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.

Photo by vastateparksstaff

Immigration:- putting the cart before the horse?

Last week, the Guardian published a leaked draft of a Home Office document entitled  ‘Borders, Immigration and Citizenship System After the UK Leaves the EU’

It contained the welcome news that the Government is determined to bring immigration down and intends to use the opportunities presented by Brexit to honour – albeit rather belatedly – its pledge to bring net migration down below 100,000.

Given the high profile of the immigration issue during last year’s referendum campaign, it is the least the government can do. In summary, free movement will come to an end on Brexit day. A scheme for seasonal workers will allow our fruit to be picked, but work permits will be time-limited, with those for low-skilled workers lasting only two years, with no right to settle. For all new EU workers, the right to bring family members will be significantly curtailed. UK companies will be encouraged to take on UK workers where possible.  Though it does not give precise details, the document says the UK is minded to introduce an income threshold for some EU citizens before they will be allowed to reside here.

It all sounds good in theory. There are good,sound reasons for slashing immigration. The pressure exerted by migrants is making it harder for native Brits to get onto the housing ladder or, in some places, to see a GP or find a place for their children in a local school. The use of short-term work permits will give the government  – and indeed, business – greater flexibility, especially as advances in robotics will drastically shrink the numbers of low-skilled workers required. Some experts suggest that we will have problems finding work for all the current UK working age population within 30 years. We certainly don’t want to saddle ourselves with lots of migrants whose jobs have been taken by machines but who have a right to stay here.

Of course, a Tory party which has found itself on the back foot since the General Election will be keen to do all it can to rebuild its support and there are plenty of voted to be garnered by being tough on immigration.

Yet the welcome given to this document must be tempered with a feeling that the Government is rather putting the cart before the horse. We know what it wants to do about immigration but very little about its proposed relationship with the EU. We would probably be able to implement most these restrictions as a member of EFTA and accessing the Single Market via the EEA agreement and applying restrictions in the same way as Liechtenstein, in spite of claims by one EU official that  “Limits on numbers of people or categories of migrant worker are incompatible with single market access.” They seem to have forgotten this small Alpine country which invalidates their argument.  Likewise, we would certainly be able to restrict migration if we stormed out of the current negotiations and left the EU in March 2019 with no agreement and some commentators are suggesting that this is seriously being considered.

The EFTA route has thus far not been in favour while walking out would be foolish and lead to the “cliff edge” which we are repeatedly being told the Government wishes to avoid. So what, then, is the Brexit framework into which these immigration proposals will fit?

Furthermore, if the Government is serious about reducing net migration below 100,000, what about immigration from outside the EU? The most recent statistics did record a drop in arrivals from EU-27, but arrivals from the rest of the world stood at 266,000 during the same period. The government could act here and now to stem the flow if it so desired. Then what about illegal immigrants? Will the Government finally get serious and deport them?

So while this document is a step in the right direction, a lot of questions remain unanswered.

 

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.