Brexit White Paper July 2018 fails to deliver frictionless trade

Unworkable, risky wishful thinking on frictionless Single Market trade

The Government’s recent White Paper entitled The Future Relationship between the United Kingdom and the European Union is unworkable, risky wishful thinking as far as frictionless trade with the Single Market (and wider European Economic Area, EEA) is concerned. The White Paper also fails to take cognisance of how the European Union (EU) and Single Market functions, and its direction of travel, which makes it unlikely that the EU can accept it. If the EU did accept these insubstantial, ‘cherry picking’ proposals, businesses and regulatory authorities, etc. would struggle to make them work.

This short examination does not consider Facilitated Customs Arrangements etc. It is difficult to work out exactly what is being proposed and how it will operate. However, it appears to be unproven and to increase the complexity and costs of importing and exporting goods and services.

Vague unreality without any practical solutions

A major shortcoming of the White Paper is the lack of detail.  It is unclear what the various terms used and their proposals actually mean in practice, what they cover and what they omit. There is also no recognition of any problems or limiting issues that need to be addressed, and no consideration of timescales or resources needed to turn the theory into reality.  Important terms not explained include: goods, services, Common Rulebook, Free Trade Area for goods, approvals and authorisations, ‘sit alongside’, ‘open and fair’ and ‘participation in EU agencies’.  These are critical to understanding and avoiding impracticalities, ambiguities, arguments (with the EU) and confusion.

Whilst goods and services are to be treated differently, there is no analysis about how they can be separated, which could often be very impractical.  The only example of a product, vaguely and briefly considered, is mutual recognition of type approval of motor vehicles, which is itself unlikely to be acceptable to the EU.

The EU’s legal basis for Frictionless Trade in Goods is ignored

The White Paper’s aspiration is for frictionless access for goods – a free trade area part in and part outside the Single Market. There would then be one set of approvals and authorisations for goods to be sold in both markets (UK and Single Market). How this will work is unclear given that EU Directives (the EU Acquis) relating to the Single Market governs how it functions.

The EU’s direction of travel (for the Single Market), is towards harmonised standards, regulations, and enforcement or surveillance through a top-down centralised legalistic and bureaucratic framework. This gives the European Commission and agencies ultimate control inside the Single Market.  This is the basis for frictionless trade. The European Free Trade Association (EFTA) incorporates relevant EU Directives into their own body of EFTA/EEA law in order for them to participate in the wider EEA.

Generally there are no deviations from the EU Directives except those permitted within the existing legal regulatory framework.  Any change must be incorporated into EU law first.  Countries outside the Single Market (and wider EEA) are ‘third’ countries effectively outside EU control or surveillance necessitating appropriate measures regarding imports.  The White Paper effectively ignores this and assumes the EU will agree to the changes and the UK exceptionalism being proposed.

The EU’s Directives for Products are ignored

The White Paper does not mention any actual EU/EEA legislation and how it will be affected, nor does it discuss practicalities. There is also no acknowledgement of the EU’s position on trade in goods with ‘third’ countries.  The EU’s legally mandated arrangements to control diseases and parasites etc. in imported livestock, products, plants, packaging etc. from ‘third’ countries are largely glossed over.

Note:    EU’s approach (to products) is outlined in principle in COMMUNICATION FROM THE COMMISSION TO THE COUNCIL AND THE EUROPEAN PARLIAMENT Enhancing the Implementation of the New Approach Directives , in more detail in the EU’s Guide to the implementation of directives based on the New Approach and the Global Approach and encapsulated in EU law in REGULATION (EC) No 765/2008 OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL of 9 July 2008 setting out the requirements for accreditation and market surveillance relating to the marketing of products and repealing Regulation (EEC) No 339/93. The EU has also recently spelt out its position, which is consistent with their New and Global Approach Directives, in Notice to stakeholders withdrawal of the United Kingdom and EU rules in the field of industrial products.   The adverse effect of Mrs May’s Brexit on a frequently essential part of this product jigsaw (the work of Notified Bodies for mandatory conformity assessment of products) is explained here.

According to EU law, products of animal origin (meat and meat products) imported into the EU must be inspected (sanitary checks) at Border Inspection Posts (BIPs). For products of plant origin (for plants and plant-derived foods) phytosanitary checks are required at Community Entry Points (CEPs, Designated Points of Entry, DPE).

The White Paper adds a new level of complexity to the Single Market and EEA

The White Paper’s advocacy of regulatory alignment and mutual recognition adds further complexity.  It would inevitably require considerable amendment to existing EU Directives covering a wide range of products and associated production, regulatory and conformity assessment and market surveillance. This is far from straightforward or quick given that requirements are effectively intertwined; change one here and there can be a knock-on effect elsewhere. Then there is the creation of new precedents that produce anomalies elsewhere and situations that can be exploited by others to gain an unfair or unreasonable advantage.

Also, more errors and anomalies are likely to occur when time is short to develop revised legislation, standards, conformity assessments, accreditations and market surveillance processes etc. Obviously it is far from certain that the EU will agree to this in any instances.  If it did, this would impose new uncertainties and risks where before matters were fairly settled and predictable.

No Go Chaos for Nobos and their Conformity Assessments of Products

Notified Bodies need accreditation for carrying out mandatory independent conformity assessment on a wide range of products to be placed on the market in the EEA. They need separate accreditation (Designated Body, Debo) when carrying out assessments relating to national specific or special cases covered by EU/EEA legislation.  The White Paper proposes a Common Rulebook (harmonisation with EU rules) applying to goods to be exported to the Single Market but not to services.  Clearly the work of Nobos and Debos are services falling outside any compliance with the EU Rulebook whatever that vague term is supposed to mean in this context; for example, EU Directives with or with European specifications, mandatory conformity assessment, market surveillance etc.

Under the White Paper’s proposals, a new product could be assessed by a Debo and then exported to the EEA where the Debo’s accreditation and product conformity assessment is currently not recognised. Obtaining this recognition raises a host of practical problems, such as who gives the Debo accreditation, how is the Debo assessed, who keeps the register of accredited Debos and test houses, and what should the Debo now include in its product conformity assessment and certification?  Where an existing product undergoes a material change requiring further or updated assessment, more difficulties will inevitably result in determining whether this is Debo or Nobo work or a combination and who does what.  This complexity and vagueness needs to be resolved or a wide range of UK goods would become non-compliant and could not be exported to the EEA.

The Practical Alternative

Mrs May’s Government is proposing an unworkable Brexit in name only. However, instead it could have opted for a workable real Brexit by remaining temporarily in the Single Market (or wider European Economic Area, EEA) under much more favourable and flexible conditions by re-joining the European Free Trade Association (EFTA). (Further information see The EFTA/EEA Solution to the Current Brexit Impasse, Brexit Reset, Eureferendum.com, various posts on Campaign for an Independent Britain and affiliates )

The Devil is in the Missing Detail

So far there is little indication that the UK’s negotiators actually understand much, if anything, about the minutiae of the EU Directives and how the EU/EEA functions.  Even if the EU agreed to this White Paper (and this is a very  big ‘If’), the resulting outcome is most likely to be more, largely avoidable confusion all round carrying on for years among customers, suppliers, regulators, conformity assessors (e.g. Notified Bodies) and organisations involved in market surveillance.  The frequent questions would be “Where do we find the requirements?”, “Must we comply with this requirement?”, “What does this requirement actually mean?”, and “How much is this going to cost us?”

In short, the whole document is seriously deficient and likely to be rejected by the EU.

Statement by Barry Legg, Chairman of the Bruges Group

Theresa May has decided to pursue a policy of Brexit in name only (BRINO). This arrangement will be worse than our current membership of the European Union as we will then be a vassal state.

If this policy is implemented the electoral consequences for the Conservative Party will be dire. I urge all members of the Bruges Group to contact their Conservative Member of Parliament if they are represented by one to explain that this is unacceptable. The decision of the British people to leave the European Union must be honoured. In many cases an appeal to a Member of Parliament`s self-interest is the most effective way of influencing him or her.

Next week on Wednesday evening we have a meeting at 7 o`clock at the ROSL with Nigel Dodds, leader of the DUP in the House of Commons, and Professor Patrick Minford. Patrick has an unapparelled knowledge and understanding of the huge economic benefits that are to be gained by leaving the European Union. Nigel Dodds, as Leader of the DUP, is the most influential figure at Westminster as his Party holds the balance of power. I hope that you will be able to attend this meeting to hear these outstanding speakers and give your views at this critical time for our country.

Barry Legg

Chairman of the Bruges Group

The EU’s potential lifeline for Mrs May’s Brexit

The European Union (EU’s) Brexit negotiators from Mr Barnier (chief negotiator) downwards must have long since realised that Mrs May, Mr Davis and the Department for (not) Exiting the European Union are incapable of serious negotiations. Meaningful progress towards leaving the EU in an orderly way including suitable agreements, arrangements and infrastructure is practically non-existent; there is a mountain of detail yet to climb. What, then, can the EU do to rescue the process and Mrs May, since Mr Barnier has previously stated on more than one occasion that he can’t negotiate with himself?

The view from Brussels must be of a weak prime minister leading a fractious, divided party and government, who has a poor grasp of detail and instead relies on spin, wishful thinking and dithering.  Even the output from the Department for (not) Exiting the European Union is poor and vague to the extent of being practically useless. Their website, where comprehensive information and practical guidance on Brexit, and hyperlinks to further sources of information should be available, is more of a case study in superficiality, grandstanding and self-aggrandisement.  There is not even a link to the European Commission’s website on Brexit preparedness.  So whose job is it to help prepare the UK for Mrs May’s decision to leave the Single Market and – by extension – the European Economic Area, EEA?

By contrast, the output from the European Commission, setting out its increasingly uncompromising position, is clear, focused and comprehensive.  Right from the beginning, the EU has been making the running.  Its dedicated website illustrates the impressive (or terrifying) detail of their ‘public’ vision of where Mrs May and Mr Davis’s Brexit is heading and the implications, which appear to look like ‘falling off a cliff edge’ to many UK businesses.  Its advice to stakeholders (available here) repeatedly spell out, in as much detail as possible, what will undoubtedly happen across a wide range of activities and policy areas when the UK becomes a ‘third’ country after leaving the EU (on 29th March 2019) and the EEA.  It is quite likely EU officials often frustratingly ponder the question, “Do our British counterparts and their political leaders understand any of this, and do they actually care what it all means?”  The problem for our team of negotiators is that they do not seem to know and understand EU laws and regulations, their rationale and implementation. This is essential if they are to develop appropriate strategies, negotiating positions and challenges to the EU’s tough, logical and systematic stance.

From the EU’s perspective they have helpfully agreed to a transition period limited to 21 months which is necessary to give Mrs May time to negotiate a free trade agreement. In reality, much longer is probably needed. However, the EU’s terms for this transition period  – which have still not been agreed – would be very unpopular in the UK and thus may never be accepted given Mrs May’s weak position in Parliament.  The EU’s terms would make the UK into a temporary or maybe even permanent EU Vassal State where Brexit means Brexit in name only.  Crashing out of the EU without transition arrangements and not having any form of mitigation of the consequences of ‘third’ country status (the “cliff edge”, in other words) is becoming increasingly likely.

The European Commission is well aware of political developments in the UK and of the consequences of no deal scenarios (given the detail on their website). Its negotiators also have to confront the contradictions in Mrs May’s position.  Frictionless trade (as required by Mrs May and Mr Davis) is not possible as a ‘third’ country outside the Single Market (and the EEA).  Time is running out for businesses both here and in the remaining 27 Member States of the EU to adjust.  Time is also impractically short to put in place new facilities and legislative frameworks needed by a ‘third’ country such as border inspection points, designated entry points and the recruitment and training of staff.  What can the EU do, if it is so disposed or there is some behind-the-scenes collusion going on, to extend Mrs May a lifeline and avoid the ‘cliff edge’?

Any EU-sponsored lifeline needs to protect their interests. It has to operate within the EU’s objectives, legal framework, and established practices. It mustn’t ‘rock their boat’ or set any potentially disadvantageous precedent. It also needs to be sellable across a wide range of opinion in the UK, addressing as far as possible rational fears and aspirations.

The only viable option for an EU-sponsored lifeline is to facilitate the UK re-joining the European Free Trade Association (EFTA) and use this as a basis for retaining membership of the EEA for at least the transition period. It appears that the European Commission may be seriously evaluating the EFTA/EEA route for transitional arrangements for the UK,  as noted by an EFTA Court judge (Mr Carl Baudenbacher) giving evidence to the Commons Committee for Exiting the EU on 7th February 2018 and reported in the Telegraph on-line.

The EFTA/EEA option is not perfect, but as a holding position while something better is negotiated, it is much better than the transitional deal currently on offer. Hard Brexiteers could be won over by the facility to control immigration through unilaterally invoking Article 112 (the Safeguard Measures) of the EEA Agreement.  Further, the EFTA route to EEA membership gives members outside the EU a say in EU legislation affecting the EEA, is largely free (although ‘voluntarily’ Norway does contribute to regional development funds) and is outside the jurisdiction of the European Court of Justice (ECJ). The EEA Acquis or body of law is about a quarter of the total EU Acquis since it only relates to successful functioning of the EEA  in other words, issues relating to trade. And EFTA members can make their own trade agreements with other countries.  Membership of the EEA solves the problem of maintaining a soft border in Ireland between the Irish Republic and Northern Ireland.  It also gives us full control of fishing in our Exclusive Economic Zone.  Those worried about the economic effects of the ‘cliff edge’ could be won over because the EFTA/EEA option prevents this allowing practically frictionless trade to continue. The EEA agreement (for EFTA members) can be adapted to suit their interests.  Thus the UK (within EFTA) could get a customised version.

We cannot know what the European Commission is covertly doing and how far its efforts, if any, have progressed to save Mrs May, the UK and the EU from her folly.  However, given the efforts it has visibly extended to help enterprises both here and in the 27 remaining Member States to understand and adapt to the implications if Mrs May does not change her decision to leave the Single Market, nobody knows better the potential disaster she is determined to inflict and how it can be avoided.

Photo by thaddselden