Half way there, but have we even started?

Last week marked the half way point between 23rd June 2016 – that euphoric day when we voted to leave the EU – and the actual day on which we will actually leave:- March 29th 2019.

On Friday, Mrs May confirmed that she plans to set the date for our departure from the EU into law. There will be no slippage and no turning back. This comes against a background of growing concern that Brexit could be stopped.  Today, Lord Kerr, a former UK ambassador to the EU, insisted that the Article 50 process could be stopped or reversed. No way, replied Mrs May. Her proposed law will make it irreversible.

This is good news for those of us who fought so hard to secure that historic victory in June last year. I have dealt with more than my fair share of correspondence recently from people concerned that the government is going to back track. My views have not changed since writing this article that Mrs May and the Tories, whatever side they supported during the referendum campaign, have no choice but to deliver Brexit because failure to do so would provoke the worst crisis in the party since the repeal of the Corn Laws in 1846.  Backtracking would be suicidal. Thankfully, a lust for power is deeply entrenched into the Conservatives’ psyche and given their shock at last June’s General Election result, they know that delivering a good Brexit is essential if they are to avoid  electoral meltdown in 2022.

Probe a bit deeper, however, and the picture is not quite so rosy.  In spite of the Brexit vote last year, as  Veterans for Britain has been keen to point out, the Government has taken us deeper into the EU’s military integration process, with there being considerable support to signing us up to PESCO, the Permanent Structured Cooperation of the EU’s external action force – set up in reality to undermine and replace NATO. Brexit can only mean Brexit if we are completely detached militarily and we can but hope that even at this 11th hour, Gavin Williamson, the new defence secretary who has little experience of military matters, will listen to those members of our armed forces who know what they are talking about and step back from this process.

Sadly, of our daily newspapers, only the Express  has so far been willing to cover this disturbing development. However, to repeat, even if Williamson’s predecessor Michael Fallon was able to get away with betraying the UK’s armed forces without being subject to too much scrutiny, it will be out of the bag by 2022 and the Tories will reap the whirlwind electorally.

Equally disturbing is this statement from the Prime Minister’s office which was passed to one of our supporters. Note the section he has highlighted in yellow:-  It also means that the existing body of EU law will become British law. So this provides certainty and clarity for all businesses and families across the country from the very moment we leave the EU.”

This is true when it comes to legislation which would only be applied internally. For instance,  the rules governing bathing water have been devised by the EU. It is no great problem for us to continue to use them over the Brexit period. They work satisfactorily so even if they could be improved, there is no urgency until we have settled down as a sovereign, independent country.

It is a different matter, however, when it comes to legislation which involves the relationship of an independent UK with the rest of the EU. We have previously highlighted the fallacy of this approach with regards fisheries, but it also applies to the general question of trade. the PM appears to be repeating the mistake that because our regulations will be aligned with those of the EU up to Brexit day, some sort of seamless trade arrangement should not be a problem,

The transitional arrangement which she seeks is essentially based on this misunderstanding – we can be essentially honorary EU members for two years while a bespoke long-term deal is sorted out. We would obey all the rules and pay into the EU’s coffers without any representation. Such a deal would be unacceptable to many Tory backbenchers, not to mention the wider Brexit-supporting community. Thankfully, although the penny seems not to have dropped in Westminster, the EU has said it is a non-runner.

The European Parliament  set out its position, where, among other things,  it “reaffirms that membership of the internal market and the customs union entails acceptance of the four freedoms, the jurisdiction of the Court of Justice of the European Union, general budgetary contributions and adherence to the European Union’s common commercial policy”  – in other words, you’re either in or you’re out. To repeat, it’s not about regulatory convergence but the legal relationship of a future EU-UK relationship. We will no longer be subject to the EU’s treaties, Article 50 is quite clear about this. We need to seek a new legal basis and any transitional agreement would require almost as complicated a legal ratification process than a long-term bespoke relationship.

The EU’s guidelines also say, “To the extent necessary and legally possible, the negotiations may also seek to determine transitional arrangements which are in the interest of the union and, as appropriate, to provide for bridges towards the foreseeable framework for the future relationship in the light of progress made. Any such transitional arrangements must be clearly defined, limited in time and subject to effective enforcement mechanisms. Should a time-limited prolongation of Union Acquis be considered, this would require existing Union regulatory supervisory, judiciary and enforcement instruments and structures to apply.”

This affirm that the EU will allow us to go ahead with a transitional deal, but it must be on the EU’s terms and subject to the appropriate legal processes being completed in time, which looks very doubtful. In other words, to repeat, it’s a non-starter and a red herring.

So until there is a change in mindset among UK’s negotiators we will continue to go round in circles. Last Friday also saw the usual Barnier/Davis press conference following the latest round of “negotiations” and there is still no indication from the EU side that they feel ready to start trade talks as insufficient progress has been made on the three critical issues of the Irish border, the rights of EU citizens resident in the EU and the “divorce bill.” Agreement must be reached within two weeks or trade talks will not be starting any time soon. Sadly, David Davis’s response was to call for the EU to show “flexibility  and imagination.” Unfortunately, the EU’s legal structure doesn’t allow it to be flexible. Mr Davis can repeat this little phrase as much as he likes. It will not make a shred of difference.

So at this point when we have just reached the half way point to Brexit, it is sobering to think that this milestone has been reached with the two sides so far apart and so little real progress made. Not what any of us expected on that incredible morning when the result of the referendum was announced. A Brexit of sorts will almost certainly happen on 29th March 2019, but unless the government raises its game, we could find ourselves, more by default rather than design, either crashing out following a breakdown of the talks or suffering a Brexit that isn’t really Brexit in any meaningful way.

The complexities of Brexit

Having been opposed to to our EEC/EU membership since the early Seventies when Mr. John Selwyn Gummer (as he then was – now Lord Deben) addressed our grain trade conference and told us that the Commonwealth countries wanted nothing more to do with us, I have picked up one or two things along the way.  Our family firm bought milk powder from New Zealand and we knew that our friends there were not at all pleased to be losing one of their best customers.

From late 1971  the government consulted our trade association and gave  very full, detailed information about what our firm would have to do when we joined the EEC on January 1 1973.

Without that information, we would have been in a total mess. Please see my account in Articles 2 and 3 of “The Miller’s Tale”.

We are due to be out of the  EU by the end of March 2019, so the government will have to start giving full, detailed information to all trades quite early in 2018, if businesses  are to have any chance of being ready.  Government departments such as Customs and Excise will have to be fully informed and equipped  too. There appears to be very small chance of this because of the lackadaisical way the government has approached the negotiations, handing the initiative to M. Barnier.  It always was unrealistic to expect to complete a wholly new style of comprehensive trade agreement within two years but they appear not even to be able to agree in cabinet what they actually want.

We already have three ministers involved – David Davis, Boris Johnson and Liam Fox plus the new unit which has been set up in the cabinet office, in part by transferring staff from David Davis’s department DExEU .

Robert Peston, who  is reckoned to be a very well-informed reporter, wrote in a Facebook post that

 “(Mrs May’s) fatal weakness is that she lacks the authority to settle this argument such that the EU  would have a clear understanding of who actually represents the UK and what we want from Brexit.

In the words of a senior member of the cabinet, it is a scandal that there has never been a cabinet discussion about what kind of access we want to the EU’s market…., what kind of regulatory and supervisory regime should then be in place  to ensure a level playing field for EU and UK businesses….”

As far as I know, no significant country trades with the EU on World Trade Organisation rules alone. They all have additional agreements on things like customs co-operation, approval of manufacturers and their quality standards  etc. All our present arrangements simply cease to exist if we “just walk away”.

To give just one example – British farmers presently export 40% of their lamb to the EU. As an independent country outside the single market without an additional agreement  that would be subject to a “sheep meat” tariff of £2,689 per tonne. The price to British farmers would collapse. But the lamb would not even get as far as customs until it had satisfied the “sanitary and phytosanitary” health controls which apply to all food products. The shippers would also have to appoint official importers on the other side – firms or individuals resident in the EU – to be responsible to the authorities for conformity to EU standards and, of course, the payment of inspection charges and tariff.  This is not the EU “punishing” us but the simple effect of the rules, if there is no other agreement.

With regard to EEA/EFTA, you may recall that Mr. Cameron went on his “hug a husky” trip and gave out quite a bit of unfavourable information which was misleading and not entirely correct but still avidly accepted by many  from UKIP  to extreme Europhiles.

Very few have since taken the trouble to check it. We in CIB have been supporting our fishermen and insisting on the need to assert control over all our fisheries – including the 200 mile Exclusive Economic Zone.  Norway and Iceland reserve all their territorial waters and EEZ for their own boats under article 112 of the EEA agreement. Our government is not guaranteeing that to our own fishermen. Iceland was able to impose capital restrictions during the financial crisis and Liechtenstein imposes strict limits on immigration – all under this arrangement.

Mrs. May is proposing a  transition/implementation period which involves continued subjection to the European Court of Justice (ECJ). The EEA agreement is preferable, being subject to the EFTA court which can only rule on on “EEA-relevant”  matters and has no formal powers of enforcement. If the arrangement does not suit us, we can be out of it by simply giving a year’s notice. Under the ECJ we would be subject not just to the 20% or so of EU legislation affecting trade but to the other 80% which enforces the political project, including things like the European Arrest Warrant..

Given the weakness of the government’s performance, I cannot see it negotiating anything better than the EEA agreement as a basis.  As an interim, it has the advantage of being a known quantity and could be subject to agreed amendments  (off the peg with alterations rather than “bespoke”). It is a least worst option. I have not heard of anything equally practicable and achievable in the limited time available.

Funnily enough, when we started discussing this possibility some  years ago it was fiercely attacked by a man who said it would be enough simply to repeal the European Communities Act 1972. It turned out he was a keen Europhile! I wonder why he was so against it?  Perhaps this article Europhiles for a sovereign Parliament may give us a clue.

When Mrs. May announced the government’s approach to Brexit in her Lancaster House speech in January, I felt that she was biting off much more than she could chew. A free trade agreement of the scope and complexity which she proposed seemed just too much to cram into a maximum negotiating period of two years.

But, on reflection, there was not even two years available. Basing things on my experience in a firm approaching entry into the EEC in 1972, it was obvious that both government departments and businesses would need a substantial lead time to get ready for the changeover to the new system. Farming and other industries with long production cycles would need at least a year’s notice, in full detail, of what the government intended. Businesses contemplating investment projects would need to know too.

In our CIB newsletter of 29 March 2017, (when Article 50 was triggered), I wrote about our chemicals industry which is a very important part of our exports. I had listened to the proceedings of the Environmental Audit Committee of 7 March.

“GREAT REPEAL BILL MAY SECURE BRITISH EXPORT SUCCESS – OR NOT

The chemicals industry is a key British exporter. For years now it has been working to comply with the EU REACH Regulation (Registration, Evaluation and Authorisation of Chemicals). On 7 March DEFRA told MPs that the Great Repeal Bill (Now the European Union (Withdrawal) Bill) would create an identical British version to be called BREACH so that British-manufactured chemicals could continue to circulate freely in the EU market.

REACH requires companies which produce the same chemical to submit joint dossiers on their product with safety data to the European Chemicals Agency. Many such registrations have been filed at very considerable expense.

Next year will be the deadline for registering specialised low-volume chemicals which will affect thousands of companies. This is creating problems. For instance, should a British manufacturer which only sells in the UK go to the expense of registering with REACH when it might have to do the same a year later with BREACH?

The officials appear to be in a muddle and not to know. DEFRA has promised that the UK “will have a functioning scheme from Day One” but this is not good enough. The UK Chemical Industries Association says there is “no clarity at all” and doubts that such a scheme can be put in place within the two year negotiating period. According to a survey of the industry, one fifth of the UK chemical manufacturers are already planning to establish themselves in another EU country as insurance against the muddle. Whether they stay or go depends on their confidence in the British government.

The government has realised that the British chemical industry must be helped over this non tariff barrier, if it is to continue its success as our second largest single exporter. The highest levels of political and official will are needed to secure the confidence of the industry. The Devil, as always, is in the detail and will not be exorcised by vain repetition of mantras about “WTO Rules”. At least it is clear, they know that much!”

Yet now, seven months later the muddle persists. Private Eye reports a setback, even from this unsatisfactory position.-

“MORE on the consequences of Brexit nobody seems to have thought of until now. The European Chemicals Agency has quietly confirmed that more than 6,000 substance registrations filed by UK-based chemical s companies will be “regarded as non-existent” after Brexit.

These registrations are a condition of access to the European Union market, but in the bloc’s overarching REACH chemicals law, there is no legal basis for registrations from countries outside the single market, which the British government is determined to leave.

This puts UK chemicals companies in a bind. As 60 per cent of UK chemicals exports go to the EU, companies will need to switch their registrations to associated companies or agents inside the single market. This will involve new contracts and costs, including payments to the European Chemicals Agency which charges about 1,600 euros to change the identity of a registrant and between 9,000 to 34,000 euros paid for the original registration.

A final deadline for registration of chemicals under REACH falls on 31 May 2018, nine months before Brexit. The deadline applies to low-volume and specialised chemicals. Should UK- based companies bother? Those that sell sufficient volumes into the EU market will need to ensure their registrations continue, but what about UK companies that sell only in the UK or to non EU countries?

In fact, they have no choice. The UK will still be a member of the EU in mid -2018 and companies have a legal obligation to register their substances. Moreover, the British government has said that it will continue after Brexit with a facsimile of REACH, including its registration provisions. So, if UK companies selling only in the UK don’t file their EU registrations, when Brexit comes round they would be on the UK market illegally.

The government says it is “working to ensure a smooth transition for the chemical industry as we leave the EU”. But time is short and there is still little clarity on the many practical details.”

So the authorities have marked time for seven months. I hope that CIB members and supporters – especially those with experience of the industry or living in areas of substantial chemical manufacture – will contact their MPs to pressure DEFRA to get a move on. There are thousands of similar things which will need to be sorted out quite early in the New Year, if affected firms are to have a chance of making a living and paying their workers after Brexit.

As a post script, readers may be interested in an e-mail exchange in which I was involved:-

From: [email protected]

To [email protected]

Sent: 24/10/2017 11:19:06 GMT Summer Time

 Subj: RE: The complexities of Brexit – Campaign for an Independent Britain

THERE  NEED  NOT  BE  ANY  COMPLEXITIES  WHATSOEVER !!!!!!  We have a very good balance of trade and payments surplus with that Mighty Economic Colossus, The  United States of America, the largest economy in the World. Nor do we have a trading agreement!!!  This endless babble with the EU, by the UK Government is just a load   of procrastinating tripe created by a weak leadership who are quaking in their Knickers and Underpants. We also have good trading, and profitable relationships with a good number of other countries around the World.

The  fact the people who would be quaking in their underwear if we simply walked away; would be the likes of Merkel, Macron, Barnier and Juncker. Particularly Merkel who is     already in the cart following the German elections, having caused an election result that has resulted in the Neo NAZIs getting into the Bundestag for the first time since 1945. As we all know this is the direct result of her insane immigration policies. She would also be very worried about the German car industries employees because of the huge number of cars that are currently imported into the UK. 1.3 million German car industry employees rely on exports to the UK, in order to keep their jobs.

As we are seeing with other national elections, the four of the above EU and national leaders, plus a number of others, are between them destroying the EU from within. The USSR was destroyed from within, and in that there is a lesson for Juncker and Barnier; POWER!, without accountability, destroys that which it represents.   Ken.

Dear Sonya and Ken,

I just remembered this article from PRIVATE EYE which includes BREXIT problems with regard to farming, trade with the USA under EU/US trade agreements and the time needed to adjust to any new arrangements.

“BREXIT is less than 18 months way and yet still no post-Brexit transitional arrangements or EU-UK trade deal is even under discussion, let alone agreed. Given that farming is a long-term business and its viability is currently governed by the EU’s international trade arrangements, will UK farmers continue to commit to the financial risks of food production faced with such uncertainty?

A good example of the difficulties ahead concerns the threat to the UK organic cheese Kingdom Cheddar, which is currently exported to the US .

Kingdom is made from organic milk produced by the 265 UK dairy farmers in the Organic Milk Suppliers Co-operative (OMSCo). In 2015, under US-EU trade arrangements, OMSCo qualified to export its premium organic cheese to the US. It took OMSCo eight years to develop the Kingdom brand, its dairy farmer members having substantially altered their farming practices to meet US standards (including using fewer antibiotics and improving animal welfare).

The arrangement that allows Kingdom to be sold in the US however is between the EU and the US. OMSCo points out that unless an “equivalence” agreement on organic farming standards is signed between the UK and the US “in the next three months”, it will stop production of Kingdom at the end of December. OMSCo chairman, Nicholas Saphir says “We cannot take the risk of producing a niche market product that, given its 18 month production(cycle) may not be able to be sold after Brexit”.

OMSCo is unique in the UK in exporting high volume premium organis cheese to the US; but given agriculture’s long production cycle, all UK food exports face the same risk of disruption, as th clock ticks down”.

The article goes on to make the same point about lamb production which I made in “The Complexities of Brexit”, pointing out that farmers will have to decide this Autumn whether to retain millions of ewe lambs for for breeding or send them for slaughter as fat lambs because their progeny will not be brn until Spring 2019, just as Britain leaves the EU which currently takes 40% of British lamb.

I am afraid that neither government nor Brexit campaigners appear to be taking this sort of thing into consideration.  All industries with long lead times will have similar problems.

Regards

Edward

 

A Brexit that will work for nobody

“Brexit means Brexit,” Theresa May famously said on a number of occasions last year, “And I intend it to work for everybody.”  With the half-way point between the referendum vote and Brexit day looming next month, current pronouncements from the Government suggest that on the contrary, we could end up with a Brexit that works for no one.

Our fishermen have good reason to be worried. Unless the Fisheries Regulation 1380/2013 is exempted from the European Union (Withdrawal) Bill – and there is no sign that this is the Government’s plan – we will end up leaving the Common Fisheries Policy only to revert to what is in effect a shadow CFP, including all the access arrangements which would continue to give away our nation’s resource to the EU. Last week, when asked about fisheries, the Prime Minister said,

“When we leave the European Union, we will be leaving the common fisheries policy. As part of the agreement that we need to enter into for the implementation period, obviously that and other issues will be part of that agreement.”.

While this “implementation period” may exist only in Mrs May’s imagination, she should instead have given an unequivocal statement that upon Brexit, we will not only immediately take full control of our Exclusive Economic Zone, but will not be running it on a quota basis.

At least as far as fisheries is concerned, there is hope that ultimately it will be Michael Gove who determines post-Brexit policy. He has shown himself sympathetic to the plight of our fishermen and his mention of John Ashworth in person during a fringe meeting at the Tory Party Conference is a recognition that the fishing community is running a well-organised campaign that not going to take no for an answer.

Another area of concern is the reluctance of this government to disentangle ourselves from the EU’s military machine. Our friends in Veterans for Britain  were understandably critical of the Government’s recent  “future partnership” paper on defence, which would limit our independence. They also do not want to see is tied in to PESCO (Permanent Structured Cooperation) a key factor in the EU’s military ambitions to create a defence union. It appears from an earlier briefing put out by VfB that many MPs are still in the dark about the very limited military autonomy with which government ministers plan to allow us. This is unacceptable. As an independent country, our political objectives will inevitably diverge from those of the EU. We will no longer be interested in its empire building in the Balkans or among the former soviet republics. Our defence policy must be disentangled from that of the EU before we leave. If Mrs May is planning a reshuffle, as is widely being rumoured, the appointment of a genuine Brexiteer to  replace the most unsatisfactory Micharl Fallon as Defence Secretary would be a very good move.

We also need to make a clean break with the EU on criminal justice matters.  Torquil Dick-Erikson has raised the issue of the European Arrest Warrant on this website before. We agree with him that it is totally unacceptable for the Government to keep us as a signatory to the EAW and to be a member of Europol. More than that, Torquil has pointed out that the Government has also declared its willingness to allow “special intervention units” from the EU to set foot on British soil, and under a smokescreen of “ensuring security.”

In these three areas – fishing, defence and criminal justice, Brexit must be as “hard” as possible and the Government’s shortcomings will be highlighted over and over again on this website until there is a change of heart. This is not the Brexit we voted for.  As last year’s Vote.Leave slogan said so graphically, it was all about “taking back control”. If our fishing grounds are shared with the EU, our defence is bound up with that of the EU and EU judges still have the power to haul us off to any one of 27 member countries on the basis of unsubstantiated allegations, we are not in control at all.

What is more, these issues must not be swept under the carpet while all the media focus being on trade talks – or rather, the lack of trade talks. Thankfully, as far as trade is concerned, a number of senior figures from industry, supported by a small but growing number of MPs are expressing their concern that the “No deal is better than a bad deal” mantra is unrealistic and dangerous. Leaving the EU without a deal would be a calamity for our economy, even though one recent opinion poll suggested that as many as 74% of voters would prefer this to a supposed “bad deal”. Do they realise that planes would be unable to fly? That the M20 in Kent would be turned into a lorry park overnight?

Of course, it is possible that the Government is engaging in brinkmanship to try to twist the EU’s arm and get it to start trade talks before the three contentious issues of the Irish border, the “divorce bill” and the rights of EU citizens have been agreed, but it is a high-risk strategy and one that looks unlikely to succeed. It is based on a long-standing failure to perceive that the EU is first and foremost a political project, not a trading bloc.

This mistaken perception of the EU’s nature suggests that the transitional arrangement mentioned recently by Mrs May (where we would be able to trade seamlessly with the EU after Brexit in return for being subject to most of the EU’s rules and policed by the European Court of Justice) is mercifully a non-starter.  It is an unsatisfactory pick-and-mix deal which violates the EU’s political integrity while being an extremely bad arrangement for the UK. It remains a mystery why the EEA/EFTA option is still being ruled out of court by all senior government figures when something far worse is being publicly advocated instead.

While no sane person would disagree with the statement by David Davis that Brexit is “the most complex peacetime operation in our history”, it is now nearly 14 months since the referendum vote and we do not yet have any indication that the Government has come up with a strategy which will deliver a satisfactory break with the EU.  Thanks to David Cameron’s ban on allowing the Civil Service to work on any Brexit plan before the  referendum, the Government and Whitehall have found themselves on a sharp learning curve, but some campaigners, such as John Ashworth have been active for 20 years or more and have considerable knowledge their specialist subjects. Why are their recommendations not being adopted? Why, after all this time, is the government still seemingly confused about the difference between the Customs Union and customs clearance agreements? Why has the defence integration continued since the Brexit vote without any consultation with the military, who actually understand the issues?

It does not help when anyone who dares to stick their heads above the parapet and suggest that we are heading for a disaster is labelled a “traitor” – as was the case with Philip Hammond last week. Of course, Mr Hammond supported remain during the referendum and some ardent Brexiteers refuse to believe that anyone who did not campaign for Brexit can possibly be genuinely committed to making it happen, in spite of our own soundings which suggested that most MPs, whatever side they took in the referendum campaign, have accepted the result and will not seek to be obstructive over Brexit. More worryingly, a veteran leave supporter like Christopher Booker, whose pro-Brexit credentials are impeccable, has been tarred with the same brush for expressing concern about the direction of Brexit talks. What is the point in saying things are looking good when there is every evidence that they are not?

There are two very big worries which force concerned Brexiteers like Mr Booker – and indeed, your author – to stick to their guns. The first is that a calamitous Brexit would be grist to the mill of the hard-core remainiacs who have never accepted the result of last year’s referendum. A spike in unemployment and inflation coupled with possible food shortages would lead to calls for us to start negotiations to re-join the EU, even though we would lose our opt-outs on the €uro and Schengen along with the Fontainebleau rebate won for us by Mrs Thatcher. This would be a disaster.

Secondly, it would lead to unprecedented political upheaval. Less than a year ago, some Conservatives were convinced not just that Jeremy Corbyn was unelectable but that the Labour Party was in its death throes. Last June’s election was a rude awakening for the Tories, proving their optimism to be very wide of the mark. The mood at the Party conference was apparently very sombre indeed.

There is good reason for this, as today’s young people in particular are far more likely to support Labour than the Tories, suggesting that far from Corbyn being unelectable, he is likely to become Prime Minister in 2022, bringing with him a team of MPs who are in the main, even more reluctant Brexiteers than the Tories. The best way  – indeed, probably the only way – of avoiding this is for the Tories to deliver a successful Brexit. Analysis of voter intentions suggest that the most popular reason why voters opted for the Conservatives last June was a conviction that they would deliver on Brexit. To betray the voters’ trust  would not just hand over the keys of No. 10 Downing Street to Jeremy Corbyn in 2022; it would produce the biggest crisis in the Conservative Party since the repeal of the Corn Laws in 1846.

As  Anthony Scholefield, a CIB Committee member, pointed out in his 2011 critique of Cameronism, “Too ‘nice’ to be Tories – how the modernisers have damaged the Conservative party“,  attempts by the Tory leadership since 2005 to reach out to urban touchy-feely politically correct types have served rather to alienate many traditional supporters. As I argued a few years ago, there are plenty of people who genuinely want to vote for what Mrs May famously called a “nasty” party. I was wrong in predicting that Cameron wouldn’t win the 2015 election, but he only won it because he was forced to give in to the mounting pressure within his party to hold a referendum on our membership of the EU. It was the EU issue which also saved Mrs May’s bacon two years later. Given that a good few Tory voters (and indeed activists) still remain most uncomfortable about this move to the supposed centre ground since Cameron became leader, I believe that nothing else can save the Conservatives from calamity in 2022 except a smooth, well-managed and complete Brexit that will enable our businesses to keep trading while at the same time revitalising our fishing industry and freeing us from the clutches of the EU’s military and the EAW.

To put it another way, the Tories have a long list of EU-related sins for which they need to repent collectively, going back to the deceit of Edward Heath in the 1970s. This is their one and only opportunity to make atonement. They created the mess; it is poetic justice that they are being saddled with the task of getting us out of it. If they succeed, the country can move on after over 40 years in our unhappy relationship with Brussels and the party need never again “bang on about Europe”.  If they fail, our country may well end up marking the centenary of the resignation in 1922 of David Lloyd George, the last ever Liberal Prime Minister,  with the resignation of the last ever Conservative Premier. It really is as serious as that

 

Groundhog Day

If you think you have read a post like this before, you’re probably right. Another week of Brexit negotiations are about to begin which will almost certainly end with very little progress being made. A smiling David Davis will emerge in a few days’ time and give a very upbeat assessment of the talks at a press conference while Michel Barnier, in guarded but polite language, will say that actually very little has happened which will enable the UK and the EU to get down to discussing any sort of future trade relationship.

It’s rather like the film Groundhog Day where an American weatherman finds himself trapped in a time loop, repeating the same day over and over again, except there’s an important difference: in the film, time basically stands still whereas the Brexit clock is ticking away.

To be more precise, Brexit day, 29th March 2019, will take place 1,010 days after our vote to leave on 23rd June last year. In exactly one month’s time, November 9th 2017, four days after Bonfire Night, we will reach the halfway point and so far, there is no sign of any deal which will enable trade to flow seamlessly between the UK and the EU once we leave the EU.

Even the plans for a two-year transition will be going nowhere. Essentially, while Mrs May may be telling the EU that the ball is in their court, the EU is being asked to make an exception to its normal rules for the sake of a former member state which doesn’t want to be part of the club any more. It is under no obligation to say yes – indeed, it has given every indication that it is not going to. Mrs May’s speech in Florence did nothing to shift the predominant belief in Brussels and elsewhere that there was plenty of goodwill in it but little of substance which could unblock the negotiations in the three key areas where agreement must be reached before trade talks can begin – the Irish border question, the divorce bill and the rights of EU citizens resident in the UK.

It may be a case that Mrs May is being advised to take a tough line in the hope that the EU will blink first. If so, she (and her advisors) are likely to be disappointed. Even so, the fallout from Mrs May’s conference speech and the  failed attempts to remove her have left her with no option but to ensure we leave the EU in March 2019. Grant Shapps, the former Tory Chairman who surfaced as the leader of the failed coup, did not raise Brexit as an issue, but Nadine Dorries, a consistent pro-Brexit Tory MP, claimed that the plan was to take Boris Johnson down with Theresa May and install a new pro-remain leader who would stop Brexit.

We will never know the truth of what went on in the aftermath of Mrs May’s speech, but the strong support she has been given from pro-Brexit MPs conveys the implicit message that there can be no turning back,

So are we heading towards a no-deal situation when our delegation will walk away from the talks, blaming EU intransigence? Business leaders will not like this and will be lobbying hard to prevent such an outcome.

This leaves Mrs May caught between a rock and a hard place.  Maybe she (or her advisors) still haven’t grasped the political nature of the EU project. This is hardly her fault. From Edward Heath onwards, the wool has been pulled over the eyes of the UK so effectively that even serving MPs think that the EU is all about trade, which it isn’t. If we are to believe those who know her well, she is typical of many Tories who  have never been that bothered about the EU but was forced by Cameron and Osborne, along with a significant number of her colleagues, to come off the fence. One of our correspondents claims that at the dinner parties he hosted, Cameron and his henchmen described supporting leave as “xenophobic”.

Indeed, if the finger of blame should be pointed at anyone, it is the dynamic duo who headed up the administration before June 23rd last year. Cameron and Osborne held a referendum they didn’t expect to lose, trying to frighten the voters and intimidate their parliamentary colleagues  so that the result would never be in doubt. So confident were they of victory that the Civil Service was banned from drawing up any exit plan.  According to Craig Oliver, Cameron’s spin doctor, Cameron arrived at Downing Street after the result was announced on 24h June saying almost jokingly “Well, that didn’t go according to plan!”

Indeed it didn’t and nor has the first 15 months of Mrs May’s premiership. We can but hope that the next 15 months see some significant progress but as far as the current round of negotiations is concerned, few people will be holding their breath.  She has been bequeathed a very difficult task by her predecessor and it may well take some further crisis before we start to see any real developments which will prevent the “cliff edge” that draws closer by the day and rightly concerns so many.

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Brexit and the mechanisms of EU trade

The UK’s International trade depends upon efficient electronic systems that avoid entry inspections and delays at border crossings. These systems depend upon various mutually-agreed standards on both sides of the border. Unfortunately, the recently-published Government Position Papers on Brexit chose to ignore such details – indeed, they amounted to little more than political aspirations. As Brexit day approaches, it would not be surprising for businesses in both the UK and EU member states to put pressure on their governments to address the steps needed to prevent a massive “Operation Stack” on both sides of the Channel once we leave the EU.

Businesses likely to be affected by Brexit will need to know about how the movement of goods, services, ships and aircraft will be controlled.  They cannot move freely after March 2019 unless they are the subject of new inter-government agreements. These agreements can be achieved by way of MRAs [Mutual Recognition Agreements], Memoranda of Understanding or Exchanges of Notes for example.

There is a great deal of interplay between Laws and Regulations, Standards, Inspections and Conformity Assessment, Government Market Surveillance by checks and Customs and Tariff requirements. It must  be pointed out that the so-called ”WTO model” post-Brexit advocated by some economists would deal only with tariffs and would not address in full the requirements of these other critical areas.

So what else would be needed? Firstly, Mutual Recognition of bilateral product regulations. Whether or not two trading countries’ standards rules are identical, either way they are deemed to be mutually acceptable by that MRA.

Then there are internationally agreed certificates recognising that a produce conforms to a given set of standards. These are vital before the goods can reach the marketplace. The most important body dealing with international  standards, the International Organisation for Standardization (ISO) is a non-government organisation although its membership does include 163 national standards bodies. It seeks to apply one international standard for a given product everywhere across the world.

In Europe there are three European standards organisations, ETS, CEN and CENELEC, and they have 34 members – all 28 current EU member states plus Iceland, Norway, Switzerland, Turkey, Serbia and the Former Yugoslav Republic of Macedonia. Every agreed standard is adopted by all 34 member countries’ standards bodies. In the UK, the British Standards Institution (BSI) is our national standards body. The UK Government therefore seeks to avoid making any other bilateral national agreements on standards for legal compliance purposes. In other words, only one standard per topic is permitted in these 34 countries.

There is a silence from the DExEU upon any progress in these areas. These standards organisations were not mentioned once in the Position Papers, even though they are going to play a hugely important role in facilitating trade with other European nations.  David Davis has perhaps unwisely accepted the Barnier sequencing agenda, which means that the concerns of Industry and Commerce over these issues cannot be addressed until the EU is satisfied with progress in other areas – and it is currently distinctly dissatisfied.

As Anthony Scholefield has pointed out in his research paper for the Futurus think tank, the Government’s “Plan A” – a bespoke trade agreement with the EU – is doomed to fail unless transitional arrangements are agreed.

There is also the question of non-EU trade. Approximately 80% of UK GDP is domestic. Of the remainder 13% is Entrepôt non-EU and 7% is with the EU. Will this Government prioritise the 13% or the 7%?

One of the much-trumpeted benefits of Brexit is the freedom to strike our own trade deals. Will the Government go for a “Plan B” and seek to negotiate some trade agreements with non-EU countries which will be conditional on Brexit taking place in March 2019?

At the moment, we have no idea. “Operation Stack” on the M20, with all the attendant  consequences are looking increasingly inevitable from April 2019. The only consolation is that the UK will at least have escaped from the EU political project of ever-closer union and will not be asked to prop up the failed Euro. As Lord Mervyn King says, ”In 30 years this will look like any old blip!” We can but hope he is right, but without a change of mindset among those entrusted with the Brexit negotiations, the blip could be rather bigger and longer than he anticipated.

 

 

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A Customs Union with the EU is a daft idea

The latest pronouncements from Michel Barnier, the EU’s Chief Negotiator, provide little comfort to those of us seeking reassurance that the Government knows how to fulfil its declared aim of leaving the EU in 18 months’ time while avoiding a “cliff edge” for business.

Essentially, the rather tired “having cake and eating it” analogy sums up what Barnier sees as the root of the problem. He talked of a “nostalgia” for the Single Market and made it clear that you cannot be outside the Single Market while continuing to enjoy its benefits.  “This is simply impossible”, he said.

There is a wide range of views among Brexit supporters regarding whether or not we should stay within the Single Market. If there is a non-single market option which could provide us with something as near as possible to the frictionless trade which Business is demanding, the Government is keeping very quiet about it. This in turn is resulting in a concern that our Brexit team – and perhaps the Government as a whole – still does not grasp what it means to be a “third country” for trade purposes.

When it comes to the EU’s Customs Union, however, there is no reason to support our continued membership. It is an open and shut issue. We certainly need a Customs arrangement with the EU or else a massive queue of lorries is going to build up on the M20 immediately after Midnight on March 29th 2019, but that is not the same as a Customs Union.

A Customs Union is an area within which goods can circulate without restriction but which imposes a common external tariff on goods from outside.  The first Customs Union was the German Zollverein, established in 1834 and which gradually included most German states. Significantly, the economic union was followed by political union.

The Treaty of Rome, which established what has become the European Union, proposed the establishment of a Customs Union. By the time the UK joined, it was up and running and we had to impose the common external tariffs on all goods from outside, including those from our Commonwealth friends such as Australia and New Zealand. In other words, we surrendered the freedom to negotiate our own trade deals.

Shortly after the Treaty of Rome, the UK which at the time was not keen on joining the European project instead became one of the founder members of EFTA, the European Free Trade Association, which was not a Customs Union. It thus allowed members to negotiate their own trade agreements if they so desired, although EFTA also has negotiated free trade deals on behalf of all its constituent countries. Significantly, EFTA has never sought to create any sort of political union among its members. It was and is purely about trade.

Why then should a non-EU member want to be associated with the EU’s Customs Union? If you are a micro-state like San Marino or Monaco, you are unlikely to have the resources to negotiate your own trade deals and thus piggybacking on your larger neighbours is the best way of keeping trade flowing smoothy across your borders. This is not the case with Turkey, the only large non-EU country which has a customs union with it.

During last year’s Referendum debate, the so-called “Turkish option” received very little coverage. Being in a similar customs union with the EU was occasionally mentioned as one possible post-Brexit scenario but then almost immediately dismissed as being unsatisfactory. The Turks themselves don’t like it, which is one very good reason for rejecting it.

For starters, being a member of the Customs Union requires accepting the jurisdiction of the European Court of Justice. Turkey also may not negotiate trade agreements with non-EU countries but does not benefit from the EU’s Free Trade agreements. Countries who have signed a free trade agreement with the EU can export their goods into Turkey tariff free while imposing tariffs on Turkish goods.

One reason for Turkey accepting this unsatisfactory arrangement was its aspiration to join the EU. We are going in the opposite direction, so there is even less reason for us to adopt it, even as a transitional arrangement.

If further proof were needed of this argument, this article on the Kapikule Border crossing between Turkey and EU member state Bulgaria,  shows that a Customs Union with the EU does not result in quick and easy movement of goods across borders.  A Turkish lorry driver is quoted as saying that a mere 14-hour wait at the customs post constitutes a “good day”!

The article goes on to describe how “each driver clutches a sheaf of several dozen documents — an export declaration, a carnet from Turkish customs officers, invoices for the products they are hauling, insurance certificates and, when lucky, a transport permit for each EU nation they will drive through.”

No one in their right minds should be suggesting that any future UK-EU trading relationship be conducted along these lines.  Like it or loathe it, re-joining EFTA as an interim arrangement and thus accessing the Single Market along the same lines as Norway and Iceland would spare us this chaos. Maybe the Government has some better alternative up its sleeve, although if this is the case, it is playing its cards very close to its chest, but we can’t stay in the EU’s Customs Union if we’re not an EU member; we can only make a Customs Union agreement on Turkish lines and evidence strongly suggests it’s not worth the bother.

 

Photo by Peanut99