Avoiding the cliff edge?

Brexit news has come thick and fast this past week. While we don’t see the need to comment on every twist and turn, some recent developments have been quite significant.

In particular, following reports of disagreements within Mrs May’s cabinet over how “hard” Brexit should be, we are now informed that the Cabinet is united over the need for a transitional deal pending full departure from the EU.  There has been considerable pressure from business leaders worried about the relatively short timescale to prepare for departing the EU. According to the Daily Mail, Mrs May told a group of senior figures from industry that she wanted to avoid a ‘cliff-edge’ exit from the EU.

The article also said that even David Davis, one of the ministers keenest to leave the EU as soon as possible, is reconciled to a transitional Brexit period lasting until 2022.

Of course, with 2022 is now the new date for the next General Election, this puts a great deal of pressure on the Government to make sure we’re through the transition period before voters go to the polls. A recent survey by YouGov studied the main reasons given by voters for supporting the two big parties in this year’s election. Among Tory voters, Brexit came top of the list with 21% citing it as their top concern. By contrast, Brexit (either supporting or opposing it) did not feature at all in the top 10 reasons why people voted Labour.  Achieving a successful Brexit looks like being essential for the Tories if they are to stand a chance of remaining in power next time round.

One big issue in many voters’ minds was immigration and it is possible from the snippets revealed by a government source that no attempt will be made to restrict migration from the EU during the transition period, although when the BBC reported on this topic, it merely used the term “might be” no restriction. If this is the case, it would confirm Mrs May’s statement earlier this week that whatever the transitional arrangement may be, it is not going to include remaining within the Single Market. If so, what will it include? A safer transitional option, the EEA/EFTA route, would enable us, via the Liechtenstein Solution, to start imposing restrictions  far sooner.

Opposition to housing development in greenfield sites and in small towns is not going to go away either, particularly as an increasing number of people are starting to make the obvious link between housing shortages, concreting over the countryside and immigration. This will only add further pressure on the Tories.

However, if voters may be concerned that the government is kicking its migration target further down  the road, the House of Lords Economic Affairs Committee thinks otherwise, noting that Brexit will encourage firms to replace cheap labour with robots. In a sense, this is nothing more than the House of Lords playing catch-up. Almost two years ago, Andy Haldane of the Bank of England said that millions of jobs would be replaced by robots in the next twenty years. Even allowing for exaggeration and/or technology not developing as fast as suggested by the headline report, if we start to become a world leader in artificial intelligence, we will be struggling to find work for the current immigrants and with the exception of top professionals, certainly won’t want any more.

As the summer recess begins, the government will not have an easy job to  keep everyone happy, be it the many shades of opinion among leave voters, the Business community or even the Cabinet. We are still woefully thin on detail about even its transitional plans, but at least we have now been told that the important players are not only talking to one another but listening and attempting to find common ground that will keep most leave voters and business people on side. That still leaves a lot of concerns unaddressed, but for this small mercy we must be thankful.

Photo by williamcho

Brexit and some alternative facts

In a time of universal deceit, telling the truth is a revolutionary act. (anonymous, often misattributed to Eric Blair aka George Orwell)

The truth is usually more complex and subtle than the simplistic soundbyte beloved of politicians and media headline writers. Fake news is not necessarily the problem; misinformation can be spread because the basic assumptions are incorrect, the background has not been thoroughly investigated or it is just speculation masquerading as fact.

The following are a couple of quite significant examples.  However, please don’t take my word and incomplete knowledge of these subjects for granted.  A much better source is Eureferendum.com and the original source documents.

Control of EU Immigration Requires Leaving the Single Market – NOT TRUE

How often have we heard or read this, but it is not actually correct.  The Single Market (aka European Economic Area), created by the European Union (EU) and to which the members of the European Free Trade Association (EFTA) also belong has free movement of goods, persons, services and capital as basic principles (set by the EU). The conditions of access of members of EFTA to the single market are set out in the Agreement on the European Economic Area which also includes free movement as a basic principle.

However, the EEA Agreement also includes an opt-out which can be applied unilaterally by members of EFTA (see Chapter 4, Safeguard Provisions, Article 112), but obviously not by Members States of the EU.  It states:

  1. If serious economic, societal or environmental difficulties of a sectorial or regional nature liable to persist are arising, a Contracting Party may unilaterally take appropriate measures under the conditions and procedures laid down in Article 113.
  2. Such safeguard measures shall be restricted with regard to their scope and duration to what is strictly necessary in order to remedy the situation. Priority shall be given to such measures as will least disturb the functioning of this Agreement.

This opt-out is intended to be temporary (until a permanent solution is implemented), but nevertheless can be invoked and maintained in the absence of that permanent solution.  It has been used already by Liechtenstein to control immigration and Iceland to control capital flows in the wake of the financial crisis.

The EU negotiators are already setting terms for the EU-UK negotiations – NOT TRUE

How often has the media reported that this or that person, with an appropriate grand EU-related title, is already laying down tough terms for us? In reality, at the moment there are no negotiators as such – just political nominations by various posturing organisations within the EU set-up and their self-important leaders or other politicians. The small print of the Lisbon Treaty Article 50 states:

  1. Any Member State may decide to withdraw from the Union in accordance with its own constitutional requirements.
  2. A Member State which decides to withdraw shall notify the European Council of its intention. In the light of the guidelines provided by the European Council, the Union shall negotiate and conclude an agreement with that State, setting out the arrangements for its withdrawal, taking account of the framework for its future relationship with the Union. That agreement shall be negotiated in accordance with Article 218(3) of the Treaty on the Functioning of the European Union. It shall be concluded on behalf of the Union by the Council, acting by a qualified majority, after obtaining the consent of the European Parliament.

Article 218(3) of the Treaty on the Functioning of the European Union states:

  1. Without prejudice to the specific provisions laid down in Article 207, agreements between the Union and third countries or international organisations shall be negotiated and concluded in accordance with the following procedure.
  2. The Council shall authorise the opening of negotiations, adopt negotiating directives, authorise the signing of agreements and conclude them.
  3. The Commission, or the High Representative of the Union for Foreign Affairs and Security Policy where the agreement envisaged relates exclusively or principally to the common foreign and security policy, shall submit recommendations to the Council, which shall adopt a decision authorising the opening of negotiations and, depending on the subject of the agreement envisaged, nominating the Union negotiator or the head of the Union’s negotiating team.
  4. The Council may address directives to the negotiator and designate a special committee in consultation with which the negotiations must be conducted.
  5. The Council, on a proposal by the negotiator, shall adopt a decision authorising the signing of the agreement and, if necessary, its provisional application before entry into force.

Clearly negotiations are with the Council (of the European Union) who nominates a negotiator and, at the time of writing, they haven’t done so, officially at least.

To sum up, all is not what is reported or stated to be true facts and because they are repeated so often, if not vehemently, it is easy to be taken in.

The UK’s strong hand in trade negotiations

The war of words between UK ministers and EU officials continues. Donald Tusk, the President of the European Council, insisted that the only choices available ot the UK were “Hard Brexit ” or No Brexit” – in other words,  give up trying to leave the EU or accept that if we will not accept freedom of movement, we canot have access to the single market. The article mentioned Norway and Switzerland, which both accept freedom of movement. It failed to mention Liechtenstein which, as we have frequently mentioned before, does not.   

As we have pointed out, this is not he first instance of the media being less than helpful in reporting the prelimiarnbies to the negotiations. However, sometimes, some useful facts to appear. The article below, from the Economic Research Council,  indicates the importance of the UK as an export market for several leading EU nations. Of course, the UK needs to ensure that our goods meet all the EU’s complex regulatory requirements to access the Single Market, but if we adopt the Liechtenstein route or some sort of shadow-EEA arrangement, we do have quite a bit of leverage.

Summary: The chart shows some aspect of each nation’s position on trade with the UK in the run up to Article 50 negotiations with access to the single market being the key issue. Theoretically, countries with a greater reliance on the UK for exports could (or should!) take a softer stance on Brexit negotiations, in order to safeguard these trade links. Where the export/import ratio increases; this pressure to achieve favourable terms should be compounded.
ercchart4116

What does the chart show? The blue bars show the export/import ratio of each nation. Values above 1 denote that the country is a net exporter to the UK, and values below 1 show that the country is a net importer from the UK (of the nations shown, only Greece and Ireland are in this category). The red dots show each country’s exports to the UK as a % of their total exports to EU28 countries, so higher values therefore signify a greater reliance on the UK trade in their dealings with other EU nations. The data represents trade in goods only (not services) and is from 2015.

Why is the chart interesting? The chart shows that the key European nations individually have a very significant reliance on trade with the UK, with five of the key players doing over a tenth of all their export trade in Europe with the UK. What is also underlined is that, unless a united front from the EU states is shown in negotiations, Britain has serious clout with each of them through the sheer scale of its buying power. In addition, the graph only displays trade in goods not services, which might increase EU state’s reliance on Britain yet further.

There has been much speculation on the tone Article 50 negotiations are likely to take, not helped by entrenched ideological positions. We have seen firm and unequivocal comments from some ministers in EU member states who are taking a decisive ‘all or nothing’ stance. This toughening of tone stands in contrast to early conciliatory statements in the days that followed the result. On the other side, the self-assured attitude of some members of the British government, particularly Johnson and Gove, stems from their confidence in the UK’s strength based on the EU’s reliance on UK trade.

What the chart illustrates well is that for the key states in Europe, these negotiations are about far more than trade, indeed they may well allow their economies to take a hit for the longevity of the political union.

Come back one day? Not on your nelly!

Sigmar Gabriel, the German economy minister, gave an interesting speech in Berlin yesterday. He began with the oft-repeated statement that access to the Single Market must be tied to acceptance of the four freedoms, including freedom of movement of people. This, as any reader of this blog will know by now, is not true. Availing itself of  Article 112 of the EEA agreement, Liechtenstein has restricted freedom of movement from the EU for over 20 years but has virtually full access to the Single Market.

Obviously, it is not in the EU’s interest to acknowledge that a tiny state bordering the EU’s most powerful member offers us a way (if Mrs May so desires) to square the circle between single market access and restricting migration from the EU, but he then hinted  that he would like the “awkward partner” to come back, which was rather a surprise. Our vote on 23rd June was a shock to many across the water, but everyone who counts within the EU has accepted the result. Furthermore, once we’ve gone, they can at least try to forge ahead with the EU army, the EU foreign service and all those other projects which us pesky Brits have been holding back. Good riddance to us.

Well, that is what you might think, but Herr Gabriel went on to say that “We must try to formulate offers in a way so that the Britons remain close to us, also to have the chance that they return some day.”

Some hope! At the moment, lack of detailed information from the Government about the Brexit strategy has caued the pound to wobble and some investors to hold back, but even with these uncertainties, business confidence has recovered to pre-Brexit levels and some of the prophets of doom have admittted they were too pessimistic. With Theresa May talking enthusiastically of using her determination to seize “a once-in-a-generation chance to change the direction of our nation for good,” the tide is turning very strongly against the  hard-core remainiacs who would wish to drag us back into the EU.

Of course, the sickening spectacle of young people painting their faces in the colour of the EU flag and  waving placards in support of EU membership is a reminder that we leave campaigners still have a job to do. De-programming our young people, who have been fed a diet of pro-EU propaganda at school, will take quite a few years, but a successful Brexit will  unquestionably aid the process.  Successful non-EU nations of Western Europe such as Norway and Switzerland command strong majorities opposed to EU membership. Once the benefits of  Brexit become apparent, there is every reason to believe that public sentiment here will likewise become overwhelmingly thankful that we have escaped from an organisation which is likely to continue lurching from crisis to crisis until finally it implodes.  Herr Gabriel, in other words, is living in fantasy land.

Photo by QuinnDombrowski

Mrs May keeps us guessing

It would have been a futile exercise to report every twist and turn in the recent debate about “hard” and “soft” Brexit. Far better to wait and see what Mrs May and her collegaues actually plan to do.

Yesterday, we were given some inkling as to her future plans, although it didn’t amount to as much detail as many would have liked.

There were, however, some encouragements in other areas. She made it quite clear that there was to be no second referendum and that those who wanted to challenge the result needed to wake up and smell the coffee:- “But come on.  The referendum result was clear.  It was legitimate.  It was the biggest vote for change this country has ever known.  Brexit means Brexit – and we’re going to make a success of it.”

This has been one of Mrs May’s stock phrases since taking office.  Yesterday, we came a little nearer to knowing what it actually meant. “There will be no unnecessary delays in invoking Article 50.  We will invoke it when we are ready.  And we will be ready soon.  We will invoke Article 50 no later than the end of March next year.” Fair enough. This is a confirmation of what had widely been expected. Thankfully, business will have less than six more months of uncertainty, for as well as a date being set, it is looks likely that by then, our exit route will have been determined.

But what will that route be? We were told what it would not be:- “It is not going to a “Norway model”. It’s not going to be a “Switzerland model”.  It is going to be an agreement between an independent, sovereign United Kingdom and the European Union.” Furthermore, alongside repealing the 1972 Accession Treaty, she intends to convert the Acquis into UK law when the Article 50 period is complete, so the WTO route looks to be off the table too.

So what does that leave us with? How is she planning to square the circle between trade and immigration control? There was not a great deal of detail:- “I know some people ask about the “trade-off” between controlling immigration and trading with Europe.  But that is the wrong way of looking at things.  We have voted to leave the European Union and become a fully-independent, sovereign country.  We will do what independent, sovereign countries do.  We will decide for ourselves how we control immigration. And we will be free to pass our own laws.”

On the one hand, she was quite clear that some restriction of freedom of movement will have to be part of any deal:- “We are not leaving the European Union only to give up control of immigration again” yet at the same time she insisted, “I want it to give British companies the maximum freedom to trade with and operate in the Single Market – and let European businesses do the same here.

Still a bit opaque. The Liechtenstein compromise would fit all the criteria she listed. Another possibility would be the Australian model. In 1997, Australia’s government signed a joint declaration on EU-Australian relations, followed two years later by a Mutual Recognition Agreement. The UK could do likewise, or make a unilateral declaration, up to and including a commitment to full regulatory harmonisation. There don’t seem to be many other choices.

Mrs May is deliberately not giving too much away on the negotiating tactics, but she didn’t mince her words about the irreconcilable Remainiacs:- “When it legislated to establish the referendum, Parliament put the decision to leave or remain inside the EU in the hands of the people.  And the people gave their answer with emphatic clarity.  So now it is up to the Government not to question, quibble or backslide on what we have been instructed to do, but to get on with the job.

Because those people who argue that Article Fifty can only be triggered after agreement in both Houses of Parliament are not standing up for democracy, they’re trying to subvert it.  They’re not trying to get Brexit right, they’re trying to kill it by delaying it.  They are insulting the intelligence of the British people.”

In summary,  there were some good things in the speech and not a lot to cause major concern, although Richard North takes the PM to task for claiming we would make our own decisions about how our food is labelled, as those regulations originate with the World Trade Organisation, to which (presumably) she would still wish us to belong. That apart, it was a speech which certainly did not deserve the put-down in the Daily Mirror, suggesting that Mrs May was a prisoner of “ideological Tories who get out of bed every morning to wind back the clock to a bygone age.”  Such garbage is typical of those people who do not accept that it is the EU which is a relic of a bygone age. On the contrary, Mrs May wasn’t anyone’s prisoner. She was spelling out her own positive vision for our future in that speech. The Sun called her a “capable PM we  can be proud of.”  Well, she is continuing to wn over the doubters and  you could sense her genuine enthusiasm as she talked about her “ambitious vision” for post-Brexit UK and it’s good that she isn’t letting herself be rushed, but a little bit more detail about how we  are going to get there would be welcome.  Hopefully , we won’t have too long to wait.

Five more monographs on Brexit from the Leave Alliance

The Leave Alliance, of which the Campaign for an Independent Britain is a member, has produced five further monographs on the subject of Brexit.

They can be downloaded here:-

Post-Brexit regulation

Trade agreements

WTO Schedules and Concessions

A European Economic Space

Liechtenstein reprised

Alternatively, a full list of monographs can be found on this page of the Leave Alliance website.

All are well worth reading, setting out some of the issues we will need to face when negotiating our exit from the EU.