Thursday, 29 November 2018

The headbangers still won't learn

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

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

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

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

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

As WTO expert Peter Ungphakorn remarks:

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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


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