous to two bald men fighting over a comb. We achieve nothing even if Labour backs off completely and concedes all of the government's points.

This, of course, is where we have been badly let down by the Conservative dogma on "fwee twade" – as Pete puts it - and the mantras of the trade wonks who like nothing better than to immerse themselves in the technical minutiae of trade deals, while completely missing the big picture.

One of the myths that pervades this discussion is the canard that the EU is not very good at signing up trade deals, citing its relatively poor performance over the last decades, compared with other trading nations.

Any serious student of this issue, however, will understand that the EU's slowness – until relatively recently – in forging new bilateral trade deals stems from its long-term commitment to the multilateral trading system and its preference for working within the ambit of the WTO, the UN and others.

A search through the Europa website using the keywords "multilateral" and "trade" will yield dozens of papers attesting to this commitment, and it was only the failure of the Doha WTO round in 2006, under the watch of Peter Mandelson, that triggered a change in emphasis. Only then was it conceded that the multilateral movement has stalled.

Then, the primary cause of failure was the disagreement between the US and EU over agricultural subsidies, but it remains the case that some of the biggest gains to be made in international trade rest not in bilateral deals between nations – or blocs – but in global deals, mainly in the areas of regulatory alignment or mutual recognition.

With that, in a beneficial way, we have seen the emergence of plurilateral agreements, skirting the dramas of the global talk-fests, allowing agreements to be made between small groups of countries which can then gradually be expanded to include other interested parties.

We have also seen the emergence of non-state actors, such as the Basel Committee on Banking Supervision, and the ISO, with its revolutionary Vienna and Dresden Agreements. Then there is the steady but unspectacular growth of UN organisations such as UNECE, the efforts of which are quietly transforming international trade, with barely any recognition or understanding by national legislators.

Yet, the very mention of organisations such as UNECE is enough to bring the sneering classes out in high-dudgeon, ready to defend their turf, often from a position of maximum prejudice and minimal knowledge. This is despite its pioneering work on WP.29 and automotive regulation and the ground-breaking WP.6, working alongside the OECD on regulatory cooperation and standardisation.

These areas are fertile territory for a major trading nation such as the UK. By forging alliances with other independent states, we could establish a role as the "honest broker" – or some such – standing in between the giant trading blocs of the EU and US, much as the Cairns Group sought to do during the Doha Round.

One can see little progress, however, when we have domestic politicians hung up on the centuries-old concept of the customs union, to whom the very concept of IRC is completely foreign.

When the trade wonks and the media are equally stuck in a rut and the trade policy debate is bogged down in the tired concept of expanding bilateral trade agreement, it is unlikely that we will be in a position to benefit from the new-found freedom that Brexit is supposed to give us.

In my days working with the poultry industry, I came across groups dedicated to releasing battery hens and reintroducing them to the open range. To their consternation, they found that one of the first things the birds did on release from their cages was to try to get back in them, where there was food, warmth and security.

The released birds thus had to be gradually introduced to their freedom and be taught how to exploit it. It would seem that the UK must be treated in a similar way, especially as there are so many who would prefer the secure embrace of Mother Europe. But there is an exciting world of opportunity out there, if only MPs knew what it was, and how to use it.



Richard North 15/04/2019 link

Brexit: eyes wide shut

13/04/2019  


If, as is indeed the case, the UK now has limited time to make a more informed judgment about what happens next, before we leave the EU in October, MPs could hardly make better use of their time than by reading Pascal Lamy's words in yesterday's Guardian.

Under the heading, "Staying in a customs union after Brexit won't resolve the Irish border issue", Lamy gets to grips with precisely the issues I was laying out in yesterday's piece, bringing a necessary corrective to the stupidity and ignorance we are experiencing in parliament and elsewhere. Referring to Labour's obsession with staying in a customs union, he tells us:
We should all remember that from 1957 to 1993, the European Economic Community was a customs union with internal borders. They were removed only when enough evidence of harmonisation or mutual recognition of regulations was there. The single market without borders is about regulatory homogeneity. Leaving the single market reintroduces a border – the thickness of which depends on the degree of regulatory divergence. The customs union is about the common external tariff. The single market is about common regulations.
Lamy goes on to say that "staying only in a customs union" would not be enough to solve the Irish border question. In just one example he cites, if the UK remains in the customs union with the same common external tariff but imports chlorinated poultry from the US, there has to be a border, because the EU does not accept the marketing of chlorinated poultry. This is a rule of the single market.

Nevertheless, one should not take everything Lamy says as gospel. Even the high and the mighty are capable of error – introduced in this case when he avers that the EU "is unlikely to accept a request from the UK that it should have a say over the EU's trade agreements".

That is fair enough, but then he asserts that Article 207 of the Lisbon treaty makes clear that the common commercial policy is exclusive to the EU's direction. It may be a small point, but it doesn't. Article 207 TFEU sets up the basis of the CCP (separate from the Customs Union, but linked with it in Art 206), but it is Article 3 TFEU which makes it an exclusive competence of the Union.

But with this being the case, the EU cannot have a situation where Member States vest their policy-making powers in the Commission, only then to have the EU share with the UK the decisions which shape the policy. This would be awarding the departing member greater powers than it had while it was in the EU – something the EU has said it will not allow.

But Lamy then goes too far by saying that Turkey, which is in a partial customs union with the EU, "has to follow EU trade agreements with third countries but has no say on them", implying that this is a function of the customs union.

In fact, the Turkish agreement is much more than a customs union. It requires Turkey to "incorporate into its internal legal order the Community instruments relating to the removal of technical barriers to trade", and to adopt elements of the EU's commercial policy, and its competition rules.

Even then, Turkey does have a limited ability to forge its own trade deals with third countries although if it wanders too far, it bumps into Article 45 of its agreement with the EU, which requires that:
In the framework of the application of trade policy measures towards third countries, the Parties shall endeavour, through exchange of information and consultation, to seek possibilities for coordinating their action when the circumstances and international obligations of both Parties allow.
This is on top of Article 12 which states that Turkey, in relation to other third countries, has to "apply provisions and implementing measures which are substantially similar to those of the Community's commercial policy", albeit that these are limited to a specified set of regulations.

Then we also have Article 16, which states that, "With a view to harmonizing its commercial policy with that of the Community, Turkey shall align itself progressively with the preferential customs regime of the Community within five years as from the date of entry into force of this Decision".

Thus do we find the Turkish government itself stating that: "Under the Customs Union, Turkey shall align its commercial policy with the EU’s Common Commercial Policy".

If one was to be pedantic – which one must be to understand fully the legal implications – it would be more correct to say that the "Customs Union" goes way beyond the strict technical definition set out by GATT/WTO and is close to a comprehensive free trade agreement, with substantive add-ons which reflect its role as a pre-accession instrument.

According to Lamy though, using Turkey as his example, he declares that the reality is that in a customs union, "all the power would rest with the EU, with the UK as a follower". But that is more than a little dubious as an assertion. If a customs union agreement was kept to the very minimum technical requirements, the EU's power would be limited to setting the common external tariff.

Even then, this is something we should seek to avoid. A customs union with the EU would be a bilateral treaty, with all that that entails. Harmonising external tariffs by adopting the EU's WTO schedules, which would have the same effect, would be a unilateral decision which would allow us much more flexibility and control - especially as the EU might make changes in the future which we might not want to follow.

However, it doesn't stop there. Sabine Weyand – Barnier's deputy – used to work for Lamy, and she intervened on Twitter to assert that a customs union would contribute to a solution and would be major bonus for UK manufacturing in avoiding rules of origin.

It is here that we get to the division of interests between the EU and the UK. Obviously, the EU would be happy to have the UK more tightly under control by having it tied to a Customs Union, but whatever benefits the UK might gain from that arrangement could be achieved by other means – without the baggage. As far as the UK is concerned, the Customs Union is an unnecessary solution looking for a non-existent problem.

But Weyand can't seem to leave it there. Her first tweet of the day (yesterday) was to retweet a Commission video extolling the virtues of the EU's Customs Union which, it says, saves you money and time, and protects you, your business and our environment.

In less than two minutes though, the film manages to elide aspects of the Customs Union with the Union Customs Code, the Single Market, Border Security, plant health and even firearms exports. In a confused jumble, the authors have ladled in multiple, disparate policies which have nothing to do with the Customs Union.

This isn't the first time that the Commission has done this, and with other of its more technical works adhering to a high level of factual accuracy, one suspects that this isn't deliberate. After all, the advent of the Single Market in 1992 is 27 years ago now, before the time when many people in the Commission – even at mid-rank level – started work. And most of them hadn't even left school, when just the Customs Union was in force.

What we are seeing – as elsewhere – is a loss of people who were actually involved in the events, coupled with a faulty institutional memory which isn't coping with the influx of new people. Thus, we end up with flawed, sloppy work – not direct lies, as the intent to deceive is not there, but misrepresentation all the same. Perhaps, though, if Commission officials can't get it right, we can hardly wonder that MPs have such a poor grip of the basics.

Certainly, in this game, you need a high level of knowledge, not only to understand the issues, but to be able to detect the many misrepresentations that plague this debate.

Lamy, for instance, concludes his piece by saying that, "Being in a customs union might be better than not being in a customs union". But, to be fair to him, he adds that "it would come with very real downsides too", declaring, "it is important that these are also considered".

And it is there that we find the words that open this piece. It is Lamy who says that the UK now has limited time to make a more informed judgement about what happens next. But then he says: "Whatever it decides, it should do so with its eyes wide open. Otherwise, we could all soon find ourselves back on the cliff edge".

Yet, it seems unlikely that these words will be heeded. The tragedy is that our MPs seem incapable of making informed decisions, simply because they have lost the capacity to inform themselves. From eyes wide open, they blunder around in their Westminster bubble, eyes wide shut.



Richard North 13/04/2019 link

Brexit: nothing is clearer

16/02/2019  


As I write, the BBC website is full of the latest news about Trump and his wall. And, in its own, pompous, arrogant way, it deigns to instruct us on whether there is a crisis on the US-Mexico border.

The BBC website is full of that sort of thing – there is barely a subject on which it does not feel qualified to lecture us, setting itself up as the "go to" authority on virtually every subject under the sun. All too often, it will advertise itself as precisely that.

The scope of that hubris extends, as you might expect, to Brexit. With insufferable arrogance, the BBC hosts a webpage authored by reporters Alex Hunt and Brian Wheeler, claiming to offer: "All you need to know about the UK leaving the EU".

Given the complexity of the subject, that alone should dissuade anyone from making such a hubristic claim, but even more so when the exact meaning of so many issues is contentious – and often hotly argued – and where, in others, careful interpretation is required.

In the first category, there is a more than adequate illustration where the Hunt and Wheeler pair purport to tell us what the European Union is, asserting that: "It began after World War Two to foster economic co-operation, with the idea that countries which trade together were more likely to avoid going to war with each other".

Here, as a co-author of a definitive history of the European Union, I would not agree. With the preamble to the Treaty of Rome declaring the objective as "the ever closer union" of the peoples of Europe, the "idea" of the EU is and always was the political integration of its member states. Economic cooperation was always the means to the end, and never the end in itself.

Some people would claim that this is arguable. I wouldn't, but even if one accepts that it is, that leaves no room for such a definitive, unequivocal statement of the type made by Hunt and Wheeler. This isn't information: it's propaganda.

As to the other category, we can see a more recent example where the pair address the issue of whether Brexit can be cancelled. They claim that the ECJ has ruled that the UK could cancel the Article 50 Brexit process unilaterally, "provided the decision followed a 'democratic process', in other words, if Parliament voted for it".

Yet, actually, that is not what the judgement says, even if the press release, rather unfortunately, has elided some of the text of the judgement to come up with this statement: "The revocation must be decided following a democratic process in accordance with national constitutional requirements".

At this level, though, there is no reference to a parliamentary vote, merely a democratic process, "in accordance with national constitutional requirements". Arguably, the cabinet of an elected government which agreed a decision by the prime minister to revoke the Article 50 notification, followed by the formal revocation initiated by the prime minister, would satisfy that requirement.

Fortunately, however, we don't have to argue the point. We need only to refer to the actual judgement, which (not unusually) differs in detail from the press release.

In its reference to a "democratic process", it declares that refusing to allow a Member State to revoke its notification, after it had decided to do so "through a democratic process", would be "inconsistent with the Treaties' purpose of creating an ever closer union among the peoples of Europe". Interestingly, we see declared the purpose of the Treaties – and it is not economic cooperation.

This section, though, is part of the preamble and only later does the judgement set out the formal condition for revocation, viz:
… as long as a withdrawal agreement concluded between the European Union and that Member State has not entered into force or, if no such agreement has been concluded, for as long as the two-year period laid down in Article 50(3) TEU, possibly extended in accordance with that provision, has not expired, that Member State … retains the ability to revoke unilaterally the notification of its intention to withdraw from the European Union, in accordance with its constitutional requirements.
Strictly speaking, therefore, the only condition which is relevant to the BBC claim is that the notification must be made in accordance with the UK's constitutional requirements. And again, even if you want to assert that this is arguable, a strict requirement that there should be a parliamentary vote (in favour) is an invention.

With this, and much more, therefore, one rather wishes the BBC would tone down the hubris, and confine itself to statements of fact. But there is more to it than that. There are issues relating to Brexit which are both complex and important, and which would benefit from simple, factual explanations. Properly presented, they would immeasurably enhance the quality of the debate. And yet here, as much as in the explanations they do volunteer, the BBC is often singularly lacking.

To look for a topical example, one does not have to go far. Yesterday, I reported on the conclusion of the US-UK MRA on conformity assessment, emphasising its importance and also (then) noting that the BBC had not reported it.

In fact, it took until after midday yesterday for an article to appear on the website and, from the content, it is very clear that the (anonymous) author had very little appreciation of what an MRA on conformity assessment is, much less how important such agreements are.

It would have helped if the BBC had referred to the agreement by the full title that is found in the government press release, where it is referred to as: "The Mutual Recognition Agreement on Conformity Assessment (MRA)".

Unhelpfully, though, not only does the term "conformity assessment" not appear in the BBC script, neither is there any explanation of what the agreement does. Yet, this is clearly set out by the government, in this passage in its press release:
The agreement will maintain all relevant aspects of the current EU-US MRA when the EU-US agreement ceases to apply to the UK. It helps facilitate goods trade between the two nations and means UK exporters can continue to ensure goods are compliant with technical regulations before they depart the UK, saving businesses time, money and resources. American exporters to the UK benefit in the same way.
It would have improved things if a little bit of detail had been added, such as telling readers something about the context. The issue, of course, is about conformity with local regulations – EU-produced goods with US requirements and US-produced goods with EU requirements.

Without the MRA, goods would have to be tested in advance in the countries of their destination or, when intercepted by the customs on entry, would be tested then – causing considerable disruption (and expense) at the borders.

With the MRA in place, manufacturers in the countries of origin can submit their products to approved testing houses in their own countries and certificates of conformity (attesting to conformity with regulations at the point of intended destination) are recognised by the respective customs authorities, without any need for further testing.

This is a massively important agreement, saving huge amounts of time and money - and is no small thing. The basic EU-US Agreement runs to 78 pages, covering telecommunications equipment, electromagnetic compatibility , electrical safety, recreational craft, pharmaceutical good manufacturing practices, and medical devices. Additionally, there is an agreement on marine equipment.

Together with the lists of approved testing houses, the implementing protocol, the procedural agreements and the specifications concerning assessment and supervision of systems, this is a substantial body of work which will do much to facilitate post-Brexit trade between the UK and the US.

All the BBC can grudgingly concede, though, is that "the UK-US agreement is not a free trade deal - which can relax trading rules, reduce taxes (tariffs) on imports and exports, and grant easier market access".

Yet, this is a trade deal. Make no mistake. While it is not a formal Free Trade Agreement in its own right, MRAs on conformity assessment can be found embedded in most of the modern EU trade agreements. So important are the EU's agreements that there is a special protocol in the EEA Agreement extending them to the Efta states – thus enabling "simplified market access".

And it is there that the BBC have introduced an egregious error, declaring that the agreement "is not a free trade deal - which can … grant easier market access". This simply is not true.

A switched-on organisation could do far better than this. It could not only get it right, it might point out that this is how trading nations organise their affairs when they do not want to commit to full-blown free trade agreements. It could also tell us that these agreements are over and above WTO rules and that countries with sophisticated economies would find it very hard to trade without them. WTO rules are not sufficient.

The UK government is to be congratulated for concluding this agreement. It was very necessary that it should have done so. But it was also very necessary for the media to explain what is going on. The BBC tried, and failed. As for the rest of the media, they don't even seem to have tried.

Where the agreement has even been mentioned elsewhere, as in the Independent, the narrative has been side-tracked into personality politics. It is far more important for the newspaper to tell us that Mr Trump has declared trade links had been "strengthened", with lengthy quotes from the president and Liam Fox than it is to explain to us what the agreement is about. All we get in that quarter is that it allows goods made in the UK to be sold in the US, and vice versa, "with less bureaucracy for manufacturers and exporters".

The Evening Standard falls for the same trap, actually providing less detail than the Independent. The Daily Mail, in substantially more space, manages to say even less on the MRA. Oddly enough, the best (although by no means full) report comes from the non-paper, the Daily Express, which parades the story on its front page as "Trump's Brexit boost for Britain". Predictably, although this rag has been at the forefront in promoting the WTO myth, any reference to WTO rules is absent.

And that, sadly, conceals the ultimate irony. Brexiteers are said to welcome the continuation of the deal, thereby contradicting the very claim made by so many "ultras" that the EU doesn't have a trade deal with the US and relies on WTO rules – permitting the UK to do likewise. It does, and it doesn't, which means that the UK is not even trying to. 

But nothing the media is saying makes this any clearer.



Richard North 16/02/2019 link

Brexit: the annals of emptiness

15/02/2019  


I gazed yesterday upon the excitable hacks, prattling away from inside and outside the House of Commons, and their breathless interviews of sundry MPs and pundits. And for all the impact and relevance, I might just as well have been watching Japanese reality television – in the original language.

There have been some votes in the Commons. In one of them, a government motion was defeated, 303 to 258 - a majority of 45 against a motion endorsing the government's negotiating strategy – a strategy that had been approved by the self-same MPs only two weeks ago. 

Why there was even a vote, though, no one has yet been able to explain. For a parliament that is so keen on meaningful votes, this was a meaningless one. The defeat, we are told, has no legal force and Downing Street said it would not change the prime minister's approach to (non-)talks with the EU.

To make the proceedings even more meaningless, some amendments were defeated and another was withdrawn. And since none of these votes had any legal implications either and the government is not bound by anything, we are no closer to ratifying the Withdrawal Agreement. We are, however, a few hours closer to a no-deal.

In the meantime, it seems, Mrs May has vowed to press ahead with her Brexit plan – whatever that is. In a statement from Downing Street, her spokesman declared: "While we didn't secure the support of the Commons this evening, the prime minister continues to believe, and the debate itself indicated, that far from objecting to securing changes to the backstop that will allow us to leave with a deal, there was a concern from some Conservative colleagues about taking no deal off the table at this stage".

The spokesman continued: "The motion on 29 January remains the only one the House of Commons has passed expressing what it does want – and that is legally binding changes to address concerns about the backstop. The government will continue to pursue this with the EU to ensure we leave on time on 29 March".

With that, we await the next episode of the soap opera, scheduled for 27 February. Closer to the day, we'll have to focus on it a bit more, long enough to find out what the plotline is. Then, perhaps – or not – we can put it on hold again until the episode after that, when there will be another storyline to follow.

And yes, I know we should care more about what's going on. But that doesn't include exposing oneself to a gibbering troop of half-trained monkeys, filling the ether with their noise, polluting our screens with their self-important posturing. We've had enough of them. We'd had enough of them a while back. But we've really had enough of them now.

Bluntly, the only thing I want to know now is the result of the next vote on the Withdrawal Agreement ratification. I don't want to hear any more progress reports about non-existent negotiations, and I certainly don't want to hear any more breathless reports about what a television reporter thinks he might have heard in a Brussels bar.

I'm also sick to the hind teeth of profound statements from anonymous "EU diplomats" and from the rest of the corps of willing but anonymous informants that the hacks use to pad out their reports. Those who are not prepared to put their names to their statements aren't worth listening to.

And to the next gormless hack who wants to write yet another puerile piece, headlined, "Six things we've learned …", a word of advice. Stay very clear of me or I will put a bullet in your brains. If I have to read another such article, be it six things, or seven things, or eight, I will put a bullet in my own.

By the way, for the simpering little girlie writing for the Telegraph, the Mexican drug-traffickers' weapon-of-choice is not an "AK57". There is no such thing. It's an AK-47 written with a hyphen, you airhead, the most prolific firearm on the planet, with over 100 million made. Next thing, we'll be told that Spitfires are jet fighters.

As for the rest, there are 43 days left to a no-deal – 43 days for the media to fill their papers and populate their studios – television and radio – with trivia, leaving us none the wiser than we are now. Doubtless, we will be a lot more confused.

Nevertheless, there is some prospect of clarity. If we do drop out without a deal, the media can devote their energies to telling us what a terrible time we're having. But, until then, we are expected to put up with the endless speculation and soap opera.

Back in the real world, though – or what passes for it – the government has a little good news to share after the doom and gloom of my previous blogpost. In a press release released yesterday, the Department for International Trade announced that the UK and the US had agreed to continue their Mutual Recognition Agreement on conformity assessment.

This will help facilitate goods trade between the two nations and means UK exporters can continue to ensure goods are compliant with technical regulations before they depart the UK, "saving businesses time, money and resources. American exporters to the UK benefit in the same way".

Highlighting the importance of this agreement, the release points out that the total UK-US trade in sectors covered by the deal is worth up to £12.8 billion, based on recent average trade flows. Of this, the UK exports covered are worth an estimated £8.9 billion - more than a fifth of total UK goods exports to the US.

The agreement, we are told, benefits a range of sectors, including pharmaceuticals. Pharmaceuticals account for around £7.7 billion of UK exports to the US - nearly 18 percent of total UK goods exports to the US. Other industries that will benefit include the tech sector and telecommunications equipment suppliers.

Furthermore, similar agreements have been signed in recent weeks with Australia and New Zealand (announced on 18 January), ensuring continuity and safeguarding revenues for British businesses and consumers.

In respect of the US, this is the first time I have seen specific figures attributed to this MRA and again it underlines the vacuity of the claims for the WTO option. Although MRAs on conformity assessment are not full-blown Free Trade Agreements, they are powerful tools of trade facilitation, and an essential part of any modern trade relationship.

As a measure of where we are with the media, it is interesting to note that none of the major media organs seem to have published the news about the US MRA. And where the BBC refers to the signing of the deals with Australia and New Zealand (and then only recently), it dismisses them as "mutual recognition agreements" and not free trade agreements, failing to note that they cover UK exports worth an estimated £2 billion.

The essence of this experience, therefore, is to confirm (and update) Mark Twain's observation that those who do not read the news are uninformed while those who do are misinformed. Despite the torrent of media coverage on Brexit, most of it is focussed on the narrow band of activity in Westminster, with emphasis on personalities and confrontation.

Another example of the vacuum created by the absence of information in the media– the annals of emptiness – comes with an article about the fate of Formula 1 in respect of Brexit, covered in some detail by Autosport magazine.

Here we have a leading figure in the industry warning that Formula 1 teams cannot risk having their "heads in the sand" over Britain leaving the European Union without a deal. To date I cannot recall any serious coverage of this issue in the national media. And yet, it was in March 2017 - nearly two years ago – that I wrote a comprehensive analysis on this blog.

Thus, while we can rightly complain about our politicians making a pig's ear of Brexit, considerable blame must also go to the legacy media, both for trivialising the narrative and also for the superficiality of its reporting. What should be a detailed and fascinating record of history being made is reduced to the level of a biff-bam storyline that wouldn't even make it into the Beano.

The politicians are, in fact, the easy target (and no less worthy for that), but the drain on our energies occasioned by the impoverished media coverage is also of note. I think, alone, I could stand the politicians. Have the media amplify their stupidity and they become intolerable.



Richard North 15/02/2019 link

Brexit: a paucity of deals

14/02/2019  


One of the more prominent scare stories during the EU referendum campaign was the claim that, after Brexit, we would have to renegotiate all the existing EU trade deals with over 50 different countries.

At the time, I was suitably scornful about this claim, arguing that we could apply the "general presumption of continuity" in respect of the treaties and request of the parties that they continue to apply the provisions.

Continued participation would not be automatic and the consent of all parties would be required – including the EU where relevant. But the "continuity" process is well-established requiring formal notifications to be made, followed by straightforward administrative procedures.

The point I made at the time, therefore, was that third country treaties were manageable. For the most part, ensuring continuance was a relatively minor administrative task that could be resolved relatively simply. There was (or should have been) no question of any need for major renegotiations.

Latterly, there have been several reports on this issue, including a comprehensive study for the European Parliament, which looked at future trade relations between the EU and the UK. The 52-page report was published in March last year.

To a great extent, the findings confirm the essence of the argument I had made two years previously, in the March just before the referendum. However, it did make the distinction between the transition period and the future relationship.

During the transition period, it noted that the UK would still be bound by EU law in exactly the same way as any Member State. Although non-EU contracting parties could point out that their agreements no longer appeared to apply to the UK, as it was no longer an EU Member State, absolutely nothing would have changed for the export and trade relationships.

On that basis, all that would be needed was for the EU and the UK to confer with the third countries concerned, and to reach an agreement with them. This could be done by simple exchange of letters, whence all parties could continue to apply the trade agreements as before.

Post-transition was not quite as straightforward, as the legal position would be different. Not least, the UK would no longer be an EU Member State, and would not be able to claim that EU law continued to apply in its territory.

The crucial point, though, would be the UK's degree of disassociation from the EU's internal market. Substantial differences would enable third countries to exclude the UK from their EU-related trade deals. Thus, the report said, whether the UK can continue to benefit from EU free trade deals with third countries "will depend enormously on the future terms of EU-UK trade".

Had the UK decided to take up the Efta/EEA option, ensuring treaty continuity would probably have been relatively simple. Most of the third country relationships that we wished to keep up would have survived – long enough, at least, for us to negotiate new deals without any disruption.

At the other extreme, in a no-deal Brexit, the degree of formal disassociation from the EU's trade arrangements would be absolute. The general presumption of continuity would not apply and we would need to renegotiate 50-plus treaties.

Actually, it isn't even as "simple" as that. We have often pointed out that UK trade relations via the EU are not managed entirely through registered Free Trade Agreements. We also rely on a network of trade-related agreements which are not registered with the WTO and therefore do not qualify as FTAs.

Nonetheless, these are vital to the conduct of our trade and, when I last counted, we were the beneficiaries of 881 bilateral treaties between the EU and third countries, together with 259 multilateral agreements.

Now, with a no-deal Brexit beginning to look a real possibility, we need to be looking hard at these agreements. Even if we stick just to the FTAs, it seems we have something of a problem. According to The Sun, it appears that we have something like 70 FTAs that need renegotiation to cope with a no-deal, with the government promising to conclude 40 of them by Brexit day.

As it turns out though, the likely number that will be concluded is a mere six. Four have already been agreed: Switzerland – signed on Monday - Chile, an Eastern and Southern African block, and the Faroe Islands. Two more deals, with Israel and the Palestinian Authority, are "on track".

Fairly obviously, this relative lack of success is down to international trade secretary, Liam Fox – he who, at one time, boasted that: "The free trade agreement that we will have to do with the European Union should be one of the easiest in human history".

He made a similar sort of claim for the rest of the trade deals. In October 2017, during a fringe event at the Conservative Party Conference, he famously promised that the UK would easily be able to copy and paste all 40 of the EU's external trade deals "the second after midnight" on Brexit day.

"We're going to replicate the 40 EU free trade agreements that exist before we leave the European Union so we've got no disruption of trade", he told his audience, adding – to resounding cheers: "I hear people saying 'oh we won't have any [free trade agreements] before we leave'. Well believe me we'll have up to 40 ready for one second after midnight in March 2019".

All he has left now is to play down his failure, insisting that trade deals are "not a numbers game". The focus, he says, should be on the "proportion of trade we can maintain".

Unhelpfully, one of Fox's civil servants, speaking for him, "would not deny the leaked tally's grim prognosis". Instead, he pointed out that, in 2018, around 12 percent of UK trade took place under formal EU Free Trade Agreements. The Guardian then put the numbers together, recording that the concluded trade deals covered just £16 billion of the £117 billion relying on the trade deals.

Furthermore, when the impact of the additional non-FTA agreements is taken into account – on which we rely for much of our £45 billion exports to the US and our £22 billion to China – then the lack of continuity could prove devastating to our overall export effort. Agreements such as the comprehensive Mutual Recognition Agreement (MRA) on Conformity Assessment with the United States are every bit as important to our trading performance as the FTAs – many of which actually include such MRAs.

Directly confirming the essence of the European Parliament report cited earlier, Fox does at least say that the best way to avoid disruption is for parliament to ratify the Withdrawal Agreement. This, he says, which would maintain Britain's current trading relationships for the duration of the two-year transition deal, until alternative arrangements could be made.

What he doesn't say, but perhaps should, is that the situation makes a nonsense of the "ultra" claims about the WTO option. Clearly, if trading solely under WTO rules was all that it was made out to be, we wouldn't have Fox struggling to replace the EU trade deals before we drop out of the EU.

If we ever get so far as to suffer a no-deal Brexit, those who believe that WTO rules will sustain UK trade will at least be fully acquainted with their folly.



Richard North 14/02/2019 link

Brexit: the zombie plan

04/02/2019  


A series launched recently on Netflix has Natasha Lyonne playing Nadia Vulvokov in the series Russian Doll. Not dissimilar in broad concept to Groundhog Day, the central dramatic device is for Nadia to be killed over and over again, each time to restart her life at exactly the same point – in the toilet of her friend's apartment, where a party is in progress celebrating her birthday.

The parallel between this and Brexit is obvious, particularly the notion that there are technical fixes that will enable the Irish to avoid a hard border in the event of a no-deal. That zombie idea has died almost as many times as Nadia in the eight-part series but, no sooner dead, it reappears in the toilet of No 10 Downing Street.

In its latest iteration, it has taken on the mantle of the "alternative arrangement" that Mrs May so desperately needs to satisfy the ERG and dispense with the Irish backstop which is holding up progress on the withdrawal agreement. It has thus acquired the unlikely sponsor of home secretary Sajid Javid, who yesterday assured Andrew Marr that this was a viable proposition.

Months ago, this great sage asked the Border Force to advise him, looking at what alternative arrangements were possible. And, he told Marr, "they've shown me quite clearly you can have no hard border on the island of Ireland and you can use existing technology".

Thus, according to our home secretary, "It's perfectly possible". We don't even need magic wands or powdered unicorn horn to sprinkle along the border. "The only thing that's missing", he says, "is a bit of goodwill on the EU side".

I must admit, it's a little bit worrying to discover that we have a cretin for a home secretary, but then you just can't get the staff these days. But, while there is no one in his own department who can call him out (and keep their jobs), at least we have the former director general of the UK Border Force (UKBF) prepared to do the honours.

This is Tony Smith CBE, who now runs his own border security consultancy. He took to Twitter to explain that the UKBF had an operating mandate agreed with Ministers which set out what checks are made by the UK.

Currently, some of those checks are electronic, some are hands-on. UKBF does people and goods checks but not in Ireland. There, due to the Common Travel Area and the Single Market, these are not necessary. And should they arise, he says, "tech" can go a long way, but it "can't fix this alone".

"We need to understand", says Smith, "what needs to be checked before we can deploy tech". And that depends upon what the Customs partnership will look like and what regulatory alignment is agreed between the authorities either side of the border.

Currently, we have bilateral agreements with neighbours such as the CTA with Ireland and Sangatte/Sandhurst with France. These inform what checks are done, where and how. And what checks can be done by one country on behalf of the other.

So, Smith advises us, "the key is in the protocol". And "tech" is then just a tool that follows that. We have good systems in place (as does the EU) for electronic checks, but without some clarity about the regulatory framework on either side it is hard to say how this will work in practice.

Bilateral or multilateral agreements can reduce the level of checks needed and "tech" can go a long way. But it needs to be seen as part of a border transformation programme within a regulatory framework, and not a solution in its own right.

And that, of course, doesn't take into account the sanitary and phytosanitary checks, to say nothing of product conformity checks in the absence of a Mutual Recognition Agreement on conformity assessment.

If there was any doubt still to be had, though, that goodwill could fix it, we had Sabine Weyand enter the fray once more, this time directly to address the issue of whether technology could solve the Irish border problem. Her short answer was: "not in the next few years".

In fact, she was being generous. Not ever will "tech" be the answer. It must always be worked in with the regulatory framework and, as long as there is no-deal, there is no framework to work with. Javid, like so many others on this issue, is simply gibbering.

Yet, despite that, Mrs May is due in Brussels this week, "Battling for Britain" over the miasma of "alternative arrangements", apparently seeking a compromise solution that will involve the EU conceding that the backstop should have a unilateral withdrawal clause or a built-in end date.

Neither of those will be agreed by EU negotiators, so if that is the extent of her mission, she is already doomed to failure. But, it seems, the "ultras" are determined to make it so, with their insistence that the backstop is scrapped entirely and replaced by the aforementioned "tech".

Given that the prime minister is already on a path to failure, though, it seems hard to accept The Times narrative that she is being set up to fail by the hardliners. Mrs May is quite capable of failing all by herself without any outside assistance.

Nevertheless, we are told that Downing Street is going through the motions, setting up a new working group to explore the possibilities of implementing the so-called "Malthouse compromise", a scheme so mad that I have not even bothered to publish an analysis, in the expectation that it would soon self-destruct.

I suppose I should have known better. As with the "WTO option", the madder the scheme and the less likely it is to work, the more likely it is that it will be taken seriously by the politicians and the media. In the working group, we are to see a mix of Brexiteers and Tory remainers, including Nicky Morgan, Steve Baker and Owen Paterson, chaired by the current Brexit secretary, Stephen Barclay.

These people will now waste their time pondering over the application of technology to the Irish border, on which basis the "cunning plan" is to get the EU to abandon the withdrawal agreement altogether – with the backstop - allowing an extended transitional period while the details of a new departure agreement are worked out.

It does not seem to matter how many times Barnier and other senior EU officials have said that, without the backstop, there will be no withdrawal agreement and, without the withdrawal agreement, there will be no transitional period. This, after all, is a zombie plan, ready for its next appearance in the Downing Street toilet.

That almost certainly keeps us on track for a no-deal exit, even if there is now talk of the EU agreeing to a "codicil" to the withdrawal agreement – whatever that actually means. More likely, we are led to expect that pressure will increase for a delay to Brexit, simply to allow us more time to prepare.

It is presumed that "the scales will fall from Theresa May's eyes" this week, when she gets the cold shoulder from Brussels and realises that her "Battle for Britain" is over before it even started. Then, she will put her energy into convincing the "colleagues" that they need to give her more scope to organise the self-destruction of the UK.

Nevertheless, we can be reassured by Liam Fox. He has recognised that it would not be in the UK's best interest to leave without a deal, admitting it could put the economy "into a position of unnecessary turmoil".

Even then, he argues that, "We would be able to deal with that scenario", asserting: "we have got to guard against two things. One is an irrational pessimism that says that everything will be a catastrophe and irrational optimism which says everything will be okay". The truth, says Fox, "lies between the two".

This, doubtless, will give us endless comfort as the zombie apocalypse gathers force, and we find the streets littered with the corpses of abandoned Brexit plans - and Nissan motor cars.



Richard North 04/02/2019 link

Brexit: gridlock

08/01/2019  


Forced to decide whether a Secretary of State might be lying or is simply ignorant, I think I would prefer to choose the former. The idea of senior government members not knowing what they are doing is not one with which I am terribly comfortable.

When it comes to the Secretary of State for Transport, though, I would find it more difficult to accept that he is lying. It is the easiest thing in the world to believe that, in Chris Grayling, we have a man who would struggle to get to grips with the Ladybird book of motor cars. Tootles the Taxi might be more his level.

Thus, when yesterday he delivered a written statement to parliament, updating MPs on the government contracts with ferry operators, one has to give him the benefit of doubt on his more dubious claims, and assume that he doesn't realise the errors he is perpetrating.

What particularly sticks in the craw is the way the assertion that the Department for Transport has completed a procurement process to secure additional ferry capacity between the UK and the EU gets transformed into a process of providing additional freight capacity, as if they were the same things.

It is not pedantic to say in this context that, when it comes to ro-ro ferries, these ships do not carry freight, as such. They carry lorries and it is those that carry the freight – assuming they are loaded, which is not always the case. About a third of the lorries travelling on ferries from the UK to the continent are returning empty.

Measurement of capacity, though, is rather more complex, as we are not so much talking about individual ferries or lorries, but of the tonnage that can be delivered via the combination of the various routes to their final destinations in a given period.

Comparing lorries with a the same load-carrying capacities, if one group takes twice as long to deliver the goods via a specified route than by another, and if a similar number of ferries transporting them can only hold half the number of vehicles, that route capacity is only a quarter of its comparator.

Given that this will apply, to a greater or lesser extent to the routes chosen by Mr Grayling for his largesse, and his ferries are not carrying additional lorries but those displaced from the Dover corridor route, the net effect of his intervention will actually be to reduce the overall capacity. The lorries concerned will be engaged in the load delivery (and return) for that much longer. They and their drivers will not be available to carry fresh loads. To maintain the capacity, many more lorries will be needed.

Nor does it stop there. Mr Grayling tells us that, in addition to the Seaborne Ferries plying the Ostend route, Brittany Ferries and DFDS will run from the Ports of Immingham and Felixstowe (DFDS) and Poole, Plymouth and Portsmouth (Brittany) to destinations in Germany (Cuxhaven), the Netherlands (Vlaardingen) and France (Caen, Cherbourg, Le Havre, and Roscoff).

Yet, if one adds in Ostend, only two of the destinations (Cuxhaven and Le Havre) are serviced by Border Inspection Posts. Although Vlaardingen is close to Rotterdam, it is the wrong side of the river for traffic to access its inspection centres.

On that basis, the actual load-carrying capacity for these routes, in delivering foodstuffs, is nil. Even if temporary facilities were provided, one might expect the ports to become so congested that their load processing capabilities might be seriously limited, especially as there are low numbers of ramps, and very few of the double-deck type.

It is certainly the expectation of the French authorities that there will be congestion and delays, which suggests that, if there is any sense behind the Grayling scheme, it is not in providing additional capacity. Rather, it is a way of getting urgent goods into the UK, by-passing the blockages on the Dover corridor.

If that is the case, then it would be helpful if Mr Grayling would say so. For the very limited capacity afforded to be actually put into use, it would suggest that the Dover corridor had come almost to a complete halt, and there was a real danger of food and other essential supplies, such as medicines, running out.

Putting a little meat on the bone, we now have some UK academic research which is endeavouring to model more accurately the effect of delays at the ports. This is the UCL, which is assessing the impact of different processing times for outbound journeys using Dover's existing layout and traffic flows. It anticipates that extra customs checks of up to 40 seconds per vehicle would have no impact on the queuing time for outward journeys through Dover.

However, if delays reach 70 seconds per truck, a queue of between 1,200 and 2,724 heavy goods vehicles is expected, leading to tailbacks taking six days to clear. "[The queue] starts Monday evening and ends by Saturday noon", the UCL estimates. However, if the processing time goes up to 80 seconds the result would simply be "no recovery". The whole country would be gridlocked in a massive traffic jam.

This research was actually commissioned by the DfT, and if it is giving the right picture, the traffic from Ramsgate won't be able to get clear of the port, as it will be caught up in the Dover congestion.

This is especially the case if separate research by Imperial College London has got it right. It predicts "paralysis" on the M20 motorway and A20 trunk road if new customs delays are introduced. Nearly five hours of traffic delays in Kent is predicted at peak times, with an extra two minutes spent on each vehicle at the border tripling existing queues on the M20/A20 to 29 miles.

The worrying thing about this research, though, is that it is only one of "a number of documents commissioned" by the DfT since the 2016 referendum. The UCL work was presented to ministers in 2017 but never published.

Perhaps, though, one might have to change one's view of Grayling. On the basis of this, he undoubtedly knows far more than he has been letting on. One can see why he is so keen to get the extra ferries in place.

It also explains, to an extent, the otherwise inexplicable road tests from Manston yesterday, when a meagre 90 lorries were used to rehearse procedures in the event of disruption arising from a no-deal Brexit.

What is so frustrating about all of this, though, is that modelling all seems predicated on congestion on this side of the Channel, with very little understanding or information about conditions in the continental ports.

It is there where the longest delays might be. Forget 80 seconds. It can take 2-3 hours to process one load through a BIP and throughput is limited by the number of bays. More time still can be taken if multiple consignments of different foods are presented for inspection.

On top of this, one has to recall that, in the event of a no-deal, UK notified bodies are no longer recognised and, without a mutual recognition agreement on conformity assessment in place, their third party certification of regulatory conformity will no longer be valid.

Unless very stringent measures are imposed, UK exporters will doubtless be attempting to continue sending goods to the continent which, without the valid certification, will not be admitted. No doubt, French and other national customs and trading standards officials will be inspecting large number of vehicles in anticipation of intercepting these prohibited goods.

The food trade, therefore, is only part of the problem. Lorries used to ship a wide range of manufactured (non-food) goods, bearing CE marking, will also come under extra scrutiny. Full loads might take considerable time to inspect.

Here, there is the question not only of secure inspection bays, but the handling equipment and manpower needed for the labour-intensive processes of unloading and reloading vehicles. Then, if re-testing of goods is permitted, numbers of vehicles and/or trailers may have to be detained for several weeks, awaiting results.

Nothing of this seems to be factored in. UK media coverage of the problems is scant, and even French publications are taking the issue more seriously than one finds in the UK. Sometimes, I find myself having to do a double-take, wondering if these issues are somehow not real.

Sadly, though, just because the media ignore a problem does not mean it doesn't exist. The problems, if anything, have been massively understated. In the event of a no-deal Brexit, cross-Channel trade will be on the brink, with gridlock the inevitable consequence.



Richard North 08/01/2019 link

Brexit: panto politics

20/12/2018  


Either of two major events yesterday should have led the news agenda: the UK government's White Paper on immigration, and the publication of the European Commission's contingency plan to deal with a "no deal" Brexit.

That, however, is to reckon without the British media. Rather than deal with the hard stuff, the political media have chosen to lead on an incident during PMQs, when Jeremy Corbyn is said to have called Mrs May a "stupid woman" – a claim which he denies.

With this given front-page treatment, the politicians are in the frame for what is described as "panto politics", but no one has forced the media to give such extensive space to this charade.

As to the substantive issues, the immigration White Paper is of little immediate concern. It is predicated on the UK agreeing a deal with the EU, and is not intended to take effect until after the transition period at the end of 2020.

Between then and now, all manner of things might happen to prevent it coming to fruition, not least a "no deal" Brexit which would wreck all the assumptions on which the White Paper is based. And since a no-deal is beginning to look to be the most likely option, that puts the Commission plan on top of the list for attention.

One can see why our media might fight shy of it though. It is not one document but a series. It starts with a press release, moves on to COM(2018) 890 final, which is the plan itself, and then to Memo on questions and answers. 

It doesn't stop there, though, as the plan links with a list of legislative initiatives and other legal acts needed to implement the plan, 14 of which were published yesterday alongside the plan, to add to the eight already in place.

The Commission makes no concessions to the triviality of the UK media and its love of all things superficial, and it offers only limited personality quotes on which reporters prefer to hang their stories and base their headlines. If you want the detail, you have to work at it, which means that reports, such as that which the Telegraph has to offer, are extremely limited.

Typically, as in The Times piece, Jean-Claude Juncker gets pride of place, saying that no deal would be a disaster and that "British MPs" needed to back the withdrawal agreement to avoid it. "The risks of a disorderly exit of Great Britain from the EU are obvious", he is cited as saying. "It will be an absolute catastrophe". He adds: "The Commission is trying, as well as the Member States, to prevent this disorderly exit from the union, but it takes two to tango decently".

Thus, according to the press release, the measures will deal only with areas where a "no-deal" scenario would create major disruption for citizens and businesses in the EU27. These include financial services, air transport, customs, and climate policy, amongst others. But they will not mitigate the overall impact of a "no-deal" scenario, nor will they compensate for the lack of stakeholder preparedness or replicate the full benefits of EU membership.

Turning to the COM final for the detail, this sets out the basic parameters governing the plan, stating that measures should not replicate the benefits of membership of the Union, nor the terms of any transition period. They have to be temporary in nature and, crucially, they are to be adopted unilaterally.

With this, there is to be no "managed" no-deal exit, and what the EU gives unilaterally it can take away when it so pleases. Measures will remain in place only to suit EU interests, and then only as long as needed – by the EU.

For all that, one has the idiot tendency in politics, with Tory MP Michael Fabricant claiming that the EU has "blinked", making a "managed no deal" workable. Yet, Fabricant is not on his own, with The Sun sharing the sentiment, calling the contingency plan a "boost for Brexiteers as EU blinks and launches plans to make No Deal work". The report then cites Jacob Rees-Mogg, who declares: "This fits in with the idea of a managed No Deal".

A more sensible view comes from the Irish Times, which sums up by saying that the Commission has made it clear that it "will take some unilateral steps to limit the damage – making sure planes can fly and banks can continue to clear some transactions in London". But it says it will not collude with the UK in coming up with some kind of managed agreement to try to take the pain out of a no-deal.

Just visiting the four headline issues should disabuse anyone of the Fabricant fantasy. Financial services leads with some interesting provisions, which illustrates the Commission's thinking.

In order to mitigate financial stability risks, temporary and conditional equivalence will be afforded for 12 months, to ensure that there will be no disruption in central clearing of derivatives. But that isn't doing the UK any favours. Simply, the Commission has concluded that EU-27 companies need this time to put in place fully viable alternatives to UK operators.

For services provided by UK central securities depositories, there is also a "temporary and conditional equivalence" afforded, but this is to last 24 months. Again, it is to allow EU-27 operatives time to find alternatives. And then there are certain technical adjustments, allowing contracts to be transferred to Union holders without falling foul of the European Market Infrastructures Regulation.

As to aviation, the Commission has tabled a proposed regulation which will maintain "basic air connectivity" with the UK, extending to the UK only the basic four of the nine freedoms.

What this means is that UK registered airlines will be able to overfly the airspace of EU Member States, make landings for technical purposes and fly passengers from the UK directly to destinations within the EU, and pick up passengers headed back to the UK. Intermediate pick-ups and all forms of cabotage are gone – with freight as well as passenger traffic.UK carriers will no longer enjoy the right to provide intra-Union air services.

There are also extremely limited waivers on safety provisions, extending the validity of certain licences and certification for a period of nine months.

All the Commission has done here is take the action necessary to "avoid the abrupt interruption of activities in the area of air transport", and it does not make pretty reading. UK air carriers, for instance, will be required to obtain an operating authorisation from each Member State in which they wish to operate – potentially 27 separate authorisations to enable EU-wide operations.

Another point to take on board is that this is most definitely a unilateral arrangement. It requires from the UK a commitment to reciprocity, which makes it another example of coordinated unilateralism, thereby not qualifying as a bilateral deal.

Furthermore, the Commission's regulation explicitly prevents Member States from negotiating or enter into any bilateral air services agreements with the UK, and they must not otherwise grant UK carriers any rights other than those granted in its Regulation.

And, down on the ground, there are basic concessions on road haulage for a period of nine months. These will allow UK operators temporarily to carry goods into the Union, provided the UK confers equivalent rights to Union road haulage operators.

When it comes to customs, however, there are effectively no concessions. This is where the full force of the "no deal" scenario is going to hit hardest. Says the Commission: "All relevant EU legislation on imported goods and exported goods will apply as of the withdrawal date. This includes the levying of duties and taxes and the respect of the formalities and controls required by the current legal framework".

As befits the UK's status as a third country, Member States are enjoined to "take all necessary steps" to apply the Union Customs Code. This makes a nonsense of Raab's supposition that, if we hit procedural blocks in Calais, we can simply transfer business to Rotterdam or Zeebrugge. The Member States will be applying the Union code and what applies to one port applies to them all.

Additionally, all the relevant rules on indirect taxation to all imports from and exports to the United Kingdom will apply. That means VAT, from which a whole load of grief will descend.

Then, to top off the misery, the time-limits for lodging entry and pre-departure declarations will apply, with the Union Customs Code delegated regulation amended to require goods to be notified to the customs authorities at least two hours before arrival at the port of entry. That should ensure a good measure of chaos at Dover.

The technical changes to climate policy complete the headline list, but it is in the customs area that the hardship will be seen. The official controls on live animals and products of animal origin will apply, which will prevent any UK exports until the appropriate listing formalities are complete.

Mutual recognition of conformity assessments will no longer apply, which means that conformity with EU standards of goods sent to EU destinations will have to be verified at the border – with extensive and expensive checks when deemed necessary.

And then, of course, there are the technical provisions for medicines, medical devices, car manufacture, chemicals and cosmetics – to name but a few sectors. Each will have their own problems, and their own hurdles to surmount.

And then there is the Irish contingency action plan - all 131 pages of it. Don't expect any significant media attention though. The fourth estate is no longer in the business of doing news. We are in the world of panto journalism to match the politics of the madhouse.

And we really can't afford this. If there is to be a sensible response in parliament to the ratification vote, then MPs above all else must be informed about the consequences of a "no-deal" Brexit. Bizarrely, for all their resources, a large number of MPs still rely on the media for their information and here, once again, the media has ducked its responsibility to inform.

We are headed for the most important vote of the century and the memory of the moment when the EU set out its stall will be of whether the leader of the opposition called the prime minister a "stupid woman". When future historians come to write this up, will anyone believe them?



Richard North 20/12/2018 link

Brexit: the invisible deal

14/11/2018  


I suppose one could get excited about the wondrous "breakthrough" on Brexit, news of which is dominating the media. There are however, a few small problems which could serve to dampen spirits just a little.

The first of these little problems concerning which is described as a "technical agreement" between the negotiators, is that no one in the UK - outside the very limited band of officials and cabinet ministers – has actually seen a copy. Nobody currently commenting in public on it, including (or especially) the media, has any certain idea of what's in it.

Secondly, considering that this is supposed to be an agreement between two parties, there is that very odd silence from Brussels, where we have yet to see an official statement. And we are seeing nothing like the situation of December last when the joint statement was published simultaneously on both the Commission and the UK Government's websites.

One can speculate on all sorts of reasons as to why this should be the case, and why this apparent deal is being handled in such an odd way, but the most obvious thing is that Mrs May wants to have the backing of (what's left of) her cabinet before going public, to give her a head start in the publicity stakes.

As with all these things though, the devil is in the detail and, as it stands, there isn't a lot of (reliable) detail to be going on with. We seem to have gravitated from a "no deal" scenario to an invisible deal, redolent of those secret treaties the great powers of old used to sign.

On reflection, I'm surprised Mrs May hasn't thought of this before. If she could keep the withdrawal agreement secret, then there can be no argument over the details and the MPs could cast their votes on what they think the deal means – which is probably what they're going to do anyway.

It stands to reason, though, that the sticking point(s) must have been resolved – or fudged in such a way as to pass muster. And from what we understand, the "backstop" is now "fixed" in such a way that a joint arbitration panel can rule on when it is no longer necessary, although the details are frustratingly vague – which is undoubtedly the intention.

Nevertheless, that which we do know (or don't) has been sufficient for the "usual suspects" to erupt in condemnation, branding the deal a betrayal.

This rather suggests that even if Mrs May gets her invisible deal past the cabinet, she is still going to meet considerable opposition from within her own party – to say nothing of the DUP which, as yet, has not been shown the agreed text.

With the general public – and us mere plebs – in exactly the same position, there is nothing left but, for those who feel so inclined, to await the crumbs from the media table, in the wake of an emergency cabinet meeting scheduled for today. One then presumes that, if Mrs May still has a functioning government, the EU will be prepared to set up its November European Council after all.

Oddly enough (or perhaps not), the Irish cabinet is also meeting today, actually at 9.30, beating the slothful Brits to the punch. They are not due to meet until the afternoon.

Until we all see the detail, though, there is not a great deal of point in adding more noise to the cacophony. If the deal actually goes to parliament, the legacy media will be in its seventh heaven, as it can play the Westminster votes game to its heart's content.

Meanwhile, of a more substantive nature, the Commission has published COM(2018) 880 final. It sets out the "Contingency Action Plan" as part of preparing for the withdrawal of the UK from the European Union. This has to be read in conjunction with COM(2018) 556 final/2, the update of which was published on 28 August 2018.

The document reminds us that, regardless of the nature of any withdrawal agreement, the UK will still become a third country when it leaves the EU and there will be considerable disruption, adding to the earlier document.  In that, Member States and private parties were being called upon to step up preparations for Brexit, following up a request by the European Council to intensify preparedness at all levels and for all outcomes. 

Of special interest to this blog – in view of the amount of coverage we've given the issue – the earlier COM notes that when the UK becomes a third country, and in the absence of an agreement providing otherwise, the strict EU rules in relation to sanitary and phytosanitary (SPS) conditions and controls on animals, plants and their products, will apply to the UK as any other third country.

It then states that trade can take place [only] once the sanitary and phytosanitary (SPS) conditions for the relevant agri-food products and the corresponding certification and control requirements are established.

Physical infrastructures, it says. will have to be put in place to allow all movements of live animals and animal products (including food of animal origin), and certain plants and plant products, to go through Border Inspection Posts (BIPs) at seaports, at airports or at land, as required by EU rules. The capacity of existing posts may need to be increased while new posts will also be necessary.

This only confirms what we've been saying for better than two years, but I am still not sure this message has percolated fully into the collective brains of government, parliament or the media. It is certainly the case that the implications haven't been fully understood. Such issues need to be given far greater emphasis then they are currently getting, as it is most unlikely that there will be a waiver on any of the provisions, which will apply even in the event of a free trade agreement being negotiated.

To an extent, the emphasis on Northern Ireland and the border has been a distraction. Border controls will have real impact on people's lives, and severely handicap our trade arrangements, yet very little planning seems to be in place to deal with the consequences.

In some respects, however, the situation is not going to be as bad as has been feared, and there is some provision for bilateral agreements between the UK and EU Member States. There is reference to this in the Commission's current COM, but the possibilities were highlighted in a recent report to the French Senate, translated by Guardian journalist Kim Wilshire.

The French government, it appears, would be prepared to continue arrangements for the mutual recognition of qualifications, and for agreements "to ensure the continuity of the flows of road transport of goods or persons".

Specifically, the intention of the Government is "to unilaterally recognise in France for a temporary period, on condition of reciprocity, the validity of the certificates and authorisations enjoyed by companies established in the United Kingdom, as well as the professional titles issued in the United Kingdom".

The stated purpose of this is to enable the carrying out of road transport operations of goods and persons by British carriers. This would be done by prolonging at least temporarily the conditions under which these companies operate on the French territory, in order to avoid any sudden interruption of flows to France or in transit on the territory of France.

The Senate report is careful to note that such provisions would only be taken in the absence of measures at Union level, which in many ways would be preferable. Should the UK have to rely on bilateral agreements, everything will have to be multiplied times 27, to give the same coverage that we currently enjoy.

In the French case, either an agreement with the European Union, or failing that, a bilateral agreement with France, would be necessary to ensure that European Union carriers, and in particular French carriers operating in the United Kingdom, enjoy the same advantages as France, those granted in the territory of the Union to British carriers.

Notably though, in COM(2018) 880, the Commission asks Member States to refrain from bilateral discussions and agreements with the UK, "which would undermine EU unity". The caveat, of course, is quite important, but it is also interesting to see that the French Government in some areas is acting unilaterally, while expecting reciprocity. These are not bilateral agreements as such, but coordinated unilateralism.

Such detail has been largely obscured by the "high politics" of the withdrawal agreement, and if we are getting to the point where this is to be resolved, then it would be a welcome relief, allowing us to start concentrating on the many practical issues that need to be settled before the essence of normality can be restored in our post-Brexit relations.

This unusual streak of optimism, though, should not conceal the fact that our earlier analyses have drawn the conclusion that there is no form of words in the withdrawal agreement that can simultaneously satisfy the UK government, the Westminster Parliament, the DUP and the EU.

For all the media hyperventilation, therefore, we are actually no further forward today than we were at the beginning of yesterday, and it remains to be seen whether Mrs May's deal is just a flash in the pan. But as long as it remains the "invisible deal" we can live in hope. It's a pity in a way that it has to be spoiled by such boring things as details.



Richard North 14/11/2018 link

Brexit: the inevitable consequence will be chaos

25/10/2018  


If the day before yesterday, cabinet ministers were being acquainted with the effects of a "no deal" Brexit on the Dover-Calais ferry links, yesterday, it seems was the turn of the aviation industry to pop up and remind people of where they stand if we drop out of the EU without a deal.

This is the Geneva-based International Air Transport Association (IATA), which has been generally rather quiet about the effects of Brexit, but has now issued a press release which outlines "urgent priorities to minimise Brexit impacts".

Although this has been picked up by Reuters, the only national UK newspaper that seems to have reported it is the Guardian.

Even then, details are superficial and none of the reports have thought to point out that the press release is based on a comprehensive study "of the effects of the United Kingdom leaving the European Union on airlines flying to and from the UK", which was also published yesterday.

Yet, in the 91 pages, commissioned from Taylor Airey and Frontier Economics, this is probably the most comprehensive evaluation yet of the effects of Brexit on commercial aviation, not just locally but globally, and from the international body which represents some 290 airlines comprising 82 percent of global air traffic.

Crucially, it notes that, in the event of a "no deal" scenario, there is an understanding that there is a short-term, emergency fall-back position under consideration. But this would only be a "bare bones" agreement, covering the basic third and fourth freedom traffic rights and safety. As such, it would provide only for a "basic level of connectivity".

Says the study, market access would be significantly limited in this case and such an agreement would be expected to be based on very limited mutual recognition of safety standards.

Looking at the possibilities of further deals, the study assesses the effects of a total loss of good will between the UK and EU, as well as each of the Member States. In this event, it surmises that a liberal EU-wide and liberal bilateral agreements "may not materialise". This, it says, would be equivalent to the relationship between Russia and many Western European states, and the resulting limits on air travel.

It goes on to say that the exact level of such limits would be unclear, but if UK-Russia limits were applied to every UK-EU route, there would be five country-pairs which would require a reduction in at least 1,000 flights per week. The equivalent UK and Spain agreement would allow fewer than five percent of current weekly flights to continue operating under UK-Russia limits.

On the other hand, the study points out that, through what it calls "affiliate membership of the European Union - such as the EFTA/EEA arrangement - the UK could maintain its position in the single aviation market".

In this scenario, it says, there would be no change to the regulations, ownership conditions or freedoms facing UK carriers, or facing EU carriers operating routes to and within the UK. The economic impact to aviation would be equivalent to not leaving the European Union at all.

That, then sets out the range of effects to which the UK could be exposed, from a 95 percent cut in international air services to virtually no effect at all. And, on the current trajectory, the former scenario looks the most likely, which has brought IATA into the fray.

Says Alexandre de Juniac, IATA's Director General and CEO, with the possibility of a "no deal" Brexit still on the table this late in the game, it is now essential that the EU and UK civil aviation authorities plan for contingency arrangements to maintain a minimum level of connectivity, which is vital for people and for business.

This, he says, has to be one of the most important Brexit considerations. "A backstop contingency plan to keep planes flying after March must be published, and quickly".

However, despite the impeccable credentials of IATA as an organisation, there is a strong element of political naïveté in its report. De Juniac complains that, "It is ridiculous that formal discussions on the future relationship between EASA and the UK CAA have been forbidden", asserting that: "This is aviation safety we are talking about – the number one priority for everyone connected with air transport and the top responsibility for governments".

The DG goes on to say: "We understand the complexity of the political issues at stake. But safety and security should be non-negotiable", thereby illustrating a somewhat incomplete grasp of those self-same political issues. Agreements between the EU and third countries must initially be made at governmental level and only within the frameworks settled can there be technical discussions between the subordinate agencies.

Politically, and legally, it is not possible for EASA to conclude any agreements with the CAA while the UK is a Member State, and without the EU and the UK having concluded an overarching agreement on aviation – which cannot be finalised until after we have left the EU.

On the other hand, the study authors, Taylor Airey and Frontier Economics, seem to be confused about the possibility of the UK negotiating third country membership of EASA, citing the positions of Switzerland, Norway, Lichtenstein and Iceland.

But, in what is actually an extremely complex situation, they have failed to note that there are unique formal agreements with Efta states which allow them to be treated as if they were EU Member States for the purposes of aviation safety requirements.

This, in fact, is an exceptional situation which is not likely to be repeated. Under the revised EASA basic regulation, there is no provision for third country membership of EASA. Basically, European third countries may only participate in the work of the Agency. And then, not only must they be contracting parties to the Chicago Convention, they must also have entered into international agreements with the EU, in pursuant to which they must adopted and apply Union aviation safety law.

Wrongly, IATA has been led to believe that the most likely outcome of the Brexit negotiations is that the UK will become a third country member of EASA. But since this cannot happen, this leaves as the only credible option the negotiation of a bilateral aviation safety agreement (BASA), the conclusion of which might take some years.

Ruling out the "quick fix" of third country EASA membership actually makes the worst case scenario in IATA's report overly optimistic. Many of the safety issues which might otherwise have been resolved will have to wait until there is a BASA in place, which rather leaves hanging any prospect of a comprehensive agreement on aviation between the EU and the UK.

What this boils down to is that, as far as the aviation industry is concerned, a "no deal" Brexit is simply not an option. The Reuters report has IATA saying that a no-deal Brexit "could wreak chaos for travellers and a nightmare at airports", which is even more certain than the trade association surmises. The effects would most certainly be even more severe than it anticipates, and resolving the issues would be harder and take longer than it suggests.

One therefore cannot dispute the comments of de Juniac at a teleconference to launch his report, where he observed that even a transition period of two years would be a "challenging time frame" to sort out the issue. "But", he added, "if the UK leaves the EU with a 'hard Brexit' in March 2019 then it is hard to see how all this work can be achieved. The inevitable consequence will be chaos".

There is something rather final about the word "inevitable". And when the Director General of IATA uses it, the UK government needs to sit up and take notice.

If Mrs May could tear herself away from her interminable squabbles with her own party, she could even use this to point out to her MPs that chaos in the aviation industry is not something that she could allow. And, in solving aviation's problems, she would go a long way towards resolving the entire Brexit puzzle.

She should, however, be under no illusions. When we first wrote about this in 2014, it was already a serious (and predictable) problem. With the referendum, it came into high profile and the issues were fully apparent in January 2017.

This is not something the prime minister can fudge and, even if the media are currently ignoring it, IATA – however imperfectly – has just marked her card.



Richard North 25/10/2018 link

Brexit: mending Humpty Dumpty

09/10/2018  


It's getting to the point where the reporting on Brexit isn't making any sense. For sure, journalists are trying to second-guess what may or may not be agreed as part of the withdrawal settlement, but we seem to be dealing with people who don't understand how the current system works.

For instance, the ever diligent Guardian is writing about a "new concept" of a veterinary deal between the EU and the UK to cover essential health checks on food produce between the UK mainland and Northern Ireland.

Under present EU law, the Guardian writers say, all products of animal origin ranging from cheese to frozen chicken coming from non-EU countries are required to undergo health and safety checks. Sometimes these involve laboratory tests and often require containers to be fully unloaded at special border inspection posts, they say.

Referring to "health and safety checks" is such amateur stuff, but we can let that pass. But what really jars is their claim that "one of the new suggestions" on the table in Brussels is that the scale of checks could be reduced from 100 percent to 30 percent trade talks go well up to 2020.

The thing is here that the normal rate of inspection is 20 percent. Concessionary rates, as with New Zealand, can drop to as low one percent. A 30 percent inspection rate is no concession at all. 

Making more sense is the assertion that "market surveillance" procedures will continue for goods destined for Ireland. Making no sense at all though, is the next apparent concession. Up until now, we are told, it has been reported that these checks would take place in British ports such as Holyhead and Liverpool. Now, it is understood that under the EU proposals, the checks would be done on premises, distribution centres and ports across the UK.

The point here, though, is that "market surveillance" means what it says – monitoring the performance of a product or system in its marketing environment. Largely, this involves the collection of information from a wide range of sources – from consumer complaints to the results of routine testing by official bodies. Not in any normal context can "surveillance" be interpreted as spot checks at any particular location.

The interpretation of what might be, therefore, is so wide of the mark that there is nothing we can learn from it. It looks as if we'll have to wait until we get some official documentation, where we can see what is really intended (if anything).

The same goes for what might or might not transpire at the October European Council - what people insist on calling the "summit". So far, the consensus from diverse media reports is that nothing formal is going to be submitted, while the Dominic Raab is not even going to Brussels this week.

Mrs May, on the other hand, is insisting that the apparent optimism coming out of Brussels is over-egged, a way of heaping pressure on the UK. She is warning that there are still "big issues" to settle and is demanding concessions on the Irish border issue.

Meanwhile, back in the real world, the truth has a habit of leaking out from the most unexpected of quarters. Via an independent Cornish councillor, we learn that Brittany Ferries are concerned about the impact of Brexit could have on the ferry service between Plymouth and Roscoff.

Brittany Ferries have been warned that every vessel carrying refrigerated goods, food and other natural products may face inspections upon arrival in France after Brexit, with around a third of the 210,000 freight units carried by Brittany Ferries every year affected.

The firm said this would need infrastructure such as huge warehouses to carry out the task and those do not exist in Roscoff and other French ports and it is unlikely to be in place by March next year.

According to this report, Brittany Ferries also said there was a risk that some ports could be excluded from post-Brexit preparations entirely, which would mean there would be fewer entry points into France for hauliers.

The company’s CEO Christophe Mathieu said: "The British may take a pragmatic approach and wave lorries through upon arrival into the UK, but cross-Channel trade works both ways".

"In a worst case scenario", he said, " British hauliers carrying refrigerated goods could face the prospect of far longer journeys – perhaps hundreds of additional miles – to find a French port equipped to process their consignment. When they finally get there they could encounter further delays waiting for checks to take place".

How interesting it is that we haven't had such clarity from other ferry operators, but all Mr Mathieu is doing is stating the obvious, facts already known to readers of this blog for a considerable time. And nothing so far has happened to prevent this becoming the inevitable outcome.

In some respects, though, the situation is worse than is painted. Once we leave the EU, we cannot simply revert to pre-EEC days and pick up where we left off. Some of the systems and procedures which sustained us before we joined no longer exist and cannot easily be restored – if at all.

Before the "completion" of the Single Market, for instance, this country operated a system of meat inspection based on local authority environmental health officers (EHOs), working within a traditional framework of a public health system dominated by medical professionals.

For reasons lost in the sands of time, meat inspections on the continent have developed as centralised services under veterinary control, the basis of which has been used as a model for the EU, leading to the dismantling of the established UK system.

With little in the way of a veterinary public health resource in the UK, however, to run the service in a way alien to the UK has required the import of cheap vets from EU Member States, contracted out by entrepreneurs to the state inspection service to act as "official veterinary surgeons" (OVSs) in UK slaughterhouses. But now that we are leaving the EU, many of those vets are going home and replacements are not forthcoming.

One of those entrepreneurs has become exceedingly rich by exploiting foreign vets, (very often young, recently qualified and inexperienced) and selling their services at top dollar rates, with UK abattoirs forced under EU law to pay for their presence. And now he is whingeing that Brexit "has the potential to decimate the United Kingdom's veterinary, food and agricultural sectors".

This is Dr Jason Aldiss, managing director of the well-named Eville & Jones, who claims that the UK will be "in deep peril" if a post-Brexit deal with Brussels does not include "guaranteed access to properly-qualified vets from other EU states and mutual recognition of professional veterinary qualifications".

There is, he says, already a veterinary recruitment and retention crisis in the UK, and that problem is getting worse. Currently, 45 percent of UK government vet posts are filled by vets from other EU member states and 95 percent of OVSs are non-UK EU vets. With less than six months to go until Brexit, there is still no guarantee than these individuals will be allowed to remain in post.

In the absence of these cheap vets, there are not enough UK vets to do the work. And not only don't they want to do it, they are too expensive. The additional costs would bankrupt the meat industry. However, the EHOs who once did the work are no longer trained for it, and also don't want to do the work.

What we should have done, of course, is sought recognition of our EHOs under EU law, which would have enabled us to maintain traditional (and more cost-effective) services. But now the system is broken, like Humpty Dumpty, it's not going to be possible to put all the pieces back together again.

That will leave the UK struggling to maintain EU export standards, which we've allowed to become based on veterinary inspection, which means that the meat industry will find it increasingly difficult to keep up current export volumes – with operating margins also under pressure.

Nothing of this, though, is understood by the media pundits, and our own government negotiators seem to be unaware of the implications of breaking with the EU. Short of staying in the EEA, nothing is going to fix this in a hurry. Certainly, a free trade agreement is not going to afford any relief.

And this brings us back to where we started with this piece. So few people understand in detail how systems work that they are unaware of what happens when you break them. And then they don't have the first idea of how to fix them.

We thus have negotiators circling round the margins of complex agreements, trying to find political fixes which simply will not deliver the goods. Small wonder the over-riding impression is one of confusion, as the Mrs May's men confront the impossible task of putting Humpty together again.



Richard North 09/10/2018 link

Brexit: parochial English and an uppity Frenchman

29/09/2018  


After the oaf Johnson yesterday refused to rule out challenging Mrs May for the leadership of the Conservative Party, some sense at last seems to be filtering through the system. This comes in an article in The Times what has former Tory deputy chairman Sir Alan Duncan declaring that Tory MPs will never let the Johnson lead the party.

The former foreign secretary, he says, mistakenly believes he can become "Britain's Trump" but has spent all his electoral appeal. His attacks on Theresa May risk seriously damaging the Conservatives and the country.

In a devastating attack on his former boss, he rates him as "an enormous character" but not "a team player", nor "intellectually focused". Further, "he's got a very untidy mind. And he doesn't know if he's a journalist or a politician - but he does know it's all about him".

Regarding Johnson's latest Brexit intervention, Duncan dismisses it as "doubling down into deeper nonsense". Twisting the dagger, he then says: "The more he repeats what everyone can see is not credible the more his own credibility disappears".

As for "his supposed solution", this is "neither workable nor on offer". Says Duncan, "If he thinks he can go into the conference and undermine [Mrs May] I think he's kidding himself. I think the party will be for her and not for him".

If that is the case, we will find out very soon, in which case Duncan's advice to Johnson is sound. He urges Johnson to abandon his ambition to lead the Tories, saying that he would fail to secure the nominations of enough colleagues at parliament. But even if he did, the Tory grassroots would not vote for someone so "reckless". If he pursued his course of action, "He risks bringing everything down".

Addressing party members, he asks them to realise that if they side with those who would attack Theresa May, "they are siding with a course of events which could destroy our prospects for many, many, many years and not be in the national interest".

Duncan is joined by Chris Heaton-Harris, a Brexit minister, who agrees that Johnson's "plan" is neither workable nor negotiable. "No deal is available without a guarantee that there would be no hard border in Northern Ireland in any eventuality, the so-called Irish backstop", he says.

And to complete a critical triumvirate, a government source adds that Johnson "was a member of the cabinet that agreed the December Joint Report - and praised the PM for doing so - and was part of the committee that agreed the customs backstop".

He adds: "The truth is that reneging on those two things would simply guarantee no deal. So this is just another very lengthy article which doesn't offer any answers, rather it regurgitates ideas which would damage our Union of nations and put jobs at risk".

In a sensible world, that would be the end of it, especially when one views the bumbling performance of Johnson when confronted with detail. The man isn't even sound on generalities and if someone would take him to task on his views on mutual recognition of standards, he would most surely fold.

Even without him, when his moronic supporter argues in public that "it is the Germans who usually have the casting vote on key European affairs and will do so on Britain’s exit", it is time to call it a day.

But then, if this was a sensible world, we would not have got into this mess in the first place. The charlatan would not have got as far as he has done; his supporters might have acquired some sense. And it is all very well seeing off Johnson – if, indeed, that is successful. But that still leaves Mrs May with her unworkable Chequers plan, and a clock ticking down to doomsday.

I don't know even if there is any comfort to be taken from the additional support of Sir John Major, who has rounded on the coterie of Theresa May's Brexiters, saying that their behaviour towards her goes far beyond acceptable political conduct.

Lambasting their "daily taunts and dishonesty", combined with a failure to come up with any coherent plan, Sir John said that her Brexit adversaries - whom he did not name, - were attacking Mrs May in a "lurid" fashion and were acting in effect as a party within a party.

This came last night at a public event in South Shields, as recorded by The Financial Times and it seems that the "ultras" are not the only ones who can co-ordinate a media response. And at least some of Sir John's words will have some resonance, when he expresses concern at the way "the prime minister is being attacked by some members of her own party".

It is very much in the nature of the Conservative Party, if it re-asserts itself, that party unity prevails at conference. So it could well be that Johnson has overplayed his hand. Having staked out his claim, he cannot keep playing the odds. At best he is a wasting asset and, if his moment hasn't already passed, it has not much longer to run.

What is different now, though, is that matters cannot be resolved by the parties patching up their differences and agreeing to work together. Beyond the horizon, there is the looming presence of Brussels and it appears that British politicians still haven't learnt the lesson that they can't fudge EU issues.

Thus, even if the outcome of the Conference is for the party to unite behind their prime minister and a single Brexit plan, this is not going to wash with the EU negotiating team. They will be looking to the longer term resolution of Brexit and will not be in the least interested in solving internal Tory party strife.

For once in their lives, therefore, British politicians will need to wake up to the singular fact that there is life outside Westminster and that there are tougher things in politics than an interview with Laura Kuenssberg. M. Barnier and his team are the ones that have to be satisfied.

That much, though, they seem incapable of learning. If they were, surely they would have learnt by now and would not be pursuing the almost child-like tactic of demanding compromises from the EU in return for notional compromises from Team UK – especially when the expectation is potentially damaging to the integrity of the Single Market.

Illustrating the great chasm, we have Liam Fox wibbling about the EU driving the UK towards a no-deal Brexit with its "intransigence", putting the "abstract purity" of the European project ahead of its own economic interests.

However, at least this one politician appears to understand a crucial point. He believes that the Government must now start detailing in public just how bad a no-deal Brexit would be, but then you realise that he hasn't joined up the dots after all. He is talking about the effect on the EU.

"I think", he says – unconscious of the exaggeration – "that it's time we started in public to make that case for why no deal would be economically harmful for European businesses". Fox concedes that, "It would be harmful to British businesses", which is why, he says, "it's better we get a deal". But he goes on to say that: "It's utterly fanciful that 'no deal' would not hurt our European trading partners".

There's an element of "straw man" here, in that few if any are arguing that the EU can escape a "no deal" scenario without damage. Furthermore, the "colleagues" have made it quite clear that they are prepared to take a "hit" rather than sustain damage to the Single Market.

Thus, there is no political gain to be made from accentuating the effects of a "no deal" on mainland Europe – and especially so as the European Commission seems to be in the advanced stages of preparing detailed contingency plans.

What should be done, of course, is properly to identify the full extent of the adverse effects of a "no deal" on the UK economy. As long as the weasel-worded "technical notices" continue, with no continuous effort from government, the enormity of the potential damage will not be appreciated.

The other thing that needs to be done is for Emmanuel Macron to shut up. He may be right in saying that Brexit is much more complicated than [some] Leave voters realised. He could even be right – although this has yet to be demonstrated – that Brexit could "for sure” be stopped.

But the very last thing that is going to have a benign effect on the coming round of talks is for an uppity French politician sounding off. The UK had enough with Charles "deux metres" de Gaulle, and a repeat is not going to go down well.

Macron does say that he does not want to meddle in the debate surrounding a fresh vote, saying: "I'm not the one to decide such a move and I do respect the choice of British voters. So I don’t want to interfere in this debate about a second referendum and so on". All he needs to do here is stick to his word.

If we're squeezed between the parochial English and an uppity Frenchman, we can only fail.



Richard North 29/09/2018 link

Brexit: the madness of Shanker Singham

25/09/2018  


Having flagged up the IEA/Singham paper yesterday, I am more or less committed to writing a review of it, even if it is a dreadful piece of work that is hardly worth the effort – and there are the latest "technical notices" to review, which will have to wait until tomorrow.

It has been billed by Jacob Rees-Mogg as the "most exciting contribution" to the Brexit debate in months yet, only a few hours after publication, Singham's "plan" had been trashed on Twitter and then ripped apart by John Crace with such verve that it should not survive. However, it still gets a better press from The Times than it deserves, which makes it all the more imperative that it is given a timely burial.

In fact, Crace gets it absolutely right. Under the headline, "Hard Brexiters' new plan gets A+ for idiocy", he derides the country's "leading trade lawyer", for "failing to grasp the basics of international trade". And having failed so spectacularly, Singham goes to prove "he really was as stupid as he sounded", suggesting that post-Brexit, "the UK might do some individual trade deals with separate EU countries".

This is part of the Singham fantasy where he advocates an "alternative approach" to the Brexit negotiations. He argues that the UK would seek to put "pressure internally on EU Member States", where there would likely be significant losses in the event of no EU trade deal. These, he says, include Bavaria (cars and dairy), Ireland (beef and dairy), Catalonia (cars and dairy), and Northern Italy (textiles and dairy).

This would amount to manipulating tariff rates, causing many EU producers to have different agendas, allowing divergence between Member States, which the UK could then exploit.

Clearly, we are being enjoined to adopt a variation on the strategy already adopted by the UK, where it has sought to split the Member States from the Commission and then practice its "divide and conquer" techniques to engineer splits in the unity of the members.

But, if we have learnt nothing else from the last two years, the one thing that should have sunk in is that the Member States are rock solid behind M. Barnier, and will not allow the UK to divide them.

Another illustration of the fantasy world in which the IEA and their favourite child, Shanker "Snake Oil" Singham, lives can then be seen in these immortal lines in his report, which address bilateral deals with countries where an EU FTA should be rolled over.

"Negotiations", Singham writes, "should be accelerated to roll over existing agreements and agree a new FTA with EFTA. the (sic) Department for International Trade (“DIT”) should seek to conclude these negotiations provisionally, so they can come into effect on 30 March 2019 in case of no Withdrawal Agreement and no Transition Period".

The reason why this is fantasy is not at all difficult to determine, especially if we take our cue from the Vienna Convention on Succession of States in respect of Treaties , which sets out the customary or settled law on the matter of continuity of treaties.

The essential point made several times in the Convention is that the law would have the effect of requiring the consent of all parties to a treaty before the UK could participate in treaties in which it had previously enjoyed participation by virtue of its membership of the EU.

Since in all the cases where the UK wants to roll over bilateral deals with countries where there is an EU FTA, the EU would, perforce, be one of the parties from which consent would be needed.

There lies the rub. In the event of the UK leaving the EU without a Withdrawal Agreement – a "no deal" Brexit – it is highly unlikely that the EU will give its consent to the UK's continued participation in its external trade deals. With no consent, the treaties simply cannot be rolled over. The UK would have to start again, and negotiate new treaties from scratch.

Given how vital these deals are to the UK, in enabling it to maintain its post-Brexit global trade, it is therefore, essential that we keep on good terms with the EU. And that effectively precludes the UK leaving without a Withdrawal Agreement and Transitional Period. Thus, the core part of the IEA/Singham case collapses.

The actual name of the Singham extravaganza is "Plan A+ - Creating a prosperous post-Brexit UK" but I prefer to call it "Plan A for amoeba", my title representing the number of brain cells expended in producing it. Mostly, it is a tired amalgam of regurgitated Legatum ideas which include the wholly impracticable proposition that the UK can trade with the EU on the basis of "mutual recognition", this giving us the fabled status of "regulatory autonomy".

"The UK", Mr Singham says, "should put forward an open and constructive offer of mutual recognition with the EU. Autonomy would be followed by recognition by the UK of EU regulation, standards, and conformity assessment, meaning institutional competition for the UK, commercial competition from EU imports, and avoidance of unnecessary trade barriers on imports".

Here, one does not have to rehearse, once again, the reasons why the EU cannot and will not accept mutual recognition. Suffice to say that there is no prospect, whatsoever, of this forming the basis of any trading relationship with the UK.

But, if the idea itself is fantasy, Singham then lurches into madness. "If the EU refuses to recognise UK regulations on day one of Brexit", he writes, "the UK should be prepared to take action in the WTO under the GATT and the SPS and TBT Agreements".

Setting out what is involved here, we have a situation in Brexit whereby the UK acquired the status of a third country, whence the EU then applies the full corpus of regulation applicable to third countries – as indeed it must under the non-discrimination rules of the WTO.

Under WTO rules, every contracting party is permitted to frame its own standards and require imported goods to meet them, with the further requirement that conformity may be demonstrated, by means of border checks.

The EU customs code, with the revised version now being implemented, works within the framework of WTO rules and, despite multiple challenges over the decades, has proved WTO compliant. There are no obvious or straightforward grounds on which the UK could base any action.

Yet Shanker Singham, hailed by some as "one of the most brilliant trade experts of his generation" asserts that these established points, which have so far resisted global challenge, can be taken on by the UK, acting on its own.

This silly, dismal, venal little man is so far from the real world that it has become a modern mystery as to why anyone could take him seriously. What he proposes it utterly barking mad, with not the slightest possible chance of success.

Nevertheless, he has just enough brain cells to understand that "such claims can take years to resolve". To Singham, though, that is not the point. The UK, he says, "should use threats of trade litigation to help support its negotiating objectives, as is normal practice around the world".

So here we go: the UK is supposed to re-enter the Brexit negotiations with an "alternative approach" which involves demanding the impossible from the EU against the threat of invoking the WTO dispute procedure, launching cases which would have absolutely no chance of success.

And, despite the EU being fully in compliance with WTO rules, Singham then goes on to tell us that "the purpose of these actions is not because we expect them to cause an immediate change in EU behaviour", but "because this is one of the ways we can highlight that the EU is in fact an outlier in its behaviour".

With only just over six months left for negotiations, just precisely where could that stance take us, except to an ignominious "no deal" outcome? But that then leaves The Times complicit in the Singham madness. "The Brexiteers' alternative comes late in the game", it writes, "and is short on detail, but would be better than no deal at all".

Singham's efforts, courtesy of the increasingly sinister IEA, are nothing but a recipe for a "no deal" Brexit. His facile, nonsensical nostrums go beyond unrealistic into the territory of lunacy, so bad that even the BBC smells a rat. They are an insult to all right-thinking people who have put the effort into exploring what is needed to secure a workable exit plan.

And those who support him, or fail to point out the fatuity of his work, are almost as bad as the man himself. For some, such as Ambrose Evans-Pritchard in the Telegraph - who sees that plan as "a breath of fresh air" - it represents a final retreat into bovine stupidity.



Richard North 25/09/2018 link
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