It’s funny, but every time one mentions ‘Article 24’ publicly – meaning (using the correct Roman numerals) Article XXIV of the General Agreement on Tariffs and Trade (GATT) which predates the World Trade Organisation (WTO) – you receive a barrage of hysterical abuse from Remainers, often with long academic titles. They are clearly terrified we’re on to something.
They say: ‘The EU would never agree to it!’, ‘The EU would not be minded to do a deal if we leave on bad terms!’, ‘You can’t do it in a no-deal situation’ and ‘We’d have to levy tariffs not just on EU goods but all good from around the world’. This last point was made on Radio 4’s Today programme discussion of Article 24 yesterday morning.
But these claims are wrong. We know they are wrong because collectively we have asked the EU: its Chief Negotiator Michel Barnier, its trade advisers and personnel, and people David has worked with for ten years on the International Trade Committee of the European Parliament doing trade deals. And together we’ve asked very senior people at the WTO and top trade lawyers too, such as the impartial Article 24 expert Lorand Bartels of Cambridge University.
Their conclusion: GATT Article 24 is not only doable, it is desirable. Here are a few facts relating to Article 24:
1) Let’s not confuse what ‘deal’ or ‘no deal’ we are talking about: we are not seeking to renegotiate the Withdrawal Agreement or attempt ratification of that deal by 31st October. Angela Merkel and other EU leaders have made it clear that ‘deal’ is not negotiable.
So this is not a deal based on the Withdrawal Agreement under EU law such as the Lisbon Treaty’s Article 50. Nor is it a trade deal conducted under the EU’s ‘Future Relationship’ or ‘Political Declaration’ provisions either with its binding legislation – it is a separate deal done under World Trade Organisation rules.
2) The World Trade Organisation makes trade rules, not the EU. There’s a clue in the title. The EU quite correctly works within the global rules system on trade via the WTO. Most EU free trade agreements incorporate WTO level agreements like GATS – the General Agreement on Trade in Services.
3) GATT was the predecessor to the WTO and Article XXIV/24 is contained within these global GATT rules which all individual WTO members – that includes the UK as an individual full WTO member, every EU member state as individual WTO members and the EU as an entity – agree to implement.
4) The whole point of the WTO is to promote free trade around the world. The WTO does not like tariffs (taxes on goods entering), quotas (a certain quantity of goods entering at a certain tariff) or barriers to trade (e.g. excessive regulation advantaging home producers or in services). So the WTO will not like it if the UK and EU return to imposing £13bn tariffs on EU goods and £5bn on British goods into the EU. It goes against the grain.
5) GATT Article 24 is there to allow two countries or blocs to move towards a free trade area or a customs union. It basically allows the two countries to level lower tariffs and quotas than what is called ‘Most Favoured Nation Rules’ (MFN). Ironically it is the very basis of the EU’s zero tariff Customs Union which took between 1957 and 1968 to actually enact.
By offering one country a better deal than other WTO members you are discriminating – you are offending the rule that everyone must be treated the same – so you must levy the same MFN tariffs to all. This is such an important rule it is actually Article 1 of GATT. But Article 24 is a specific exemption to this.
Free Trade Agreements (FTAs) are really a licensed form of discrimination where you are allowed to offer better terms to one country over all the others but only if you really free up trade – particularly getting rid of at least 90% of tariffs.
6) So given the WTO hates tariffs (it’s not happy with President Trump and others reimposing tariffs but that’s another story), then it is amenable to ways of avoiding tariffs without disadvantaging its other members.
So if the UK and EU go to the WTO jointly and say that we have agreed to move to a full and comprehensive Free Trade Agreement (what we term ‘SuperCanada’ – that is better than the EU-Canada FTA) – that keeps tariffs at zero with no real change to other members, the WTO is happy to allow us a period of time to keep tariffs and quotas at preferential rates. GATT 24 allows what are called ‘standstill’ arrangements – much remains the same and this is essentially a WTO form of a transition – but is not an interim arrangement as is often claimed.
We can keep tariffs at zero for as long as the two partners need to negotiate the full works: that comprehensive FTA. Legally this could be up to ten years, but most are two to three years to negotiate. That is GATT 24.
7) Yes, GATT 24 needs a temporary agreement between the EU and UK, but frankly it could be written on the back of an envelope. Lorand Bartels has helpfully written a one-page FTA properly that is sufficient to allow Article 24 to apply. This is a ‘basic deal’ or a ‘temporary FTA’. But it is entirely manageable and legally sound.
So to our Remainer friends – yes, you need a deal, but one or two pages of FTA is much easier than the 585-page Withdrawal Agreement to agree.
8) So why would the EU agree?
Well, the UK is the fifth largest economy in the world and the EU’s largest single market – bigger than the USA, China and India. The EU has a £96 billion goods deficit with us (we have a £13bn services surplus). Over a million German jobs alone rely on British consumers buying German goods like BMWs. Without a basic GATT 24 deal, the EU would have £13bn tariffs slapped on its goods – 10% on VWs; 12% on wine, 40% on cheese. They would suffer far more than the UK simply because they sell more to us than we do to them. The EU – particularly Germany, which accounts for nearly a quarter of all EU trade to the UK – does not like the idea of this. Better for everyone surely to keep on an even keel?
There is also the question of money. The UK may well be prepared to pay a fair contribution, if not anywhere near the £39 billion associated with the Withdrawal Agreement, but this would be contingent on such a basic deal. It is also much easier to deliver by the end of October.
In the absence of EU agreement to GATT 24, the UK can unilaterally and universally change its import tariffs, and be open to cutting all tariff rate quotas – but obviously the UK would not be able to control EU import tariff rates.
9) What about services and standards?
Services will be a part of the future trade deal but will be along the lines of ‘Mutual Recognition’ of standards or ‘enhanced equivalence’, not on a harmonisation or rule-taking basis.
10) What about all the the other non-trade elements, such as aviation flying rights?
GATT 24 is not the only basic deal needing to be done if there is no Withdrawal Agreement. It will need an accompanying flotilla of what we call ‘mini deals’.
But – good news – the EU has already quietly agreed most of these through emergency legislation. As an MEP, David has voted on 17 main pieces of legislation to keep trucks rolling, planes flying, trains running, goods flowing, fishing boats sailing, visa costs eliminated, energy efficiency maintained, social security cooperation, the Northern Ireland Peace programme running, Erasmus+ for students allowed, and other affairs. The UK just needs to reciprocate.
The reality is that much of the non-controversial elements of the Withdrawal Agreement can be agreed as separate ‘mini deals’ in exactly the same way – for example, the elements on citizens’ rights – but can be done outside the provisions of the European Court of Justice. This is the case with other EU free trade deals including Canada and Switzerland.
11) What about the Northern Ireland border and Good Friday Agreement?
Iain served as a soldier in Northern Ireland and well knows its challenges, whilst David worked on the Peace Process 20 years ago as a Government Special Adviser. There is no mention of the border in the Good Friday Agreement for a start (rather a sensitive subject!).
With Ireland only checking 1% of goods imported now and with existing trusted trader and other current mechanisms available, such as checks in factories and warehouses, even the EU admits alternative arrangements can be done with the border remaining free. No one wants a hard border. But the detail of this can await the negotiation of the bigger free trade agreement – and is part of that.
What GATT Article 24 represents is a Clean Managed Brexit – and what’s more it is deliverable by 31st October.
The post The facts about GATT Article 24 – and how it can deliver a Clean Managed Brexit by 31st October appeared first on BrexitCentral.
The next Leader of the Conservative Party has an almost Herculean task in seeking to reunify a party which has been riven for many years by disputes over Europe and, most fundamentally since 2016, by whether or not to approve Theresa May’s so-called Withdrawal Agreement.
Looking at the six remaining leadership contenders, three of them voted to Remain in 2016 (Jeremy Hunt, Sajid Javid and Rory Stewart) and three of them voted to Leave (Boris Johnson, Dominic Raab and Michael Gove). I believe it is imperative that the final decision on who should become our Prime Minister, should go to our 130,000 or so members in the country. This is absolutely vital as, firstly, we had a coronation last time – and look what happened to that. Secondly, the new Prime Minister has to be able to stand in front of the 1922 Committee and tell my parliamentary colleagues that, whoever they voted for, as the new leader they now have a mandate from our party members and our MPs must give them at least a fighting chance to lead.
I cannot presume to say how 130,000 plus people are going to vote but, given that Theresa May voted Remain in 2016, I would be extremely surprised, to put it mildly, if our party members actually voted to choose anybody who voted Remain again in the final. After three years of effectively going around in circles, I think it overwhelmingly likely that our members will pick a Brexiteer by instinct. But which Brexiteer should it be?
The key questions in deciding who to select will be: how determined are they to leave the European Union by Halloween and what is their plan for doing so? If I have followed things correctly, only Boris Johnson and Dom Raab have said they are absolutely determined to leave on 31st October, whatever the circumstances.
The other candidates have tended to equivocate on this point and Rory Stewart has been the most hard over saying that he thinks to leave on 31st October, with No Deal if necessary, is unachievable. Michael Gove has certainly not given any promise to leave on 31st October.
The next critical difference is, what is the attitude of the candidates towards the Withdrawal Agreement – which has been voted down three times by the House of Commons and which the European Union have been absolutely adamant that they will not re-open. Other than Boris, all five of the other candidates have said, one way or another, that they would seek to revive the Withdrawal Agreement.
The only candidate to state that the Withdrawal Agreement is dead, is Boris Johnson (as for instance he did when he told the BBC’s Vicky Young on Politics Live on 15th January 2019: “I do think this deal is dead”).
It is a common misnomer that we need a Withdrawal Agreement in order to withdraw from the EU. We don’t. Parliament has already provided all the legislative authority for us to leave the European Union, when it passed an Act of Parliament to permit the Prime Minister to trigger Article 50, and when it subsequently passed the EU Withdrawal Act 2018, which is the piece of legislation under which we leave.
The legal default position under both EU law and UK law is that we now leave the European Union on the night of 31st October 2019. The only further legal requirement is that a Minister of the Crown physically signs the so-called “Commencement Order” to finalise the process. In short, no further legislation or even a Statutory Instrument is required in order for us to leave on Halloween. This is something the Remainers know but do not wish to advertise for very obvious reasons. When Michael Gove said in this week’s Channel Four News debate that “Parliament would have to vote to approve No Deal”, he was factually incorrect.
Given the history of all of this, I believe that any attempt to revive the Withdrawal Agreement is futile. It would, in effect be like a dog returning to its own vomit. Firstly, the EU have been absolutely emphatic that after all the time it took to negotiate what is in effect a 585-page draft Treaty, they have no intention whatsoever of reopening it. In this I believe they are telling the truth and this is not merely a negotiating tactic – they absolutely mean it. I therefore believe that any leadership candidate who thinks that they can somehow persuade the EU to do this, especially before 31st October, is completely kidding themselves.
Secondly, even if it were possible to persuade the EU to reopen the Agreement, and delete the backstop (or even put a time limit on it) that would then require the whole Agreement to be ratified in an Act of Parliament, the so-called Withdrawal Agreement Implementation Bill – or WAIB for short.
I have not seen the draft Bill but others have and I am told that it is almost half an inch thick. As we would require this to ratify the Treaty this would likely lead to between four and six weeks of absolute parliamentary trench warfare with crunch votes night after night and frequent attempts by Remainers to table wrecking amendments. In reply, no doubt my colleague, Sir Bill Cash would table a number of amendments of his own, which would likely enter the Guinness Book of Records! Even if we could generate sufficient parliamentary time to do this, I suspect the whole process would be an absolute nightmare and one which is hardly likely to reunite the party; in fact, by setting Tory against Tory once again, it would have precisely the opposite effect.
A much better approach was put forward recently by my friend and Deputy Chairman of the European Research Group, Steve Baker, in his very well-argued paper, A Clean Managed Brexit. In essence, this too agrees that the Withdrawal Agreement is dead and indeed that we should be perfectly plain about this to the Commission and the European Council. We should tell them instead that because it will never pass the House of Commons, we have decided to junk it completely and transition straight to the Future Relationship and indeed that achieving a Free Trade Agreement (FTA) is now our desired end state – rather than leaving with No Deal.
Nevertheless, in order to maintain confidence in the democratic process in the UK, we must adhere to the deadline of 31st October at all costs, even if this means leaving with No Deal and trading temporarily on WTO terms – but with the clearly declared end state of an FTA rather than No Deal itself. Ironically, the President of the European Council, Donald Tusk, offered us such an option in March of last year but the Prime Minister (surrounded by her fanatically pro-EU Civil Servants) rejected the option out of hand.
Of the six candidates on the ballot today, the only one who accepts the reality that the Withdrawal Agreement is dead and that we need to transition to the Future Relationship, is Boris Johnson. Moreover, Boris has been utterly emphatic that such is the degree of public frustration, three years on from the referendum, that leaving the European Union on 31st October is now an existential necessity for the Conservative Party. Moreover, he has been prepared to withhold part of the £39 billion until the FTA is agreed – or perhaps even contest the final sum itself.
In summary, given that Theresa May was a Remainer, and that she promised 108 times we would leave the European Union on 29th March – but didn’t – it seems extremely unlikely that our members in the country will pick a final winner who voted Remain in 2016. Of the six candidates, five wish to revive the ill-fated Withdrawal Agreement, via one method or another, even though this seems to be flying in the face of providence, given that the EU are so emphatic that they will not reopen it. The only candidate who has had the courage – and frankly leadership – to acknowledge that the Withdrawal Agreement is dead, and to propose instead transitioning straight to the Future Relationship and arguing for a comprehensive Free Trade deal, that would allow us to trade to our mutual advantage with our European partners, with low or no tariffs, into the foreseeable future, is Boris Johnson.
In short, no deal is still better than a bad deal – but a trade deal is better than both of them – and we should leave the European Union on 31st October with that objective very firmly in our sights.
The post Theresa May’s deal is dead – and Boris Johnson is the only Tory leadership contender saying so appeared first on BrexitCentral.
For the last six months or more, we have had to put up with an increasingly sterile and I would say dishonest debate about a Deal or No Deal exit from the EU. In the same way that the Prime Minister’s proposed Withdrawal Agreement is dead, the term No Deal is a misnomer. The hysteria and dire warnings that accompany use of the term are disingenuous and used as cover by those hostile to the whole idea of Brexit.
In the same way that we have moved on from the proposed Withdrawal Agreement, so we have moved on from the idea of leaving without any arrangements in place to smooth the break. The main changes happened in the weeks leading up to 29th March, before the Prime Minister and Parliament panicked at the prospect of leaving without ratification of the Withdrawal Agreement. During this period, both the UK and EU authorities agreed – on a reciprocal basis – to a broad spread of arrangements to facilitate trade, citizens’ rights, students, transport, security etc.
Rather than being fixated on trying to negotiate an overarching “deal”, building on the arrangements agreed before March 29th would seem to provide a much more flexible approach. This would allows for tailor-made arrangements that can be modified if necessary once operational, rather than having to re-open the whole Withdrawal Agreement in order to change a particular detail. The other great advantage of following this approach is that one can build on the practical solutions devised by HMRC and others to address issues raised by our departure. One addition that would provide extra reassurance to traders on both sides of the Channel – and on both sides of the border in Ireland – would be to utilise the GATT Article 24 to facilitate a continuation of the existing free trade arrangements.
Another great advantage of working this way is that it would leave the options open to develop the long-term relationship that best reflects the situation as it is, after the UK leaves, rather than trying to prejudge how it will be on the basis of how it is now. It has always seemed to me preferable to leave and then develop the future relationship without being tied to how things worked whilst we were members. It would also allow the UK to take back control of the £39 billion promised by Mrs May solely against a promise to negotiate a free trade agreement.
Having a multitude of small deals and agreed arrangements in place to govern our relationship with the EU would also not be without precedent. Switzerland, for example, is not part of the EU Customs Union or a full member of the Single Market but has a very close relationship with the EU governed by more than 200 individual agreements.
From a trade perspective, writing as an exporter, I have been very impressed by the work done by HMRC prior to 29th March in simplifying procedures and finding ways to keep trade flowing smoothly with the EU. This was complemented by the work done by freight forwarders and others to guarantee that shipped goods would flow smoothly. Due to the parliamentary rejection of the proposed Withdrawal Agreement, the path provided by HMRC and others was the only exit that my company were able to prepare for – and is still the only one that we are prepared for.
From a business perspective, the problem for my company and most others is not leaving but is the endless uncertainty of when or if we are actually going to leave. An end to the uncertainly would mean that we can at last move on, invest and develop the business knowing how trade is going to be conducted.
Let us hope that we will stop being subjected to the sterile and meaningless Deal/No Deal debate by the Conservative leadership candidates. Instead I hope we start hearing from them constructive and practical proposals for taking forward the March agreements already in place to provide a comprehensive multi-deal arrangement that can be developed into permanent treaties once we actually Brexit.
The post It’s time it was acknowledged a “No-Deal Brexit” is a complete misnomer appeared first on BrexitCentral.
I have an apology. I got something wrong – well, partially wrong. I argued on this site on March 14th, after the second defeat of Theresa May’s Withdrawal Agreement, that the UK was bound to leave the EU on March 29th 2019 and that “At worst, we might see a short extension to prepare for ‘no deal’”.
I based my belief on what seemed a reasonable assumption that no Conservative Party leader would be as stubborn, unimaginative and self-destructive as Theresa May. I could not believe that any Conservative Prime Minister would go back on a solemn promise repeated over 100 times to leave and deliver on the referendum result. I could not conceive that a Conservative Prime Minister would seek to lead the party into certain defeat in a European election held after we were supposed to have left. Now, don’t get me wrong, being stubborn and unimaginative can achieve great things – but in this case the failure of the Prime Minister to ensure we left the European Union on March 29th has led the Conservative Party into an existential crisis.
However, what I did get right back in March was that the better part of the European Research Group and the DUP would not fold and that the Withdrawal Agreement was indeed dead. It is now stone cold. We are in a second and last ‘short’ extension until October 31st 2019 in which we should indeed prepare for No Deal.
The future direction of the UK’s EU exit policy is now subject to the Conservative leadership contest. In this context the publication yesterday of a key policy paper – A Clean Managed Brexit – by the influential Deputy Chairman of the ERG, Steve Baker, is particularly interesting.
The paper calls for a “Clean Managed Brexit” on October 31st 2019 and was supported by 14 senior pro-Brexit MPs spread across a number of the rival Tory leadership campaign teams. It therefore has both logic and political support behind it.
So what does it propose?
The key proposal that any aspiring Conservative leader should adopt is to make it the “unshakable policy of the Government to leave the EU by October 31st 2019”. This date is fortunately already set in EU and UK law. Given the deleterious effect the delays past March 29th have had on the Conservative Party, it is inconceivable that any serious Conservative leader could propose further delay. With the Brexit Party eating into the healthiest of Conservative majorities, MPs have got the message – there can be no delay.
That leads onto the method of departure and destination.
With only three months remaining for an incoming Prime Minister to prepare the country for departure, the paper accepts that the Government should now exit the EU without the negotiated draft Withdrawal Agreement. This makes sense for a number of reasons:
- The Withdrawal Agreement cannot get through Parliament in anything like its current form (the backstop is only one of a number of problems) and the EU has stated repeatedly that it cannot be re-opened. Given the European Commission will not have a negotiating team, and the obstructionist, nationalist policies of the Republic of Ireland, it is reasonable to take them at their word.
- The Withdrawal Agreement was designed to take the UK into the Chequers deal. That deal is dead and the implementation period designed to take us there is nearly half gone. The reasoning and philosophy underpinning the Withdrawal Agreement (rule-taking and customs union) has expired.
- Any redraft of the Withdrawal Agreement to make it acceptable would change it so profoundly that it would be easier to start from scratch. For good measure, Baker includes a number of changes required in an Annex. These range from removing the backstop to the role of the ECJ – and it is clear the EU could spend three months discussing each and every one of them. Time is at a premium.
Instead of straying into the political minefield of reopening the Withdrawal Agreement and attempting to remove the UK-busting backstop, the paper proposes offering the EU a comprehensive Free Trade Agreement. The offer would include a new wide-ranging, zero-tariff, zero-quota free trade agreement of the kind offered by Donald Tusk in March last year. Baker proposes the UK takes the initiative and lays down its own text.
As a part of this and building on previous work, there should be indefinite alternative arrangements for the border around Northern Ireland: a WTO-compliant border, using currently-available administrative and technical procedures – but without any need for new technology. No new infrastructure or checks at the border will be required. Added to this, the UK should offer co-operation on defence and security, without prejudice to the primacy of NATO and unilaterally grant rights to the EU citizens in the UK.
While the aim is for free trade, the paper proposes planning for departure on WTO terms on October 31st 2019.
This leads to the future. The paper sets out how the UK should promote an ambitious free trade agenda: trade deals with the USA, accession to the Pacific rim TPPC to give access to Japan and Australia and a rollover of existing EU trade deals made on the UK’s behalf – while all the time using the UK’s new regulatory autonomy to promote a competitive pro-prosperity environment.
It is a pity the current Prime Minister wasted three years negotiating a plan to leave the EU that was never going to gain the support of her DUP Confidence and Supply partners, her party or Parliament. We have wasted three years and can waste no more. If trust in the UK’s political system is to be maintained, it is imperative that we now leave without further delay. To this end, Steve Baker’s paper sets out a practical and achievable route to leave and save the Conservative Party from potential extinction.
Is there an alternative?
When I predicted we would leave on March 29th, I based my prediction on a belief the Prime Minister would not actively set out to obstruct our departure. The next Prime Minister must therefore be committed to leave. If they are ,there is nothing Parliament or the EU can do to stop them.
Requesting further delays to re-negotiate the unnegotiable Withdrawal Agreement or seeking a longer transition to implement the harmful, fantastical Chequers end state is again a recipe for delay and obfuscation. We need a new Conservative leader sure and uncompromising in their desire to leave on October 31st – with a Clean Managed Brexit. We wait to see who will take up the challenge.
The post Steve Baker’s Clean Managed Brexit proposal provides an achievable route to leaving the EU in October appeared first on BrexitCentral.
I believe we can make a great success of Brexit. If we take full advantage of our new-found freedoms we can be the best place in the world to start a new business, trial a new product or develop emerging tech like AI.
But first we’ve got to actually leave. Our failure to deliver Brexit on March 29th was a democratic disaster. Now we need a credible plan to leave on October 31st. I have that plan.
To deliver on that commitment I’ve set out my detailed Brexit Delivery Plan.
It’s a plan that deals with the world as it is, starting with a realistic assessment of the facts.
The first thing is that, like it or not, this House of Commons has blocked a no-deal Brexit and threatens to do so again. Whether by changing procedural rules with the blessing of the Speaker, or by forcing a confidence vote and an early general election, MPs would either seize control of the parliamentary timetable as they did in March, or bring down the Government.
The oft-cited Institute for Government report which argues that No Deal is the ‘legal default’ comes with a huge caveat: it says right at the top that’s all true unless the Speaker of the House of Commons devises any constitutional innovations aimed at frustrating No Deal. That assumes away Speaker Bercow. But Speaker Bercow is a fact.
The honest truth is that No Deal is not a policy option available to the next Prime Minister. The only way to escape the bind is to get a new Parliament. But that would mean an election, which would risk Corbyn by Christmas, a second referendum and no Brexit at all.
It’s also clear that renegotiating the Political Declaration on the future is much easier than renegotiating the Withdrawal Agreement.
Changes to the Withdrawal Agreement must now be unanimously agreed by all 27 member states, not just Brussels. Any such agreement is highly unlikely to be forthcoming. And if it were, it would only be offered with unacceptable strings attached, like conditions on issues like Gibraltar and fisheries. A Brexit plan based on changes to the Political Declaration is more credible than a plan that rests on reopening the Withdrawal Agreement.
Given all this, my Brexit Delivery Plan will get us out by October 31st, without gambling Brexit on an early election.
I want to see a much more ambitious Comprehensive Free Trade Agreement, one that will need changes to the current Political Declaration. That way we restore our sovereignty, protect the economy and safeguard our Union.
The first part of my Plan is to seek a democratic mandate from the Conservative Party by setting out my plan in advance. I hope other candidates will do the same.
Second, I will unilaterally enshrine the rights of EU citizens in UK law. This is the right thing to do, and will create much-needed goodwill for the negotiations ahead.
Third, I will propose a Comprehensive Free Trade Agreement as the basis for our future relationship with the EU. That means leaving the Single Market and the Customs Union.
This free trade deal with the EU will include a major security co-operation element. It will also ensure UK regulatory autonomy on emerging technologies, helping us create the high-pay jobs of the future.
The fourth part of my Plan provides a long-term solution to the most vexed issue of the whole Brexit process: avoiding a hard border on the island of Ireland.
I will set up an Irish Border Council with a remit to agree, as soon as possible, a political, administrative and technological solution that avoids a hard border and allows for an independent UK trade policy.
This will be modelled on the George Mitchell talks which drove the Northern Irish peace process and will include cross-party representation from across Northern Irish society, as well as a role for the EU and the Irish government. Its aim will be to secure the consent of communities on both sides of the border.
To support the Council’s work, we will make it a national UK mission to develop an effective border system. And we will invite the world’s leading logistics and technology experts to come and help us solve this problem.
But this problem cannot be solved with technology alone. It will need political buy-in and the consent of those on both sides of the border. So we will invest an initial £1 billion in communities on both sides of the border, including a new PEACE programme and a new fund to support North-South trade.
The fifth and final part of my Brexit Delivery Plan is to include a time limit on the backstop.
This will focus minds and, crucially, will put an endpoint to the Irish border process. It will be delivered through an addendum to the Withdrawal Agreement. Conversations I have had with EU contacts give me cautious grounds for optimism about the prospects for this.
That’s my Brexit Delivery Plan: a Comprehensive Free Trade and Security Agreement that respects our sovereignty; an Irish Border Council to find a solution that all sides can live with; and a time limit to the backstop.
Once we’ve left the EU by October 31st, I am determined to make such a success of Brexit that we vindicate the choice of those who voted to Leave and we surprise those who voted to Remain.
We can start to reunite our country with an open and optimistic, patriotic unionism. We can focus on the properly-funded, world-class high-tech public services that people want to see. And we can make the new dividing line in British politics higher pay with the Tories or higher taxes with Corbyn’s Labour.
So let’s get Brexit done, let’s make it a success and let’s move our country forward.
The post The Speaker would stop No Deal, so here’s my plan to ensure we’re out of the EU by October 31st appeared first on BrexitCentral.
There is no easy, undiscovered solution to the Brexit impasse waiting for some brilliant mind to uncover. A ‘better deal’ – in the sense of a modification to Theresa May’s Withdrawal Agreement without the Irish Backstop – is unlikely. As many have known for some time, the best outcome would consist of a comprehensive Free Trade Agreement (FTA), like the CETA concluded between the EU and Canada, but which includes deeper commitments on services and mutual recognition of professional qualifications.
To be sure, this will not replicate the closeness currently enjoyed under the Single Market but, crucially, it will allow the UK to diverge in terms of regulatory standards in order to promote a more competitive economy focused on pragmatism, innovation and the needs of business in the tradition of the common law (which helpfully permits everything except that which it does not) as distinct from the uncompromising continental civil law (which irritatingly prohibits everything except which it deigns to allow). Our dynamic, reliable legal system is one of the reasons that the UK and the US have thrived while Europe continues to stagnate under the weight of its own bureaucracy and rigidity.
The new Prime Minister must pursue such an FTA aggressively in the spirit of full co-operation and amity with our European partners, presenting it, and genuinely so, as in our shared interest. While it would be difficult to finalise such an agreement in four months, an interim agreement could be agreed in principle, as specified in Article XXIV of the GATT and Article V of the GATS, allowing the two parties to trade with virtually friction-free trade until a final agreement is in place.
If an FTA or an interim agreement leading to one is not forthcoming by October 31st, so be it. Preparations to mitigate any shocks from trading with the EU without a formal trade deal must continue in earnest. This will include continued infrastructure and technology enhancements at all borders. A significant portion of the £39 billion that would have been paid to the EU had there been an FTA, but which will be withheld without one, can be set aside to help businesses cope with adjustments. This could support tax relief, especially for small- and medium-sized businesses, to help offset some of the costs of handling diminished access to the EU market. With a no-deal Brexit in time for Halloween, by Christmas people will be wondering what all the fuss was about. It will be the biggest anti-climax since the predicted non-recession of the autumn of 2016.
It is hard to see why presenting ‘No Deal’ as a sensible counter-strategy to an FTA should in any way be construed as reckless or extreme. No-deal Brexit continues to be painted by the media and some politicians as the most radical of all options, one which represents a complete rejection of not only Europe but one which is the embodiment of isolationism, as if it were somehow the manifestation of the UK’s taking on the mantle of the North Korea of the Atlantic. The reality could not be further from the truth. No one, including not one candidate for Prime Minister, has advocated anything remotely like this. No one has said we should impose punitive tariffs on EU goods after Brexit. No one has suggested rejecting the WTO or trade deals with other countries. To the contrary – everything that has been put forward by Brexit supporters has unfailingly embraced free trade and economic globalisation.
Under WTO terms, the EU’s MFN tariffs on most goods are quite low, with some exceptions for agricultural products. There is every indication that the customs processes at borders will minimal, designed to prioritise flow with minimal inspections based on genuine risks. Likewise, there is no reason why the UK would block goods coming in from Europe. The picture for services is somewhat less promising, but steps can be taken to enhance GATS-level access to EU markets through the establishment of a commercial presence in an EU Member State.
We do not need membership of the EU to be active participants in the global economy; if anything, it is the EU which is holding us back from doing so more robustly. It has been the EU’s trade agenda which has imposed all sorts of harmful policies, such as high tariffs on goods we don’t produce, anti-competitive data localisation rules, unscientific health and safety regulations on food and labyrinthine financial regulations. Don’t believe the merchants of doom. An FTA/No Deal strategy is the very essence of prudence and moderation.
The EU, The UK and Global Trade: A New Roadmap by David Collins is published today by Politeia
The post The next PM should pursue a Free Trade Agreement with the EU, but retain a No Deal counter-strategy 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.
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.
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.
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.
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.
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.
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.
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’.
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.
I am standing for election as Leader of the Conservative Party for many reasons. I believe in building a fairer Britain for working people, a land of opportunity for the aspirational and entrepreneurial, and an economy which gives workers a fairer deal, lowering taxes and ending consumer rip-offs.
But I have no illusions about what will be in my inbox on my first morning at No. 10, if I am elected Leader. Brexit. The Gordian Knot of British Politics, the apparently unsolvable puzzle that politicians have so far failed to undo in a way which reflects the democratic will of our people. That prospect doesn’t daunt me. In contrast to the army of nay-sayers and professional pessimists in Parliament and the media, I am confident that we can and must deliver Brexit – and that it presents huge opportunities for us to grasp.
As a former Foreign Office lawyer and Brexit Secretary, this process bears all of the classic hallmarks of international diplomacy. Having seen the process up close and personal, I also appreciate how intensely political it is for both sides.
Serious negotiating mistakes have been made, but in any negotiation you can’t just turn the clock back. We are where we are. So, my starting point is that there is still – just about – scope for a reasonable compromise with the EU to achieve a deal, although it will require the EU to demonstrate a level of pragmatism and goodwill that has been absent since 2016.
At the same time, we must recognise the UK’s fundamental strategic mistake, in failing to retain the prospect of leaving on World Trade Organisation terms as a fall-back position. Ruling out a no-deal Brexit was the rough equivalent, in negotiating terms, of taking out a gun, carefully loading a bullet into each chamber, and presenting it to your opposite number with an invitation to use it, if required.
We need to change the narrative. We need to reset the terms of the negotiation, and we need to restore our negotiating leverage. I am the only candidate in this contest who has set out a clear and credible plan.
We should engage with our EU partners, by reverting with a final offer to overhaul the Backstop, as approved by Parliament in the form of the so-called Malthouse compromise.
We would also make clear that the end destination for our future relationship must centre on a ‘best in class’ Free Trade Agreement (such as the EU-Canada agreement), not a Customs Union or any other hybrid arrangement requiring close regulatory alignment.
This is both constructive and reasonable – a final attempt to bridge the gap with our EU partners, in a way that allows us to take back control of our laws and forge an independent global free trade policy, tailored to UK needs and interests.
This approach must be backed up by a disciplined Cabinet, in which every member of the top team is willing to keep our 2017 election manifesto promises. And it must be reinforced by an early Budget. That way, we can demonstrate to business and the country that the Government is absolutely committed to seeing us through any short-term risks or disruption, and making a success of Brexit.
Leaving on WTO terms is not the preferred outcome, but it is far better than leaving with a fatally flawed deal. If the EU stubbornly refuse to budge, it is the principled and practical solution to the position in which we find ourselves. The alternative – of protracted and prolonged uncertainty – would be far worse for our country.
Of course, the predictable voices are already emerging to obstruct this strategy by suggesting a range of parliamentary procedural ruses, which have made sensible decision-making more difficult since the last election.
These are always presented as great matters of constitutional principle, although the constitution which is prayed in aid seems to be a very mutable one, adapted on each occasion for the convenience of those who want to frustrate or derail, rather than deliver, the will of the British people.
That has to end. Leaving the EU on WTO terms is presented by the doom-mongers as an apocalyptic outcome that will leave British business in ruins. But in truth, the endless uncertainty that has gripped the UK since the referendum is much worse. Not only for business, which can’t plan ahead, but for public trust in our democracy.
We politicians were given a clear mandate in June 2016: take us out of the European Union. We have failed to deliver. The fact that the country had to go through the pantomime of the recent European Parliament elections was a grotesque reminder of that failure – and the Conservative Party was punished by voters for its part in that failure.
We cannot afford to continue on that path to political oblivion any longer. My commitment is to deliver Brexit, and to make sure it happens at the end of October. I will not countenance another extension. I am confident, as a recent Institute for Government report made clear, that a resolute Prime Minister could steer a course to leaving on WTO terms at the end of October. I am committed to that, because we need to get Brexit done and move on. I am also convinced that it is the best way to give us our best shot at an eleventh hour deal with the EU that would be acceptable.
When Alexander the Great was presented with the original Gordian Knot, he took his sword and cut it in half with a single stroke. It is time to bring this tortuous Brexit process to an end. It is time for a clean break. We should keep the arm of friendship extended to our EU neighbours. But, if we have to leave on a WTO basis, then so be it. It is high time all of us as politicians delivered on the Brexit promises we have made to the people of the United Kingdom.
The post Brexit on WTO terms is far better than leaving the EU with a fatally flawed deal appeared first on BrexitCentral.
If the most recent polling is to be believed, Thursday’s unintended and unwanted European Parliament elections will have been a disaster for the Conservative Party. We may well fail to have a single MEP returned. The Labour vote, too, will have been drastically reduced, as voters abandon the two main parties, principally in favour of one that has existed only for a few weeks.
The reason is obvious. Despite being told it time and again, the UK did not leave the European Union on 29th March. As soon as the Prime Minister opted to extend Article 50 and so necessitate the UK’s participation in these elections, the sense of betrayal – which had been long brewing – overflowed. When Mrs May compounded that sense by opening the door to a second referendum on Tuesday, it erupted. One by one, the 17.4 million people who voted to Leave the European Union had seen each and every promise which had been made to them since the referendum broken.
In 2015, the Conservatives promised that, if elected, we would hold a decisive referendum on the UK’s EU membership. The party was returned to government with more votes and MPs. When the then Foreign Secretary – a certain Philip Hammond – introduced the legislation to the Commons to bring that promise about, he exhorted MPs:
“…to give the British people the final say on our EU membership in an In/Out referendum… The decision about our membership should be taken by the British people, not by Whitehall bureaucrats, certainly not by Brussels Eurocrats; not even by Government Ministers or parliamentarians.”
The Government then spent £9.3 million of taxpayers’ money during the referendum campaign telling every household that: “This is your decision. The Government will implement what you decide.” After the referendum, in which more people voted to Leave than have ever voted for anything in British history, the 2017 Conservative Manifesto pledged that the UK would leave the Single Market, the Customs Union and the jurisdiction of the European Court. Page 36 said that “no deal is better than a bad deal.”
In her fateful “Charing Cross speech” this week, the Prime Minister’s “ten-point” offer starkly laid out the extent to which those promises have been reneged upon. The legally-binding Withdrawal Agreement remains unchanged, as she confirmed to me in the House of Commons this week. That means the Backstop remains, fundamentally altering the constitutional status of Northern Ireland by keeping it permanently locked to EU rules, overseen by the European Court of Justice.
The Prime Minister said that, should the Backstop be triggered, a disparity between Northern Ireland and the rest of the UK would be resolved by having Great Britain follow EU rules as well – simply multiplying the number of people sharing in the misery. In any case, we would remain aligned to EU rules for goods, severely hampering our ability to forge an independent trade policy. It was an interpretation of Taking Back Control warped beyond all recognition.
Mrs May’s decision that she was not now the person to find a new way forward was, of course, the correct one.
But her departure, and with it that of her Withdrawal Agreement, will not be enough on their own. The radical shifts in voting intention – even in long-held party allegiances – in recent weeks demonstrate that there is an accelerating appetite for genuine political change and realignment. If the Conservatives want to survive, we have to change course, deliver a genuine Brexit as we promised and demonstrate that when we make such totemic promises to the electorate, we will keep our word. We will simply not be listened to on any other issue until the UK leaves the EU and we fully take back control.
Immediate action is required on the part of the incoming Prime Minister. Of chief importance will be returning to Brussels to tell them that the current Withdrawal Agreement is dead and then seeking a wide-ranging, zero-tariff, zero-quota Free Trade Agreement, of the kind offered by Donald Tusk in March last year.
That offer initially foundered on the question of the Northern Ireland border. But the work of the European Research Group, built upon by the Alternative Arrangements Working Group alongside senior European customs professionals, has provided robust solutions to guarantee continued seamless trade based upon existing techniques and administrative processes. The Taoiseach, Leo Varadkar, has expressed confidence that arrangements can be implemented to avoid new border checks. Even Michel Barnier has now confirmed that in any scenario the Belfast Agreement will continue to apply and “there will be no hard border” using our alternative arrangements.
There is, therefore, every reason that the UK and the EU ought to be able to come to a mutually-beneficial trading relationship. If, however, the EU refuses, then the next Prime Minister must be prepared to leave without a deal. The extraordinary success of the Brexit Party is testament to the public enthusiasm for this approach. Indeed, a recent ComRes survey found that two thirds of those expressing an opinion agreed that “if Parliament rejects the Withdrawal Agreement, then Parliament has to accept no deal as a consequence”.
There is nothing to fear from this “Plan B” outcome. First of all, the arrangements for the Northern Ireland border were devised without prejudice to the nature of the trading relationship. They are available and can be effective in any event.
Secondly, “no deal” is a misnomer. What we are really talking about is a WTO deal – leaving the EU without a formal Withdrawal Agreement but instead with a series of pragmatic mini-deals.
The WTO approach has often been criticised on the basis that very few countries trade on “purely” WTO rules. It is true that many micro-agreements exist between countries without a formal trade agreement, but it is important to keep these in perspective.
The EU does not, for example, have a trade agreement with the USA, but 147 side-deals are in place. Of these, most are multilateral agreements such as the Air Transport Agreement (to which the UK is also a party) and only 31 of the bilateral agreements have any relevance to trade.
The EU also has 97 micro-agreements in place with Russia, on which it is currently applying economic sanctions. It is surely ridiculous to suppose that the EU would be unwilling to replace many micro-agreements with the UK.
Indeed, as the former Brexit Minister Chris Heaton-Harris confirmed, unilateral and bilateral preparations for “no deal” are “well advanced”. The European Commission similarly confirmed in March that its preparations for “no deal” have been completed.
Air travel will continue. The EU confirmed in November that it would continue to allow UK airlines to fly over, land in and return from EU airports even if there is no Withdrawal Agreement, provided the UK reciprocates. Baroness Sugg, the then Transport Minister, confirmed this reciprocity in March when she told the House of Lords that: “Measures put forward by the UK and the EU will ensure that flights can continue in any scenario; deal or no deal.”
Medical supplies will arrive. The President of the Royal College of Paediatrics and Child Health, Professor Russell Viner, confirmed in a message to 19,000 doctors:
“I have been considerably reassured by governments’ preparations relating to medicines supplies…Governments, the Medicines and Healthcare products Regulatory Agency and the NHS have been working hard behind the scenes… and we believe that our medicine supplies are very largely secured.”
Cross-Channel trade will continue. The continuing Remain campaign has made particularly alarmist claims of a country completely cut off from the rest of the world, but they are nonsense. The Chairman of the Port of Calais, Jean-Marc Puissesseau, has robustly refuted suggestions of disruptions to freight. Xavier Bertrand, President of the Hauts-de-France region, dismissed the scaremongering completely: “Who could believe such a thing? We have to do everything to guarantee fluidity.”
Sensible measures can be straightforwardly implemented in the best interests of both the UK and the EU, mitigating any potential disruption.
Most significantly of all, it is important to remember than “no deal” need not be an end state. Indeed, even without a Withdrawal Agreement, both sides can agree to a transition period maintaining our current zero-tariff, zero-quota arrangements while a new trade deal is negotiated. Under Article XXIV of the WTO’s General Agreement on Tariffs and Trade, this can be achieved by the UK and EU both agreeing to a Free Trade Agreement and notifying the WTO of a sufficiently detailed plan and schedule for it. As David Campbell-Bannerman has pointed out, such an “interim agreement” need be little more than an agreement to continue talks.
The incoming leader has, therefore, a clear remit on how to proceed. One thing is absolutely certain. There can be no further extensions to Article 50. Failure to meet the 29th March deadline has been near catastrophic for the Conservatives. Any further delay would surely prove fatal.
Any new leader must say, completely unequivocally, that we leave on 31st October at the latest, whether or not we have a new deal. We must seek to negotiate a wide-ranging trade agreement, but we must be prepared, if necessary in the interim, to go to WTO terms. We must also correct a significant mis-step by giving absolute clarity that EU citizens resident in the UK will continue to have the right to live and work here in any event.
The new Prime Minister and the new Cabinet will face a difficult task, but one which can be expressed very simply. If it wants to have any hope of bringing back the members and voters it is currently haemorrhaging, and if it wants to have any credible claim to believe in democracy, it must make good on the promises which the outgoing Government has broken. It must repair the trust which the mistakes of its predecessor have so profoundly eroded.
The post The next Prime Minister must ensure we are out of the EU by 31st October, deal or no deal appeared first on BrexitCentral.
In the below article, Patrick Minford writes in a personal capacity.
In the latest discussions on the Brexit Withdrawal Agreement and Political Declaration (WAPD), two views have emerged about the UK’s future choices. One, which I will call the lawyer view, is that once signed, the WAPD binds the UK indefinitely; this view is held by many of my friends and Brexit allies who are largely lawyers and as such tend to believe that the letter of the law will prevail. The other, which I will call the realist view, is that it can be ‘evolved’, to use a word popular with some politicians, in line with the mutually evolving interests of the two sovereign parties, the EU and the UK. The latter view is the one generally adopted in the economic analysis of international treaties, as the following quotation from a recent paper in a leading economic journal makes very clear.
At the national level, such conflicts [over payment for/usage of public goods] between individual and collective rationality can be resolved by the intervention of the government (Demsetz, 1967). At the international scale, however, there is no supranational authority that could coerce states into adopting efficient policies if they run counter to national interests. Filling the void are international agreements. Under the terms of the Vienna Convention on the Law of Treaties, a state that ratifies a multilateral treaty chooses partially to surrender its sovereignty and to subject its policies in a specific domain to the rules and prescriptions of the treaty. In so doing, sovereign states agree to coordinate their policies in mutually beneficial ways. By the very nature of sovereignty, however, the agreement is fundamentally non-binding and states can always withdraw from it. Therefore, the fact that public good provision is implemented through an international agreement should not change a country’s incentives to contribute per se — unless the treaty alters the country’s incentives to cooperate in other ways. (Wagner, 2016)
The point of economic analysis of treaties therefore is that a sovereign state only continues as a party to any treaty if it remains in its interests to do so. Therefore one must analyse treaty development over time with reference to how these sovereign interests evolve; and how at any time the sovereigns reach an accommodation based on their mutual interests. The basic reason, as explained in the quotation, is that there is no supranational power that enforces treaties in the way that a national state, with a monopoly of force, enforces domestic law.
The realist view is therefore asserting that once the UK is out of the EU, how it deals with the WAPD is a matter of subsequent choice and negotiation with the EU, which also has freedom of the same sort. Anyone supporting the lawyer view must therefore demonstrate that the WAPD remains an agreement that it is in the interests of both sides to maintain in the same form. It is not sufficient to say that because it has been signed it is indefinitely binding; this would only be sufficient if there was a supranational power that could enforce this, and I shall assume it as obvious that indeed there is no such power. In a recent posting on the Lawyers for Britain website my old friend and longtime Brexit ally, Martin Howe, argues that the Treaty of Utrecht binding Spain into Gibraltar’s status illustrates that treaties bind long-term. However, in fact this well illustrates the point about self-interest. Spain, like the UK, has had a strong interest in Gibraltar not accidentally becoming a casus belli, much as the Falklands, with a population similarly determined to remain British, became, at great expense to both the UK and Argentina. Ceaseless ongoing diplomacy on both sides to accommodate mutual complaints has found the Treaty a useful figleaf.
In the rest of this piece I will discuss what the interests of the UK and EU are and how, if at all, they might evolve, and with them the UK/EU future Treaty relationship. This type of analysis is a branch of game theory, which can involve highly complicated mathematics, as in the paper cited, but fortunately not in this case here.
Current UK and EU interests and the Withdrawal Agreement
Based on economic analysis within a rather standard World Trade model and other models described in Should Britain leave the EU? An economic analysis of a troubled relationship by Minford et al (2015) I suggest the following broad interests of the EU and the UK:
The EU: for the EU the status quo is optimal. The UK contributes 10% of the EU budget. Its food and manufacturing industries sell to UK consumers at 20% above world prices because the Customs Union places trade barriers of this tariff-equivalent value against products from the rest of the world. EU regulations prevent UK practices that would reduce UK costs and so undercut EU competition, driving down margins. Unskilled EU workers can be exported to the UK labour market where their wage is supplemented by the UK taxpayer by about 20%.
The UK: for the UK the optimal policy is abolition of protection against the non-EU; this ‘free trade’ policy eliminates the 20% premium paid to EU producers of food and manufactures and it also lowers consumer prices, pushing up productivity via trade competition. At the same time the UK would want to sign a Free Trade Agreement with the EU that keeps the current free access with zero tariffs between them; nevertheless it turns out that any tariffs or equivalent that are imposed will benefit the UK and be paid by EU traders, because UK prices of both imports and exports are set by world prices, so UK tariffs must be absorbed by EU exporters while EU tariffs must similarly be absorbed by EU importers. It follows that although the UK would be willing on the ‘good neighbour’ principle to sign an EU-UK FTA, it would strictly speaking be better off under WTO rules with no deal.
These descriptions of economic interests take no account of current political pressures. A natural question is: given its interests why on earth did the UK Government sign up to the WAPD? This effectively makes the status quo the most achievable agreement, given that the backstop endows the EU with effective veto power over anything it dislikes; under the backstop the UK effectively stays in the EU as now until the EU deems there to be an agreement.
The only way to account for this is in terms of the votes in Parliament. With a part of the Tory party led by Philip Hammond having a Remainer view of UK interests – that is wanting protection for reasons of preserving current jobs (notice not gaining the most jobs in the long term as would occur under free trade etc), following vested interests like the CBI – the Government of Mrs. May seems to have assumed that only the ‘soft Brexit’ WAPD could get through Parliament. Similarly, it assumed that Parliament would not support No Deal, because this too would sacrifice some current jobs to a free trade strategy under WTO rules; as a result the Government did not prepare for No Deal and so lost its only bargaining counter with the EU so that the WAPD failed to favour UK interests. As a result, the WAPD too cannot get through Parliament because the ERG Conservatives and DUP votes oppose it.
Now Mrs May is trying to get Labour votes to push through some even ‘softer’ WA, with a PD promising EU customs union in some shape or form. Hence the EU have not had any difficulty achieving a WAPD that favours its interests, because of parliamentary politics. Add to this that the EU was in any case determined – due to its own politics – to show that exiting countries get a bad deal, to discourage others. It is clear that the politics of the divorce situation was bound to produce a bad deal from the UK viewpoint. One does not need to go further and accuse Mrs May of being a closet Remainer, which she may well be, to account for what has been agreed.
The Economic Analysis puzzle
How those Remainer ideas took hold in the face of strong economic arguments to the opposite effect, as set out above, for the long-run gains of Brexit, is rather baffling. As I explained in a recent paper in World Economy, Remainers and their economist allies (e.g. Breinlich et al, 2016) used ‘gravity theory’ to argue that leaving the EU would be damaging to the UK and that gains from free trade with the rest of the world would be small. However, the ‘gravity models’ they used did not obey the canons of good general equilibrium modelling, in which all causal factors are simultaneously analysed for the effect of a major policy change like Brexit. All the gravity models were ‘partial equilibrium relationships’ in which trade, GDP, FDI and productivity were separately related without any overall inter-linking.
This approach was originally – in 2016 – also adopted by the Treasury; but at the end of 2017 the Treasury for this reason finally abandoned it, in favour of a full general equilibrium model, the GTAP model, bought in from the Purdue University Trade Modelling Project. This was used to reevaluate Brexit in the Cross-Whitehall Civil Service Report of that time. Given the strong Whitehall bias against Brexit the new model was given assumptions that produced similar negative results to the previous ones. These consisted of a) few and limited FTAs with the non-EU world; and b) large border barriers, even with an EU FTA, between the UK and the EU.
However, plausible alternative assumptions reverse the Brexit effect on GDP under a WTO No Deal for example from highly negative (-7%) to firmly positive (+3%).These assumptions are that the UK uses FTAs with the non-EU to eliminate all trade barriers on goods against them while also gaining wide market access; and that it signs an FTA with the EU that prevents any new barriers, or if it goes to WTO rules then only tariffs spring up at the border, other interferences being illegal under WTO obligations.
As this debate has unfolded between our critique and the Treasury, academic economists espousing the previous gravity methods have stayed strangely quiet while the Treasury dropped their methodology. Meanwhile we published another paper in which we tested a full ‘Computable General Equilibrium’ (CGE) model with gravity mechanisms against a plain Classical CGE trade model without them, to see how well each matched the UK trade facts. Using an elaborate and thorough Indirect Inference test we found that the gravity version was strongly rejected while the Classical one fitted the facts. Furthermore when we did the Brexit policies on the Gravity version the effects were much the same as with the Classical, our main tool; this was because Brexit gives gains with the rest of the world while not much disturbing our relations with the EU and so stirring up the negative gravity effects. Therefore it is clear that the anti-Brexit claims based on the gravity approach are invalid.
Unfortunately in the present fevered atmosphere, calm academic debate cannot take place; it is reminiscent of wars of religion where each entrenched side only wants to hear confirmation of its prejudices. One of the side benefits of Brexit occurring is that people may move on to normal technical discussions about optimal UK policies.
The way forward in Parliament
There are now three main parliamentary scenarios. In two of them, one or another WAPD – Mrs May’s or some even softer one agreed with Labour – gets through Parliament. The UK then leaves the EU in these two scenarios, initially for the transition period, as soon as either gets through.
In the third, there is no WAPD agreed and the possibility strengthens of a second referendum with Remain on the ballot paper, leading to either no Brexit or a renewed demand for Brexit. This third scenario is one in which Brexit uncertainty continues for a year or more, with unknown political consequences, given that the Leave voters in the first referendum would feel betrayed. This third scenario will only be welcomed by Remainers determined to reverse the democratic referendum decision. From a Brexit viewpoint, the only hopeful outcome would be a new Conservative leader and government determined to change the WAPD and get it through Parliament before exit. But how could this be achieved without an election to change Parliament’s composition? Also, what would be the odds on the Conservatives winning such an election, given the fury of the populace with the Conservatives for failing to deliver Brexit? Such hopes look forlorn.
Scenarios 1 and 2, if Brexit occurs: What of UK and EU interests post-Brexit?
In this section I ask what, given we have a WAPD as described, opposed widely by Brexiteers, is likely to occur if, as seems probable, Mrs. May steps down and is succeeded by a Brexiteer Conservative leader? Such a leader is likely to agree with my account above of UK interests. If so, what can such a leader do, if saddled with the WAPD?
Under the realist view espoused by economic analysis, this leader’s government moves to re-open bargaining with the EU. This would be done via normal diplomatic processes, in which the EU would face a possible general lack of UK political cooperation in a wide array of areas, including key ones like security and military matters; also the WTO option would be reactivated as a ‘walk away’ trade strategy, should the EU be unwilling to move away from its status quo aims.
The UK having left the EU after resolving basic administrative issues such as citizens’ rights, aviation/transport/visa agreements, there would probably be little appetite to revisit these issues; and the focus should be on the trade relationship quite narrowly. Nevertheless were it to be widened, the new government would make active preparations for a breakdown in these areas.
At the same time the UK would proceed to negotiate FTAs with non-EU countries, informing them of their aims on EU relations. These would be widely welcomed, as we already know.
How would the EU/UK bargaining go from here? We can think of the ‘game’ now as a series of proposals and counter-proposals. Start from the opening WAPD ‘proposal’ for the status quo. This violates UK interests radically, breaching its basic ‘red lines’. The UK counter-proposal is to walk away to WTO rules and No Deal. This UK counter-proposal damages EU interests radically, as we have seen: they face world prices in the UK market and tariffs in both directions are paid by EU traders. In order to counter this the EU now offers an FTA: Canada+ which consists not just of zero barriers on goods (Canada) but also the plus of mutual recognition in services where EU interests are served by free trade, given a wide reliance on UK service industries. The UK wants either Canada or Canada+ more or less indifferently as its service industries are all highly competitive around the world. As noted earlier, while No Deal gives strictly better gains, the UK is likely to agree to this proposal for the sake of neighbourly relations.
The bargaining round, which may well take a few years to play out, is therefore likely to be resolved by Canada+. We can essentially rule out any other resolution because all other alternatives leave one side unacceptably badly off – beyond its red lines – or can be improved on by one side without making the other worse off.
What I mean by ‘unacceptably’ is literally that it will not accept it in the long run, when by walking away or co-operating it can avoid it. The EU can avoid No Deal by co-operating. The UK can avoid the status quo by walking away.
All this is illustrated in the following diagram: the top line shows how the UK ranks all options, with No Deal the best; the second line shows the EU rankings, with the status quo the best. Each side’s red lines of unacceptability are marked out on each side. Any resolution must be inside these. Canada+ within these is better than Canada for the EU and an equals with it for the UK. So Canada+ gets chosen.
Notice that all this diplomacy is carried out between ‘consenting sovereigns’. Neither will bring in outsiders because no outside power has jurisdiction or indeed wants it. In so far as third parties have preferences, they tend to favour the UK as they typically want to agree FTAs with the UK. As for the WTO, it allows states to negotiate FTAs freely; and in general favours all agreements that in net terms reduce trade barriers, just as will occur under the EU-UK renegotiation.
The need for a new Conservative leader and government
In order for this new diplomacy based on the UK’s true economic interests, not sandbagged by Remainers within the tent like Hammond and Co., there plainly needs to be a new Conservative leader and government, fully seized of the Brexit case for free trade and so on. The current leadership/government has proved that it has neither the understanding nor the will to pursue the UK’s true interests. Without it changing no progress along the lines discussed here is possible.
It is now very likely that the Conservative Party will change its leadership, if only for reasons of pure survival. With the agreed extension, the Conservatives face carnage in the local elections and if the European elections take place, annihilation in those. This will inform the party of how unpopular its failure to deliver Brexit has made it. Its best hope then is for Mrs. May to go and for a new leader to chart a new direction, while making it clear that the new government rejects and regrets the old government’s failed Brexit agenda.
What are the implications of the realist view for parliamentary votes?
MPs now have some time for reflection during their Easter recess. They need to ponder the effects of their votes. Any MP that wants to avoid the chance of that third scenario of possibly No Brexit needs to consider voting for one or other WAPD. With either of them, Brexit occurs and the renegotiation can be launched under a new Prime Minister.
An ERG Brexiteer will prefer Mrs May’s original WAPD since it does not contain extra ‘soft’ commitments put in to satisfy Labour. These become yet another element to be renegotiated. In principle that too will be jettisoned; but it adds complication.
A DUP Brexiteer will remain nervous about the backstop in Mrs May’s WAPD; and could be less nervous with a softer one including a customs union because with that the backstop does not come into play. Nevertheless a DUP MP should reflect that none of these will survive renegotiation and should not therefore be unduly concerned. What it really needs from Mrs May and her potential successors is a guarantee that whatever is renegotiated it will never include differential treatment for Northern Ireland, or indeed any other devolved part of the Union. But they should feel confident on this: the Conservatives have been robustly and consistently a unionist party.
It should be noted by both these groups that in opposing any WAPD they are playing the role of ‘useful idiots’ to Remainers who want no Brexit, leading to a second referendum.
When one turns to Labour MPs and Mrs May, both involved in negotiations over a softer WAPD, they should reflect that their new WAPD causes both sides difficulties – Mrs May because it infuriates most Conservatives, Labour because it will infuriate the substantial Labour group that wants a second referendum rather than any sort of Brexit; but at the same time achieves no extra long-term ‘softness’ in the outcome, as the added-on soft elements will simply be the first to go in the inevitable renegotiation.
Reflection on all sides should therefore have the effect of terminating the May-Labour negotiation while logically inducing ERG and DUP Brexiteers to push the May WAPD over the line.
The realist view of post-Brexit affairs clearly implies that the UK, once it is out of the EU will behave like any other sovereign power and see that its foreign relationships evolve to suit its interests. So far, these have been stitched up in talks with the EU due to a Remainer group of Tories who have opposed the Government’s Brexit policies in favour of industrial vested interests, in alliance with Labour opponents, and undermined its bargaining position vis-à-vis the EU which was in any case politically determined not to agree a good trade deal. No sovereign state could put up with this sort of stitch-up in the long term. This piece has described how a new government, fully seized of the UK interest in free trade and domestically set regulation, besides control of borders and the ending of budget transfers to the EU, will have both the incentive and the scope to achieve a logical renegotiation that reaches an EU agreement tolerable to both sides.
Under this view the key aim for Brexiteers should be to get the WAPD in some form – it does not much matter what form – over the line, so that Brexit definitely happens as demanded in the referendum. Policy in the future will then evolve to meet UK interests.
The right post-Brexit trade and investment policy can rebalance economic disparity across UK regionsAs the preparations for the United Kingdom to [...]
- Tory leadership frontrunner’s claim comes one [...]
- Tory leadership candidate promises to [...]
Nigel Farage should face 'highest penalty' over undeclared gifts from Arron Banks, says EU committeeBrexit Party leader should be referred to European Anti-Fraud Office (OLAF) for further investigation, letter says
Brexit: Government announces plans to bring medicine from Europe in case of no-deal after Grayling's ferry fiascoGovernment sources said no money would be spent or committed until September
Nigel Farage should face 'highest penalty' over undeclared gifts from Arron Banks, says EU committeeBrexit Party leader should be referred to European Anti-Fraud Office (OLAF) for further investigation, letter says