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. 

2 comments:

  1. It is unclear to me that if we maintain the Common External Tariff for Northern Ireland, who trousers the collected cash?
    At the moment for every £ we collect in tariffs at the ports HMRC pockets 20p and gives 80p to the EU as traditional own resources - that then gets redistributed according to the priorities we jointly decide. Now, if NI were to start charging the CET at the ports (mostly on UK goods, but lets not worry too much about that) would they keep all the receipts, or remit 80% to the EU? If they were to remit, would they get back redistributive regional development funding?

    If HMRC NI collects the tariffs and hands them over to Phil Hammond, why would the EU let the goods over the border to the South if *they* haven't been paid any tariffs?

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  2. Fundamentally, the government has no positive vision for Brexit, and they cannot justify leaving the single market save for some vague reasons regarding the "will of the people", as if they knew what leavers voted for precisely.

    Everything indicates that leaving the single market, and doing so whilst attempting to retain frictionless trade after a mere two years, is going to have catastrophic economic, and even political, consequences. Yet the government seems to be in complete and utter denial. What astonishes me is that the government is going for broke without even TRYING the safest Brexit option (EEA/EFTA).

    Sadly this farce is ultimately the result of a combination of extreme incompetence and malevolence on the government's part.

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