Ireland – The Second Government Brexit position paper

No one wants to return to a hard border between Northern Ireland and the Irish Republic. Even less does anyone, bar a few fanatics, want to return to the days of “the Troubles”. This much is obvious.

Settling the issues relating to what will be the UK’s only land border with the EU has been given a high priority by the EU too. Only yesterday, in response to the first UK government position paper (on customs), the  EU’s chief negotiator, Michel Barnier,  named the Irish question as one of three important issues on which agreement would need to be reached before serious discussions on trade-related issues could begin.

So a mere 24 hours after the position paper on customs, another has appeared which offers us some insights into the Government’s thinking on Ireland.

The paper identifies four priorities:-

  1. Upholding the Belfast (‘Good Friday’) Agreement in all its parts
  2. Maintaining the Common Travel Area and associated rights
  3. Avoiding a hard border for the movement of goods
  4. Aiming to preserve North-South and East-West cooperation, including on energy.

As far as the Good Friday Agreement is concerned, the paper points out that it was an agreement between the UK and the Irish Republic rather than the EU. Among other things, it affirmed “the permanent birthright of the people of Northern Ireland, irrespective of Northern Ireland’s constitutional status: to identify themselves and be accepted as British or Irish or both, as they may so choose; to equal treatment irrespective of their choice; and to hold both British and Irish citizenship.”  The UK Government has every intention to preserve this arrangement after Brexit.

The Common Travel Area pre-dated either the UK or the Irish Republic joining the European project. Indeed, Irish citizens have enjoyed special rights in the UK for most of the period since 1922 – a reflection of the strong, historic links between the Irish people and those in the UK. The Common Travel Area in its present form also involves the Isle of Man and the Channel Islands, which were never part of the EU. It allowed freedom of movement throughout the area and  allows Irish citizens to vote in the UK’s locla and Parliamentary elections.

Given that the Common Travel Area arrangements have been administered by the governments of the parties involved rather than by the EU and that the EU has been happy about this, the document maintains that there should be no reason why this situation should not continue after Brexit.

The “hard border” issue is likely to prove the most complex. In 1972, the paper informs us, there were 17 HM Customs and Excise boundary posts at the major road crossing points along the 310-mile long Northern Ireland land border and more than 200 other crossings not approved for vehicular traffic.  These have all disappeared but this is the number of potential crossing points which would need to be reinstated if a “hard border” were imposed. No wonder all sides are keen to avoid such a scenario.  Some farmers’ land straddles the border.

The paper recognises that it cannot propose a unilateral solution to the problem of maintaining the free flow of trade across the Irish border. It does, however, point to instances “where the EU has set aside the normal regulations and codes set out in EU law in order to recognise the circumstances of certain border areas.” – including the border between the Greek and Turkish sectors in Cyprus and the Croatia/Bosnia border. At the same time, the paper acknowledges that resolution of this issue “cannot be based on a precedent”. This makes sense for, after all, the EU’s aspiration is for Cyprus to be reunited with both parts of the island in the EU and likewise, Bosnia is a candidate country, even though it is unlikely to be joining the EU any time soon. By contrast, the UK is going in the opposite direction.

The paper also refers to the position paper on customs. Obviously, on the one hand the peoples of the UK and Ireland have an unique relationship, but the Irish Republic is an EU member state and part of the EU’s Single Market and Customs Union.  A solution for customs issues at the Irish border is inevitably going to be linked to wider customs and trade issues which will need to be addressed as part of the Brexit process, but as anyone who has visited the Irish Republic will be very aware, a substantial percentage of the products on sale in supermarkets in Irish towns and cities originate in the UK. It is therefore unsurprising that Irish officials are very concerned about the damage their economy may suffer if no trade and customs agreement is in place on Brexit. Leo Varadkar, the Irish Taoiseach, expressed a wish that the UK would not actually leave the EU, or if it did, that we would remain within the EEA. Dan Mulhall, the Irish Ambassador to the UK, by contrast, hoped that we would remain inside the Customs Union.

So the  progress towards the “innovative and untested” customs proposals and the possibility of a temporary customs arrangement discussed in the earlier position paper will be followed particularly closely in Dublin. Given that even if the UK government  changes tack and opts for ongoing membership of the EEA, agricultural goods would be outside this arrangement, it will take a lot of hard bargaining on both sides if all goods and services are to enjoy even relatively free access across the Irish border, whatever form that border may take. If it sticks to the proposals outlined in the position paper, there will be a number of areas where agreements on mutual recognition of conformity would have to be signed and time is short.

The North-South East-West cooperation may be a new term to many of us. North-South simply means the Belfast-Dublin axis and East-West refers to the relationship between London and Dublin. In many ways, the various fora such as the British-Irish Council and the British-Irish Intergovernmental Conference which have been set up under this label are the outworking of the recognition of the  close historic and geographical links between the UK and the Irish Republic. The cooperation has manifested itself in some specific sectors such as energy and the position paper emphasizes the need for the cooperation to continue after Brexit.

With this in mind, the concluding statement that a formal agreement between the EU and the UK on the Irish border issue early in the Brexit negotiations would not mean the end of any dialogue between the UK and the Irish government makes perfect sense. There will be a number of bilateral issues to resolve which do not directly involve the EU as a whole.

As with the position paper on customs, the abiding impression left by this document is that it has identified the issues which need a resolution without offering too much detail as to how they are to be resolved. Unlike the customs paper, however, where failure to reach an agreement would be far more disastrous for the UK than for the EU as a whole, when it comes to Ireland, a crashing out of the EU with no agreement would probably hit them harder than us. The Irish government is well aware of this and we cannot but hope for their sakes as well as ours that it will not be WTO rules on March 30th.

 

Customs: What the Government position paper told us

Today, the Government published its first Brexit position paper, which covers future customs arrangements. It is a short document, only 16 pages long and intended to be a precursor to a White Paper on trade which is scheduled to appear in the autumn.

What does it tell us? Firstly, the Government has been talking to businesses concerned about a “cliff edge” situation on 29th March 2019 and is seeking to ensure that we will end up with  “the freest and most frictionless trade possible in goods between the UK and the EU, and allows us to forge new trade relationships with our partners in Europe and around the world.”

The paper expresses enthusiasm for striking trade deals with “old friends and new allies” – in other words, the Commonwealth nations and the rapidly growing economies of Asia. We can only do this from outside the EU and particularly, outside the Customs Union. It was announced very early after Mrs May took office that we will be leaving the EU’s customs union – in many ways, this was a bit of a non-issue as it was hardly mentioned during the referendum campaign.

The paper recognises  the challenges of establishing a new relationship with the EU. As a short-term transitional measure, what is proposed is in effect a shadow customs union where by the EU will treat the UK as thought it was a member of the customs union. David Davis, interviewed on Radio 4 today, was adamant that the transitional period would end before the next General election – probably no more than two years – to be replaced by a “deep and special partnership” with the EU. This, the paper admits, will be an innovative but untested approach. It suggests two options:-

  • A highly streamlined customs arrangement between the UK and the EU, streamlining and simplifying requirements, leaving as few additional requirements on UK-EU trade as possible. This would aim to: continue some of the existing agreements between the UK and the EU; put in place new negotiated and unilateral facilitations to reduce and remove barriers to trade; and implement technology-based solutions to make it easier to comply with customs procedures.
  • A new customs partnership with the EU, aligning our approach to the customs border in a way that removes the need for a UK-EU customs border. One potential approach would involve the UK mirroring the EU’s requirements for imports from the rest of the world where their final destination is the EU.

There is, in theory, a third option – failure to reach an agreement (see Paragraph 53), but the paper insists that “this is not the Government’s preferred outcome to the negotiations, but it is essential that the UK is prepared for all possible outcomes of customs arrangements.” As for the first option – a high-tech solution, there are some doubts as to whether it really will create frictionless borders, especially as soon as March 2019. As one analyst has said, ” making sure there are no traffic jams in Dover will be more about the arts of management, politics and the law than technology.

The obvious concern on reading the paper through is that this paper is very much a UK wish list. The EU is under no obligation to say yes. What is a particular cause for concern is that its treaty-based structure may not allow it to treat us as an honorary member of its Customs Union.  It is likely that we will be able to devise a system allowing  goods from the EU a reasonably smooth passage through UK customs by March 2019, especially as the if the new customs declaration service using state-of-the-art technology is up and running by then. What is far from certain is that our exports to the EU will enjoy anything like a seamless passage through their customs.  The EU will have to change its customs procedures to adapt to the different  status of the UK on Brexit. Are they prepared to do this?

We will have to wait a while for a formal response. So far, the main comment from Michel Barnier, the EU’s chief negotiator, is that no discussions on customs can proceed until sufficient progress is made on the UK’s exit bill, the Irish border and the rights of EU citizens living in the UK after Brexit. Guy Verhofstadt, representing the EU Parliament, was  very sceptical, dismissing talk of a shadow customs union and invisible borders as “fantasy”.

One also would like to know if the author(s) of this paper are sufficiently aware of the differences between a customs union and a customs clearance agreement.  The latter is essential, the former almost certainly not, even as an interim arrangement.

The CBI has nonetheless described the proposal as “encouraging”.  David Davis’ interview made it clear that his Department still has a few cards up his sleeve and that for tactical reasons, he was not prepared to give anything further away. What has been put into the public domain has shown that the Government is aware of the issues UK businesses will face but offers little detail on how they will be resolved.

Avoiding the cliff edge?

Brexit news has come thick and fast this past week. While we don’t see the need to comment on every twist and turn, some recent developments have been quite significant.

In particular, following reports of disagreements within Mrs May’s cabinet over how “hard” Brexit should be, we are now informed that the Cabinet is united over the need for a transitional deal pending full departure from the EU.  There has been considerable pressure from business leaders worried about the relatively short timescale to prepare for departing the EU. According to the Daily Mail, Mrs May told a group of senior figures from industry that she wanted to avoid a ‘cliff-edge’ exit from the EU.

The article also said that even David Davis, one of the ministers keenest to leave the EU as soon as possible, is reconciled to a transitional Brexit period lasting until 2022.

Of course, with 2022 is now the new date for the next General Election, this puts a great deal of pressure on the Government to make sure we’re through the transition period before voters go to the polls. A recent survey by YouGov studied the main reasons given by voters for supporting the two big parties in this year’s election. Among Tory voters, Brexit came top of the list with 21% citing it as their top concern. By contrast, Brexit (either supporting or opposing it) did not feature at all in the top 10 reasons why people voted Labour.  Achieving a successful Brexit looks like being essential for the Tories if they are to stand a chance of remaining in power next time round.

One big issue in many voters’ minds was immigration and it is possible from the snippets revealed by a government source that no attempt will be made to restrict migration from the EU during the transition period, although when the BBC reported on this topic, it merely used the term “might be” no restriction. If this is the case, it would confirm Mrs May’s statement earlier this week that whatever the transitional arrangement may be, it is not going to include remaining within the Single Market. If so, what will it include? A safer transitional option, the EEA/EFTA route, would enable us, via the Liechtenstein Solution, to start imposing restrictions  far sooner.

Opposition to housing development in greenfield sites and in small towns is not going to go away either, particularly as an increasing number of people are starting to make the obvious link between housing shortages, concreting over the countryside and immigration. This will only add further pressure on the Tories.

However, if voters may be concerned that the government is kicking its migration target further down  the road, the House of Lords Economic Affairs Committee thinks otherwise, noting that Brexit will encourage firms to replace cheap labour with robots. In a sense, this is nothing more than the House of Lords playing catch-up. Almost two years ago, Andy Haldane of the Bank of England said that millions of jobs would be replaced by robots in the next twenty years. Even allowing for exaggeration and/or technology not developing as fast as suggested by the headline report, if we start to become a world leader in artificial intelligence, we will be struggling to find work for the current immigrants and with the exception of top professionals, certainly won’t want any more.

As the summer recess begins, the government will not have an easy job to  keep everyone happy, be it the many shades of opinion among leave voters, the Business community or even the Cabinet. We are still woefully thin on detail about even its transitional plans, but at least we have now been told that the important players are not only talking to one another but listening and attempting to find common ground that will keep most leave voters and business people on side. That still leaves a lot of concerns unaddressed, but for this small mercy we must be thankful.

Photo by williamcho

Look who’s talking!

A worthwhile article on rare.us gives us some insight into Brexit by asking “How could so many be furious over a female Doctor Who?”. The answer is, they’re not. The author says “I decided to go in search of this misogynistic outrage mob, only to find that it existed mostly in the imaginations of the people mocking it”. This largely confirms what we already know. No-one really cares. This is the fuel of today’s culture wars. Pre-emptive reaction to and satisfaction in the other’s side’s anticipated reaction.

This is interesting because it extends right across the issue spectrum. I’ve seen this exact dynamic mocking a cardboard cut-out Brexiteer who, as far as the wider populace is concerned, doesn’t exist save for a few high profile loonies they coalesce around and elevate to the status of typical. 

The dynamic creates a hyper self-congratulatory, smug and sanctimonious bubble, personified by Nick Cohen and Matthew Parris, spawning their own little bands of acolytes and fan boys on Twitter. Since other hacks lower down in the pecking order like to be in with the gang so as to appear clever, you get a groupthink unable to see outside the walls of its self-satisfaction. And then they wonder why they lost the referendum.

To a point it’s all fair game in that you have the Leave.EU idiots but they speak only to a sub-sect of what was the Ukip vote – which at last polling was far less than 52%. Closer to 6% one suspects. Still, there is enough low hanging fruit to go after.

As much as anything, though, it betrays the intellectual dishonesty of the remain crowd in that there are perfectly well reasoned arguments for Brexit, encompassing issues where even the FT hacks dare not tread. This all contributes to the mythos of Brexit where the silent leavers are left unrepresented and left patiently to endure the ongoing insults. The stereotype of the stupid Brexiteer is well deserved if Brexit ministers are anything to go by but the people very often show more wisdom than those they elect. The on-going condescension is a stark reminder of why it is necessary to put these people in their place.

There are plenty of leavers who are well aware that Brexit comes with trade-offs, who aren’t obsessed with immigration and recognise the need for a transition. Certainly everyone I campaigned with was aware Brexit would have economic consequences but made the decision on balance.  

In this respect, remainers have a little cult of their own going on, mocking the straw man Brexiteer but dishonestly refusing to engage on a more sophisticated level. Certainly the globalisation of regulation is an issue they will go to any lengths to avoid – not least because it is complex, but also because it opens up a debate about the world beyond Brussels which they cannot admit exists or their entire worldview starts to fall apart. The most we get is a nod from the FT to the “Brussels Effect” which they have only half understood – and as to the ecosystem of private authorities they wouldn’t know where to begin.

Over the next few months we can expect a torrent of gloating articles pointing out how many areas of governance will be locked into the existing régime. We are probably looking at being tied to EU tariff rates for a long time to come, and we will likely have to maintain the status quo in agriculture for ten years at least until we have taken full control of our customs régime. This is all besides the point. The fact is, the separation process will mean we have to keep a high level of conformity but this is about ending EU political integration and engineering the EU out of domestic decision making. Nobody was expecting anything to change overnight. They can gloat all they like, but outside the bubble, it is they who look foolish.

Who will blink first?

Our attention has been drawn to an interesting article which appeared on the Conservative Home website. The author, James Arnell, claims that we in the UK have a different mindset when it comes to negotiations. “In the UK”, he claims, “parties generally start from a position which is more or less reasonable on each side and move together to a deal relatively quickly, seeking to avoid unnecessary escalation up the chain of command.”

The Continental approach is very different:- “Negotiations generally start with almost ridiculously extreme positions on each side….It is not at all unusual for these steps….to be accompanied by walkouts, requiring bosses to get things ‘back on track’. Ultimately, this continental form of negotiation culminates in a relatively rapid final phase of negotiations between the ‘head honchos’, in which, after months or years of painful posturing on both sides, points are traded embarrassingly quickly and a deal is sealed.”

Mr Arnell says that we should really start worrying if the negotiations are going smoothly at this stage as it means that the UK side would have been giving too much away.

The author works for Charterhouse, a private equity firm.  His biographical page on that firm’s website states that he is a barrister who speaks French and German fluently. All things considered, this article on ConHome sounds like it has been written by someone with first-hand experience of the Continental mindset with which David Davis and his team are having to deal during the Brexit negotiations. Maybe this is why not a lot is being given away by the UK government. While such tactics may ultimately turn out to be the best way of getting a favourable deal with the EU, as we have pointed out the lack of the details of any Brexit masterplan is causing concern for a number of business figures who are keen to know in far more detail what the government’s exit plans actually are.

A little extra piece of detail did emerge yesterday morning. According to Open Europe, Theresa May was adamant that even any transitional deal would not involve membership of the Single Market.  “We said we would no longer be members of the single market because we will no longer be members of the European Union.,” she said. Fair enough, but if there is another plan, not only organisations such as the Campaign for an Independent Britain but more importantly, some big names in the business world are straining at the leash for some reassurance.

Some confirmation of Mr Arnell’s analysis of the Continental mindset has surfaced in the shape of a  reference document of the Workshop on “Common Fisheries Policy and BREXIT” held on 21th June 2017, by the European Parliament’s Committee on Fisheries.  Concern has already been voiced about our denunciation of the 1964 London Fisheries Convention, an agreement which pre-dated our joining the EU allowing limited access to vessels from other Western European nations to certain areas of the waters between 6 and 12 nautical miles from our coastline.

As the wording of the original document was vessel-specific and no boats permitted to access our waters in 1964 are likely still to be active, denouncing this Convention could turn out to have been little more than a precautionary measure. The message it conveyed, however, was that the UK is serious about regaining control of all of our waters right up to the 200 nautical mile/median point limit and it was not well received. The response of Geert Bourgeois, the Flemish Prime Minister, was to wave around an ancient charter signed by Charles II in 1666 allowing fifty herring boats from Bruges “eternal rights” to fish in UK waters.  A bit of research showed this action to be nothing more than sabre-rattling. Even nearby Zeebrugge, a far more important fishing port than Bruges these days, could only muster 43 fishing boats in total four years ago.

So it comes as no surprise that the European Parliament is keen to see EU boats continue to plunder our waters. Although trade and fisheries will be handled separately, the report says, “The fact that these issues will be negotiated in separate legal frameworks should not lead to the fragmentation of fisheries issues, which should be addressed in their entirety and together, so as to ensure that the free movement of fishery products is linked to free access to waters and resources and vice versa”. As John Ashworth of Fishing for Leave commented, “The EU will want to tie the whole package together using blackmail on trade” –  In other words,  let us fish in your waters more or less as before or we’ll make it hard for you to sell fisheries products in the EU.

John has studied the issue of historic rights and has concluded that we can take back control of our waters without being open to a legal challenge over this issue. Nonetheless, the European Parliament document says “These historical fishing rights should be taken into account in the negotiations to facilitate preferential access by Member State fleets.” I shan’t repeat his rather forthright comments about this for fear of offending anyone’s sensitivity, but suffice it to say that he is distinctly unimpressed with the reasoning of the European Parliament! As an aside, it is worth pointing out that the European Parliament has a relatively minor role to play in the Brexit process, but its attitude is unlikely to be different from that of other EU institutions.

The bottom line is that if there is no agreement on fishing, the EU will be the clear loser. We would have full control of our waters right up to the 200 nautical mile/median point on Brexit day and no EU vessel would be able to fish anywhere within it. The loss of access to EU waters by our fishermen would be more than compensated by having exclusive access to our own.

This, or course, assumes that Michael Gove does not blink first and give way. The denunciation of the 1964 Convention was a move in the right direction, but the howls of protest from across the Channel are a warning to him that he will need to hold his nerve.

Indeed, it may not just be Mr Gove who needs to take James Arnell’s advice on board. Yanis Varoufakis, the former Greek Finance Minister has written a book called Adults in the Room based on his personal experience of how awkward he found EU officials to be.  On the other hand, while we have the upper hand on fisheries, we certainly don’t when it comes to other important areas of trade. Our negotiators must hold their nerve and not be intimidated, but they know that the mantra “no deal is better than a bad deal” is no more rooted in reality than the prospect of fifty 350-year old herring boats from Bruges suddenly appearing in the Channel demanding their eternal rights to fish in our waters.

Photo by waltercolor

Cameron’s legacy of confusion

David Cameron didn’t expect to lose last year’s referendum and banned the Civil Service from devising any exit strategy. That became an excuse for a nine month gestation period by Mrs. May which delivered only repetitions of “Brexit means Brexit”. The official leave campaign, vote.leave, refused to devise an exit strategy either. The only serious research on offer before the referendum which charted a comprehensive exit strategy was Flexcit, which recommended the EEA/EFTA route as a transitional arrangement. Since the referendum, only one further independent, detailed attempt has been made to tackle the issues involved – the Bruges Group’s What will it look like? which claimed that another exit route was possible within the time limit, while recognising a number of potential obstacles.

A recent post by Sir Jeremy Heywood, the Cabinet Secretary and head of the Civil Service painted a very upbeat picture of the work being done by the newly-created Department for Exiting the EU but he didn’t go into any detail about exit strategy. This department has far more staff available than the Bruges Group so it is rather worrying that we still know so little.

As our Chairman, Edward Spalton, has pointed out, when we joined the EEC in 1973, businesses were being briefed over a year in advance about the forthcoming changes.  Recently, a number of businessmen  who  met with government ministers, including the Brexit secretary David Davis, were very concerned about the lack of  detail they had been given. Similar reservations have come from groups ranging from the chemical manufacturers and the Federation of Small Business – the latter including a number of long-standing Brexit supporters.

Mr Davis unquestionably feels very confident about the UK’s prospects outside the EU. In the long term he could well be right. To be free of control by Brussels and able to manage our own affairs will be an inestimable benefit – but only if we are able to chart a sensible course through the choppy waters of what are shaping up to be far more complex negotiations than many Brexiteers ever imagined.

The stakes could not be higher for Mrs May and the Conservative Party.  There will be no backing out of Brexit.  Even though only a minority of MPs campaigned for leave, the majority of her party’s activists are staunch leavers and would not countenance any sort of betrayal. The unexpectedly strong showing by Labour in last month’s General Election only adds to the pressure. Any failure to deliver a competent Brexit as good as guarantees Mr Corbyn the keys to No. 10 in 2022 – or perhaps earlier.

Leaving  the EU  is the biggest challenge Mrs May and her team will face. We do not know what is going on behind the scenes but  the government  needs to have sufficient known policies in view to reassure the public, to avoid disrupting  economic expectations  and to deny traction to the campaign to rejoin the EU. Advice to all industries concerning the effects of government plans needs to be given in plenty of time for them to adjust.

To put it another way, our EU membership has been like a malignant, cancerous tumour. Untreated, it would have led to certain death. That’s why we were right to vote to leave. However, the complex task of cutting it out should  be done by a team of top surgeons who not only know what they are doing but can communicate their knowledge and confidence to the people. At the moment, even though there seems to be a growing agreement that some sort of transitional deal is necessary, no details at all have emerged.

Membership of the Single Market, even as an interim arrangement, has been ruled out and significantly, it was the Chancellor Philip Hammond, one of the “doves” in government, who stated this explicitly on the Andrew Marr show last Sunday. So what will it include? Catherine McGuinness, the de facto leader of the City of London’s municipal body, says Britain and the EU must agree the outlines of any transition before the end of the year or as many as 15,000 banking jobs could leave London.

The sense of lack of concentration was not helped by a picture of Michel Barnier and his EU team turning up  for the second round of Brexit talks with  great thick folders of notes while David Davis and his associates had none.

So will some positive signal emerge to calm worried businesses  – and indeed, worried Brexit supporters? If so, the sooner the better, as the opponents of Brexit are gleefully cashing in on the  lack of direction,  communicated by default.   Most people just want to see Brexit done and dusted with reasonable assurance of that steadily performing  economy on which all our livelihoods depend.