Mrs May’s flimsy free trade agreement with the EU

If and when Mrs May, Mr Davis and the Department for (not) Exiting the European Union eventually  finalise a Free Trade Agreement (FTA) with the European Union (EU), it could potentially render the UK somewhat powerless against EU hegemony.  It will most certainly not be “taking back control” in any meaningful sense of the term, instead it will give the EU carte blanche to ‘turn the screws’ on the UK any time it wishes.  This potentially painful situation arises as a consequence of how the Single Market, the EU and our own Government, including the Civil Service, functions.

As first stated in her Lancaster House speech 17th January 2017, Mrs May recklessly decided to leave the Single Market (and the wider European Economic Area, EEA) when the UK notionally leaves the EU on 29th March 2019. As a result, under current plans, we will become either a temporary or permanent Vassal State of the EU. In place of membership of the Single Market, she is proposing an ambitious Free Trade Agreement (FTA) which, she hopes, will offer a continuation of existing stable ‘frictionless’ trade with other Member States of the EU and avoid trade ‘falling off a cliff’.  In the real world, trade deals with the EU are usually complex and slow to negotiate, taking several years. However, Mrs May and Mr Davis still believe it can be negotiated and finalised in a matter of months. At first, they hoped to have everything signed, sealed and delivered before next March when we leave the EU. Now they are aiming for 31st December 2020, 21 months later, following what the EU calls the “transition period” although misleadingly referred to by Mrs May et al the ‘Implementation Period’.

By any standards, the negotiating timescale for the FTA is very short and likely to be further shortened due to delays in fully agreeing the necessary terms within the Withdrawal Agreement for the Transition Period. Given Mrs May’s desperation for a deal, the ticking clock is a recipe for concessions being made on the UK side. Unless closely monitored and exposed, the many mistakes and concessions she is likely to make may well only show up later when both parties start implementing the complex and wide-ranging FTA.  Shortcuts and inadequate assessment of the details and their consequential implications are likely to be the order of the day.

The British negotiating side is further hampered through a general lack of motivation and expertise in intra-governmental negotiations in Government, Parliament and the Civil Service.  After kowtowing to the EU and its executive (the European Commission) for 43 years, our government has lost much of the acumen necessary to govern a sovereign country competently and responsibly. In any case the responsibility (‘competence’) for negotiating FTAs rests with the EU.

Once competence built up over many years is outsourced to the EU, it is rapidly lost and extremely difficult to reacquire in a short period.   The Civil Service, reduced to little more than a rubber-stamping organisation for EU directives could prefer to remain under EU leadership as it makes for a quieter decision-free and responsibility-free life.  This would explain their willingness to acquiesce to EU demands.  This seems to be the case with defence and defence procurement where the plan appears to be for increasingly close integration with the EU.

The EU negotiators, on top of their subjects, are running rings around our negotiators, who are repeatedly caving in to their demands and agenda. The EU’s negotiators are demonstrating a level of competence that is far superior to that of Mrs May, Mr Davis and Department for (not) Leaving the European Union.  Their dedicated website and Notice to Stakeholders (under Brexit preparedness) are not replicated on this side of the Channel.  A major consequence has been that the EU has effectively been in the lead all the time, dictating the terms for the negotiations and setting demands far outside what they are reasonably entitled to. For example, Article 50 negotiations were originally intended to cover financial arrangements for a Member State leaving the EU, nothing more.  Now, however, the EU wants to control UK fishing during the Transition Period through a continuation of the Common Fisheries Policy and still to manage our fishing afterwards – at least, what little is left of it – by treating it as a common resource.  The EU’s position is becoming more uncompromising slipping in further demands outside those strictly necessary for trade.

Another major weakness on the UK’s side is a lack of understanding of how the EU and the Single Market (or wider EEA) function.  The aspirations of ‘frictionless’ trade through an FTA and a soft border on the island of Ireland cannot be achieved by anything so far suggested by the UK side, as the EU has repeatedly pointed out.  Leaving the Single Market (or wider EEA) on 31st December 2020 (when the Transition Period is meant to end)  makes the UK into a ‘third’ country, nominally outside EU control, and subject to the same treatment as any other ‘third’ country trading with the Single Market (or wider EEA).  It is membership of the Single Market AND NOT THE CUSTOMS UNION which delivers customs cooperation between Member States across a range of products and frictionless internal trade.

The EU’s approach to most products within the Single Market is outlined in principle in COMMUNICATION FROM THE COMMISSION TO THE COUNCIL AND THE EUROPEAN PARLIAMENT Enhancing the Implementation of the New Approach Directives and 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 9th 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’s guide, in describing the processes involved and their overall approach, also provides an indication of where future problems could occur and how out of touch with reality Mrs May and Mr Davis are.  At any time the EU can legally ‘turn the screws’ on us when it comes to trade.  Mutual Recognition of Standards or an FTA will not make much – if any – difference, simply because the EU’s negotiators will make sure they don’t.  They don’t have much alternative since to cave-in to UK demands would go against their direction of travel which was determined many years ago. Such a cave-in would set a precedent that could be exploited by other ‘third’ countries.

There is no guarantee that we will get to a Free Trade Agreement. The Transition Deal and Withdrawal Agreement are still far from finalised and, as the EU have stated many times, ‘nothing is agreed until everything is agreed’.  However sacrificing UK fishing, defence and agreeing to continue to adopt existing and future EU laws et al in the hope of one day achieving a free trade utopia is delusional and incompetent.  Hopefully reality will dawn – in particular, the horrific electoral consequences for the Conservative Party of such an abject surrender – in time to change tack. It is not too late for Mrs May to cut off negotiations and pursue a faster, safer and simpler approach to leaving the EU – for example EFTA/EEA explained in some detail in Brexit Reset.  Is it too much to hope that our latter-day Chamberlain may net metamorphose into a Churchill or the second Iron Lady which we so desperately need? “No! No! No!” is the only language which the EU understands. They need to hear it loud and clear from Mrs May or she will soon be hearing it from disgruntled voters.

The Customs Union – stupidity or sabotage?

Regular readers of this blog will know without a shadow of doubt that there is nothing to be gained by remaining in the EU’s Customs Union. Well, dear readers, you can pat yourselves on the back for you are clearly much wiser than 348 members of the Upper Chamber of our Parliament.

Lord Kerr of Kinlochard, speaking in the debate preceding the vote, said “I do not recall at the time of the referendum any debate about a customs union.” He was perfectly correct in saying this. Staying in the customs union is such a daft idea that no one felt the need to bring the subject up.  As Dr Richard North points out,  “A customs union does not in any way eliminate a border, as we see with the borders between Turkey and EU Member States.” it is therefore no help in solving the Irish border question. 

He also makes the point that, as usual, the Press are all over the place in their reporting of yesterday’s vote. It was not a “big defeat” for the government as the amendment supported by 348 peers only forced “the government to explain what it has done to pursue remaining in a customs union”. In other words, suppose that some degree of light finally dawned and the government realised that there was no point in remaining in a customs union, all this “big defeat” would require them to do would be to say to their Lordships “not much”. Hardly the sabotaging of Brexit which the headlines seem to suggest.

For people looking for a way to keep the flow of trade moving in the immediate post-Brexit period, both across the Irish border and through the Channel Tunnel, it makes for more sense to visit the invisible border between Sweden and Norway rather than Turkey’s version of “Operation Stack” at Kapikule on its border with EU member state Bulgaria. Norway is not in the customs union; Turkey is.  Need one say any more?

The Government should finally lay to rest all this nonsense about a customs union. It should also abandon the current plans for a transitional deal. Further evidence of its inadequacies emerged yesterday  when Cecilia Malmström, the EU’s trade commissioner, said that the UK would no longer be part of trade agreements negotiated by the EU with third countries  once we leave. Re-joining EFTA  as an interim arrangement would not only solve the Irish border issue but would address the issue of our trade with countries like South Korea and Mexico as EFTA has negotiated free trade agreements with virtually all the countries with which the EU has FTAs.

It remains a mystery to many observers why this sensible option isn’t being pursued. For all its well-known faults as a long-term relationship, as a stopgap arrangement it is far better than the arrangement currently being discussed with the EU. Adopting it would put to bed a number of issues which should have been dealt with well before now and thus enable the Brexit debate to move on after being stuck in the same groove for far too long

 

 

Corbyn – misled and misleading

This letter from our Chairman appeared in the Derby Telegraph on Friday 2nd March

Sir,

MR CORBYN IS MISLED & MISLEADING

EU documents are rarely an easy read, so very few people bother to read them. Even politicians tend to rely on commentators or journalists, who also don’t read them, but who will tell people what they want to hear. Mr. Corbyn appears to be amongst the non-readers. Like many MPs, he seems to believe that the EU Customs Union facilitates swift movement of goods through border controls. It has very little to do with that and is mainly concerned with harmonising tariffs.

Turkey has an agreement with the EU Customs Union yet the crossing point to Bulgaria at Kapikule is notorious for delays. Lorries can be stuck there for days at a time. As studying EU documents is so boring for readers as well as for Mr Corbyn, I refer to another part of his recent speech.

“A Mini will cross the channel three times in a 2000 mile journey before the finished car rolls off the production line. Starting in Oxford, it will be shipped to France to be fitted for key components before being brought back to BMW’s Ham’s Hall plant in Warwickshire where it is drilled and milled into shape. Once this process is complete, the Mini will be shipped to Munich to be fitted with its engine before ending its journey in the Mini plant in Oxford for its final assembly…”

This statement is pure fantasy. Assembly is carried out at the BMW plant in Oxford. The Swindon plant produces body pressings and sub assemblies and the Ham’s Hall plant near Birmingham has made the engines since 2006.

Most of BMW’s aluminium block and head castings are made at Landshut near Munich and some of the machining is done at Steyr in Austria where other components for the Mini are also made. Since 2013 most of the machining and main assembly of the Mini’s engines is done at Ham’s Hall. The complete engines are mated with front suspension and steering units which are fitted to the cars as sub assemblies in the Oxford plant.

Mr Corbyn’s ignorance of the process of motor manufacture with its supply chain of components brought together and cars assembled in one plant is perhaps excusable in a man who has no industrial experience. But where did he get his strange ideas from? The answer is the media. This part of his speech may have been lifted from an Evening Standard article from July 2017 which, in its turn, may have been lifted from a Guardian article of March 2017.

Given his reputation for getting back to the roots of the Labour party, Mr. Corbyn could have consulted an engineer trade unionist who would have put him straight and stopped him making such an ass of himself. Yet the listening media took him seriously and did not realise it was being fed rubbish. So perhaps it doesn’t matter. People may draw their own conclusions about the reliability of the rest of his speech.

Yours faithfully,

Edward Spalton

Photo by Chatham House, London

Customs Union confusion – yet again

Jeremy Corbyn gave a speech about Brexit in Coventry today. He was 100% correct in his observations about the Government’s progress (or lack of it) :- “They can’t agree amongst themselves about what their priorities are or what future they want for Britain after Brexit….. The truth is we really don’t know much more about where they’re actually heading in these talks.

On the other hand, he has fallen into the trap into which a number of other politicians have fallen – he fails to understand what a customs union actually is.  He said, “During the transition period, Labour would seek to remain in a customs union with the EU and within the single market. That means we would abide by the existing rules of both.”

Why? if he wants us to stay within the single market, remaining in the customs union is superfluous. His reasoning is that “when 44 per cent of our exports are to EU countries and 50 per cent of our imports come from the EU, then it is in both our interests for that trade to remain tariff-free.”  That is fair enough, but Norway, which is not in the Customs union, manages virtual tariff-free trade with the EU. EFTA and EEA membership is sufficient.

Corbyn’s confusion is laid bare when he says that “Labour would seek to negotiate a new comprehensive UK-EU customs union to ensure that there are no tariffs with Europe and to help avoid any need for a hard border in Northern Ireland. ” How can the EU be part of a customs union with the UK while being a customs union in and of itself?

He then went on to say “But we are also clear that the option of a new UK customs union with the EU would need to ensure the UK has a say in future trade deals. A new customs arrangement would depend on Britain being able to negotiate agreement of new trade deals in our national interest.” If the UK was able to make its own trading arrangements, then it could not be in a customs union with the EU. The whole point of a customs union is that it includes a common external tariff. If we negotiated a trade deal with, for example, Australia while the EU did not have one, what would be the point if we were forced to charge the same tariff as the EU on Australian goods?

Perhaps Mr Corbyn and other advocates of either remaining in the EU’s Customs Union or somehow creating a new one with the EU should see what goes on at Kapikule on the border between EU Bulgaria and non-EU Turkey. Turkey is linked to the EU’s customs union, so you would expect reasonably seamless movement across the border. According  to this report, however, this is far from being the case, with delays for lorries sometimes lasting for several days.  A customs union may be a good idea for micro-states like Monaco or San Marino, but not for a country like the UK, where each year, over 2 million lorries pass through the port of Dover alone.

What we desperately need is a customs clearance agreement with the EU, or else we could face “Operation stack on steroids” on the M20 after Brexit Day.  Unfortunately, if so many of our senior politicians cannot distinguish between customs clearance and a customs union, there are good reasons to fear that Kent may become gridlocked with lorries in a mere 396 days’ time.  Yes, it really is getting that close and on the basis of today’s speech, it seems that the leader of Her Majesty’s Opposition has no more idea of how to save us from such a disaster by delivering a sensible, workable Brexit than our Government.

Photo by Peanut99

Fishing for Leave’s comments on the proposed transitional arrangements

Below is the EUs recommendations for the transition. Those with the particular detrimental implications for the United Kingdoms trade are Clause 14 and 15 as amended by the Council. Indeed, the implications defeat the whole point of HM Governments raison-d’etre for a transition.

TRADE

14. During the transition period, and in line with the European Council guidelines of 29 April 2017, the United Kingdom will remain bound by the obligations stemming from the agreements concluded by the Union, or by Member States acting on its behalf, or by the Union and its Member States acting jointly; while the United Kingdom should however no longer participate in any bodies set up by those agreements.

The Council replaced the words ‘will no longer benefit from’ with ‘will remain bound by the obligations stemming from’. It also deleted the words Where it is in the interest of the Union, the Union may consider whether and how arrangements can be agreed that would maintain the effects of the agreements as regards the United Kingdom during the transition period’.

The intention seems to be that the UK will still have obligations to the EU to apply agreements concluded with non-EU countries by the EU (or the EU jointly with its Member States).

However, since the withdrawal agreement cannot bind non-EU countries, those non-EU countries will no longer have obligations to the UK as the UK will no longer be an official member of the EU but merely maintaining regulatory alignment.

The UK would only be able to be recognised within such agreements if other non-Eu countries agree to continuing existing obligations in force.

The negotiation of treaties between the UK and non-EU countries is the subject of the next paragraph which seemingly makes that an impossible contradiction. 

15. In line with the European Council guidelines of 15 December 2017, any transitional arrangements require the United Kingdom’s continued participation in the Customs Union and the Single Market (with all four freedoms) during the transition. The United Kingdom should take all necessary measures to preserve the integrity of the Single Market and of the Customs Union. (full regulatory alignment is the only way to do so and this complies with Clause 49 of Phase 1 regards UK vs EU border on island of Ireland)

The United Kingdom should continue to comply with the Union trade policy. It should also in particular ensure that its customs authorities continue to act in accordance with the mission of EU customs authorities including by collecting Common Customs Tariff duties and by performing all checks required under Union law at the border vis-à-vis other third countries. During the transition period, the United Kingdom may not become bound by international agreements entered into in its own capacity in the fields of competence of Union law, unless authorised to do so by the Union.  

The final sentence added by the Council. This paragraph ensures no change in the application of the single market or the customs union to the UK during the transitional period.

This limits the UK’s power to enter into treaties and subjects the UK to more constraints than it would have as a Member State.

The UK will not be free to negotiate and sign treaties within the transitional period, even if those treaties only come into force afterward – we will only be able to begin to negotiate treaties AFTER the transition period.

How will this allow the UK to sign a trade deal with the EU for post-transition as David Davis claims the transition is necessary to facilitate?

One has to ask how under the terms of Clause 15 the UK will be able to respond to Clause 14 where the UK (as a non-EU member) would have to seek recognition by other non-EU counties for the UK being party to agreements they have concluded with the EU.

One struggles to see how we can enable a continuation of any agreements the EU has concluded with the rest of the world as per Clause 14 yet still comply with Clause 15?

This revised text means they have amended Clause 14 to appear a lifeline that doesn’t actually attach to anything.

We take this contradiction to mean we are locked into the single market and customs union but if other non-Eu nations fail to recognize the UK being party to the agreements they concluded with the EU (as we’re no longer a member – merely maintaining regulatory alignment) and we are unable to pursue our own agreement with such other non-EU nation then we are on WTO with the rest of the world which defeats the point of a transition in the first place.

It would be interesting to hear the government and DexEUs response to how Britain can conclude a future “deep and special” trade deal with the EU under the transition as David Davis professes is required if Clause 15 bars us from concluding agreements…?!?

 

FISHING INDUSTRY

Clause 20 obliges the UK to “consult” on fishing opportunities in full respect of the Acquis – i.e. obey the entire CFP!

20. Specific consultations should also be foreseen with regard to for the (interesting change/use of language..?)  fixing of fishing opportunities during the transition period, in full respect of the Union acquis.

Therefore, the UK delegation would possible be allowed to sit in the room yet the UK will still be bound by the ENTIRE ACQUIS and therefore the entire CFP – Equal Access, Relative Stability Shares and Quota system.

A continuation of the quota system where fishermen have to discard in order to find the species their quota allows them to keep conjoined with a fully enforced discard ban will finish the UK fleet.

Under the discard ban rather than address the cause of the discard problem, that a quota system does not work in mixed fisheries, the symptom of discards is banned. Under the discard ban a vessel must stop fishing when it exhausts its smallest quota allocation – these “choke species” will bankrupt 60% of the UK fleet as detailed by the governments own figures through Seafish.

This would destroy our catching capacity and allowing the EU to claim the “surplus” of our resources we would no longer be able to catch under terms of UNCLOS Article 62.2 due to such a culling of our fleet.

Signing up to a transition on will see the ruination of what is left of the UK fishing industry when Brexit should be its salvation. Another 2 years of the CFP and a continuation of the quota system will see our fishing industry become yet another British industry consigned to museum and memory.

CONCLUSION

Under the auspices of this proposed “deal” (more a dictation) the UK will be on WTO with the rest of the world, unable to conclude deals with the rest of the world until after the transition and will be locked into maintaining regulatory alignment whilst obeying the entire Acquis (with continued freedom of movement) and trapped in the CFP where our fishing industry will be culled to make way for the EU fleet. All whilst being subject to the ECJ and ruled by the Commission and Council as some sort of vassal state.

It is nearly unbelievable that the political establishment could contemplate locking the 5th most powerful nation in the world into such a subservient position especially against the expressed wish of the British people to leave the EU in its entirety as voted for in the biggest vote in British history.

Impressions of meeting with Michel Barnier in Brussels – John Mills

ON WEDNESDAY, 10TH JANUARY 2018

    Michel Barnier is an impressive person, tough and charming, who is evidently well on top of his Brexit brief and thus a formidable person to have on the other side of the table as the Brexit negotiations take place. He wants to get a deal completed but not at any cost to the EU27.

    His primary aim is to secure the integrity and security of the Single Market and the Customs Union rather than to search for a deal which is necessarily in the overall best interest of both the UK and the EU27. The notion that the EU27 may make substantial concessions to avoid economic pain is therefore very probably misplaced.

    While the best outcome from both the UK’s and the EU27’s point of view has always seemed to be for the UK to be outside the Single Market and the Customs Union but with a free trade deal in place covering goods and as many services as possible, this now looks as though it may be difficult to achieve. This is despite the fact that this is substantially the relationship the EU27 has with other countries as varied as Israel, Peru, Mexico, South Korea, Canada and the Ukraine.

    There are at least four major reasons why this is the case, these being:

1. The UK is starting from a radically different position from these other countries – essentially looking for a divorce rather than marriage, with all the baggage that this brings with it.

2. The UK is a much larger player in EU trade terms than any of these other countries, and thus potentially more disruptive if derogations are needed from the existing carefully balanced EU acquis.

3. The UK’s negotiation position has been gravely weakened both by the sequencing insisted on by the EU27 – dealing with money, Ireland and citizenship before trade – and by the result of the recent general election which has left no majority in Parliament for the WTO option which – although not the optimal outcome – is the only realistic fall-back position for the UK to have, without which the EU27 is left with all the cards in its hands.

4. Time is running short, although some extension of time by suspending Article 50 to create the proposed transitional period may help.

    In these circumstances, the most likely offer to the UK from the EU27 seems be free movement of goods and some concessions on services with the UK formally outside the Single Market and probably the Customs Union too but with the UK having to continue to accept nearly all the legal and regulatory obligations currently in place. These will almost certainly include substantial annual net contributions to the EU budget, free movement of people, significant jurisdiction by the ECJ, constraints on the UK’s capacity to negotiate trade deals on its own, and continuing membership of both the Common Agricultural Policy and the Common Fisheries Policy.

    An offer to the UK along these lines would probably be supported by all the EU27, led by Germany and France, but may not be acceptable to Parliament, let alone the British electorate. In these circumstances, preparing for the UK to fall back on WTO terms appears to be essential both to safeguard the position if no acceptable deal is presented to the UK, and to stiffen the UK’s negotiating position in the meantime.

    There may well be calls in circumstances where no acceptable deal is offered to the UK, for a second referendum on the UK’s EU membership, although probably only by a small minority of diehard Remainers. Even in the unlikely event of another referendum being held, current polls indicate that it would be unlikely to produce a different outcome from the one held in June 2016, thus confirming that Brexit is some form is likely to be inevitable.

    If the EU27 wants a deal with the UK it is therefore essential that this takes account of the political realities exposed by the 2016 EU referendum and current polls, which is that – if push comes to shove – the UK electorate would very probably be willing to opt for a clean break with the EU rather than finishing up being in a worse position than we were before Brexit started – with all the obligations against which people voted still in place, but with the UK having no say in how the EU develops in future.

John Mills 11th January 2018