Awaiting the storm (or explosion!)

It cannot be much longer before the penny finally drops regarding the terms being proposed by the EU for the UK’s 21-month “transitional arrangement.”

Businessmen like John Mills and John Longworth, both of whom met Michel Barnier in Brussels last week, are distinctly unimpressed with what we are likely to be offered, but it is surprising that there haven’t already been even louder cries of outrage from the Conservative back benches. Last November, at a meeting organised by Conservative MEP David Campbell Bannerman, Rt Hon David Jones MP was quite unequivocal that any further involvement of the European Court of Justice (ECJ) in the legal affairs of the UK after Brexit would be an “absolute red line” for himself and a number of his colleagues, who would rather leave with no deal.

As more details emerge, it is becoming clear that it’s not just a role for the ECJ in our affairs which the EU wishes to incorporate into the transitional deal. According to an article in The Times, the EU will insist on the free movement of people throughout the period and the inclusion of people moving to the UK before 31st December 2020 in any post-Brexit agreement on citizens’ rights.. This again is a slap in the face for leave voters. It’s not just that many of us voted leave because we want to see a drastic cut in immigration; more to the point, we voted leave because we wanted our institutions to be sovereign – and this means that the EU must have no say in determining who can or cannot come into the UK or how long they can stay.

This tougher stance is contained in a new document dated 15th January. It is not the final word on the EU’s position, which will not be published until the end of the month, but it certainly gives us an idea of the general direction of travel. The guidelines produced last year by the European Parliament, although essentially a consultative document, were bad enough. We would be, in effect, a colony of the EU, unable to sign any trade agreements with other countries and still subject to the Common Fisheries and Common Agricultural policies. This document was bad enough, but according to Bloomberg, the latest document also states that we would need to seek the EU’s permission even to start negotiations on trade deals with third parties. We would be unable to strike out on our own path. The net “divorce bill” may also be increased.

Perhaps ironically, the Council President Donald Tusk told the European Parliament that “our hearts are still open “that the UK might “have a change of heart” and stay within the EU. This suggests a warmth towards us which just is not reflected in the negotiating guidelines which seem designed to squeeze and humiliate us as much as possible. Chancellor Philip Hammond claimed recently that the EU is “paranoid” that other countries will follow us out of the door. It has also been claimed that the EU is pressurising Switzerland not to make a bilateral deal with the UK The EU’s tough stance may well all be technically justifiable from the treaties, but it clearly wishes to interpret them in the toughest way possible as far as Brexit is concerned. No one with any sense of self-respect should give in to this bullying.

The transitional deal must therefore be kicked into the long grass as soon as possible, especially as there is no guarantee that a new trade deal will be ready to replace it after 21 months. The EU’s ambassadors have signalled a willingness for the transitional period to be extended, but this would only prolong an unsatisfactory situation which is not Brexit in any real sense of the term.

A further complication is looming on the horizon. The Norwegians have indicated that they would seek to renegotiate their trading arrangements with the EU if we were given favourable access to the EU’s single market  while not being a member of it.  This, of course, refers to any long-term deal and therefore is not an issue for Mrs May at the moment as the EU has insisted that negotiations on a long-term trading arrangement cannot start yet.  Let’s face it, she has enough on her plate as her team prepares to negotiate the transitional arrangements. We must hope that there is already a storm brewing up on the Conservative back benches which will rapidly knock these unacceptable proposals on the head and force the government to take a different approach.

If not, the storm is likely to strike with far greater ferocity  in four years’ time. A botched Brexit where we leave in name only is not what we voted for and not what Mrs May promised us when she became leader.   Brexit must mean Brexit or our Prime Minister will not only find herself consigned to a “rogues gallery”, excoriated by posterity alongside the likes of Lord North, Neville Chamberlain, Heath, Blair and Brown, but she may well take her party down with her.

Taking Stock

Where are we with the Brexit negotiations and where would we like them to be going?

It’s hard to find any sort of consensus about the former, let alone the latter. Are we being led deliberately towards a Brexit in name only or are we about to see our side walk away from the negotiations and rely on so-called “WTO rules” to govern all our future international trade? Was Article 50 always a trap which was going to end up locking us into the EU?

Given the multiplicity of deeply-held views, this piece could end up being just one other person’s opinion. I hope not.  In summing up where we are now, I have read a fair number of different commentators and weighed their opinions before writing this summary.

Firstly, I think it is beyond dispute that the talks have not gone brilliantly from the UK’s point of view, but at least we can be thankful they did not grind to a halt last December as some had predicted.

David Davis and his team got off to a bad start by agreeing to the EU’s sequencing – in other words, “sufficient progress” had to be made on the Irish border issue, the rights of EU citizens resident in the UK and the “divorce settlement” before we could proceed to other issues. Under Article 50 of the Lisbon Treaty, there was no requirement for him to agree to this.

Next comes the transitional arrangement. This was our side’s idea and does not reflect well on our politicians and civil servants.  Not that long ago, we were hearing from some quarters that a trade deal between the EU and the UK would be “the easiest in human history” because of our regulatory conformity. It has since dawned on at least some politicians (although possibly not even all of them, even now)  that this isn’t the case.

The mistake is a very fundamental one because it reveals a profound ignorance of the purpose of the whole European project. We have always viewed the EU as a trading bloc – after all, that was what Edward Heath sought to emphasise in the early 1970s. He did occasionally talk about the sharing of sovereignty, but he didn’t exactly bend over backwards to  explain even to Parliament what we were joining. Of course, Heath knew the truth and now our team is having to learn the hard way. The EU is primarily a political project and trade issues are only a means to an end.

It is also a very rules-bound organisation. Belatedly, our team is discovering that “flexibility” is not a popular word in Brussels. Treaties with precise wording govern every aspect of the EU project. The EU’s chief negotiator, Michel Barnier, knows its workings inside out and unfortunately, comes across as far more on the ball than David Davis.

Is Barnier an ogre? Does he want to punish the UK? Is he merely a puppet whose strings are being pulled by Berlin? A delegation of pro-Brexit businessmen met him in Brussels recently. One of them, CIB Committee member John Mills, described him as “tough and charming“. Essentially, he wants these negotiations to succeed but not at the expense of the integrity of the EU’s single market.  The European project unquestionably took a knock when we voted to leave and he as much as any senior figure in the EU is committed to damage limitation and keeping the show on the road.  The EU has other crises on its hands and Brexit is an unwelcome distraction. After all, it was our decision to leave.  Given these factors, Barnier is merely sticking to the EU rulebook which he knows so well. There is no evidence of any personal animosity towards us our our politicians.  His biggest gripe is that we don’t seem to know what we want from Brexit.

This is essentially where our request for a transitional arrangement comes in. There have been pro-withdrawal groups, including the Campaign for an Independent Britain, even before we joined the European project in 1973. We have been good at arguing the case for independence and ultimately persuaded over 17 million voters of our point of view. We have been less good at explaining how we can leave seamlessly and this has been the root of the Government’s problems.

The Transitional deal, at least if it is negotiated according to the rules laid down by the European Parliament, will be very bad news for us.  It seems to be being pursued purely because the Government knows that a full trade deal will not be ready by March 2019; in other words, it buys us more time.  Theoretically, there is a “sunset clause” – it will only last 21 months, but what if the trade deal isn’t signed by the end of this period?

The significant and surprising support for this transitional deal seems to be based entirely on the assumption that this won’t be a worry. If there’s something good to look forward to, these 21 months of being essentially controlled by Brussels is a price worth paying. This is a fallacy, however, as this piece helpfully explains.

The dilemma we face is that while there is widespread agreement about where we actually want to be after Brexit, there is no agreement on how to get there.

Apart from diehard remoaners, most people would probably agree on all or most of the following:-

i) The ECJ must have no power whatsoever to interfere in the government or legal process in the UK – including those EU citizens currently resident here. We must remove ourselves from Europol and the European Arrest Warrant – in other words, we are back to being a normal sovereign independent country as far as criminal justice is concerned.

ii) Fisheries and agriculture must be 100% under domestic control (and fishing should not be managed on a quota system)

iii) We must be separate from the EU’s military machine, including in the areas of procurement.

iv) We should not make any contribution to the EU’s funds apart from covering our costs where we wish to participate in a specific scheme such as the Erasmus student exchange.

v) we must have complete control of our borders

vi) we must have complete freedom to set our own levels of taxation, benefits and tariffs.

Agreeing our long-term goal is the easy bit. The problem is that we may never get there unless the Government can define in terms which the EU can understand what we want in the immediate post-Brexit period. The transitional arrangements might at least keep industry happy inasmuch as no new guidelines need be given for life could continue for a further 21 months more or less as it does now, but this is only kicking the can down the road. If we find ourselves bogged down in a transition arrangement along the lines already discussed and this period is then extended to (and beyond) the next General Election, we may find ourselves stuck in a sort of limbo which would please no one and would leave many voters vulnerable to the remoaners’ propaganda and thus eventually crawling back into the EU. Alternatively, if we walk away from the negotiations altogether, the net result could be a sudden and severe recession. In this instance,  once again we could be faced with a clamour to re-join.

This would be a tragedy. The key to preventing this happening is to focus on the unacceptability of the current transitional proposals. While many leave voters are strongly opposed to any further membership of the European Economic Area, as a stopgap, it is much less awful, as Nigel Moore argues here. What is more, according to Profesor George Yarrow, unless we give notice that we are quitting the EEA before 29th March of this year, we will still be in it on Brexit day by default, as leaving he EEA is totally separate from leaving the EU.

Yarrow’s thesis has not been put to the test, but then, Brexit as a whole is breaking completely new ground. It is hardly surprising that the path has not been a smooth one. All the same, progress has not been satisfactory thus far and although on balance, I think that the Government’s poor performance has been borne out of an inability to master the issues as quickly as anticipated rather than out of a devious plan to stifle Brexit, Mr Davis and his team desperately need to up their game if we are to achieve a successful Brexit in just over a year’s time.

Impressions of meeting with Michel Barnier in Brussels – John Mills

ON WEDNESDAY, 10TH JANUARY 2018

    Michel Barnier is an impressive person, tough and charming, who is evidently well on top of his Brexit brief and thus a formidable person to have on the other side of the table as the Brexit negotiations take place. He wants to get a deal completed but not at any cost to the EU27.

    His primary aim is to secure the integrity and security of the Single Market and the Customs Union rather than to search for a deal which is necessarily in the overall best interest of both the UK and the EU27. The notion that the EU27 may make substantial concessions to avoid economic pain is therefore very probably misplaced.

    While the best outcome from both the UK’s and the EU27’s point of view has always seemed to be for the UK to be outside the Single Market and the Customs Union but with a free trade deal in place covering goods and as many services as possible, this now looks as though it may be difficult to achieve. This is despite the fact that this is substantially the relationship the EU27 has with other countries as varied as Israel, Peru, Mexico, South Korea, Canada and the Ukraine.

    There are at least four major reasons why this is the case, these being:

1. The UK is starting from a radically different position from these other countries – essentially looking for a divorce rather than marriage, with all the baggage that this brings with it.

2. The UK is a much larger player in EU trade terms than any of these other countries, and thus potentially more disruptive if derogations are needed from the existing carefully balanced EU acquis.

3. The UK’s negotiation position has been gravely weakened both by the sequencing insisted on by the EU27 – dealing with money, Ireland and citizenship before trade – and by the result of the recent general election which has left no majority in Parliament for the WTO option which – although not the optimal outcome – is the only realistic fall-back position for the UK to have, without which the EU27 is left with all the cards in its hands.

4. Time is running short, although some extension of time by suspending Article 50 to create the proposed transitional period may help.

    In these circumstances, the most likely offer to the UK from the EU27 seems be free movement of goods and some concessions on services with the UK formally outside the Single Market and probably the Customs Union too but with the UK having to continue to accept nearly all the legal and regulatory obligations currently in place. These will almost certainly include substantial annual net contributions to the EU budget, free movement of people, significant jurisdiction by the ECJ, constraints on the UK’s capacity to negotiate trade deals on its own, and continuing membership of both the Common Agricultural Policy and the Common Fisheries Policy.

    An offer to the UK along these lines would probably be supported by all the EU27, led by Germany and France, but may not be acceptable to Parliament, let alone the British electorate. In these circumstances, preparing for the UK to fall back on WTO terms appears to be essential both to safeguard the position if no acceptable deal is presented to the UK, and to stiffen the UK’s negotiating position in the meantime.

    There may well be calls in circumstances where no acceptable deal is offered to the UK, for a second referendum on the UK’s EU membership, although probably only by a small minority of diehard Remainers. Even in the unlikely event of another referendum being held, current polls indicate that it would be unlikely to produce a different outcome from the one held in June 2016, thus confirming that Brexit is some form is likely to be inevitable.

    If the EU27 wants a deal with the UK it is therefore essential that this takes account of the political realities exposed by the 2016 EU referendum and current polls, which is that – if push comes to shove – the UK electorate would very probably be willing to opt for a clean break with the EU rather than finishing up being in a worse position than we were before Brexit started – with all the obligations against which people voted still in place, but with the UK having no say in how the EU develops in future.

John Mills 11th January 2018

For those who DON’T want a break from Brexit……

Maybe you are longing for Christmas, especially given the Parliamentary recess will at least give s a week’s break for Christmas. If so, there’s no need to read any further…..

On the other hand, you may find this article of interest. Whatever the turmoil of our Brexit negotiations, our country has risen from fifth to first ranking in the Forbes list of the best countries in which to do business.  This is the first time we have ever taken the top spot and the competition is fierce – several Anglophone nations, Scandinavia, Hong Kong Singapore and Switzerland  would have given us a good run for our money.

On a very different note, Open Europe has published a report entitled Beyond the Westminster Bubble – what people really think of immigration. It’s quite long- 74 pages in total, but it well illustrates the strength of feeling that exists among the UK population for a cut in migration, even though there isn’t much confidence in the Government’s ability to meet its target to reduce numbers to “tens of thousands”.

Open Europe may not be the moist popular think tank among Brexit supporters, but it does produce some very useful research and this paper is well worth reading.

 

 

The border which nobody wants

Ar first glance, it seems utterly bizarre. We don’t want to build a hard border fence between Northern Ireland and the Irish Republic and neither do the Irish or the EU. No one wants it but it may nonetheless have to be erected.

The reasons lie with the UK’s change in status. If it leaves not only the EU but also the European Economic Area, it becomes a Third Country. The EU does not permit goods to be transferred across its borders without the necessary customs clearance and the fact that we are going to maintain regulatory convergence with the EU up to Brexit day makes not one iota of difference.

But couldn’t we just agree to treat Ireland differently? In this instance, the rules of the World Trade Organisation wouldn’t allow it. Discrimination in trading arrangements that favour one country over another without any formal trade deal is not permitted – and we can’t strike a bilateral trade deal with the Irish Republic as it has no freedom to negotiate such deals, being a member of the EU. After all, this desire to regain control of trade policy was one of the reasons why we voted to leave.

So it is no surprise that Mrs May came away empty handed from her meeting with Jean-Claude Juncker yesterday. It is hard to read between the lines and fathom out what really went on. Did she really consider a deal which would have seen Northern Ireland end up with separate trading arrangements from the rest of the UK?  Such an arrangement would compromise the constitutional integrity of the UK and thus was never going to be acceptable to the Unionist community in the Province. “Northern Ireland must leave the European Union on the same terms as the rest of the United Kingdom,” insisted Arlene Foster, leader of the Democratic Unionist Party.

On the other hand, the Dublin government insists that EU regulations on issues such as food safety and animal welfare must be maintained in Northern Ireland, to avoid damaging cross-border trade once Britain leaves the EU’s single market and customs union.  However, to repeat, mutual recognition of standards cannot be agreed without a formal trade arrangement and that isn’t going to be on the table any time soon.

Parliament’s Exiting the European Union Committee published a report which  was decidedly pessimistic about the  prospects of a deal given Mrs May’s insistence that we will be leaving the Single Market. “The Committee does not see how it will be possible to reconcile there being no border between Northern Ireland and the Republic of Ireland with the Government’s policy of leaving the Single Market and the Customs Union.”

Quite why the Customs Union has to be dragged into this debate is anyone’s guess. There are seamless borders between non-EU Norway and EU member states Sweden and Finland. This is everything to do with the Single Market but nothing at all to do with the Customs Union, of which Norway is not part.

There can be no doubt about the concern felt in the Irish Republic about the prospect of “no deal”. Comparing the UK to EU-27 as a whole, our country could well end up facing the greater problems in the short term. Some individual countries would not suffer that badly either. Germany, for example, would soon shrug off any decline in trade with one of its major export markets and find others. For the Irish Republic, however, the effect of “no deal” would be devastating. We are the second largest importer of Irish goods and services after the USA, receiving 13% of total Irish exports. We are also the biggest exporter to Ireland, with a 24% share of Irish imports.

Given these figures, you would expect the Irish government to be among the most dovish of EU27. Unfortunately, according to Anthony Coughlan, this is far from being the case. In an e-mail to Edward Spalton, our Chairman, he wrote:

The members of the political Establishment in the Republic of Ireland, dominated as they are by career Euro-federalists, hope fervently that the whole Brexit project can be aborted or made effectively meaningless by doing everything they can to obstruct the EU/UK negotiations and by interacting privately with those cross-party interests that are seeking to test Brexit to destruction in Parliament. Irish policy-makers are doing everything they can these days to encourage this end, egged on by the Brussels people –  while not saying so publicly of course.”

He went on to claim that there was some collusion between Irish Euro-federalists and UK remainiacs: “I have not the least doubt that  key Irish/EU grandees such as Peter Sutherland, John Bruton, Pat Cox  and Alan Dukes are interacting at present with the likes of  Peter Mandelson, Keir Starmer, Tom Tugendhat et al to do all they can to frustrate Brexit in Parliament and that they are being encouraged by Messrs Barnier, Juncker and the Brussels people to do this, with the full support of the Irish Government and Opposition behind the scenes.”

Some eagle-eyed readers will remember that Peter Sutherland, a former European Commissioner, was the person who told the House of Lords that the EU should do its best to undermine the ethnic homogeneity of individual nations by increasing mass immigration. Anyone in this country who is formally associated with this contemptible individual is truly beyond the pale.

Given these serious allegations of troublemaking by Irish politicians, it is unsurprising that Mrs May has been sent a letter signed by a number of Tory MPs, economists and business leaders urging her to take a tough line with the EU, insist on a trade deal and walk away if the EU will not play ball. Add into this potent brew the firm and perfectly understandable stance of the DUP that every part of the UK must leave the EU on the same terms and it is unsurprising that David Davis has found himself having to work hard to find a solution to the impasse. His latest suggestion is that that the whole of the UK, and not just Northern Ireland, should retain regulatory “alignment” – not “convergence”  -with the EU.

Even before any discussion has taken place on what this actually means, however, an un-named EU official has effectively torpedoed the whole idea:-  “The UK will not have any say on the decisions taken in Brussels and will basically implement them without having any influence over them… it makes the UK kind of a regulatory ‘protectorate” of Brussels.‘” Any suggestion that such an abject surrender would be acceptable to the signatories of the letter to Mrs May – or the DUP for that matter – is plainly ridiculous.

It isn’t easy to separate the wood from the trees in the current flurry of activity, but it is looking highly unlikely that the Brexit negotiations will be moving on to the next stage (i.e., trade talks) after the critical European Council meeting later this month. The deadlock over the Irish border issue is raising the stakes higher by the day and it would be a brave man who would place any money on what the eventual outcome is likely to be.

Photo by Michael 1952

Deal or no deal? Some thoughts on last week’s meeting

Last week I, along with about 90 other people, attended a conference entitled Deal or no deal – what are the options? hosted by David Campbell Bannerman MEP.  I was very much hoping to hear something of the government’s current thinking about the progress of the Brexit negotiations with the EU.

The opening speaker, Rt Hon Greg Hands MP, gave a very upbeat assessment of our trading opportunities post-Brexit. His department, he assured us, is ready, come what may. Nine new trade commissioners are to be appointed and our new tariff schedules are being prepared for the World Trade Organisation. At a time when protectionism is on the increase, there is considerable enthusiasm in some quarters (which he did not name) for a new independent UK to re-emerge as a champion of global free trade. He was adamant that all the major countries with whom the EU had signed trade deals were keen to continue a similar arrangement with us on Brexit.

One member of the audience expressed concern about how high standards in agriculture could be maintained if trade was to become freer. Mr Hands insisted that there would be no lowering of standards on food quality and we would not be flooded with poor-quality imports (Presumably a reference to chlorine-washed chickens about which there are currently many worries)

David Campbell Bannerman then introduced what he called the “Super Canada” option which, he claimed, was the Government’s  preferred option. This was no surprise, given that a few days beforehand, the EU was widely reported as considering a deal along the lines of CETA, the EU/Canada deal, with the UK. This has been strongly criticised both by the left and by other informed commentators for its inadequacy. Mr Bannerman said that the EU likes the CETA deal and intends to use it as a template for future trade deals with Australia and New Zealand too, Twelve of the 30 chapters in this deal would need no change, he informed us. The others would not be suitable without re-writing, as we would (presumably) wish to protect the NHS  The EU is worried about the future UK attitude towards regulation, as it doesn’t want to see us becoming the Singapore of the North Atlantic, an option enthusiastically supported by, among others, Owen Paterson, whose piece appeared, perhaps coincidentally, on the same day as this conference.

David Davis gave the keynote speech. He stated that he does not want to end up with no deal and is confident that we will get a deal. He pointed out the areas where progress had been made and insisted that our exit will be conducted in a smooth, orderly way.

There was, nonetheless, a possibility that we may not get a deal, but Whitehall was preparing for every eventuality.

Mrs May has consistently rejected using Norway as a model and Helle Hagenau, a familiar face to our more long-standing members, explained some of the pitfalls. Although advising against our staying in the EEA, however, she felt it was worth our re-joining EFTA as we needed some trading arrangement with the four EFTA countries once we leave. Switzerland is our sixth most important trading partner while bilateral trade with Norway  was worth £18.57 billion in 2015. She did, however, mention that although EFTA courts are not bound to implement the ECJ rulings, , they were in fact doing so, even though the ECJ has no direct power to intervene in EEA matters and the actions of the EFTA court was an encroachment on the original basis of the EEA agreement.  With the alleged indivisibility of the “Four freedoms” of the Single Market mentioned on a couple of occasions during the morning, I was surprised that no one mentioned Liechtenstein’s unilateral restriction on free movement of people at this point.

The final speaker was Rt Hon David Jones, who had formerly worked as a minister in DExEU (the Department for Exiting the European Union)  who informed the meeting that any role for the ECJ in our affairs post-Brexit would be totally unacceptable to him and a number of his colleagues. If this meant we would leave with no deal, then as far as he was concerned, so be it.

Interestingly, little was said about the details of any transitional arrangement, which as we have pointed out, the EU is only prepared to offer us under terms which would see us still under the thumb of the ECJ. We can therefore presume that Mr Jones and a number of his colleagues will be  equally opposed to any such arrangement.

Although only billed as a “comment” rather than a speech, the few words shared by Hans-Olaf Henkel of the BDI, the German equivalent of our CBI, were well received. Although he regretted our vote to leave the EU and still hoped Brexit wouldn’t happen,  he was most unimpressed with the way the EU was handling the negotiations. He referred in particular to the “divorce bill” which  he regarded as unacceptable. He also said that Brexit was the fault of Brussels, although his statement that “you joined an EU of sovereign nations and suddenly someone decided to make a United States of Europe out of it” was a rather naive comment given the United States of Europe was always the destination of the European project, right from the days of Jean Monnet.

It was good to meet up with a number of colleagues from other campaign organisations, quite a few of whom I had not seen since the referendum.  It was worth attending this meeting, although I came away with a clear sense that not everyone in the government is singing from the same songsheet, so perhaps the lack of a clear Brexit strategy is understandable given the balancing act required to avoid a massive rebellion on the back benches.

Among the other attendees was Viscount Matt Ridley, whose rather witty comments on the conference may be of interest. They can be found here.