Thursday, 31 August 2017

An interview on EFTA and the EEA

...that I gave Business Insider UK can be read here. For the purpose of clarification, the final quote attributed to me does not suggest that I claim the UK would not be able to invoke Article 112. Rather I am saying that doing so would likely provide a slightly different framework than that carved out by Liechtenstein, meaning possibly for a different length of time or for different reasons.

Monday, 28 August 2017

There is no real mandate to leave the Single Market

Note: thanks to the publicity which greeted this post, the Vote Leave website has since been updated and the content I referred to changed. It does, though, remain the case that our stance on the Single Market was ambiguous. 

I am often criticised by both Remainers and hard Leavers for my commitment to staying in the EEA. It is a fundamental violation, the argument runs, of the mandate provided by last summer's referendum result. This sentiment tends to be strengthened by silly, populist slogans like 'Brexit means Brexit', which mean nothing and only further fuel the notion that we must leave all institutions as quickly as possible instead of treating EU secession (which we are forgetting presents the country which very many positive opportunities) as something we must understand and think our way through. 

Brexiteers talk about the Single Market (EEA) as if it is but a minor obstacle in their quick escape vision of Brexit. This rashness is wholly irresponsible and will in the end galvanise exactly the counter forces seeking to keep Britain within the European Union. Many of them would be easier to argue with if they bothered to open their minds to alternative thinking and those of us who favour a softer Brexit. I mean, take this, from Brendan O'Neill, for whom I have developed a particular dislike:



He's very confident for somebody who makes very open and notable errors. I suppose that doesn't matter to him. He has his very intimate and close-knit band of followers, who will lap up anything he says because he's cool, Right-wing and edgy. But he doesn't have such a tight relationship with factual information. He asserts that the Single Market is an EU institution, but this is categorically not the case. The Single Market, as per the EEA Agreement of 1994, is a collaboration - a trade deal if you like - consisting of the EU and 3 EFTA states: Norway, Iceland and Liechtenstein. The EU is not the Single Market, so from a purely logical perspective, Brexit cannot de facto mean to leave the Single Market. He then says that a softer Brexit entails 'staying in' the ECJ, which for EFTA EEA members is also an untruth, as per the skeletal structure of the Single Market below. 



Misinformation like this has stifled the national Brexit discussion for months. But what is more concerning is the number of people who believe in an imaginary mandate to leave the Single Market, or rather to withdraw from the EEA Agreement. No such mandate exists. Vote Leave did not ever present to the electorate a plan for Brexit, and did not advocate leaving the Single Market. Don't believe me? Our website is still online at voteleavetakecontrol.org. Take a look at our campaign messages and our claims. We argue for things which are utterly achievable in the EEA and make no mention at all of leaving the Single Market. 

We campaigned for an end to ECJ subordination, which EFTA EEA provides. We demanded more control over immigration, which Article 112 of the EEA Agreement provides. We asked to be free to trade with the entire world, which EFTA EEA members are, largely by virtue of their ability to reclaim independent voting rights at international bodies (like the World Trade Organisation), which the EEA provides. We wanted to stop sending the EU money, which EFTA EEA membership ensures is spent on EEA grants which the UK would participate in. As for the NHS, I don't support nationalised healthcare so could care less how poorly the system is funded. And, crucially, we wanted the ability to make our own laws, which the EEA largely does not infringe upon. As Pete North notes earlier today:


"That is where the EEA option is the superior model. It really is about "taking back control". When the EU brings a new piece of legislation into being (likely adopted global standards), it is not automatically adopted by Norway. There is a constitutional process whereby the Norwegian parliament debates and decides whether or not to adopt a measure. We know that there is a penalty if they do not adhere to single market rules, but ultimately it is their decision to consider the balance of trade-offs according to their own strategic trade goals and domestic values."

Around early May 2016, the Remain campaign started to go hard on the fact that leaving would mean leaving the Single Market. But there was absolutely no official scope for them to say this at all. It was perhaps their most deceptive lie during the entire campaign. McGrory and his colleagues on Cannon Street sat in their office and forced this issue on to the agenda. It was something they conjured up out of thin air because it aided one of their primary arguments for remaining: Leave doesn't have a plan for Brexit, it'll therefore be a step into the dark (the horrendous catchphrases are piling back into my brain as I type).  

Some Leavers, it is true, did want an exit from the Single Market. But they are not as numerous as certain people would have you believe. And if we took all of these people into a room, and showed them how the EEA Agreement can ease their concerns, many would be quickly converted. To them Brexit may mean a Single Market exit, but to me Brexit means leaving the European Union and is part of a much bigger plan, both for democracy and the future of European trade. 

I don't care how many times Nigel Farage uses the term 'backsliding' to describe the progress of Brexit negotiations. Brexit is not his toy to play with. Brexit is a national effort which ought to be constructed in the national interest. Brexiteers are often guilty of forgetting that an EU departure is for all of us. It isn't something to be rubber stamped only by our approval and the democratic process, including scrutiny and critique, must continue. I would also point out that a Brexit which relies on continued membership of the Single Market could be the only way to repair a fractured electorate, now more likely to exploit non-party dividing lines than perhaps ever before. 

Sunday, 27 August 2017

Brexit: Labour missing an opportunity

The shadow Brexit Secretary, Keir Starmer, has written an article in today's Observer, covered also by the paper's splash, which provides some clarity over Labour's position as far as the direction Brexit negotiations should go in. Note that I say some clarity. 

Mr Starmer tells us that 'constructive ambiguity, David Davis’s description of the government’s approach, can only take you so far', and that 'the harsh realities of the negotiating process and the glacial pace of progress in the first two rounds of talks' have helped to discredit the 'illusion' that transitional agreements are not necessary. He therefore asserts:

"Labour has repeatedly emphasised that in order to avoid a cliff edge for our economy there will need to be a time-limited transitional period between our exit from the EU and the new lasting relationship we build with our European partners.
Labour would seek a transitional deal that maintains the same basic terms that we currently enjoy with the EU. That means we would seek to remain in a customs union with the EU and within the single market during this period. It means we would abide by the common rules of both."

The first of these two paragraphs frustrates me somewhat. It tends to imply, as with most discussion around pursuing the EEA, that the Single Market option is solely about avoiding economic collapse and that no positive case can be made for it. This is fundamentally dishonest, but more on this in a later post. The second paragraph doesn't diverge nearly as starkly as the parliamentary Labour Party might like to think. The Tories, too, seek transitional arrangements, like a temporary customs arrangement, but outside the Single Market. There is some difference to the immediate positions of both the major parties, but Labour aren't mobilising effectively and are missing important opportunities. Of course, I am absolutely happy that the opposition is redirecting attention towards the many uses of the Single Market. But there are problems. 

Mr Starmer only provides reasoning for the policy announcement in his piece. He doesn't shed any light at all on how the party or country might go about reaching such an agreement. He talks about the number of 'significant advantages' to the approach, not entirely without merit, but since the Article 50 period has but a year and a half left, I doubt Labour will be able to influence government policy or get into power before Brexit day arrives. And God forbid we have yet another election. The shadow Brexit Secretary's article lacks any indicator of practical application. 

He then goes on to say:


"By remaining inside a customs union and the single market in a transitional phase we would be certain that goods and services could continue to flow between the EU and the UK without tariffs, customs checks or additional red tape."

...which again doesn't bare complete resemblance with reality. Much like the government's position paper on customs last week, Starmer confuses customs cooperation with Customs Union. They are separate concepts both in terms of real world effects and treaty provision. There is no economic or political necessity whatsoever to stay in the Customs Union. The CU predates the establishing of the Single Market, but Article 10 of the EEA Agreement renders the initial use of the CU redundant. The only residual importance retained by the CU is a Common External Tariff (CET) and its role in accumulating revenue which is collected by member states and sent to Brussels as part of a membership fee. 



And that reminds me, could somebody make it clear to our politicians that leaving the EU means leaving the Customs Union? Still so many fail to recognise that to be of it requires membership and that it is tightly integrated into the treaties. 

The Observer's Toby Helm, in his splashed report, argues:


"In a move that positions it decisively as the party of “soft Brexit”, Labour will support full participation in the single market and customs union during a lengthy “transitional period” that it believes could last between two and four years after the day of departure, it is to announce on Sunday."

I don't think Mr Helm is monitoring negotiations as closely as perhaps he ought to be. There is no 'decisive' positioning that I can see. One issue here is that Starmer's announcement in no way reflects the current stage of negotiations. The UK and Brussels are yet to crawl past even discussions of citizens rights and a financial settlement. Jumping the gun while everybody else is working at a snail's pace appears utterly pointless. The other problem I note is that, by virtue of their commitment to a transitional arrangement, Labour aren't committing to long-term, permanent support for Single Market membership, and thus are failing to establish any substantive divergence with Tory policy. 

If we take a look back at this year's General Election results, we can see that Labour performed surprisingly well in more liberal, metropolitan parts of the country. Kensington's conversion was especially telling and seemed to demonstrate that voters aren't willing to give up on a softer Brexit and the Single Market without a fight. A safe Tory seat is not going to glow red overnight thanks to a pledge to renationalise the railways. The Single Market is a sharp dividing line throughout the UK and large pockets of the electorate can use it as a voting guide. Like geography, parliamentary debate must reflect this. 

If Labour were cunning, they'd back EEA membership and rejoining EFTA. In doing so, they would guarantee the support of Remain voters and quite a number of Lib Dem voters, who remain largely opposed to a hard Brexit of any kind. But not just this. We also need to examine the effect that a hard Brexit will have on the Tories. Brexit is in many ways a poisoned chalice: in all likelihood it will expose the Conservative Party's very thin mantra that they are the party of economic strength. 

I am not surprised that Theresa May is already thinking about stepping down. She failed to commandeer an election and will, in the end, be disgraced by her government's handling of our EU departure. I can't pretend to feel any sympathy for her. This is all her making. Even if you leave aside the events of 2016 and 2017, her political track record is spotty at best. She remains a fierce opponent of free expression and one of the most ban-happy politicians in recent memory. 

The Labour Party must be able to sense this. If they can, then support for merely temporary membership of the Single Market is a squandered opportunity. Important too will their role be in pressuring David David on more pressing matters, such as the border with Ireland and enshrining the rights of EU citizens living in Britain. If Labour want to appear proactive, they need to jump back a few steps and rejoin the progress of negotiations, even if it means that in doing so, they find the picture as bleak and uninspiring as I do. 

Saturday, 26 August 2017

Brexit: the difficulty in escaping the ECJ

Apologies for my relative absence over the last few days. I've just found myself particularly busy. It wouldn't ordinarily be a problem, but since I haven't really commented on recent Brexit-related events at this blog I thought it was best I return this morning, even if yesterday's Peroni decides to do some of my writing for me. 

Yesterday afternoon I was interviewed by Business Insider's Adam Payne in a nice pub in the London Bridge area. He's a very pleasant chap, who may prove somewhat useful in the coming months as he has been focusing on the merits of EFTA and the EEA, as well as the political plausibility of pursuing a softer Brexit. We spoke, among various other topics, about the potential role that the EFTA Court could have in settling trade disputes in the event of a comprehensive trade agreement being concluded. I owe great thanks to EFTA4UK for the opportunity. 

Both Adam and I agree that completely escaping the jurisdiction of the European Court of Justice, and thus the law that it interprets and enforces, will be virtually impossible. But this does not mean subordination is unavoidable. The problem with this issue is that there appears to be some confusion over whether ceasing to be subject to a court necessarily equates to escaping it's jurisdiction entirely. For instance, neither Norway nor Iceland or Liechtenstein is subordinate to the ECJ in principle, but its rulings do impact upon the EEA's EFTA states. 

To argue that we can untangle ourselves totally from the remit of the ECJ is to misunderstand the legal nature of trade. Trade between countries is enhanced not by deregulation but by harmonisation. When importers and exporters engage in trade on a level regulatory playing field, trade flow is boosted by the minimisation or elimination of checks and the simplification of paperwork designed to assess conformity to standards and process. The 'frictionless' movement of goods between exporters and importers that the government is craving in its position papers can only be achieved through regulatory convergence. And this regulation requires surveillance and enforcement. 

In the event of the unlikely conclusion of a deep and comprehensive FTA, mechanisms will have to built in to mediate dispute settlement between the UK and the European Union. This could, in theory, be achieved on a bilateral, trilateral or multilateral basis. I am speculating because we've not seen a trade agreement anywhere close to the complexity of Brexit in political history. Provisions for dispute settlement in an FTA between the UK and the EU would, at least in part, equal the ECJ retaining some influence over Britain's trade with Europe. It would not mean being subject to, but being influenced and often mediated by the ECJ. 

The distinction here is important. I think, judging by the introduction of a red line over ECJ subordination, an idea is had that we can completely avoid the rulings of any European Court. Hard Brexit does tend to suggest leaving all institutions and having very little or nothing to do with them in future, regardless of whether that is the case. The issue, though, that is raised by the prospect of an FTA is the legal arbiter that the UK will rely on or 'dock' to in order to provide effective co-determination in any trading settlement.  

There is scope for the UK docking to the EFTA Court, as has been recommended to Switzerland in exchange for further market access to compliment its existing arrangements with the EU. There may also be scope for a trilateral system in which a UK Court, the ECJ and the EFTA Court work collaboratively in the course of settling disputes. If Britain were to pursue the WTO option, in one of the most economically suicidal policies in political history, the remit of dispute settlement would indeed divert somewhat from the ECJ. The trouble, as I have written, is that dispute settlement that relies upon WTO mechanisms is arduous and ineffective. A case between Airbus and Boeing, for instance, lodged back in 2004, is still ongoing and yet to be resolved. 

But this is all guesswork. The trouble is that since nothing remotely resembling Brexit has ever taken place in international trade, there are no templates with which to work. This all depends on negotiation. And this uncertainty to me further reinforces the fact that the two-pillar structure characterising the Single Market, as per almost every facet of this debate, provides us with the most stable and useful legal framework in which to service trade with our nearest and dearest European market. 


This, from Carl Baudenbacher, the president of the EFTA Court, on the homogenity achieved in the relationship between the ECJ and the EFTA Court is pretty enlightening: 

"When it comes to the law on the books, the EFTA Court is supposed to follow relevant ECJ case law, whereas the ECJ is free to follow EFTA Court case law. As regards the law in action, this system has, however, largely been replaced by judicial dialogue. In this discourse, Advocates General and the General Court also play an important role.
ECJ President Vassilios Skouris wrote in 2014 that the relationship between the two EEA courts is a symbiotic one marked by mutual respect and dialogue which allows the flow of information in both directions. Homogeneity has therefore become a process-oriented concept. 
The EFTA Court is in fact the only court of general jurisdiction whose jurisprudence is regularly taken into account by the ECJ when interpreting EU law. There have been cases in which the ECJ initially did not follow the EFTA Court, but in later cases put itself in line (taxation of outbound dividends, state gambling monopolies, the legal nature of a website)."


EFTA states are cushioned by the security of what this interesting study refers to as a 'constructive judicial dialogue', whilst unbound by a supranational authority. The EEA is really a trade agreement in itself, both configurable and constantly evolving. It seems increasingly obvious to me that any eventuating Brexit will in some significant way be influenced by the functions of the ECJ. The government knows this; hence their quite reasonable proposal to take ECJ rulings into account after a settlement has been finalised. I just wish we'd confront the blindingly obvious and stop beating about the bush. 

Monday, 21 August 2017

Brexit: camouflaging deceit

I've written a guest post at LeaveHQ for the Leave Alliance, for any readers of this blog who are interested. It's about the state of our Brexit negotiations, the government's latest position papers and the influence of Patrick Minford. You can check it out here


Brexit: why the WTO option is a terrible idea

One person I never managed to meet during the EU referendum, despite extensive networking and travelling, was Patrick Minford. In fact, the only instances in which colleagues and I would mention his name were after his often disastrous appearances both on television and radio. At the time, I was paying zero attention to the merits of what he was saying, or indeed to the World Trade Organisation (WTO) option more widely, but most discussion about him at Vote Leave went along the lines of: 'he admits that unilateral free trade will kill UK manufacturing, he's unhelpful'. I agree with this more now than I ever have. 

What confuses me is why he, a stand-alone economist and advocate of the WTO option, receives unique and fairly widespread press coverage. The Leave campaign was routinely mocked for lacking support amongst economists, most notably by Faisal Islam in his interview with Michael Gove. But we had Patrick Minford in our corner, whatever that amounted to. His influence during the referendum was limited, but his ideas did, and still do, occasionally filter through into the domain of the mainstream media. This is probably more so a reflection of the fact that most economists (probably sensibly) reject Brexit, and less an illustration of the usefulness of Minford's ideas. 

In his new report on trade, misleadingly entitled 'From Project Fear to Project Prosperity', he asserts that a hard Brexit, one which takes the form of the WTO option (which I will explore more extensively), can offer the country an economic boost in the region of £135bn. Astoundingly, this claim is slapped front and centre of the BBC news website, making it difficult to miss. The paper will be published in full at some point during the autumn, but the introduction is already available for reading. From what I gather so far, this new report will be of very little use to the accuracy of the public debate around Brexit. Take, for instance, Minford's summary of what a 'soft' Brexit is:

"What they mean by ‘soft’ is a Brexit that changes the status quo minimally: in it, we retain the customs union and the single market and consequently also the EU’s freedom of migration. This status quo agreement would promote the interests of existing producers who obtain protection from the EU through its high trade barriers on food and manufacturing, who benefit from EU regulation that supports the aims of large lobbying businesses against smaller competitors and who gain from taxpayer-subsidised cheap unskilled EU labour."

He refers to the notion of a soft Brexit as a 'fallacy', which is more than a little ironic given that he favours a trading relationship with the European Union which has been adopted by no country in the world. Other states rely on a variety of trade agreements, from FTAs to customs cooperation agreements to Association Agreements. Minford also incorrectly states that soft Brexiteers call for a stay in the Customs Union, for which there is no economic or political need. EFTA EEA states (Norway, Liechtenstein and Iceland) have not remained inside the Customs Union. Instead, through Protocols 10 and 11 of the EEA Agreement, they have committed to mutual border inspections programmes. 

But I digress. The nature of his comments about softer forms of Brexit are perhaps for a future blog post. Instead, we should be focusing on Mr Minford's ideal: what is called either the 'no deal' option or the WTO option; the hardest form of Brexit thus far proposed and one based upon unilateral free, tariff-less trade. I now worry that with the exposure granted to next month's paper on the economic benefits of a (very) hard Brexit, support for this plan will fester amongst the chattering classes. We may even end up witnessing the conversion of a think tank or two. Certainly, with politicians like Theresa May and Nigel Farage regurgitating the myth that no deal is better than a bad deal, I wouldn't rule these things out. The issue is that if it wasn't so dangerous I wouldn't have much of a problem with that. But it is. 

The WTO option essentially says that Brexit negotiations with the European Union aren't necessary. Instead of finalising Britain's exit with a series of cooperative agreements, single market membership through EFTA or a definitive Free Trade Agreement, we will after Brexit day rely solely on GATT (General Agreement on Tariffs and Trade) and WTO trading rules. In other words, there ought to be no specified bilateral trading arrangements with the European Union in place of membership at all. It sounds simple, but even as we delve into the issue of tariffs (stupidly saddled as the be-all-and-end-all of Brexit trade discussion), the picture muddies somewhat. 

Tariffs

I have recently figured out that a good way to spot a liar or a fraud in the Brexit debate is to look for those who talk about trade purely in terms of tariffs, ignoring the importance of NTBs as they go. If you follow this principle, you will soon be able to differentiate between those who are reasonable and have a clue and those who simply don't pay any attention to the issues. What is especially demoralising is the fact that so many agencies, websites, think tanks, parties and politicians are guilty of this. Even a certain former UKIP leader still maintains that 'no deal is better than the rotten deal we have today', and cites ceaselessly the size of our EU budgetary contributions in relation to tariffs as a way of justifying this claim. And still many believe he has a use in returning to frontline politics. 

I am not so worried about the significance of tariffs as I am more pressing matters, like customs cooperation in the event of single market departure or the obstacles presented to us by non-tariff barriers. Since referendum campaigning began, most discussion about post-Brexit trade has revolved purely around tariffs. This is a problem. I don't disregard their role in modern trade, but I do think we place too much emphasis upon them. Free Trade Agreements, for instance, tend to focus far more intensively on achieving regulatory convergence (something the IEA appears to scorn at) and dispute settlement than they do tariff negotiation. This is partially because tariffs have plummeted internationally, so figurative reduction has become a less pressing issue. 

But, to focus on tariffs momentarily, which we ought to remember do not apply to services, it is important that we address the argument that since we import much more from the EU in the way of goods than we export, Brussels will not seek to impose upon us any vindictive, predatory tariffs. To assert this is to overlook the mechanics of reverting to solitary, national membership of the WTO (as opposed to the current regime of sitting under the umbrella of the European Union). This leap of faith fundamentally ignores established trading systems and the very WTO rules Mr Minford is so keen on abiding by. 



Upon leaving the EU and relying upon WTO rules to trade, Britain acquires the status of 'Most Favoured Nation' (MFN) when trading with the EU. This is automatic and occurs in conjunction with the international trading system. Under WTO rules, as pictured above, the EU (as a WTO member in its own right) would be legally obliged to impose upon the UK the same tariff schedule as it does other members, so as to avoid discrimination and promote equal treatment. As an EU member, the UK benefits from tariff concessions organised by the bloc thanks to years of negotiated, individual trade agreements with other countries. This may seem like a contradiction. How can the EU arrange preferential tariff arrangements with countries it has entered into agreements with, given established WTO rules about discrimination?

The answer is given in Article XXIV of the General Agreement on Tariffs and Trade 1994, as interpreted to mean: 



As the European Union is a customs union, it is able to modify concessions in ways that other members cannot. This has for a long time been one of the trading benefits of European Union membership (note, not single market membership). But here is the kicker. As we have outlined, ordinary WTO members, as Britain would be, must apply tariffs and treatment equally to all other members. This means that Britain could not in any legal sense retaliate by imposing spiteful tariffs against imports from the EU without doing the same to all other WTO members. A point must be made here that the WTO option is dangerous in that it essentially threatens a protectionist race to the bottom. 

Non-tariff barriers

As the Leave Alliance has spent many years now explaining, the country ought to be turning its attention towards non-tariff barriers in order to compliment its attitude towards post-Brexit trade. Tariff imbalances are only the first major problem with the WTO option. The problem with NTBs is that they cannot be overcome or reduced as easily as duties can. Regulations are structured by countries often for complex domestic reasons, such as for the sake of protecting the environment or dealing with organised crime. As a member of the European Union, and thus the single market, Britain currently enjoys regulatory convergence with the continent and a removal of internal frontiers once goods are past the external EU border. 

After leaving the EU and relying instead upon WTO systems, the UK would be guided by the Agreement on Technical Barriers to Trade (TBT) and the Agreement on Sanitary and Phytosanitary Measures (SPS) for its dealings with non-tariff barriers. The issue here is that this multilateral system of NTB reduction is not optimal, especially for a country which has just left the comfort of the EEA. This is primarily because without the intimacy provided by bilateral trade agreements, dispute settlement is tricky and long-winded. A long-running dispute between Airbus and Boeing, lodged in 2004 and mediated through the WTO system, has still not been settled.

Another important facet of global trade are what are called Mutual Recognition Agreements (MRAs). Mutual recognition of standards is a vital aspect of customs cooperation, and such agreements tend to be built either into Free Trade Agreements or as separate MRAs. MRAs deal with assessing conformity to regulations; they test whether or not the exporter or importer has obeyed the necessary standards when (for instance) constructing, treating, labelling or transporting a good across borders. With an MRA established, a country can rely on agreed domestic mechanisms to produce the required paperwork allowing for cross-border transportation. 

Working solely with WTO rules, the UK would not benefit from existing MRA practices. Major economies recognise the importance of such agreements; China, Japan and the United States all have conformity agreements with the European Union to improve trade flow. Achieving uninterrupted trade flow as an independent WTO member would be incredibly difficult as verification of standards conformity would be more time-consuming and in some cases non-existent. It is in reference to trading obstacles like this that so many commentators have expressed concerns about lorry hold-ups on motorways or massive delays at ports. Drivers or shippers at entry points to the EU may be refused entry or have to undergo lengthy documentation procedures in order to continue the journey of the goods they are transporting. Such worries are entirely reasonable, and will form much of the trading picture if Patrick Minford is to get his way. 

Further thoughts

Brexit is not just a question of trade. It is a massive diplomatic and legal undertaking which transcends large segments of public policy. The WTO option is unclear about Britain's place in a variety of schemes led by Brussels, such as Erasmus, the student exchange programme. There isn't any useful WTO clarity, by definition, around issues which aren't relevant to trade. It is therefore impossible to argue that Britain and the EU can untangle from one another and co-exist without the provisions of any political or economic agreements whatsoever. 

To argue that this is acceptable, as does Professor Minford, is absolute lunacy. He still isn't helping the Brexit debate, and my concern now is for the number of people who pay special attention to his views and use them as a template for leaving. He is an academic, but more importantly he was an economist in favour of Brexit, so he is likely to generate substantive support amongst quite a few Leave voters. I don't mean to rain on their parade, but his policies are dangerous and completely counter-productive both for Leave in general and for the productivity of the country. More startling is the fact that whenever he reemerges on our television screens and news websites, he appears to express exactly the same opinions again and again and again, apparently without any real modification or reflection at all. Minford, now a principle barrier to an orderly Brexit, must be ignored at all costs.

Sunday, 20 August 2017

Stephen Hawking and the poison of NHS emotionalism

I felt a bit sorry for Jeremy Hunt when he decided to enter battle with Stephen Hawking over his bizarre NHS claims. It reminded me slightly of the scene in the final Harry Potter movie, where Harry strolls over to a salivating Voldemort having accepted the necessity of his death. There was no way Mr Hunt was going to look good by engaging with the country's most admired professor. And given his default association with the alleged collapse of the NHS, popular praise isn't something that he can expect to be met by very often. 

I must admit that I quite like Stephen Hawking. I certainly have huge respect for him. How could anybody not be moved by his incredible story? I am not somebody who sours on another person over political differences. I've met some pretty awful and especially stupid Leave voters since becoming politically active a few years ago. If Professor Hawking supported remaining in the European Union then more power to him. I can understand his Brexit fears, given the grants afforded to British science from Brussels. Hawking and I also disagree on the question of whether the country perseveres with the NHS or not. It needn't be cause for any sort of contempt.

His recent comments are, though, worth analysing. Addressing London's Royal Society of Medicine, in an event organised to air concerns about the state of the NHS, he said: 

"I wouldn't be here today if it were not for the NHS. I have received a large amount of high quality NHS treatment, without which I would not have survived. I have had a lot of experience with the NHS, and the care I received has enabled me to live the life that I want and to contribute to major advances in our understanding of the universe. We cannot afford not to have the NHS."

He then went on to say that he believed the UK was slowly creating a 'US-style insurance system', and even more contentiously, that a publicly run, publicly provided would be the 'most efficient' solution. I believe that there is some merit to the former of these two claims, which is especially worrying when one considers how privately and publicly expensive and thus unfit for purpose the American healthcare system is. The second of Hawking's two claims, however, is simply not true. I don't mean to cherry-pick evidence, to borrow one of his phrases, but only the latest Commonwealth Fund study, referenced in the linked BBC article, ranked the NHS as one of the worst performing health systems in terms of patient outcomes. It's not an anomaly either. Previous such studies (always twisted as positive because the NHS tends to score well in categories like 'equity' or 'value for money', which aren't as important) have raised similar doubts.




There are efficiency problems which necessarily accompany big, bloated, bureaucratic systems. These issues lead to longer waiting lists and inferior results when combatting serious illnesses, an issue Bow Group have produced a fair amount of research on (such as this policy paper). In fairness to Hawking, who knows all about serious illness, I am sure he has access to excellent treatment which makes his condition somewhat manageable. But a void of market forces means this will not be the case for large parts of the country. Poorer individuals and regions are more likely to struggle with access to treatment and suffer worse outcomes. 

But, it is the original quote indented above which I am much more interested in. Hawking makes the bizarre claim that he would not be alive if it were not for the NHS. I think he is fundamentally disregarding the existence of alternate and high quality private healthcare available all over Europe and in pockets of the Middle East and Asia. I speak as a non-scientist, but I am more than capable of reading authoritative studies, as well as the interesting picture painted by international rankings. The Lancet medical journal's findings, for instance, had the NHS in a very average position relative to global performance, backing up the well-known WHO study back in 2000 (when Labour were in power), which had Britain's healthcare system in 18th. 

It is not like Britain has never known a more private system. Prior to the National Insurance Act of 1911, introduced by David Lloyd George, which 'provided for the compulsory insurance of lower paid workers and set a fixed capitation fee for doctors', healthcare was administered through what were called 'friendly societies', where workers would get together collaboratively, in miniature, socialist arrangements, and fund the services of a doctor collectively. Yes, we've moved on, both in terms of research and technology, but history shows healthcare needn't be complicated or provided by ministers. 

The other issue I have with Professor Hawking's comments is that they essentially capture the nauseating emotional connection that Brits have with healthcare provision. It is odd because healthcare needs are, by their very nature, private and oughtn't represent bargaining chips for politicians at election time. 'Groupthink' surrounding the NHS is rife and poisonous. I particularly loathe the term 'our NHS'. In using it we promote unhealthy tribalism, which blockades against meaningful debate about how we improve a stagnant system of healthcare. Diluting this poisonous emotional attachment is perhaps the first step to achieving a market-based system, similar to those seen all around the continent. 

Notice also the reliance upon using the American healthcare system as some kind of stick with which to beat free marketeers in Britain. It is as if there are only two structures globally, and we must protect one from becoming the other. Professor Hawking, a clever man, knows full well that by instigating comparison with the United States he can more aptly generate support for the maintenance of the NHS. Which I believe, given changes to demographics, life-expectancy and population-induced strains, is bad for our healthcare outlook. 

Increasingly, academics believe that, almost by right, they are entitled to transfer their authority in a particular field to other fields, often for the sake of making noise and boosting their own public profile. This became especially apparent during Britain's referendum on European Union membership. Of course, I am not saying that academics should not have the right to speak and be heard. Nobody values the importance of free speech more than I do. The issue is that by association alone they are afforded disproportionate exposure and their words a special (and often unwarranted) significance. This is damaging to debate as it promotes laziness and useless conventional wisdom. 

Professor Hawking does, it is true, have extensive experience as a recipient of NHS treatment, and as a fellow human being I can only sympathise. But this should not enable him to lie at respectable conferences about which models of ownership are best for the UK. Sympathetic and respected figure or not. 

Saturday, 19 August 2017

Brexit: an intellectual crisis and unknowingly pursuing the EEA

The more I think about Brexit, the more clearly I recognise that the most useful impact it has had so far has been to expose the gaping intellectual void at the heart of British politics. It's been a difficult pill to swallow for those of us who care deeply about getting the right deal for the country, but it has also been a sobering eye-opener. Shocking our democratic institutions to the core is a vital component of revitalising British democracy (the primary purpose of Brexit), much like slapping a newborn's bottom and causing it momentary distress is a necessary component to testing its response and resolve. 

I am occasionally accused by hard Brexiteers, just as I thught I'd be, of regretting my vote and abandoning principles. This isn't so. I am clearer now than I ever have been. Brexit, even in the face of its many complexities, is ultimately worth it. The problems we face in Westminster, which appear to extend beyond the realm of politicians if yesterday's IEA paper on post-Brexit trade is anything to go by, were perfectly predictable. If a nation spends forty years in the lap of a child-minder, willingly handing over pockets of sovereignty and thereby reducing its jurisdiction of domestic competency, it will gradually learn not to think about certain aspects of policy within the public domain. 

This to me stands as one of the better arguments for pursuing membership of EFTA. Britain's civil service doesn't have the infrastructural base or technical know-how to be able to deal with returning sovereignty on such a large scale. The groundwork for the reconstruction of our fisheries, for instance, will be immensely complicated. National policy won't be drafted and agreed upon in a matter of a few months. This bureaucratic minefield will, I think, represent the most significant domestic rebuild since post-war reconstruction took place in the late 1940s. 

The trouble is that the government is pursuing a course of action it deems conducive to the public mood. Number 10 thinks it can replicate the arrangements laid out within the EEA without accepting any of the drawbacks of the EEA. The best evidence of this comes from this week's published paper on future customs arrangements. As I have written, the proposals outlined by the Department for Exiting the European Union seemed to favour continued participation within the single market, and thus established customs cooperation, rather than any substantive framework for a transitional (I am forgetting which policy prescriptions are permanent and which are temporary) Customs Union agreement with the European Union. 

There is also the question of free movement, which according to referendum doctrine and large swathes of the population is the absolute red line in any potential Brexit deal. People who think this are going to be disappointed. They will swallow the convenient line that a Brexit involving compromise isn't Brexit at all, when in fact any Brexit necessarily involves compromise, due mainly to the magnitude of such a complex legal undertaking. Brexiteers are often guilty of thinking that we can just move past the single market, trading and existing without it retaining any notable economic leverage over us. 

Interestingly, the Institute for Government, who have been a refreshing source of sanity during these turbulent times, concluded a few months ago

"The scale of the administrative challenge is too great and the current immigration system should be kept until a replacement is ready to avoid disruptive changes to labour markets, the think tank has concluded. 
It also found the current process for registering EU nationals was “not fit for purpose” and the Home Office could require up to 5,000 extra civil servants to cope with large numbers of applications and appeals. "

...thus echoing my concerns about the inevitable backlog that will accompany mass restoration of policy competences. Certainly this is one of the main reasons for the current trend in advocating transitional arrangements with the EU. 

The government claims its aim is to reintroduce controls to immigration not available inside the single market. I am sceptical of this, in part due to the forgotten availability of options when tackling immigration as an EFTA member in the EEA. Article 112 of the EEA Agreement states that "if serious economic, societal or environmental difficulties of a sectorial or regional nature liable to persist are arising, a Contracting Party may unilaterally take appropriate measures under the conditions and procedures laid down in Article 113. Such safeguard measures shall be restricted with regard to their scope and duration to what is strictly necessary in order to remedy the situation. Priority shall be given to such measures as will least disturb the functioning of this Agreement."

The negotiating strategy so far has been to over-promise. The issue is that the the government wants to replicate the terms outlined by membership of the EEA through EFTA into a Free Trade Agreement. This is a futile endeavour. As far as trade goes, the EEA presents us with a ready-made package and the best standing for British trade policy, especially through such a sensitive period. And need I bother with those who think leaving with no deal is better than leaving with a bad deal. I would ask readers to point to a productive economy which trades with the EU on the terms set out by WTO rules. 

Any negotiation has to begin with confidence. We have to believe we can leave with a good deal. But there is no point going about it with such flippant dishonesty. Whitehall has found itself sucked into an intellectual black hole and is unlikely to be pulled back out. 

Thursday, 17 August 2017

Farage can return if he likes, but for what?

I get the impression, watching Nigel Farage on TV and occasionally listening to the more bearable parts of his LBC radio show, that he is convinced that his inevitable return to frontline politics will mean finding the magic recipe for an orderly hard Brexit. We should expect no less from a man of his arrogance. I can see it happening before 2017 is up, given the painfully poor progress made so far by our government. 

The argument doesn't lie in whether he will return. It lies in what he thinks his return can achieve and whether he'll be useful to negotiations or as some kind of pressuring mechanism for Number 10, ever-conscious of growing discontent over the potential of a so-called 'Brexit betrayal'. That phrase has already well and truly nestled itself under my skin. Notice how rarely it is used by people who actually have a clue about all this. 

I presume Mr Farage's return to the British political scene would entail retention of UKIP's leadership. I hear, given how woefully they performed at the General Election, they have a vacancy for the post. I'm sure nobody saw that coming. Some of their more combative spokesmen, including the likes of Michael Heaver, whose attempt at journalism over the past few months has been nothing short of hilarious, like to pretend that UKIP always had a future outside of the referendum, but our electoral system ensures that this is not the case. No other issue they try to pursue even remotely compares to the magnitude of Brexit. And that includes Islamic terror (my thoughts are with victims in Barcelona, on that note).  

The prodigal son can return if he likes, but he isn't capable of having the impact he had back in 2014/15. Initially, he was a useful battering ram, endeavouring to associate mass immigration with membership of the European Union (or, rather, the single market). It is hard to argue that he wasn't successful, but what is easy to argue is that his use in public debate was always going to be limited. Once he became a household name, that was it. He was too toxic to convince swaying or middle ground voters to opt for Brexit. If he had led the designated Leave campaign, I would probably be writing an entirely different blog right about now. 

His main use during the referendum was in rallying support amongst his already converted followers, trying to get them to turn up on the day. This he managed, but without an active referendum for him to participate in, it is very unclear what his purpose in coming back would be. Certainly there are more general elections to be held, but there is only so much a minor party can achieve on such a platform. UKIP will never again cause the Conservative Party much of a problem. They have issues of their own to sort out, starting with where their next inspiring leader will come from (Jacob Rees-Mogg is a bad idea, by the way). 

It is true that Mr Farage was such a leader, but it was aided hugely by the fact that, finally, a referendum was on the cards. As I have written previously at this blog, Farage's primary skill is oratory deception. He speaks simply and with energy, painting issues as black and white and scooping up the bewildered as he goes. This was precisely why I was at one stage so heavily influenced by him. Thankfully, though, this has vaccinated me against him in quite a powerful way. His antics are more transparent and much easier to expose. 

He's even using the wretched 'Brexit means Brexit' phrase, promising to come back to battle if his Brexit isn't delivered. Well, whose Brexit will be delivered? Must Brexit be stamped with his approval? What will he do exactly to ensure that his needs are satisfied, even if at the expense of diplomatic ties, economic stability or the productivity of negotiations. Mr Farage above anybody ought to have recognised the gravity of the Article 50 period, and indeed what it is we're trying to achieve. Once that result was announced last June, he became a smaller fish in a much larger and far more dangerous pond. 

Thanks in no small part to the infuriating myth that he was the man who made Brexit, Mr Farage has developed in his mind the idea that Britain's EU departure is his toy to play with. Away from politics, other children are playing with it and they are doing so incorrectly. But there's a problem. When he does decide to come back, what is his plan? There is no avenue through which he can influence anything significant. He is about as prepared for what is ahead as the next man. And about as useful in dealing with it too. 

Tuesday, 15 August 2017

The government's customs proposals are a vacuous deceit

Earlier on I realised how much I hate agreeing with Guy Verhofstadt, a president among hundreds in the European Parliament and one of the smuggest to occupy the offices of Brussels. But, having read enough of David Davis' fanciful Paper on future Customs Arrangements, I was left with no real alternative. He described being in and out of the Customs Union, with invisible borders and having not yet agreed to a financial settlement or provisions over citizen's rights as a 'fantasy'. I prefer 'big fat nothing burger', having fallen in love with the phrase ever since CNN's Van Jones used it to describe the Trump-Russia collusion story.

His summary of the government's proposals for a new, UK-EU Customs agreement more or less hits the nail on the head. If this is what the Brexit Secretary is referring to when he describes negotiations as going 'incredibly well' then I despair. I wouldn't be surprised if Brussels suspended talks indefinitely after reading yesterday's rubbish. Readers will hardly need reminding that Britain's wants do not necessarily equate to Britain's gets. And what Britain appears to want simultaneously is the ability to have free and frictionless trade with the European market and to adopt 'third party' status as a result of leaving it. 



Seeking a customs union agreement post Brexit is, don't get me wrong, perfectly achievable. But it isn't necessary to productive trade continuity. Turkey enjoys a comprehensive customs union agreement with the European Union, though note that they are not of the EU Customs Union (EUCU) itself. The difference is simply a matter of jurisdiction - a little like Switzerland's arrangement with the EEA. And, despite widespread belief that being in a customs union prevents the signing of independent, bilateral FTAs, the UK can conclude a customs union agreement and retain independent trade policy. I used to believe that to be in a customs union means, in principle, to lose the ability to sign bilateral trade deals, but this is not the case. Mercosur, for instance, is a customs union but its signatories can trade bilaterally and of their own accord. I should therefore clarify that it is in fact the EU's Common Commercial Policy (outlined in Article 207 in the Treaty on the Functioning of the European Union) which precludes us from doing so. Here there is a crucial distinction. 


And while we're on the subject of misconceptions surrounding the EUCU, it must also be pointed out that we are separating issues that ought not to be separated. If a member state leaves the EU, it leaves its Customs Union. No ifs, no buts. The EUCU is an integral part of the treaties which form the provisions we are bound by. I am tired of reading commentators in mainstream publications calling for us to leave both the EU and the CU. That is like saying: 'I am going to lock my front door as I leave the house today. And I'm going to lock it with my front door key.' If we discuss the CU in the context of Brexit, then we are discussing one and the other. There is no way of staying within the CU and leaving the EU. At least the Department for Exiting the European Union understands this.

The paper they have produced, whilst not mentioning the single market, draws quite obvious attention to the fact that upon leaving the EU and EEA, the UK becomes what Brussels perceives as a 'third party country', meaning we are forced practically immediately to work with significantly worse trading terms. The publication outlines two, apparently workable routes for continued cooperation over customs:


  • A highly streamlined customs arrangement between the UK and the EU, streamlining and simplifying requirements, leaving as few additional requirements on UK-EU trade as possible. This would aim to: continue some of the existing agreements between the UK and the EU; put in place new negotiated and unilateral facilitations to reduce and remove barriers to trade; and implement technology-based solutions to make it easier to comply with customs procedures. 
  • A new customs partnership with the EU, aligning our approach to the customs border in a way that removes the need for a UK-EU customs border. One potential approach would involve the UK mirroring the EU's requirements for imports from the rest of the world where their final destination is the EU. 


Notice immediately how unhelpful much of the language is. It's all about trying our best to 'simplify' and 'remove barriers', as if the authors haven't recognised that this is exactly the point of retaining membership of the single market. Article 10 of the EEA Agreement tells us that "customs duties on imports and exports, and any charges having equivalent effect, shall be prohibited between the Contracting Parties." It is as if this document was written about the single market and an error was made when typing up the title page. Also, rather more peculiarly, this paper has virtually no relevance to the current standing of negotiations. We haven't even reached a conclusion over the financial settlement yet. 

One of the things that stands out most from the paper is the government's continued assertions that it is on some kind of level playing field with its closest and largest market. Take this arrogant, wishful thinking, for instance, in paragraph 30:

"The promotion of the free flow of trade in both directions between the UK and the EU would also require the EU to implement equivalent arrangements at its borders with the UK. The Government believes that collaborative solutions would benefit all parties and will work closely with European partners to negotiate and implement such arrangements." 

We appear to be working under the impression that we can just bypass the 'third party' status phase and carry on as normal. What is striking is how mixed up the authors of this document appear to be when differentiating between Customs Union and customs cooperation. The lack of capital letters in the latter phrase should alone be enough to signify important difference. The Customs Union is a fundamental feature of EU membership, comprising of an external tariff wall (CET), whereas customs cooperation, according to UNECE, relates to "improving control of trade flows and the enforcement of applicable laws and regulations through the exchange of information on Customs aspects such as export and import declaration data, trader-related information, origin and valuation-related information."

Throughout the government's paper on customs proposals is the running assumption that an entirely separate negotiated Customs Union agreement will achieve the 'free and frictionless' trade cited in the executive summary. This is not the case. My belief is that EFTA membership under the aegis of the EEA is the only way to meaningfully achieve this. If the UK does indeed leave the single market, which appears to be the desired course of action and will be immediately regretted, we will need a customs cooperation agreement to be put in place, whether through an FTA or negotiated as part of the Article 50 settlement. If we are to focus on anything over the next year and a half it should be making progress on a customs cooperation agreement. 

A customs cooperation agreement would attempt to re-standardise different facets of trade flow. This will mean things like agreeing upon measures to mutually recognise and approve certificates or dealing with paperwork and administering computer systems which identify customs fraud. This stuff is far too complicated for me to get a full grip on, but I can only pass on the basics as I understand them. Which is a hell of a lot more than can be said for the civil service. 

As for leaving the Customs Union, indeed a necessary part of the Brexit process, it needn't be over-complicated. The only residual feature of the EUCU is a Common External Tariff (CET) and a mechanism through which funds are collected by member states and paid to Brussels as a condition of membership. The Customs Union actually predates the establishing of the single market, and has subsequently had much of its aegis hijacked by the single market. Principally, the single market took over the responsibility of abolishing internal duties and quotas between member states (again, Article 10 of the EEA Agreement). 

I can't wait for this autumn's Customs Bill. No doubt it'll follow much of the emerging pattern with Brexit negotiations: we'll do our best to pretend that pursuing anything other than EFTA and the EEA is worth the light of day. For the EFTA states, customs cooperation tends to be organised on the basis of exchange letters, which seek to speed up trade flows between each bloc. Such agreements can be read here. I think agreements like this are entirely appropriate and perfectly adoptable from a UK perspective, in the unlikely event that we end up in the right corner of the EEA. My fear about a separate Customs Union agreement with the EU is that it will narrow any scope we have left for other deals we negotiate in the future, in that we won't be able to adjust unalterable tariffs. That is if we ever find our way out of this depressing maze.

Much of the reaction to the release of yesterday's proposals espoused that irritating 'cake and eat it' line. I think this is entirely missing the point. The more worrying takeaway is the inability to distinguish between our terminology. Do we mean Customs Union or do we mean customs cooperation? The SNP even managed to rebuke the paper by making themselves look foolish. They appear to be arguing for the UK to stay in the EEA and the Customs Union, but outside the European Union the latter is not possible. They never did know anything about the nitty gritty. They have about as much use in the Brexit debate as I have on a catwalk. I await their inevitable electoral dissolution with uncontrollable salivation. 

And speaking so fondly of control, as we ex-Vote Leavers much like, I am more fearful than ever of all this getting away from us. The more incompetence our leaders display, the more easily counter forces can mobilise and put a stop to the greatest chance we'll have of leaving the European Union. I'm starting to sound like a revolutionary Marxist, but if only we'd followed a more workable guide we wouldn't be nearly as stuck as we currently are. The government's proposals for future customs arrangements are deceitful and arrogant. They conflate and confuse concepts, safely in the knowledge that most people simply won't read them. The Department for Exiting the European Union is, with irritating futility, trying to craft a bespoke deal that gives us everything EEA without the setbacks of the EEA. Here's a radical suggestion: why not just go with the EEA?