Only a credible non-cooperative strategy that cannot be blocked by either the EU or Parliament will get us out of the EU by 31st October 2019. And that strategy needs to be executed with ruthless conviction and commitment by the new Prime Minister. To demonstrate his support for Global Britain, his first trip abroad should be to the US to kick-start the UK-US Free Trade Agreement.

As the largest ever list of candidates to offer themselves as the next British Prime Minister has been whittled down to the final two, it is clear that we are in grave danger of validating Einstein’s definition of insanity – doing the same thing over and over and expecting a different result.

Between them, Boris Johnson and Jeremy Hunt have said that they will: renegotiate the Withdrawal Agreement (WA) and the backstop; leave the EU with a ‘deal’ on 31st October; and get parliamentary approval for their new improved deal. They both claim to be skilled negotiators, implying that this makes them ideally suited for the most important job in their career. There are differences, however: Johnson recognises that the WA as a whole is dead and just wants to lift some of its acceptable features, such as on citizens’ rights; while Hunt is prepared to delay leaving the EU for ‘a short while’ to achieve a ‘better deal’.

The naivety of the candidates’ positions is breath taking. Have they not observed how easily the EU has run rings around our current ‘skilled negotiators’? Are they like the Bourbons and learned nothing and forgotten nothing? 

The new Prime Minister needs a credible negotiation strategy

It is going to be déjà vu all over again, unless the new PM has a clear strategy to leave the EU on the basis of what game theorists call a non-cooperative solution. That is one that the EU cannot block if it is not willing to cooperate in producing a solution that makes both sides better off.

This means that the starting point for any negotiations with the EU cannot be the WA. The EU says that it will not renegotiate this and it remains completely unacceptable to the vast majority of the British people. As Chairman of Lawyers for Britain, Martin Howe QC, says:

‘I can’t think of any clause in the WA end-to-end which is actually in the interests of the UK. The only neutral part of the agreement is the reciprocal rights of UK and EU citizens, in which the clauses on substantive rights are acceptable. However, even those are surrounded by completely unacceptable requirements that the treaty must perpetually have direct effect and must (as interpreted by the courts) override future UK Acts of Parliament in our own courts, and must be “interpreted” by the European Court of Justice for about 10 years by direct references and thereafter via a back-door mechanism in an international arbitration clause’.

His devastating criticism of the WA is here: Avoiding the Trap – How to Move on from the Withdrawal Agreement. How a British Prime Minister could collaborate with the EU to produce this document and how so many MPs could subsequently vote for it is beyond me. The WA is nothing less than a venus flytrap. It therefore needs to be avoided at all costs.

In any case, the WA does not offer a ‘deal’ about a future relationship in any meaningful sense. For example, there is nothing on services which account for 80% of UK GDP. Trade in services will be negotiated after the UK leaves the EU. It is completely bizarre for MPs to object to leaving the EU without a deal, when the WA itself involves leaving the EU without a deal. 

A non-cooperative solution requires the UK to specify both the terms under which it will leave the EU and the terms under which it will trade with the EU in the future. And to do so in a way that the EU cannot block.

Theresa May specified the leaving terms very clearly in the Lancaster House speech in 2017. They were to leave the Customs Union, Single Market and the jurisdiction of the ECJ. In other words, a clean Brexit. This was a clear deliverable strategy that did not require EU cooperation. But then Remainer Philip Hammond stepped in and said there needed to be a transition period which would require EU cooperation and this was the beginning of the backtracking that led to the toxic WA and the equally toxic Political Declaration (PD).

The non-cooperative solution involves three steps. And each one has to be credible to the EU

The first step is for the new PM to restate that the clean Brexit set out in the Lancaster House speech will be implemented by 31st October 2019. This is credible and does not require EU consent.

In parallel with this, the new PM should immediately inform the US President that the UK will enthusiastically take up his long-standing offer to negotiate rapidly a US-UK Free Trade Agreement (FTA). This also is credible and does not require EU consent once we leave. During the few weeks that remain before 31st October, the UK can make much progress in setting the stage for post-Brexit negotiations – a task that the International Trade Secretary, Liam Fox, has consistently dragged his feet in doing. This will send an electric shock to the EU that will tilt every aspect of subsequent negotiations with the EU in our favour. The prospect of us concluding an FTA with the US when the EU has been struggling for years to achieve this will motivate the EU to conclude an FTA with us. They will fear the fact that the UK would be able to import virtually all of its requirements from the US and at lower world market prices. This would signal to the EU that we can leave them behind if necessary. 

The second step is to set out in a new Departure Statement (DS) how the principal issues involved in departing from the EU will be implemented: citizens’ rights, the financial settlement and the border between Northern Ireland and the Republic. The PM can guarantee the rights of EU citizens living in the UK without granting them the special status of the WA. He can agree to pay our financial obligations up to the point of departure. Any additional money is not a strict legal requirement but can be used as a bargaining tool in negotiations about the future trade deal – as the EU is fond of saying, ‘nothing is agreed, until everything is agreed’. Let the EU take the UK to international arbitration if they want. Finally, he can restate that the UK will not impose a hard border. All these are credible and do not require EU consent.

The big advantage of being absolutely clear on the border is that it will force the EU and, in particular, the Irish Taoiseach Leo Varadkar to agree a workable solution that allows the UK to leave the Customs Union and Single Market at the end of October. Solutions exist to protect the integrity of both the UK and EU internal markets without any physical infrastructure on the border or any need for new technology. The Smart Border 2.0 report commissioned by the European Union Parliament from customs expert Lars Karlsson confirms this – as does the more recent report of the Alternative Arrangements Commission. Annegret Kramp-Karrenbauer, Angela Merkel’s successor as leader of the Christian Democratic Union, has said that a workable solution could be agreed in five days of discussions. There were discussions between British and Irish customs officials on creating an invisible border, but Varadkar stopped these when he came to power. In doing so, he politicised the border issue and turned it from being the EU’s Achilles’ heel into the UK’s – ably abetted by collaborating British ‘negotiators’. 

It was this single issue that was then exploited in order to propose the backstop comprising a ‘single customs territory between the (European) Union and the United Kingdom’, without rules of origin. Northern Ireland, in addition, would have to abide by the rules and regulations of the EU Single Market. So long as the backstop is in operation, the UK would have to meet ‘level playing field conditions’ that prevented the UK competing against the EU. The UK would not be able to leave the backstop without the consent of the EU. 

This, of course, is completely unacceptable. By making it clear that the UK will leave the EU on 31st October, the positions are immediately reversed. Both the EU and Varadkar have said that there will be no hard border. Varadkar would be forced to restart the discussions between British and Irish customs officials. He knows full well how devastating for the Republic’s economy a ‘no deal’ Brexit would be: the Irish Central Bank predicts a 4% cut in GDP and 100,000 job losses. And there are plenty of five-day periods between now and the end of October to agree a workable solution. But it requires the UK side to make it absolutely clear that we are leaving on Halloween, come hell or high water. This too is credible and again does not require EU consent. 

The third step is to make a Future Relationship Statement (FRS), setting out the terms on which the UK will agree to trade and cooperate with the EU. Again, this has to be done in a way that cannot be blocked.

There is only one set of trading terms that the EU cannot block. Under WTO (World Trade Organisation) rules – which almost all international trading arrangements follow – we are free to set the tariffs and product standards for trade with the EU, so long as these are the same as for all members of the WTO under MFN (Most Favoured Nation) rules, unless we have a FTA with any country or group of countries. This is the default position, so is also credible and does not require EU consent. 

We can actually do better than that and offer the EU to continue trading in goods on current zero-tariff terms under Article XXIV of GATT (General Agreement on Tariffs and Trade) and in services under Article V of GATS (General Agreement on Trade in Services) – while a full FTA is negotiated. But if they refuse, we can temporarily revert to the MFN rules under Article I of GATT.

The EU will ultimately agree to a FTA. In the meantime, we need to exploit the fact that the UK has a huge trade deficit with the EU – we are net buyers of goods of around £100 billion, equivalent to 5% of our GDP. Since the customer is king – and we are the customers – it should be us who decides the quality and prices of the goods and services we purchase from not only the EU but from the rest of the world. But what the WA and PD do is to allow the EU to determine these things. The audacity is astonishing. Did the EU and our ‘negotiators’ seriously believe that they could get away with this – and not just in the short term but indefinitely?

Since we will no longer be bound by the EU’s Common External Tariff, we can lower the tariffs we set on goods that we do not produce domestically. But whatever tariffs we set, the EU will be worse off given that they sell us mostly high-tariff goods like cars and agricultural products. We would pay tariffs to the EU of around £5 billion and they would pay tariffs of £13 billion. In addition, we would save the £11 billion net contribution to the EU. 

This provides a strong incentive for the EU to agree a FTA, unless they want to continue punishing us for leaving the EU, and in doing so damage the EU economy even more. Given that we have a services trade surplus with the EU of around £30 billion, it is essential that this is secured in a future trading relationship. This means a SuperCanada deal, already offered to us by the EU in March 2018.

But although there is a strong economic incentive to agree a FTA, we cannot force the EU into accepting any deal that works for us in terms of services, and, in particular, financial services. Still this does not prevent us leaving the EU on the basis of the above DS and FRS. There are enough ‘mini deals’ in place – covering visa-free travel, aircraft landing, rail and shipping agreements, road haulage licences, student exchanges, defence and security etc – for the citizens and businesses of both the UK and EU to continue visiting and trading with each other. In addition, a sufficient number of the international trade deals negotiated by the EU have been novated that we can continue trading on the same terms with most of these countries as we do now. A key example is Switzerland which accounts for more than a quarter of our trade under these EU-negotiated deals.

A number of proposals have fleshed out the details of a future relationship along the lines outlined above: A Clean Managed Brexit from Steve Baker MP, The EU, The UK and Global Trade: A New Roadmap from Professor David Collins, A Better Deal from Shanker Singham, Robert MacLean and Hans Maessen, A World Trade Deal from Economists for Free Trade, and the Howe et al report cited above. For example, Baker suggests that we should send a draft UK-EU FTA to the EU – such as the ones proposed by Shanker Singham, Victoria Hewson, Hans Maessen and Barnabas Reynolds or Dr Lorand Bartels of the University of Cambridge – rather than wait until they do the drafting – which was such a disastrous error with the WA and PD. The EU could agree such a FTA under Article 207 of the TFEU (Treaty on Functioning of the European Union) on the Common Commercial Policy on the basis of qualified majority voting.

But unless the strategy is clear about what is needed to deliver these outcomes, we will soon be back wading through the same treacle of compromise and capitulation that have been the hallmark of our negotiations over the last two years. The only strategy that is guaranteed to work by 31st October is the non-cooperative one outlined above.

The new Prime Minister also needs to demonstrate conviction and commitment – and that involves putting Parliament in its place

A credible negotiating strategy is necessary, but this will not be sufficient. The new Prime Minister also needs to have ‘conviction and commitment’, as Dominic Raab has pointed out. But Boris Johnson – the front runner to be PM – has already wavered by first stating categorically that the UK will leave the EU by 31st October and subsequently saying that this is merely ‘eminently feasible’. This change was immediately picked up by EU negotiators, one of whom told The Times: ‘Even the boldest Prime Minister for a no-deal will have to demonstrate that he has had one serious try and that means an extension [beyond 31 October]’. Another told the Daily Mail that the EU believes Johnson will end up trying to sell an amended version of the WA: ‘If people really brief Boris and talk him through the implications of ‘no deal’, I think he will really think twice’. The first view is perfectly plausible and, unless further wavering is prevented, then we are very likely to end up with the second. After all, Johnson supported the Withdrawal Agreement on the third vote. Hunt voted for it three times. Johnson’s declared position, however, is that he is seeking a FTA with the EU and clarified that he will leave the EU by the end of October ‘do or die’.

The new PM also needs to demonstrate conviction and commitment with the other group trying to block Brexit: the British Parliament. It too needs a lesson in democracy. Read our lips: we voted to leave the EU in June 2016 by a bigger majority than any vote that any individual MP has ever received. We understood the decision we made. We understood why we made it. No amount of scaremongering by the majority of MPs who oppose this decision or their friends in the civil service and CBI etc will change this.

So if MPs are still determined to block the deal that the next PM sets or try to insist that the deal is put to a ‘confirmatory vote’ – weasel words for a second referendum to try and get Brexit reversed – then they also need to be blocked. They need to be made to understand that it is the people who are sovereign not MPs. And the people are here for ever, they are not.

If this, in turn, means that Parliament is prorogued until after 31 October 2019, then so be it. Constitutional historians like Professor Jonathan Clark argue that this would not be ‘“unconstitutional”:

‘[It] would be in accord with statute law, but applied in a situation that legislators could not foresee. [Nor] would [it] be “undemocratic”, for the point at issue is the clash between two sorts of democracy, representative and direct. Whatever the merits of these two, Parliament recognised the priority of the People in legislating for the referendum of 2016. Parliament’s claim to control prerogative depends also on public opinion, and support has ebbed away as Brexit has not been delivered’.

However, prorogation might not be necessary since, in June 2019, Parliament voted down a Labour motion to block a no-deal Brexit. Indeed, Maddy Thimont Jack from the Institute of Government argues that MPs have no decisive route – such as legally binding backbench motions, emergency debates, amendments to the Queen’s Speech, or ‘no confidence’ votes – to stop a PM determined from leaving the EU on 31st October.

Only a credible non-cooperative strategy executed with ruthless conviction and commitment by the new Prime Minister will get us out of the EU by 31st October

The message needs to be clear, simple, with no compromises. Theresa May said in her resignation speech outside No. 10 that the next Prime Minister must compromise. Well just look where that got her. Time’s up for doing the same thing over and over and expecting a different result. Only a credible non-cooperative strategy that cannot be blocked by either the EU or Parliament will get us out of the EU by 31st October. And that strategy needs to be executed with ruthless conviction and commitment by the new Prime Minister. Given that both Johnson and Hunt have voted for the WA, the new PM would need to signal his conviction and commitment by appointing a Brexit Secretary who refused to vote for the WA on all three occasions. To demonstrate his support for Global Britain, his first trip abroad should be to the US to kick-start the UK-US Free Trade Agreement. There is no need to make another round of humiliating visits to Brussels or to Europe’s capitals – as Theresa May repeatedly did.

This is an extended version of a blog originally posted on Briefings for Brexit

The post Here’s how the next Prime Minister can ensure we leave the European Union by 31st October appeared first on BrexitCentral.

As President Trump visits the UK, it is worth thinking about the potential for a UK-US free trade deal of the sort that President Trump has promised, and how that might work in practice.

On February 28th, the Office of the United States Trade Representative (USTR) announced its negotiating objectives for a free trade agreement (FTA) between the US and the UK. It announced objectives for negotiations with the EU and Japan at the same time. While the objectives are similar for all the countries with which the US is seeking to negotiate FTAs, they were received in the UK with predictable howls of anguish from those who fear being railroaded by superior American negotiating strength and forced to consume supposedly dangerous, unhealthy American food. Here, we will consider whether the objectives could yield a genuinely liberalising FTA, and whether they accord with what the UK government is likely to seek in negotiations. We will also compare the potential UK response with the potential responses from the US’s other trading partners.

The US Context

Under the US’s Trade Promotion Authority legislation, the USTR must produce negotiating objectives prior to negotiating trade agreements. The objectives for the proposed FTA with the UK mirror the equivalents published recently for FTAs with the EU and Japan, and essentially build on existing agreements which the US has negotiated to date. They look to address the key trade barriers where the US is most concerned, responding to consultations with industry and interest groups. The negotiating mandate is consistent with a comprehensive UK-EU FTA. It is not consistent with the UK being in the (or a) Customs Union, or regulatory harmonisation with the EU (whether achieved through membership of the European Economic Area or a bespoke agreement, or by operation of the backstop set out in the Protocol to the Withdrawal Agreement).

The US wishes the UK to honour its WTO commitments particularly in the SPS area.  It should be noted that these objectives are what it seeks from all of its partners, not just the UK. Many of the objectives merely restate commitments already made in international agreements such as a commitment to regulate in the SPS area on the basis of sound science. These would not, in the normal course be seen as an aggressive move, but they do highlight the fact that the EU is in violation of WTO rules in a number of these areas, and does not give them in its FTAs. The US government appears to be proceeding on the basis that the UK will be prepared to be more open than the EU in a variety of areas, making a UK-US FTA both more likely and quicker to deliver than an EU-US agreement.

The UK Context

The UK government has also carried out a public consultation on the basis that “the UK will have the opportunity to negotiate, sign, and ratify Free Trade Agreements (FTAs) during the implementation period (provided for under the draft Withdrawal Agreement) and to bring them into force from January 2021”. Responses have not yet been published. The consultation document, issued in July 2018, stated that the UK would be pursuing an “ambitious bilateral trade agenda, taking full advantage of the flexibility provided by our proposal for a future economic partnership (as set out in the White Paper on The future relationship between the UK and the EU on 12th July 2018)”.

This refers to the so-called ‘Chequers plan’, under which, as previously noted, many of the trade objectives of a UK/US FTA would not be achievable. The future relationship described in the Political Declaration (which the parties are obliged to use their best endeavours to negotiate) is based on a single customs territory with no rules of origin, and consideration of regulatory alignment, so even if the UK is able to avoid or exit the customs union arrangement provided for in the Irish backstop, the prospect of the UK’s future relationship with the EU allowing either the UK or the US to meet its objectives seems remote. The outline terms in the Political Declaration would be difficult to reconcile with a US-UK FTA meeting these objectives; a more usual FTA between the UK and EU would be.

US negotiating objectives must be looked at in the context of the evolution of US trade objectives over the last several years. These objectives have been developed to secure a bipartisan consensus in the US, and to achieve maximum market access gains abroad.

Goods

Tariffs

As an opening principle, the objective is to “ensure fair balanced, and reciprocal trade with the UK”. The US will be seeking “comprehensive duty free market access for US industrial goods” this is certainly positive and liberalising but there are a couple of protectionist hangovers, in respect of textile and apparel products where “US import sensitivities” are to be taken into account, and for agricultural goods where there is a suggestion that tariffs will not be eliminated entirely and will be subject to adjustment periods in close consultation with Congress.

If the UK is ultimately in a customs union with the EU (whether as a result of the backstop coming into effect or the conclusion of the future relationship currently envisaged in the Political Declaration), then it will not be possible to fulfil this negotiating objective. On the other hand, if the UK and EU agree an FTA, then this would be consistent with the US objectives. If the Withdrawal Agreement is ratified on its current terms, then the UK could have simultaneous negotiations with the EU and the US, in which case the terms pursued in each will influence what is possible in the other. The negotiation that is moving more rapidly will drive the process. If the US is prepared to exert political will as is evidenced by the many statements of the US President and the US Ambassador in London, then it is possible the US track will move much faster than is generally thought. It may even be possible to achieve an interim agreement with the US on basic matters like tariffs and quantitative restrictions more expeditiously.

The EU has indicated that it does not intend to include agriculture in its FTA negotiations with the US, and therefore will find it difficult to match the pace of a UK-US FTA if the UK is willing to have different regulatory settings than the EU.

Sanitary and Phytosanitary Rules

The US will seek to build upon the existing WTO commitments of both parties, working towards rules and mechanisms to eliminate unjustified restrictions and barriers on trade in food and animal products. This has been a source of friction between the US and the EU and will be an important test of the UK’s commitment to, and capacity for, real progress towards free trade. The EU has a history of violating WTO commitments on sanitary and phytosanitary (“SPS”) rules, in particular with respect to goods of interest to the US and does not make significant commitments beyond the WTO SPS Agreement in the SPS area in its FTAs. Critically, under the US objective it is expressly stated that each side “can set for itself the level of protection it believes to be appropriate to protect food safety and plant and animal health in a manner consistent with its international obligations”. This is vital for sovereignty and innovation and makes clear that it will not be a case of adopting US standards, rather of removing or amending regulations that are discriminatory in their effect and not based on sound science to achieve their policy goal.

The US wishes the UK to commit not to “foreclose export opportunities to the US with respect to third country export markets, including by requiring third countries to align with non-science based restrictions and requirements or to adopt SPS measures that are not based on ascertainable risk”. This is unusual, but given the challenges the US faces as the EU actively seeks to export its regulatory approach, it is understandable. There is a global battle between the EU’s approach to regulation, which is prescriptive and precautionary, and more liberal approaches based on evaluations of equivalence and adequacy, as envisaged by the WTO SPS Agreement.

A significant concern of the US and other trading partners of the EU and of China is the tendency of both to use the size of their markets to project their regulatory approaches, and base their market access offers on trading partners having identical regulation. This is an outlier position to that of most countries in the global trading system, which is to try to recognise as much as possible of other countries’ regulations provided the regulatory aims are aligned, and the regulation objectively achieves these goals. The US will be anxious to ensure that its trading partners adopt this vision of regulatory coherence and not that of the EU and China.

It is in the SPS area that the EU would find the greatest difficulty in meeting US negotiating objectives. It would require a course reversal on the EU’s overall direction on SPS regulation. If anything, the EU’s SPS regulation is becoming more restrictive not less.

Technical Barriers to Trade

The US’s objectives for non-agricultural goods are similar to the objectives for SPS rules. The US wishes the UK to address trade barriers in its technical regulation by adhering to WTO TBT Committee decisions and recommendations, and pursing mutual recognition of conformity assessment, amongst other things. This section includes an equivalent objective in respect of third country agreements that might prejudice US trade to that in the SPS section. Depending on the negotiations of the future relationship with the EU, the UK is more likely to share this objective than the EU. TBT/SPS and other regulatory issues have plagued the EU-US relationship from the early days of the Transatlantic Business Dialogue in the 1990s to the more recent attempt to negotiate an EU-US deal (the Transatlantic Trade and Investment Partnership, “TTIP”). TTIP foundered primarily on the fundamentally different approaches to regulation, and standard setting between the EU and US. If the UK merely replicates the EU approach, it is likely the UK-US FTA would founder for the same reasons.

Services

There should be much for the UK to agree with in the objectives that the US has set out for services trade and investment.

The US objectives for trade in services, including telecommunications and financial services, are generally very liberalising on market access and non-discrimination, with reservations from the core commitments to be by way of “negative list”, which means that all sectors will be covered unless specifically excluded. This would lead to greater openness than the “positive list” approach under the General Agreement on Trade in Services. The US has long advocated a negative list approach. Even the NAFTA agreement, now almost a quarter of a century old, has this approach to services.

The US objectives also accept the possibility of exceptions from the core disciplines for the UK, to be kept as narrow as possible. This will be of vital importance to UK negotiators who will be required to secure reservations to protect public services, including the NHS. As noted by Liam Fox, “the UK’s public services are protected by specific exceptions and reservations in all EU trade agreements, and as we leave the EU, the UK will continue to ensure that rigorous protections are included in all trade agreements to which it is party.”

The EU has now partially adopted the negative list approach to services but is likely to require many more reservations than the UK, as the UK has traditionally been one of the most open member states on services.

Horizontal Matters

Investment

The US primary objective in investment negotiations is to ensure the best possible protection for US investments. In international agreements, this has come to mean agreeing not to engage in expropriations, actions tantamount to expropriation and even to cover some areas where government action takes away an investor’s legitimate expectations. Investment is an area where the US seeks maximum protection for its investors. Since both countries are the largest investors in each other’s markets, both will likely seek this protection they should come to an agreement on this measure of protection.

The US objectives are silent on the issue of investor state dispute settlement (ISDS) which allows private parties to bring claims against state parties for violations of investment provisions. The UK has not made its position on ISDS clear. In his letter to the International Trade Committee, Liam Fox was at least open to the inclusion of ISDS, but given the political sensitivity of ISDS in the UK as well as in the US, it seems unlikely that the UK would insist up on it as an objective. Investor-State dispute resolution has been a part of the regulation of investment for decades under Bilateral Investment Treaties (BITs). While publics in the EU have resisted them, it should be pointed out that they do provide an avenue for smaller firms to hold governments to account when they expropriate their property or take actions tantamount to expropriation. Large firms can simply rely on their governments lobbying on their behalf. The mere possibility of being sued under ISDS does have an effect on a government’s domestic policy choices.

The US has handled this issue in the USMCA by eliminating ISDS with Canada but limiting it in Mexico to certain sectors (oil & gas, power generation, transport services and management of infrastructure). Given that flexibility compared to previous BITs and FTA investment chapters, we do not expect the ISDS issue to be a significant problem with the UK. 

Data Flow

The US will be seeking “state of the art rules to ensure that the UK does not impose measures that restrict cross-border data flows and does not require the installation of local computing facilities”. This will be one of the most difficult areas for the UK to agree. Even if the UK leaves the EU without a Withdrawal Agreement or otherwise negotiates a future relationship restoring regulatory autonomy in this area, the attachment to the EU approach to data protection and privacy is strong amongst regulators and larger businesses. This lays down barriers to international transfers of personal data (so vital to financial services, which are specifically mentioned by the US in this context) and the uses of personal data.

The UK has already enacted the EU’s General Data Protection Regulation and as a matter of domestic policy there is no intention to reform or amend it. In a letter to the International Trade Committee, Liam Fox noted that the UK will wish to promote “robust data protection standards and the flow of data internationally” but wishes to “discuss with the US how best to ensure that the current protections afforded to UK citizens can be maintained post exit”, referring to continuing the EU’s Privacy Shield arrangement for data transfers between the UK and the US, which has now been confirmed.  

There is deep concern among US firms about the EU’s approach to data protection. The US has long set great store on data flow – it is currently one of its most important trade objectives. If there is to be a global solution to the data issue, it can only come from a global set of disciplines based on adequacy as the US will never accept the EU approach. This will be one of the more difficult areas of the tripartite negotiation between the UK, US, and EU, all elements of which will be moving broadly simultaneously. The UK must be able to move away from the strict territorial requirements of the EU’s data protection regime, but build on and extend the EU’s Privacy Shield arrangement with the US. It should also work to eliminate barriers to the flow of non-personal data. These efforts would deliver huge benefits in services trade and e-commerce.

The discussion of data flow does not take place in a vacuum. The UK also seeks to be part of the new WTO working group on e-commerce, and if it is to play any serious part in this group, it will have to diverge from EU data protection rules and instead seek an adequacy type arrangement both for itself and on a global basis.

Intellectual Property

The US seeks strong protections for intellectual property rights in its agreements with all its trading partners, and it is duly included here as an objective. While it can be expected that the UK may have broadly similar objectives, given the UK’s interests in pharmaceuticals and technology sectors. The economic literature supports the notion that intellectual property protection is a critical part of economic development. It is a part of the panoply of property rights protection, and the UK and US’s economic interests are relatively aligned on these issues. At the same time, it is important that intellectual property rights are not drawn so broadly as to curtail innovation and the activities of new entrants.

The US objective of preventing “the improper use of the UK’s system for protecting or recognising geographical indications (GIs), including any failure to ensure transparency and procedural fairness, or adequately protect generic terms for common use” will likely come into conflict with the UK’s commitment to protect EU GIs in the draft Withdrawal Agreement and intention in the Political Declaration to continue with “appropriate protection” for GIs. This will be a difficult negotiation as it is a crucial part of the US’s negotiating objectives. US agricultural interests see the vast number of EU GIs as a protectionist tool, and an incorrect application of intellectual property protection. The number of UK specific GIs is relatively small, and some are protected by international agreements to which both the US and UK are parties (such as Scotch Whisky, for example) so if it were possible to renegotiate the UK’s commitment on GIs in the Withdrawal Agreement, UK businesses would not be materially prejudiced.

The EU position on GIs is inconsistent with US negotiating objectives. This will make an EU-US FTA very difficult to negotiate.     

Good Regulatory Practice

The objective here is to facilitate market access and promote greater compatibility between US and UK regulations. This has been a persistent problem that has thus far proved to be unsolvable in trade talks between the US and the EU. What constitutes good regulatory practice is left at a high level and includes, for example, transparency, promoting the use of impact assessments and similar methods, and providing opportunities to comment on the development of regulations that includes both trade and competitive effects, and due process. The UK already operates practices that would meet many of these requirements, and provisions covering these matters are common in FTAs, including the EU’s. This objective is a sound one, and one where the parties would be well placed to make significant progress in achieving greater regulatory compatibility, but only if the UK is not bound to EU regulations, which would mean it would not be able to make commitments in respect of regulation that it has no real role in promulgating.

Liam Fox noted in his letter to the International Trade Committee of the UK Parliament of July 2018 that “it is critical… that UK-US FTA is a living agreement. We support the inclusion of a structured arrangement for future dialogue between UK and US regulators, while recognising that such a dialogue should not have a chilling effect on future public interest regulation.” This indicates that in principle the UK and US will be aligned on this objective, although Fox’s letter also cautioned that the independence of regulators in the UK and its partner countries would need to be taken into consideration in the context of regulatory mechanisms in an FTA with the US. This should be welcomed, but, given the commitment the UK has made in the non-binding Political Declaration to consider aligning on regulations and to maintain alignment in Northern Ireland, if Northern Ireland effectively stays in the EU single market for goods, the UK’s ability to negotiate around this objective would be constrained.

Competition Policy

The negotiating objectives set out basic requirements in competition policy, in particular some current high profile issues for the US. US authorities have become concerned with the application of antitrust law by the European Commission. The US believes that the EU is interpreting competition law in increasingly restrictive ways and applying it expansively outside of its territory, most notably in the tech sector. The US has previously complained about the Commission’s approach to transparency and due process, and so the negotiating mandate’s reference to these issues is also unsurprising. If the UK is committed to maintaining EU competition policy (as it would be under the current iteration of the backstop in the Withdrawal Agreement and Political Declaration) it would be unable to commit to anything in this area that would entail diverging from the EU. However, the UK could seek to negotiate a competition chapter in the UK-US FTA if it also negotiated similar provisions in an EU-UK FTA.

State-Owned Enterprises and Market Distortions/Currency Manipulation

These objectives do not particularly relate to specific UK challenges, but represent what the US will be seeking in any trade agreement given its current priorities and the situation in the global trading system.  The US has been pre-occupied by the impact of China’s state-owned enterprises (SOEs) and market distortions on the US market, particularly in manufacturing. It would like to see strong disciplines in this area in all modern FTAs to put more pressure on China. The US anticipates that the UK would be a strong ally in the fight against market distortions caused by governments and SOEs. As this plays into concerns often raised in the UK, we can be hopeful that this will be the case.

Rules of Origin

The negotiating objectives here are unsurprising given recent pronouncements of the Trump administration. They include ensuring that the benefits of the FTA “go to products genuinely made in the United States and the UK” and that “the rules of origin incentivise production in the territory of the Parties, specifically in the United States”. This is disappointing in that it would likely result in the rules of origin becoming trade barriers. The FTA would then be trade destructive rather than trade creative, cancelling out or annulling the benefits of tariff elimination. Such an approach to rules of origin would present the UK with challenges as it negotiates an FTA with the EU at the same time. The UK will seek very liberal of rules of origin so that it can ensure that products from the UK-EU27 supply chain can qualify for preferences under its FTAs. This is likely to be one of the tougher areas of negotiation.

Government Procurement

A core objective of the UK will be minimal restrictions on competition for government procurement, including the US agreeing to waive its Buy America regulations for the UK. Buy America, and numerous other domestic preferential purchasing programmes allow sub-federal authorities (i.e. state and local government) to preference US suppliers and not open their procurement processes to foreign competition. While the US seek to open up government procurement opportunities in the UK, its objective is not to allow these disciplines to cover its own sub-federal entities. Most government procurement is at the sub-federal level in the US, and the UK would be seeking access for its suppliers to compete in that market, as confirmed by Liam Fox in his letter to the International Trade Committee.

In government procurement, the federal government for constitutional reasons cannot compel states to open their government procurement to foreign entities. In the Uruguay Round USTR was able to persuade some two dozen states and some large municipalities to unilaterally make procurement commitments in the WTO, but the willingness of states to do that now is less. The UK will have to convince the states and their municipalities to be more open on government procurement. A critical element of this will be how much market access the UK will be able to give for key exports of products from those states, and much of that will be in the agricultural area.

The UK also has major interests in defence procurement, and would likely seek to ensure its defence industry is not disadvantaged by US rules. There are Buy America provisions in defence procurement, as well as other restrictive rules such as the International Traffic in Arms Regulations (“ITAR”). The UK should seek to be part of the common defence area with the US to which ITAR exemptions can apply (as have Canada and Australia). The US objectives state that it wishes to maintain exemptions for key Department of Defense procurements and broad exceptions for government procurement for national security, so there may be some room for negotiation in this sector.

Environment, Labour and Anti-corruption

The objectives in these areas are not especially controversial given the approach trade agreements have adopted in recent years. Both the UK and US maintain high standards in both these areas, and negotiation of this chapter should not present major difficulties. Both sides will likely need to include protections in these areas to reassure domestic interest groups and legislatures that the FTA does not start a ‘race to the bottom’.

Conclusions

There is nothing especially surprising in the US’s negotiating objectives. Even in the areas which have attracted the most media coverage, the objectives are as expected and do not materially go beyond what the UK can expect from other trading partners, such as the CPTPP countries. The US does not have adoption of its systems and regulations as an objective, but would require the UK to comply with WTO rules and regulate in ways that are consistent with sound science. This will raise issues in the negotiations between the UK and the EU, as the more goods that the UK allows into its territory that are not compliant with EU rules, the more border checks will be required to ensure that only compliant products are exported from the UK to the EU. This is a particular problem for the border between Northern Ireland and the Republic of Ireland where the parties have agreed that they will not operate physical infrastructure or related checks and controls. This makes the work of the alternative arrangements joint group as agreed between the UK and EU even more important.

There is no question that managing a UK-US and UK-EU negotiation at the same time will be a challenging task, not least because of the legal default underpinning the UK-EU negotiations comprising a customs union under the backstop. Many of the EU and US’s trading partners have found ways of agreeing with both but not from within a customs union or the single market. What the UK has forgotten after more than forty years of its trade policy being subsumed within the Common Commercial Policy is that trade policy is a dynamic process with an ever-changing battlefield. Ultimately it is at the intersection of politics, economics and law – and politics usually wins.

The post What do the American negotiating objectives mean for a future US-UK trade deal? appeared first on BrexitCentral.

The following is the text of the speech Theresa May has just delivered in London:

I became Prime Minister almost three years ago – immediately after the British people voted to leave the European Union. My aim was – and is – to deliver Brexit and help our country move beyond the division of the referendum and into a better future. A country that works for everyone. Where everyone has the chance to get on in life and to go as far as their own talent and hard work can take them. That is a goal that I believe can still unite our country.

I knew that delivering Brexit was not going to be simple or straightforward. The result in 2016 was decisive, but it was close. The challenge of taking Brexit from the simplicity of the choice on the ballot paper to the complexity of resetting the country’s relationship with 27 of its nearest neighbours was always going to be huge.

While it has proved even harder than I anticipated, I continue to believe that the best way to make a success of Brexit is to negotiate a good exit deal with the EU as the basis of a new deep and special partnership for the future. That was my pitch to be leader of the Conservative Party and Prime Minister. That is what I set out in my Lancaster House speech and that was what my Party’s election manifesto said in 2017.

That is in essence what the Labour Party’s election manifesto stated too. And over 80% of the electorate backed parties which stood to deliver Brexit by leaving with a deal.

We have worked hard to deliver that – but we have not yet managed it. I have tried everything I possibly can to find a way through.

It is true that initially I wanted to achieve this predominantly on the back of Conservative and DUP votes. In our Parliamentary system, that is simply how you normally get things done. I sought the changes MPs demanded. I offered to give up the job I love earlier than I would like. And on 29th March – the day we were meant to leave the EU – if just 30 MPs had voted differently we would have passed the Withdrawal Agreement. And we would be leaving the EU. But it was not enough.

So I took the difficult decision to try to reach a cross-party deal on Brexit. Many MPs on both sides were unsettled by this. But I believe it was the right thing to do. We engaged in six weeks of serious talks with the Opposition, offering to compromise. But in the end those talks were not enough for Labour to reach an agreement with us. But I do not think that means we should give up.

The House of Commons voted to trigger Article 50. And the majority of MPs say they want to deliver the result of the referendum. So I think we need to help them find a way. And I believe there is now one last chance to do that. I have listened to concerns from across the political spectrum. I have done all I can to address them. And today I am making a serious offer to MPs across Parliament. A new Brexit deal.

As part of that deal I will continue to make the case for the Conservative Party to be united behind a policy that can deliver Brexit. 9 out of 10 Conservative MPs have already given the Withdrawal Agreement their backing and I want to reach out to every single one of my colleagues to make the very best offer I can to them. We came together around an amendment from Sir Graham Brady – and this gave rise to the work on Alternative Arrangements to the backstop.

Although it is not possible for those to replace the backstop in the Withdrawal Agreement, we can start the work now to ensure they are a viable alternative. So as part of the new Brexit deal we will place the government under a legal obligation to seek to conclude Alternative Arrangements by December 2020 so that we can avoid any need for the backstop coming into force.

I have also listened to Unionist concerns about the backstop. So the new Brexit deal goes further to address these. It will commit that, should the backstop come into force, the Government will ensure that Great Britain will stay aligned with Northern Ireland. We will prohibit the proposal that a future Government could split Northern Ireland off from the UK’s customs territory.

And we will deliver on our commitments to Northern Ireland in the December 2017 Joint Report in full. We will implement paragraph 50 of the Joint Report in law. The Northern Ireland Assembly and Executive will have to give their consent on a cross-community basis for new regulations which are added to the backstop. And we will work with our Confidence and Supply Partners on how these commitments should be entrenched in law.

This new Brexit deal contains significant further changes to protect the economic and constitutional integrity of the United Kingdom and deliver Brexit. It is a bespoke solution that answers the unique concerns of all parts of the community in Northern Ireland.

But the reality is that after three attempts to secure Parliamentary agreement, we will not leave the European Union unless we have a deal that can command wider cross-party support. That’s why I sat down with the Opposition. I have been serious about listening to views across the House throughout this process. That is why when two Labour MPs, Lisa Nandy and Gareth Snell, put forward their proposals to give Parliament a bigger say in the next phase of the negotiations I listened to them.

So the new Brexit deal will set out in law that the House of Commons will approve the UK’s objectives for the negotiations on our future relationship with the EU and they will approve the treaties governing that relationship before the Government signs them. And while the talks with the opposition did not reach a comprehensive agreement, we did make significant progress in a number of areas. Like on workers’ rights. I am absolutely committed to the UK continuing to lead the way on this issue.

But I understand people want guarantees. And I am happy to give them. So the new Brexit deal will offer new safeguards to ensure these standards are always met. We will introduce a new Workers’ Rights Bill to ensure UK workers enjoy rights that are every bit as good as, or better than, those provided for by EU rules. And we will discuss further amendments with trade unions and business.

The new Brexit deal will also guarantee there will be no change in the level of environmental protection when we leave the EU. And we will establish a new independent Office of Environmental Protection to uphold the highest environmental standards and enforce compliance.

The new Brexit deal will also place a legal duty on the Government to seek as close to frictionless trade with the EU in goods as possible, subject to being outside the Single Market and ending freedom of movement.

In order to deliver this, the UK will maintain common rules with the EU for goods and agri-food products that are relevant to checks at the border. This will be particularly important for our manufacturing firms and trade unions, protecting thousands of jobs that depend on just-in-time supply chains.

The most difficult area is the question of customs. At the heart of delivering Brexit lies a tension between the strength of our ambition to seize the new opportunities that Brexit presents – and the need to protect the jobs and prosperity that are built on an interconnected relationship with other European economies. This ambition should not be divisive. There are many people who voted to Leave who also want to retain close trading links with Europe. Just as there are many people – like myself – who voted to Remain and yet are excited by the new opportunities that Brexit presents.

Indeed I believe that one of the great opportunities of leaving the European Union is the ability to have an independent trade policy and to benefit from the new jobs and industries that can result from deepening our trade ties with partners across every continent of the world. But I have never believed that this should come at the expense of the jobs and livelihoods that are sustained by our existing trade with the EU. And to protect these, both the Government and the Opposition agree that we must have as close as possible to frictionless trade at the UK-EU border.

Now the Government has already put a proposal which delivers the benefits of a customs union but with the ability for the UK to determine its own trade and development policy. Labour are both sceptical of our ability to negotiate that and don’t believe an independent trade policy is in the national interest. They would prefer a comprehensive customs union – with a UK say in EU trade policy but with the EU negotiating on our behalf. If we are going to pass the Withdrawal Agreement Bill and deliver Brexit, we must resolve this difference.

As part of the cross-party discussions the government offered a compromise option of a temporary customs union on goods only, including a UK say in relevant EU trade policy and an ability to change the arrangement, so a future government could move it in its preferred direction. We were not able to agree this as part of our cross-party talks – so it is right that Parliament should have the opportunity to resolve this during the passage of the Bill and decide between the government’s proposal and a compromise option. And so the Government will commit in law to let Parliament decide this issue, and to reflect the outcome of this process in legislation.

I have also listened carefully to those who have been arguing for a Second Referendum. I have made my own view clear on this many times. I do not believe this is a route that we should take, because I think we should be implementing the result of the first referendum, not asking the British people to vote in a second one. But I recognise the genuine and sincere strength of feeling across the House on this important issue. The Government will therefore include in the Withdrawal Agreement Bill at introduction a requirement to vote on whether to hold a second referendum. This must take place before the Withdrawal Agreement can be ratified.

And if the House of Commons were to vote for a referendum, it would be requiring the Government to make provisions for such a referendum – including legislation if it wanted to ratify the Withdrawal Agreement. So to those MPs who want a second referendum to confirm the deal: you need a deal and therefore a Withdrawal Agreement Bill to make it happen. So let it have its Second Reading and then make your case to Parliament.

Finally, we cannot expect MPs to vote on the same two documents they previously rejected. So we will seek changes to the political declaration to reflect this new deal.

So our New Brexit Deal makes a ten-point offer to everyone in Parliament who wants to deliver the result of the referendum.

  • One – the Government will seek to conclude Alternative Arrangements to replace the backstop by December 2020, so that it never needs to be used.
  • Two – a commitment that, should the backstop come into force, the Government will ensure that Great Britain will stay aligned with Northern Ireland.
  • Three – the negotiating objectives and final treaties for our future relationship with the EU will have to be approved by MPs.
  • Four – a new Workers’ Rights Bill that guarantees workers’ rights will be no less favourable than in the EU.
  • Five – there will be no change in the level of environmental protection when we leave the EU.
  • Six – the UK will seek as close to frictionless trade in goods with the EU as possible while outside the single market and ending free movement.
  • Seven – we will keep up to date with EU rules for goods and agri-food products that are relevant to checks at border protecting the thousands of jobs that depend on just-in-time supply chains.
  • Eight – the Government will bring forward a customs compromise for MPs to decide on to break the deadlock.
  • Nine – there will be a vote for MPs on whether the deal should be subject to a referendum.
  • And ten – there will be a legal duty to secure changes to the political declaration to reflect this new deal.

All of these commitments will be guaranteed in law – so they will endure at least for this Parliament.

The revised deal will deliver on the result of the referendum. And only by voting for the Withdrawal Agreement Bill at Second Reading, can MPs provide the vehicle Parliament needs to determine how we leave the EU. So if MPs vote against the Second Reading of this Bill – they are voting to stop Brexit. If they do so, the consequences could hardly be greater.

Reject this deal and leaving the EU with a negotiated deal any time soon will be dead in the water. And what would we do then? Some suggest leaving without a deal. But whatever you think of that outcome – Parliament has been clear it will do all it can to stop it.

If not no deal, then it would have to be a General Election or a second referendum that could lead to revocation – and no Brexit at all. Who believes that a General Election at this moment – when we have still not yet delivered on what people instructed us to do – is in the national interest? I do not. And my views on second referendum are well known.

Look at what this debate is doing to our politics. Extending it for months more – perhaps indefinitely – risks opening the door to a nightmare future of permanently polarised politics. Look around the world and consider the health of liberal democratic politics. And look across the United Kingdom and consider the impact of failing to deliver on the clear instruction of the British people in a lawful referendum. We do not have to take that path. Instead, we can deliver Brexit.

All the changes I have set out today have the simple aim of building support in Parliament to do that. I believe there is a majority to be won for a Brexit deal in the House of Commons. And by passing a deal we can actually get Brexit done – and move our country forwards. If we can do so, I passionately believe that we can seize the opportunities that I know lie ahead.

The world is changing fast. Our young people will enjoy opportunities in the future that my generation could have never dreamed of. This is a great time to be alive. A great future awaits the United Kingdom. And we have all we need as a nation to make a success of the 2020s and the 2030s. But we will not do so as long as our politics remains stuck in an endless debate on Brexit.

We all have to take some responsibility for the fact that we are in this impasse – and we all have a responsibility to do what we can to get out of it. The biggest problem with Britain today is its politics. And we can fix that. With the right Brexit deal, we can end this corrosive debate. We can get out of the EU political structures – the Parliament, the Commission, the Council of Ministers that are remote from our lives – and put our own Parliament back in sovereign control of our destiny.

We can stop British laws being enforced by a European court and instead make our own Supreme Court is genuinely supreme. We can end free movement and design an immigration system based around skills that work for our economy and society. We can stop making vast annual payments to the EU budget and instead spend our own money on our own priorities like the NHS. We can get out of the Common Fisheries Policy and the Common Agricultural Policy, and design our own systems around our own needs and resources. We can do all of these things.

And by leaving with a deal we can do so much more besides. By reaching an agreement with our EU trading partners we can keep tariff barriers down and goods flowing friction-free across borders. Protecting jobs, and setting our firms up for future success. We can guarantee workers’ rights and environmental protections. With a deal we can keep our close security partnerships – and keep working together to keep people safe. We can ensure that the challenge of the land border between Northern Ireland and Ireland is met in a way that works for people on both sides.

This is a huge opportunity for the United Kingdom. Out of the EU, out of ever closer union, free to do things differently. And doing so in a way that protects jobs, protects our security, maintains a close relationship with our friends and works for the whole United Kingdom. It is practical. It is responsible. It is deliverable. And right now, it is slipping away from us.

We risk losing a great opportunity. This deal is not the final word on our future relationship with the EU – it is a stepping stone to reach that future. A future where the people of the UK determine the road ahead for the country we all love. This deal lays the groundwork – and settles many of the core issues.

But in the years ahead, Parliament will be able to debate, decide and refine the exact nature of our relationship with the EU. Some will want us to draw closer, others will want us to become more distant. Both sides can make their case in the months and years ahead.

The key thing is, decisions will be made not by MEPs or Commissioners or the EU Council – but by the United Kingdom Parliament, elected by the British people. That is what being an independent nation state is all about. Those debates, those decisions, are for the future. What matters now is honouring the result of the referendum and seizing the opportunity that is right before us. So we are making a new offer to find common ground in Parliament. That is now the only way to deliver Brexit.

Over the next two weeks the government will be making the case for this deal in Parliament, in the media and in the country. On what is best and right for our country now and in the future. And on what the majority of British people of all political persuasions want to see happen.

Tomorrow I will make a statement to the House of Commons. And there will opportunities throughout the Bill for MPs on all sides to have their say. But I say with conviction to every MP of every party – I have compromised. Now I ask you to compromise too.

We have been given a clear instruction by the people we are supposed to represent. So help me find a way to honour that instruction, move our country and our politics forward, and build the better future that all of us want to see.

The post Full text of Theresa May’s speech introducing her “new Brexit deal” appeared first on BrexitCentral.

The pre-emptive strike by Keir Starmer insisting that a confirmatory public vote must be part of any deal with the Government stems from deep-seated weakness rather than strength; it is a sure sign of panic on the part of those intent on reversing the vote to leave the EU.

His claim that up to 150 Labour MPs would refuse to vote for a deal, any deal, if it doesn’t include a confirmatory vote is as unfounded as Tom Watson’s proclaiming that the Labour’s EU election manifesto will commit to a people’s vote. Both are attempts to bounce Labour into a Brexit policy contrary to that agreed at the last Labour Party Conference; Starmer’s attempt will no doubt meet the same fate as Watson’s.

It is worth reminding those who are thinking of flirting with Starmer’s latest depiction of what Labour’s Brexit policy is of what Labour’s conference resolution actually said. The relevant part states:

Should Parliament vote down a Tory Brexit deal or the talks end in no-deal, Conference believes this would constitute a loss of confidence in the Government. In these circumstances, the best outcome for the country is an immediate General Election that can sweep the Tories from power. If we cannot get a general election Labour must support all options remaining on the table, including campaigning for a public vote.

It is axiomatic therefore, that if there was an agreement between the Government and Labour on a deal to put to Parliament, then that deal would not be a ‘Tory Brexit deal’ and therefore the option of a public vote would not arise. This explains Starmer’s procrastination throughout the talks, complaining of red lines and the failure of the Government to compromise without a single hint of what Labour is prepared to compromise on in return.

Originally, Labour’s policy of a customs union was regarded as the lever to scupper the talks between the Government and the Opposition. While the Government is right to reject membership of the EU’s own customs union, forming a customs union is an entirely different creature. Remaining in the customs union would tie the UK to the EU’s trade policies without any meaningful say in the formulation of these policies. A customs union, on the other hand, is a trade and tariff arrangement between two sovereign bodies, the United Kingdom and the European Union – an arrangement between equals. Neither side can impose its policies on the other; neither side is predominant.

In a customs union, decisions on trade are mutually agreed. There is as much likelihood of the EU imposing its preferred policies on Britain as the UK imposing its preferred policies on the EU. And there is no such thing as a permanent customs union; all customs unions are temporary and once one side finds its interests are undermined by its participation in a customs union, it can and does have the right to withdraw from it.

Having failed to make the issue of a customs union a sticking point in negotiations – after all, some sort of customs arrangement is implicit in the Withdrawal Agreement and the agreed political declaration – Starmer and the hard-wired Remainers in the Shadow Cabinet, in a last desperate attempt to halt Brexit, invented a non-existing condition for an agreement, a confirmatory vote.

Irrespective of the pessimism from Starmer and his Remainer colleagues about the chances of a deal with the Tory Government – a pessimism quickly picked up by a media eager to inflate differences and heighten the political tension – the talks are heading towards a positive outcome.

Following a face-to-face meeting between the two party leaders with only their respective Chief Whips present, a Labour spokesperson explained that Corbyn ‘set out the Shadow Cabinet’s concerns about the Prime Minister’s ability to deliver on any compromise agreement’. There was no mention of a customs union, let alone a confirmatory vote. A text has obviously been agreed, the only concern is delivery – especially since Theresa May would not be there to oversee it. But Labour cannot afford to be too purist about this.

There is pressure on both party leaders to abandon the talks on the grounds that they will taint their respective image in the eyes of the electorate, as if the public is too stupid to understand the necessity for an agreement if Brexit is to be delivered. Once a deal is done, normal hostilities will resume on domestic and international issues. Warnings from both Labour and Conservative MPs of splits are self-serving and highly exaggerated. MPs should be more concerned about the rupture with the electorate than ruptures within their own parties if Parliament fails to deliver on the result of the EU referendum.

As we approach the circus that is the EU elections, it falls for the two party leaders, Theresa May and Jeremy Corbyn, to shift the talks forward towards an agreed Brexit deal. The public demands it. History would not look kindly at either if they fail.

The post The public expect May and Corbyn to strike a deal that delivers Brexit appeared first on BrexitCentral.

After a quarter of a century of continuous membership and service to the Labour Party, my decision to resign from it has not been easy. Unlike the high-profile resignations of stalwarts like Sir Tony Robinson (aka Baldrick in Blackadder), I’m a relative unknown. I’m just one of those many foot soldiers who has, until now, stuck with the party through thick and thin. But not anymore.

The party’s inability to tackle anti-Semitism and its ongoing dissembling and duplicitousness over Brexit has made it an intolerable place to be. This feels like a stark conclusion to reach about a party that has been my political home since I left school and foster care in the late 1980s.

When first joining, I met some real mentors and like-minded people who believed in Britain; ordinary everyday patriotic people who believed our country could and would be better with Labour. I campaigned for the party in my local working-class community of Nuneaton, where I grew up. And as a student at university, where I ran the Labour Club. Slogging away for the party whatever the physical and political weather had become almost hardwired into my DNA.

After Tony Blair’s landslide victory in 1997, it was a real privilege to be appointed as the national policy officer responsible for education and employment policy, working at the heart of the party’s campaign HQ in London. In government, I was able to work closely with Labour ministers, albeit as a junior staffer, on shaping the New Deal for young people; the introduction of the first ever national minimum wage; and improving skills training at all levels in our society, including the renaissance in apprenticeships. The values that drove these reforms have helped shape my professional life outside of politics where I have dedicated my whole career to improving post-compulsory education and training opportunities for people in this country and overseas.

Until the recent May local elections, I served as a Labour councillor in Brighton and Hove, including a challenging period as the lead member for children’s and social services. This role coincided with the election of Jeremy Corbyn and the transformation of the membership, driven by the leftist policies of Momentum.

In June 2016, I chaired the official Vote Leave campaign in Brighton and Hove and I’ve written for BrexitCentral previously about how this was really a democratic revolution for our country. It was the largest democratic decision in our history. The 52-48 split in the vote belies the fact that in the majority of our market towns, rural, coastal and working-class communities, often more than two-thirds of the electorate voted to end our membership of the European Union.

Two thirds of Labour’s representation in the House of Commons comes from Leave-voting seats. Yet the party’s treatment of these voters by the majority of Remain-supporting Labour MPs and MEPs has been despicable. They have been called thick, ignorant and racist. Leavers are patronised as people that “did not know what they voted for”. The majority of Labour’s MEP candidates in these futile upcoming European elections have actively goaded, on social media, five million Labour Leave voters – telling them that the party is no longer for them. Jeremy Corbyn and senior spokespeople, when asked by journalists whether Labour is a Brexit party or a Remain party, regularly contradict one another. As the socialist hero Nye Bevan once said: “We know what happens to people who stay in the middle of the road. They get run down.”

And therein lies the result of the unfolding betrayal of Brexit that the “constructive ambiguity” policy, pioneered by Keir Starmer. Remain zealots in the party will simply not rest until Article 50 is revoked. Leavers in the party, meanwhile, come under pressure to compromise on a Brexit-in-name-only approach as Starmer plots to anchor the UK permanently within the orbit of future EU-made laws. You only have to look at the party’s incoherent commitment to a permanent customs union with the EU, to see it has no interest in the United Kingdom becoming an independent self-governing nation again.

Rather, the party of Keir Hardie and Clement Attlee now seems content to allow unelected bureaucrats in Brussels to make our future trade policy — setting tariffs, taxes and regulations for whole swathes of the British economy — without any real say in how these rules are made. Labour is living in cloud-cuckoo land to think that the EU would grant a non-member state a seat around the table when negotiating future trade deals. In fact, what is most likely to happen is that large swathes of our public sector, like the NHS, would be open to privatisation, while German manufacturing and French agriculture would continue to sit behind a protectionist tariff wall.

At one point, I was sympathetic to Peter Kyle and Phil Wilson’s attempts at a compromise, by pegging the passage of any deal in Parliament to a so-called “confirmatory referendum”. The problem with this approach in practice, however, is that if it were to come to pass, there could be little faith in the Establishment or the Electoral Commission to allow that the choice of a clean WTO Brexit to even be on the ballot paper. Instead, the choice would likely be between Theresa May’s terrible withdrawal deal and remaining in the EU. This is the real agenda of the People’s Vote campaign. It is not to compromise over Brexit, but to nullify the 2016 referendum result by rigging a future contest.

The recent local election results and the loss of Labour councils and councillors in the Midlands and our Northern heartlands demonstrates that the party is continuing to allow itself to be defined and run by the interests of metropolitan London elites; socialist conspiracy theorists; and by a predominantly student, retired and public-sector profile of membership that resides mainly in our big university towns and cities.

No wonder the Brexit Party is now surging in the polls. People have really woken up to the fact that following the 2017 manifestos of both the major political parties, they were lied to. Both Conservative and Labour leaderships said they would respect the referendum result and take the country out of the institutions of the EU on 29th March 2019. As a result, Nigel Farage’s previous insurgent party, UKIP, was all but wiped out.

As the next set of elections approaches, there is so much more to fight for than Brexit. We have reached a point in this unfolding national crisis where the whole question of whether we actually live in a democracy is now at stake. In 1991, the late Labour legend, Tony Benn, said:

“Some people genuinely believe that we shall never get social justice from the British Government, but we shall get it from Jacques Delors; they believe that a good king is better than a bad Parliament.”

The salient point about where the country finds itself is that we have a ruling political class that lacks any real confidence in taking back control of our laws, borders, money and trade. That is, after all, fundamentally what the Brexit vote was all about. Instead, we appear to have some MPs and fellow travellers who are content to be merely supplicants of Brussels: a bad Parliament subservient to an even worse king.

The post Labour’s dissmembling and duplicitousness on Brexit has driven me to quit the party I’ve served for 25 years appeared first on BrexitCentral.

It’s happening again. Have you noticed? The slurs. The smears. The tropes. With the phenomenal and unprecedented emergence of the Brexit Party (complete with election-topping poll predictions) Labour, the Conservatives and their faithful ambassadors in the media have gone on the attack.

Andrew Marr’s cringeworthy interview with Nigel Farage on Sunday revealed that the BBC research team spent licence fee-payers’ money trawling the archives for any historical statement he’s ever made to get off topic and detract from the debate on the veteran broadcaster’s eponymous political programme.

During a panel discussion for Radio 4’s Westminster Hour on Sunday, I found myself subjected to the usual lazy attacks from Labour insinuating that somehow our quest for autonomy is unsavoury. They did this in 2014 to no effect. They’re using the same strategy again.

The Great Brexit Debate is on rinse and repeat. What Nigel said to Marr about psychologically preparing for a second referendum is right. We need to be ready to go into battle for our beliefs yet again. It is now highly likely that to break the SW1-contrived political deadlock we will have to face some kind of public ballot. The problem with this is that, unless the result swings in favour of ‘Remain’, the cycle will have to be repeated ad nauseam while the status quo continues.

That is why it is time to change tack.

Whether we are forced back into a second referendum or a general election, where the First Past The Post system gives substantial in-built advantages to the two main parties, both will require a leap of faith from a fatigued electorate to ensure the democratic will of the British people is upheld. Much like Liverpool’s epic comeback in the Champions League semi-final last week, what we need is belief. We have to become, as Jürgen Klopp described his team, ‘mentality giants’.

So how do we do this? With positivity.

The more we can frame Brexit with the simple and patently true message of opportunity and agency, the harder it will be for the other side to argue any sort of positive of being involuntarily trapped within a declining and deceptive supranational bloc.

Let Guy Verhofstadt strut. Last week’s Storyville documentary on BBC4 where his staffers celebrate turning the UK into a colony could not be more helpful. If you haven’t watched it, I implore you to do so – part one is here and part two is here.

Challenge Remainers on their choice of Spitzenkandidaten: we are gifted with the fact that the candidates  for European Commission President are currently setting out their respective agendas to be Juncker’s successor. How many Remainers do you think would be able to name even a single candidate for Europe’s top job, let alone outline their agenda to be imposed upon the UK forever? Their argument is that being governed by someone who (i) you can’t name (ii) whose plans you really don’t know, and (iii) who we can’t get rid of is irrelevant. Doesn’t this sound absurd?

Ensure that our youth are aware that Brexit is placing our country’s destiny, and their futures, entirely in their hands. Why the leaders of tomorrow would rather subject themselves to an unknowable future under the architects of the Eurozone crisis – which has caused mass unemployment for a generation of young people in the Mediterranean – is beyond me. Show them that Brexit means they are the sole authors of their own destiny.

Communicate that Brexit is progressive. It means changing the way a stagnated and outdated trading system works. Brussels is a one-stop-shop for big business and big banks to manoeuvre in the corridors of power in the interests of profit, not people. The Customs Union facilitates ongoing exploitation of the developing world, trapping three quarters of the workforce of Sub-Saharan Africa in agrarian toil at the behest of 30,000 corporate lobbyists in Brussels.

Explain that while international cooperation on big issues, such as climate change, is vital, this exists within the framework of the Kyoto Protocol. No need for us to remain a vassal state of the EU. Besides, Brussels’ handling of carbon trading is often cynical and corrupt and shifts the blame onto poorer countries. The UK already does better than our continental neighbours and would continue to do so.

Point out that the UK’s standards on workers’ rights, social protection and animal welfare are already some of the best in Europe and would improve further as our new-found autonomy enables even bolder steps.

Show that continental collaboration in academia and research, such as CERN and Erasmus+, are not beholden to EU membership; the large Hadron collider is in Switzerland and Erasmus+ has 34 member countries and 22 partner countries compared to the 28 member states of the EU. Remind our youth with pride that the UK boasts more of the world’s top 100 universities than the rest of the EU and we will always be not just a desirable research and academic collaborator, but a vital one.

There are so many moral arguments for Brexit. We need to tap into this positivity to capture the zeitgeist and take as many people with us as possible.

Show our countrymen and women that Brexit will enable Britain to become a global exemplar and that it is one of the most fantastic, inspirational and exciting journeys to be on.

The post Let’s challenge the Remainers’ slurs and smears with an unashamedly positive Brexit agenda appeared first on BrexitCentral.

Every relationship requires ground rules to work. Whether it is a marriage or a business partnership, a shared understanding of the ‘terms of reference’ are vital to its longevity and success. And yet, if one argued for full homogeneity – a partnership where a business colleague or a spouse completely acceded to every opinion or demand of the other, would we argue that such relationships are ‘perfect’?

Most people would say that in such situations, forcing one party to the other’s priorities creates a false sense of compatibility, and will eventually fold when it can no longer paper over the differences. Business partnerships dissolve and marriages end in divorce. Relations between nations – particularly in matters of trade – are no different. Indeed, the rise of populism and the phenomenon called ‘anti-globalisation’ are a consequence of this breakdown. But is it an indictment of globalisation, or just globalisation done badly?

For thirty years, free trade conditions have existed between Canada and the US. If there ever was a situation where a power imbalance could lead to the abuse of one party by another, this would certainly be it. One country has one tenth of the other’s population, and roughly one tenth of its GDP. The other is, arguably, the most powerful nation on earth by every measure.

The original Canada US Free Trade Agreement – and its NAFTA successor – did not harmonise currencies, courts or laws. There is no NAFTA flag, Parliament or anthem. There is no customs union, or equivalent of ‘Norway+’ or any kind of plus this-and-that. Any cursory reading of the history of these two nations would readily reveal that the United States places great importance in its ability to act independently of other nations, while Canada’s history is that of a nation where sensitivity to American power and influence is ever-present. Any sort of union – customs or otherwise – would be unacceptable to either side.

Despite this, the bilateral relationship is the most successful of any in the global economy. Not perfect, but better than virtually every other pairing. The two-way goods and services trade between the nations in 2017 totalled US$673.1 billion, with the US enjoying a surplus of US$8.4 billion – the equivalent of US$0.01 per dollar. In other words, it almost reaches the ideal for any trade deal – the ever elusive thing known as ‘reciprocity’.

Unlike the NAFTA experience, Britain has harmonised its economic laws and significant aspects of its governance with other EU members. It has, in a legal sense, “gone along to get along.” One would assume, therefore, that the relationship would be even more mutually beneficial than the North American case – after all, on so many measures, we are comparing ‘apples to apples’.

Yet, in the same year (2017), British two-way trade with the rest of the EU was US$800.8 billion, with a trade deficit of $87.25 billion – a loss of nearly US$0.11 on the dollar. When one subtracts the US$15.91 billion (£12.2 billion) surplus Britain enjoys with Ireland – arguably the most similar and compatible of EU member states absent legislative harmonisation – on US$77.72 billion (£55.8 billion) of bilateral trade, the deficit moves to US$103.16 billion on a total volume of US$728 billion – a loss of US$0.14 on the dollar, or a 21% worsening over the status quo.

Those losses have real consequences for the future of globalisation. They do not accrue to those in professions and industries – like finance and legal services – where incomes are earned on the total value of the transaction. They fall squarely upon those who earn their livings in sectors and activities where the deficits equate to substitution for foreign competition – like manufacturing.

Free trade, as a theoretical construct, considers this and argues that, at some juncture ceteris paribus, there is a levelling out and some form of equilibrium is reached. Canada, having agreed to only a free trade treaty with the world’s largest, most powerful economy, has achieved close to that balance. Britain – even after having outsourced so much of its legal, political and bureaucratic functions to Brussels for four decades – is nowhere close to that elusive goal.

The result of this flawed policy is a perfect storm. Forty years of sweeping trade problems under the rug has led to an electorate increasingly angered and motivated for change. Unfortunately, the only ones who can make a difference haven’t exercised that authority in Britain’s right for decades. The current debacle over implementing Brexit demonstrates that lack of vision and the courage.

Critics of Brexit are correct that it is not a magic bullet for Britain’s problems. It may very well be that it will not fix what is broken with UK-EU trade. What it will do is give Britain both the tools to address the economic dislocations it brings, and the freedom to pursue relationships where the benefits accrue both ways – something we Canadians have taken for granted for over thirty years.

The above was originally written for The Red Cell

The post A lesson from Canada: trade freely with your neighbours, but don’t go entering a customs union appeared first on BrexitCentral.

The Prosperity UK Alternative Arrangements Commission, which launched earlier this week, is a serious attempt to address the complexities of the Irish border and break the Brexit logjam. Co-Chair Nicky Morgan and I have decided to take an entrepreneurial approach to solving the conundrum of the Irish border, and ask the private sector for its help.

Our starting point is to find out what is possible by asking a panel of technical experts to develop credible Alternative Arrangements for the Irish border, which can be delivered in a timely fashion, and without the presence of physical infrastructure at the frontier.

The Commission will be made up of a broad spectrum of MPs and Lords, representing many different views on Brexit. The Commission is agnostic on the preferred future relationship between the UK and EU. Our work will be compatible with virtually all of the EU-UK end states currently under consideration and will ensure that the UK retains full flexibility in its future negotiations with the European Union.

There are three common misconceptions about Brexit which are relevant to the Commission.

The first is that Alternative Arrangements will not be necessary. But in every single scenario bar staying in both the EU Customs Union and the Single Market, for goods and agrifood, alternative arrangements of some kind will be necessary. And if we are in that scenario, we would have no ability to execute an independent trade policy or improve our domestic regulations, taking away all the potential economic gains of Brexit.

It is not well understood that free circulation of goods comes from both the Customs Union (CU) – and the rules of the Single Market. If the UK were a full member of the EU Customs Union, this would only address rules of origin. Checks would still be needed on animals, animal products (including processed food), plants and plant products. Technical regulations and standards that define specific characteristics of a product would also require checks. If the UK was in a CU, not the CU (like Turkey), the UK would need movement certificates for all relevant goods. For these very reasons, a customs union on its own does not solve the Irish border question.

Let us look at some of these potential scenarios:

  • Membership of the EFTA/EEA? We will need to prove origin, and consequently, there will be customs checks.
  • Membership of a Partial Customs Union? We will need movement certificates and there would need to be checks for standards, TBT (Technical Barriers to Trade) and SPS (Sanitary and Phytosanitary) issues.
  • A Customs Union and EEA? We would still need movement certificates and some customs checks.
  • A comprehensive Free Trade Agreement between the UK and the EU? Yes, this will require the complexities of the Irish border to be addressed.
  • But what about leaving on WTO terms, a so-called ‘no deal’ scenario? Leaving the EU without a deal doesn’t absolve us from finding a solution to the Irish border. If anything, it makes it more important.

The second misconception is that there is no majority in Parliament for any Brexit alternative. But as avid BrexitCentral readers will know, the Brady Amendment was the only amendment during the recent Brexit debates to gain a parliamentary majority. Central to the amendment was the need to come to an agreed path on alternative arrangements for the Irish border.

The Alternative Arrangements Commission is – and was designed to be – a broad church. We welcome any parliamentarian who is committed to finding a workable solution to the Irish border, which means the UK can leave the EU.

The third misconception is that Alternative Arrangements for the Irish border would be a hi-tech unicorn, dreamt up by some futurologist in Silicon Valley and which would take years to develop. To that, I say, no, absolutely not. We are seeking solutions based on existing, working technology and processes. There just has not been sufficient practical work done on this by the Government or anyone else. And whilst this lack of work is regrettable, it does no good to look backwards.

The Commission has engaged a Technical Panel comprising border and customs experts, practitioners and lawyers with detailed knowledge of Ireland as well as the EU, UK and international trade regulations in order to create draft processes and procedures to fulfil our goal. In addition, the Commission will engage with established technology providers in order to develop a comprehensive set of solutions and timelines for review.

The Technical Panel will address the most challenging aspects of the Irish border including small traders, tax issues, security and movement of people, trusted trader schemes, rules of origin, financial settlement and issues relating to Sanitary and Phytosanitary Measures (i.e. treatment of food and plant-based goods).

The Commission is seeking solutions that are both realistic and sustainable and recognises that their formulation and implementation will require the engagement of many stakeholders in the UK, the Republic of Ireland and Europe. Central to the proposals will be a commitment to protecting the Good Friday Agreement.

There are no easy answers with Brexit, but I hope this Commission into Alternative Arrangements is the impetus for finding both the technical solutions and the political consensus for a deal with the EU. We owe it to the country, and Northern Ireland in particular, to do everything we can to create a seamless border in Ireland. Just because it has not been done before, does not mean it is impossible.

Anyone wishing to offer their expertise or to make a submission to the Commission can do so by emailing Greg Hands.

The post Here’s how I want to address the complexities of the Irish border and break the Brexit logjam appeared first on BrexitCentral.

At a crucial moment in the battle to leave the European Union, I am fighting to keep a dream alive.

It is a vision that could increase the UK’s economic competitiveness, boost international trade, create thousands of jobs, and rejuvenate many of Britain’s coastal communities and regions all at once, as set out in a brilliant paper by my colleague Rishi Sunak, it is The Free Ports Opportunity.

For the last two years, Teesside has been buzzing about the idea of hosting a Free Port at Teesport. This idea has huge support from the local business community and from local politicians like the Tees Valley Mayor Ben Houchen. The former Brexit Secretary David Davis visited our port last year to support the case.

But now this dream is in danger of dying – because of Labour’s demand that our exit from the EU must involve remaining in a Customs Union.

To understand why, you need to understand what a Free Port is.

A Free Port is an area that is physically within a country but legally outside it for customs purposes. Consequently, goods that enter a Free Port do not incur import duty. Instead, import duty is only paid if and when goods pass out of the Free Port and into the domestic economy.

This offers a number of advantages. Goods can be imported, processed, and then re-exported without incurring any duty. This incentivises international businesses to use the Free Port as part of their supply chain, thereby stimulating domestic manufacturing and creating jobs in the process. Free Ports also often offer their users a number of additional advantages, including tax reliefs and a simplified regulatory environment.

They are not a novel or untested idea. Indeed, there are now approximately 3,500 Free Ports operating in over 135 countries.

The UK is unusual in that we have no operational Free Ports. But there is a really compelling economic and social case that we need them.

Free Ports would make post-Brexit Britain a hugely attractive location for international businesses to process and trade their goods. Wherever Free Ports have been implemented properly around the world, they have demonstrated this effect.

Just look at how quickly and impressively the Jebel Ali Free Zone in the United Arab Emirates has transformed Dubai. In the space of just a few decades, this Free Zone has brought unimaginable wealth to the country. It now hosts 7,000 global companies, employs 145,000 people, and accounts for around 40% of the UAE’s total Foreign Direct Investment.

Jebel Ali may be a unique example, but Free Ports have also demonstrated their worth in highly developed and mature economies. The growth seen in Free Ports in the US, for example, has outperformed the US economy as a whole. Indeed, Rishi Sunak’s report predicts that if a Free Port programme in the UK were as successful as those in the US, we would create an additional 86,000 jobs.

Here in the UK, such a boost to our great port towns and cities is sorely needed. Half of the twenty most deprived UK districts are located on our coast. The European political project offered these communities very little – indeed, the Commons Fisheries Policy has been partly responsible for their demise. It was unsurprising, therefore, that almost 100 of the 120 English parliamentary constituencies that have a coastline voted to Leave in June 2016.

A report produced by the consultants Mace Group last year looked at what a programme of ‘supercharged freeports’ in the North of England might mean for the regional economy. It found that such a programme, once established, would:

  • Boost UK trade by nearly £12 billion a year
  • Create 150,000 extra jobs across the North
  • Provide a boost to Northern powerhouse GDP of £9 billion a year (equivalent to £1,500 a year for every household in the North)

Although I’d eventually love to see Free Ports dotted around the entire UK coastline – like giant magnets pulling in container ships from every direction – I won’t miss an opportunity to fly the flag for Teesport in our bid to be the first new Free Port in the country.

Teesport is a hugely ambitious port, run by the extremely professional and impressive team at PD Ports. The container platform at Teesport has seen £120m invested over the past seven years, bringing improvements in infrastructure and state-of-the-art equipment to expand capacity. It would be the perfect site for a Free Port.

However, leaving the EU – and leaving it properly – is crucial for this opportunity to be realised.

This is where Labour’s demand for a customs union – and the Government’s apparent flirtation with it – is so dangerously misconceived.

A Customs Union would give the EU unilateral control over our trade and customs policy, and hand them power over the UK’s state aid rules. This would completely undermine any prospect of setting up meaningful Free Ports in the UK post-Brexit, as the necessary allowances would almost certainly be found to breach state aid requirements.

By pursuing their ideological drive for close alignment with the EU, therefore, the Labour Party is letting down many of their traditional voters in the UK’s most deprived regions, and denying them the opportunities that would otherwise be available if their decision to leave the EU were to be properly respected.

In areas like the North East, the Labour Party, with their narrative of gloom and negativity, has dampened the natural British spirit of enterprise and opportunity for too long. Denying our coastal communities the Free Ports opportunity because they are too afraid to let the British people govern themselves is just the latest expression of this defeatism.

We can and must do better – but we must reject the Customs Union if we are to do so.

The post Labour’s demand for an EU customs union risks killing the dream of Free Ports in struggling coastal communities appeared first on BrexitCentral.

Following the Easter break, Parliament may soon once again debate our future relationship with the EU. Despite numerous votes against the idea of the UK being in a or the Customs Union with the EU, it appears many still believe that some form of customs union is necessary to break the Brexit deadlock. This seems to be because of the perception that, in a customs union, there are no tariffs or non-tariff barriers to trade between its members. Unlike a free trade area, members of the Customs Union impose a common external tariff on all goods entering the union.

However, a customs union does not, by itself, lead to frictionless trade (only rules of origin checks would be avoided, and in the case of a partial customs union, some checks in the form of movement certificates would still be required) because the bulk of the checks come from other rules to be found in the EU’s Single Market. In the case of Turkey – the non-EU country that does have a partial customs union with the EU – not only are movement certificates required, but Turkey has committed to the EU acquis. The Turkish arrangements were intended as a way-station en route to full EU membership.

But there are strong reasons not to be in a customs union with EU.

Firstly, it is a myth that the UK would have any significant say in the operation of the EU Customs Union if we are not a fee-paying member of the EU. Those who believe we would have a say seem to assume that we would have more of a say than we currently have as one of 28. Since it is unlikely that the Commission has fallen asleep, there is no reason why a departing member state would be rewarded in this manner.

Secondly, the EU would set the common external tariff and the trade policy to suit them, not the UK. They would prioritise protecting French and German agricultural goods, and put in no effort to open up markets outside of Europe to UK financial services or even Scotch whisky.

The UK would also not be able to have its own meaningful and independent trade policy, and this would lead to a huge loss in British influence around the world. Trade is a big part of foreign policy, and the UK frequently uses its ability to change EU trade policy with various asks we might have in security cooperation when talking with other countries. Trade is a vital instrument of diplomacy.

Furthermore, the EU would run our trade remedies (or trade defences) against dumping of goods, most frequently from China. It is very doubtful that the EU would give much priority to defending our industries – those who pay the bills would be the priority.

Finally, and most importantly, in new trade agreements the EU would be able to offer – via the Customs Union – access to Britain’s 65 million consumers, without any equivalent access for UK goods and services. The US and the EU have announced their intention to re-start trade talks with each other. Even though the US is our largest single trading partner, we wouldn’t have a seat at the table. Worse still, if the EU lowered tariffs for US goods, or changed its regulations to allow in particular US goods which were previously not allowed, the UK would have to follow and seek to negotiate for ourselves what we need with no leverage.

Many say that we could agree a customs union with the EU and have a greater say than we have now. This is pure fantasy. The EU would not give the UK a greater say outside the EU than the member states have themselves. We will not be able to defend our interests better in a customs union than we could as members of the European Union. If we are also to align our regulations closely to the EU’s in a number of areas, we will certainly not have a say in how those regulations are made. 

Currently, in the European Economic Area, members must accept the EU’s acquis in the relevant areas and do not have the ability to veto or change those regulations. Norway discovered this to their cost when they refused to implement the third postal directive and found themselves punished in unrelated areas like fishing. Even the Swiss, who are not even EEA members but have a series of agreements with the EU, have found themselves at the short end of EU negotiations. It would be this way for the UK in these types of arrangements – and the UK would be powerless to resist.

The real solution to the Brexit impasse is this: to find alternative arrangements on the Irish border; and to negotiate a deep and comprehensive Free Trade Agreement between the UK and the EU as equals. The UK and the EU can remain friends, while the UK also has its own independent free trade policy going forward, to take advantage of growing markets in Asia and around the world.

The post Remaining in some form of EU customs union is not the answer to the Brexit deadlock appeared first on BrexitCentral.




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