Trust you, Mrs May?

 

In an article in the Sunday Times, Prime Minister Theresa May implored voters to trust her to deliver Brexit. “I will ensure that we take back control of our borders…our money…[and] our laws.” she said.

But why should we trust her? After being office for over 18 months, there is no sign that she has come up with a trustworthy exit route that would see us make a clean break with the EU while at the same time allowing trade to continue reasonably seamlessly. Coming back to work after a week’s holiday, I signed on to my computer to find that nothing has changed; nothing has progressed. Mrs May and the Brexit negotiations are still going round in circles. An unworkable “customs partnership” is still being pursued even though no less than HMRC has described the current proposals as “unviable.” Michael Gove likewise claimed that there were “significant question marks” about them.  Mrs May has split her cabinet into two asking them both to pursue what, to any intelligent analysis, are two different but equally impractical solutions to keeping our trade flowing with the EU, including across the Irish border.

Why should we trust her when the obvious solution  – at least in the short term – to this problem is under her nose but she has so far steadfastly refused to change tack and replace her unworkable proposals with something which will get us out of the EU while giving her a longer breathing space to negotiate a longer-term arrangement? I am referring, of course, to the EEA/EFTA arrangement. Nigel Moore has written an article which sums up its strengths. Yes, it has weaknesses too – I hardly need point that out to regular readers of this blog. The weaknesses are, however, far fewer than those of the arrangements Mrs May is proposing. In particular, we can regain total control over our fishing, we can keep goods flowing across the Irish border and we will be beyond the reach of the European Court of Justice.  For more on this, please see also the “EFTA 4 UK” Facebook page.

Why should we trust her when she seems so keen to keep us shackled to the European Arrest Warrant? Her argument that other extradition routes are more costly and time consuming is a red herring. The EAW is fatally flawed and has exposed UK citizens to flawed criminal justice systems abroad on the basis of the flimsiest of evidence.

Why should we trust her when, under her watch, several agreements have been signed without Parliamentary debate (and possibly without some MPs even being aware of what is going on) which tie us to the EU’s military programme?

The Daily Express published an article today about a secret document, known as FCO30/1048, which, it claimed, was locked away under Official Secrets Act rules for almost three decades. The author’s identity is unknown, but was most likely a senior civil servant in the Foreign Office. The document, which was written before we joined the EU, suggested the Government should keep the British public in the dark about what EEC membership means predicting that it would take 30 years for voters to realise what was happening, by which time it would be too late to leave. Thankfully, the author was wrong about the last point but correctly predicted that “the increased role of Brussels in the lives of the British people would lead to a “popular feeling of alienation from Government”.

There is nothing new here. Christopher Booker mentioned this paper in a piece for the Sunday Telegraph six years ago, having discovered it as far back as 2002. However, the Express is bringing it to our attention at a very opportune moment. Mrs May has been given the chance to rebuild trust in the government and in politicians in general. She is asking for our trust and if she delivers a successful Brexit, the beginning of  that rebuilding of trust will be part of her legacy. Getting rid of her current Brexit advisor, the untrustworthy Europhile Civil Servant Ollie Robbins, whose poor advice may well be hampering her, would be a good start, but she needs to go a lot further.

As things stand, Mrs May is leading us towards a chaotic Brexit in Name Only which will only further alienate voters from the political system while possibly precipitating the worst crisis in her party since 1846. It is not too late for her to change course – after all, she did promise not to call an early General Election  and then changed her mind. That decision proved disastrous, but as far as Brexit goes, a change of direction would actually prevent, rather than precipitate a disaster, both for the Conservative party and for the country as a whole.

Photo by Tiocfaidh ár lá 1916

The EFTA/EEA Solution to the Current BREXIT Impasse

Implications of current Brexit negotiations failing

Mrs May’s government, without any practical Brexit plan, has created a mess and time is running out. Without a practical solution to the soft border in Ireland there can be no transition deal and, therefore, no withdrawal agreement.   Without one, the UK would leave the European Union (EU) on 29th March 2019 with no arrangements in place to continue trading with the Single Market (Internal Market or wider European Economic Area, EEA).  Such a situation (often called ‘falling off a cliff edge’) would be hugely disruptive to the existing highly integrated trade with the EEA and would impact the wider UK economy.

Government Proposals lead to Brexit in Name Only

However, should the government succeed in getting the EU to accept its proposed solution(s) to the Irish border and to wider trade with the EU, the outcome is likely to be Brexit in name only. Worse, the UK would become firstly a powerless temporary vassal state and then a permanent one under increasingly arduous EU imposed conditions, such as sacrificing the UK fishing industry, surrendering UK defence and defence procurement to the EU, paying substantial amounts into the EU budget, accepting a continuation of free movement (uncontrolled EU immigration, with extra rights for EU citizens), unconditional compliance with all existing and future EU laws, remaining under the EU’s European Court of Justice (ECJ).

Mrs May’s approach to Brexit is the Problem

Yet this unwanted situation is of Mrs May’s making by her seriously reckless decision, first mentioned in her Lancaster House speech, 17th January 2017, to leave the Single Market on Brexit day. Whilst leaving may be desirable in the long term, it is hardly practical now and her proposed solutions of mutual recognition of standards and a free trade agreement look increasingly unrealistic and counter-productive.  Her wishful thinking, dithering and failure to understand how the EU and EEA works, have only made matters worse.

A simple EFTA/EEA Solution to Mrs May’s Brexit Problems

Many of the problems Mrs May has created can be solved by remaining within the Single Market (even temporarily) via a different, more flexible route.  Such a route is available if we re-join The European Free Trade Association, EFTA, assuming they would have us back.  Whilst this cannot be taken for granted, it would be advantageous to the existing EFTA/EEA countries (Norway, Iceland, Liechtenstein – Switzerland is outside the EEA) giving the overall grouping greater robustness.  The EU has hinted that it could accept this as an option to achieve an orderly Brexit.

Criticisms of EFTA/EEA (aka The Norway Option) can often be resolved through research using original or reputable sources via the internet (e.g. here).  However, there will always remain the opportunity for the EFTA/EEA option or any other suggestions to be misrepresented by the unscrupulous or ignorant.

EFTA is a Trading Association without political aspirations

Originally set up by, among various countries, the UK, EFTA is not a stepping stone to EU membership or even to associate membership of the EU. EFTA existed before the creation of the Single Market. As its name suggests, it was  – and indeed is – purely a trading bloc. However, EFTA countries can participate in the Single Market on the basis of the EEA Agreement.

EEA Agreement is Flexible and Customisable

The basic EEA Agreement  is amended from time to time (through additional Annexes and Protocols) as it applies to each of the EFTA members. It is not a ‘one size fits all’ approach and is customised to fit each’s requirements.  Thus we could get a bespoke agreement by taking and amending the existing ‘off the self’ versions.

Control of EU Immigration into the UK

Article 112 (the Safeguard Measures) of the EEA Agreement provides a mechanism for the UK unilaterally to control immigration from the EU. Similar wording has already been copied by the EU into their draft Withdrawal Agreement (Article 13, Protocols relating to Northern Ireland) effectively allowing the EU unilaterally to limit immigration into the EU from the UK.

Agriculture and Fishing are outside the EEA

The EU’s Common Fisheries Policy and the Common Agricultural Policy are excluded from the EEA Agreement. We could therefore regain control of our Exclusive Economic Zone  next March without having to ask the EU.

Laws relevant to trade in the EEA

The EU acquis (or body of laws) relevant to trade comprises about 25% of the total EU acquis and in 90% of cases reportedly originates from higher (global) bodies.  We would need to comply anyway in order to trade elsewhere, unless we chose to leave organisations such as the World Trade Organisation.  The rest of the EU acquis does not apply unless we choose to adopt any which we could modify as required at a later date.

Almost  frictionless trade within the EEA

It is membership of the Single Market (or wider EEA) and not membership of a customs union that delivers nearly frictionless trade with the EU for countries like Norway. This is because each member is working to common standards and processes (harmonised) for product, production, market surveillance and conformity assessment under a centralised system of bureaucratic control by the EU.  The EU’s Guide to the implementation of directives based on the New Approach and the Global Approach explains what applies to many products.

External Border Controls protect the EEA

By contrast, accessing the EEA from outside its external borders involves complying with regulations, inspections and testing, processes and procedures, external tariffs, customs checks/clearance, VAT etc. intended for dealing with ‘third countries’.   These provisions, effectively border controls, also manage safety and other unacceptable risks to EEA members, consumers and enterprises involved with ‘imports’ and are sometimes protectionist.

There also need to be arrangements to control diseases and parasites etc. in imported livestock, products, plants, packaging etc. from ‘third’ countries.  According to EU law, products of animal origin (meat and meat products) imported into the EU must be inspected (sanitary checks) at Border Inspection Posts (BIPs). For products of plant origin (for plants and plant-derived foods) phytosanitary checks are required at Community Entry Points (CEPs, Designated Ports of Entry). It is a nightmare and this is what we would face next March if Mrs May persists in her stubbornness.

EEA Membership allows participation in critical trade related decision making

A mechanism exists for EFTA members to participate in shaping decisions by the EU, which is described here.  Unlike EU Member States, EFTA members also freely participate in global bodies helping to form standards and practices before these are passed down to the EU for implementation.

Free Trade Agreements

Both EFTA as a whole and individual EFTA countries are free to make their own trade agreements, unlike Member States of the EU or of its customs union.  EFTA countries do not operate common external tariffs.

EEA Membership is Free

For EFTA countries, EEA membership is effectively free although they do ‘voluntarily’ contribute to the specific agencies they participate in and to development grants. We could pick and choose.

Judicial Oversight of EFTA/EEA by the EFTA Court

The EFTA Court is independent of the ECJ although it can take into consideration or follow ECJ rulings. It does not take precedence over national courts enabling the UK, if we so choose, to ignore any of its judgments.  The European Commission could object but we could then ignore it too.

Quitting the EEA at any time

Article 127 of the EEA Agreement covers the process which involves giving 12 months’ notice.  Unlike leaving the EU, no payments and negotiations are required.

Further Information

The EFTA/EEA option and Brexit debate in general has often suffered from misunderstandings or errors and mischievous misrepresentation effectively inhibiting rational discussion.  The following are useful sources of research information: Brexit Reset, Eureferendum.com, various posts on Campaign for an Independent Britain and affiliates.  For consequences of a No Deal situation, see the EU’s Notices to Stakeholders under Brexit preparedness.

The Way Ahead to Independent Sovereign Nation Trading

The EFTA/EEA route could salvage the faltering Brexit process, at least as an interim measure. It would facilitate leaving the political, centralised, anti-democratic construct of the EU whilst still retaining (and expanding) almost frictionless trade.  It could also provide a springboard for a highly successful trading relationship for independent sovereign nations in Europe.

EFTA might save the day if MPs will read the small print

We have pointed out regularly on this website that, for all its faults as a long-term relationship with the EU, the EEA/EFTA route – whereby the UK remains in the European Economic Area (EEA) by re-joining EFTA, the European Free Trade Association – is a much better short-term arrangement to see us out of the Brexit door than the current proposed “Vassal State” transitional arrangements, particularly as it appears that these will be based on “good faith” rather than a treaty. Since when has the EU ever respected “good faith”?

More on good faith here, but it appears that the initial talking down and misrepresentation of the EEA/EFTA route by David Cameron selectively and inaccurately  highlighting the negatives, which were duly repeated parrot-fashion by everyone from Nick Clegg to Nigel Farage for their different reasons has distorted MPs’ perception of  what in reality could be a life saver for Mrs May and her government, whilst taking the wind out of the sails of all but the most fanatical remoaners.

This option has been brought into focus once again by Iceland’s Foreign Minister Guðlaugur Thór Thórðarson. A year ago, speaking on Radio 4’s Today programme, he urged the UK to rejoin EFTA and this last week, he has intervened in the Bexit debate again, saying that Iceland’s relationship with the EU had been misrepresented in the Brexit debate and allowed more independence than many people realised. “We have the best of both worlds, we can make deals wherever we like, we usually do it through EFTA,” said Thórðarson, adding “We also have bilateral agreements, for example we were the first Western nation to sign a bilateral agreement with China,” adding, “It’s not true we take 80 to 90 percent of [EU’s] acquis, we have taken 13.4% since 1994.” Of course, Iceland is not tied to the Common Fisheries Policy, the Common Agricultural Policy nor to any of the political structures of the EU.  As an EFTA country, it is out of the direct reach of the European Court of Justice. If the terms of the EEA agreement are found to be unsatisfactory, the agreement can be ended by simply giving a year’s notice.

Given the overlap between free trade agreements signed by the EU and those signed by EFTA, following Iceland and Norway’s example would enable trade to continue to flow seamlessly between the UK and EU as well as  countries like the USA, Japan, South Korea and Mexico. It would also much reduce the Irish border problem. Some hard brexirteers applauded the suggestion by Yanis Varoufakis, the former Greek finance minister, that Britain should avoid the Article 50 procedure altogether and simply leave. But they overlooked the fact that he suggested that the UK should move instantly to the EEA/EFTA model, pending completion of final negotiations which, he foresaw, could take some years.

At the moment, Mrs May is squeezed between a rock and a hard place. Six out of the 11 members of her “Brexit war cabinet” have stated their opposition to any “customs partnership” while 60 Tory MPs have insisted that they will not support the government if it pursues a “customs partnership” as it would make meaningful trade deals “impossible” and render the Department of International Trade “obsolete”. Given that Jacob Rees-Mogg, the leader of these sixty, has stated his willingness to endure 21 months of the proposed “Vassal State” transitional arrangement, it is hard to imagine that using EFTA instead as a transition would lead to widespread revolt. On the other hand, the security offered by EFTA would deprive the hard-core remainiacs of their support on both the Tory and Labour benches. The reasons given, for instance by Dr Sarah Wollaston, for supporting the House of Lords amendment – namely that she was not prepared to “endorse economic ruin” – would no longer apply.  There would be no credible reason for MPs not supporting the EEA/EFTA route unless they were genuinely determined to wreck Brexit. Some of the Lords, according to Lord Lamont, are seeking to do just this.  The EFTA route would pull the rug from under their feet, as few MPs would like to be exposed as mere wreckers when there would be no reasonable grounds to justify their behaviour.

This option could well become more attractive given that ever more MPs are starting to speak out against any close customs partnership with the EU. But, if the EEA/EFTA route is necessary at some stage on the way to a final settlement, it looks more tolerable than anything else which is within the bounds of possibility as a transitional arrangement during the few available remaining months of opportunity before the Article 50 notice expires.

Should the UK stay in the EEA after Brexit?

This revised version of Anthony Scholefield’s briefing note can also be downloaded as a pdf here.

We don’t start with a ‘clean sheet’

If we were considering ideal future trading arrangements for the UK from the basis of a clean sheet, it would probably not be sensible for the UK to join the European Economic Area [EEA].  However, the decision to remain in the EEA is quite different from a decision to join the EEA from outside.

Today, the UK does not face a clean sheet.  The UK has been in the EEA for 26 years (40 years in the EU) and its trade has developed in this environment.  Following the decision to leave the EU the question of whether to change trading arrangements is only one of a number of political decisions the government has to take.

Background

The background fact to be borne in mind is that a huge part of the UK’s export trade has always been with Europe.  According to Professor Ashworth, in his ‘Economic History of England, about 40% of UK gross goods exports in the mid-nineteenth century went to Europe.

The definition of ‘Europe’ in the nineteenth century was different from the EU of today, of course, and included the Russian Empire but, notably, excluded Ireland

Free Trade Agreements

The underlying rationale of any trading agreement is not free trade but an increase of trade between the participants at the expense of third party countries.  Indeed, a ‘free trade’ agreement is a contradiction in terms.  It will also usually benefit producers at the expense of consumers in the participating countries.  But the point is that such ‘agreements’ cause trade to flow in certain ways which are not ‘free trade’ but once actioned have costs when they are dismantled.

Political advantages of staying in the EEA

It is very important to consider that staying in the EEA will massively reduce the political upheaval and workload of the government organising Brexit, reassure business, achieve a degree of national unity and make it easier to negotiate on other matters with the EU which will favour this scenario.  It also reverses the burden of responsibility for causing a breakdown in negotiations.  Finally, it offers a secure refuge (the UK already being in the EEA) should the talks break down.  For the EU also, the political upheaval and workload is minimised.  It is always good negotiating strategy to consider the difficulties of your opposite numbers.  If, after experience, it does not work, the UK can leave the EEA by giving 12 months’ notice.  Therefore, there are political reasons to remain in the EEA.

There is also the need to balance the costs of disruption against the calculation of the net benefits and disbenefits of the EEA membership.   At present, no such cost/benefit analysis exists, which is an essential preliminary to negotiation.  It is possible to recall the exhaustive studies by the Swiss government before their referendum on joining the EEA.

Theory of Trade

There are two unspoken assumptions about the advantages of trade as put forward by the conventional economic wisdom:

‘Any trade is good trade’

‘All trade is of equal value’

Therefore, bulking up trade is ‘a good thing’.

However, the political economists of the nineteenth century recognised there was more to it than the above two assumptions.

John Stuart Mill included the question of the different profitability of different types of trade and which party got the most benefit in his study entitled ‘Essays on Some Unsettled Questions of Political Economy’ in 1848.  The particular question of the profitability of various trades is still ‘unsettled’ but ground-breaking work has been done by the OECD and WTO in focussing on trade as a value added phenomenon rather than just gross trade statistics.  The OECD/WTO joint paper entitled ‘Trade in Value-Added: concepts, methodologies and challenges’, sets out the intellectual case for viewing trade through the lens of value-added rather than gross figures.

One significant example, which has been widely referred to in the literature is the case of the Apple I-phone, which is assembled in China and whose ex-factory price appears as exports in Chinese trade statistics.  Estimates are that only 8% of the ex-factory price accrues to the Chinese assembler with 92% being spent on imported components and thus showing up in Chinese import statistics and then again in the Chinese export statistics as part of the Apple phone.

Another interesting area arises in the case of the UK where Switzerland in 2014 became the UK’s fifth biggest export market and, in December 2015, was actually the UK’s single biggest export market (£4293 million of exports, according to UK Overseas Trade Statistics, December 2015) and twice the size of the German market.  Much of this export trade was non-monetary gold which, of course, is not produced in the UK.  Therefore, the value added to national factors of production in both these examples is very small.

Plainly, therefore, trade is not an undifferentiated item.  All trade is not of equal value.  Some trading is more profitable than other trading.  Simply increasing exports of any type is not an adequate policy.

Profitability of Trade

Profitability of trade for a national economy is dependent on value being added so the factors of production, such as labour and capital, get increased returns after buying in necessary supplies to effect increased exports.  Therefore there is a hierarchy of added value in trading activities.  Simply bulking up gross exports is meaningless.

Generally the most profitable areas of trade from the point of view of the national economy are in services or manufactured goods with a high skill content because they involve very little imports or have a high added-value content.  In these examples the gross revenue flows through as very high added value.  At the other end of the spectrum are re-exports of raw materials or precious metals with very little added value.

UK gross services exports have recently approximately overtaken UK gross goods exports when considering UK overall trade outside the EU.  However, the percentage of UK exports to the EU which relates to services is much lower than in UK trade outside the EU.

Therefore, in principle, UK trade with the rest of the world generates greater added value per unit and, consequently, greater returns to labour and capital than the UK’s trade with the EU.  For this reason, a clean sheet consideration would not favour joining the Single Market where services exports are weak whether because of greater competition or restrictive practices.

Paul Samuelson and ‘over trading’

So some trade is more profitable than other trade.  But we can go further than that in critiquing the conventional wisdom that all trade is good, following the line of argument put forward by Paul Samuelson, the most influential ‘liberal’ economist of the post-war generation, in a revolutionary paper just before he died.

This was entitled Where Ricardo and Mill Rebut and Confirm Arguments of Mainstream Economists Supporting Globalization’, 2004.

In this work he questions the alleged benefits of ‘more trade in modern conditions’.

The kernel of his argument was that trade is beneficial to start with but can cease to be beneficial when shifts in capital and skills make it hard for a country to compete in its supposed (Ricardian) superior productivity industries.  Having already given up its supposed (Ricardian) inferior productivity industries, it is faced with a retreat to national autarky to balance its payments situation.  At some point the disruptive effects of trade outweighs the benefits.  In effect, Samuelson is enlarging on a long-standing critique of the theory of comparative advantage.  This is that trade advantages do not stand still.  England had comparative advantage in the cotton industry in the nineteenth century and over-concentrated on this industry.  In the twentieth century, other countries with cheaper labour out-competed the English cotton industry.  In the terminal phase, after 1945, the cotton industry even imported cheap labour from Asia to try to maintain competitiveness but was unable to do so.

So, concentration on what is presently a trade where there is comparative advantage is not necessarily an advantage in the long-term.

The Supply Chains

It is estimated that a majority of trade in manufactured goods takes place within supply chains, co-ordinated by major corporations and worked through legal subsidiaries, associates or clusters of component and assembly suppliers.

These supply chains have adjusted themselves, for good or bad, to working within the EEA.

To leave the EEA would be to disrupt these supply chains, at least in the European Area.  There is exactly the same situation which was experienced in the agricultural sphere when the UK joined the EU and the food and raw materials exports of Latin America and Australasia, which were geared to the requirements of the British market, were heavily disrupted.

Weighing up the Balance

The decision to remain in the EEA, however, is quite different from a decision to join the EEA.

UK trade with the Rest of the World appears more profitable than trade with the EEA.

However, once settled inside the Single Market, the argument for not disrupting supply chains is a major issue, counterbalanced by the clear fact that trade with the EEA in services is not proportionate to their role in trade with the Rest of the World and the endless prevarication about removing the barriers to services trade in the EEA.

If the warnings of Paul Samuelson are correct, seeking extra gross trade from supposedly superior productivity activities is not beneficial in itself in the long run.  Better is to ensure a balance of manufacturing and service activity with, to be sure, an emphasis on what appears to be superior productivity industries but with particular emphasis on new industries.

Hidden Costs of Trade

Of course, a deeper analysis of the benefits of trade would need to address issues connected with the social or financing costs of trade.  It is widely noted, in the case of EU membership, that there is a substantial budgetary cost for British taxpayers for the trading arrangements with the EU as they stand now.  (This budgetary cost would be massively reduced by a move from full EU to simple EEA membership.)

A further point is that trade secured by the use of extra factors of production, rather than use of existent national factors, should be strictly analysed for cost.  Many advocates of bulking up trade are also advocates of the importation of capital and labour rather than utilising existent capital and labour.  These advocates belong to a kind of ‘deus ex machina’ school of economics where problems can be solved by outside actors.

Extra factor inputs are not costless.  For example, in the UK foreign owners of UK assets can receive dividends tax free while UK owners pay income tax.  Of course, these dividends are also negative.  This is, therefore, an outright subsidy to foreign capital.  Similarly, the provision of extra labour through migrants require massive social and economic capital such as buildings, roads, hospitals, schools, etc. to be paid for by natives either by taxation or by displacement of capital investments from supporting native workers to meeting the needs of migrants.  Additionally, there are two further costs in the UK as regards foreign labour.  The way the income tax system is set up now means very few low income workers pay any tax (many of these are migrants) despite being heavy users of public-financed capital investment and of public services.  So, both foreign capital and foreign workers are subsidised by the British tax system.

Additionally, many migrant workers make substantial remittances to their home countries.  These remittances are a dead loss to UK national income.

These extra costs should be considered when looking at the purported benefits of increased trade dependent on introducing extra factors of production.

Summing up

As a basic starting point, cost/benefit analyses are needed in two areas:

  1. What are the net benefits and disbenefits of EEA membership vis-à-vis, say, WTO stand-alone trade?

What are the costs of disruption of leaving the EEA?

  1. Where is any trade with the EEA which is lost going to be replaced?

Anthony Scholefield

Anthony Scholefield

Anthony Scholefield is Director of the Futurus Think Tank

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Stupidity or sabotage part 2

Following last week’s debate on the Customs Union in the House of Lords, Thursday saw the Commons stage a debate, entitled “Customs and Borders”. Dr Richard North followed it and the title of his blog post, “a showpiece of ignorance”  is enough in and of itself to make the point that the level of understanding about the nature of a customs union in the lower chamber is, with a few exceptions, as  appallingly low among MPs as among their Lordships. Dr North described the contribution of Yvette Cooper  and others as “an exercise in futility.” If we have needed any further evidence since the referendum of why we ought to leave the EU, it is our MPs’ total cluelessness of the true nature of the beast.

He also suggest a reason why some MPs are clinging on to the fantasy that staying in the customs union would enable us to enjoy seamless trade with the EU. It only needs a plane trip to the Turkish/Bulgarian border crossing at Kapikule to watch Turkey’s version of “Operation Stack” to expose the fallacy of their argument, so why cling to their illusions?

The most likely answer is that the remoaners have realised that their dream of a second referendum is a non-starter. There is no groundswell among the public to go through all that again. Desperate to stop us leaving the EU, their only hope is via Parliament.

Can they succeed? Unlikely but one must never underestimate the malice of convinced remoaners. They could easily be thwarted, however, if the bulk of MPs realised that a customs union (i) is not joined at the hip to the single market, (ii) would not solve the Irish border problem and (iii) would not lead to seamless trade with the rest of the EU. We can be thankful that the penny has dropped with a few MPs bu they need to show a bit more evangelistic zeal among their colleagues.

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.