MPs’ vote on Brexit deal – is it a climbdown?

Yesterday, David Davis announced that MPs would get a binding vote on the final Brexit deal agreed with the EU. Although Labour called this decision a “climbdown”, in reality, it does not concede very much and does not put Brexit in doubt.

Essentially, MPs will be asked to take it or leave it. The choices will either be to accept the deal or to crash out of the EU without a deal.

Unsurprisingly, the Tory incorrigibles, led by Dominic Grieve and Anna Soubry were none too happy with Davis’ concession, calling it unacceptable.

It may well be, however, that the wrangling turns out to be academic. There has to be an agreement upon which to vote and there is no sign of the two sides moving any closer. One informed commentator, indeed, has suggested that within a few weeks, the  chances of a deal will drop to zero.

There is no question that the “transitional deal” about which there has been much talk faces huge obstacles. Such outlines as have been provided would be unacceptable to many Tory Brexiteers and would still need a huge amount of negotiation with the EU within a short timescale to be signed off by Brexit day.

Is there a via media between this pipe dream (or better, pipe nightmare) and the worrying prospect of having to fall back on the so-called WTO option?  The EEA/EFTA route has been ruled out, a “deep and comprehensive” trade deal on the lines of the EU/Ukraine agreement would take too long and any bespoke deal would take too long to conclude.

And this remains the biggest concerns for those of us desiring to see a successful Brexit. There is no doubt that the remainiacs are still causing trouble, but outside the political bubble, very few people are taking any notice of them. The real worry is that the talks may fail and we will drift aimlessly towards March 29th 2019 with the resulting chaos leaving us battling calls to re-join the EU forthwith.

The older Milipede – partly right but partly very wrong indeed

Before the referendum, at least one well-known pro-remain politician talked of leaving the country if we voted to leave. Unfortunately, not only has there been no indication that Red Ken has kept to his word and cleared off to somewhere like North Korea, where he would probably feel far more at home, but also some equally odious politicians whom we thought we had already got rid of have re-emerged from obscurity to give us their pennyworth on the subject of our future relationship with the EU.

David Miliband (remember him?) has recently chipped in to the Brexit debate, saying that we should have a second referendum which would include the option of staying in the EU. He was critical of Theresa May for her decision to start the two-year countdown to Brexit by triggering Article 50 without knowing the outcome.

Irksome as it is to find oneself in agreement with this arch-Blairite and remoaner, unfortunately, he is correct – at least on this point. The government does not seem to know what it wants. Yes, in the long term, it wants a deal with the EU which will give us considerable access to the single market without being subject to the “four freedoms”  – in other words, a bespoke trade deal like CETA. But utterances from HM Government have been very heavy on  the “deep and special” relationship but very light on detail. Furthermore, how are we to get there? We are hearing talk of a transitional deal or “deferred withdrawal”, as David Davis calls it, but while it is no pleasure either to be agreeing with someone like the former Chancellor Alastair Darling, he is right in saying, “you can only transition to a destination.”

Such outlines as have been released about the proposed transitional deal are distinctly unsatisfactory. The “deferred withdrawal” would see the UK spending a further two years after March 2019 as an honorary member of the EU with no voting powers. We would continue to apply all the EU acquis and to pay into the EU budget, but would be totally passive, with no input into the EU’s processes. This would be not only a betrayal of Brexit but “a legal minefield” according to Chris Bryant, an EU expert at lawyers Brewin Leighton Paisner. Even this arrangement simply cannot be agreed, signed and ratified in time for Brexit Day.

Mr Bryant then went on to say that the government doesn’t seem to have got to grips with the need to pin down even a transitional deal legally. “Vague talk is not going to cut the mustard.” This is the problem. The government is convinced that the EU will agree to some sort of transitional deal, but when David Davis was asked about what legal authority the EU had for this, he was very evasive – and with good reason.

This exchange with the SNP MP Joanna Cherry in the Sel;ect Committee on Exiting the European Union on 25th October is particularly enlightening:-

Q67            Joanna Cherry: Can I go back to the transitional period or the implementation period?  What is your understanding of the legal basis for a transitional deal or an implementation period?

Mr Davis: The presumption we have been working on is that it comes under the Article 50 proposal.  It was raised with us by the Commission.  The European Parliament sees it in those terms.  I am assuming the Commission legal service does.  But in many ways it is a question almost for the Commission rather than me.

Q68            Joanna Cherry: Do you have any legal advice of your own as to the basis of a transitional deal or implementation period?

Mr Davis: I am not going to share the legal advice for the reason I gave earlier: that is the convention.  But our belief is that it fits under Article 50.

Q69            Joanna Cherry: Legal advice exists, and it is your belief that it is under Article 50.

Mr Davis: I am not going to be drawn any further on that.  I said I believe it is going to be under Article 50.

Q70            Joanna Cherry: Article 50 does not actually say anything about transitional deals or implementation periods.

Mr Davis: Article 50 does not say very much about anything, if you read it.  It is the blandest and unhelpful phrase you are ever likely to come across, but there we are: that is that.

Q71            Joanna Cherry: What it does make clear is that, during any period of deferred withdrawal, the treaties would continue to apply, so if we went into a period of deferred withdrawal under Article 50 we would still be in the single market; we would still be in the customs union; and we would still be under the jurisdiction of the European Court of Justice.  That is correct, isn’t it?

Mr Davis: My response to that is the same as my response to Mr Bone: we are not looking for deferred withdrawal; we are looking for an implementation period.

Q72            Joanna Cherry: But if it is the case that, as a matter of law, all you could have under Article 50 was a deferred withdrawal, we would not be leaving on 29 March 2019, would we?

Mr Davis: That is not what we have been negotiating for.  The phrase “deferred withdrawal” has never been used to me by the Commission.  The phrase they use is “transition period”.  Our term of art is “implementation period”.

Even the most unsatisfactory idea of being a passive honorary EU member requires the EU to agree and such an agreement would require it to go through almost as complex a legal process as a long-term deal.  There is no indication that Mr Davis has appreciated this important point. His answers suggest that he cannot explain the legal basis under which the “transitional deal”,” implementation period”, call it what you will, can be agreed. Once we leave the EU on 29th March 2019, the treaties no longer apply to the UK, including the Lisbon Treaty, with its Article 50, so it will have to be something else. But what?

Furthermore, what guarantee is being offered that the transitional arrangement, if agreed, really will only last for two years?  David Davis was not convincing in his reply here too when questioned by Sammy Wilson MP over this. Ironically, he then went on to say that “no deal” still remains an option.

But  is it really? The “no deal” option  assumes that “with one bound, we will be free.”  In other words, there may be a few little glitches but we would still survive – and indeed prosper  – if we  cut our ties at a stroke in the event of the talks getting bogged down. There are many reasons to be highly sceptical that things will run anything like so smoothly.

In summary, the government seems to believe there are only two positions in which the UK could  find itself in March 2019 and both would be disastrous.The first would see us essentially still in the EU in all but name, the second is cloud cuckoo land.  – or rather, a massive headache for many businesses which could well lead to a very severe recession.

Where the Government is going wrong in its thinking on both the proposed long and short term relationships with the EU is its assumption that if any nation has aligned its own regulation with that of the EU, the EU will happily treat it as an honorary member of the club. This is to miss the whole point of the EU project – it is not a trading bloc but a political construct. The sheer complexity of Brexit has already shown to us just how much independence we have already surrendered thanks to Edward Heath’s manic determination to shackle us to this contruct.

So  Miliband is right in saying that the government should have worked out its exit strategy before triggering Article 50. Even all this time later, less than a week before the mid-point between last year’s referendum and Brexit day, the government still seems caught between a rock and a hard place  when it comes to devising a strategy which would enable us to leave the EU satisfactorily.

His other comments, however, are totally and completely wrong. “”Those of us who are outside the country take absolutely no pleasure in the low ebb to which Britain has sunk. Brits abroad look at the fact other countries see us in retreat, having lost our way” he said. For all the muddle of the negotiations at the moment, this is not a country in retreat nor one which has lost its way. Rather, we are groping our way slowly and indeed very awkwardly towards something better. It may be a long tunnel, but one day, there will be some light at the end. To reiterate a point made above – and indeed, on many other occasions on this website – the Brexit negotiations have laid bare just how many areas of public policy have been surrendered by our government as a result of 43 years’ membership of the EU. It has been like an octopus, wrapping its tentacles around our political institutions and slowly squeezing the life out of them. We want to escape before it finally throttles us. If we have sunk to a low ebb, it’s because of our membership of the EU, not because we voted to leave.

The Brexit vote was a vote to re-join normality – a reflection of our desire to be a successful nation state once again and a vote of confidence in ourselves that we can do it. I doubt if any of us involved in the campaign to free the UK from the EU have had the slightest doubt that it was the right thing to do.  Successful nation states are flourishing in Asia, North and South America and Australasia. Nearer to home, Norway, Iceland and Switzerland are happy outside the EU. Indeed, in Switzerland, one minister recently said that in his country only “a few lunatics” want to join the EU.  It will take some time to readjust and there is no denying that the government is in a mess over its Brexit strategy at the moment, but even if Miliband and his like cannot hide their contempt for the UK electorate’s decision to regain its freedom, we did the right thing and we will be vindicated  – eventually.

Photo by Hanna Irßlinger Fotografie

A reasonable divorce bill?

Mrs May, so we were told last Sunday, has decided to agree a £50 billion divorce bill with the EU, although the UK’s Chief negotiator, David David has denied this, saying that it was “complete nonsense”.

Accounts appeared in several papers suggesting that the government would be paying between £7 billion and £17 billion for three years after Brexit, but that payments would cease by 2022 – the year of the next General Election.

There is a sizeable group of Brexit supporters who believe that we should pay absolutely nothing to the EU after we become independent. “Not a a penny to the blackmailers!” says one comment to the article cited above. Others would not take such a hard-line position, maintaining that we should honour our obligations to the end of the current seven-year budget cycle, which ends in 2020.

Whatever, it is hard to justify the figure of £100 billion which the EU is demanding. Our current net budget contribution amounts to somewhere in the order of £10 billion and was not predicted to rise that much up to the end of the EU’s budget cycle or beyond.

Of course, the EU is not only losing a member state but losing a net contributor to the EU budget. In only one year since joining in 1973 has the UK received more money from the EU than in paid in. Günther Oettinger, the EU Commissioner responsible for the budget, reckons that Brexit could make a hole as big as €20 billion in the EU’s finances.

During the last round of Brexit talks, Michel Barnier, the EU’s negotiator, was distinctly unhappy with the UK negotiating team’s three-hour line-by-line rebuttal of the EU’s expensive divorce bill. There does seem, however, little justification for the figure demanded by the EU.

Perhaps the most sober estimate of a reasonable divorce settlement comes from the Institute of Chartered Accountants of England and Wales. It has produced a report suggesting that the likely cost should end up somewhere between £5 billion and £30 billion. The most likely figure, £15 billion, would equate to be £225 for every person living in the UK in 2019.  This is roughly on a par with our net annual contribution to the EU budget – in other words, how much we pay after the rebate and agricultural subsidies are deducted.

The full report can be downloaded here. It includes spending which has been authorised but not yet incurred, which will be hard to avoid. ICAEW’s study puts this figure at £28 billion.

On the other hand, there are assets which we can cash in. We have a 16% stake in the European Investment Bank, estimated to amount to some £10 billion by 2019. With ownership restricted to EU members, our shareholding will need to be sold.

The authors also indicate that some additional expenditure will be needed to complete the Brexit process. After all,  for one thing, extra staff will need to be employed for what will be complex but one-off negotiations.

The report considers that the most contentious issue may be any ongoing commitment to infrastructure projects in the former Soviet bloc countries. After all, the state of infrastructure in the UK leaves much to be desired and given the claims that some UK workers, including teachers and nurses, are worse off now in real terms than they were five years ago, it would not be unwise for Mr Davis and his team to argue that charity must begin at home.

We have been somewhat critical of certain aspects of the government’s approach to the  Brexit negotiations recently, but when it comes to the divorce settlement, there is no question that it is the EU which is being most unreasonable in the sum it is demanding.

Photo by aronbaker2

Brexit and the mechanisms of EU trade

The UK’s International trade depends upon efficient electronic systems that avoid entry inspections and delays at border crossings. These systems depend upon various mutually-agreed standards on both sides of the border. Unfortunately, the recently-published Government Position Papers on Brexit chose to ignore such details – indeed, they amounted to little more than political aspirations. As Brexit day approaches, it would not be surprising for businesses in both the UK and EU member states to put pressure on their governments to address the steps needed to prevent a massive “Operation Stack” on both sides of the Channel once we leave the EU.

Businesses likely to be affected by Brexit will need to know about how the movement of goods, services, ships and aircraft will be controlled.  They cannot move freely after March 2019 unless they are the subject of new inter-government agreements. These agreements can be achieved by way of MRAs [Mutual Recognition Agreements], Memoranda of Understanding or Exchanges of Notes for example.

There is a great deal of interplay between Laws and Regulations, Standards, Inspections and Conformity Assessment, Government Market Surveillance by checks and Customs and Tariff requirements. It must  be pointed out that the so-called ”WTO model” post-Brexit advocated by some economists would deal only with tariffs and would not address in full the requirements of these other critical areas.

So what else would be needed? Firstly, Mutual Recognition of bilateral product regulations. Whether or not two trading countries’ standards rules are identical, either way they are deemed to be mutually acceptable by that MRA.

Then there are internationally agreed certificates recognising that a produce conforms to a given set of standards. These are vital before the goods can reach the marketplace. The most important body dealing with international  standards, the International Organisation for Standardization (ISO) is a non-government organisation although its membership does include 163 national standards bodies. It seeks to apply one international standard for a given product everywhere across the world.

In Europe there are three European standards organisations, ETS, CEN and CENELEC, and they have 34 members – all 28 current EU member states plus Iceland, Norway, Switzerland, Turkey, Serbia and the Former Yugoslav Republic of Macedonia. Every agreed standard is adopted by all 34 member countries’ standards bodies. In the UK, the British Standards Institution (BSI) is our national standards body. The UK Government therefore seeks to avoid making any other bilateral national agreements on standards for legal compliance purposes. In other words, only one standard per topic is permitted in these 34 countries.

There is a silence from the DExEU upon any progress in these areas. These standards organisations were not mentioned once in the Position Papers, even though they are going to play a hugely important role in facilitating trade with other European nations.  David Davis has perhaps unwisely accepted the Barnier sequencing agenda, which means that the concerns of Industry and Commerce over these issues cannot be addressed until the EU is satisfied with progress in other areas – and it is currently distinctly dissatisfied.

As Anthony Scholefield has pointed out in his research paper for the Futurus think tank, the Government’s “Plan A” – a bespoke trade agreement with the EU – is doomed to fail unless transitional arrangements are agreed.

There is also the question of non-EU trade. Approximately 80% of UK GDP is domestic. Of the remainder 13% is Entrepôt non-EU and 7% is with the EU. Will this Government prioritise the 13% or the 7%?

One of the much-trumpeted benefits of Brexit is the freedom to strike our own trade deals. Will the Government go for a “Plan B” and seek to negotiate some trade agreements with non-EU countries which will be conditional on Brexit taking place in March 2019?

At the moment, we have no idea. “Operation Stack” on the M20, with all the attendant  consequences are looking increasingly inevitable from April 2019. The only consolation is that the UK will at least have escaped from the EU political project of ever-closer union and will not be asked to prop up the failed Euro. As Lord Mervyn King says, ”In 30 years this will look like any old blip!” We can but hope he is right, but without a change of mindset among those entrusted with the Brexit negotiations, the blip could be rather bigger and longer than he anticipated.

 

 

Photo by Pharma Mike

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

New government position paper – Enforcement and dispute resolution

This latest Government position paper begins with a phrase we have heard time after time “new deep and special relationship.” This is a most unfortunate term, although at least it makes the point that we don’t want to make enemies of EU-27. Our relationship will certainly be “new” as we will no longer be a member state but “deep and special”? We voted for a looser relationship to enable us to be closer to the rest of the world. It is hard to imagine that in a decade or so, if Brexit is managed successfully we will be any closer to the EU than to our friends in the Commonwealth, for instance. The EU, in other words, will not be particularly special even if we naturally want to work closely with it.

The paper attracted much comment over the future role of the European Court of Justice. Upon its publication, the Government was accused of back-tracking over its commitment to end the jurisdiction of the European Court of Justice upon  Brexit. Even the Prime Minister felt obliged to make a statement confirming that this was still the Government’s intention.

The paper says little about one contentious issue – the desire of the EU that its citizens resident in the UK will remain subject to EU law after Brexit. This is a most unreasonable request and flies in the face of our Common Law principle – that the law is the law for everyone from the monarch downwards. Historically, the scope of our Common Law has applied to non-nationals either resident in or visiting the country. We do not hear of the governments of, for example, India, Saudi Arabia, Switzerland or the USA wanting an arrangement whereby their citizens remain subject to the laws of their home country while they reside in the UK, nor would these countries grant UK citizens living abroad the right to be governed by UK law. The EU’s claim to “extra-territoriality” is exactly the same as that which the nineteenth century Imperial powers imposed on China. Under their terms, Citizens of the European states could not be tried by Chinese courts but only in the courts established by the European powers in China. Given that the UK’s legal systems are better than those found in much  of Continental Europe, the EU’s demand should be resisted


As an aside, if the UK rebuffs the EU on the grounds that the same legal system applies to everyone resident in the country,* it does pose the question about the legitimacy of the Sharia courts operating in the UK, which do not have any formal legal status but in reality, make decisions which have a profound impact on the lives of women and children in particular.

The paper leaves open the nature of cooperation between the legal authorities in the UK and the EU in the event of international disputes. It quotes examples of international legal bodies already in existence, including the EFTA court, interestingly enough. The UK government has thus far shown no inclination that it wants to re-join EFTA, but such a move could be helpful in enabling us to take advantage of an existing body which works closely with the ECJ while remaining independent of it.

Like the previous papers, detail is rather limited and although these papers have been produced in theory to guide the next round of Brexit talks which are due to start next week, this topic isn’t going to be discussed any time soon. We need not have agreed with the EU’s demand for progress on the rights of EU citizens living within the EU, the exit fee and the Irish border issues before moving onto discussing the wider Brexit settlement, but David Davis did so. Consequentially, as has been pointed out elsewhere, this paper is really only for domestic consumption only.

 * Obviously, Scotland and Northern Ireland have different legal systems to England and Wales