Container inspection at port of entry

The BBC’s Fake Britain series was not produced to make a contribution to the debate on options for UK trade once we leave the EU. However, this latest episode, which shows the identification, inspection and eventual rejection by the Port Health Officer at Southampton of a distinctly dodgy container, consisting mostly of food products  from China, contains a number of incidental details of great importance to this subject which will be  exercising the minds of government ministers and civil servants in the coming months.

Anyone interested in the subject of how trade passing through our ports is regulated should watch the  first ten minutes of  this episode while it is still available on the BBC website. (You will need a valid TV licence)

The first thing which strikes anyone watching this programme is the huge volume of containers handled at this port – 1.3 million per year. Southampton is a port of entry for goods from outside the EU and thus a first line of defence against risks to public health, not only for the UK but for the whole of the EU.

The officials are first drawn to examine the container because its documentation is incorrect. Then on inspection, the contents of the container are not the same as those on the packing list.

The Port Health Officer remarks that there is no EU-approved manufacturer for one of the meat products. People often say “China has no free trade agreement with the EU”. This is true enough but China has many agreements with the EU about mutually recognised standards of quality and traceability for different classes of product, approved manufacturers etc.

These agreements are mostly registered with the UN rather than the WTO. Many commentators discussing the trade issue have overlooked them, continuing to believe that tariffs are the main or sole barriers to trade.  China’s trade with the EU is therefore dependent on far more than “WTO rules” about tariffs alone.

These Mutual Recognition agreements are critical. If they did not exist, every single container from China would have to be inspected individually for compliance with EU standards – a  hugely expensive and very onerous task given the volume of trade.

The legal compliance and safety of goods made and circulated within the EU rests on the common regulations enforced by each member state and certified in the documents accompanying each container. If these are all in order, containers from member states cannot usually be detained for inspection when crossing EU borders. That is the effect of the Single Market. Trade moves very much more easily. For this reason, there are very few BIPs (Border Inspection Posts) at ports which mostly handle trade from one EU country to another.

If the UK were to leave the EU without a comprehensive agreement on maintaining the mutual recognition of the standards (with which we already comply), then our trade with the EU would be gravely handicapped. Relying solely on basic “WTO rules” means that every container would have to be inspected. Some people have advocated “WTO rules” – saying “Better no agreement at all than a bad agreement”. As far as we know, no other country relies on this sort of trade relationship with the EU.

Photo by Robert.Pittman

Photo by Robert.Pittman

Andrew Tyrie’s paper “Giving Meaning to Brexit”

A paper called Giving meaning to Brexit by Andrew Tyrie MP, has just been published by Open Europe.

Mr Tyrie is Chairman of the House of Commons Treasury Select Committee and former Chairman of the Parliamentary Commission on Banking Standards. Given he supported remain during the referendum campaign, it is highly unlikely that  you will agree with everything he says, but it is nonetheless interesting to read the thoughts of one influential backbench MP on the subject of Brexit.

He spends some time explaining why he feels the so-called “WTO option” is not viable except as an emergency fall-back if negotiations with the EU break down.

He also addresses the issue of single market in some detail, although like many other commentators on this subject, he hasn’t done his homework very thoroughly. He talks of a Norway-type relationship giving us “no formal say” over the development of financial services regulation. This is not true. Norway is widely consulted in the framing of EEA-relevant regulation, even if it does not have a vote. He does, however, mention that with much financial regulation originating in global organisations (with the EU merely acting as a conduit),  withdrawal from the EU would give us an independent seat on all those bodies where we are currently represented by someone from the EU.

Given the influence of global bodies in dictating the terms of international trade, he feels that the promised “bonfire of regulations” upon withdrawal will not be anything like as great as has been claimed, although he identifies one or two beneficial changes that may be possible .

He also says little about the possibility for non-EU members of the EEA to restrict free movement of people, which Liechtenstein has done, merely usng the phrase “emergency brake”, which is not a very accurate description of the possibilities under articles 112 and 113 of the EEA arrangment.

He is critical of the substantial savings promised by some “leavers” and is very sceptical that we will be £350 million per week better off.  He also doubts that a settled arrangment with the EU will be complete within the two years stipulated by Article 50.

On a more positive note, he does see the freedom to make our own trade arrangements as one of the big benefits of Brexit.

He says that Parliament should be given a chance to “express a view” on the planned negotiations before Article 50 is triggered, but does not call for a vote.

As for the future of the EU without the UK, he feels that sudden collapse of the project would be disastrous for us as well as the EU, but he does not mention the possibility of other nations peeling off one at a time, which cannot be ruled out and which would not necessarily cause a collapse. His description of the EU project as the “most sophisticated system of cooperation and integration, supported by the rule of law, between a large number of nation states – freely entered into – ever attempted” is a bit wide of the mark, given the deceit used by Edward Heath to take us in and the considerable sweeteners and twisting of the rules used to ensure that other candidate states vote to join when they get round to holding referendums on membership.  I recall being told that in Malta, for instance, voters were told that not voting would count as voting not to join the EU, which was a lie.

In spite of these reservations, the essay is worth reading if for no other reason than it shows that most erstwhile Tory remainers have accepted the result and just want to make Brexit work as best as it can,  for which we must give thanks.

BREXIT – Onwards from the Referendum by Edward Spalton

(This article was written for our Chairman’s local newspaper, the “Three villages” magazine)

The leading campaigns on both sides of the EU referendum were lacking in honesty. In that, they followed the example of successive British governments which have all pretended that the European project concerned the economy (“The Common Market”) when it was always about developing a single European government under which the nations of Europe would be subordinated in a new polity. We know from official documents that the government understood this from 1960.

The Remain side presented the EU as being about the economy and the Leave side emphasised the cash savings from leaving. Both exaggerated greatly.

In 1971 the Foreign Office advised the government “…there would be a major responsibility on HM Government and on all political parties not to exacerbate public concern by attributing unpopular policies to the remote and unmanageable workings of the (European) Community”. The referendum was the last hurrah for this long-maintained policy of deceit. The leaders of all the main parties stuck to it and lost. So we are now moving in a new direction and the impetus has come from the people not from the political establishment.

Mrs May has said that “Brexit means Brexit” but people are naturally apprehensive about how things will develop. There are three main approaches to forming a new relationship with our European neighbours:

  • The Bilateral Option – An agreement or series of agreements negotiated individually, as Switzerland has done. This takes a very long time – 16 years for the Swiss.
  • The WTO Option – To have a minimal agreement with the EU and to rely on the rules of the World Trade Organisation. This would involve paying tariffs on certain classes of goods exported to the EU (and vice versa) but would be very cumbersome if it was not accompanied by a Mutual Recognition Agreement on quality standards, allowing containers to pass EU customs without having to be individually inspected(and vice versa).
  • The EEA/Efta Option.  This is sometimes called “The Norway Option”. EEA stands for European Economic Area and Efta for European Free Trade Association.

Effectively this is inside the “Common Market” but outside  the EU political union. Britain is free from most EU policies including Foreign & Security, Justice & Home Affairs, Economic & Monetary Union, the EU Court of Justice, the Customs Union, Common Trade Policy, Common Fisheries Policy, Common Agricultural Policy.  But we would have to observe the rules of the Single Market. Contrary to the general belief it is possible for EEA countries to impose their own restrictions on excessive inward migration of EU citizens under Articles 112 and 113 of the EEA agreement.

Some 80% of EU regulation on trade is now adopted from global bodies such as the UN and WTO. EU membership keeps Britain from having a voice there. So paradoxically, EEA states, which are not EU members, have a bigger direct say on many EU regulations than EU members which are bound by the “Common Position” decided by the EU Commission.

By Googling “FLEXCIT” you can get a full description of how the EEA/Efta option might work. The short version is 48 pages. The full document is over 420 pages. The government may, of course, choose to combine some elements of these three listed options. Things are more complicated than the sloganeering of the referendum suggested but, given careful thought and steady purpose, there is not really anything to fear.



June’s result must be respected

The result we achieved on 23rd June 2016 was a key victory but it is clear that this was not the end of the war. There are still key obstacles to be overcome before we find ourselves fully disengaged from EU membership.

The first issue is to ensure that we all agree, at least broadly, on what our negotiating strategy should be. Here, a broad consensus has emerged. Starting with trade, unless there are massive and permanent –  and thus very unlikely – derogations, we will have to be outside the Single Market, if we are going to secure control of our own borders, to reduce very substantially our payments to the EU and to be outside the jurisdiction of the EU’s Luxembourg Court. Ideally, we should then combine this with a Free Trade deal with the rest of the EU, which would keep our existing trade relations in place more or less as they are at the moment.

There is a school of thought which says that we would be better to be outside the Single Market but in the European Economic Area (EEA). This might be easier to negotiate but it could still leave us with obligations on free movement of labour, payments and jurisdiction which nearly everyone who voted Leave would like to avoid. Being outside the EEA – but in the European Free Trade Area (EFTA) – would therefore be a better bet, but this could be more difficult to negotiate. To secure a deal along these preferred lines, therefore, we may well need to be willing to walk away altogether from free trade with the EU, falling back on World Trade Organisation (WTO) tariff levels which are actually quite low – averaging around 3%. UK willingness to do this, however, if push comes to shove, may concentrate minds on achieving a free trade deal, which would make much more sense for everyone, within the two year period stipulated by Article 50 in the Lisbon Treaty.

Sorting out our trade relationships with the EU would very probably be the most difficult part of our Brexit negotiations, but it would leave a large number of other areas where co-operating with other countries in Europe on the right terms would make sense. Here our objective should be to ensure that there is maximum continuity but on the basis of inter-governmental co-operation rather than the UK being part of the EU’s federal project. As co-operation in all these areas is in everyone’s mutual interest, hopefully, reaching agreement will not be too difficult.

Having set the scene on where we would like to be, how are we going to make sure that we get there? There are significant obstacles in the way.  There is a large majority – probably between 75% and 80% – of MPs who were not Leave supporters. Some of them – ignoring the clear referendum result – are threatening to derail negotiations by opposing them on principle rather than in detail, either by calling for a second referendum or by having reversing Brexit as part of their manifestos for the next general election.  Others are preparing to oppose details of negotiations in such a way that the effect will be the same.

These are dangerous tactics, however, for those who want to win elections.  The outcome of the recent EU referendum was a decisive vote for Brexit. Those who feel they have the right to overturn the biggest vote ever in the UK for any proposition put before the electorate do so at their peril. A recent poll showed that 69% of those questioned thought that the decision taken on the referendum should be respected whether or not they agreed with it and only 22% were against.  Voters are not likely to be happy with either political parties or individuals who fail to support the electorate’s clearly expressed view. Eurosceptics should make sure that those standing for election know this.

Labour Leave will campaign for a fair exit

With the Labour Party currently occupied with choosing its leader, reporting of Brexit developments has largely focussed on the Government  – in particular Prime Minister Theresa May and the three ministers apointed to oversee the process – Boris Johnson, David Davis and Liam Fox.

However, the Labour Leave campaign, like CIB, is still very much in existence and will continue working hard to ensure that Brexit will mean Brexit and that there will be no second referendum. Its website has recently been updated to highlight its intentions to hold both the Government and the Labour Party to account. “Labour Leave will demand that the government leads us out of the EU” it states.

Labour Leave’s five principles are:

  1. Return all law-making powers to the UK Parliament, renewing our democracy.
  2. Ensure complete control over immigration policy and visas.
  3. Secure free trade in goods and services with Europe.
  4. Pursue global trade deals which protect our public services.
  5. Rebalance our economy, helping firms to achieve higher productivity, with rising wages and investing in the infrastructure to support export-led growth.

The website also features an interview with John Mills (depicted above) who, besides his involvement with Labour Leave, is a Committee Member of the Campaign for an Independent Britain. His upbeat assessment of the state of the UK  economy is well worth a listen.

The Complexities of Brexit

The government is recruiting experts to work out how best we will leave the EU.

It is going to be a complicated process if there is to be no major disruption to trade. These papers, written by Richard North and published under the auspices of the Leave Alliance, of which CIB Is a member, look at some of the issues which will need to be addressed.

Squaring the Circle looks at how the two seemingly conflicting demands for access to the single market and a restriction on migration from the EU can be reconciled.

WTO Option analysed looks at what would happen if we did not end up with any agreement on trade with the EU and had to rely purely on so-called “WTO rules”

EU Payments addresses the knotty subject of what financial contribution an independent UK would be likely to make to the EU. It isn’t going to be zero!

Article 50 and Brexit addresses the issue of whether any other alternative exit route from the EU is available.

Trade Barriers and Brexit debunks the suggestion that the EU would offer us a good trading deal by default and also considers the issue of non-tariff barriers, which are a big potential problem for exporters if there is no access to the single market.

With not a lot of Brexit news on which to comment at the moment, we would thoroughly recommend these very thoroughly-researched papers.