A failure to plan was a plan for failure.

Friday 12 October 2018  

If speculation is to be believed, Theresa May is mulling a whole UK customs union to avoid a customs border between the mainland Britain and Northern Ireland. Naturally this sets alarm bells ringing with leavers, particularly Tories for whom "free trade" has become an article of faith and a sine qua non.  

This would seem to be at odds with much of what Theresa May has previously said as we have noted, along with the EU Commission, a customs union of itself does not actually achieve very much. Here we have a government grasping for any and all solutions having allowed itself to be bullied by the ultras into closing down entirely viable options such as the EEA. Now Mrs May finds her options are limited. 

It was always the case that the UK would have to make compromises to one extent or other where it would have to decide on its political priorities for now and the future. The Leave Alliance anticipated this long in advance which is why we thought it necessary to publish a plan before the referendum. 

Now that we are at this critical juncture it would appear that the so-called Norway option, our preferred means of exit, is gaining in popularity as it presents itself as the most obvious solution to the various trade realities. 

Doubtlessly this has all of the hardcore Brexiters crawling out of the woodwork to trot out the usual anti-EEA mantras but these are the same people who have written off Chequers and every other proposal on the table bar an ill-defined Canada style FTA which still sees the UK facing standard third country controls and likely would involve adopting the EU's food safety and product regulations in full with direct ECJ influence eventually.

The cynical ploy on their part is pretending that a Canada style FTA can be adapted for frictonless trade despite there being no precedent for this and plenty of messages from the EU apparatus saying that this categorically isn't possible. It is also wholly inadequate for our services sector.  

It is our view that EEA critics are not engaging in reality. Many of the criticisms of the EEA are valid (though often overstated) but if maintaining frictionless trade is an objective of the Brexit process then there simply isn't any other option. Furthermore, the persistent antagonism against the Norway option is not only at odds with many of the claims made by key leavers during the referendum, it also ensures that of the solutions remaining, they are worse for the UK in terms of both sovereignty and market access.

Though there are repeated attempts to kill off the EEA as an option, the UK could pick up the threads at any time and there is every reason to expect a collaborate attitude from the EU in doing so. The EU would prefer not to add yet another strand to its external relations and the EEA is designed to those ends. 

If anything has made Brexit more costly and difficult than it ever needed to be it is the obstinacy and intransigence of the Brexiter ultras who have squandered a genuine opportunity to to reshape Europe in favour of free trade delusions and a stunted idea of sovereignty. Worse still we will pay for it through the course of a long vassal state transition that could have been avoided. It's almost like a Brexit plan was a good idea. 

12/10/2018 link

Doubling down on madness

Saturday 22 September 2018  

Theresa May has doubled down on her Chequers insanity in what is probably the most breathtaking speech thus far. She has dismissed any EU version of a Northern Ireland backstop while once again closing down the EEA avenue. "Here, the EU is still only offering us two options". said May.

"The first option would involve the UK staying in the European Economic Area and a customs union with the EU. In plain English, this would mean we’d still have to abide by all the EU rules, uncontrolled immigration from the EU would continue and we couldn’t do the trade deals we want with other countries.

That would make a mockery of the referendum we had two years ago. The second option would be a basic free trade agreement for Great Britain that would introduce checks at the Great Britain/EU border. But even worse, Northern Ireland would effectively remain in the Customs Union and parts of the Single Market, permanently separated economically from the rest of the UK by a border down the Irish Sea.

Hitherto now May has been content to trot our mealy mouthed rejections of the EEA but this week has gone all out to smear the option and has joined the ranks of her ultras in lying about it in totality. It is, therefore, a dead option under this prime minister. The second remark eliminates all known legal solutions for a backstop which takes us further away from concluding a deal. 

The core dishonesty here though is knocking the ball back into the EU's court. It was always for the UK to present a workable proposal and despite having been warned on a number of occasions that the single market is indivisible May has time and ignored what she is told. She is washing her hands of any responsibility. 

In one spectacularly ill-judged statement Theresa May has destroyed anything we might consider progress and the goodwill that goes with it. If we were nowhere yesterday then we really are nowhere today. Barring a miracle fudge in the final hour it now looks less likely than ever that we will leave with a deal. Theresa May is going down in history as the PM who wrecked Britain.  

22/09/2018 link

Norway then Canada cannot work

Thursday 6 September 2018  

The "Norway option" is often described as an off the shelf solution. It is only off the shelf insofar as it already exists but it is only the framework of a solution and one will will need to be configured for the UK's unique needs.

The EEA agreement can be tailored to meet our needs. It is an adaptive framework with country specific protocols and the UK will need several to cover fisheries, agriculture customs cooperation and most likely a distinct protocol for Northern Ireland. All of this will take almost as long to negotiate and implement as an FTA.

Consequently, the notion that we can use the EEA as a short term interim measure, as suggested by Nick Boles MP, is one not in touch with reality. He proposes that we pick up the EEA as a short term transition while we negotiate a Canada style FTA.

This would effectively double the workload where we spend considerable technical and diplomatic resource in configuring the EEA only to have to start the process all over again. We would ask, for starters, what the actual point is? A tailored EEA solution would be entirely adequate for our needs and one that addresses most of the technical dilemmas thrown up by Brexit. It would safeguard our EU trade in ways that an FTA wouldn't.

Put simply, if we leave the EEA we are treated as a third country and subject to full third country controls which even an unprecedented FTA cannot address. There is no economic utility in doing so. Were we to embark on such a process it would be with a view to full divergence in the hopes of serving larger markets elsewhere which is highly improbable.

Diverging on standards would create considerable customs problems for our EU trade, which of itself is troubling, but it is also fruitless since a number of countries already have harmonisation commitments with the EU centring on global standards - which are increasingly forming the backbone of EU regulation.

If the aim is a looser relationship than the EEA then it makes more sense to work with other Efta member to improve the EEA agreement over time and make better use of the system of veto. Moreover the UK would be welcomed as a fully committed member. In this it is difficult to see why EEA states would welcome the disruption to the EEA system for the sole benefit of the UK if we intend to leave it.

Superficially, "Norway then Canada" seems like a sensible approach but it ignores the level of work involved and assumes the EEA is immediately operable as though it were a software patch. It isn't. There is no possible way we can leave the EU without at least transitional provisions for fishing and agriculture and if we wish to retain participation in integrated markets, any new protocol would have to be permanent.

Though the UK has global ambitions the reality of trade points to the fact that we must continue to participate fully in European markets and Efta is the obvious vehicle for doing so. Should we take the EEA avenue then we must do so as a fully engaged member rather than using it as a cop out. It is difficult to see why the EU would entertain a transient use of it or deviate from the existing exit schedule if the end point is a Canada FTA. It will not seek to prolong Brexit or add another layer of complexity that would require coordination with EEA states.

We would urge Nick Boles and "Better Brexit" to rethink their proposal. It is impractical, unworkable and naive. The EEA is only going to work as a long term venture and should we commit to it there is every chance we can shape it into something better with the cooperation of the EU, perhaps even expanding it to Switzerland, thus consolidating the EU's neighbourhood relationships. Brexit is then a win-win for Europe and nobody feels used by it.

Longer term, as the UK establishes its own external trade relations it may be possible to phase out aspects of the single market where appropriate thus contributing to the overall wealth of Europe. The EU says that we cannot cherrypick from the single market, but there are ways to configure it from within and the UK is more likely to get what it wants by coordinating divergence with the EU rather than opening up retaliatory spats.

The short of it is that Britain needs a deep and comprehensive partnership that goes well beyond the scope of an FTA and the most intelligent means of doing so is to join a multilateral system such as the EEA. We can then go further as the EEA is not subject to the same WTO MFN clauses we find in FTAs. It then provides a framework for continuous and managed exit rather that attempting it all in one go. It has been our view from the beginning that Brexit is a process, not an event - and that much has not changed.

06/09/2018 link

The EEA is smart Brexit, not soft Brexit

Wednesday 11 July 2018  

The Leave Alliance is the only campaign to have produced a workable comprehensive plan. Our recommendation is to leave via the EEA. This is not because we are soft brexiteers.

We took the view that a vision without a plan is just a pipe dream. In beginning the analysis we first had to ask if the vision was achievable and relevant. That's where we first hit problems. The classic eurosceptic free trade mantra hasn't kept up with the times.

This is largely because free trade does not exist and has not existed for some time. A free trade deal is not free trade. It is regulated trade - and we find that in the era of globalisation the driver of intergovernmental trade talks is regulatory harmonisation.

Being that we have, unlike other countries, spent three decades in a harmonised ecosystem, a lot of our trade has evolved to suit that system. So in departing from that system we must offer a viable alternative. That's where things get messy.

This is because of the emergence of global standards and regulations which we discovered have enormous influence on what we'd always assumed were just Brussels regulation. This changes the game entirely. It limits the potential and the economic utility of deregulation.

That then certainly leaves a number of Tory Brexiter ideas out in the cold. We could leave the single market and diverge but this is at a point in history when all of the countries we have eyes on are converging on the global standard with a view to trading with the EU.

We then looked at the constraints of the Brexit process where Article 50 puts time constraints on us. Looking at the extent of EU integration there was never any possibility this could all be done in a hurry. From there we took the view that Brexit is a process, not an event.

It became clear that forty years of technical, legal, social, political and economic integration could not be unravelled overnight - and in a great many instances, undesirable to do so. So how do we separate the good from the bad?

We then had to do something that Tory Brexiters have not. We thought about what the EU point of view might be and the red lines it would likely hold us to. It became clear that an FTA would be entirely inadequate as either a destination or a means to manage the process.

We therefore needed a framework. A transition. Given the preparations we would need to make, it would have to be a longer term transition. We are still of the view that Mrs May's "vassal state" transition is not long enough.

So it became clear that we needed a departure lounge that avoided any cliff edges. Being that the EEA is an available framework covering all the relevant subject areas, it presents itself as the obvious way to manage it.

But then we enter the extensive discussions about the respective limitations of the EEA. Certainly it is suboptimal, but preferable to the alternatives. As a longer term destination though, the UK would probably find such a solution to be too restrictive for our size.

But then there are plenty of avenues available to us after we resolve the immediate issue of leaving. We could either look to negotiate a new relationship and declare our Efta membership temporary or throw our resources at developing Efta.

Since the referendum our understanding has evolved and we have come to appreciate the EEA agreement for what it is. An adaptive framework with country specific protocols. We can use the system to evolve the relationship.

By adding our weight to Efta - a respected entity in its own right, with members able to forge their own trade deals as well as having an enhanced preferential relationship with the EU, we can improve the EEA and re-balance the power equation.

We also took the pragmatic view that if we took the step into the EEA there would be no real incentive for the EU to start a new process and a new comprehensive framework for the sole benefit of the UK. Why bother when we can adapt what we have?

In doing so we would be leaving without a vassal state transition which could end up lasting a decade or more, and we would accomplish the first job of leaving the political union while minimising the economic damage.

In respect of that, this would honour the eurosceptic view that we want the best available trade with the EU, just not ever closer union and the final destination of the EU. Given the kind of technical integration which is mutually beneficial, it makes sense to keep the EEA.

But this then raises the vexed question of freedom of movement. Our view has always been that leaving the EU is the primary goal and immigration is a secondary issue and we deal with the issues in that order. Take the win and then address the FoM issue.

Here we find that under Article 112 of the EEA agreement there is a mechanism available to us and a precedent which would begin a political process to adapt freedom of movement. So would this be sufficient?

Obviously this does not appease the hard liners - but what we find is that we need a full spectrum policy of varying measures because modern immigration control is not done at the borders. We need an entirely new policy on immigration.

At this point we would be better looking to negotiate with our Efta allies for an EEA wide reform of FoM, where combined with voices from inside the EU, we could be kicking at an open door. The point is, though, that we were never going to resolve all of the issues all at once and it will take continual pressure to keep the Brexit momentum going. What concerns us most is securing the first step - leaving the EU safely.

By taking a harder line we risk either being in a perpetual state of transition only to move to a threadbare FTA, sacrificing substantial trade for ineffectual immigration controls which don't really address what people are really worried about.

We do not, therefore, see EEA as "soft Brexit". Rather we see it as the most efficient, clean, smart Brexit, taking into account the polticial obligation we have to Northern Ireland and the desire to remain open to trade with the EU. It works and it beats the alternatives.

11/07/2018 link

No deal is not an option

Monday 4 June 2018  

Could food, medicines and petrol run out in the event of a no deal scenario? The short answer is yes, absolutely. It only takes a small disruption to sophisticated supply chains for things to grind to a halt.

Leaving the EU without a deal means becoming a third country overnight. The status of having no formal trade relations. The UK would not exist as an entity anywhere inside the EU legal framework. We would be subject to third country customs controls without any of the single market product approvals or valid certification.

If you don't have the valid paperwork for your goods to circulate freely in the market then you have to find a named importer and have your products re-certified inside the EU - at considerable cost. Some classes of foodstuffs must be diverted to border inspection posts.

So that means if we go from single market members to being a third country then overnight the ports back up, Operation Stack goes into effect and lorries are sat on the motorway for days. That takes trucks and drivers out of circulation. The normal flow of supply chains is interrupted.

Remember this works both ways for trucks coming in and out of the country. Meanwhile companies by law have to file declarations which our current system is not designed to cope with. For some suppliers there will be no point in trucks even leaving the depot.

With roads jammed with trucks, supply chains collapsing very rapidly we see rumours of shortages which leads to panic buying. It happens every time we get even a dusting of snow where Tescos run out of bread and loo roll even if there is no actual shortage.

Those of you old enough to remember the fuel strikes will remember how perilously close the country came to grinding to a complete halt. This would be the same with fuel lorries trapped in traffic. The way the EU legal system works is that if there is no paperwork and there's no tick in the box then there is no trade.

All the while keep in mind that we will have been ejected from the treaty system governing airways and flight-plans, and without legally valid flight-plans then aircraft are grounded. All rights in the EU airline market are rescinded.

There is nothing in WTO rules that compels the EU to breach its own rules even in an emergency. Driving licences wouldn't be valid, nor would qualifications so there would be no mutual recognition of conformity assessment. Veterinary inspectors, drivers and pilots would be disqualified.

This is not "remoaner" speculation. Our own findings at The Leave Alliance paint a pretty grim picture of the WTO Option. This is a simple matter of law. If we have no formal relations with the EU then trade simply does not happen.

Longer term, as a third country, the costs of delays, inspections and re-registration make UK business uncompetitive in the EU. Costs go up, contracts are lost, deadlines are missed, tariffs kick in. This is what it means to be outside the European Economic Area.

All of this has been made clear in the EU's Notices to Stakeholders. These are formal notifications based on the current law. This is no scaremongering or diplomatic threat. This is the business end of the EU.

We don't know how long it would take to get the trucks rolling again. We'd have to revert to paper declarations because the current IT is not set to cope with the volumes of declarations nor is it mapped to a third country regime.

There are mid term fixes in the form of bilateral agreements but these would take time and since the UK will have left without paying, the EU would not be in a rush to do us any favours. It will take years to rebuild a functioning customs and regulatory system.

In the meantime businesses cannot afford to wait. Suppliers to EU assembly lines will have no choice but to relocate. Delays will naturally mean production slowdowns and all the secondary suppliers will take the hit.

Trade is more than just movement of goods and there are far bigger worries than tariffs. By leaving without a deal all the otherwise manageable problems of exit happen overnight without the capacity to cope with them. We would be in very serious trouble.

Frictionless trade does not happen by accident. It is the product of thirty years of technical and regulatory collaboration and the result of several strands of agreements on everything from fishing to aviation. Without formal status in the system then UK trade collapses.

Additionally, it's not just the immediate effects we must consider. It's the ripple effect that passes through every supply chain, every regulatory system and anything that depends on licencing, certification and approvals. Nearly all of it has an EU dimension.

Without alternative arrangements a lot of our insurances become invalid, contracts voided and work will grind to a halt an major infrastructure programmes. It will simply be illegal to operate without valid insurances.

So deep and comprehensive is EU integration that there is no escaping the regulatory gravity of the EU without serious and lasting harm. It is therefore not remotely realistic to suggest that things can function without a formal framework for trade. Leaving without a deal simply is not an option.

04/06/2018 link

Not out of the woods yet

Friday 8 December 2017  

It is reported to much fanfare that a deal has been reached. In fact, it is an agreement to shunt the issue of Northern Ireland into the next phase of talks. We are kicking the can down the road. Though there is much to churn over, the significant accomplishment is an agreement that any solution must be a whole UK solution where, unless the UK can produce a unicorn, we will maintain "full alignment" with the rules of the internal market and the customs union.  

It should be noted that the EU is also bound by the exact wording of the agreement. That requires both parties agree in trade talks what "full alignment" means when both sides have implied it means frictionless borders. The government still thinks regulatory alignment can somehow be the foundation of frictionless trade without single market membership. They are wrong

Since full alignment would appear to be the inevitable destination given the condition "in the absence of agreed solutions" the Tory ultras may move to scupper such a deal. 

As to the customs union, the process of separating quotas and tariffs at the WTO is the mechanics of the UK becoming a distinct customs entity with its own customs code - ie leaving the customs union. It is therefore a matter for further discussion as to what full alignment with the customs union looks like. Likely it will require a shadow agreement whereby we uphold the EU common external tariff and apply the same rules of origin thresholds. Beyond that, the customs union is a red herring

We now expect the next stage of talks to be a discussion as to whether the final settlement will be conducted inside the framework of Article 50. Since any bespoke interim agreement is likely to require that same "full alignment" it begs the question of whether Article 50 should be extended to address the entire process. Logic will be overturned by politics.

Ultimately the outcome depends on the battle on the home front. Theresa May has reasserted this morning that we will leave the single market but at some point she will have to confront reality and have this out with her indignant back benchers. Collapse is still a very real possibility. 

08/12/2017 link

Brexit: the first crack in the dam

Monday 4 December 2017  

News has broken that Northern Ireland will maintain regulatory alignment for the purposes of keeping an open border. This should come as no real surprise as there was never any realistic alternative. If we turn our backs on regulatory cooperation we open a hole in the EU's customs firewall. It then has no choice but to police its frontier.

The EU will not make substantive concessions on the NI border because, when we leave, the border becomes the outer frontier of the most mature and complex customs and regulatory union on the planet. It cannot redesign it the for the sole benefit of a departing member. It's a choice of remaining in the single market or erecting a hard border. It is that simple.

To make any kind of substantial concession for the UK so as to avoid a hard border the EU would have to revise its treaties, and any concession would then apply to all third countries. That is simply not going to happen. 

As yet, we do not know what form the final agreement will take and the wording of today's announcement is typically vague, but the mechanics of it dictate that regulatory alignment alone is not enough. A broad statement may be enough to progress talks but we have not heard the last of this issue. The details are everything. We can expect a reaction from the Tory right who have some deeply flawed ideas on how frictionless trade can be accomplished.   

We can also expect a tantrum from Leave Means Leave in that they must be well aware that any arrangement for Northern Ireland which retains single market regulatory mechanisms will have obvious ramifications for the future relationship. It will not be the Brexit they demand.

The Leave Alliance, however, believes this is a step in the right direction. The arguments for divergence and absolute sovereignty over technical rules are not compelling. We would only seek that were there another market of a similar size where realignment would better serve our economic interests. There isn't.

Ultimately we would suggest that meat hygiene regulations are not worth going to the barricades over nor are they worth potentially disturbing the peace. We would also note that this kind of concession takes us one step closer to an amicable Brexit, avoiding what we believe to be a catastrophic no deal scenario. Any progress is good. 

There is no Brexit deal which satisfies everyone so a compromise must be found. Hard liners of any stripe are bound to be disappointed. As with most diplomacy, that is usually a good sign. 

04/12/2017 link


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