Should the UK stay in the EEA after Brexit?

This revised version of Anthony Scholefield’s briefing note can also be downloaded as a pdf here.

We don’t start with a ‘clean sheet’

If we were considering ideal future trading arrangements for the UK from the basis of a clean sheet, it would probably not be sensible for the UK to join the European Economic Area [EEA].  However, the decision to remain in the EEA is quite different from a decision to join the EEA from outside.

Today, the UK does not face a clean sheet.  The UK has been in the EEA for 26 years (40 years in the EU) and its trade has developed in this environment.  Following the decision to leave the EU the question of whether to change trading arrangements is only one of a number of political decisions the government has to take.

Background

The background fact to be borne in mind is that a huge part of the UK’s export trade has always been with Europe.  According to Professor Ashworth, in his ‘Economic History of England, about 40% of UK gross goods exports in the mid-nineteenth century went to Europe.

The definition of ‘Europe’ in the nineteenth century was different from the EU of today, of course, and included the Russian Empire but, notably, excluded Ireland

Free Trade Agreements

The underlying rationale of any trading agreement is not free trade but an increase of trade between the participants at the expense of third party countries.  Indeed, a ‘free trade’ agreement is a contradiction in terms.  It will also usually benefit producers at the expense of consumers in the participating countries.  But the point is that such ‘agreements’ cause trade to flow in certain ways which are not ‘free trade’ but once actioned have costs when they are dismantled.

Political advantages of staying in the EEA

It is very important to consider that staying in the EEA will massively reduce the political upheaval and workload of the government organising Brexit, reassure business, achieve a degree of national unity and make it easier to negotiate on other matters with the EU which will favour this scenario.  It also reverses the burden of responsibility for causing a breakdown in negotiations.  Finally, it offers a secure refuge (the UK already being in the EEA) should the talks break down.  For the EU also, the political upheaval and workload is minimised.  It is always good negotiating strategy to consider the difficulties of your opposite numbers.  If, after experience, it does not work, the UK can leave the EEA by giving 12 months’ notice.  Therefore, there are political reasons to remain in the EEA.

There is also the need to balance the costs of disruption against the calculation of the net benefits and disbenefits of the EEA membership.   At present, no such cost/benefit analysis exists, which is an essential preliminary to negotiation.  It is possible to recall the exhaustive studies by the Swiss government before their referendum on joining the EEA.

Theory of Trade

There are two unspoken assumptions about the advantages of trade as put forward by the conventional economic wisdom:

‘Any trade is good trade’

‘All trade is of equal value’

Therefore, bulking up trade is ‘a good thing’.

However, the political economists of the nineteenth century recognised there was more to it than the above two assumptions.

John Stuart Mill included the question of the different profitability of different types of trade and which party got the most benefit in his study entitled ‘Essays on Some Unsettled Questions of Political Economy’ in 1848.  The particular question of the profitability of various trades is still ‘unsettled’ but ground-breaking work has been done by the OECD and WTO in focussing on trade as a value added phenomenon rather than just gross trade statistics.  The OECD/WTO joint paper entitled ‘Trade in Value-Added: concepts, methodologies and challenges’, sets out the intellectual case for viewing trade through the lens of value-added rather than gross figures.

One significant example, which has been widely referred to in the literature is the case of the Apple I-phone, which is assembled in China and whose ex-factory price appears as exports in Chinese trade statistics.  Estimates are that only 8% of the ex-factory price accrues to the Chinese assembler with 92% being spent on imported components and thus showing up in Chinese import statistics and then again in the Chinese export statistics as part of the Apple phone.

Another interesting area arises in the case of the UK where Switzerland in 2014 became the UK’s fifth biggest export market and, in December 2015, was actually the UK’s single biggest export market (£4293 million of exports, according to UK Overseas Trade Statistics, December 2015) and twice the size of the German market.  Much of this export trade was non-monetary gold which, of course, is not produced in the UK.  Therefore, the value added to national factors of production in both these examples is very small.

Plainly, therefore, trade is not an undifferentiated item.  All trade is not of equal value.  Some trading is more profitable than other trading.  Simply increasing exports of any type is not an adequate policy.

Profitability of Trade

Profitability of trade for a national economy is dependent on value being added so the factors of production, such as labour and capital, get increased returns after buying in necessary supplies to effect increased exports.  Therefore there is a hierarchy of added value in trading activities.  Simply bulking up gross exports is meaningless.

Generally the most profitable areas of trade from the point of view of the national economy are in services or manufactured goods with a high skill content because they involve very little imports or have a high added-value content.  In these examples the gross revenue flows through as very high added value.  At the other end of the spectrum are re-exports of raw materials or precious metals with very little added value.

UK gross services exports have recently approximately overtaken UK gross goods exports when considering UK overall trade outside the EU.  However, the percentage of UK exports to the EU which relates to services is much lower than in UK trade outside the EU.

Therefore, in principle, UK trade with the rest of the world generates greater added value per unit and, consequently, greater returns to labour and capital than the UK’s trade with the EU.  For this reason, a clean sheet consideration would not favour joining the Single Market where services exports are weak whether because of greater competition or restrictive practices.

Paul Samuelson and ‘over trading’

So some trade is more profitable than other trade.  But we can go further than that in critiquing the conventional wisdom that all trade is good, following the line of argument put forward by Paul Samuelson, the most influential ‘liberal’ economist of the post-war generation, in a revolutionary paper just before he died.

This was entitled Where Ricardo and Mill Rebut and Confirm Arguments of Mainstream Economists Supporting Globalization’, 2004.

In this work he questions the alleged benefits of ‘more trade in modern conditions’.

The kernel of his argument was that trade is beneficial to start with but can cease to be beneficial when shifts in capital and skills make it hard for a country to compete in its supposed (Ricardian) superior productivity industries.  Having already given up its supposed (Ricardian) inferior productivity industries, it is faced with a retreat to national autarky to balance its payments situation.  At some point the disruptive effects of trade outweighs the benefits.  In effect, Samuelson is enlarging on a long-standing critique of the theory of comparative advantage.  This is that trade advantages do not stand still.  England had comparative advantage in the cotton industry in the nineteenth century and over-concentrated on this industry.  In the twentieth century, other countries with cheaper labour out-competed the English cotton industry.  In the terminal phase, after 1945, the cotton industry even imported cheap labour from Asia to try to maintain competitiveness but was unable to do so.

So, concentration on what is presently a trade where there is comparative advantage is not necessarily an advantage in the long-term.

The Supply Chains

It is estimated that a majority of trade in manufactured goods takes place within supply chains, co-ordinated by major corporations and worked through legal subsidiaries, associates or clusters of component and assembly suppliers.

These supply chains have adjusted themselves, for good or bad, to working within the EEA.

To leave the EEA would be to disrupt these supply chains, at least in the European Area.  There is exactly the same situation which was experienced in the agricultural sphere when the UK joined the EU and the food and raw materials exports of Latin America and Australasia, which were geared to the requirements of the British market, were heavily disrupted.

Weighing up the Balance

The decision to remain in the EEA, however, is quite different from a decision to join the EEA.

UK trade with the Rest of the World appears more profitable than trade with the EEA.

However, once settled inside the Single Market, the argument for not disrupting supply chains is a major issue, counterbalanced by the clear fact that trade with the EEA in services is not proportionate to their role in trade with the Rest of the World and the endless prevarication about removing the barriers to services trade in the EEA.

If the warnings of Paul Samuelson are correct, seeking extra gross trade from supposedly superior productivity activities is not beneficial in itself in the long run.  Better is to ensure a balance of manufacturing and service activity with, to be sure, an emphasis on what appears to be superior productivity industries but with particular emphasis on new industries.

Hidden Costs of Trade

Of course, a deeper analysis of the benefits of trade would need to address issues connected with the social or financing costs of trade.  It is widely noted, in the case of EU membership, that there is a substantial budgetary cost for British taxpayers for the trading arrangements with the EU as they stand now.  (This budgetary cost would be massively reduced by a move from full EU to simple EEA membership.)

A further point is that trade secured by the use of extra factors of production, rather than use of existent national factors, should be strictly analysed for cost.  Many advocates of bulking up trade are also advocates of the importation of capital and labour rather than utilising existent capital and labour.  These advocates belong to a kind of ‘deus ex machina’ school of economics where problems can be solved by outside actors.

Extra factor inputs are not costless.  For example, in the UK foreign owners of UK assets can receive dividends tax free while UK owners pay income tax.  Of course, these dividends are also negative.  This is, therefore, an outright subsidy to foreign capital.  Similarly, the provision of extra labour through migrants require massive social and economic capital such as buildings, roads, hospitals, schools, etc. to be paid for by natives either by taxation or by displacement of capital investments from supporting native workers to meeting the needs of migrants.  Additionally, there are two further costs in the UK as regards foreign labour.  The way the income tax system is set up now means very few low income workers pay any tax (many of these are migrants) despite being heavy users of public-financed capital investment and of public services.  So, both foreign capital and foreign workers are subsidised by the British tax system.

Additionally, many migrant workers make substantial remittances to their home countries.  These remittances are a dead loss to UK national income.

These extra costs should be considered when looking at the purported benefits of increased trade dependent on introducing extra factors of production.

Summing up

As a basic starting point, cost/benefit analyses are needed in two areas:

  1. What are the net benefits and disbenefits of EEA membership vis-à-vis, say, WTO stand-alone trade?

What are the costs of disruption of leaving the EEA?

  1. Where is any trade with the EEA which is lost going to be replaced?

Stupidity or sabotage part 2

Following last week’s debate on the Customs Union in the House of Lords, Thursday saw the Commons stage a debate, entitled “Customs and Borders”. Dr Richard North followed it and the title of his blog post, “a showpiece of ignorance”  is enough in and of itself to make the point that the level of understanding about the nature of a customs union in the lower chamber is, with a few exceptions, as  appallingly low among MPs as among their Lordships. Dr North described the contribution of Yvette Cooper  and others as “an exercise in futility.” If we have needed any further evidence since the referendum of why we ought to leave the EU, it is our MPs’ total cluelessness of the true nature of the beast.

He also suggest a reason why some MPs are clinging on to the fantasy that staying in the customs union would enable us to enjoy seamless trade with the EU. It only needs a plane trip to the Turkish/Bulgarian border crossing at Kapikule to watch Turkey’s version of “Operation Stack” to expose the fallacy of their argument, so why cling to their illusions?

The most likely answer is that the remoaners have realised that their dream of a second referendum is a non-starter. There is no groundswell among the public to go through all that again. Desperate to stop us leaving the EU, their only hope is via Parliament.

Can they succeed? Unlikely but one must never underestimate the malice of convinced remoaners. They could easily be thwarted, however, if the bulk of MPs realised that a customs union (i) is not joined at the hip to the single market, (ii) would not solve the Irish border problem and (iii) would not lead to seamless trade with the rest of the EU. We can be thankful that the penny has dropped with a few MPs bu they need to show a bit more evangelistic zeal among their colleagues.

Mrs May’s flimsy free trade agreement with the EU

If and when Mrs May, Mr Davis and the Department for (not) Exiting the European Union eventually  finalise a Free Trade Agreement (FTA) with the European Union (EU), it could potentially render the UK somewhat powerless against EU hegemony.  It will most certainly not be “taking back control” in any meaningful sense of the term, instead it will give the EU carte blanche to ‘turn the screws’ on the UK any time it wishes.  This potentially painful situation arises as a consequence of how the Single Market, the EU and our own Government, including the Civil Service, functions.

As first stated in her Lancaster House speech 17th January 2017, Mrs May recklessly decided to leave the Single Market (and the wider European Economic Area, EEA) when the UK notionally leaves the EU on 29th March 2019. As a result, under current plans, we will become either a temporary or permanent Vassal State of the EU. In place of membership of the Single Market, she is proposing an ambitious Free Trade Agreement (FTA) which, she hopes, will offer a continuation of existing stable ‘frictionless’ trade with other Member States of the EU and avoid trade ‘falling off a cliff’.  In the real world, trade deals with the EU are usually complex and slow to negotiate, taking several years. However, Mrs May and Mr Davis still believe it can be negotiated and finalised in a matter of months. At first, they hoped to have everything signed, sealed and delivered before next March when we leave the EU. Now they are aiming for 31st December 2020, 21 months later, following what the EU calls the “transition period” although misleadingly referred to by Mrs May et al the ‘Implementation Period’.

By any standards, the negotiating timescale for the FTA is very short and likely to be further shortened due to delays in fully agreeing the necessary terms within the Withdrawal Agreement for the Transition Period. Given Mrs May’s desperation for a deal, the ticking clock is a recipe for concessions being made on the UK side. Unless closely monitored and exposed, the many mistakes and concessions she is likely to make may well only show up later when both parties start implementing the complex and wide-ranging FTA.  Shortcuts and inadequate assessment of the details and their consequential implications are likely to be the order of the day.

The British negotiating side is further hampered through a general lack of motivation and expertise in intra-governmental negotiations in Government, Parliament and the Civil Service.  After kowtowing to the EU and its executive (the European Commission) for 43 years, our government has lost much of the acumen necessary to govern a sovereign country competently and responsibly. In any case the responsibility (‘competence’) for negotiating FTAs rests with the EU.

Once competence built up over many years is outsourced to the EU, it is rapidly lost and extremely difficult to reacquire in a short period.   The Civil Service, reduced to little more than a rubber-stamping organisation for EU directives could prefer to remain under EU leadership as it makes for a quieter decision-free and responsibility-free life.  This would explain their willingness to acquiesce to EU demands.  This seems to be the case with defence and defence procurement where the plan appears to be for increasingly close integration with the EU.

The EU negotiators, on top of their subjects, are running rings around our negotiators, who are repeatedly caving in to their demands and agenda. The EU’s negotiators are demonstrating a level of competence that is far superior to that of Mrs May, Mr Davis and Department for (not) Leaving the European Union.  Their dedicated website and Notice to Stakeholders (under Brexit preparedness) are not replicated on this side of the Channel.  A major consequence has been that the EU has effectively been in the lead all the time, dictating the terms for the negotiations and setting demands far outside what they are reasonably entitled to. For example, Article 50 negotiations were originally intended to cover financial arrangements for a Member State leaving the EU, nothing more.  Now, however, the EU wants to control UK fishing during the Transition Period through a continuation of the Common Fisheries Policy and still to manage our fishing afterwards – at least, what little is left of it – by treating it as a common resource.  The EU’s position is becoming more uncompromising slipping in further demands outside those strictly necessary for trade.

Another major weakness on the UK’s side is a lack of understanding of how the EU and the Single Market (or wider EEA) function.  The aspirations of ‘frictionless’ trade through an FTA and a soft border on the island of Ireland cannot be achieved by anything so far suggested by the UK side, as the EU has repeatedly pointed out.  Leaving the Single Market (or wider EEA) on 31st December 2020 (when the Transition Period is meant to end)  makes the UK into a ‘third’ country, nominally outside EU control, and subject to the same treatment as any other ‘third’ country trading with the Single Market (or wider EEA).  It is membership of the Single Market AND NOT THE CUSTOMS UNION which delivers customs cooperation between Member States across a range of products and frictionless internal trade.

The EU’s approach to most products within the Single Market is outlined in principle in COMMUNICATION FROM THE COMMISSION TO THE COUNCIL AND THE EUROPEAN PARLIAMENT Enhancing the Implementation of the New Approach Directives and in more detail in the EU’s Guide to the implementation of directives based on the New Approach and the Global Approach and encapsulated in EU law in REGULATION (EC) No 765/2008 OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL of 9th July 2008 setting out the requirements for accreditation and market surveillance relating to the marketing of products and repealing Regulation (EEC) No 339/93.

The EU’s guide, in describing the processes involved and their overall approach, also provides an indication of where future problems could occur and how out of touch with reality Mrs May and Mr Davis are.  At any time the EU can legally ‘turn the screws’ on us when it comes to trade.  Mutual Recognition of Standards or an FTA will not make much – if any – difference, simply because the EU’s negotiators will make sure they don’t.  They don’t have much alternative since to cave-in to UK demands would go against their direction of travel which was determined many years ago. Such a cave-in would set a precedent that could be exploited by other ‘third’ countries.

There is no guarantee that we will get to a Free Trade Agreement. The Transition Deal and Withdrawal Agreement are still far from finalised and, as the EU have stated many times, ‘nothing is agreed until everything is agreed’.  However sacrificing UK fishing, defence and agreeing to continue to adopt existing and future EU laws et al in the hope of one day achieving a free trade utopia is delusional and incompetent.  Hopefully reality will dawn – in particular, the horrific electoral consequences for the Conservative Party of such an abject surrender – in time to change tack. It is not too late for Mrs May to cut off negotiations and pursue a faster, safer and simpler approach to leaving the EU – for example EFTA/EEA explained in some detail in Brexit Reset.  Is it too much to hope that our latter-day Chamberlain may net metamorphose into a Churchill or the second Iron Lady which we so desperately need? “No! No! No!” is the only language which the EU understands. They need to hear it loud and clear from Mrs May or she will soon be hearing it from disgruntled voters.

The Customs Union – stupidity or sabotage?

Regular readers of this blog will know without a shadow of doubt that there is nothing to be gained by remaining in the EU’s Customs Union. Well, dear readers, you can pat yourselves on the back for you are clearly much wiser than 348 members of the Upper Chamber of our Parliament.

Lord Kerr of Kinlochard, speaking in the debate preceding the vote, said “I do not recall at the time of the referendum any debate about a customs union.” He was perfectly correct in saying this. Staying in the customs union is such a daft idea that no one felt the need to bring the subject up.  As Dr Richard North points out,  “A customs union does not in any way eliminate a border, as we see with the borders between Turkey and EU Member States.” it is therefore no help in solving the Irish border question. 

He also makes the point that, as usual, the Press are all over the place in their reporting of yesterday’s vote. It was not a “big defeat” for the government as the amendment supported by 348 peers only forced “the government to explain what it has done to pursue remaining in a customs union”. In other words, suppose that some degree of light finally dawned and the government realised that there was no point in remaining in a customs union, all this “big defeat” would require them to do would be to say to their Lordships “not much”. Hardly the sabotaging of Brexit which the headlines seem to suggest.

For people looking for a way to keep the flow of trade moving in the immediate post-Brexit period, both across the Irish border and through the Channel Tunnel, it makes for more sense to visit the invisible border between Sweden and Norway rather than Turkey’s version of “Operation Stack” at Kapikule on its border with EU member state Bulgaria. Norway is not in the customs union; Turkey is.  Need one say any more?

The Government should finally lay to rest all this nonsense about a customs union. It should also abandon the current plans for a transitional deal. Further evidence of its inadequacies emerged yesterday  when Cecilia Malmström, the EU’s trade commissioner, said that the UK would no longer be part of trade agreements negotiated by the EU with third countries  once we leave. Re-joining EFTA  as an interim arrangement would not only solve the Irish border issue but would address the issue of our trade with countries like South Korea and Mexico as EFTA has negotiated free trade agreements with virtually all the countries with which the EU has FTAs.

It remains a mystery to many observers why this sensible option isn’t being pursued. For all its well-known faults as a long-term relationship, as a stopgap arrangement it is far better than the arrangement currently being discussed with the EU. Adopting it would put to bed a number of issues which should have been dealt with well before now and thus enable the Brexit debate to move on after being stuck in the same groove for far too long

 

 

Brexit roundup – short-term problems; longer-term potential?

With Parliament  still in the Easter recess, things have been a bit quieter than usual on the Brexit front. However, the well-supported fishing protests last Sunday suggest that we are going to be entering a  period in which the Government will face ever-mounting pressure to try a different approach to securing some sort of workable short-term post Brexit arrangement.

The long term is not looking promising either. Given how readily Mrs May and David Davis rolled over, what is the likelihood of their resisting demands from Michel Barnier that the UK sign a “non-regression” clause in any long-term agreement, which would force the UK not to undercut EU standards on tax, health and the environment to poach investments. He has also insisted that access for EU fishing vessels must be included in any long-term deal. The “environment” issue is a red herring as many EU environmental laws owe their existence to UK influence, but why should we not determine who fishes in our waters? Why should we be denied the freedom to cut tax? The state in the UK is horrifically bloated, as in most other Western nations.  It needs to be shrunk drastically and were this to be undertaken, taxes would inevitably undercut those in many EU member states.

Going back to the transitional arrangements, a report from the House of Commons Brexit Committee has confirmed that if a “deep and special partnership” with the EU proved unsuccessful, EEA/Efta membership was an alternative that could be implemented quickly. Although the Committee is looking at EEA/Efta as a long-term solution (which it isn’t)  it would be a better alternative than the current proposals for the short term, which poses the question as to why Mrs May and her team are pursuing such a damaging alternative. Maybe they still believe that it’s worth enduring 21 months of humiliation because  there will be a marvellous deal at the end – a hope which is unlikely to be fulfilled. Barnier’s comments make it clear that he wants to deny us as much long-term freedom as possible.

A number of Commonwealth countries have been discussing a future trade relationship with the EU. The Canadian Prime Minister Justin Trudeau has said that it would be “fairly easy” to negotiate “an improved approach on trade between Canada and the UK” after Brexit. The same article claimed that India is becoming less enthusiastic, no doubt due to  the recent statement by Theresa May that she still intended to reduce annual net UK migration to less than 100,000, meaning that India’s desire for more of its citizens to come over here as part of a new trade deal is unlikely to be fulfilled. Australia is also keen to start negotiations with the UK on trade, but pointed out that  if we stayed in the EU’s customs union after Brexit, we wold become “irrelevant”.

Meanwhile, disgruntled remoaners are still seeking to over turn Brexit by demanding a second referendum.  For all her failings in other areas of Brexit, at least Mrs May is standing firm on this. “Regardless of whether they backed Leave or Remain, most people are tired of hearing the same old divisive arguments from the referendum campaign, and just want us to get on with the task of making Brexit a success. And they’re right to think that. The people of this country voted to leave the EU and, as Prime Minister, it’s my job to make that happen.” she said in a recent speech to mark one year until Brexit day.

Mrs May is most definitely right in claiming that most people have had enough of Brexit controversy. Claims that some 44% of voters want a second referendum do not tally with real-life experience.  Given that the poll was conducted by a pro-remain group, Best for Britain,  a healthy degree of scepticism is justified. Mrs May has the support of Jeremy Corbyn in opposing a second referendum and it is doubtful whether those activists on both sides of the argument who spoke in debate after debate, criss-crossing the country and having to suspend anything resembling a normal life for three months would want to go through it again.

The clamour is coming from those who wouldn’t have to do the donkey work. The latest addition to the ranks of these good-for nothings is David Miliband, who called Brexit “the humiliation of Britain.”  Well, Mrs May does seem to be trying to do this at the moment, but a decent Brexit would be the absolute opposite – a chance to stand tall as a sovereign nation once again. there’s nothing humiliating about this.  One after another, the fears stoked up by remoaners are being debunked. The UK economy has performed well since the vote and only today, Andreas Dombret, Member of the Executive Board of the Deutsche Bundesbank, stated that despite attempts to lure parts of the finance industry to Paris or Frankfurt, London would remain Europe’s financial hub after Brexit.  A mass exodus from the City was always a concern during the referendum campaign, but such fears are unfounded.

In many ways, a healthy debate on how we leave  – i.e., the relative merits of the current transitional proposal versus EEA/Efta as a holding position will take the wind out of the remoaners’ sails and would cut their media exposure in favour of more important issues. However, one cannot overstate the importance of winning this debate. Brexit must mean Brexit (to quote Mrs May). Surrendering to the EU’s demands for a transitional deal would prevent us fully achieving the separation for which we voted in June 2016. This must not happen.

Fishing: the threat goes right up to the shoreline.

When the Prime Minister gave her first major speech outlining Brexit at the Conservative Party conference on 2nd. October 2016, Fishing for Leave rapidly produced an analysis,  pointing out the pitfalls within the Prime Minister’s plan.

Invoking Article 50 was fine. This would create  a clean break, with no repercussions from the other 27 Member States because they had accepted the terms in the Lisbon Treaty  and the Croatian Accession Treaty What was of great concern was the Prime Minister’s quest for a “deep and special” relationship, which like David Cameron’s red lines, would never be on offer or available, so such a policy would be chasing rainbows.

While FfL could understand the reason  for bringing all EU existing legislation into domestic Legislation, (otherwise on Brexit day there would be vast sections of UK legislation missing), we had serious concerns. This procedure was satisfactory for internal law, but it would cause problems with joint EU external legislation (Regulation) such as the Common Fishing Policy.

This concern was heightened when the Prime Minister stated that all rules and Laws would be the same the day before Brexit as after. The rules can be made to be the same, but the laws cannot be the same, simply because the UK will no longer be an EU member state, but treated as a third country, with no obligation for the EU to treat the UK as compatible.

Because of the huge mount of time wasted at the start of the Brexit process, the UK is having to  go through the process of an implementation/transition period (21 months) and  if the terms agreed with the EU are formally adopted, we face a serious risk of a legal action through the Vienna Convention on Treaties, which could tie us down to the status quo for many years.

By surrendering fishing, the Nation’s resource, for the 21 months of the transition period, instead of leaving the CFP on 29th. March 2019 and introducing a sensible scientific and environmentally sound British policy, we would be continuing with the CFP management, meaning that UKfioshermen would have to be subject to the final stages of the discard ban, which will be introduced at the start of 2019. If it is strictly enforced, by the UK Government’s own findings, 60% of the UK fleet will face bankruptcy, opening up the possibility for the EU to catch more fish in our waters in 2021,. Under International Law  UNCLOS3, Article 62 (3), because the UK would no longer have sufficient catching capacity, what we can’t catch must  have to be handed to our neighbours – in other words, the EU.

If that was not bad enough, the UK government, under the draft withdrawal agreement of 19th. March has agreed Article 125, and section 4, though paragraph 1, to allow the European Commission to propose to the Council that they can adopt measures on fixing prices, levies, aid and quantitative limitations and on fixing and allocation of fishing opportunities.  This includes the waters right up to UK beaches, as the derogation for the 6 and 12 nautical mile limit will have fallen, so the UK can say goodbye to the inshore lucrative squid fishery, and  shellfish  industry.

Our coastal communities will continue to decline, in spite of the token Government support of the Coastal  Communities Fund which, since 2012, has encouraged the economic development of coastal communities. So far £170 million has been spent and the scheme is now to be extended to 2021 with a possible further £90 million spend. That  is a pittance compared to the possible potential of over £6 billion annually our UK marine life could generate.

The only success which the UK Government can claim is leaving the 1964 London Convention, but that will  be tested July 2019, when all EU vessels should be excluded from the 12 nautical mile zone. That will be a test on whose law is superior EU or UK, as July 2019 will be during the transitional period.

There is no doubt that during the 21 month period, the UK fishing Industry, thanks entirely to UK Government policy, will be worse off than if we had stayed in the CFP . For the Prime Minister to say we will come out of the CFP in 2021, taking control of our Nation’s waters, to run our own affairs, is chasing rainbows, as the European Parliament has made it clear there will be no trade deal without EU access to UK waters. There is strong evidence to suggest that the EU was not prepared to consider any transitional agreement if we regained control of fisheries. Having capitulated once for the 21 month transition, a second capitulation – trade deal for fisheries access, is inevitable.

Without a legally watertight binding document in the next few months stating that nothing within our EEZ will be given away, the Prime Minister will not be believed.

This is not the fault of the EU, which will strive for the best deal for the benefit and unity of the remaining 27 member states. Our Government  has been told, and warned of the consequences of their actions, but it seems determined to push our maritime heritage beyond the point of recovery – to become global Britain, a land mass only. To repeat, it was the decision of our government to capitulate. The European Commission’s “notice to stakeholders“, published today (9th April) could not have been clearer, “As of the withdrawal date, the Common fisheries policy rules no longer apply to the United Kingdom…In accordance with international law of the sea, fishing vessels wishing to engage in fishing activities in waters under the sovereignty or jurisdiction of a third country are required to obtain a fishing authorisation from that third country.” This could not be clearer. The government held all the trump cards, but threw them away.

The actions of the UK Government is proving that it has a very different interpretation  of  Brexit from those who voted leave. The problems that will arise for the UK stem from  our own Government’s policy, no one else.

Fishing for Leave has constantly pointed out the pitfalls of Government Brexit policy, and one extra concern which we wish to highlight is the fate of the 12 nautical mile zone during the possible transitional period from 30 March 2019 to 1 January 2021.

One has to remember that basis on which the UK has exclusive rights in the 6 and 12 nautical mile zones  zones is a derogation, by regulation, from our EU Accession Treaty (which gave the EU rights up to our  low water mark.)

On the 29th March 2019 the EU treaties cease to apply, which in turn takes out the regulations, so at that point we are our cleanly out, with no repercussions. However, if we find ourselves subject to the CFP in all but name, there will be no derogation this time.This means that EU vessels can fish in the 12 miles around our coasts – wht out the limitation of quota. This would ruin our   shellfish and squid fisheries. Much of this catch is sold to the EU, but it now looks like EU vessels can catch and harvest it themselves.

The only saving grace, could be what Fishing for Leave tirelessly campaigned for, the removal of the 1964 London Convention, which allows foreign vessels into our 6 and 12 nautical mile zone. This should take effect on the 4th July 2019, and it will be a huge test of Government resolve, to see if they capitulate 100% and continue EU vessel access. If they do, EU vessels will be up to the beaches, and like the Kent Kirk case in January 1983, thanks to our Government’s own actions, there will be nothing we can do about it.

Michael Gove, the secretary for the Environment, Food and Rural Affairs was living in a fantasy world when he replied to Alastair Carmichael with these weasel words:-

“There is a significant prize at the end of the implementation period, and it is important that all of us in every area accept that the implementation period is a necessary step towards securing that prize. For our coastal communities, it is an opportunity to revive economically. For our marine environment, it is an opportunity to be managed sustainably. It is critical that all of us, in the interests of the whole nation, keep our eyes on that prize.”

Both Mr Gove and the Prime Minister had previously stated categorically that we would leave the CFP on the 29th March 2019 and take back control of our Exclusive Economic Zone of 200 nautical mile/median line, but in order to secure what will be a disastrous 21 month transition to buy moew time (in other words, to cover up the fact that they didn’t have any idea about a final settlement), the Government surrendered our EEZ to the EU.

Just to remind ourselves, here are Mrs May’s words:-

We will be leaving the common fisheries policy—and, as I indicated, the CAP—on 29th March 2019. The arrangements that pertain to fisheries during that implementation period will, of course, be part of the negotiations for that implementation period. Leaving the CFP and the CAP gives us the opportunity, post-implementation period, to introduce arrangements that work for the United Kingdom. The Environment Secretary is discussing with the fishing and agriculture industries what those future arrangements should be.

Can we trust her? After recent events, no amount of words, promises, assurances, will convince coastal communities that come 2021, the people’s marine resource will back under national control. After such a volte-face, they are justified in assuming that it will be given away for a trade deal, just as it has been given away now for the 21 months transition. The EU will demand that position for a trade deal and the UK Government will capitulate, and hand it over.

Just look at Article 125  part 3 of the draft UK draft leaving document :

The Union may exceptionally invite the UK to attend, as part of the Union delegation, international consultations and negotiations referred to in paragragh  1 of this article, to the extent allowed for Member States and permitted by the specific forum.

What a degrading, humilitating position the UK Government has placed our nation in.

Finally, part 4 states:   Without prejudice to article122(1) , the relative stability keys for the allocation of fishing opportunites  referred to in paragraph 1 of this article shall be maintained.

Paragraph 1 relates to article 43(3) TFEU : The Council, on a proposal from the Commission, shall  adopt measures on fixing prices, levies, aid and quantative limitations and on the fixing and allocaion of fishing opportunities.

As relative stability keys can be changed, the EU can take what they like out of UK waters.

DEFRA (the Department for the Environment, Food and Rural Affairs, claims that it had reached a deal with the EU whereby the UK’s share of the catch in our waters wold not be reduced during the transitional deal, which includes keeping the 12-mile limit exclusively for UK fishermen. Whatever DEFRA might, however, as far as the 12 nautical mile zone is concerned, based on the draft Withdrawal Agreement Article 125, it is wrong.

The 6 and partial 6 to 12 nautical mile zone is protected presently by a derogation within Regulation 1380/2013. That Regulation ceases to apply to the UK when we leave the EU on 29 March 2019.

DEFRA will argue that this isn’t the case because through the European Union (Withdrawal) Bill this Regulation has been incorporated into domestic legislation.

Not just DEFRA but the UK Government as a whole is making a huge mistake in this thinking. While our rules might be identical, as we have pointed out, the legal basis is not the same, simply because we will no longer be a member state. In order for this arrangement to be acceptable with the EU, it would have to be incorporated in a treaty.

Until that happens, the wording of Article 125 relates from the base line (Low water mark) out to 200 nautical mile/median line.

Even if the EU agrees by handshake to maintain the existing arrangements, without a legal basis, EU vessels will enter our 12 nautical mile limit to take non quota species, such as squid, cuttlefish and scallops.

The only saving grace, could be the UK’s withdrawal from the London 1964 Fisheries Convention, commencing 4th July 2019, which withdrawal excludes all EU vessels from within the 12 mile zone. A determination to enforce this exclusion will be another test of the Government’s resolve. Will it stand firm, or capitulate? If it is the latter, then as with the 21 month implementation period, it will be certain capitulation over any trade deal which might come into effect at the end of 2020.

The fishing industry is not going roll over and Fishing for Leave will be organising a series of protests in ports up and down the country to highlight the plight of the industry – to be betrayed a second time by a Conservative government. Details of the location and dates of protests will be found in this article, which will updated regularly.

What angers fishermen and their supporters is that this surrender is totally unnecessary. If the government needs more time to negotiate a long-term deal, then why not go for the EEA/EFTA route as a holding position?   As far as fisheries is concerned, it would mean that we could take back control and the EU would be powerless to stop us. It could not stop us signing up to an arrangement which it has already signed with Norway, Iceland and Liechtenstein and would also mean that any negotiations on a long-term trade deal would be starting from a much better position. Having regained control of fishing, we could make it clear to the EU that sharing our resource once again, to the detriment of our national fishing industry, will not be on the table. Indeed, it could not be on the table as the electoral price would simply be too high.

Why the government is sticking so rigidly to its suicidal course remains a mystery, but yesterday’s protests are only the start. Our fishermen have their backs against the wall. They have nothing to lose. The government – and the Conservative party in general – by contrast has everything to lose.