Brexit: miracle of the century

03/10/2019  


One of the oddest things about the media coverage of Johnson's "take-it-or-leave-it" proposal is the assumption that Northern Ireland will remain in the single market for all goods – for a period, at any rate.

That most of the media sources are saying the same thing suggests that they are working to some central crib-sheet, possibly produced by one of the news agencies, but it could even have been from a supplementary media briefing produced by the government.

As to the main government briefing, this is to be found in the explanatory note to the "UK proposals for an amended protocol on Ireland/Northern Ireland". And in that seven-page document (including the title page), there is no reference at all to Northern Ireland staying in the single market. What the explanatory note does say is that:
The introduction of a zone of regulatory compliance across Northern Ireland and the EU would remove the need for regulatory checks and related infrastructure at the border between Northern Ireland and Ireland, while enabling the UK and EU to maintain their own distinct customs regimes ((2) 6.).
However, although this is an official government document, there is an assumption which does not compute. Regulatory compliance is required of all exporters to the European Union. It is a condition of entry.

But compliance alone does not buy immunity from regulatory checks at the border. The privilege only comes with full membership of the Single Market, and that requires a lot more than just regulatory compliance. Conformity with the "four freedoms" and raft of so-called "flanking policies" is also required and - as I am continually pointing out - full implementation of what Barnier calls the "regulatory ecosystem".

It may, therefore, be rather presumptuous of the government to assume that, because Northern Ireland continues to comply with EU regulation in the relevant areas, goods are necessarily going to get free passage into the Irish Republic.

Nor is this detail a matter of pedantry. The EU has the integrity of the Single Market to protect, and it must comply with WTO non-discrimination rules. If it allows free access to goods from Northern Ireland into the Single Market, purely on the basis of regulatory conformity, then it will come under pressure from other third countries to allow the same level of access.

Needless to say, the devil will be in the detail – what may be acceptable to the Commission in principle may founder when the two sides have to get together to produce a workable system. And then there is the matter of services. The explanatory note talks only of goods, yet we know that services are a significant part of the trade bundle between the Republic and Northern Ireland – and the free movement of services will not be permitted.

This is a much understated problem. How, for instance, will the Republic authorities prevent a plumber from Northern Ireland darting over the border to service a client's boiler? This, in fact, is an issue which has been addressed on the border between Norway and Sweden, where tradesmen such as plumbers and carpenters are only allowed to take hand tools across the border. How would such restrictions be enforced on the Irish border, without a system of checks?

Furthermore, it is all very well calling for special provisions to be made for small traders – as the UK government is doing. None such apply on the border between Sweden and Norway, they certainly don't apply on the Turkish border and neither do SMEs in Ukraine get any special breaks. If Northern Irish traders are allowed special privileges, how long will it be before there are demands for equal treatment from other third countries?

We also hear nothing about the 20 percent or so of traded goods which rely not on harmonised regulation but on mutual recognition. The concession which permits free circulation of these goods applies only within the Single Market and, despite the media chatter, Northern Ireland will most definitely not be a member of the Single Market.

Taking all this into account, it is hard to see how the European Union will be able to permit the free movement of goods into the Republic from Northern Ireland, without imposing significant conditions and physical controls at the border. It will also be insisting on the ability to supervise and enforce regulatory conformity within the territory of Northern Ireland, while demanding implementation of the regulatory ecosystem.

But then, if the rest of the UK – as indeed is the case – is to go its own way, it will be imposing its own regulatory border between Northern Ireland and Great Britain. That will mean border checks carried out by UK authorities, controlling access of goods into Northern Ireland and, from there, into the Single Market. Again, one would expect the EU to impose its own conditions, including supervision and enforcement provisions, on this arrangement.

Despite this, there is probably nothing here which presents irreconcilable difficulties when it comes to negotiating a final deal, given that the UK is prepared to compromise on its ambition to regain control of its borders, and other conditions can be satisfied.

Here, one sees that the UK is seeking to rely on a trusted trader scheme, but there is an elephant in the room. Without the EU awarding "adequacy" status to the UK under its data protection legislation (which is yet to be resolved, and may take some years), the exchange of personal data required to make a trusted trader system work simply cannot take place.

But, even if such issues can be resolved, there will be a lot of detail to be addressed by negotiators which will require turning into legal prose before an agreement can be finalised. And these matters are only some of the aspects which need addressing, raising the spectre of the negotiators running out of time. With only about ten days left, it seems hardly possible that they can finalise a watertight legal draft in the time.

Then, this assumes that some of the fundamental issues can be resolved – such as the approval system which the UK government seeks to impose, and the four-year cut-off which allows unilateral termination of regulatory conformity by the Northern Ireland Assembly.

This is something which drives a horse and cart through the concept of a backstop. It passes the buck on the border question, leaving open the possibility that there will be a hard border at some time in the future, frustrating the EU's desire to settle on an arrangement which will last into perpetuity.

Another of those fundamental issues which could well prove a sticking point is the UK assumption that the EU will agree to introduce simplified customs procedures, alongside an "ambitious" temporary admissions arrangement. Both will require amendments to the Union Customs Code (UCC) but, given that the EU has only just completed extensive revisions, with the new code not fully in force, it will be extremely reluctant to countenance further changes.

Equally, the proposal on VAT assumes a degree of integration with the EU system that goes beyond Norway and exceeds that afforded to any other third country. This is unlikely to be conceded.

Looking at what is on "offer" from the UK, therefore, the proposal seems remarkably UK-centric, failing to take into account any of the sensitivities or constraints which might limit the EU's response. Something of this comes over in the letter from the prime minister in office to Jean-Claude Juncker, which is almost truculent in tone.

"Both sides now need to consider whether there is sufficient willingness to compromise and move beyond existing positions to get us to an agreement in time", writes Johnson, adding: "We are ready to do that, and this letter sets out what I regard as a reasonable compromise: the broad landing zone in which I believe a deal can begin to take shape".

It comes as no surprise, therefore, that Juncker's response is not exactly gushing with enthusiasm, even if he welcomes Johnson's "determination" to advance talks ahead of the October European Council and make progress towards a deal.

However, he also noted that there were still some "problematic points" that would need further work in the coming days, notably with regards to the governance of the backstop. Another concern related to the "substantive customs rules", while Juncker also stressed that "we must have a legally operational solution that meets all the objectives of the backstop".

The Commission was now going to "examine the legal text objectively, and in light of our well-known criteria", which could be taken as code for saying that it does not conform with those criteria.

Certainly, the vibes do not seem to be favourable, with the predominant Brussels response said to be "dismay". Barnier, we are told, fears that implementing the proposal could prevent Brussels from protecting its internal market.

With EU sources saying that the flaws in the UK's proposals are such that there appears to be scant chance of agreement by the European Council on 17 October, it looks as if Johnson might need to go back to the drawing board. But, since this is supposed to be a "take-it-or-leave-it" proposal, he seems to be on the verge of producing the miracle of the century - turning the European Council into leavers.



Richard North 03/10/2019 link

Brexit: another look at Norway

31/08/2019  


It was not so very long ago that I wrote a piece on negativity, one of several I've written on this general theme. This one concluded that, when it came to Brexit, it wasn't only parliament that was clear on what it didn't want, but without ideas of what it did want. The whole nation seemed stricken by that same, overpowering sense of negativity.

I was minded of this when reading some of the comments to yesterday's piece. There is nothing so certain to bring out the naysayers than offering a solution (or solutions) to an intractable problem.

Here, there is an interesting dynamic at play. Generally speaking, we tend to respond (with more intensity and length) to matters with which we disagree. I'm as bad as the rest, where my longer posts on this blog's comment section tend to be devoted to disagreeing with other comments (although mainly because they disagree with mine).

Posts with which we agree, and especially in areas where we have little personal commitment, we tend (and I am talking about tendencies) to let pass by. And nobody wants to be seen a toady or sycophant. Some of the more disgustingly vitriolic posts that I have had to delete from this site have been those which make quite explicit attacks on readers who have committed the mortal offence of agreeing with me.

On balance, therefore, there is a bias in favour of critical comment. If I write a piece which is critical of either people or things, I can be pretty well assured of some support on the blog. When I promote something, the naysayers come out in force while supporters tend to be silent.

This is not a tendency confined to this blog – not by any means. Most of the newspaper and political sites host huge volumes of hostile comment, so much so that one ventures a contrary opinion with the greatest of trepidation. Comment sites have become the domain of mob rule and the death of reasoned discourse.

If one is to attempt to apply reason to Brexit, therefore, there are likely to be many people who agree with the findings, but say nothing. On a day when my hit-rate might exceed 60,000, the views of maybe 200 commenters (at most) may dominate the post-publication discussion – the majority of their comments may well be contrarian, painting a completely false picture of reader sentiment.

Many of them will struggle to remain on-topic and will seek any excuse to depart from the issues at hand. With some responses, one sometimes wonders whether they've read the posts to which they are linking. In some cases, one wonders whether they've ever read the blog at all.

Nevertheless, in the final analysis – to use that dreadful cliché – reason must eventually prevail. A real world requires real solutions to practical problems and, while the politicians may beat about the bushes for ages before coming to a conclusion, even they eventually have to concede to reality or be replaced by people who will.

When it comes to the Irish backstop, therefore, reason will eventually have to prevail – simply because it must. There is no point at which an unsound doctrine can survive for all time, without something having to give. Mind you, when it comes to Ireland, what might be seen by outsiders as fairly simple matters to deal with have taken centuries to remain unresolved.

However, the backstop is not about Ireland – per se. The trouble is that explaining this gets repetitive and, after a while, one gets tired of repeating the same things. Those pushing the errors, with a wider constituency, thus start to dominate what passes for the debate – simply by dint of greater perseverance.

But right at the heart of this issue is the simple, unalterable fact that, with Brexit, what was once an internal land border in the European Union now becomes the external border between the EU and the newly defined "third country" state of the United Kingdom.

Under any normal circumstances – if there could ever be such a thing in what is a unique situation – there would be no discussion about border controls. They would apply automatically. The analogy I offered, some time ago, still stands.

You must imagine, I wrote, a medieval walled city, inside which the traders happily do business – with the public and between themselves – secure within the fortifications. When a trader (unhappy with the rules and regulations) decides to move his stall outside the walls, he cannot then complain that he is no longer able to trade freely with the people still inside.

It is not as if the authorities of the walled city have decided to impose new barriers between the unhappy trader and the rest. The walls already existed. Our unhappy trader has moved outside them.

Less easy to understand is the fact that we are not dealing with physical barriers but with tariffs and the far more important non-tariff barriers (NTBs) – mostly regulatory barriers.

In the latter event, the only way of restoring trading equilibrium is to ensure not only regulatory alignment but also full conformity with what is now referred to as the "regulatory ecosystem". As again I've pointed out earlier, regulatory alignment is only the starter for ten. We need the full package, which extends way past mere "equivalence" or "mutual recognition".

Now we come to the particular situation of Northern Ireland. If the full EU package must remain in place for there to be frictionless trade, this potentially creates trading barriers between the province and the rest of the United Kingdom – something which is politically unacceptable to a significant and influential Unionist constituency.

Thus, to avoid the creation of what amount to an external border between Northern Ireland and the rest of the UK, the rest of the UK must then adopt the full regulatory package – unless "alternative arrangements" to like effect can be agreed. And if they can't, within the time – that's where the backstop comes in.

Now, when one looks at the situation rationally, it is self-evident that there are very few workable solutions to this impasse. We are not spoilt for choice here and it is certainly the case that the fraudulent "alternative arrangements" worked up by Shanker Singham and espoused by prime-minister-in office Johnson are not a solution.

One thing that would work is the Efta/EEA option, with new, bolt-on protocols covering such matters as customs, VAT and data protection. The UK, with its past history of integration as a member of the EU, would also have to agree protocols which kept policies akin to the CAP and CFP in place. There is too much water under the bridge – so to speak – for us to walk away from these core EU policies. At the very least, we would need a prolonged transition.

Perversely – and certainly unintended – Johnson's prorogation of parliament, thus creating a new parliamentary session, has opened a new window of opportunity for the Efta/EEA option. It allows the Withdrawal Agreement to be represented to parliament as is, and allows for a workable solution to ensure that the backstop never comes into effect.

And that is why the so-called "Norway Option" must be revisited – and urgently. It is the only credible option which will resolve the Brexit impasse. And that's why it will always bring out the naysayers in force – especially those who don't want a solution at any price.

Irrespective of the chance of success - which is slight - it would be remiss of us if we didn't go the last mile to bring to the attention of politicians the one remaining prospect of a successful Brexit, avoiding the economic trauma of a no-deal. The politicians will probably ignore us – as they usually do – but they can't say they haven't been told.



Richard North 31/08/2019 link

Brexit: fantasy politics

22/08/2019  


Laid out unequivocally in the European Council (Art. 50) guidelines for Brexit negotiations is one of the core principles which set the tone for the talks.

Any agreement, the guidelines say, "must ensure a level playing field, notably in terms of competition and state aid, and in this regard encompass safeguards against unfair competitive advantages through, inter alia, tax, social, environmental and regulatory measures and practices".

In short, that means that the UK will not be allowed to negotiate an agreement which puts it in a better position after Brexit than it would have had as a full EU member, and neither can it be allowed to have greater influence over EU affairs than it had previously.

When it comes to the Single Market, these guidelines readily translate into certain unalterable requirements which would, in effect, amount to the EU's own "red lines".

Specifically, a dominant feature of the Single Market is the body of harmonised regulatory standards, and it is an absolute requirement that Member States should conform fully with those standards. Not only that – except under the most exceptional circumstances – traders wishing to export goods to EU Member States must also conform fully with those same standards.

This is the very basis of the Single Market, where huge effort is devoted to ensuring conformity, and any divergence from set standards is rigorously discouraged.

Yet, in his letter to Donald Tusk this week, the man occupying the post of prime minister blithely stated that he was seeking to ditch the backstop, with its commitment to "full alignment" with wide areas of the single market and the customs union. That, said Johnson, "cannot be the basis for the future relationship and it is not a basis for the sound governance of Northern Ireland".

Instead, Johnson has been making reference to "alternative arrangements", which he re-emphasised in Berlin yesterday, saying: "We do think there are alternative arrangements that could readily be used to address the problem of frictionless trade at the Northern Irish border and you'll have heard them before, whether it is trusted trader schemes or electronic pre-clearing. All that type of solution and more besides is what we will be wanting to discuss".

Doubtless, he has in mind "Snake Oil" Singham's Alternative Arrangements Commission and his ideas on mutual recognition – the adoption of which is the only way that frictionless trade across the border could be maintained without regulatory alignment.

And sure enough, no sooner has Mrs Merkel told the prime minister in office that she would be prepared to listen to his proposals for an alternative to the backstop – ostensibly giving him 30 days to come forward with a "practical and workable" scheme – up pops the egregious Singham in the Telegraph.

With a level of hubris which is probably only exceeded by the second Cummings, he blithely declares that the EU leaders "have got it wrong" and that there are plenty of solutions to the Irish border problem.

Then, in an extraordinary statement – even for him – Singham asserts that "it is now recognised that there will be regulatory divergence", going on to say that: "If there is any alignment to be had, it will be alignment of goals. If our aims are aligned and the regulations put in place objectively achieve them then differences in regulation should not prevent mutual recognition".

Of course, it is very far from being recognised that there will be regulatory divergence. This is wishful thinking to a very advanced degree. The essential feature of the backstop is regulatory alignment and the EU has not moved one iota from this principle.

Furthermore, if you stand back from this and consider what is being proposed, Singham is expecting the EU Member States (and the rest of the world) to conform with the Single Market's harmonised standards, while uniquely allowing the UK to set its own standards. It should then enjoy "frictionless" access to the Market which, to everyone else, is conditional on regulatory alignment.

Not only does this give the UK an unfair competitive advantage, it also puts us in a far better position than we enjoyed as an EU member. Inside the EU, we were bound to comply with EU law. Outside, Singham expects us to enjoy all the benefits of the Single Market without having to trouble ourselves with conformity with its most fundamental precept.

And should the EU actually allow such a situation, not only would it be in breach of its own principles, it would be driving a cart and horse through EU rules, and in particular the requirement to apply the same rules to all its trading partners.

Thus, should the EU allow the UK to work on the basis of mutual recognition, it would be under enormous pressure to open that concession to all its other partners. The Single Market, as we know it, would cease to exist.

Clearly, there is not the slightest chance that the EU is going to accept Singham's idiot proposal and it is to the eternal shame of the Telegraph that they give space to such a lamentable absence of realism.

Nor indeed does it stop there. Where currently the UK enjoys the benefit if mutual recognition, where there are no harmonised standards, that provision ceases on Brexit – deal or no deal. Mutual recognition of standards applies only to fully-fledged participants in the Single Market.

While variously estimated as accounting for as much as a fifth of our trade in goods with EU Member States, I cannot recall seeing any serious discussion in the media or by politicians about this loss, yet there can be little dispute that it will represent a severe body-blow to the UK.

The inability to address such points does, of course, reflect poorly on both media and politicians but there seems to be no limit to the degree to which the likes of Singham are given undisputed platforms to perpetrate his disinformation.

Despite his assertions being demonstrably false, Singham is still allowed to claim that the challenge of sanitary and phytosanitary measures, as well as the requirements for veterinary checks at Border Inspection Posts, " could be solved by moving facilities away from the border and utilising mobile units wherever possible to carry out checks".

Not anyone, it seems, in either a select committee or on the editorial staff of a national newspaper – nor even in critical trade groups – is capable of looking up the relevant EU law to show that these claims are entirely fabricated. And, as long as your lies are bold enough, the Telegraph will print them.

But where this fantasy takes us is anyone's guess. If Johnson is relying on Singham's "alternative arrangements", then he is going to come a cropper. A scheme based on lies and misinterpretations is not a sound basis for public policy, but it appears that Johnson doesn't have the wit to realise this.

Nor does he seem to understand that Merkel is not talking about reopening the negotiations on the Withdrawal Agreement. All that is on offer is another massage of the political declaration, which can hardly deliver more than we have already seen with the Strasbourg Agreement. Johnson is not going to get the backstop removed.

If there was even the slightest doubt about that, today he meets Macron over lunch in Paris, where officials warn that a no-deal Brexit is now regarded as "the most likely outcome", while Macron is taking pains to emphasise that a renegotiation at this point "is not an option".

Scrapping the backstop, he says, is "impossible", presenting the EU an unacceptable choice between protecting its internal market by reintroducing border controls at the Irish border, or preserving peace on the island.

A French official puts the issue nicely in context, saying that: "If the UK considers that having a backstop is absolutely excluded, that is its right, but in that case it limits the possibility of reaching an agreement". And it was supposed to be the British who were masters of understatement.

Macron, though, is even more forthright, pointing to a "British democratic crisis" over Brexit. "The British were asked to choose, in perhaps a simplistic way, without the government telling them how it would be done" he says.

"Many lied about how it would be done, and democracy couldn't find a majority to apply what people decided. It's unheard of, but that's what we're living. We have to help the British deal with this internal democratic crisis, but we mustn't be hostage to it nor export it".

It comes to something when we have a French president lecturing us on a "democratic crisis", but before Brexit is over, I guess we'll be seeing a lot stranger things. Fantasy politics are fast becoming the new norm.



Richard North 22/08/2019 link

Brexit: a suicide note from Number 10

20/08/2019  


Yesterday, the man occupying the post of prime minister sent a letter to the president of the European Council, with copies to each of the 27 heads of states and governments, plus a further copy to the president of the European Commission.

The content was nothing new – simply Alexander Boris de Pfeffel Johnson reiterating the points previously made. He condemns the backstop as "anti-democratic and inconsistent with the sovereignty of the UK as a state" and then proposes that it should be replaced with a commitment to put in place alternative arrangements as far as possible before the end of the transition period, as part of the future relationship.

He also deigns to "recognise" that there will need to be "a degree of confidence about what would happen if these arrangements were not all fully in place at the end of that period". And, out of the goodness of his heart, he tells Donald Tusk that "we" (presumably, the UK government) "are ready to look constructively and flexibly at what commitment might help", consistent with the principles set out in his letter.

So transparent is this ploy that, within hours, the Guardian was writing that the initiative "appears intended to portray Johnson as willing to negotiate with Brussels, even though he is making a demand for the abolition of the backstop that they have repeatedly rebuffed".

By last night "Brussels sources" were once again ruling out any renegotiation of the Withdrawal Agreement, including the backstop. "There was a two and a half year negotiating process in which the EU compromised, including on the question of the backstop", someone described as "a well-informed source" was telling the Guardian.
The withdrawal agreement is not open for renegotiation and the backstop is not open for change. A legally operable backstop to avoid a hard border remains central to the withdrawal agreement for the EU27.
And, as the momentum built up, others joined the fray, stating that the letter was a "clear attempt" to kill off any prospect of renegotiating the Brexit deal, which leaves no "room for compromise".

Another of those wondrously anonymous EU diplomats said Johnson had failed to put forward any "realistic alternatives", adding that "hope and imagination" would not prevent a hard border. By calling for the backstop to be abolished in its entirety, Johnson was effectively ruling out any prospect of the EU offering any concessions.

Earlier in the day, however, Johnson had been insisting that he was "confident" the EU would buckle and give into his Brexit demands, agreeing to renegotiate the terms of the Withdrawal Agreement.

Said Johnson, it was "fine" that Brussels was currently opposed to changing the Withdrawal Agreement as he outlined his belief that the EU will drop its "reluctance" to shift its stance when it comes to the crunch.

And with that, nothing has changed since the very start, when it has been an article of faith amongst the hard core leavers that the EU will give in at the 59th minute of the eleventh hour, as long as we threaten a no-deal and stand firm, intimating that we are fully prepared to deal with the consequences.

That, of course, is the other half of the crass stupidity emanating from Number 10 with Johnson burbling about preparations for a no-deal, saying: "I'm not pretending that there won't be bumps on the road […] but if everybody puts their minds to it, I have absolutely no doubt that we can get ready" – even though the leader of the CBI said it was impossible for companies to be fully prepared for the disruption that would happen if the UK crashed out of the EU without a deal.

The essence of his stupidity, though, is expressed in Johnson's letter, where he re-affirms that the UK is "unconditionally committed to the spirit and letter" of our obligations under the Good Friday Agreement, whether there is a deal with the EU or not.

One assumes that this necessarily means the maintenance of a "soft" border. Although we don't see Johnson make specific reference to this, he does say that his government "will not put in place infrastructure, checks, or controls at the border between Northern Ireland and Ireland", stating that "we would be happy to accept a legally binding commitment to this effect", hoping that "the EU would do likewise".

Unfortunately, what he then says has the effect of making this impossible, by declaring:
Although we will remain committed to world-class environment, product and labour standards, the laws and regulations to deliver them will potentially diverge from those of the EU. That is the point of our exit and our ability to enable this is central to our future democracy.
The point he then acknowledges is that the "backstop is inconsistent with this ambition", misinterpreting its requirement in asserting that it required "continued membership of the customs union" and the application of "many single market rules in Northern Ireland".

A careful reading of the protocol, however, will not reveal any specific requirement from Northern Ireland to stay in the EU's customs union. Rather, it requires "full alignment with those rules of the Union's … customs union", which is actually a different thing.

By shadowing the EU's schedules of tariffs agreed with the WTO – which we already intend to do – and by committing (by way of a political declaration) to conforming with the EU's common external tariff, we would be able to maintain "full alignment" with the rules of the customs union, without formal membership of the customs union.

Nevertheless, Johnson's letter declares that we cannot "continue to endorse the specific commitment, in paragraph 49 of the December 2017 Joint Report, to 'full alignment' with wide areas of the single market and the customs union. That, says Johnson, "cannot be the basis for the future relationship and it is not a basis for the sound governance of Northern Ireland".

Yet again, reference to the offending paragraph of the Joint Report shows the commitment, in the absence of agreed solutions, "to maintain full alignment with those rules of the Internal Market and the Customs Union" – which is not the same as membership.

But at the heart of the problem here is Johnson wanting to reserve the right for UK standards to "diverge from those of the EU". It is that, in his view, which makes the Withdrawal Agreement, and the embedded Protocol untenable, notwithstanding that the ability to secure "frictionless" trade demands full regulatory alignment.

Undoubtedly, in making reference to "alternative arrangements", Johnson has in mind "Snake Oil" Singham's ideas on mutual recognition – the adoption of which is the only way that frictionless trade across the border could be maintained without regulatory alignment.

If that is what he has in mind, then his initiative is doomed, illustrated by an air of unreality as Johnson blathers, "Now of course our friends and partners on the other side of the Channel are showing a little bit of reluctance at the moment to change their position".

There is simply no prospect of the EU moving away from an absolute requirement for regulatory alignment, not least because any deviation from that principle would prejudice the integrity of the Single Market. Concessions would create precedents, and require similar treatment to be afforded to all the EU's other trading partners.

The net effect of Johnson's letter, therefore, is to set in stone a determination to force the EU into setting up a hard border between the Republic of Ireland and Northern Ireland.

There can be no other outcome and it is thoroughly disingenuous for him to "hope" that the EU will be able to avoid "infrastructure, checks, or controls at the border". There is absolutely no way the EU can allow an unguarded back door into the Single Market.

It is, therefore, completely unsurprising that Johnson should have spent almost an hour on a phone call to the Irish premier, Leo Varadkar, only for the conversation to end in stalemate. A joint statement was released, acknowledging no progress over the issue of the backstop.

The prime minister in office has agreed to go to Dublin for talks with Varadkar in early September but, before that – this week - he is to see Merkel (in Berlin for dinner on Wednesday), before moving to have lunch with Macron in Paris on Thursday, ending up at the close of the week with a meeting of world leaders at the G7 summit.

Predictably, Downing Street sources are saying that they are not expecting any end to the deadlock this week, and nor should they. There will be no end to it. Johnson has just written the suicide note for the UK, ensuring that no-deal is our only destination on 31 October.



Richard North 20/08/2019 link

Brexit: trading confusion

14/08/2019  


I've been taking a back seat on the John Bolton controversy, where president Trump's national security adviser has said the UK is "first in line" for a trade deal with the US and, what is more, claimed deals could be done on a "sector-by-sector" basis, with an agreement on manufacturing made first.

According to Bolton, a bilateral agreement or "series of agreements" could be carved out "very quickly, very straight-forwardly". A trade deal for financial services and agriculture would not be the first to be agreed, he added, then declaring that "doing it in pieces" was not unprecedented.

Predictably, this reference to "doing it in pieces" has brought the pundits out in force, with the likes of BBC economics correspondent, Andrew Walker, telling us that "there is a problem with sector-by-sector trade agreements". They are not, he avers, "compatible with WTO rules", which say free trade agreements for goods should cover "substantially all the trade".

And while he concedes that there is no formal definition of that latter term, he will have us believe that a figure of 90 percent "has often been suggested". Thus does Walker maintain that, "It is unlikely a deal covering a few sectors would qualify. Other WTO members could start a dispute and would, on the face of it, have every chance of winning".

Needless to say though, in matters of trade and WTO rules, things are never quite as simple as the Janet & John pundits make out. For instance, two Sussex University academics at the UK Trade Policy Observatory, Emily Lydgate and Alan Winters, recently offered an analysis of what they thought the WTO might or might not permit in respect of a Free Trade Agreement (FTA) between the UK and the EU – a scenario that might reasonably be expected to have some application to a UK-US deal.

As one might expect, they concede the Janet & John point that, "WTO rules prohibit Free Trade Areas (FTAs) that provide tariff-free access or services liberalization in only one or a few sectors". In this sense, they say, "a narrow, sectoral approach to concluding an FTA between the EU and the UK would contravene WTO law".

However, in grown-up dealings there is always a "however". Assuming the EU and the UK were able to agree a substantially broad tariff-free FTA, our Sussex academics write, WTO rules would not prevent them from moving further to maintain the bulk of the benefits of the Customs Union and the Single Market in a few key sectors. In the abstract to their 29-page paper, they go on to say:
They could establish customs union-like conditions by coordinating external tariffs in some sectors and agreeing on relaxed Rules of Origin (RoO) administered lightly and Single Market-like access could be approximated through sectoral Mutual Recognition Agreements. Such an approach would enable continued deep integration, whose desirability has been signalled on both sides. It would fall short of current market access levels even in the selected sectors, and, in the case of tariff coordination, re-create some of the limits to an independent trade policy that Brexit aimed to remove. If the trade-off were deemed desirable, however, the approach could be reconciled with WTO rules including the 'Most Favoured Nation' requirement that equal treatment be awarded to all WTO Member States.
Without putting too fine a point on it, therefore, it would be more correct to say that, as a general rule sectoral agreements between developed countries are not permitted. But there are circumstances where parties can pursue such agreements. And even where the precursor might be the agreement of a "substantially broad tariff-free FTA", any tariff reductions required can be phased in over a number of years.

Despite this, in the popular media (even the supposedly "quality" end), Janet & John prevails. Thus we have Jeremy Warner in the Telegraph - who seems to have assumed the role of the paper's licensed Cassandra – writing that, "Post-Brexit trade policies are in danger of becoming an incoherent desperate mess".

He concedes that Mr Bolton "presumably knows his stuff when it comes to national security" but, says Warner, "he plainly has very little idea about trade". Sadly, though, in seeking as explanation as to why his "sector by sector" suggestion "falls at the first hurdle" under WTO rules, our licensed Cassandra relies on Lorand Bartels, lecturer in international trade at Cambridge University. He sternly instructs us that "you cannot normally discriminate between trading partners".

Thus we are enjoined, in relentlessly Janet & John terms:
Offer a special favour to one nation, and you have to offer it to all other WTO members. This so-called "Most Favoured Nation" principle is there to ensure that trade remains as open and free as possible.

There are, however, exceptions, one of which is a bilateral free trade agreement. But here’s the problem. The rules stipulate that such FTAs must cover substantially all trade between the two nations, usually defined as about 90 percent of it. If partial arrangements were allowed, it would open the door to precisely the sort of discrimination the rules are meant to outlaw. On the face of it, then, Mr Bolton's suggestion is a non-starter.
Lorand Bartels, of course, is the man who told us that, "the customs union is essentially what you do in order to get rid of customs border posts", despite the EEC's customs union (CU) having been completed in 1968 yet internal Community borders not being finally abolished until 1992.

Challenged on this, Bartels turned out to be a somewhat sensitive soul, eventually telling me that, "When I said the point of a CU is to get rid of border checks I meant CUs are necessary, not sufficient for this. You misunderstood".

Thus this "leading academic" was incapable of error. When he wrote: "The customs union is essentially what you do in order to get rid of customs border posts", we should have known that he actually meant: in order to get rid of them, it is necessary to have a customs union, but not sufficient.

And then there is the reality of the Single Market which, if it was extended to all products and services, could also allow the elimination of customs border posts without the need for a customs union. Things such as rules of origin could be dealt with administratively, without border inspections.

I suppose his reappearance as Warner's guru proves that you can never keep a bad man down. But what he and most – if not all - the other pundits seem to have missed is an EU press release in April of this year announcing that the European Commission had been authorised to open negotiations with the United States on two agreements.

The first was a trade agreement limited to the elimination of tariffs for industrial goods only, excluding agricultural products, while the second was an agreement on conformity assessment. This would remove non-tariff barriers, by making it easier for companies to prove their products meet technical requirements both in the EU and the US "while maintaining a high level of protection in the EU".

As I pointed out in my own piece, reporting this development, this new initiative had followed on from the failure of TTIP, while discussions on the elimination of tariffs was being confined to industrial goods – excluding automobiles - thus avoiding the contentious agricultural chapter which brought the Doha Round to a premature halt.

This is in addition to the joint ventures between the EU and the US on International Regulatory Cooperation (IRC), all pointing to the development of extensive trade cooperation between the parties – highly discriminatory yet short of a Free Trade Agreement which would conform with the WTO's definition.

One might also note that Turkey has agreed a Customs Union (a type of FTA within WTO law) with the EU which excludes both agriculture and services, thus embodying exactly the same exclusions to which Bolton was referring in respect of a UK-US deal.

Whether one can be optimistic or pessimistic about the outcome of post-Brexit trade negotiations between the UK and the US, the problems the parties will encounter do not seem to be entirely (or at all) in the area that the self-appointed pundits would have us believe.

Perhaps the more serious obstacle is the question of whether Congress will ratify any deal agreed by the Trump administration, especially in the context of reservations expressed in the US legislature about the impact of the Irish backstop.

But then, the bigger problem yet is the absence of a trade deal between the EU and the UK, where our exports are currently more than twice the level of US trade, 40 percent of which are services. The US, for all its apparent willingness to do a deal with the UK, may be a dangerous distraction.



Richard North 14/08/2019 link

Brexit: no-deal predictions

02/08/2019  


I wonder if it is a coincidence that an "internal government document" on the potential consequences of a no-deal Brexit has been leaked to Sky News, especially as the "document" is merely a single slide from a presentation made during the May regime – apparently during the last few weeks of her tenure, although we have no evidence of a date.

The slide (pictured above) bears the header, "What this could look like on the ground" and is marked "Official Sensitive- for discussion – not government policy". It apparently sets out a worst-case scenario, with summaries covering the first day, the first fortnight and the first month and was, according to Sky News, shown to some cabinet members but not the whole cabinet.

What strikes one of the first day scenario, though, is the superficiality of the analysis. Its assertion that "trade and passenger flows from the UK to EU slows" is undoubtedly correct, although it is unlikely that this will be because of "additional process at border" – which the slide suggests.

As we've discussed before, the 31 October is a Thursday, which means that the first day of Brexit will be a Friday – then, of course, followed by the weekend. The best guess here is that most businesses will hold off sending consignments to EU destinations for the first day, and even the following week, until they get some feel for the situation.

Thus, we expect to see a drastic fall-off in commercial traffic, driven entirely by business sentiment. The residual volume will probably present little challenge to the customs and other systems in EU ports, so it is most likely that delays will be minimal.

Another oddity in the slide is an assertion that "UK vessels could no longer have access to EU waters and vice versa", with obvious consequences for the flow of trade, and particularly the operation of ferries on the cross-channel routes.

That this is considered a potential problem is actually rather strange, as shipping access to maritime states is not directly an EU competence, with rights of "innocent passage" (which includes access to ports) guaranteed by the United Nations Convention on the Law of the Sea (UNCLOS).

Maritime states are permitted to impose certain conditions covering the access of shipping to their ports. This applies very much to the ports of EU Member States, where EU law sets requirements for pollution standards and safety inspections. However, these are dealt with in a Notice to Stakeholders, with the publication of a regulation covering the continuation of ship inspections.

Nowhere is it suggested by the European Commission that mutual access of shipping to ports, as between the UK and EU Member States, might be a problem, while both the Commission and Member States are working on the assumption that ship movements will continue.

This, therefore, raises some questions as to the authority of the Sky News "scoop". If this represents the best analysis the government has to offer, then perhaps we need to be worried about the lack of grip.

Nonetheless, the day-one scenario does go on to state that UK nationals in the EU "may lose access to services and resident rights", which could possibly be true. A number of Member States have drafted laws granting UK citizens in their territories rights to remain, but most of these depend on UK reciprocity, which has yet to materialise.

And on the matter of services, those UK citizens who provide services in EU Member States may find that the cessation of mutual recognition of qualifications prevents them from working, effectively rendering them unemployed.

This is not raised by the slide, but it does deal with Northern Ireland, stating that cross-border agricultural trade would "virtually stop" with other trade slowing, while the legal basis for the single electricity market "falls away".

Here, the first of these issues is entirely speculation. In truth, no one knows what might happen in Ireland on day-one of a no-deal Brexit. It is quite possible that, for a short period, Brexit proves a non-event while the relevant authorities work out what to do. And then, the implementation of restrictions may be a slow burn, with a long period of light-touch enforcement.

It is probably fair to say, however, that trade generally will slow down. In fact, this is already happening as Irish exporters look to buyers in the EU to replace UK trade.

As to the electricity market, cross-border transmission will doubtless continue. Even without a legal base, the relevant Notice to Stakeholders points out that Commission Regulation (EU) No 838/2010 provides that a transmission system use fee is to be paid "on all scheduled imports and exports of electricity from all third countries which have not adopted an agreement whereby it is applying Union law". This will apply to the UK, providing a mechanism – albeit less flexible – for the continued trade in electricity.

Then the slide confronts security issues, noting that UK law enforcement will be "working via non-EU security channels". Once again, this is already happening as the UK is being progressively excluded from Europol and is increasingly reliant on Interpol. The erosion of capabilities, though, is likely to be a slow burn and will probably not materialise as a major issue on day one.

Finally, for day one, the slide notes that there will be "volatility of currency and financial markets". Given the current slide in the value of the pound, this is almost certainly going to be the case, and may prove to be the dominant feature of a no-deal Brexit.

This brings us to the first fortnight, where the slide asserts that we could potentially see consumer panic and food shortages, "even in areas which are not directly affected at the border".

Given that panic buying could at any time strip stocks from the shelves, giving the impression of shortage even when there are adequate supplies, this dynamic could be a feature of Brexit at any time, even in the lead-in to 31 October. This is something over which the government (and retailers) have no control and much will depend on public sentiment.

In addition to this, we also get told that there could be possible friction at sea between UK/EU fishing vessels. This, though, I doubt, as vessels flagged with EU Member States will not be permitted by EU law to fish in UK waters unless there has been an agreement on fisheries management plans between the EU and the UK. A re-run of the "Cod Wars", therefore, is – in my view – low down in the order of risks.

More likely is the slide's assertion that unlawful data transfers may lead to enforcement action by EU regulators, leading to disruption of [data] flows. In fact, this is one of the understated risks of a no-deal Brexit, the impact of which could be colossal – bearing in mind that it usually takes much longer than a fortnight for EU regulators to act.

And then there is "continued volatility of currency and financial markets", together with the "potential for disruption of debt markets". These possibilities are undeniable.

Coming then to a month post-Brexit, the slide suggests that small businesses in Northern Ireland may face distress, and there will be potential law and order challenges. UK nationals may be unable to meet new EU Member State residency requirements and may start returning to the UK, or asking the government for help. And, on the domestic front, the heightened policing resource may prove unsustainable and operational gaps will "continue to emerge".

All of these are realistic possibilities, as will be sterling settling at a lower level, with near-term business disruption, leading to calls for support through operation Kingfisher – the government's "secret" Brexit bailout fund.

If anything, though, the slide shows just how difficult it is to predict the effects of a no-deal Brexit, or to rank the effects in terms of seriousness. One could also suspect that the authors had not read the European Commission's Notices to Stakeholders.

However, with the situation changing as Johnson is prepared to throw money at mitigating the effects of a no-deal, the most powerful take-away from this exercise is how poorly informed ministers were of the consequences. And this is likely to be the current state. The higher up the tree they go, the less they seem to know.



Richard North 02/08/2019 link

Brexit: preparation is a cruel hoax

30/07/2019  


If one takes a cold, hard look at the current situation, we have to conclude that we're in the Tipperary scenario – to get there, we wouldn't start from here.

Probably, the only way we could have secured an orderly Brexit was for MPs to have ratified Mrs May's Withdrawal Agreement. Once parliament bottled it for the third time, and the Tories decided to go for a new leader, it was effectively game over. A no-deal Brexit was the inevitable destination.

Arguably, though, there was still one potential window of opportunity. A new prime minister could have approached the European Council to ask for another extension. He could then have used the additional time to broker cosmetic amendments to the political declaration, and then perhaps to call a snap election, creating a mandate for the "new" position, which parliament could not ignore.

However risky that might have been, it would have held the promise of a solution to the Brexit impasse. But, instead, by committing to Brexit on 31 October, the current occupier of the post of prime minister has closed down his options.

Not only do the terms of the current extension specifically exclude using the time to renegotiate the Withdrawal Agreement, the European Union – even with the best will in the world – could not handle the mechanics of new negotiations and conclude a revised deal by 31 October. This is simply not possible.

For Johnson thus to declare that he is willing to negotiate with the EU, as long as it removes the backstop, rather misses the point. For the EU to conduct negotiations with the UK, it must follow the Article 238 procedure set out in the Treaties, the steps of which simply could not be concluded in the short time available.

It would help, therefore, if Johnson – perhaps for the first time in his life – told the truth about something and admitted that his "no ifs, no buts" policy leads inevitably to a no-deal Brexit.

Short of a change of heart where he applies for a last-minute extension, there is no other possible outcome. His precondition that the EU should remove the backstop is a red herring. And his assertion that the odds of a no-deal were a million to one, is of no value: He posits that this requires "sufficient goodwill and common sense on the part of our partners", when what he actually means is that the EU should concede something it has already said it will not.

As well as a first-time venture into the realms of honesty, it might also help if a man to whom the words "f**k business" came so easily, applied them to the source of all our troubles and simply said, "f**k parliament". No-deal is the default option under Article 50 and there is absolutely nothing parliament can do to stop this administration sitting on its hands and letting the clock run down.

With the position clearly stated, acknowledging only the inevitable, the media might also stop its tedious speculation and focus on the one event over which there is any certainty – that we are leaving the EU on 31 October without a deal. Then we can concentrate on the consequences of this outcome, giving the media hackery time to find out what exactly is involved – assuming that any of them are capable of learning.

That would also save us from being patronised by the likes of Dominic Raab (pictured), in his unlikely guise as foreign secretary. Currently, he is taking us for fools by asserting that the UK would be better able to negotiate with the EU after no-deal Brexit, and secure a "good deal". He also asserts that a "stubborn" Brussels would be to blame if the UK crashed out on 31 October.

Taking the last point first, we can see where Raab is going with this, and it very much seems to be part of the Johnson strategy to blame the EU for not doing something it cannot do. But then, in this propaganda game, one doesn't expect the Johnson administration to dally with the truth – given that he even knew what it was.

As to Raab's assertion that the UK will be in a better position with the European Union if it crashes out at the end of October, the man actually seems to believe that a no-deal scenario could provide more leverage when arguing for a free trade agreement and in resolving long-standing issues such as the Irish backstop.

How precisely this works, Raab doesn't seem to specify in any detail. All he can manage is the argument that we would be an independent third country and thus "less subject to effectively the demands of the EU as we are now".

Unsurprisingly, it didn't take EU officials long to intervene and reject the foreign secretary's thesis.

Apart from anything else, one can expect in the immediate aftermath of a no-deal exit, a certain amount of diplomatic frigidity – possibly extending to a full-blown war of words as the two side get stuck into an acrimonious blame game. This could hardly be conducive to calm talks on the future relationship between the UK and the EU.

In fact, says one senior diplomat, a no-deal departure "would mean the complete breakdown of political relations". He doesn't think there would be much trust on the EU side with the Tories, or with Johnson. "Eventually", he says, "we would get around it because we are pragmatic, but this would be really, really bad, because of all the rhetoric around blaming".

Another diplomat, who actually spoke before Raab's intervention, argued that all contact would cease after a no-deal Brexit. "Our phones will not be connected at that time … I don't think they will be connected to someone who has reneged on their obligations", he said.

But what could turn out to be the real "killer" is that the EU would undoubtedly demand preconditions to any talks. If the matter hadn't already been settled, citizens' rights would be high on the agenda. Then the EU would require commitments on the financial settlement and an agreement on the Irish backstop.

In other words, the UK would be no better off in terms of securing a settlement than it is now, with the added proviso that, if the UK was seeking some form of trading agreement, it could well be looking to four or five years before talks were concluded. There would be little incentive for the EU to expedite matters.

What is missing, therefore – as always – is any sense of reality. In the years between leaving with a no-deal and concluding a free trade agreement, the UK would be in a third country no-man's land, where our exporters would have to confront both MFN tariffs and the full range of non-tariff barriers. A substantial reduction in the flow of exports to EU Member States would be an inevitable consequence.

Still, though, the government and even the CBI is maintaining the fiction that we can somehow prepare for our new status as a third country.

For sure, businesses can address certain paperwork issues, such as the preparation of customs declarations, but we cannot prepare for such issues as sanitary and phytosanitary checks at EU Member State borders. These will be conducted after Brexit, but will be entirely outside our control – our exporters will simply have to conform with whatever regime is imposed upon them.

Nor can firms prepare for the fact that the service elements of trade currently conducted will be very difficult to pursue, made especially difficult where mutual recognition of qualifications lapse. It will be very hard to move personnel freely about the continent in order to deliver services.

Perhaps of greatest significance, no business will be able to prepare for the major change in status that comes with us leaving the Single Market. Whereas a UK enterprise can at the moment ship goods to EU Member States without formalities, after Brexit they will find that their goods come under customs supervision when they enter the EU, and can only be released for circulation by an importer, who must be an entity established (and resident) in the European Union.

This change has scarcely, if at all, been discussed in the UK but the change to requiring goods to be placed in charge of an EU-resident importer represents a major barrier to trade, and an active disincentive to EU buyers. For instance, while currently a UK exporter to the EU retains legal responsibility for standards conformity, post-Brexit the importer becomes liable, with significant cost and legal implications.

To that extent, much of the preparation for a no-deal Brexit rests not with UK businesses but with either authorities or businesses in the EU. Bearing in mind we have no control over these processes, we are increasingly in the hands of others, upon whose goodwill we will have to rely. So much for taking back control.

With the Commission no longer monitoring – nor seeking to prevent – barriers to trade between the UK and EU Member States, we can also expect individual states (and businesses) to introduce hurdles which will give them a competitive advantage and make it more difficult for UK businesses to trade.

This will be especially the case for the 20 percent or so of products where there are no EU harmonised standards, and mutual recognition of standards falls away. UK enterprises will suddenly find themselves having to conform with a raft of local standards that many of them didn't even know existed. And without that knowledge, they are hardly in a position to prepare.

In short, a no-deal Brexit is a leap in the dark and there are very severe limits on the amount of preparation that can be done. For the main part, we will not find out where the problems lie until after we have left, by which time it will be too late. Talk of "turbocharging" Brexit plans, therefore, is little more than a cruel hoax.



Richard North 30/07/2019 link

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
20
















Brexit - the first year - New e-book by Richard North
Brexit - the first year - New e-book by Richard North
Buy Now





Log in


Sign THA
Think Defence





The Many, Not the Few