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

Tony Blair must be silenced

Do you know anyone who doesn’t hate Tony Blair? The most I can say in his favour is that I know a couple of people who loathe certain other politicians even more than they loathe him. Most people wish he would just shut up and retire to obscurity but unfortunately, being an ex-Prime Minister, the media is still more than willing to listen to what he says – and as far as Brexit is concerned, he has been rather verbose recently.

His latest outburst shows that he remains stubbornly opposed to the government carrying out the democratic will of the people.  He doesn’t want us to leave the EU. Even though much of the article focuses on the problems of a future trade relationship, his  support for the EU goes beyond trade issues. “Membership of the European Union is right as a matter of principle, for profound political as well as economic reasons.” he asserts. He goes on to say “We are making an error the contemporary world cannot understand and the generations of the future will not forgive….Brexit isn’t and never was the answer.”

Naturally, we would disagree, but if Blair and his ilk are to be silenced once and for all, two things are necessary. Firstly,  his arguments in favour of the general principle of EU membership have to be refuted, but secondly, the government must address the current weaknesses in its Brexit strategy.

The first of Blair’s points, namely that EU membership is a good thing politically as well as economically, is so fatally flawed  that no fair-minded well informed person could possibly agree.  Thanks to our EU membership, we have found ourselves unnecessarily mixed up in the EU’s empire building – for example, in the Ukraine, a part of the world where we have little strategic interest. We have found our excellent Common Law legal system compromised by our membership of  Europol or the European Arrest Warrant. Furthermore, the direction of travel in the EU is towards closer integration, which means in effect power will be taken still further away from the people and their elected representatives,  given instead to a largely unelected and increasingly unaccountable clique of bureaucrats and politicians in Brussels.

In 2012, Angela Merkel told David Cameron, “Your vision of the EU is so cold, David.’ The point she was making is that for most of us, including our former Prime Minister, the EU was about trade. We have always been sceptical about grandiose political projects.  and thus have always felt on the outside of the EU, most of whose member states do not share our scepticism. Only a few senior British politicians have ever embraced the EU’s federalism wholeheartedly. One of these few, however, was Blair’s mentor Roy Jenkins, the only Briton ever to lead the European Commission. As Prime Minister, Blair never felt himself in a position to display his federalist sympathies quite so openly as Jenkins but now Brexit looks like extinguishing the dying embers of his megalomaniac ambitions of becoming Emperor Tony the First, he clearly feels he has nothing to lose.

For those of us living in the real world, however, it is blindingly obvious that our political system needs to be reformed so that we digress further from the EU. In other words, power should be brought closer to the people – taking non-EU Switzerland as our model, which has one of the most accountable systems of government in the world. Indeed, we should seek to become the leader of Free Europe, as we were between 1940 and 1945, showing that there is a better way for countries to organise themselves than to emasculate their national democracies in favour of a remote, unaccountable bureaucracy in Brussels. We can do far more good and wield far more influence internationally this way than by remaining in the EU. The future generations, far from being unwilling to forgive us for Brexit, will be delighted that by leaving the EU, we made not only our country, but other lands too, a better place. Blair’s argument that Brexit was an unfortunate mistake will, unless the Government messes up badly, prove to be about as accurate as his conviction that Saddam Hussein possessed a vast stockpile of weapons of mass destruction.

Unfortunately, our opportunities to help the government address the weaknesses of its Brexit strategy (and thus avoid making a mess of Brexit) are more limited, but we must do what we can. Blair outlines four possible outcomes:- staying what he calls a “reformed Europe”, leaving the EU but staying within the Single Market and Customs Union, leaving the EU but negotiating a bespoke Free trade agreement which “keeps us  close to Europe politically” or leaving the EU and “negotiating a basic Free Trade Agreement and market ourselves as ‘Not Europe’”.

As far as the first option is concerned,  the Conservative Party has spent much of the last 30 years trying to “reform” the European Union. last year’s “State of the Union” speech by Jean-Claude Juncker and the strongly pro-federalist speech by Martin Schulz a couple of months later  shows how deeply federalism which, above all, led to the Brexit vote, is still embedded into the EU’s DNA. Perhaps Blair has forgotten that for all his talk of our “staying in the EU, using the Brexit vote as leverage to achieve reform” that David Cameron did come back from Brussels with some degree of reform nearly two years ago.  He secured a sort-of exemption from ever closer union and a very weak concession that the EU might allow a limited “emergency brake” on immigration. The majority of the electorate wasn’t impressed and voted to leave. 18 months on, there has been no indication of any widespread change of heart.

The way Blair frames the second option, he is either being devious or just plain stupid. Like a number of other remainers, he portrays the single market and the customs union as somehow joined at the hip. They are not. Staying in the EEA as a transitional arrangement would be a vast improvement on the transitional deal currently being discussed, which would leave us as a colony of the EU with no power. The Customs Union, on the other hand, was never even discussed during the referendum debate. Apart from micro-states like San Marino, Turkey is the only non-EU country to be part of the Customs Union. The Turks do not like this deal and given that we would not be able to secure an independent trade policy, it wold not be popular here either. It is an irrelevancy and the sooner it falls out of any discussion of our future, the better.

Blair’s third and fourth options are more about politics than trade. Both assume we end up with a bespoke deal with the EU. Do we want to stay politically close to the EU or deliberately launch out on a different path? In reality, rather than a binary choice, the question should be phrased more on the lines of whereabouts on the scale of political closeness or political divergence do we wish to position ourselves? The answer is probably far closer to the “divergence” end of the spectrum than Blair would wish, as has been noted above.

Unfortunately, the muddle which the Government has found itself in may result in our ending up stuck in limbo between options 1 and 2 – a transitional deal which sees us effectively locked into the EU for a further 21 months and which gives us access to the Single Market but on far worse terms than Norway or Iceland. It is staggering that there has so far been so little critical analysis of the proposed transitional deal, as it is a very bad arrangement indeed. Somehow, the EU’s harsh guidelines have been completely ignored by many politicians and indeed, much of the media. As mentioned above, we would essentially end up as a colony of the EU, forced to accept the full acquis but with no say in the framing or implementation of these laws.  In such circumstances, it would be all too easy to end up saying “What was the point of the Brexit vote?”

To throw in the towel is exactly what Blair and co would love us to do. No one can deny that the last 18 months have been exasperating and there is still little light at the end of the tunnel as far as a sensible exit strategy is concerned. If you are a leave voter who has become utterly fed up with the whole subject of Brexit, take heart; you are not alone! Perhaps, however, we should think back to that momentous day in June 2016. Our elation at the time should act as a reminder that we must not give up, no matter how frustrated we feel at the moment. To allow the likes of Blair to win by default, especially given the weaknesses of his arguments, would be the ultimate tragedy for our countrymen and a betrayal of all  that we have fought for over the last four decades. Blair can only finally be silenced by persevering to the end, continuing to make the case for Brexit, seeking to influence the debate on how best to achieve the best deal – and persevere we must and shall.

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

Going round in circles?

It’s now the third round of Brexit negotiations. Last week, we were given what amounted to an aspiration list – five “position papers” following on from two the previous week which went into very little detail as to how the UK negotiating team intended to go about achieving its desired objectives. The papers also made a number of assumptions about the EU’s negotiating position which do seem at first glance rather unrealistic. In short, it doesn’t seem very clear what the UK government actually wants. By contrast, the EU has made its position clear from the very start.

The EU’s Chief Negotiator, Michel Barnier, is understandably frustrated and warned about the clock ticking. He recently told the UK to “start negotiating seriously.” We are now less than 19 months to Brexit day; 14 have already elapsed with very little achieved except a foolish agreement to submit to the EU’s negotiating schedule whereby sufficient progress must be made on the divorce settlement, the rights of EU nationals and the Irish border before issues such as trade can be discussed. A helpful summary of the full areas of disagreement can be found in this article.

As far as the UK government is concerned, there has been a recognition that a long-term trade deal cannot be negotiated before March 2019 so some sort of interim arrangement will be needed. Even this is going to be a challenge as the rather nebulous statements from the government insist that the Single Market is not on the agenda, necessitating a bespoke deal (or a change of mind). Labour, however, seems to be moving round to supporting membership of the Single Market.  It now agrees with the Government that a transitional deal is necessary but disagrees with it not only on the Single Market but on the customs union too. As Dr Richard North points out, Keir Starmer, the shadow Brexit secretary, has advocated the Single Market without offering any hint of how we would access it – in other words, no mention of the European Economic Area or EFTA.

Professor George Yarrow from Oxford University, has argued that the default position for a newly-independent UK is that we would remain within the Single Market and would not need to rejoin EFTA to retain access. Not everyone is convinced by his arguments and if he is wrong, a bespoke deal allowing the UK to remain within the Single Market or the Customs Union would require a new treaty – a very challenging prospect within this increasingly tight timetable.

Of course, there are still some voices arguing against any sort of transitional agreement and claiming that a “hard” Brexit will bring economic benefit, such as Professor Patrick Minford of Cardiff Business School.  We have also highlighted the Bruges Group’s paper What will it look like? which claims that it is possible to agree a long-term trade deal within the Article 50 timeframe.  This paper has highlighted the key areas on which an agreement will be required, but if the Government is considering this route, the Position Papers offered us not the slightest hint that this is their preferred strategy.

So it looks like this week’s talks will be little more than going round in circles. We will, no doubt, be given a very upbeat assessment of the talks by David Davis, but little real progress will be made as the Government does not seem to be offering any sort of road map to arrive in the promised land of Brexit while Labour has little idea either. Meanwhile, as M. Barnier keeps reminding us, the clock is ticking away and the cliff edge is getting closer……

Photo by Digital-Designs

Varadkar gets a caning from Lord Stoddart over Brexit comments

THE PRESS OFFICE OF

The Lord Stoddart of Swindon (independent Labour)

News Release

8th August 2017

 

Comments from leader of “EU minnow country” go down badly with Brexit peer Lord Stoddart of Swindon

The independent Labour Peer, Lord Stoddart of Swindon has taken the new Prime Minister of the Irish Republic, Leo Varadkar to task about his contribution to the ongoing debate over Brexit and advised the “stripling leader of a mini-state” to “learn his trade” before presuming to lecture the United Kingdom.

Lord Stoddart said: “The British people must be getting fed up with EU minnow countries telling them either to stay in the EU or agree to conditions like remaining in the Single Market and the Customs Union, which would effectively keep our country in the EU.  The latest culprit is the Prime Minister of the Irish Republic (population 4.7million) Leo Varadkar.  He should be reminded that the United Kingdom is the Republic’s good friend and a substantial trading partner –indeed, such a good friend and partner that that it gave Ireland a loan of £3billion to save it from bankruptcy caused by its membership of the single currency, during the last recession (I wonder if they have paid it back yet?).

“This stripling leader of a mini-state should learn his trade before presuming to lecture substantial and successful countries like the United Kingdom on how to proceed on Brexit, particularly after its people have voted in a democratic and free referendum to leave the European Union.”

The great trade muddle

“We are leaving the European Union… We are leaving the Single Market… We are leaving the Customs Union.” Theresa May has repeated these phrases on numerous occasions since her Lancaster House speech in January.  Only last week, Steve Baker, the new Brexit minister, insisted that there would be no watering down of the Brexit strategy. “It’s like putting blood in the water to even talk about the EEA,” he said. “We don’t want to be a rule taker, for all the reasons that David Cameron gave during the referendum. We mustn’t take up some of those ideas.”

The Customs Union is a red herring. It never came up during the referendum debate last year and, one suspects, it has only re-surfaced recently because some people may well not know the difference between it and the Single Market.

The Single Market is another matter. It is not true, as suggested by a number of senior EU figures  including Michel Barnier, the chief negotiator, that the four “freedoms of movement”  – goods, services, capital and people – are indivisible.  They may be for EU member states, but not for the non-EU countries in EFTA. Iceland imposed restrictions on the movement of capital when its banks collapsed and Liechtenstein still imposes restrictions on immigration from the EU. Furthermore, no Brexit campaigner suggested that the “Norway Option” or even the “Liechtenstein Solution” should be anything other than an interim arrangement to get us safely through the EU’s exit door within the Article 50 timescale.

It is certainly not an ideal arrangement, and some leave campaigners, including CIB Committee member Ian Kealey, have offered a number of reasons why it should be avoided even as a temporary solution.  Carolyn Fairbairn, the Director General of the Confederation of British Industry, which represents large employers,  has nonetheless been pushing hard for us to adopt this approach. Some leavers are naturally suspicious of an organisation which campaigned for us to stay in the EU, arguing that the real motive of the CBI is to stop us leaving the EU at all. For all the objections to re-joining EFTA and accessing the Single Market via the EEA agreement, the fact is, countries which use this model are most definitely outside the EU as this helpful comparison by CIB Committee member Anthony Scholefield illustrates

Mrs May, however, has not shown any enthusiasm for this route, although she mentioned the possibility of an interim arrangement as far back as November of last year, without going into any details. Her  recent pronouncements have been very much about the long term, stating her desire to sign a “bold and ambitious” trade deal with the EU by March 2019 and only yesterday, at the G20 summit in Hamburg, she said she wanted a “deep and special partnership with the EU, a comprehensive free trade agreement with the EU, so that we can continue to trade with the European Union. That’s not just in our interests in the interest of the other 27 member states as well.”

Fair enough, but only two days ago, Michel Barnier said that “There will be no business as usual.” To underscore the point, he later continued, “I have heard some people in the UK argue that one can leave the single market and keep all of its benefits – that is not possible.”

It has been argued that many other countries trade with the Single Market without being members of it. This is true, but they do not get 100% access nor of the benefits. There will inevitably be obstacles. Most people who have looked at this complex subject accept that being outside the Single Market will involve some loss of trade access to the EU. The big question is whether or not they can be minimalised.  The Bruges Group has come up with an alternative which, its authors claim, can be implemented in eighteen months and which would address the main concerns of business, including non-tariff barriers. However, it does not deny the presence of significant obstacles.

We do not know whether or not this report is being digested by the Civil Servants of David Davis’ department. What we can say is that there has been precious little comment from the government on its  proposals regarding this important subject. To date, the Bruges Group proposal is the most detailed study of a non-EEA  solution to the trade conundrum which would avoid the need for any interim arrangement.  If it isn’t going to be adopted but something better has been produced, it clearly hasn’t reached the ears of the CBI or some other concerned politicians who advocate our remaining in the EEA.

What is worrying is the lack of a detailed response to these concerns. Could it be that even a year on from the referendum, the Government still doesn’t have any idea of what its Brexit trade strategy should be? When we joined the EEC (as it was) over forty years ago, businesses were given increasingly detailed guidance, starting over a year before entry. If the transition to independence is to be seamless, businesses need adequate notice to comply with whatever the new arrangements will be. Regulation has become a lot more complex since 1973 and the process of informing them of what needs to be done will surely need to start no later than March next year.

With some economists suggesting that the UK economy is slowing, some leave campaigners have expressed a concern that Brexit may not actually happen given the additional challenges which lie ahead. We do not believe this to be the case as any backtracking on Brexit would be suicidal for the government and the Conservative Party. Nonetheless, the Article 50 clock is ticking away and if the government is still in a muddle about trade, we may end up going down the EEA/EFTA route as an “off the peg” solution which, due to time constraints, could end up by default as the only way of preventing a “cliff edge” scenario in March 2019.