It’s impossible to know for certain what deal the Prime Minister and her advisers are planning to spring on the Cabinet, Parliament and the country over the coming days; all that’s for sure is that they are, we are told, about to come up with something. The signals have, however, been clear enough, so that a pretty good guess can be made: their plan is to come up with a last-minute triumphant announcement that the ‘backstop’ problem on the Northern Ireland border issue has been resolved, and in the UK’s favour.
Whether they will be correct or not in announcing that is irrelevant; that’s what they’ll announce – and indeed, it is perfectly possible that some major concession will be offered up by the European Union on this point, since the border ‘problem’ was always a ruse, designed to focus attention on a non-problem while funnelling the negotiations into an agreement that would include membership of the Customs Union (and, to all intents and purposes, the Single Market). If the Northern Ireland border was a problem, then it could be resolved by us staying in the Customs Union; ergo, we agree to stay in the Customs Union thus ensuring that the Northern Ireland border is not a problem. Whatever the reason for the backstop imbroglio, it is in any event a chimera – something that has become, in the most ludicrous way, the tiny tail that wags the enormous dog of Brexit.
The border in Ireland already divides two jurisdictions with different tax regimes, products and the like. It should never have become an issue; the authorities on both sides already monitor it, to prevent smuggling, but through intelligence-led policing, not physical border structures. It is a border that the UK, the Irish and the EU have all confirmed will never be hard.
Now it has become a pretence for bouncing a post-Brexit UK into the Customs Union, complete with further surrenders on fishing and financial services. That reputable people apparently take the backstop issue seriously is a puzzle. The backstop is nonsense; both sides have repeatedly confirmed that they will not impose a hard border between Northern Ireland and the Republic of Ireland. The issues of wandering cows and travelling milk can be resolved through agreements on sanitary and phyto-sanitary standards, not through physical border impedimenta. The amount of trade involved is negligible. The issue is a fraud and should be treated as such.
Some assert that the Prime Minister is desperate to keep us in the Customs Union because of promises, never published, that Greg Clark made to the auto industry two years ago. Others point to paragraph 49 of the December agreement with the EU (where the backstop is promised). This ignores the next paragraph, paragraph 50, inserted at the insistence of the DUP, which basically negates any claim that paragraph 49 is binding. Regardless: the Prime Minister and her advisers’ major mistake seems to be that they believe that if victory can be declared regarding the backstop, they can then come back from Brussels, waving a piece of paper and asserting a good deal has been agreed, because the backstop has been resolved.
It won’t work. Way before backstop became the cause du jour of the negotiations, Chequers had already reared its ugly head, and Chequers is what this whole false angst about the Northern Ireland border has been about; to provide a reason for the UK to stay in the Customs Union after Brexit. Chequers is no good; enough people know it is no good; it won’t be possible.
There are many reasons why the UK must avoid at all costs being in the – or a – Customs Union. This article by Graham Gudgin published on BrexitCentral yesterday is a comprehensive tour d’horizon of these reasons. MPs – both Remainers and Brexiteers – understand all that, enough of them to preclude its being accepted by Parliament. And yet, when the Irish border “issue” has allegedly been put to bed, with some sort of faux “backstop” agreement, Chequers will, apparently, remain as the Government’s negotiating stand for Brexit: a proposal that we remain tightly bound into the Customs Union (and for all intents and purposes, the Single Market) – goods, fisheries, banking and all.
There have been some eyebrow-raising odd leaks from “EU officials” in recent weeks, claiming that the EU’s arm was being twisted to force them to graciously allow the UK to stay within the Customs Union. Some may find that a joke – since the UK in the Customs Union is, in theory, precisely that vassal status that the EU should want the UK to be in (i.e. having German goods and French produce stuffed down our throat, with no say in the rules that govern competition in such goods and produce).
Nonetheless, I’m told that M. Barnier has assured delegations from the UK, with the utmost sincerity, that he does not wish the UK to be in the Customs Union. That is, however, what looks like is being offered by the UK in return for a “solution” to the Irish border. It is, also, precisely where the Government’s fatal error lies: enough Members of Parliament have made it very clear that they are not going to vote for such a deal, so any deal built around a Chequers view of the world will fail in the so-called ‘Meaningful Vote’ that we expect to take place in the House of Commons in the coming weeks.
The Chequers construct involves keeping the UK within a Customs Union and (as the news from the City of London illustrates) also the Single Market – for an extended, possibly indefinite, quite possibly permanent, length of time. It has been identified over and over as something that a large group of MPs will not accept.
How many such MPs? Well, there are so far 51 who have signed up to the “Stand Up for Brexit” pledge; there is a handful of Labour Leaver MPs; there are 10 DUP MPs; there are the ten or so further Scottish Tory MPs from fishing communities who know it would be electoral suicide to vote with the Government on this; there are the Remain-backing Conservative MPs, such as Jo Johnson, who now recognise that Chequers means vassalage; and there are most likely several Cabinet Ministers who will finally vote with their conscience by resigning their post and then voting against the Government in the Meaningful Vote.
The Labour Party says it will not support the Government in the Meaningful Vote, and it cannot be imagined that there will be enough renegade Labour Remainer MPs prepared to support the Conservative Government to overcome this group of anti-Chequers MPs so the Government, with its thin majority, faces an anti-Chequers vote that in total adds up to 60; 90; maybe many more.
What will the Prime Minister do when the reality of this becomes clear? What will happen if and when a Meaningful Vote on a Chequers-based deal is lost? The most likely outcome of such an event has to be that we would shortly thereafter have a new Prime Minister. If not, and somehow – however unlikely that may be – she survived the defeat of her policy (perhaps by ditching her clique of hardcore Remainer advisers, just as she ditched Nick Timothy and Fiona Hill after the 2017 election fiasco), then she would have the same choice as a new Prime Minister would: either to hunker down and start properly preparing to leave the European Union on WTO terms on 29th March next year; or to seek some kind of unholy alliance in Parliament with the Labour Party that allowed her to sue for peace with the EU by asking for an extension (temporary or ongoing) of Article 50 – with all that implies for a never-ending failure of the UK to exit the EU
The former choice carries the possibility of some – but if truth be told, not a lot – short-term pain, with a saving of £39 billion (enough to fund roughly 20,000 policemen and 20,000 teachers and 20,000 nurses for the next 20 years); the latter would rent the Conservative Party (the vast majority of whose voters side with the “Stand Up for Brexit” MPs) in two, with disastrous likely consequences in 2022. The Conservative Party might not recover for a generation or more.
It is late – very late – but the Government must urgently reconsider its position, and move to, first, making clear that a WTO terms exit is very much in contemplation, and second, offering as an alternative to that a Canada-style deal with the EU, as described in Plan A+ – a clearly laid out and workable plan for a Free Trade Agreement that builds on the already solid work that David Davis and Steve Baker did while still in Government.
The EU has indicated it is prepared to accept such a deal; it is the only deal that can pass a Meaningful Vote in the Commons; it is extraordinary that the Government has not already pivoted to such a deal. Anything else, and the current shambles will just get even worse: if and when Chequers comes to the Commons, it will be defeated and the Government, as currently led, will fall.
The post Ministers should not believe a resolution to the bogus ‘backstop’ problem clears the way to a deal appeared first on BrexitCentral.
What is going to happen if the Prime Minister’s Brexit deal fails to secure parliamentary support? Are we really facing a catastrophic “no deal” scenario? Very probably not. “No deal” – at least in its extreme form – is so obviously in nobody’s interest that it is very unlikely to happen.
It is much more probable that Brexit will go ahead on 29th March 2019 but that – pending the outcome of further negotiations – common sense and practicality will prevail. Most existing arrangements for trade and other forms of co-operation will continue substantially as they are for the time being. Albeit with some disruption, negotiations to find workable solutions for the future will continue.
Parliament and the UK generally – and the EU27 – will nevertheless have to make up their minds what they are aiming for. So far, the main ways ahead – both for Parliament and maybe for the electorate, if we have either a general election or even a second referendum, have been portrayed as a choice between reapplying to re-join the EU, accepting some variant of Chequers, or “crashing out”.
Not nearly enough has been heard recently of Canada+++. This could be a big mistake because – especially in the new situation in which we may well find ourselves – Canada+++ has very substantial advantages over other options.
First, it has always been the most obvious way of fulfilling the result of the EU referendum and all the promises about honouring its result that were made at the time, thus abiding by the critical democratic decision taken in the June 2016. This approach is very much in line with the policy laid out in the Prime Minister’s Lancaster House speech, before the Brexit negotiations got side-tracked into Chequers by the outcome of the 2017 General Election.
Secondly, with caveats about the Irish border discussed below. Canada+++ is an option which the EU27 have repeatedly offered to us – not least by Donald Tusk in March this year and by Michel Barnier again just recently. It is easy to see why the EU27 should favour this approach. If the UK is out of the Single Market and the Customs Union, the integrity of these crucial components of the EU structure would not be compromised or destabilised. This has always been a primary – and understandable – aim of the EU27 negotiators.
Thirdly, Canada+++ would supply Leavers with pretty well all that they thought they were voting for in 2016, while also providing Remainers with an outcome with which at least the more reasonable among them ought to be able to accept, especially if trade between the UK and the EU27 was on the widest possible free trade basis.
Trade would not be quite as frictionless as “free movement”, but pretty close to it. Supply chains would not be disrupted. It is worth bearing in mind that although 36% of the bought in components for the UK car industry come from within the EU, 21% arrive from outside, imported into the UK on WTO terms.
Fourthly, Canada+++ has a better chance than any of the alternatives of providing the UK with a stable long-term relationship with the EU, reducing differences of opinion and approach to Europe from being a constant source of friction and disharmony, distracting our MPs and many other people from addressing the many problems faced by the UK other than our relations with the EU27.
Fifthly, Canada+++ may provide us with a way of dealing with the Irish border issue. In a new negotiating environment, we would no longer be under the obligation to go along with the concessions made by the UK in December 2017. The UK could then agree unilaterally not to have a hard border, to implement electronic pre-clearance as soon as practical for larger companies, to provide local traders with exemptions, and to recognise that there might be some slippage to start with. If there are no tariffs to collect, this seems a small price to pay to overcome an otherwise intransigent issue.
The reason why Canada+++ has slipped down the agenda is because the Parliament elected in 2017 had no majority for any arrangements which left us outside the Single Market and the Customs Union. Now that everyone can see that trying to leave the EU while staying in either one or both of these constraints simply does not work, the advantages of a free trade deal with the UK outside both of them are increasingly obvious.
Of course, Canada+++ is not absolutely ideal from every point of view. Nothing ever is. But from the perspective of both the heavily divided Conservative and Labour parties, it now looks like a much better option than anything else on the horizon.
The post It is time the Conservative and Labour parties united in support of a Canada+++ deal appeared first on BrexitCentral.
Since as far back as 2016, the Treasury and other elements of the UK Government have been pushing for the UK to remain in some form of customs union with the EU after Brexit. Recent weeks have seen this idea again coming to the fore, with talk of a ‘temporary’ customs union to be created after the ‘transition period’. Those proposing this idea put it forward as a solution to what they see as the problems of Brexit. In reality, it would be in no way a solution, and it would create a whole new raft of problems.
The main arguments for a customs union are that it will guarantee tariff- and quota-free access for UK exports to EU markets and that it will avoid UK firms having to bear customs and ‘rules of origin’ costs that they would face in a free trade agreement (the latter involve the costs of ensuring your product has enough ‘local’ content to qualify for zero tariffs). On top of this, it is claimed that a customs union solves the problem of the Irish border.
In my view, the purely economic arguments in favour of UK customs union membership with the EU are weak:
- There is not much evidence that a customs union would be more beneficial for UK-EU trade than a standard free trade agreement (FTA). The study by Cippolina and Salvactici (2006), based on a large number of estimates of the trade-creating effects of FTAs and customs unions, finds no evidence that customs unions outperform FTAs. The similarly large-scale study by Head and Mayer (2013) found membership of the EU customs union had modest trade-boosting impacts (15-20%) but that these were often smaller than the trade-creating effects of FTAs such as NAFTA.
- Rules of origin costs are often hugely overstated. Claims that rules of origin costs for UK businesses in case of a UK-EU FTA could be as high as 7-8% of trade values are far too high. A careful study by the WTO points to the cost of compliance with rules of origin being less than 1% of traded values, and often negligible.
- Costs of customs processing are also massively exaggerated. Claims by HMRC earlier this year that customs costs could total 1% of UK GDP or 6% of trade values are anything from five to twenty times too high, being based on a mixture of double-counting (now admitted) and dubious claims about the future costs and numbers of customs declarations.
- It is not even clear that a ‘new’ UK-EU customs union would entirely remove customs-related costs. The EU’s customs union with Turkey has not led to ‘frictionless’ border trade – queues at the border are often lengthy. Formal customs checks within the EU only ended in the early 1990s due to the Single Market Programme.
- The UK’s foreign trade structure is not suited to a customs union. Customs union arrangements have some logic where one economy does a very large share of its trade with another. But the EU now represents only around 45% of UK goods exports. And this share has been dropping rapidly as the EU grows slowly compared to the rest of the world. Twenty years from now it is likely that the EU will take only around a third of UK goods exports.
- The UK would remain locked into the EU’s highly protectionist agricultural trade system. While average EU tariffs are not very high, they are often steep on agricultural products. This represents a heavy effective ‘tax’ on UK consumers, especially given the UK’s status as a large net food importer. UK consumers are denied the choice of cheap food from outside the EU and pushed towards consuming expensive products from within it. This cost is high at 0.5-1% of GDP – almost certainly higher than possible rules of origin costs for manufacturers under an FTA.
Moreover, the strategic/political arguments in favour of a customs union are even less compelling:
- Entering a customs union would make meaningful trade deals with other economies impossible. While there might be scope for very limited deals on trade facilitation or deals on services the scope even for these would be very small. Why would India or the US be interested in a deal on services (potentially benefitting the UK) when the UK had nothing to offer on the goods side?
- The EU would be effectively able to ‘sell’ access to UK markets with no reciprocal benefits for the UK. The EU-Turkey customs union is a good example of this. When the EU does trade deals with third parties, these third countries gain tariff-free access to Turkish markets but Turkish exporters do not gain automatic reciprocal access to these third countries and Turkey has to try to negotiate parallel arrangements (not always successfully). Notably, Turkey came close to cancelling its customs with the EU when the EU was negotiating the TTIP trade deal with the US. Britain in a customs union would be in the same position as Turkey.
- A future customs union would jeopardise the UK rolling over existing EU FTAs. Under a Turkey-style arrangement, the UK would be reduced to trying to replicate any new EU FTAs with third countries to get access to the markets of the EU’s FTA partners – but these partner countries would have little incentive to agree having already got access to UK markets. For the same reason, the prospect of an open-ended future UK-EU customs union could undermine attempts the UK is currently making to transform existing EU FTAs with countries like Korea into UK-only FTAs. Current EU FTA partners would continue to benefit from free access to UK markets under a new UK-EU customs union – so they would have no incentive to negotiate new UK-only FTAs.
- Britain would have no voice at future WTO discussions about global tariffs. It would simply have to accept whatever the EU agreed.
- The EU would be able to damage UK business using anti-dumping actions. Under a new UK-EU customs union the EU would be likely to be in charge of the UK’s ‘trade defence’ measures such as ‘anti-dumping’ actions (where large tariffs are levied on countries deemed to be ‘dumping’ their goods on the EU market). Again, the EU would make anti-dumping decisions without a UK say and such decisions could damage UK business and consumers. So, engineering and vehicles manufacturers could be hurt if punitive tariffs were imposed on some steel imports, and consumers hurt if food or other imports were raised in price by anti-dumping duties. Worse still, the EU might well insist on being able to impose anti-dumping duties on the UK as well – as is the case with Turkey.
- A customs union would not simply cover tariffs and quotas, i.e. a ‘bare bones’ arrangement. The EU would also require the UK to follow EU rules in a broad swathe of policy areas including competition policy, environmental policy and social and labour standards – without any say at all in how these rules were set. This would not only be a huge loss of UK sovereignty but also dramatically narrow the UK government’s freedom of action in key economic policy areas.
- The ‘temporary’ customs union would be unlikely to be temporary. The EU has made it quite clear in recent days that it would require such an arrangement to be permanent. The proposed withdrawal agreement currently being negotiated between the UK and EU (and which would potentially contain proposals for a ‘temporary’ customs union) looks unlikely to have a unilateral exit clause, leaving the UK tied to the customs union indefinitely.
- A customs union does not solve the Irish border ‘problem’. Customs checks only represent a small element of potential border checks at EU borders today. A bigger issue is generally product conformity and other single market rules. This is another reason why any customs union would require either effective UK single market membership (see above) or border checks between Britain and Northern Ireland and/or Britain and the rest of the EU.
In sum, a customs union arrangement whereby the UK contracted out huge areas of trade and economic policy-making to the EU would be totally unsuitable for an economy like Britain’s.
Customs unions arrangements may work well for small economies that do an overwhelming share of their trade with a large neighbour (Liechtenstein and Switzerland for example). But the UK is the world’s fifth largest economy, with a diverse pattern of foreign trade and with business and consumer interests that will often diverge from those of the EU.
It is no accident that Canada and Mexico are not interested in joining a customs union with the US, despite their strong trade orientation towards the US. They know that the loss of economic independence involved would be far too great to justify what would probably be quite a modest reduction in border frictions. The calculation should be the same for the UK.
Supporters of a customs union have suggested the UK could somehow retain some influence over decision making in such a new UK-EU arrangement. But this looks like a fantasy. It would be legally and politically difficult for the EU to grant any significant decision-making power to the UK. The best the UK could hope for would be some kind of observer status (again as proposed for Turkey). But the arrangement would remain a thoroughly one-sided one where, at the end of the day, the UK would have no power either to veto potentially damaging agreements or push for deals that benefitted it.
Entering a new customs union with the EU would be a backward-looking step for the UK, with a massive loss of policy independence and flexibility and businesses and consumers at risk of having damaging decisions imposed on them with no say in how those decisions were taken. It would be a significant downgrade from the UK’s current position whereby it retains some authority over EU trade policy. It would also give the UK minimal additional policy freedom in the trade and economic policy area. Meanwhile the benefits would be small and mostly accrue to a handful of industries (the car industry, for instance, accounts for less than 1% of UK GDP). Overall, it is hard to imagine a more sub-optimal policy.
The eyes of the world are upon the British Parliament as we move ever closer to the date set for leaving the European Union. The Chequers proposal is a test of the trust that the British people decided to place in Parliament when voting to leave the EU. Either MPs will shun that trust by accepting the Chequers proposal or MPs will champion the national interest and the democratic mandate to leave the EU without a new deal.
The people consistently voted for a free and sovereign UK, both at the 2016 referendum and the 2017 general election, and politicians must be held to account for their commitment to leave the European Union.
In rejecting Britain’s membership of the EU, the people decided the UK’s policy. We need to put the decision behind us and the national interest ahead of us. The national interest is greater than any political party or special interest lobby group. The national interest and the outcome of Brexit is Britain’s place in the world on our own terms; it is the confidence, ambition, dynamism and agility which can once again be virtues of a global Britain.
Leaving the EU opens up the world to Britain, and opens up Britain to the world, beyond our immediate friends and neighbours across the Channel. It is for this reason that any deal, policy, treaty or political arrangement with the EU which comes into effect as we leave, must be commensurate with our standing as a sovereign nation on the world stage. This is why Chequers must be rejected. Chequers means EU control over Britain, as would remaining in the Single Market and Customs Union. Chequers does not mean Leave.
The Chequers common rule book compels the UK to comply with EU regulations without any say. Binding the UK to a Customs Union creates barriers for our businesses which grow by trading with other nations. And a continued period of uncertainty in ‘transition’ means the EU can impose its will upon the UK without an ability to stop them.
Tying the UK to EU Single Market rules defies economic sense and the best interests of UK business. Small and medium sized businesses cannot afford to lobby Brussels, though they can adapt quickly to maximise the benefits of business outside the EU. It is the large multinationals who make up the business groups who lobby to remain, despite the interests of UK business as a whole.
In seeking to placate the EU instead of working with them as an equal partner, the UK falls into the trap of the EU ideologues who will feel no shame in positioning Britain as a vassal state, warning other states of the punishment that awaits if they seek independence. The EU’s institutions are a natural concern to Brussels; the UK does not wish to harm those institutions – we simply see no future in them for us.
The British people voted to Leave without a new deal on the table, rejecting remaining in the EU with the empty deal that Prime Minister David Cameron had agreed. If there is a mandate for a new deal, it is for a free trade deal as outlined in Theresa May’s Lancaster House speech and the Conservative Party manifesto. Leaving the EU with a free trade deal is a worthy ambition, but we do not need a new deal before we leave, and we can thrive without one.
As the Government has no policy to leave the EU with a mutually beneficial free trade deal, politely ceasing negotiations and pursuing a Brexit without a new deal is in the national interest. Halting talks with Brussels would strengthen Parliament’s hand and taking control of our departure provides the people and our businesses certainty. We can govern ourselves once more and begin trading on WTO terms. There would be no more payments to the EU and the £39 billion promised to Brussels in exchange for a new deal would remain in our hands.
Michel Barnier is right about one thing: the clock is ticking. When the time comes will our MPs stand on the side of democracy by voting down the Chequers proposal? Or will our MPs lay down and let the EU machine trample on their principles, crush the unequivocal mandate from the people to leave the EU and destroy all trust in politics?
When the covers and scaffolds are removed from the House of Parliament, will it be repaired in all its glorious splendour, a beacon to the watching world, a shining example of representative parliamentary democracy? Or will the building be reduced in status to a museum to the democracy that was, the democracy that could have been, the looming statue of government failure and a symbol of political decline? As we restore the fabric of our Parliament, we must restore the institution it represents, the parliamentary institution in which the people put their trust in when they voted to leave the EU.
Few MPs knew when they first took their seats in Parliament that they would bear ultimate responsibility for the governing of our great nation; they were elected when so much power and responsibility resided outside of our shores in the many bodies of the EU in Brussels. Our MPs may not have expected such a responsibility; however, the people expect more from their MPs, more from Parliament, more from democracy, and in this the people show their confidence in the institutions, businesses and people of Britain. It is time for our MPs to take up that confidence and that trust, to seize the agenda that a truly global Britain can realise, and the benefits we can maximise outside the EU.
The country voted to Leave the EU with the largest democratic mandate in the history of our great nation. MPs must answer that call, trust in the people as they were trusted and reject the Chequers proposal. I urge MPs of all parties to accept that Britain will leave the EU on 29th March 2019, without a new deal with the EU, and start trading globally on WTO terms. Leaving on those terms means we have a new deal for the people of Britain; we will have control of our laws, our borders, our fishing waters, our taxes and our regulations.
The sooner Britain truly leaves the EU, the sooner Parliament can devote its efforts and attention to the challenges our country faces at home, challenges which we can solve together when Parliament is once again sovereign, when we are outside of EU control and free to prosper.
The post The people gave our politicians their instructions – now they need to obey them appeared first on BrexitCentral.
The wide-ranging Free Trade Agreement with zero tariffs proposed by Donald Tusk in March foundered on the supposed problems of the border between Northern Ireland and the Republic of Ireland. In response, the Prime Minister proposed in her Chequers document to bind the UK to a “common rulebook” – really the EU’s rulebook – for goods in order, she said, to ensure continued frictionless trade between the EU and the UK.
This attracted little political support in the EU because it was seen as “cherry-picking” and even less in the UK for leaving us as permanent, non-voting rule-takers. The proposals were rejected on a technical level by the professional customs body, CLECAT, whose 19,000 members handle 80% of European customs transactions. They found that Chequers “would require five to ten years before it can be applied in practice… new/non-existing systems and procedures will potentially lead to more complications.”
Reports this week suggest that the Prime Minister has now gone even further to secure a deal at any cost. Her new “backstop” proposal is for an open-ended customs union. She has ruled out customs union membership 21 times, so this would represent a humiliating defeat. The UK would have submitted to everything the EU demanded, paying them over £40bn for the pleasure and completely ceding our international trade policy to Brussels in clear breach of the Conservative Party’s manifesto commitments.
How has the Prime Minister got into this mess? Her motivation – a seamless border – is well founded, but her premise is that the only way to guarantee this is by some new, complicated customs arrangement. This is simply not true.
Firstly, only 4.9 per cent of Northern Ireland’s sales are with the Republic of Ireland, representing under 0.2 per cent of UK GDP. We should not, surely, give up our law-making capability over a wide area for the sake of that tiny fraction.
Secondly, there is already a border now – for tax, VAT, currency, excise duty and security – managed by technical and administrative procedures. These existing measures provide the foundation to maintain frictionless trade after Brexit. The Heads of HMRC and the Irish Revenue have confirmed this, saying that any additional requirements can be achieved without any new facilities at the border.
To see why, consider the range of simplifications to customs procedures and administrative obligations available under EU law. These are an ideal fit for much cross-border trade, characterised by regular, repetitive shipments – the same milk, from the same cows, from the same farm, in the same tankers, on the same roads, to the same destination. These obligations typically require only a one-off registration and, for regular trade, negligible costs of repetition. Companies already have to report all cross-border trade for VAT purposes, and the current system provides a framework for streamlining customs controls. Even small traders can – and currently do – take advantage of a voluntary registration to claim back VAT.
The agri-food sector accounts for just under half of all cross-border trade. Inspections can be necessary for these products but can, in practice, take place many miles from the physical border. I saw this myself when I visited Rotterdam, Europe’s largest port, this week. The Border Inspection Point is 40km from the docks and deals with 30,000 shipments annually from all over the world, including from outside the Single Market and Customs Union. There, 97-98 per cent of chilled or frozen meat and fish are cleared without physical inspection. Only 2-3 per cent are physically checked, based on intelligence, and 90 per cent of those shipments are cleared well within an hour.
The simplest way to avoid the need for animal checks between Northern Ireland and the Republic of Ireland is by maintaining an all-island biosecurity zone for disease prevention and public health. I visited the facility where inspections already take place for livestock shipments from Great Britain at the port of Larne. There are clear lessons from Rotterdam as to how such checks can be managed efficiently and how intelligence can minimise the need for lengthy inspections.
The Prime Minister’s convoluted customs proposals are unnecessary. Existing technical and administrative processes can ensure that a frictionless border is maintained after Brexit, not as a temporary, cobbled-together “backstop” but as a durable, long-term arrangement which allows for the wide-ranging, zero-tariff trade agreement which Donald Tusk proposed. That, surely, is the optimal solution for all sides.
The post The Prime Minister must not go for a deal at any cost appeared first on BrexitCentral.
The Chequers proposal had two aims: (1) ensuring frictionless trade and (2) solving the Irish border problem. Its proposal to keep the entire country (not just businesses that trade with the EU) perpetually locked to EU standards in which we have no say, and from which we cannot depart to enable us to agree trade deals with other countries, was totally condemned by both Leavers and Remainers.
The ‘common rule book’ was rejected by the EU for ‘cherry picking’ and undermining the Single Market; and the ‘combined customs territory’ was rejected by the EU which, justifiably, refuses to delegate its tariff collection to a third party. So Chequers was on life-support. The addition of “temporary” all-UK membership of the Customs Union is unacceptable to us without a time-limit and unacceptable to the EU without a backstop-to-the-backstop that could ultimately separate Northern Ireland from the UK. Finally, the idea of an extended transition (that wouldn’t necessarily solve the Irish border problem) has been universally rejected by all wings of the Conservative Party.
Even if Theresa May managed to pile in enough further concessions to solve the Irish border problem (if it really is a problem, not just a political device), that wouldn’t be the basis for a deal unless we were prepared to sign the Withdrawal Agreement and contract to pay £39 billion with no understanding of the nature of any future trading relationship (since Chequers has been rejected by the EU). Not even Mrs May – surely – would do that?
So, fortunately, through her successive and futile concessions to the EU, Mrs May seems to have put the final nail in the coffin of the Chequers plan, and left the way open for a fresh and possibly more sensible approach.
Boris Johnson’s Plan B or Canada+++, or whatever you want to call it, has been dismissed by critics, including Mrs May, as ‘fantasy’ because it does not solve the Irish border problem. Up to now, Mrs May has been able to claim that ‘only my plan can solve the Irish border problem’. That argument is now demolished.
So now a “no-deal” seems increasingly likely. There are some potential upsides: we will save most of £39bn (not all, because legal obligations will be honoured) and be free at once to negotiate Free Trade Agreements around the world. Downsides include the cliff-edge in March 2019 (although the Government is now, belatedly, making serious plans for no-deal); trading with the EU on WTO terms until a free trade deal is agreed with them; potential UK/EU border friction (at Dover, etc); and having to deal with the Irish border.
The exact wording of the backstop agreed in December 2017 was:
“In the absence of agreed solutions, the United Kingdom will maintain full alignment with those rules of the Internal Market and the Customs Union which, now or in the future, support North-South cooperation, the all-island economy and the protection of the 1998 Agreement.”
As Boris Johnson and David Davis were reportedly told, this wording and the implied definitions were pretty narrow and meaningless, i.e. that “those rules” which apply to goods exported from the UK to the EU across the Irish border must be aligned with EU regulations. That is seemingly obvious… and harmless. There’s not a word about Northern Ireland staying in the Single Market or having to follow the EU rule book for everything. “Those rules”, it says, not “all rules”. What the EU has been demanding is something far beyond what they agreed with the UK last December.
It must be perfectly plain that we will not allow the EU to try to split Northern Ireland from the rest of the UK (any more than they would expect Spain to split off Catalonia or France, Corsica or Normandy).
If there is no deal, the Irish border will still exist, and neither Ireland nor the EU will want to invoke a hard border. Britain certainly won’t. So some kind of pragmatic monitoring/enforcement arrangement would have to be agreed between the respective customs authorities in the event of a no-deal.
By offering one concession after another Mrs May is just manoeuvring herself and us further and further into a tight corner. Much simpler to say “no”, we won’t play your game, it’s no deal.
With no-deal, the EU will have to tolerate what they consider to be an unsatisfactory border arrangement and forgo their £39 billion. Why would they allow their intransigence force us into that situation when they could do a deal under which they tolerate – temporarily – that same unsatisfactory border arrangement and pocket their £39 billion?
So the choice for the EU becomes a simple one: do you want a no-deal-style Irish border arrangement with or without £39 billion?
As to future trading arrangements, Mrs May must be persuaded that the Canada-plus formula offered by the EU is the most favourable for the UK. While entirely frictionless trade would be very nice, the price she is proposing to pay – EU regulations imposed on all UK businesses including the more than 80% that trade only domestically or with non-EU countries; no say in regulations or trading standards or ability to challenge regulations that especially damage British businesses; no ability to innovate; no ability to negotiate trading standards as part of FTAs; cumbersome tariff reclaim procedures – is simply too high as an alternative to accepting some friction but minimising it. When encountering friction, you don’t scrap the machine, you apply oil: trusted-trader status for regular just-in-time supply-chain consignments; number-plate recognition that opens barriers at designated trusted trader lanes. Where is the friction?
Where are the obstacles? There is only one – the need for a firm negotiating stance.
Last Thursday, the same day that we read “Theresa May to trigger full-scale parliamentary no-deal planning ‘within three weeks’”, we read of Guy Verhofstadt brazenly insisting there’s a 0% chance of a deal unless we agree to the EU’s Irish border demands, apparently blind to the consequences to the EU – a no-deal Irish border problem and a £39 billion financial black hole.
On the other hand we have seen Wednesday’s news: “France threatens to block Calais port to the UK if we refuse to pay £39bn divorce bill”. The EU persists in making unjustifiable and unconscionable demands regarding the Irish border, aimed solely at keeping us in the Customs Union and so preventing us from entering into global free trade deals.
Their insistence on their childish game of chicken is getting beyond ridiculous. Is this how intelligent adults behave? Don’t intelligent adults just sit down and agree new feasible cooperative arrangements that will be to their mutual advantage? It’s called an amicable divorce.
The post We must stop playing the EU’s games and be clear we are willing to walk away with no deal appeared first on BrexitCentral.
Theresa May talked the talk when she said ‘Brexit means Brexit’ and ‘no deal is better than a bad deal’ to such an extent that one couldn’t help but be reminded of Shakespeare’s ‘the lady doth protest too much, methinks’. So now is her chance to show that she can walk the walk.
The Prime Minister is right not to be provoked into walking out, insisting on proper and constructive negotiations; but she should not feel inhibited about coming back without an agreement; the vast majority of the British people want the Government and Parliament to get on with it and a no-deal outcome has always been a possibility.
The media has taken to presenting the EU negotiations as a game of chicken, a game of bluff. Who will blink first? Would the DUP really go ahead with their threat to vote down the Budget if the deal that the PM comes back with results in further checks on goods crossing the Irish Sea? Amongst all this speculation, one thing is certain: the 17.4 million who voted to Leave the EU were not bluffing and they have no intention of blinking.
We have become used to the warnings of the dire consequences of Brexit; warnings that adorn our news bulletins on a daily basis from car manufacturers who threaten to cut and run through to the IMF and assorted bankers predicting economic recession. We were even told that ‘planes will not be able to take off’ presumably because the laws of physics will be suspended once we leave the EU as well. But in spite of all that, the people have remained steadfast with poll after poll showing no change in their desire to leave the EU.
Yet, the metropolitan elite refuses to accept the result of the referendum and continue to call for a second vote, a ‘People’s Vote’, when one has already been held. The disconnect of the British establishment, and the schism between the elite and ordinary working people, is comparable only to that of the House of Louis XVI in late eighteenth century France. When the people gathered outside the Royal Palace asking for bread, Marie Antoinette told them to eat cake. When the people voted to leave the EU, the elite told them to vote again. Marie Antoinette lost her head, literally. The British establishment lost its head, metaphorically; they refuse to come to terms with the fact that we are leaving the EU on 29th March 2019.
The nearer we are to that date, the more desperate they become, with the wealthy, well-to-do and the comfortable instructing workers on what is best for them. The recent open letter from ‘Bob Geldof and friends’ is their latest lame offering. In their letter – and without any sense of irony – unelected and unaccountable ‘Bob Geldof and friends’ described the implementation of the vote to leave the EU as ‘the undemocratic fiat of mediocre politicians’. And even though there was no mention in the letter of a second referendum (obviously, his ‘friends’ refused to endorse a second vote), it was spun by Geldof and an obliging media as an endorsement of it.
It’s not clear if the Prime Minister has rejected the EU’s open-ended ‘backstop’ designed to keep the UK in the Customs Union in perpetuity. She seems to see an extension of the transition period as a way of avoiding the backstop, which makes any sense only if the transition period is indefinite, keeping us in the EU indefinitely. An unspecified extension of the transition period would have the same effect as an open-ended backstop and that’s why it was suggested by the EU in the first place; it is equally unpalatable. Just how bad does a deal have to be before a no-deal becomes preferable?
The EU has treated the Government, and Theresa May in particular, with contempt. Instead of working with the Government to find solutions, the EU ‘demands concrete proposals from the Prime Minister’ as if Brussels is a third party to the negotiations with no responsibility to search for answers.
They insist on a solution to the Irish border before the details of a trade agreement can be negotiated, a solution that can only be found once an agreement on our trading relationship has been reached – the very thing the EU prevented when it insisted on phasing the negotiation in such a way that solutions to problems that can only be resolved once the second phase has been concluded were to be found before the second phase begins. It is like looking for a plug to fill a hole in a wall before you have any knowledge of the size of the hole that has to be plugged.
Since a solution to the Irish border can only be found when the trading relationship with the EU is finalised, an insurmountable hurdle was created. This was no accident or a miscalculation. The sequencing of negotiations was designed to make an amicable UK departure difficult; a warning to any member state that might be tempted to follow the example of the UK – and there many of these.
Theresa May was sanguine and allowed the EU to dictate the pace and the process.
The Prime Minister’s task is not to satisfy this or that group of MPs, this or that section in Parliament; it is not a numbers game, regardless of what we are consistently told by the media. Brexit belongs to the people and the people have been its driving force. Her task is to satisfy the desire of the people to leave the EU; if she does, parliamentary approval will follow in the same way as an 80% Remain-supporting House of Commons voted by an overwhelming majority to invoke Article 50 and to repeal the 1972 Accession Act. If she fails to do that, she must make way for someone who can.
Photocredit: Zero 2010
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The Prime Minister describes the backstop as an insurance policy which no one in the UK or the EU wants or expects to use.
In fact the backstop was introduced by the EU and the EU has refused to concede the point, because the EU actually intends to use this legally-binding provision as a powerful lever in future negotiations.
If the UK signs a Withdrawal Agreement which includes any form of effective backstop, consider the negotiating position the UK would be in after we leave the EU.
During the negotiations on any future trade agreement, the EU would be in a position to demand whatever terms they choose: full compliance with all EU regulations, free movement of goods, services, people and capital and even compliance with EU taxation policy all under the jurisdiction of the ECJ. The UK could also be required to make huge payments to the EU for the privilege of permitting the EU to sell £95bn more goods to us than we do to the EU.
If the UK ultimately rejects the unreasonable trade terms offered by the EU, the transition period will ultimately end and the EU will exercise the backstop. Northern Ireland would become part of the Single Market and the Customs Union and be torn away from the rest of the UK with a border down the Irish Sea or the entire UK would permanently be locked into the Customs Union under the ECJ. That is precisely the reverse of what Theresa May says she is seeking to achieve.
The backstop is not an insurance policy which will never be needed or used. It is an ingenious device developed by the EU to create a comprehensive lock on the future trade and regulatory policy of the UK thereby ensuring that the UK would be under the absolute control of the EU and ECJ and could never effectively compete with the EU.
The EU’s negotiating strategy is brilliant and the UK would be the suckers. With any form of effective backstop, the UK would become a powerless vassal state with no negotiating position in terms of trade or any other policies that the EU chose to impose and the £39bn would have been committed irrevocably.
Clearly, the EU planned from the start to neutralise all of the UK’s strongest negotiating cards by demanding that the £39bn payment be unconditional and developing the Northern Ireland border issue and then introducing the backstop as a mechanism ultimately to force the UK to remain under the EU’s overall control. Olly Robbins and the rest of the Civil service are probably complicit in this deception which would achieve their preference of keeping the UK in the EU, if necessary, by stealth.
The critical importance of this issue is to understand how the dynamics of the trade negotiations will inevitably unfold during the transition period if the UK walks naively into the EU’s Backstop trap.
What is at stake with the EU’s backstop is the entire future of the UK as an independent sovereign state. If the UK concedes any form of backstop then the UK will have conceded the country’s sovereignty on a scale unprecedented in the democratic history of the United Kingdom. There is no conceivable basis that agreeing to a backstop can be in the national interest and it is certainly not a price to be paid for so-called “frictionless trade” with the EU.
The post The EU’s backstop is not an insurance policy but a trap appeared first on BrexitCentral.
The transition period is supposed to be the time when businesses and Government adjust to the new arrangements for trade with the EU. Theresa May’s preferred own term of ‘implementation period’ makes clear that the original vision was for a period of time in which the practical systems would be put into place to allow the new trade agreement to come into force.
By definition, the implementation period therefore requires that before it begins we have an agreement to implement. Without an agreement to implement, a transition period is simply about delay and disguises the fact that while we may have left on paper, we are still effectively in the EU.
When I was involved negotiating for the UK Government with the EU on the terms of the future EU Constitutional Treaty – with Michel Barnier on the other side of the table – every negotiation concluded in the final days and even the final hours before the deadline.
The two sides can seem far apart but even so agreement generally emerges at the eleventh hour. That is why, if we can hold to a deadline for negotiations to end, we should not rule out an agreement emerging between the EU and the UK. It is, based on history, the most likely outcome.
However, we seem to be letting things slip. First we moved from a promise that the Withdrawal Agreement would include detailed heads of terms on the future trading arrangements with the EU. These have now apparently been diluted to a loose political agreement which it seems likely will contain sufficient ‘constructive ambiguities’ to allow the details of the future trading arrangement to be kicked down the road beyond the March 2019 deadline and into the transition period itself. Now the Government wants to extend the next deadline by delaying the end of the transition period.
We know that we hold maximum leverage in the negotiations before we agree to the Withdrawal Agreement which will see us hand over a potential £39 billion. We also know that businesses and individuals want certainty about what our future relationship with the EU will entail.
Once decisions are made and when we know what we are doing, we can all get on with earning a living and making the most of the new opportunities. Delaying decisions will weaken our negotiating position and is likely to cost investment and jobs.
The Government says it hopes that by giving more time for a deal to be reached, an extension of the transition period would make it less likely that the EU’s demand for a backstop on Northern Ireland would ever come into effect. This is wishful thinking.
The problem lies with the backstop itself, which was never necessary and should not have been agreed to. It effectively commits either the entire UK or Northern Ireland to remain part of EU arrangements – including the Customs Union – on the basis of a flawed analysis of what the EU says is necessary in order to prevent a hard border between Northern Ireland and Ireland. Both the EU and the Irish Taoiseach have made clear there would be no hard border in the event of ‘no deal’, yet EU negotiators have refused to engage with proposals to ensure a smooth border in a future UK-EU deal.
If the Government agrees to this backstop, which it knows it can never accept, then the EU will use the threat of it as leverage to make it impossible to reach an agreement that is either in our interests or that delivers what people voted for. There is already talk that the extension of the transition would allow time to negotiate a customs union for the whole of the UK to satisfy the EU’s backstop conditions.
The Government has said it doesn’t want to stay in the Customs Union, the people voted to leave the Customs Union and yet this is the position we have got ourselves into.
The danger in the Government’s strategy is therefore that we remain locked in the transition period or accept a deal that satisfies the EU’s interpretation of its backstop conditions, either of which would keep us under the control of the EU and locked into EU institutions that we voted to leave.
The Government may believe that its customs proposals in the Chequers proposal can satisfy the EU’s backstop conditions, but the EU has made it clear it does not agree – and if we enter the transition period without these issues resolved, then the EU will hold all the negotiating leverage.
There is the further issue of cost, with estimates of an extended transition period ranging from an additional £10 billion to £15 billion. These are huge sums of money that belong to taxpayers, not to Government. The voters – the taxpayers – have already said they want them to stop.
There is a trap being set here and we must not walk into it.
Things would be easier if there were more trust in the process. Before Chequers, those of us who were involved in the Leave campaign and who had stayed in touch with Leave voters since the referendum had faith that the Government was committed to delivering a form of Brexit that would respect what people across the country had voted for.
The Government’s handling of the shift in policy that led to the Chequers proposal and the handling of negotiations since then has eroded that sense of confidence and trust. Now is not the moment to be giving the negotiators more time.
The post We must not walk into the trap of an extended transition period appeared first on BrexitCentral.
The Chequers Plan has to be withdrawn if we are to achieve a meaningful Brexit. Discussions between the EU and UK about allowing an extension to the transition period in return for dropping the unnecessary Irish backstop are only of relevance if it means a Canada-style deal can then go ahead – it should not be a precursor to accepting a Chequers-based agreement.
The reason for this is simple: in a new report published today by Global Britain we show the Chequers Plan is the Single Market by another name – and remaining in it (rather than accessing it) would be damaging to British economic interests.
The key myth propagated in favour of the Single Market is that it is central to UK prosperity. It is not. Our report demonstrates that the UK trades well with the world but poorly with the EU. This is odd as the UK has no special trade arrangements with the US, China or Australia yet runs a small trade surplus with the rest of the world, but a very large deficit with the very region with which we have a customs union – the EU.
For example, our report exposes the contradiction that the UK enjoys a trade surplus with the US – arguably the most competitive market in the world – without having a trade deal, but suffers a huge trade deficit of £96bn with the EU where Single Market membership is the equivalent of a trade deal.
Due to its bureaucratic approach, the EU is in structural decline. It has underperformed every other region in the world for a generation. This is not a coincidence as other advanced economies including the US, Canada and Australia have powered ahead. It is the institutional arrangements of the EU – and the single currency in particular – that have resulted in rapid economic decline and socially unacceptable levels of unemployment in much of the EU.
The EU’s trend towards centralised regulation undermines competition and increases regulatory burden. Within the Single Market framework provided by adoption of a common rule book, the UK would continue to be beholden to needless regulation and legal creep as EU lawyers interpret a definition of EU competence well beyond merely trading standards and into to many other areas of national life.
The EU has also failed to sign global free trade deals with many of the world’s most important partners including the US, China and Australia. Inside the EU, the UK cannot strike its own deals with the many much faster growing nations. Because the EU is a diverse group of 28 nations, agreement is highly problematic and cumbersome, hence the failure to reach agreement. Outside the EU, the UK can much more readily strike free trade deals.
It is now apparent from comments from the US, China, Australia, India and others that far from being ’at the back of the queue’, other countries are very keen to strike mutually beneficial free trade deals with the UK. This will allow the UK to rebuild its historic mission of encouraging global free trade that has gone off track over the last 40 years as the UK has surrendered its trade policy, so unsuccessfully, to the EU.
It is also a myth that the UK needs to be part of the Single Market to trade with it. This is clearly not the case. All nations have access, outside a tiny number under sanction (North Korea and Syria for example) so long as they comply with local regulations. One does not need to join China to trade with it any more than one needs to join the EU.
It is clearly in the EU’s interests to agree a zero tariff deal with the UK – such as a Canada-style agreement. There are many reasons for this but the primary one is simply because the EU sells more to the UK than the UK sells to the EU. It would be nonsensical to undermine its own trade particularly at a time when EU growth is so weak.
If, however, the EU refuses to do so within a reasonable timeframe, the UK should leave the EU without a formal agreement on 29th March 2019, relying on WTO rules and striking free trade deals with our global partners. This outcome would be far better than what the Chequers Plan offers because the UK would otherwise be saddled with no say on Single Market regulation.
To remain under the jurisdiction of the common rule book, effectively still under EU jurisdiction, having left the EU, is a Remain option that delivers a sovereignty illusion – with no say, low growth and a high regulatory burden that would lock in perpetual trade deficits. That is why Chequers must be chucked and a Canada-style deal for the whole UK used as the template for a new relationship.
The post The EU is in structural decline – which is why we must not remain tied to its Single Market appeared first on BrexitCentral.
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