Tuesday, 5 February 2019

A customs unicorn

Customs unions have very specific operational features and provide very specific benefits. These benefits tend to be modest and achieve very little if one approaches trade from the perspective of maximising economic integration between two trading partners. The gulf that exists between the scope and functionality of the single market, and that of the EU Customs Union, is remarkably wide.

But, what is also important to recognise is that the drawbacks of customs unions are also vastly over exaggerated. This is mostly because, as this blog has previously explored, global tariffs have seen widespread reduction thanks largely to globalisation. In their place, non-tariff measures have crept up on trade actors to pose the really noticeable threat to the international system.

Countries who find themselves bound by common, harmonised tariff schedules, like the EU's member states, will experience a reduction in the independence of their trade policy. Note that this does not entail foregoing total independence, for customs unions deal only with tariffs: they construct a common external schedule and abolish quotas and duties between members.

Talk of tariffs must also include rules of origin, the main obstacle eliminated by continued customs union membership. Rules of origin is the device used by exporters to prove they qualify for tariff-free preferential treatment stipulated in any relevant trade agreement with another country. Likewise, importers need to identify the exact source of a good entering their customs territory.

In summary, a safe assumption can be made that any good found inside a customs union either originates within that territory or came from the outside and has filtered through the common external tariff. Checks between members of the customs union for origin are therefore not necessary, and this is where the customs union links in with the preservation of the Northern Ireland border. Here the benefits of customs unions find their end.

It is often argued that while left in a customs union, members cannot make their own independent bilateral trade deals, but this is not technically true. To placate the hard Leavers angry at the prospect of a comprehensive customs union with the EU I like to make the point that various other trade agreements are possible. Because we are only removing tariffs from the equation, other elements of trade policy are left broadly untouched.

Agreements covering services, customs cooperation, some non-tariff measures and facets of mutual recognition can still be dealt with. This does not sound like much but in essence trade oughtn't be steered by what media and politicians find politically entertaining. It is a specialised branch of statecraft as well as an important tenet of foreign and economic policy. Trade is not simple and the UK will need to re-learn it as a distinct customs entity.

And so relearning trade begins, as with anything else, with establishing the facts. What is not possible in a comprehensive customs union with the EU is to retain a say in the direction and rulemaking of the customs union, especially with regard to negotiating tariff reductions for implementation within preferential trade agreements. This is for the birds and totally negates any close inspection of existing customs union models.

The most useful template with which to work would probably be Turkey, a third country which negotiated a distinct, bilateral customs union with the EU in December 1995. The customs union does not fully replicate the EU version; it doesn't include agriculture, coal and steel products or public procurement, and as such it is incomplete. But that does not mean we cannot learn lessons from it.

Turkey's arrangement with the EU leaves it in a sub-optimal position from a negotiating perspective on several fronts. Firstly, the usual gravity models of trade apply and Turkey simply cannot outweigh the influence and size of its customs union partner. The EU in tandem will not tolerate any compromising of the integrity of its internal market, so the customs union offered will extend EU terms to Turkey and not the other way around.

To me it should not matter that the UK is a larger economy. It is a former member and precedents must be set. Any UK manipulation of the common external tariff forces the EU into a position where parts of the single market are left vulnerable to backdoor circumvention and this very real prospect will govern much of the EU's attitude towards any future customs union with the UK.

In practice, therefore, Turkey does not set the tariffs which make up the fabric of the customs union arrangement. These are set by the European Commission and are based upon the existing EU model. The customs union agreement between the two partners states in rather unalterable terms:

"From the date of entry into force of this Decision, Turkey shall, in relation to countries which are not members of the Community, apply provisions and implementing measures which are substantially similar to those of the Community’s commercial policy.”

This should not come as any surprise. Regulatory superpowers get their way and this is something the UK will need to face up to post-Brexit. Turkey has no practical involvement in setting the agenda(s) of the external tariff or of the Common Commercial Policy, ensuring it trails behind the EU in all of its subsequent trade negotiations and any conclusions of agreements.

Secondly, in the event of the EU securing an FTA which provides for tariff reduction, like with Canada or Japan, Turkey is required to automatically apply the concessions unilaterally and seek the necessary reciprocity afterwards, with no Treaty guarantees of reciprocity in the works. It is here where a somewhat bleaker picture of things can be painted. The UK would not have the right to demand liberalising reciprocity from any EU FTA partners. 

Interestingly, the customs union agreement does provide some space for trade remedies between Turkey and the EU. Turkey can fight back if it feels an imported products are causing undue or disproportionate harm to its domestic industry, but this privilege is also granted to the Commission. According to the World Bank, "Decision 1/95 allows both Turkey and the EU to retain their rights to initiate, investigate and impose TDIs in cases of import surges in both their bilateral trade and trade with third countries."

By TDIs we mean trade defence instruments. Types of defence might include anti-dumping measures or emergency countervailing duties. Any comprehensive customs union between the UK and EU would likely also make use of trade defences, but this would be the extent of any unilateral powers granted to the UK and no amount of Labour Party posturing will change this.

In more general terms, though, Labour need to be clearer about what exactly a customs union with the EU can achieve. Corbyn talks lazily of protecting 'free and frictionless trade', but as I have been at pains to point out at this blog, customs unions do not get us anywhere near this line. If Labour were to come out for the single market I'd be all for it, but any pretence that a customs union removes the need for border friction is intellectual dishonesty of the highest order.

Sunday, 3 February 2019

GATT Article XXIV does not soften a no deal Brexit

Keen observers of Brexit will know by now that nobody has a weaker understanding of WTO rules than the very advocates of a no deal Brexit. Perhaps marred by desperation, the no dealers have retreated back to one of their favourite policy safe spaces in an attempt to avoid any kind of second thought or realisation that may have made errors. It is, as Roland Smith put it just recently, the 'I have no solutions and can't be arsed to think option'.

What makes the whole ordeal so frustrating is that their track record on understanding the issues and communicating them honestly is so disgracefully poor. They told us the WTO's Trade Facilitation Agreement would prevent any kind of hard border with the EU post-Brexit. They told us that new non-tariff barriers to trade governing the EU's sanitary and phytosanitary regime would be prevented under WTO rules. And now they contend that GATT Article XXIV paves the way for some kind of transition, allowing for a continuation of terms for a reasonable length of time.

The new line, echoed this week by Nigel Farage in the European Parliament, essentially argues that a no deal Brexit can be softened through the use of the Article XXIV mechanism built into GATT. Presumably the no dealers envisage it to be some kind of lever used to help WTO members transition from one trading relationship to another. And to some extent this is true, but important details are being missed out and the provisions outlined in the agreement are specific enough in their scope for us to understand where the hardliners are going wrong.

The overall narrative is that the main purpose of GATT Article XXIV is to outline the criteria by which WTO members can deviate from the principle of non-discrimination, known formally as Most Favoured Nation (MFN). This, we know, is the rule which allows countries to afford certain other countries special treatment so long as it manifests within the form of either a free trade area or customs union. This is also why tariff free trade is permitted bilaterally or multilaterally in say, the EU, or CETA, for want of a more recent example.

In addition, the Article makes space for members to establish 'interim agreements' designed to lead up to the formation of either a free trade area or customs union. The WTO outlines that Article XXIV has application across "customs unions, free-trade areas, and interim agreements leading to the formation of a customs union or free-trade area." The interim agreements part of this provision is interesting for two reasons. Firstly, it is wrongly assumed to apply in the context of Brexit, and secondly because it is almost never used.

Paragraph 5 sub-para c notes that "any interim agreement referred to in subparagraphs (a) and (b) shall include a plan and schedule for the formation of such a customs union or of such a free-trade area within a reasonable length of time." The comment at the end about a reasonable length of time is often used to propel the idea that we could in effect have a transition period after a no deal. This is a fallacy. The space for a reasonable length of time simply refers to the adoption of an interim agreement. And the key word here is, indeed, agreement.

The point about no deal is that there is no agreement in place between the UK and EU. There is no notification lodged at the WTO that the both sides have concluded the formation of a customs union or free trade area, or that they have concluded a 'plan and schedule for the formation' of a customs union or free trade area. So the provision simply doesn't apply. Since GATT Article XXIV's main mission is to encourage the proliferation of preferential trade agreements, it wouldn't make much sense for its provisions to apply to a bare bones, WTO-based trading relationship.

On March 29th, unless anything substantial changes, the UK leaves the EU with no agreement and overnight becomes a third country. The EU's third country regime automatically kicks in and community law no longer applies to the UK and is no longer applied to the UK. No dealers like to forget the second part of that fact because, of course, specialising in cakeism is a great way to avoid tackling detailed and complex problems. There is no interim to anything. The withdrawal issues do not disperse and negotiations to conclude an FTA or customs union do not kick in.

Wednesday, 16 January 2019

No more excuses

There are no more excuses available for MPs who still fail to grasp the basic mechanics of Brexit. They've had long enough to weigh up the pros and cons of each position and to learn about the functions of European systems. Enough decent material, written both by experts and well informed scribblers like myself, has weaved through public debate, ironing up the creases as we've gone along. There is no reason for any more blatant cognitive dissonance. Yes, Chris Grayling and Esther McVey, I'm looking at you.

Both Grayling and McVey had horrid 2018s. The former proved to blight and curse everything he touched, while the latter managed to spin together so much ignorance and so many lies that it is now pretty much impossible to work out whether she is deceiving when running her mouth about the consequences of a no deal scenario. So again we resort to having to waste time rebutting and correcting incorrect claims about some of the tenets of the Brexit debate.

The first is Mr Grayling's claim yesterday evening, to top off what was a rather unsurprising Commons defeat for May, in which he told Sky News that keeping the customs union "effectively means staying in the single market and keeping free movement." The second was Esther McVey's (repeated) claim that the UK can sort out many of the No deal details out during the transition period after we have left the EU. Both comments are not worthy of ministers of the crown and this nonsense should no longer be tolerated by anybody sensible.

Firstly, the issue of the Customs Union. An interesting debate circulated the world of Twitter today concerning whether, if they had to choose, Tory MPs would elect to stay in either the Single Market or Customs Union. My feelings on this are pretty clear. The Single Market is by a comfortable distance the more beneficial and useful of the two systems, being that it is an agent of regulatory conformity and responsible for removing a much larger portion of the checks away from the UK's borders with the EU.

The Customs Union and Single Market are divisible frameworks. A country can have one and not the other, irrespective of whether that country is in the EU. It is correct to say that the Customs Union and Single Market are intertwined with one another in distinct and complex ways, particularly when it comes to the elimination of tariffs between members and, even more pertinently, with regard to protecting the integrity of the EU's internal market. But what is not true is Grayling's suggestion that one necessarily comes with the other.

Last year I wrote a helpful post comparing and contrasting the practical scope of both the Customs Union and Single Market. Anybody interested will find it here. I also reproduce the summary sheet produced by the EU's negotiating team below:

As explained previously, the checks in red are eliminated by keeping a customs union. Those in black are the exclusive competence of the single market, which creates not only a harmonised regulatory culture but also instils in the EU setup the assumption of regulatory conformity, something it achieves by organising checks on product standards behind the border through a complex market surveillance programme.

This point is absolutely central to understanding the effects of leaving the EEA on the EU's enforcement regime and on our borders and supply chains more widely. The Single Market plays host to an intricate web of regulatory agencies that are responsible for cross-communication in the event of potential criminal activity and maintaining information on the completion of checks and the manner in which checks out to be carried out. 

Through a Rapid Alert System (RAS), agencies communicate with each other in order to weed out any counterfeit goods or general customs risks. Customs is intelligence-led and the market surveillance programme is designed to facilitate information-sharing through complex databases and analysis. Member states are in constant contact with each other through this largely invisible system, ensuring that the free flow of goods can continue for exporters and importers, and that fraudsters can be caught and prosecuted if necessary.

The Customs Union works a lot more simply. Customs checks imposed upon British exporters in the event of an absence of a customs union will be pretty painful for some, but they are merely a drop in the ocean when we compare the impact with the impact of leaving the Single Market. Keeping a Customs Union only necessitates the removal of a rules of origin border check and tariffs between ourselves and the EU. In many ways, then, it would be dishonest to describe a Customs Union Brexit as a soft Brexit. Not much is eased or softened at all. We still have a whole sea of product standard checks to tackle. 

The point here is that the Customs Union and Single Market are responsible for dealing with different areas of trade policy. With customs we are examining whether the right tariff has been paid. With regulatory checks we are ascertaining whether a good meets the relevant quality specs. And as for the free movement aspect of Mr Grayling's claim, I don't suppose he is making a direct linkage between the two, but if he is he is not fit to sit in May's cabinet. Customs and immigration are nothing to do with one another. 

McVey's claim about the transition period is equally disturbing but I can see where it might be confusing to members of the public not familiar with the nature of sequencing. To recall: first, we leave on the terms set out by a withdrawal agreement (which must include a backstop), then after we have left and settle into temporary transitional terms outlined in the withdrawal agreement, we can start to mould together the characteristics of the future relationship and the political settlements. This is all there is to it. 

What McVey is suggesting is that the transition period (also called the implementation period) exists independently of the withdrawal agreement and sources the authority of its existence from somewhere else. My question therefore would be: where exactly? No other text, be it Article 50 or an EU Treaty, accounts for such a transition period. To reach the transition period you have to ratify the withdrawal agreement, because that is where the transition period comes from. This really is child's play. 

In some ways our politicians deserve to be in the crisis they are currently in. If they can't be bothered to digest the elements of our withdrawal that actually matter then perhaps they are not fit to serve public life. 

Thursday, 29 November 2018

The headbangers still won't learn

Once again it's WTO rules and once again the headbangers are still incapable of learning. They have banded together in the warped belief that a no deal Brexit scenario will not lead to increased non-tariff barriers to trade between the EU and UK. Nothing could be further from the truth. Their groupthink and collective dishonesty is now at the stage of potentially doing serious harm to the country and it is now imperative to stop them, challenge their assumptions and make them justify their ignorant claims.

The latest in the very long stream of misinformation from hardliner Tories comes from Owen Paterson (intriguingly once a close associate of Richard North, and so will no doubt know better privately), who argues that what he calls "arbitrary" new barriers to trade cannot be erected the day we leave in the event of a no deal. Mr Paterson explained that any future sanitary and phytosanitary checks would be "contrary" to WTO rules, justifying this by pointing out that "our lamb and our cheese and our beef" would be of the same trading standard as they were the day before.

All good lies contain a grain of truth and Paterson's comments are no exception to this rule. Everything he has argued sounds accurate on paper, and it is made to look even more impressive when these circulated myths are afforded a certain legitimacy by apparently credible academics like David Collins. Here we have a lot to unpack because we must grasp not only concepts but also establish some legal ground. The rebuttal to this deceptive bile really comprises two elements, one of which a matter of WTO agreements, the other an issue of EU law.

What is first important to note is that there is no WTO rule which says that members must impose border checks on one another. This in the eyes of a certain type of Brexiteer is gold dust because it implies that customs controls and SPS measures are unnecessary. But this fact is not actually the point. The point, in fact, is in honouring WTO commitments, most especially concerning equal treatment. Theoretically the UK could abandon all checks on all goods so long as it applied this standard to all of its trading partners. Enter most favoured nation (MFN).

As this blog has explained previously, MFN essentially means that one must treat one's trading partners equally - with some precise exceptions. The exceptions, outlined in GATT Article 24, pertain to the formation of some form of free trade area, be it FTA or customs union. But I digress. What is and isn't legally acceptable post-Brexit in large part weighs upon whether or not the principle of equal treatment has been unreasonably breached. In many cases unlawful discrimination is clear, in others things are rather trickier.

As WTO expert Peter Ungphakorn remarks:

"Suppose the UK and EU trade on WTO terms after Brexit. Suppose American apples arriving in the UK at an English port have to go through controls, but Irish apples crossing the border into Northern Ireland (also the UK) do not. Then the US could complain that its apples were discriminated against. They weren’t given equal treatment with Irish apples when they entered the UK."

In the case of Brexit, the EU could wave away any need for a border with the UK if it applied this to other third countries. The reverse is also true, but there are problems. Firstly, the EU would be discriminating unfairly in favour of the UK when compared with its other third country trading partners. Secondly, it would pose an enormous risk to public health, regardless of existing regulatory harmonisation. The UK would leave information sharing systems like the Union Customs Code and Rapid Alert System, which monitor criminal activity and spread awareness of any malpractice.

Sometimes things go wrong and EU citizens would find themselves exposed to the aftereffects of counterfeiting or human error. Desperate calls to abolish border checks unilaterally in the absence of a deal do not seem to recognise the importance of checks in the first place. There is no no-checks paradise in this life. The things we take for granted every day in our lives, from the wheels on our train carriage to the efficiency of our microwaves, are taken for granted purely because they are checked sufficiently enough for us not to be blighted by problems with them.

What is crucial to remember here is that if the UK were to leave with no deal in March 2019, it would become overnight a third country, and thus no longer a community member. All the current political obligations, excrescences and trading benefits would cease to apply. This important transition in status is what is oft overlooked by the headbangers, who think that we can simply walk away with EU membership if and when it suited us. Becoming a third country necessitates facing up to established third country protocols.

Countering this point, the clique of Tory Brexiters - in arms with David Collins, their newfound expert friend - point to the WTO's TBT and SPS agreements, which, they contend, prohibit the implementation of new or arbitrary checks at the point of the border. But this again overlooks the effect of becoming a third country. The 'new' checks fall in line with our 'new' status. Thus they are permissible. The re-imposition of checks on the UK as a community member would be a whole different story, because this would not have followed our acquiring of a new third country status.

The EU is able to shield its internal market with customs and SPS procedures in the event of a no deal Brexit and will not be blocked by its WTO commitments. We ought to remember that there while there is a system in place for dispute resolution, there are no WTO police officers. The WTO is a member-based organisation, and if members conclude that unfairness is taking place they are able to take the necessary action to eradicate it. It is here where we see why the WTO has been broadly successful over the past two decades: innate balances based on pre-negotiated member commitments.

The headbangers' current line is to point to Article 2.3 of the SPS Agreement for evidence supporting their no deal utopia. The provision in question states:

"Members shall ensure that their sanitary and phytosanitary measures do not arbitrarily or unjustifiably discriminate between Members where identical or similar conditions prevail, including between their own territory and that of other Members. Sanitary and phytosanitary measures shall not be applied in a manner which would constitute a disguised restriction on international trade."

I have highlighted the phrase 'discriminate between members' because it supports the point I have made about the UK's acquisition of third country status. In the event of the EU imposing SPS checks on the UK, no unjust discrimination would take place. We would simply fall in line with what already exists. And what already exists is designed in such a way to allow the EU to protect the integrity of its market, as any WTO member is perfectly entitled to do. What astonishes me about all of this is that certain Leavers just assume the EU would rather treat us preferably. This will not happen.

Paterson's second point, about the UK retaining a symmetrical system of regulation, is also not correct. He argues that since our standards are the same, we can walk on through the door and expect to encounter no friction. This assumption is again based on the assumption that all a third country needs in order to trade frictionlessly with the EU is regulatory harmonisation. This is a fallacy. For third countries, regulatory requirements must first be met, and secondly such countries must prove that they have met them.

Third countries are by definition not party to Union law and so the EU does not have any legal jurisdiction in their internal affairs. Third countries must therefore prove that they have met the relevant regulatory standards at the point of the border, in a marked shift in enforcement regime. It is all well and good saying: 'we have met your standards', but the proof is always in the pudding. The short of all this is that matching regulations is only the first major step. To argue that reciprocity of law and regulations grants us a green light into the internal market is to deceive.

In the case of lamb, beef and cheese, the EU has a strict body of rules which facilitate and inform the necessary SPS measures which must be carried out before consumption can occur within its territory. Food of animal origin is a particularly nasty beast because there are several layers of controls which are designed to maximise any defence of public health. Regulatory requirements actually begin far in advance of an animal being slaughtered, with strict rules governing the use of animal feed and rearing practices, as well as the appropriate medicinal and veterinary devices used on animals.

In the event of a no deal scenario, the UK would need to re-qualify for exporting such products by appearing on approved lists of third country exporters. Then, warehouses and other agricultural establishments need to be licensed. This layer of controls involves the EU's FVO inspectors checking premises, veterinary procedures, postmortem protocols, slaughtering equipment and pesticides. No stones are left unturned. Certification, which is necessary for export to begin, can only be afforded when officials are happy with results.

Once approval for export is granted, the UK can begin to sell its animals and animal products into the EU's market. But this does not mean the checks are over. At the border, the products will be streamlined through Border Inspection Posts (BIPs), where consignments are checked in accordance with track record and information sharing. The percentage of a consignment checked can vary greatly. We can expect up to 50% of a consignment to be checked by officials on bad days. But I can't put my finger on an exact inspection schedule.

And so this is what faces British exports of animals and products of animal origin on March 30th 2019 if Owen Paterson and his cronies are to get their way. My only assumption is that their lying is deliberate and that they are not as naive as they let on. This is partly why I have not been so critical of May's negotiated withdrawal agreement as others have. I fear a scenario in which its failure leads to Paterson et all getting their dream Brexit into the statute book with absolutely no understanding of its ramifications.

Monday, 26 November 2018

Reflections on the free movement of people

This weekend I was fortunate enough to be able to visit the beautiful city of Prague with friends ahead of my 23rd birthday (tomorrow). This was my first time in the Czech Republic and I was pleased to find myself in an hospitable country with enjoyable nightlife and friendly locals. If you get a chance to go then I must recommend in particular St. Vitus Cathedral, which sits next to Prague's castle and overlooks most of the city. It is architecture of astonishing beauty. The river Vltava, winding and picturesque, is also well worth any tourists's time.

As ever with these continental getaways I was afforded a useful opportunity to ponder the free movement issue and reflect on what Brexit consequences could mean for me. Travel is sobering in that respect and reminds me not take anything I currently have for granted. It certainly helps to drive home the reciprocity aspect to free movement, which, if I may contend, was not driven home hard enough during the referendum campaign.

One of my failures over the past couple of years has been to subconsciously pander to hardliner rhetoric on free movement. I have not been guilty of this when discussing the other three fundamental freedoms so I perhaps have some reason to be disappointed with myself. If one looks at how the issue has been discussed, one notices a lot of talk of 'putting up with' free movement or 'conceding' it through softer Brexit options. The perspective taken on it has been one of a glass half empty rather than glass half full, and this I feel I have not sufficiently countered or challenged.

The central premise to being a soft Leaver is to recognise that not only do European 'systems' make a harder Brexit less plausible, they can also be worth protecting when they are not the exclusive property of EU membership. In other words, taking away what aids us may not in the end be such a bad thing. What separates us from the hardliners is a recognition that free movement is largely a good thing and if I could go back and re-make any case for a soft exit then standing up for free movement a little more defiantly would have been somewhat preferable.

My mentality for the last couple of years was that if I got to grips with some of the complexities behind modern trade I might be better equipped at making the arguments. I have been effective to a small extent but in focusing primarily on trade (and thus the free movement of capital, services and goods) I forgot to make the case for safeguarding the free movement of people. I regret this and in hindsight feel I should have done a better job of not pandering to the lopsidedness of discourse by virtue of my inaction.

As I have argued here repeatedly, language matters. Especially in politics. Any political issue can be framed in multiple ways if we care enough to examine consequences beyond what is immediately obvious. Free movement may be free movement for EU citizens but the reciprocal elements make it an opportunity just as much as a constraint on domestic policy construction. Free movement in the eyes of a British traveller or worker undoubtedly expands horizons. And my fear now is that it is likely too late to fully appreciate things like this.

Of course, it is often argued that free movement is a meaningless right only really reaped by the minority of people in a position to benefit. This may well be true. People have family and professional commitments, as well as health issues which prevent any long-term uprooting. But what is missed here, I feel, is that the four freedoms which lay the groundwork of the single market are principles just as much as they are rights. People are, among other things, economic units, and so their ability to move in tandem with other economic units is of paramount importance.

Beyond this, another interesting point about free movement is its bifurcation with EU membership. This we know came about back in 1994, when it became possible to detach the four freedoms from membership of the EU. Curiously, direction of travel has been one way and countries outside the sphere of the EU have only moved towards it. Finland, much like the UK, abandoned Efta for the EU. No country has hopped in the reverse direction. This I feel may have something to do with a feeling of strength in numbers or perhaps a perception of becoming a vassal-like, rule taker.

But the point I make shouldn't be discarded. With the ratification of the EEA Agreement, clearer lines were drawn between the single market and the EU, or perhaps (to put it another way) the baby and the bathwater. The EEA is not perfect and has its institutional downsides, but what it manages in some part to do, intellectually speaking, is undermine some of the case for EU membership. It took the best of what the EU had to offer and render it up for grabs for countries less happy with the political baggage which comes with membership.

Most pro-EU figures I know who are invested in the Brexit debate, be it trade wonks, academics or journalists, typically argue that the four freedoms are at the forefront of the case for EU membership. They often claim that the best thing about membership of the EU is free movement itself and they are not wrong. I think this is why so many of them have always given me the time of day and appreciated some of the thinking behind what I have written and argued. EU and Efta/EEA are not by any means identical, but they do share important beneficial commonalities which we can work with as a basis for discussion.

But the political elite decided not to score what I would consider to be an open goal and opt for a Brexit which protects something worthwhile. Instead they interpreted the Leave vote as something which revolved entirely around immigration, which it didn't, and flipped the question of EU membership into a question of free movement. And what we are looking at now is a deal which places a higher premium on ending said free movement than on anything else.

So my current thinking is left at something of a crossroads. Textually impressive and considerate of the Irish border though it may be, the withdrawal agreement ends free movement and threatens the stability of supply chains. I have stated that I can reluctantly support it only on the premise that I think this is all we will get. It is this, no deal or no Brexit. I know I won't be satisfied with any option, and maybe I don't deserve to be.

Wednesday, 21 November 2018

Judge a man by the company he keeps

There are two persisting problems with being a soft Leaver. Together they form the baggage which I and other like-minded folk carry around with us. One is the EU's Customs Union, which I will address more fully in a later post, the other is some of the company we keep. Specifically the bigoted and further-Right types who have been energised somewhat by use of the nastier, more populist rhetoric which has laced much of the discourse surrounding Brexit.

For me personally the latter of these two issues has been a consistent weight on my shoulders for quite a long period of time and in some respects I have not done enough to distance myself from it. When I first became interested in the politics of Brexit I was a newly-anointed member of the UK Independence Party, at the stage very much in the Farage corner of debate, captivated by his (undoubted) charisma and positive vision for the outlook of an independent UK.

I don't look back on membership of UKIP fondly. The reason I rarely talk about it or acknowledge it is because I am ashamed of it and wish I had pursued participation in Brexit politics through some other channel. The party itself was structured appallingly and became increasingly inept at internal communication as it grew. Any ground campaigning which took place was slapdash, uncomfortable to be apart of and seldom particularly fruitful. Even in the South East, where I live.

Though lots of its members were more moderate than portrayed in the media, being that they were largely disgruntled former Labour and Tory types, many were more unsavoury round the edges in terms of holding more xenophobic opinions and I regret not challenging that more when I saw it. The sticky truth is that some Brexit voters have simply pulled a lever which they continue to think should result in strict immigration policy on the basis that they do not like foreigners. Whichever way one cuts the issue, this uncomfortable truth does not go away.

Of course, at one point I too favoured pulling in the numbers. I forwarded what I thought was a sound economic case. The argument being: let's pull up the drawbridge and we can protect wages. But the honest truth is that the evidence supporting the claim that immigration reduces wages is spotty at best. On the face of things it is quite incredible that such a widespread claim is so thinly supported by scientific research. And once I clocked this, my outlook swiftly began to change.

Colour of skin or place of birth never moved me. I grew up in an ethnically mixed town parked in the more urban north of Kent. I attended a very diverse partially selective bilateral school which allowed me to mix with individuals from a range of backgrounds, some of whom became (hopefully) lifelong friends and with whom I have travelled to various corners of the world. Judgement of a person is more appropriately placed upon pegs like the content of their character - a lesson I was lucky to learn at a young age.

The reason for the focus on immigration is because this tends to be the major tramline along which soft and hard Leavers diverge from one another. The immigration debate, more than most, is also an arena which attracts the worst sort of people. I am constantly conscious of the fact that I share a side of the ballot paper with people I find unpleasant and distressing and this is a cause of discomfort. There is no remedy which makes me feel better about it.

Sometimes I receive messages from people who tell me that I shouldn't remain on the same side of the fence as those who are overtly xenophobic. I sympathise with the view but I have always responded by arguing that a) unsavoury characters exist in both camps, b) I believe I am well placed to be a more thoughtful and moderate voice this way and c) it only distracts from the question of whether I support EU membership, which has to be the ultimate arbiter of partisanship.

What would Remainers prefer to hear from Leave voices? Well reasoned arguments based on knowledge and research? Or would they prefer for one side to be hollowed out to the extent that they may as well be conversing with brick walls? It seems to me that civilised, intelligent discourse from either side benefits us all. As in any debate, in any arena of politics. Drowning out the bigots matters to me, and if it matters to Leavers then it should matter to Remainers also.

An excellent example of the sort of thing I am talking about came just days ago when Theresa May told the CBI:

"It will no longer be the case that EU nationals, regardless of the skills or experience they have to offer, can jump the queue ahead of engineers from Sydney or software developers from Delhi."

This is an immensely upsetting statement which is not only needlessly inflammatory, it is also logically incoherent. I am not best placed to assess the impact that comments like this have on individuals as I am English and my family are English too. We have no immediate familial ties to the continent. I can only try to put myself in the shoes of people who do and who are negatively affected by careless political discourse.

It does not help in any way that such words are spoken by a person at the pinnacle of politics. There is a reason why politicians have speechwriters: the words politicians say matter. They have a fall-through effect on the lives of citizens, and on the political culture in which we attempt any political expression. May is in a position of privilege and power and she should have known better than to (in effect) describe EU migrants as cheats and underhanded.

EU migrants take advantage of rights afforded to them by the political structures built over them. British citizens abroad have too. Steve Bullock made the excellent counterfactual point on Twitter when he asked what the reaction would be here if EU brass made similar comments about UK expats. He makes an interesting point. What would the reaction be? I'd bet that quite a lot of the noisier hardliners would have a thing or two to say about it. But then again we should be used to Brexit ironies by now.

As far as policy is concerned, the British government could at any point decide to replicate our immigration policy with the EU and apply it to third countries. Politically unpopular though it might be, it is legally and logistically possible and thus undermines any logical basis for condemnation of what is being called 'queue jumping'. If we were to create an equilibrium amongst potential migrants, theoretically speaking there would not be a queue to jump.

Needless to say I am therefore compelled to condemn the language used by the Prime Minister about EU migrants. It might not mean much to anybody, and sure I will still be accused of aiding and emboldening the sort of behaviour sometimes seen on my side of the argument, but I can only set a more preferable example and criticise what I see as wrong where I see it. It's tough, though. For how long I can stomach it remains unknown.

Monday, 19 November 2018

My assessment of the Withdrawal Agreement

I wanted to wait a little while before offering my thoughts on the draft withdrawal agreement (WA) negotiated between the UK and the EU. This is partly because I wanted to weigh up some of the existing responses on both sides and partly because I expected instant developments like resignations and a confidence motion to interrupt proceedings somewhat. A brief moment of quiet now seems quite an opportune time for me to share with readers my comments.

Before I begin, I would like to thank Holger Hestermeyer for this highly useful contents document, which makes the 585 page agreement a lot easier to break down and digest. Holger has my appreciation for his efforts. More than make perusing the agreement easier, the breakdown also captures both the magnitude and scope of the deal. We are dealing with an impressive piece of text which has clearly resulted from enormous care and consideration.

My two main takeaways from the substance of the WA are as follows. Firstly, the deal is clearly anchored on a commitment to end free movement. Second, it reflects the impossible position the Prime Minister found herself in, trying to balance demands and red lines on all sides of the equation. It may well be this or no Brexit at all, and as such, neither May nor the agreement deserve the intensity of criticism that they are currently receiving.

The first of these observations is clearly earmarked from the government's comms strategy in the post-agreement period. Ending free movement, something I'm not excited about because I don't consider it much of a success, has taken centre stage as the key 'benefit' of May's deal because it was most stringently warned about during the referendum period. Forget about whether or not the issue of free movement has lost some of its salience since 2016 (it has), just end it and we'll be fine.

One problem with flying the free movement banner is that when the port of Dover becomes clogged up after the transition period is over, calls to re-apply the EEA framework to the rest of Britain (in order to mitigate the friction) will be much harder to meet, being that full market participation is a balancing act between rights and responsibilities. It seems to me that lingering ideas of instead pursuing the EEA as a landing spot are made trickier by the free movement question.

Plus, the four freedoms are worth protecting in and of themselves. My biggest issue with the negotiated deal is that it effectively discards the immeasurable benefits of the single market, at least as far as Britain is concerned. To me it was the very fact of EU membership and the four freedoms being separable that weakened the case for EU membership back in the 1990s. I think at least three of the freedoms will be missed dearly and the UK could spend years regretting the decision to abandon them.

I think May believes that her legacy in large part rests on her ability to remove free movement from the statute books. To her this would symbolise great victory. This was her one real red line from the beginning and everything in Brussels flowed from it. That is why I don't argue that this deal is the best we could possibly have gotten - because as this blog has made clear, I would prefer a relationship framed around the EEA. Rather I think what we have is imperfect but amending or besmirching it may not be in our interests either.

Which brings me to the second of me key observations. It appears to me that while the WA is not by any means ideal, it amounts to slightly more than I was expecting and I am pleasantly surprised by this. It is okay, not brilliant. And it is workable. Extreme language should play no part in any realistic summary of the nature of the agreement because its contents do not merit it. The EU, to my shock, reneged on their commitment to avoid an all-UK customs territory within the remit of the backstop. This was May's major backstop victory.

For the EU, the issue is avoiding a scenario in which the UK lingers in its customs territory for long enough that it can begin to tamper with things and undercut it. This is precisely the reason the backstop was initially designed to apply only to Northern Ireland; a NI-specific customs union with deeper single market provisions. What we have arranged instead is an all-UK customs territory, which to me is preferable and a significant negotiating concession.

In one of the more sobering and thoughtful articles on the WA, my friend Roland Smith observed:

"Leaving ‘Remain’ & Political Union behind should be Brexiters’ biggest consideration and achievement, rather than now over-reaching themselves in a quest for something better."

This is a key point which must factor into any astute analysis of the deal. It is why I have been reluctant to criticise the agreement in ways that others have not. The thing about the quest for something better is that it is a) incredibly hard to define and apply in practice, especially given the wildly disparate views on the topic in the Tory party and cabinet, and b) such a quest can easily lead to the breakdown of negotiations and a no deal.

We know that FTAs are not sufficient for mitigating Irish border friction because they facilitate a change in enforcement regime whereby the UK leaves the auspices of all EU regulatory agencies. This means checks are relocated because, with few exceptions, they can no longer be coordinated at the point of production. Any pursuit of an FTA-based relationship would inevitably take the form of 'Canada with a far more pronounced NI-specific backstop.'

At the very least the WA narrows checks between Northern Ireland and Britain to standard third country sanitary and phytosanitary procedures. These will mostly take the form of routine consignment checks at Border Inspection Posts (BIPs) and these checks would be based, as ever, upon track record and information sharing. There will also be scope for a more targeted veterinary agreement further reducing the regularity of the checks.

I tweeted last week that for soft Leavers, the WA is a last chance saloon of sorts. Some of the feedback I got correctly pointed out that the agreement is not soft in the sense that it does nothing for services and free movement is left behind. This is true. My last chance saloon reference was, though, more an observation that this deal acts as a barrier to a no deal scenario, which I have been at pains to point out is no appropriate way to modify 40 years of integration - it is an unmitigated disaster. 

My opposition to a no deal has helped to frame much of my thinking since early 2017 when I began to grasp some of what it entailed. Nothing will encourage me to support a no deal. After any no deal scenario, future British governments are likely to be a lot more desperate for enhanced cooperation. This will result in an even weaker negotiating position and those in Downing Street would be more inclined to accept speedy bilateral deals set on less favourable terms.

This is why we are much better off engineering a deal which borrows elements of Turkey, Switzerland and Ukraine. It is better to negotiate from a more stable platform than a desperate one, even if we do end up conceding on some CJEU jurisdiction and adoption of non-regression rules concerning various environmental and social policies like carbon pricing. It was never going to be the case that a WA would make the UK look like a million bucks and to that extent pockets of this deal do not surprise me.

The transition is also not worth crying over. We are entitled to a one-time extension of the transition period, leading up to 2022, and I think it is highly likely this will occur. The transition period will be a time for massive preparation of our customs infrastructure, including in particular investment in BIPs in Northern Ireland and at the ports of Dover and Hull, and the development of e-systems like our Customs Declaration Services (CDS), which remains in need of rapid maturation.

We need to make what we have agreed work because without doing so the options are bleak. This isn't the deal that I wanted but I am prepared to defend it on multiple fronts, even if it means attracting criticism. The deal is not as bad as is being suggested: it honours the referendum mandate in that it gets us out, it honours financial commitments and the Belfast Agreement. It ends budgetary payments and repatriates controls over swathes of domestic policy making.

We should be grateful for what we have. This could have been far worse.

Wednesday, 14 November 2018

And now we wait

You'll have to excuse me for the prolonged radio silence here since the summer. I have been juggling full time work and a Masters degree and have not had the time or energy to contribute with anything close to the consistency I managed last year. That and, to put things mildly, we haven't heard much in the way of substantive policy developments emanating from Brexit discourse since really last winter. In recent months discussion has mostly taken the form of speculation, until the whipping up of rapid panic which has gripped elite circles and political Twitter over the last 48 hours.

Tonight, we await the publishing of the long-awaited withdrawal agreement. If those mysterious "sources" are broadly accurate, we are looking at a deal which reflects a Prime Minister trying her utmost to wriggle out of a corner. If the period of transition (March 2019-December 2020) does not yield the proposals needed to establish a workable framework for future trade, taking into account red lines and both sides' constitutional requirements, the backstop will appear thus: an all-UK customs union and a NI-specific arrangement on full single market participation.

The exact nature of the Northern Ireland element is very interesting and I am hesitant to make any firm predictions at this point. I will say that I think the provisions will be extensive but subtle, likely bolted into annexes by the Commission, knowing full well that most people won't bother to read them. Some reports have suggested that the backstop is a full UK setup, with "deeper provisions" for Northern Ireland, but to me this is all semantics and my assumption is that an all-UK formulation will end up appearing more like a two-tier system of rules, establishing a customs border in the Irish Sea.

What is interesting is that though none of this has been confirmed, one would be forgiven for thinking it had been judging by the ferocity of the Tory Brexiter response. I can't say I have much sympathy for them. Their input has not extended very far beyond sloganeering and wild claims about the alleged fruits of a no deal scenario. And that applies to the assortment of think tanks which lace the Tufton Street area. Mrs May has done well in my estimation to keep their influence at arms length and she should perhaps be credited for not entertaining a no deal scenario as much as she could have.

I will reserve judgement on the withdrawal agreement until I have sunk my teeth into the meat and potatoes of it but for now it might be worth examining a rather interesting parallel with Norway's EU accession referendum in 1994, which saw a turnout of almost 90% of the voting electorate. The result swung, of course, in favour of 'No', by 52.2% to 47.8%, and the country proceeded to establish an appropriately reflective relationship with the EU given the proximity of the vote. The EEA Agreement became the destination for the Norwegians, symbolising their intention to stay close but remain outside.

Ostensibly, what appears to be the fabric of May's draft exit agreement more or less mirrors this concept and that is no bad thing. This is one thing it will have going for it and observers of Brexit, particularly those of the Leave persuasion, would do well to acknowledge it. What we are looking at in the coming days is not the Norway option but oddly enough it does have a Norwegian tinge to it because we are in effect reverse engineering a broadly opposite (yet almost symmetrical) approach to our European trade and political relations.

The UK's over-reliance on JIT supply chains and deep integration within the EU's internal systems (the union customs code, rapid alert system, market surveillance programme - the list is extensive) make it difficult to coordinate any abrupt or fully detached exit. This isn't how trade works. Globalisation of standards, driven in no small part by the EU itself, seriously undermines any logic in leaving the structures of the single market. Especially if done so on a semi-constitutional basis where a part of the Kingdom remains embedded further within the system than another part.

A few minutes ago the Prime Minister announced that the cabinet had agreed to allow the government to proceed and work with both the draft withdrawal agreement and outline for the political declaration. We are told that a statement is due in the Commons tomorrow, but that trailing just behind this news is a bubble of thus far well-repressed anger in Tory ERG circles. Yesterday I predicted that May would be toppled as a result of her agreement and there is every chance this will still happen. Chequers initiated two resignations and I don't expect this deal to be any different.

I must confess that if May is toppled I'll be a little choked up for her. She hasn't been an exemplary Prime Minister by any stretch of the imagination and I find her politics a little too authoritarian and ban-happy. But what she has managed to do is walk a tightrope of tightropes, enduring the respective gravitational pulls of the factional interests around her, in order to cobble together what may best be described as a half way house between what is desired from the Brexiteers and what is required at negotiator level to satisfy thorny issues like the Irish border.

Don't mistake my comments for unbridled support. I would have preferred a shot at Efta and at least a concerted effort to plug the customs union gap by stitching together various country-specific protocols to deal with the residual border demands - even if unsuccessful. One wonders whether a commitment to Efta from the outset might have created sufficient political will to craft something hodge-podged and technologically bespoke for dealing with any residual border issues. I also think a simple association agreement would have been preferable to an apportioned backstop settlement afflicting a certain segment of the country. But hey-ho, there is little more we can squeeze out of reality.

The withdrawal agreement is now online and available here, alongside the outline on the political declaration. Events have unfolded since I began writing but I am yet to properly read either document.