EU Referendum

Brexit: a leap in the dark


For those of you who have Netflix, you need to play "Whatever happened to Monday?" and run the sequence from 1:12:30 to 1:14:11. The man holding the gun is Barnier, just after reading our Government's position paper on "Continuity in the availability of goods for the EU and the UK", published today.

One can't keep saying this or it really does get boring, but there is no way of dressing it up. The Government has blown it, demonstrating a complete inability to understand (or accept) the consequences of leaving the Single Market and acquiring the status of a "third country".

The key elements of its paper, that confirm we're going to dive off the edge, are set out in the section covering the "principles for an agreement on goods", and in particular, the second section (b) of paragraph 15. This section is expanded into paragraphs 21-28.

What paragraph 15 does is address in brief the post-exit scenario where UK businesses will want to continue exporting goods (and services) to EU Member States. It suggests to the EU negotiating team that:
… to avoid unnecessary duplication of activities and provide legal certainty, where (UK) businesses have undertaken compliance activities prior to exit, they should not be required to duplicate these activities in order to place goods on the UK and the EU market after exit. This includes recognising the validity of type approvals, certificates and registrations issued prior to exit.
In the more detailed passages in paragraphs 21-28, it is then argued that "compliance activity" is on-going and, to avoid unnecessary disruptive transfer of activities between the EU and the UK, the Government proposes that UK assessment bodies should be able to continue their work. It then says that "approvals, authorisations, certificates and registrations issued prior to exit should continue to be recognised as valid".

As any changes to current arrangements could potentially cause a huge amount of disruption, these proposals make a certain amount of sense, except for one small problem. They effectively constitute a proposal that the UK continues to benefit from the advantages of Single Market membership, without being in the Single Market. Once again, the UK Government wants to have its cake and eat it.

By way of an example, the UK wants all medicines with market authorisations which are held by UK firms to continue in force, so that products can be freely exported throughout the EEA. However, as it stands, Union law in the form of Regulation (EC) No 726/2004 requires that the holder of a marketing authorisation "must be established in the Community".

This we pointed out in a long piece in the end of January and then in June we noted that the provisions had been amplified by the European Medicines Agency (EMA). In a terse "questions and answers" document, the EMA had stated unequivocally that market authorisations held by UK pharmaceutical companies would have to be transferred to "a holder established in the Union (EEA)".

This, we remarked, is by no means a simple process (nor cheap) and, with other changes, had the Association of the British Pharmaceutical Industry (ABPI) very worried indeed. Dr Virginia Acha, executive director of research, medical and innovation at ABPI, described the EMA's paper as the "opening chapter" in what she described as a "crisis".

If there were any doubts about this, the Commission on 12 July issued its own position paper on "Goods placed on the Market under Union law before the withdrawal date". In general terms, it stated, that "any good lawfully placed on the single market before the withdrawal date can, after that date, continue to be made available on the market of the United Kingdom or on the single market under the conditions set out in the relevant Union law".

The crucial point here is that goods can only be made available (i.e., supplied for distribution, consumption of use) "under the conditions set out in the relevant Union law". In respect of market authorisation procedures, therefore, the Commission paper stated that:
The Withdrawal Agreement should ensure that risk assessments, approvals and authorisation procedures of biocidal products, plant protection products, and medicinal products (human and veterinary) led by a United Kingdom authority which are ongoing on the withdrawal date are transferred where appropriate to another national competent authority.
In effect, the Commission has already rejected the UK proposal, in general terms and in specific instances. It will not accept that "approvals, authorisations, certificates and registrations issued prior to exit should continue to be recognised as valid". And, just to remind us of this, Michel Barnier posted a link on Twitter to the position paper.

That goods "made available" on the Single Market will be subject to the "conditions set out in relevant Union law" captures a huge swathe of UK exports. As regards the chemical industry and REACH, for instance, UK manufacturers will no longer be able to hold registrations for their products. They will have to appoint "only representatives", based in the territory of an EU Member State. These will then assume all the responsibilities of registrants, as set out in the regulations.

As regards live animals and animal products, the UK wants the EU to all products that have been "placed on the market" to continue to be made available. On the other hand, the Commission position is that "the withdrawal agreement should specify that live animals and certain germinal products, the movement of which has been initiated before the withdrawal date, can be allowed entry into the single market area on the basis of rules governing intra-EU movements".

However, it says, all animal-derived food and animal-derived feed, as well as animal by-products entering the single market as of the withdrawal date "should be subject to the applicable rules for importation". In other words, there are to be no concessions. The goods can be made available, but the full range of Union legal requirements have to be satisfied before that can happen.

There can be no other way. To change its own laws to accommodate the UK would present the EU with considerable problems. Concessions given to any one nation would trigger demands from its other trading partners to treat them in the same way. If it failed to do so, under certain circumstances, the EU could even find itself in breach of WTO non-discrimination rules.

Despite all this, we have the UK Government, with David Davis in charge of this particular bit, actively proposing something that has already been rejected. This is a form of madness for which there is no easy explanation. All one can suggest is that Mr Davis (and his close advisers) simply cannot come to terms with the concept of the UK as a "third country".

Hard to believe, though, it actually gets worse. Following on from the article by Davis in the Sunday Times which we reviewed, we have the Government's position paper reaffirming his views on the Irish border question.

"The border between Northern Ireland and Ireland is the UK's only land border", it says, adding: "It is essential to avoid a return to a hard border, and trade and everyday movements across the land border must be protected as part of the UK-EU deal".

Yet, as I pointed out in my piece yesterday, for the EU to make concessions that permits a "soft" border between Northern Ireland and the Irish Republic, the settlement must be one of a kind, entirely separate from a general UK-EU deal. If it has general application, it will set a precedent, again triggering demands from the EU's other trading partners for equal treatment.

For that powerful reason, the EU cannot accept a bundled deal any more than it can combine the negotiations. The Irish border question must be settled separately and first, before the talks can move on to general trade issues. Furthermore, as Barnier points out, the EU has made its positions "clear and transparent since day one".

By insisting on bundling therefore, looking for a solution that is part of the UK-EU deal, Davis is effectively preventing the talks from progressing. He is creating a situation where time is being spent uselessly on sequencing, instead of actually addressing the issues.

This has the makings of a classic impasse. Barnier will not talk about trade until the Irish question is settled, while Davis insists that we can only settle the question in the context of trade discussions. With Brussels already refusing to change the sequence, these talks have nowhere to go.

The extent of the impasse, though, seems to have eluded the media. Nowhere are we seeing alarm expressed as what amounts to the publication by the UK government of a blocking agenda that will drive the Bexit negotiations to failure.

We see plenty of coverage about what the UK "wants", but nothing of the fact that its demands are entirely irrational and will not be met. The best we get from Sky News is: "UK Brexit plan for goods may not be good enough for Brussels".

The negotiations, therefore, are like a giant container ship run aground. At high tide, only the lack of movement betrays its predicament, but the legacy media hasn't noticed. By the time the waters recede and we see the damage, it may be too late.