Friday, 24 November 2017

Brexit: still fooling ourselves

The cheesecake scene involving Chandler and Rachel in Friends is proving to be usefully analogous of the government's current approach to the Brexit cake. Both characters believe they can each enjoy a large share of the desert, encounter unforeseen difficulty and end up on all fours scraping at it with forks. The Irish border question, which I have begun to address more extensively of late, captures this problem quite exquisitely. 

Number 10 maintains that Britain's goal is for there to be no hard border, which is achievable with appropriate proposals and a certain savviness during phase two discussions. But, by the same token, they also rule out Northern Ireland remaining within the frameworks of either the Single Market or the Customs Union. Something will have to give and I do not believe for a second that Brussels is about to blink. 

The contradiction between these positions is absolute. Outside of either, with particular emphasis upon the use of the Single Market, Northern Ireland will not enjoy a frictionless trading relationship with its southern neighbour. There is no chance of it. These structures exist and we have no time to come up with imaginary solutions to what are actually very clear problems. 

Keeping Northern Ireland inside the EEA with Ireland will mean adopting the same enforcement and surveillance strategy, which (as I have been at pains to point out at this blog) ensures that checks take place at the point of production, as opposed to the border. Northern Irish goods will retain the assumption of conformity as they cross the border, thus eliminating the need for almost all customs formalities. 

The Customs Union is less significant in terms of its softening effect. The abolition of tariffs on goods between EU members now relies on Article 10 of the EEA Agreement for its authority. The Customs Union lost this competence in 1993 and its only residual feature is the Common External Tariff (CET). Here we see how it can help us solve Rules of Origin and cumulation hurdles. 

The CET means that other countries cannot export goods into the UK at lower tariff rates, for re-exporting onto the European continent, as a means of circumventing higher EU tariffs. Once an independent Britain has FTAs, this will become an increasingly prevalent issue and will result in RoO documentary checks. If Northern Ireland replicates the CET, goods which enter its territory and then move in to Ireland will not fall foul of EU tariff requirements. 

In practice, keeping the entirety of the island of Ireland in the Single Market and Customs Union will have a marked softening effect on the border. It will minimise disruption and prove particularly useful for companies whose supply chains involve goods crossing the border multiple times. The two mechanisms, though, perform very separate functions. The question is therefore one of politics. We are talking here about a balancing act

The main problem with this government's approach to the Brexit 'negotiations' has been a mistaken belief that it is in the EU's interests to offer us a preferential trading arrangement. The failure of understanding here is an inability to recognise that preferential terms offered to the UK undermine the economic and functional integrity of the Single Market. 

Leavers have for many years referred to the European Union as a 'protectionist racket'. This description is accurate. Why wouldn't it be? If you spend years developing a community which is designed to cushion its members and oil internal competition, you take appropriate action to protect the integrity of what you have created. This should not be a difficult concept to grasp. 

The point here is that if we have spent many years complaining about protectionism, we cannot then conceivably pretend that the very protectionism we decry is going to be temporarily lifted. It is a stoic feature of the European Union's operations. This premise cannot be conveniently forgotten just at the moment we are drawing out our departure. It will only blockade us from necessary progress. 

What is more, third country provisions, such as import regimes and official controls, are all easily accessible online and have always been publicly available. The terms we are set to assume have never been withheld for secrecy. They have been selectively and carefully predetermined and apply in uniform fashion. Granting exemptions will break WTO rules governing equal treatment. 

The United Kingdom voted to leave the European Union and her leaders have chosen to respect the mandate provided by last year's referendum. The EU has not forced us out, as it perhaps should have done given our persistent obstinacy over the last forty years. On that note, this blog by Chris Grey is a good critique of the prevailing attitudes of many of the Brexit ultras. 

Theresa May and David Davis have, to their credit, stuck to the task of getting us out, but abiding by the instructions set by the electorate has been made exponentially more difficult by conceptual ignorance. The search for a settlement cannot  remain stagnant for much longer, because with every passing day this issue looks more and more capable of bringing the entire process to a halt. 

Monday, 20 November 2017

Brexit: a matter of perspective

I ought to confess that I quite like Michel Barnier. This, I rather think, will not look good for my leave credentials, but I cannot jump on board with the clan of ultras who ceaselessly attack him after every one of his increasingly urgent speeches. I don't know very much about him, but he does possess admirable qualities.

From the get-go he has been fair with Britain. He has spoken highly of the UK's history and contributions to the Union and treated the Irish border issue with sensitivity. He has reinforced the European position with consistent clarity, demonstrably refuting claims of negotiating malice or desires for a no deal. He also does not espouse the same detestable veneer of arrogance that we see from the likes of Jean-Claude Juncker and Guy Verhofstadt.

He has not been the barrier to a deal that so many have accused him of being. The EU's collective position is very simple: offering us a preferential trading arrangement will undermine the integrity of the Single Market, and is thus not in their interest. This fundamental point is why I have soured on the idea of leaving the EEA. It will do us no good in the short or long term.

When I try to explain this to the Leave.EU and UKIP types, inevitably I am accused of hating the country and hoping for Brexit and Britain to fail. Nothing could be further from the truth. What we are talking about here is a matter of perspective. If the roles were reversed, and we were Brussels, we would not consider Brexit an ideal opportunity to create a glaring and damaging precedent. We would seek not to undermine our own institutions. 

In his speech at the Centre for European Reform today, he reiterated that the "European Union will want to have a close relationship with the UK. We have a shared history – it started long before the last 44 years. That is why the “no deal” is not our scenario. Even though we will be ready for it. I regret that this no deal option comes up so often in the UK public debate."

I like the historical references in speeches of this nature. They are above all a reminder that the EU is and will remain a crucial ally. The bloc will not be unravelling at any time soon and we must learn to view Brexit more through the prism of a transformation than a divorce. Continued cooperation will be vital, both at the WTO and in relation to security and climate challenges.

Then, getting to the nub of this whole process, Barnier said: "Those who claim that the UK should 'cherry-pick' parts of the Single Market must stop this contradiction. The Single Market is a package, with four indivisible freedoms, common rules, institutions and enforcement structures. The UK knows these rules like the back of its hand. It has contributed to defining them over the last 44 years, with a certain degree of influence…"

The EU's insistence on protecting its integrity, he adds, "simply draws the logical consequence of the UK's decision to take back control. The EU does not want to punish. The integrity of the Single Market is not negotiable. The Single Market is one of our main public goods. It is the main reason why countries around the world – such as China, Japan, and the US – look to us as a strong partner."

Barnier is right that we cannot pack up facets of membership in our suitcase and take them with us because this would undermine the very purpose of the Single Market. There are clear reasons, after all, why Brexiteers often refer to the EU as a 'protectionist racket'. But it is worth remembering that some of this protectionism has also protected us. A point I have sought to drive home rather forcefully in recent weeks.

What does need to be highlighted is the issue of punishment. The UK correctly decided that EU membership was not in its best domestic interests and chose to leave, and so it therefore runs that we do this - the good and the bad - onto ourselves. There is no point outsourcing blame or pointing fingers. Doing so simply will not stack up to any logic that I can see.

During the referendum there was a narrow vein of argument which saw Brexit as a means to strengthen the rest of Europe. The theory behind this was that if the Union's most obstinate and hesitant member withdrew, it would allow for more rapid integration and a renewed focus upon minimising opt-outs and harmonising unbalanced levels of sovereignty between member states.

It wasn't my argument and for the record I don't think it is an especially good one. Brexit is a cause of instability and a Single Market exit will cause economic tremors not seen on the continent since 2008. Defence strategy will also be significantly hampered by our exit, given our comparatively impressive military strength, nuclear arsenal and valuable expertise.

Again, we are looking at differences in perspective. Europe and Britain can both enjoy bright futures, but only if they work closely together. We need not drive unnecessary wedges between us and our largest trading partner. Leaving was always a political question. There is no point cutting off our nose to spite our face.

Sunday, 19 November 2017

We need a market called Europe

I am pleased to see increased urgency around the idea of remaining in the Single Market post-Brexit. Remainers are not solely behind this - it is a position being converged upon by representatives of both sides of the debate. This tends to suggest a level of objectivity, given the practical difficulties of leaving the EU which have been laid before us by reality. The case for the Single Market is actually quite easy to make, but it is made more powerfully by Leavers, who are far too often associated with prioritising levels of immigration in their approach towards Brexit. 

My stance on the issue is simple: I want a market called Europe, not a country called Europe. The former facilitates enormous amounts of trade, the latter creates a worrisome democratic deficit. The Single Market is not the EU. Staying in the European Economic Area (EEA) does not tarnish the mandate provided by last year's referendum, and nor does it mean staying in the EU by the backdoor, as the lazy ultras often like to claim. The EEA is, as we have discussed before, simultaneously configured yet configurable, flexible yet static. It takes into account the territory-specific interests of the add-on, non-EU member states. 

Inside the Single Market we have not only regulatory conformity with our largest trading partner, we also have the assumption of conformity, which is far more important. The assumption exists because checks and inspections - here we are referring to enforcement and surveillance strategy - take place at the point of production. They are carried out by a widespread market surveillance programme comprising of national authorities like government departments, who are charged with overseeing conformity to product standards and are themselves inspected by centralised EU bodies, such as the Food and Veterinary Office (FVO). 

This arrangement is designed in such a way as to eliminate technical barriers to trade at borders - so called non-tariff barriers. The real achievement of the Single Market since 1993 has been substantial progress towards the eradication of non-tariff barriers, which are now of far more significance than tariffs across international trade. Quite a number of intensive studies, such as this one, have suggested that their effects can add more than a fifth to the cost of global trade. A fraction much greater than that of the impact of tariffs. 

Leaving the Single Market does not mean we lose regulatory conformity, but it does mean we lose the assumption of conformity, so post-Brexit, our enforcement and surveillance strategy fundamentally changes. This is the reason for the increased warnings about lorry queues at Dover: customs checks will move to the border, just as they do for all third countries. Any exemption granted to Britain would break WTO rules governing equal treatment. (Dover, though, is only one part of the problem and our obsession with it merely reflects how South East-centric our media and political discourse is. Ports like Hull and Southampton will also struggle and customs declarations will pile huge pressure on both HMRC and shipping lanes)

Queues of this nature are a problem. They have material effects upon fragile and perishable goods being transported from one country to another. They may result in huge storage costs - reaching upwards of £700 - for exporters, if consignments need more thorough inspection. These are backdoor overheads which have largely been ignored by political commentators in Brexit discourse. Queues at ports and border entry points, if ground to a halt, may also have serious consequences upon the preservation of key supply chains. If customs logjams slow down trade flow too forcefully or quickly, importers in Europe may seek alternative products from elsewhere. 

But a relocating of enforcement procedure is not the crux of the issue. There will even be mechanisms at our disposal in the future, such as Mutual Recognition Agreements (MRAs), which I describe in more detail here, to help de-congest our borders. The more profound and immediate danger of leaving the EEA will be the invalidity of licences and qualifications which currently facilitate the exporting of both goods and services into the EU. Martin Donnelly, a trade wonk in Whitehall, has written a letter to parliamentarians in the Guardian, in which he warns that "large parts of our service businesses would lose their current passport into the EU market. UK qualifications, from accounting to hairdressing, would no longer be accepted across Europe."

Industry will not automatically qualify for access, both in terms of trade in goods and in services. I would add that this also applies to professionals like architects, doctors and dental nurses, as well as drivers of various kinds. There is a reason for my insistence that this damage is not in any way fictional. I maintain that the biggest problem with Britain's approach to Brexit thus far has been an insistence that it is in the EU's interest to offer us a preferential trading arrangement. This is immediately disproved by the mere fact that it would undermine the integrity of the Single Market. This has been the core of the European negotiating position from the very beginning, and it simply hasn't been grasped in Westminster. 

Richard North produced a damning summary of what is expected to happen to the British car industry only a few days ago, highlighting the importance of seeking vehicle type approval by Brussels post-Brexit. He references the evidence provided by Patrick Keating, a spokesperson for Honda, to a select committee earlier this week. Keating told the committee: "What we're picking up from the Commission is that type approvals issued by the VCA, the UK Vehicle Certification Authority, will either no longer hold validity or not be able to be extended. So we need to find a way to bridge that gap."

We also face not only the relocation of the European Medicines Agency (EMA), but the very frightening problem of not being able to export medical products into the EU. For the pharmaceutical industry, market authorisation is an EEA-wide system and thus has Single Market relevance. The EMA notes that "a partnership between the European Commission, the medicines regulatory authorities in EU Member States and the European Economic Area (EEA), and the European Medicines Agency (EMA) – works to ensure that patients in the EU have access to high-quality, effective and safe medicines." 

In other words, two major industries could be unnecessarily undermined by an action Britain does not need to take. Here I do not pretend that staying in the Single Market solves every conceivable issue - it does not. But a considerable, industry-saving burden is lifted from our shoulders if remain party to the EEA, and this is without referring to the impact upon the chemicals industry and our ability to register 6,000 chemicals with REACH. I will need to delve into this topic in more detail as I currently lack sufficient knowledge to provide any informative overview of the challenges we may face. Regardless, the point here is that rejoining EFTA after a stay in the EEA would be a much cleaner and more orderly Brexit, and if the country did not like the eventual position, it could quite easily mobilise to change it in the future. 

The Single Market is in need of reform and is not perfect. I don't like the hold the EU has on it and I think an EFTA 5, which sees the UK partner its more natural allies, would be better (though not completely) able to shape the progression of the acquis. I also acknowledge the pertinence of the immigration issue, which I believe Article 112 of the EEA Agreement gives us some breathing space on and will help us to leverage some kind of improved deal. On Friday I argued with Jonathan Lis of British Influence about the use of Article 112 on Twitter. He claimed invoking it would in a practical sense undermine our membership of the EEA, but I think safeguards against excesses of the four freedoms exist in the treaty for a reason. 

The big picture here is that the continent of Europe benefits from collective efforts to reduce technical barriers to trade. Most of us are made richer as a result and, if we can protect and champion the initiative of the Single Market, we avoid the harshest elements of Brexit. It will also help to reinforce the image of Britain some leavers are doing their utmost to promote: this idea of a global Britain, which risks evolving into nothing more than vapid sloganeering if the ultras get their way. And if we leave the Single Market, it appears increasingly likely that vast sectors of the British economy will not be getting their way either.  

Saturday, 18 November 2017

Brexit: filling the void

One of the most intriguing aspects of Brexit discourse is the newfound importance placed upon Free Trade Agreements, or specifically how they have taken centre stage as the be-all and end-all of trade relations. There is a common misconception that, since the EU does not have FTAs with major economies, bar Canada, it does not have trade agreements with them. This is completely spurious. 

Whilst it is true that most EU FTAs are with small economies, this is merely an uninteresting inevitability. With a huge gulf in size between two economies in a negotiation, there is (by default) much narrower scope and necessity for compromise. Negotiations will be focused on the extent of accommodating one into the other, rather than overcoming regulatory divergence, as smaller economies are less able to develop a distinct or protectionist regulatory framework. This is because they tend to lack resources and thus the same kind of clout across sectors. 

It therefore follows that, by and large, FTAs between large economies are rare by comparison and take a very long time to be concluded. The EU's FTA negotiations with India were launched a decade ago and have yet to be concluded. CETA took well over seven years, and no FTAs yet exist between the EU and China, Japan, Australia and the United States. But herein lies the all-important misconception: the lack of FTAs between the EU and large economies does not render their trading relations a product of mere WTO rules.  

There are many different types of trade agreement. We see not just FTAs but partnership frameworks, sector-specific agreements (like SIOFA, a multilateral fisheries agreement), good-specific agreements (such as in wine with Australia), Exchanges of Letters, Mutual Recognition Agreements (MRAs) and Customs Cooperation Agreements. These types of trade agreement are different to FTAs but are extremely important in terms of facilitating trade. 

The latter two in particular are of profound importance. I will return to them in a moment. Even the BBC, in their latest reality check on Britain's global trading relationships, missed them. It is disappointing because in furthering the myth that no FTA means trade ties are conducted on the basis of WTO frameworks, support for a no deal will increase. Journalists must bear some responsibility here. Increasingly we are seeing public figures claim WTO rules suffice between major powers without their comments receiving appropriate scrutiny. 

David Bannerman made this error on Sky yesterday. William Dartmouth, well rebuked by EFTA4UK, has also implied this over at Brexit Central. This morning, Wetherspoons boss Tim Martins was on the Today programme. Apparently his business, of which I am a fairly regular customer, is at the centre of the trading universe, and thus he must be consulted on as many Brexit issues as possible. At 53:40, Mr Martins informs the presenter, John Humphreys, and the show's listeners that 'the EU hasn't done any trade deals' with any of the top 10 economies. He was not halted over this point and continued rambling incoherently. This is a man who is ignorant to the point of malevolence, and Humphreys ought to have flagged him up. 

The truth, as ever (when you're asking a pub landlord about international trading relationships), is more than a little different. The EU has a whole host of trade agreements with major economies, all of which can be found and read at the EU's online treaty database. I tend to advise people that it is preferable to search by country, especially since it is those major economies which seem to be attracting the attention of the Brexit ultras. Australia, China, India, Japan and the United States are worth looking at in more detail. 

Please note here that not every treaty listed under each of the above countries is trade-relevant. About a third of those with the United States are, and about half of those with China are. Common sense will largely be sufficient in working out which ones are and which ones are not. I mentioned above the significance of MRAs and agreements on customs cooperation. These agreements facilitate enormous amounts of trade in a whole variety of ways, and as an alternative to FTAs work more or less satisfactorily. 

Mutual Recognition Agreements (MRAs) are agreements between countries which establish recognition of one another's conformity assessments. The purpose of these agreements is to minimise costly delays caused by customs checks. They require evidence to be supplied in the form of paperwork confirming that the necessary activity has been undertaken in order to assure conformity to standards. Such agreements also cover things like licences and professional qualifications, allowing architects or doctors to work in both territories and thus facilitating trade in services. The EU has MRAs on conformity assessment with most of its largest trading partners, including Australia, Canada, Japan, New ZealandSwitzerland and the USA

Beyond MRAs, though, we are also to look at Customs Cooperation Agreements. Here we are talking about deals that establish joint bodies, called Joint Customs Cooperation Committees (JCCCs), which consist of representatives from each party's customs authority and who are responsible for overseeing the practical application of these agreements. The work carried out to achieve this relates heavily to intelligence, risk profiling and the maintenance of computer systems and databases. 

Customs is intelligence-led and a balancing act between facilitating trade and cracking down on abuse. Importers 'risk profiling' exporters off the back of track record and trust. Exchange of information regarding specific goods, potential criminal activity, expected and unexpected consignments and volume of trade all help to aid contracting parties in deciding where checks are necessary and where they are not. Without this information and collaborative work, risk profiling is much more difficult, so checks increase as a precaution. Agreements on customs cooperation are therefore crucial in terms of preventing customs logjams, which have the potential to devastate supply chains. 

As readers will by now expect, the EU has agreements of this nature with countries such as ChileChina, CanadaIndia, JapanKorea, and the United States. Notice again the prominence they enjoy amongst major trading partners. They are not Free Trade Agreements, but they arguably facilitate trade to a far greater extent and, importantly, do not include highly protectionist elements. More importantly, the existence of these, very important agreements immediately disproves continued claims that we have solely WTO-based arrangements with large economies. Instead, the phrase 'beyond WTO' can be used to better describe these relations. 

Brexit discourse has centered heavily on Free Trade Agreements. The extent to which this has happened has polluted understanding of bases for trade relationships. The opposite to FTAs is not a void, but popular understanding simply does not reflect this. It might well be the case that after forty years of trade competence residing in Brussels, we simply do not know how to conduct appropriate trade discussion. Re-communicating these issues to the public, therefore, will be a long and difficult process. Not one aided in any way by the continued booking of third rate interviewees acting as knowledge vacuums. 

Tuesday, 14 November 2017

Brexit: a balancing act

In recent years, Britain's constitutional discussions have largely revolved around Scotland and its lack of a voice in Westminster. To some degree I have been sympathetic, given that I live within the bubbled protection of the M25 and therefore enjoy a disproportionate amount of media focus. But if we think Scotland have had it badly, we may also want to look to Northern Ireland, whose marginalisation from discourse and consensus has been captured exquisitely by the Brexit issue. 

Slowly, and with enormous difficulty, our media are beginning to delve into the mechanics of the Northern Ireland problem. At the weekend I wrote fairly plainly about the Irish border question, explaining - without too much detail - why the situation needs agreement within the Article 50 window. If blogging has taught me anything, it is that it is always best to leave an issue alone if I know very little about it. This is why I have not tackled the Northern Ireland question as extensively as perhaps I ought to have done. 

The situation is uniquely complex because we are having to find solutions not only to technical questions, but also to deep-rooted political ones which concern the maturation of the ongoing peace process. There is also the looming problem of acquiring what's called third country status, which necessitates a change in enforcement and surveillance strategy, meaning checks on goods no longer take place at the point of production, but rather take place at the border. 

Which is exactly where the issue of special status comes in. Whichever way we cut this, special status of some kind will characterise the eventual relationship between Northern Ireland, the EU and the rest of the UK. We have discussed already the need to settle the border problem during the window of the Article 50 period. The British government itself acknowledges the importance of doing so, having agreed at the beginning of talks to the sequencing which has ensued. 

The balancing act before us is really a question of how much of this 'special status' is politically acceptable to the DUP, and indeed to British unionists in Northern Ireland. The desire for as soft a border as possible provides each side with a strong prerequisite for facilitating this special status, which will need apply not only to Northern Ireland, but to the island of Ireland more widely. It is entirely possible that there may come a point at which the DUP feels Northern Ireland is too politically detached from Britain for a deal to be considered reasonable. 

The crux of the issue is that in order to maintain a soft Irish border, which is possible (though we will not achieve perfection by any means), Northern Ireland will need to replicate a selection of facets of EU membership. This will include, most crucially, retention of status as an EEA country, and thus remaining in the framework of the Single Market. This will be necessary because countries participating within the Single Market adopt a harmonised enforcement and surveillance strategy - the mechanisms of which become apparent at the point of production. 

On March 29th 2019 (we presume), Britain becomes a third country to the European Union. On this date, if we leave without any agreement over the Irish border, Northern Ireland borders a Customs Union, the EU and the EEA. These political walls exist by virtue of our leaving, not out of predatory action or spite commandeered in Brussels. We leave and so step outside of these walls, and by 'walls' I am referring to non-tariff barriers; hoops which are thrown against countries to enable the EU to ensure standards are being met. 

Acquiring third country status means a huge shift in enforcement and surveillance regimes, meaning in essence: inspections take place at the border, not during production. This is so because the EU does not have legal jurisdiction in a third country and so cannot organise internal checks. This stands in contradiction to what we are trying to achieve, which of course is a part of the UK preserving similar levels of openness and access with its southern neighbour. 

The EEA and EU are not the same thing. The Single Market is an extension of the EU's Internal Market, whereby add-on states enjoy a very healthy trading relationship and centralised enforcement in return for a variety of obligations, including financial commitments and, with some configuration and caveats, an honouring of the four major freedoms. Northern Ireland being in need of the EEA is unequivocal. What is less certain is whether such an arrangement would come in the form of a bolt-on to the EEA Agreement itself, or whether it would be agreed upon less formally and exclusively as part of the divorce settlement. 

Northern Ireland will cease to be an EU member in 2019, but will need to duplicate the referenced inspections procedures in order to work productively towards the maintenance of a soft border. Keeping those checks away from the border is a difficult task, but will be vital both for business activity and the protection of integrated supply chains. It is here worth remembering that quite a number of businesses, such as those involved in dairy produce, see their goods cross back and forth multiple times as part of ordinary processing procedure. 

If the UK were, as it ought to be, pursuant to an EFTA Brexit, this particular issue would simply disappear. Our problem with the border would ease, leaving us to worry about VAT, the effects of leaving the Union Customs Code (and subsequent assistance governing customs cooperation and mutual border inspection programmes) and the Common Agricultural Policy. These things are not relevant to the EEA acquis and must be dealt with separately. But the way I see it, three important issues are less bothersome than three important issues and a fourth, much bigger one. 

We have decided instead to make things much more difficult for ourselves. The theory behind adopting special status as an EEA country is sound, but what I am slightly less certain about is how permissible it will be to the DUP, who are keen on reaching the closest possible ties with Britain and who, quite ironically, currently provide our government with numerical backing and policy support. 

Ultimately the DUP will need to back down over any potential complaints they may have here. Special status doesn't end with the Single Market. It will be a recurring theme as negotiations progress, covering things like agricultural tariffs and rules of origin. The easier they make the process now, the easier it will be to work towards practical solutions come phase two. 

Sunday, 12 November 2017

Brexit: why Northern Ireland comes first

Belatedly, and with some understandable difficulty, we are starting to talk about the mechanics of the Irish border question. The technicalities are, as ever, complicated - particularly those surrounding VAT. If I am to do what I set out to do, and inform the informers, a breakdown of the components involved in this facet of Brexit is preferable. This post will focus on the bigger picture: why the border question comes as part of the divorce settlement and thus before general talks about trade. Later posts will deal with the added challenges. 

Comprehension of the border issue is not all about detail. We must also get to grips with broad concepts, such as the implications of acquiring third country status and the use the Single Market (EEA) has to us in terms of eradicating non-tariff barriers to trade and maintaining an efficient enforcement and surveillance strategy. We must also establish firstly that the British government has agreed to the Article 50 sequencing process, and secondly that the Irish border question framing part of the divorce settlement is in the interests of all sides. 

The United Kingdom, Ireland and the rest of the European Union all favour a soft border. This is in part to protect the maturation of the peace process and in part to maintain frictionless trade. There is no desire for punishment here on any side and no political will for a hard border. The question therefore becomes: how do we go about preventing such an outcome? 

The answer is to sort it out before leaving. On March 29th 2019, the UK becomes a third country to the European Union and Northern Ireland shares a border with the EU, a Customs Union and the Single Market. Without an island-specific arrangement embedded within the framework of the divorce settlement, Northern Ireland will simply be regarded as a third country on Brexit day. This comes with a huge shift in enforcement strategy, whereby checks and inspections move from the point of production to the border. Hence, a hard border.

Again, this is not done out of spite or predatory action commandeered in Brussels. The EU has no legal jurisdiction in the internal affairs of a third country and so must assess conformity to standards at the border. Leaving the EU before agreeing on a specific deal for Northern Ireland (which will probably have to involve special status as an EEA member and a possible replication of the Common External Tariff) will give us an Irish border bogged down by checks. This is unavoidable and will not be especially conducive for the preservation of the ongoing peace process. 

The volume of transportation at the Irish border and the intricacy of certain supply chains cannot be overstated. The Irish border is six times busier than the Norwegian-Swedish border and we also have to take what are called 'X-crossings' into account, where products cross back and forth as part of their respective supply line. Milk is as good an example as any of this, and a useful case study to use because it is a widely consumed good and as such will easily capture the public's interest. There is a milk cooperative, set up by Gabriel D'Arcy, called LacPatrick. It has processing facilities situated on either side of a border rendered non-existent by the Good Friday Agreement in 1998. 

Here we can paint a picture of the difficulties to some pockets of trade caused by a failure to come to a pre-Brexit arrangement and a subsequent hard border. Rigorous checks at this border, which are likely unless we prevent them beforehand, will cost producers hundreds of thousands every year. Delays and storage costs can provide business with quite punitive overheads, and this will compound any political friction induced by a hard border. It is imperative, therefore, for agreement to be reached during the Article 50 period. 

The island of Ireland will need specific protocols related particularly to the origin of goods, VAT and enforcement procedures. Keeping those checks and inspections at the point of production will require a stay in the EEA, whether this is done officially and bolted onto the EEA Agreement or by stealth: unofficially but with agreements to keep Northern Ireland within the jurisdiction of the EU's network of market surveillance agencies, will be up to negotiators. But either way, it must be agreed soon. 

Saturday, 11 November 2017

Brexit: a new battleground

Democracy is of intrinsic merit. It doesn't need to be defended any more than freedom does. Societies which are democratic honour the value and contributions of citizens. Democracy restrains power systems with checks and balances and provides individuals with the necessary mechanisms to pursue justice, equality and their own creative participation within policy domains. 

It sits at the core of my politics, which I admit have become increasingly difficult to define, given that I now assess the political landscape almost exclusively through the prism of Brexit. I have written very narrowly in the past about the value I place upon democratising the information burden. This, I rather think, has been the major success of the blogosphere, despite its ongoing uphill battle with media giants for audience and authority. A belief in democratising efforts like this are of huge comfort and importance to me. 

I thank 'MagicAldo' for leaving the following comment underneath yesterday's post. He sheds light on what could possibly be the updated intellectual battleground in the Brexit debate. His retort is very interesting and worth exploring in more detail.

Those who are observant will notice how stark the change in tone of this debate has been. Negotiations have not been successful, there is no sign that adequate scoping (assessing of our options) took place prior to the invoking of Article 50 and even less evidence that David Davis and his department understand to any great length what becoming a third country to the European Union means in practice. We now find ourselves staring down the barrel of a no deal. I now see no better reason to take seriously the EFTA option, making sure we use Article 112 (explainer here) in order to leverage a better deal on free movement, and take valuable steps towards separating the EEA acquis from the EU. 

One gets a sense that Britain's attempts to re-learn self-governance are rather like that of a newborn deer's attempts to stand up on all fours. I think this is analogous of our current struggles and coincides with the theme struck by the above comment. This is now the battleground on which Brexit debate is currently being fought. As a country we are asking ourselves a very important question: are we actually capable of reviving our democratic integrity and ability to govern ourselves? Can we rise to the challenge of self-determination? 

Yesterday I had quite an illuminating discussion with Roland Smith, who has also made his name advocating a softer Brexit position. He appears to be thinking along the same lines. Assessing our capacity for self-governance is, at this early stage, mere speculation. We will struggle, but ultimately that baby deer needs to learn how to walk. Without doing so, he will not survive.  

My vote in last year's referendum was, I now realise, an expression of my belief in the country's ability to meet this task head on. Re-learning how to govern at home is an opportunity, but will be a huge challenge. We will need to re-organise our civil service at departmental level, reintegrating expertise and facilitating modern approaches to administration and bureaucratisation. Some ministerial departments, such as those of trade and international development, may need to be merged together. We will need to re-coordinate links between universities and industry, ensuring that research and policy guidance is aimed at domestic sectors, rather than outsourcing technical assistance and advice to Brussels. 

This blog has made several references to the democratising core of the eurosceptic argument without going into more specific detail. Increasingly I sense a certain confusion on the part of Remainers who do not feel they have had the purpose of Brexit properly explained to them. Whether they agree to it, of course, is a whole other matter. My fingers and keyboard are not used as tools to convert others. Since the referendum, my mindset has been: 'we have our mandate, now let's focus on issues of withdrawal'. But it doesn't do anybody any harm to pause for a few moments and reflect upon the goals we are reaching for. 

Here we turn away from the world of economics and the neoliberal obsession with growth, and focus on the state of our domestic democracy. We could easily have ignored the issue for another forty years, but at what cost? Trade must always come second and democracy must always come first. An increase in non-tariff barriers is a small, though undoubtedly troublesome, price to pay for the rejuvenation of the democratic process. Our reluctance to take part in ever closer union and our lack of care for eurofederalism to me highlights just how inappropriate a supranationalist model of governance is for Britain. 

Brexit must be a means to an end rather than an end. I fear the government is treating our withdrawal (with electability and public opinion in mind) as if it is purely the latter. Brexit cannot be done for its own sake; it must be a part of something much wider and more profound. Even the pursuit of self-determination, or as great a measure of it as we can recover, which is intertwined with democracy, needs some kind of purpose. There is value in bringing policy closer to people, but it must be met with efforts to innovate, to be creative and to instill confidence in consumers, banks and foreign markets that we can hold our own. 

The United Kingdom has been crying out for stronger degrees of localism. All politics is local and people care more about issues which touch them, not grandiosity and ideology. Instead of a top-down structure of government, whereby local councils lack any tangible flexibility or independence, we ought to be looking at devolving powers which do not necessarily need to reside with the European Commission or Palace of Westminster. At some point, sovereignty must find its home with the people it concerns, not just regalia and suits. 

Brexit is the first, brave step towards this process. We need substantive reclamation of competencies which have been handed to Brussels, largely behind the public's back, for centralised administering. This, remember, has also not been done for the sake of it. Supranationalism has been the necessary prerequisite to the formation of a United States of Europe. And in this we have seen immense power seep from our increasingly hesitant island. If we are to take the meaning of 'democracy' literally (and by this we mean rule by the people), we need to begin by relocating powers, such as those governing energy and the environment, agriculture and rural development, fisheries and employment law, to jurisdictions which can be influenced by the citizens they have effect on. 

Three years ago I asked myself a very simple question. How do I, an EU citizen, influence EU policy? I came quite quickly to the conclusion that I couldn't, and I have not veered from this analysis. This realisation initiated a whole trail of thought, from which I am yet to emerge. Brexit has evacuated British politics of any semblance of normality, but luckily, I have managed to retain strong faith in nation state democracy. In some ways I feel like a religious man. It has been a testing process which for others would have been great cause for retreat. But I am above all else comforted by a belief that we are doing the right thing. 

Friday, 10 November 2017

Brexit: reversal is a false trail

A lot of Remainers read this blog and I consider that a compliment. This is not because I agree with them, but rather because it tends to suggest a level of objectivity on my part. Maybe some of them do it purely to extract information out of me for use against both me and other Brexiteers. I am renowned for being pessimistic and can't bring myself to blindly defend either liars on my own side or the handling of every step in the withdrawal process. 

Some, I am glad to say, take genuine interest in my thoughts and this is always nice. It is good to have a mixed readership because otherwise I would be left with what amounts to not much more than an echo chamber. In this respect I am lucky to have built up a Twitter following which is surprisingly diversified and mixed in terms of political beliefs. This can be extremely difficult to achieve, as any active user will know. 

Many of those who favour EU membership will no doubt feel a sense of spirited encouragement when they hear high profile figures such as Lord Kerr recounting the ability of the British government to legally reverse Brexit. I have always admitted that we are able to backtrack on leaving the EU, though would in any event fight back against it. What most surprises me is the way this is seen as some kind of shocking admission. 

Speaking on BBC Radio 4 this morning, he said: 

"At any stage we can change our minds if we want to, and if we did we know that our partners would actually be very pleased indeed. The Brexiters create the impression that is because of the way article 50 is written that having sent in a letter on 29 March 2017 we must leave automatically on 29 March 2019 at the latest. That is not true. It is misleading to suggest that a decision that we are taking autonomously in this country about the timing of our departure, we are required to take by a provision of EU treaty law.”

Then, in a speech to an Open Britain event earlier on this morning, he added: “One should bear in mind that it is always possible at a later stage to decide that we want to do something different.”

He has said nothing especially significant or anything most did not know already, so the media buzz around his comments is more than a little underwhelming. The question of whether we can reverse the process of leaving is more one of political will and mandate than ever it is legal scope. I don't think there will ever be that political will, in part because not enough Remainers are enthusiastic enough about mobilising to stop Brexit, and in part because it simply isn't clear that the 52-48 divide has in any profound way changed since the referendum. We have all seen and heard from conversions on both sides of the debate. 

Lord Kerr is today being painted as the man behind Article 50 but a far more important influence, naturally unobserved, is Altiero Spinelli, who perhaps stands as the main reason why Article 50 was not drafted in any reasonable or constructive manner. I have expanded upon this elsewhere for any who are interested in the details. Both Kerr and his comments are far less important than advertised, and what is more, his views have been reported on by the BBC before, such as here, back in June. This issue of political will is very important. It is undoubtedly true that a democracy, if it is truly a democracy, should be able to change its mind. But there is no objective evidence of the country having done this. 

Another referendum on the final deal is a possibility, but I suspect many simply would not have the appetite or energy for such a vote. I don't suppose turnout would crawl past 65%. If Brexit were to be reversed in absence of a clear demonstration of political will, faith and trust in our democratic institutions, from parliament to our media, would be left in total disarray. We are talking about a scar left on a country by an establishment too weak and incompetent to follow orders. Divisions of unparalleled anger and hatred would solidify into pretexts of all kinds of political action. This is not something which is characteristic of a functioning democracy, and is therefore a question to which Brexit reversal has no answer.

Furthermore, the hidden element to all of this appears to me to be that Brexit was always inevitable. How much integration would have been intolerable, given that the coalition government legislated for a referendum on any further European constitution? In this context, a reversal looks rather like kicking the can a little further down the street. It might well look good for the strength of the pound, but I doubt it would achieve anything longstanding. I think in some respects we confronted leaving earlier than we were perhaps prepared for, but then again, how does one prepare for something the magnitude of Brexit? 

The next major treaty would have been a major stumbling block for our electorate, who have grown increasingly wary of the lengths to which ever closer union will travel. I noticed back in my campaigning days quite a large number of Remainers were critical of it. The democratic case against the European Union, which forms essentially the bedrock of euroscepticism, has always been a very powerful core argument for us. With it we can build from an intellectual base which is both progressive and thoughtful. 

A Brexit reversal sees a return to a 'status quo' as being the tonic for an unhealthy democracy. But this is a false trail and does not address any fundamental questions about the future of our democracy. It is the political equivalent of putting our fingers in our ears and pretending all will be steady and dandy if we give up on that which is difficult. The Stop Brexit circles can be heard loud and clear in concentric Twitter bubbles, but ultimately they cannot yet, or ever, demonstrate adequate reflection of public opinion. This I see as worth remembering as Lord Kerr does his rounds in the media. 

Wednesday, 8 November 2017

Brexit: configured yet configurable

I wrote yesterday about the EFTA position and the simultaneously configured and configurable nature of the Single Market. I drew attention to the country-specific protocols which have been bolted onto the EEA Agreement and explained how an EFTA Brexit allows the UK, in effect, to leave the European Union without becoming a third country. 

Inevitably, when I write about the Norway option, I am met with criticism by many on the Leave side who feel there is nothing that can be done about the free movement of people (which I feel obliged to remind them is in reciprocal fashion their freedom to move also). This is an interesting topic which I feel has not been explored sufficiently by mainstream media channels who prefer to paint immigration as a simplistic issue, as if it is void of any complexity. 

Reality, though, tells us this isn't true. Immigration is not just about points and numbers. It is also about international laws governing asylum policy and human rights, the accommodation of relatives of established migrants and mechanisms for tackling illegal immigration without allowing the state to become too overbearing on the individual. The right to 'family reunion' is a particularly prominent driver of immigration to Britain. 

We need to find ways of distinguishing between EU and EEA regimes on immigration: the Single Market does not offer uniform standards on free movement rules which apply symmetrically to both EU and EFTA member states. Then there is the problem of extricating certain groups of people from figures, such as students and asylum seekers. For obvious reasons, there needs to be some perspective here. Migration figures (which are collected dubiously, through the use of passenger surveys no less) are easily blown out of proportion, so communicating these issues in a way that is coherent is vital. 

On immigration, I take the precursory view that if Tony Blair had exercised the use of available transitional measures, in accordance with Article 8 of the 2003 Treaty of Accession, when formulating British policy towards the inclusion of the eight former communist countries into the European Community, there would not have been a referendum on membership of the EU in 2016. This point was not raised enough during the referendum by the Remain side and indeed was largely overlooked by Leave voters too. 

This is quite a powerful statement and I stand by that belief. In this regard, committed eurosceptics like myself owe him quite a lot for his lack of foresight. The last Labour government did not fully consider the impact that this policy would have on changes to public opinion. Regardless of your opinion on the issue of immigration, it was a domestic decision for the A8 controls to be waivered and Brussels cannot be blamed directly. And since then, all subsequent figures and trends have been distorted inappropriately. 

I am not saying that reshaping immigration policy is not an argument for Brexit. I explicitly said that it was at this blog only the other day. But it depends on how we go about doing this. No country has complete control of its borders and presenting Brexit as a means to achieve this is irresponsible and misleading. We can't monitor everybody and we will need to abide by international commitments on migration and asylum if we want to steady our rocky diplomatic standing. Image is very important at global forums. 

My ideal immigration policy would steer away from the idea of points and quotas. I think such systems are slightly discriminatory and relatively inflexible. I prefer the sound of an immigration policy which is fundamentally rule-based, but without the rigidity of arbitrary caps, points or quotas. They are also intellectually flawed in that we would end up viewing a certain number of immigrants as being acceptable but a few more not so. Missed targets may also add fuel to the fires of xenophobic pockets of the country, stoking anger and frustration when reported on. 

The world we live in is complex and we must work with what we have at our disposal. I can't conjure up my utopian vision of what British immigration policy ought to be because I simply wouldn't be able to account for every caveat and legal requirement. So the argument being offered against the Norway option, being that we cannot provide full control of our borders, is slightly suspicious from the get-go. But that does not mean we have nothing of use to us. 

Inside EFTA, the regime on free movement shifts slightly. Importantly, what we find embedded within the EEA Agreement are 'safeguard measures'. These are described in Article 112 and expanded upon in Article 113. I would advise readers to read the following excerpt. 

Article 112 allows, upon short notice, unilateral suspension of any of the four freedoms given formal and reasonable justification and followed by a period of consultation with the EEA Joint Committee. What form the suspension takes, including how long and what policies emanate from it, are up for discussion. The point here is that upon invoking this article, a political process is underway. We can from here look towards leveraging a deal on reform, or making changes to existing EEA regulations, which are already enshrined within UK law. 

EU membership requires unanimity in this context. All members of the Community must agree to a member state's ability to invoke the article, which given the size of the club appears more than unlikely. EFTA, being merely the trading bloc the EU once pretended to be, demands no such supranational requirement. Here we have a prime example of what I described in my opening paragraph: configured yet configurable is the EEA, taking into account the interests of the countries which are added to it. 

In an interview with Business Insider, I admitted that Liechtenstein's use of Article 112, which permitted them a quota-based system of immigration, is unlikely to be replicated by the UK. We are a much larger country and economy, with a different geographical character and different labour needs. Stephen Kinnock and Keir Starmer have made the argument that we can have the same, but I think they are naive in this respect. If we do manage it, which I don't rule out, then great. We'll have our cake and we'll be eating it. If not, it's not the end of the world and there are other things we can do. 

Often when the issue of invoking Article 112 is raised, critics claim that it is for emergency use only. This is not true and Article 113 (3) clearly shows that there are emergency safeguards within the safeguard measures, rendering this argument completely and utterly redundant. Have a look at page 34 of this European Council statement. Senior EU leaders already believe we are justified in using it, which may put some minds at rest. 

In treaty terms, safeguards and so-called 'waivers' are crucial. They provide a degree of flexibility where real life challenges threaten the integrity of general provisions. Article 112 can, I believe, be used as a valve of pressure relief. It needn't be permanent and I think the general turbulence caused by Brexit will see migration decline regardless. We may arrive at a situation where, simply by leaving, the numbers begin to dry up. On this issue, the devil is in the detail. We aren't looking at simplicity and leaving the EEA will not accomplish everything we expect it to.