Brexit: farming for dereliction?

Saturday 18 January 2020  

Slipped by with rather less attention than it deserved last week was the first of the government's major, post-Brexit policy initiatives – the replacement of the EU's Common Agriculture Policy with what passes for our own domestic farming policy.

This is to achieved – in theory at least – by the 94-page Agriculture Bill which, with its own explanatory notes running to 68 pages, was introduced to the House of Commons on 16 January, under the aegis of environment secretary Theresa Villiers.

Needless to say, the noble representatives of the fourth estate could not be asked (or even arsed) to read material of such length (or complexity). Thus, Defra has obligingly produced a 700-word press release, complete with conveniently packaged quotes from Villiers.

As one might expect, it is this which became the basis of most of the press coverage on the day, spun according to the particular obsessions of the authors, the likes of the BBC, for instance, stressing that "soil" was at the heart of what it called a "UK farm grant revolution".

Sky News, however, decided that key feature was that farmers were "to be paid to protect the environment and improve animal welfare". But this was not for the Guardian. It thought that the "Food security plan after Brexit" was the main element of the "biggest shake-up to farming in 40 years".

From a time when every major newspaper had its own farming correspondent, so far down the media agenda has the issue slipped that neither the mighty Times nor the Telegraph seems to have bothered reporting this "revolution", leaving much of the second-tier media to rely on a general purpose agency headline which told us that [the] "New UK Agriculture Bill to move away from ‘inefficient and overly bureaucratic’ CAP system".

Straight out of the Defra press release, we are thus told that the Agriculture Bill is part of a radical shift to move subsidies away from the EU Common Agricultural Policy system of direct payments, which correlates payments with the total amount of land farmed.

Instead, the legislation sets out how farmers and land managers in England will instead receive "public money for public goods", such as better air and water quality, higher animal welfare standards, improved access to the countryside or measures to reduce flooding.

In doing so, says Defra, it aims to move the UK one step closer towards "a future where farmers are properly supported to farm more innovatively and protect the environment".

If one was to attempt to be fair to our lacklustre media, which usually fails to step up to the plate when the analysis of anything complex is needed, one might argue that a full analysis of a highly technical 94-page Bill was always going to be a bit of a challenge.

Thus, even when we see the official NFU response, we see a fairly cautious and limited appraisal from President Minette Batters, with the promise that, in the coming days, the union "will scrutinise this Bill in great detail to ensure that it provides the policy for a thriving farming sector post-Brexit".

Despite all that, to gain an insight into where this Bill is going, though, does not actually require any lengthy study of what, in fact, is a deeply unhelpful instrument.

The main issue, in my view, is that it replicates precisely the flaws of the CAP that it seeks to replace. With the EU's policy, the problem was that there was a single "one-size fits all", top-down policy, covering a geographical area stretching from the near-Arctic tundra of Sweden and Finland, through the temperate regions of Northern Europe, to the semi-arid fields of Malta, Greece and Portugal.

And, although the climatic variations in the England are not as great (to which the policy applies), it is still the case that the hill farms of Cumbria and the Pennines, the lush dairy country of Cheshire, the fertile Vale of York and the "barley baron" territory of Lincolnshire and East Anglia, alongside the chalk downs of Southern England and the Exmoor hills, present such a vast contrast that a single policy for them all is just as inappropriate.

Yet, if ever there ever was to be a revolution in agricultural policy, it would have encompassed devolution, down to regional or even County Council level, setting up truly autonomous units with their own budgets, to manage their own policies. Instead, we have more of the same, with the top-down control from Brussels being replaced by top-down control from Whitehall.

And from there, if at all possible, it gets worse. While there was a great deal wrong with the CAP, over the decades is has undergone several transformations to emerge as a relatively stable system which delivers subsidies of about £3.4 billion a year to UK farmers.

The bulk of this comes in the form of direct payments, related mainly to the acreage farmed, a system which gives a high level of certainty to farmers, enabling them manage their finances in an otherwise unpredictable and risky business.

But, over a transition period of seven years, the proposal is to delink payments from the land, abolishing direct payments. The main flow of cash will them be directed to this concept of paying for "public goods", which may encompass (but are not limited to) environmental protection, public access to the countryside and measures to safeguard livestock and plants.

While this sounds fine in theory, though, the scope of such payments is vast, covering ten major headings, which includes supporting activities which mitigate or adapt farming to climate change, as well as supporting "ancillary activities", which range from "selling, marketing, preparing, packaging, processing or distributing products deriving from an agricultural, horticultural or forestry activity".

The point here is that, while the £3.4 billion or so, to which the government is still committed for the next parliament, there are about 2000,000 agricultural holdings in the UK and, within the scope of this new Agriculture Bill, as many more non-farming enterprises which might qualify for subsidy.

For instance, financial assistance may be directed at managing land or water in a way that "maintains, restores or enhances cultural or natural heritage. This my include a building, monument, site, place, area or landscape identified as having a degree of significance due to its archaeological, architectural, artistic, historic or traditional interest".

While such spending might be seen as highly desirable, traditionally it does not belong to the agricultural budget. Currently, it might be covered by funds directed at English Heritage, the National Trust and Natural England – all of which organisations will doubtless be pitching for grants under the new system.

On this basis, the new scheme not only represents an effective reduction in agricultural support, because its scope is so wide and so many more enterprises are covered, there is a risk that the funds will be spread very thinly – so thinly that the amount directed at any one sector might be insufficient to have any material impact.

Then, given that the distribution of this finance is within the gift of the secretary of state, and thus open to the ebb and flow of political whims, there is a very real danger that spending will be devoted to populist causes, which may not only change with different administrations but also become prey to volatile and changing public fashions and obsessions.

Whatever might be the outcome of that, the system seems certain to lose major elements of stability and predictability, depriving working farms of the certainty they need for financial planning and investment – quite possibly to the detriment of food production in the UK.

Now that agricultural policy is reverting to the UK, though, one might like to think that public debate might once again embrace this issue, having been rendered useless as long as the power resided with Brussels. But that would include the major media players reappointing knowledgeable farming correspondents to their teams.

Sadly, there is no sign of that happening, any more than we are likely to see the break-up of Defra, and the reinstatement of a dedicated ministry of agriculture, now that we have a domestic agricultural policy to manage. And, faced with this Agriculture Bill, we need a far more vibrant debate than we have seen to date.

As we know from experience, a derelict policy can very quickly lead to derelict farms.

Richard North 18/01/2020 link

Brexit: when the bells were silent

Friday 17 January 2020  

I can't imagine why Johnson ever thought he could "bury" Brexit, especially when he seems to be in some disarray about how he will celebrate the end of the first phase on 31 January.

But the main reason why he is unlikely to get away with it lies in his own hands or, to be more blunt, his failure to turn the next phase into a boring routine, so tedious that the media won't bother to follow it.

Having been adamant throughout the election campaign that the UK would secure a "fantastic" deal, telling everybody that the chance of no-deal was "absolutely zero", he has now admitted to BBC Breakfast television that there is a "slim chance" that the UK won't make it before his self-imposed December 2020 deadline.

Needless to say, he is keen to say that it was "epically likely" it would happen, which is about as convincing as a surgeon telling you "it won't hurt", just as he is about to saw off a limb without anaesthetic – having drunk all the whiskey to steady his nerves for the operation.

What Johnson has done therefore is inject just the necessary amount of "will he, won't he?" uncertainty to give it legs as a media story, allowing endless speculation as to the outcome of the coming talks.

It also sets the scene for a nail-biting drama in December, as the talks go to the wire, giving him a platform to announce another famous victory, artfully avoiding questions about the content.

You can see the dynamic at play when the Financial Times reports this development as "likely to cause concern in the business community", which supposedly "fears that if no deal is in place then Britain will have to start trading with the EU on WTO terms in January 2021, with tariffs, paperwork and delays at ports".

This, of course, nicely distracts attention from what should be the real concern – that Johnson, as he himself avers, is likely to get a deal, but a very poor one which will cause no end of problems in the longer term. To that extent, it is the fact that there will be a deal which should really be worrying business, given that it is most likely going to be a slow-motion train crash.

But you can also sense where Johnson is going with this, having told BBC Breakfast that, although there was it was "very, very, very likely" a deal would be done, he accepted that "you always have to budget for a complete failure of common sense". Without having to read between the lines very much, it is fairly evident that he holds himself as the reservoir of "common sense", and thus any failure will be down to the intransigence of the European Union.

That remark, however, will not have gone unnoticed in Brussels, especially as stage Irishman Phil Hogan is sounding off yet again, with another of those statements of the bleedin' obvious. This time, to an audience in the United States, he is accusing Johnson of "brinkmanship" complaining that the UK's approach to negotiations was creating "uncertainty" for business.

Once again, this rather misses the point as the problem for business is not so much the uncertainty – even if there is plenty of that – but the certainty. The entire business community can be pretty well assured that they will be something delivered on their plates, but it will most likely be a steaming pile of crap.

Undeterred, Hogan is warning that the short timeframe "puts enormous pressure on the UK system, and then of course on the EU system" to meet the deadline, and adds that it would be legally very difficult for Britain to change its mind and request an extension later on, after the 1 July extension deadline expires, even if it became clear to both sides that more time was needed.

Given the propensity of the EU to break its own rules, there must be few people seriously ruling out the possibility of a fudge. Doubtless, the best minds in Brussels are already working on a formula which might buy more time, possibly involving the creative use of vocabulary, where we get an extension by any other name which produces a "non-transition" to cover the period of the no-extension.

Nevertheless, Hogan is adamant that "We need to wake up to this reality that gamesmanship and brinkmanship is not going to work on this occasion", referring to the brinkmanship that worked last time round, if only for the EU. And if it worked once, then the EU will hardly be adverse to trying it again, right up to the point when it ceases to deny that it is possible.

The bigger problem that the EU has – even it hasn't fully realised it yet – is that Johnson probably doesn't want an extension, at any price. Worse still, he shows every sign of being entirely indifferent to the shape of an EU-UK agreement, beyond the vague aspiration of seeking an abolition of tariffs and quotas.

Thus, the only response we've had from UK officials is that Hogan's warnings, and the rest of the "noise" from Brussels, is a negotiating tactic intended to lure the UK into requesting an extension. And since that would require the UK to make extra contributions to the EU budget and to continue applying all European law for an extended period, the answer is set to remain, no thank you very much.

As this ritual dance progresses, though, the legacy media never fails to disappoint, keeping up its reputation for embracing the lowest common denominator, focusing its attention on the so-called "battle of the bongs", as Johnson sparks a surge of fruitless donations in an attempt to get Big Ben chiming on 31 January.

For so many of us who have worked decades on campaigning to leave the EU, it was always on the cards that we should look to some sort of celebration to mark our formal passage from the "evil empire".

I would have thought that a chain of beacons, from one end of the nation to the other, might have been the appropriate activity, each bonfire attended by copious consumption of alcoholic beverages, pork pies and mushy peas. Only Farage could think that a party in Parliament Square was an adequate substitute.

Once again, though – and rather ironically – the leaden blanket of uncertainty has cast its dire effect. With no way of telling until the last moment that we were really going to leave, after so many false starts it has not been possible to organise a genuine community response from the heart of England.

But, given the botched process so far, with little prospect of anything better, for most of us – including Eurosceptic die-hards - 11pm on 31 January will be a sombre moment of reflection. We may take such comfort as we can from the fact that we have achieved a lifetime's ambition of actually leaving the EU. 

But it is perhaps just as well that the bells of Big Ben will not be chiming. Otherwise, we might be reminded of the words of Sir Robert Walpole. When the bells were rung in London on the declaration of war against Spain in 1739, of which Walpole disapproved but which was compelled by popular clamour to support, he was heard to say, "They may ring their bells now, before long they will be wringing their hands".

This was the same man who, when his son offered to read history to him, remarked, "Oh, don't read history! That I know must be false". These days, politicians tend to write the histories, rather than read them, which is why we know they must be false, but who then will be there to write the history of this event, when the bells themselves were silent? 

At least Quasimodo can have no complaints, not that Notre Dame is in a position to take up the slack. Perhaps we should give him a job.

Richard North 17/01/2020 link

Brexit: trapped by events

Thursday 16 January 2020  

There seems to be something all too familiar in this current, pre-negotiation period, with the EU making all the running. And, once again, from the UK side, we get nothing but the sound of silence.

The big difference this time, though, is that the EU is not dealing with Theresa May who, for all her many faults, did actually want a deal, even if she had little idea of its nature. Here, it is having to contend with the maverick Johnson who appears to believe that his counterparts will be forced to offer him something, which he can take or leave, or even cherry-pick, as the mood takes him.

Another big difference is that, unlike the withdrawal agreement – which was strictly a matter between the UK and the EU – there is a sense of competition in this round, with the UK seemingly able to play off the European Union against the United States (and other players).

That notwithstanding, the EU is still having to go through the process of working up its own negotiating mandate, which is precisely what it is doing with its internal discussions, covering issues such as fishing, transport, energy and the level playing field.

In the absence of a similar initiative from HM Government, it is easy to fall in with the assumption that the current EU documents, and others like them, are going to set the tone of the coming negotiations – as happened with the previous set of negotiations.

But this assumes that Johnson wants a deal at any cost. It would also neglect the possibility (if not likelihood) that the prime minister believes he can float above the cut-and-thrust of the next eleven months or so, and then swoop down to launch his own distinctive deal, the nature of which will depend greatly on the level of agreement with the United States.

And if that feels more than a little nebulous, that might be because it is. Like former Soviet Union citizens who had to read between the lines of their daily newspaper, Pravda, to get some clue of what was going on in their own government, we have to read the fanboy gazette in an attempt to glean some idea of Johnson's intentions.

But that would presuppose that the prime minister has anything like a coherent plan, or even anything more than just a vague understanding of the issues, putting him in the position of being able to put a sensible deal on the table.

It is more credible to assert that he is flying by the seat of his pants, guided by an inchoate set of half-formed principles which will somehow come together at the last minute to resemble something approaching a trade policy – a "deal" sufficient to convince a credulous media that the "future relationship" talks have been a success.

Given that we might be confronting a failure – for which there are multiple gradations - his alternative, of course, is to seek solace in the blame game. And it is here that the EU seems to be going out of its way to give Johnson the ammunition he might need.

For, while from the EU's point of view, insisting on continued regulatory alignment and the adoption of "level playing field" measures is eminently sensible, it plays to the gallery of "ultras" who would like nothing better than to see Johnson walk away with a de minimis deal, transferring much of our trade interests to the other side of the Atlantic.

It is nevertheless still relatively certain that, even at the lower level of expectations, there will be a deal with the EU, even if the "bare bones" are bleached white and devoid of the slightest hint of flesh.

That alone may be enough to ward off the mantle of failure, and give the prime minister the laurels of the victor, which he can wear with confidence in the certain knowledge that it will be some time before the extent of his dereliction becomes known to the wider public.

And Johnson may well believe that he can buy enough time for a comprehensive trade deal with the US to kick in, gambling that it will give the UK the boost necessary to make up for the loss of trade with the EU. When it comes to British politicians, there is no natural limit to the unrealistic expectations which they can entertain.

Politically, though, it will be easier for him to run with this expectation, and the promise of sunlit uplands garnished with the Stars and Stripes, than it will be for him to be accused of shackling the UK to the EU "corpse", symbolised by stultifying layers of regulation and initiative-killing red-tape.

Even should the US-UK negotiations fail to deliver, though, Johnson could still get away with a relative failure on the EU front, simply because – to his target audience – it would not be couched as failure but as an act of resistance that would be worth any amount of pain and sacrifice.

Such is the uncompromising language in the EU briefings, with talk of "Union autonomous remedies", which are being described as "punishment clauses", that this will not be difficult to do. Unwittingly, the EU seems to be carving out a trap for itself, from which there might be no escape.

From the EU's perspective, though, it is difficult to see what else it can do. Affording pride of place to its Single Market, as the one achievement of consequence that it has secured in its long history, it has no choice but to defend the integrity of its creation, and thereby extract a significant penalty from the departing UK, just to demonstrate that there is continued value in EU membership.

The reality here is that, once the Efta/EEA option was closed down, there was no way the UK could participate directly in the Single Market. And, since we are, by default, emerging with something that might approximate the Swiss option – in structure if not scope – then we will suffer the same inflexibilities that the Swiss have had to tolerate, or go for the very barest of bare-bones deal.

In retrospect, we should have seen this coming. The UK government's objection to the Efta/EEA option has been the lack of formal decision-making afforded to the Efta partners – just about acceptable to the Efta "dwarfs" but completely unacceptable to a country of the status of the United Kingdom.

Oddly enough, in the early stages of what were to become the EEA negotiations, Jacques Delors held out the promise of co-decision, with the "Houses of Europe" all having an equal say in the formulation of standards. That, however, proved a step too far for the nascent EU, leaving Delors to resile on his promise, whence the EEA took on its current form.

If there is no resolution to this problem, and the demands being made of the UK are that it should tie itself in perpetuity to standards and rules over which it has no direct say in their formulation – a position even worse that EEA membership – then we have the makings of an impasse.

When the EU's "punishment clauses" could be seen as replicating the notorious "guillotine clauses" in the Swiss Agreements – where non-compliance with one provision brings down the entire agreement matrix – this is a scenario that Johnson's propaganda skills would come to the fore. He would have no problem demonising the EU's endeavours, as a precursor to outright rejection.

And, while it is early days yet, we begin to see in the new Commission President no great charismatic leader but a rather leaden bureaucrat who shows no sign of rising to the challenge of keeping the UK in the European political sphere.

With that, having failed to come up with its own plan for a new relationship with the European Union, the only thing the UK has is the dirigiste offering from the Commission which, even under the best of circumstances, it would have difficulty accepting.

Had they any self-awareness, those who rejected or ignored the Efta/EEA option (especially as modified by Flexcit), might now understand that they threw away the only chance of an acceptable resolution, with both sides now trapped by events over which they have no real control.

Richard North 16/01/2020 link

Brexit: where angels fear to tread

Wednesday 15 January 2020  

There has been a lot of noise recently on the post-Brexit fate of the UK fishing industry, and the shape of the agreement we will need to forge with the EU. However, sorting out the wheat from the chaff is extraordinarily difficult in a field that is so complicated that very few could claim to understand it fully.

One entertaining meander around the issues can be found here, published some 30 months ago after the UK government had denounced the London Fisheries Convention, of 1964 – part of the process of recovering control over our fishing grounds.

The article, which is heavy on international law, raises serious questions as to whether EU Member States (or fishing vessel owners) could gain continued access to our waters after Brexit, based on the doctrine in international law of what is known as "acquired rights".

In an area where the complications make a bowl of spaghetti look as straight as an ebony ruler by comparison, that does not apparently prevent some states making a case for the retention of "historic rights", which have the same effect but stem from a different corner of international law. Names and terminology can have a profound effect on the arguments when the lawyers get involved.

The situation, however, is further complicated by the bane of treaty negotiations, where we are dealing with an uneasy meld of international law, EU law, domestic law and multi-level politics. Boundaries are not clearly defined and responsibilities are blurred, all set against the overarching technical and practical nature of the fishing industry which itself is beyond the grasp of most players and commentators.

On that basis, it is a very brave man (or woman) who can report coherently on what might transpire from the coming trade talks, as they affect fishing, as the EU circles the wagons and starts to leak something of its negotiating position.

That said, whatever legal and political complications there might be, there are several unarguable facts which will serve to frame the discussions.

Firstly, it is a given that the majority (anything up to about 80 percent) of the fish caught in our waters are not sold to British consumers. Secondly, the bulk of fish (a similar percentage) consumed in the UK are caught in non-EU waters – and especially Norway, Iceland and the Faeroes.

Further, even if we gained absolute control over UK waters after Brexit, and were able to exclude all foreign vessels, the British-flagged fishing fleet does not have the capacity to harvest the biomass that would become available.

But, even if it could, UK vessels would be prohibited from landing their catches in the ports of EU Member States, until the UK government had lodged a fisheries management plan with the EU, and it had been approved by the European Commission.

Despite the rhetoric on "taking back control", therefore, and the desire in certain Brexiter quarters to purge our seas of "Johnny Foreigner", everybody has something to gain from allowing vessels registered in EU Member States continued access to UK waters.

Both sides, though, will be keen to leverage their positions to gain the greatest possible advantages for themselves. Thus, we see reports that the EU is prepared to offer the City of London access to its financial markets in return for the retention of fishing rights in UK waters.

However, things are not that simple. They never are. As soon as the UK leaves the EU, it becomes a third country. Not only are UK vessels then cut off from the EU market until a management plan is lodged and approved, vessels flagged in EU Member States are likewise prohibited from accessing UK waters or landing catches in EU Member State ports.

Thus, while the UK has a bargaining chip, in that it can trade access to its fishing waters for concessions elsewhere, it too needs the goodwill of the Commission to expedite approval of a UK fisheries management plan, as that serves both EU and UK interests.

But there is also the question of reciprocal access. Some UK fishing vessels traditionally fish in the waters of EU Member States, while some also benefit from access to the waters of third countries, such as Mauritius, via EU-brokered "Sustainable Fisheries Partnership Agreements". There will be a price to pay for continued access there.

Then there are also EU quota agreements with Norway and the Faeroes, for which some continuity arrangements will have to be brokered, pending the UK making its own agreements, presumably via the North-East Atlantic Fisheries Convention.

Certainly, according to the EU's own preparatory discussions, it is seeking to maintain reciprocal access to fishing waters, but secured "in the overall context of the FTA" which the EU is about to negotiate.

Nevertheless, the situation is far from straightforward as either side could easily overplay its hand. The UK might have on offer access to its waters but, on the other hand, that access is of limited value if the Commission refuses to endorse the UK's fisheries management plan. In effect, the Commission has the capability to veto any deal, outside the framework of the FTA negotiations, which it could well do if it believes that the asking price is too high.

Then, if the UK pushes its luck too far, there is always the possibility that one or other Member States might find compliant lawyers willing to take a case to the International Court at the Hague, arguing for "historic rights" or whatever other device that might get them a hearing.

And yet, if the EU demands too much, the UK could simply close down all access to vessels on the EU Member State registers, and ride out the storm until it can secure better terms.

Whether the UK has the resources to police a fisheries ban, however, is another question. No doubt the RAF's newly acquired P-8A Poseidon maritime patrol aircraft (pictured) will come in handy. To intercept rogue fishing vessels, though, surface assets are still needed, and it is unlikely that the Royal Navy has the resources to fight a full-scale "cod war".

For all that, the specific details will only get us so far, while the EU is making it clear that it has other priorities to address before it gets down to the nitty-gritty. As we heard recently from Michel Barnier, the first thing on the list is new capacity building, setting up mechanisms and institutions that will enable the EU and the UK to work together in the future.

From the EU briefing, we learn that this will include "adequate mechanisms to ensure effective implementation domestically, enforcement and dispute settlement mechanisms in the agreement", as well as "Union autonomous remedies, that are all commensurate with the depth and breadth of the EU-UK economic connectedness".

The latter is being described as a "punishment clause" which would allow the EU to take unilateral action in the event of the UK failing to abide with the terms of the agreement and permitting uncontrolled divergence. This might have special relevance where ECJ judgements are overturned.

In the coming talks, such matters are likely to dominate the agenda, leaving little time for detailed sectoral talks. Perhaps all we can expect on fishing is some form of status quo agreement, on the back of the EU's approval of a management plan, until more substantive issues are settled.

Richard North 15/01/2020 link

Brexit: stupidity unchained

Tuesday 14 January 2020  

One of the fêted scriptures of the Tory right wing is a rather dire, to say nothing of unreadable, tract called Britannia Unchained. It purports to set out a new vision for a Conservative future, telling us that Britain "must learn the rules of the 21st century, or we face an inevitable slide into mediocrity".

Actually, though, we're already there, as witnessed by an extraordinary article in the fanboy gazette by the idiots' idiot, Steve Baker MP, chairman of the European Research Group.

This is the man who is telling us that Britain (although he probably means the UK) "should prioritise American trade talks over the EU", thereby prioritising a trade relationship which delivers £200 billion-worth of imports and exports, as opposed to the EU's £648 billion (2018 figures).

Baker justifies this idiocy by asserting that "all our ambitions to solve domestic and global problems are underpinned by the need for a strong market economy". Yet, he says, "all economies are vulnerable to threats to the global trading system". And that is why "this empowered Conservative government" must make its manifesto commitments on trade "a pre-eminent strategic priority".

Our manifesto, says Baker, pledged parallel trade talks with the EU, the US, Australia, New Zealand and Japan, aiming to cover 80 percent of UK trade with free trade deals in the next three years. "This whole-UK, whole-world policy is exactly the right approach", he adds, "and Liz Truss has done brilliantly to secure it".

Accepting the idea that Liz Truss is capable of doing anything "brilliantly" stretches credulity way beyond breaking point but, setting that aside, Baker sees "deep dangers" ahead.

He thinks that, by linking access to its markets with demands for regulatory harmonisation, the EU is making itself a "global outlier". Thus, in his view, "we need immediately to end the UK's timid Eurocentrism by negotiating simultaneously with independent, free-trading partners".

Accepting the export of EU power, he says, "would deepen our recent humiliation as we succumbed to be a mere regulatory satellite, unable to join old friends as equal partners".

What makes this so dismal a critique is that it comes from a man who has access to virtually every resource imaginable. Yet we have in Steve Baker someone who treads the earth seemingly totally unaware of the nature and extent of regulatory globalisation which has been building since the Second World War and with increasing speed over the last twenty years.

As to the EU's role in all this, I explored one of the most comprehensive expositions in a blogpost I wrote nearly five years ago, headed the "Brussels effect", reviewing a paper by Anu Bradford, a professor of law at the Columbia Law School and also a director for the European Legal Studies Centre.

The opening words of the abstract of her paper puts us in the picture, as she explains that her article:
… examines the unprecedented and deeply underestimated global power that the European Union is exercising through its legal institutions and standards, and how it successfully exports that influence to the rest of the world. Without the need to use international institutions or seek other nations’ cooperation, the EU has a strong and growing ability to promulgate regulations that become entrenched in the legal frameworks of developed and developing markets alike, leading to a notable "Europeanization" of many important aspects of global commerce.
If there is a single take-away point to be had from Bradford's 68-page paper, it is that the EU is a global regulatory superpower, Her thesis – as I wrote back in 2015 - kicks into touch many of the ill-informed posturing of those who would argue that there is any immediate regulatory relief to be had from leaving the EU.

The European Union, she writes, sets the global rules across a range of areas, such as food, chemicals, competition, and the protection of privacy. EU regulations have a tangible impact on the everyday lives of citizens around the world.

To her specific audience, she adds, few Americans are aware that EU regulations determine the makeup they apply in the morning: the cereal they eat for breakfast, the software they use on their computer, and the privacy settings they adjust on their Facebook page.

The EU, we learn, also sets the rules governing the interoffice phone directory they use to call a co-worker. EU regulations dictate what kind of air conditioners Americans use to cool their homes and why their children no longer find soft plastic toys in their McDonald's Happy Meals. This phenomenon, the "Brussels Effect", is the focus of her article.

En route to exploring this phenomenon, Bradford takes a look at the so-called "California Effect" where, due to its large market and preference for strict consumer and environmental regulations, this US state is, at times, effectively able to set the regulatory standards for all the other states.

Businesses willing to export to California must meet its standards, and the prospect of scale economies from uniform production standards gives these firms an incentive to apply this same (strict) standard to their entire production.

This effect expands to become the "Brussels effect", when firms trading internationally find that it is not legally or technically feasible, or economically viable, to maintain different standards in different markets.

Thus, when trading with the EU requires foreign companies to adjust their conduct or production to EU standards - which often represent the most stringent standards - or else forgo the EU market entirely, they tend to adopt those standards uniformly throughout their entire enterprises.

This is, I wrote, summed up in one paragraph, telling us that:
… export-oriented EU firms to seek consistent and predictable regulatory frameworks. Uniform regulations have abolished obstacles for doing business within the common market - it is more complicated and costly to comply with multiple, sometimes conflicting regulations than with a harmonised regulatory scheme. And once all European firms have incurred the adjustment costs of conforming to common European standards, they have preferred that those standards are institutionalised globally. Hence, to level the playing field and ensure the competitiveness of European firms, EU corporations have sought to export these standards to third countries.
This, I asserted, is the crunch issue. As trade has globalised, so has regulation, and when it comes to the choice of standard, firms will always opt for the most demanding, simply because it is cheaper and more efficient to work to a single standard than it is to work to multiple standards.

Yet. so limited is the understanding of Steve Baker that all this passes him by, leaving him to believe that the EU regulatory regime is a "global outlier". 

In meeting ambassadors and their teams, he tells us, "I have found categorical differences of approach. Our European partners regard our decision to leave the EU with bewilderment".

"It has been necessary", he says, "to reassure them that, overwhelmingly, Tory Eurosceptics are free traders with an expansive view of prosperity and our friendship with the world, that we reject technocracy and have faith in the collective wisdom of the people, expressed in the markets for products, services, culture, ideas and public policy".

This brings the man to assert that "our friends in Australia, New Zealand, Canada and the US are fearless in accepting our commitment to civilised values, impatient in their desire to see us become international equals" If they are bewildered, he says, "it is only because we have been hesitant in reorienting ourselves to the global outlook we have chosen. These old friends outside the EU are those we need most right now".

Baker is thus quick to call in aid the US Ambassador to the UK, Woody Johnson, who recently argued that having a trade deal with the US … will strengthen your hand when you are negotiating with your, you know, your closest geographically trading partner, which is the EU".

Woody Johnson reminds us that America is the world’s largest economy, which somehow equates with it "offering huge potential to our businesses". The Americans, Baker says, are ready to negotiate and are prioritising us. But, he is at least aware that "the window for success" is closing as the US heads into presidential elections.

And it is for that reason that Baker feels this government must fully commit to parallel trade talks, immediately prioritising the US. The day for action on US trade, he says, is the day we leave the EU.

His real problem, though, is this is all he has, arguing that when the EU demands level playing field provisions, we must agree the UK will not distort our markets artificially to secure advantages that ordinary commercial processes should yield. But, he says, this cannot mean harmonisation.

Regulatory competition, he says, "is essential to discover the best ways to secure the best outcomes for consumers, especially for the poorest, who cannot afford to game the system". We must recognise that neither socialists nor our European Commission friends will choose to accept that approach. They evidently believe in power and exporting it.

So, because the Americans apparently believe in "regulatory competition", that's why they are "our greatest friends". They too, he says, "fundamentally believe in liberty, that pioneering spirit that rises above mere materialism, along with ambition and courage and the hope that a better future is there, not merely to be discovered, but to be created through the energies of an entrepreneurial people seeking tirelessly to serve others for profit and moral sentiment".

And that seems to be the level of rhetorical BS that sustains the ERG, one so divorced from real world conditions that it is not parallel negotiations that Baker is after. He needs a parallel universe.

Global trade, and the whole process of globalisation, relies increasingly on the harmonisation of trading standards. Common standards, applied in a uniform fashion, facilitate trade, breaking down barriers. And such is the regulatory power of the EU that, if we want to be a "global outlier", all we have to do is follow Baker's advice, throwing away our EU links "to boldly start with the US as we leave the EU".

Still, as Pete points out, it gives Labour a useful stick with which to beat the Tories, just supposing they ever have a leader with the ability to exploit it.

Richard North 14/01/2020 link

Brexit: a legal trap

Monday 13 January 2020  

Today, the House of Lords is to entertain itself with the second reading of the European Union (Withdrawal Agreement) Bill 2019-20. This, when given Royal Assent, will amend the 2018 version and provide the legal template which will enable the UK to execute Brexit.

But, while it has been given a free passage in the Commons by Johnson's adoring claque of newly-elected MPs, reservations on certain details are being expressed, and may be the focus of some argument when the Bill is debated today.

One such issue came to the fore on 18 December, when it was reported that the lower courts would be given the power to roll back case law arising from ECJ judgements. This was a departure from the 2018 version where the incorporation of all ECJ case law would have left the supreme court as the only body able to overturn these decisions.

Typically, the Guardian , noting that Downing Street had confirmed the plan, wrote of it in alarmist terms, focused on its particular issues of interest. Thus it reported that the plan had "prompted concerns" that it would become easier to challenge European standards in areas such as workers' rights and the environment.

At the time, a Downing Street spokesman said: "The Bill will ensure that the supreme court is not the only institution able to consider retained European court of justice rulings. This is an important change, which will ensure that we do not face a legal bottleneck and inadvertently stay bound by EU rulings for many years".

Needless to say, this was accompanied by a dose of the Johnson mantra, with the spokesman adding: "We will take back control of our laws and disentangle ourselves from the EU’s legal order, just as was promised to the British people".

However, taking back control is not exactly the issue. What is dealt with in the new Bill (clause 26) is the level at which case law may be disapplied. And, given that case law is effectively the law of the land, this is of some importance as it can override or modify statute law.

In my own time, I've had some interesting times with case law, in particular provisions on the contamination of food. In the old 1970 Regulations, there was a prohibition on the exposure of food to contamination, failure to conform with which was a criminal offence. The Regulation, though, was modified by case law, requiring that any "contamination" had to be harmful to health.

When one of my clients was faced with prosecution for placing a tray of raw chicken carcases on the floor, partly in contact with a less than clean table leg, EHOs were confident of a conviction. However, I successfully argued in court that the primary source of contamination, in accordance with the case law definition, was the raw chicken. And while the dirt of the table leg had been unsightly, it was my experience that long-standing organic dirt has a bactericidal effect.

Thus, in my view, this was not a case of the table leg contaminating the chicken but the other way around. And since there was no intention of selling the table leg for human consumption, there was no offence.

Such is the impact of case law that one quite obviously needs to be careful about how, when, and by whom it is changed. Hence we see in today's Times the celebrated QC, David Pannick, expressing his own concern about Clause 26.

There is no question of peers trying to block the Bill, he says, but we will perform our function of scrutinising the legislation and, where appropriate, make suggestions for improvements to its content. And, he avers, Clause 26, concerning judgements of the Court of Justice of the EU, requires particularly careful scrutiny.

Setting the scene, Pannick reminds us that, when we leave the EU, much of the EU law will, for the time being, remain in our legal system - so-called "retained" law. To ensure legal continuity and certainty, he says, the Bill confirms that almost all of the EU law which currently applies in this country will continue to do so unless and until parliament or ministers amend or repeal it.

That law, as it stands, includes all judgements previously handed down by the ECJ, with the original 2018 Act stating that such judgements would remain binding on our courts and tribunals, unless it was overturned by the Supreme Court and the final court of appeal for Scottish criminal cases, the High Court of Justiciary.

Crucially, in the interests of ensuring continuity and certainty, only those courts could overturn the ECJ judgements. But Clause 26 adopts a different approach. Ministers, says Pannick, are to be given power to make regulations governing which of our courts and tribunals should, after the end of this year, no longer be bound by these judgements. Additionally, Ministers will be able to regulate the binding force of previous decisions of our own courts when they applying EU case law.

Pannick has two concerns about this. Firstly, he writes, legal certainty will be undermined as we leave the EU if lower courts are given power to reverse well-established decisions on competition law, environmental law and equal pay, among many other subjects.

Precedent – as he rightly reminds us - is vital to the integrity of our legal system. If settled case law could be overturned in lower courts, a flood of litigation would hit companies and individuals. And it will come as no surprise to learn that the main beneficiaries of such litigation would be lawyers.

You can actually imagine the situation. While case law is widely published, and available on the legal databases used by practising lawyers, that is not always the case with the decisions of lower courts and tribunals. A case, therefore, which was decided on the basis of an ECJ precedent, could be upheld in one court or tribunal, but overturned in another, bringing something close to anarchy to the legal system.

For his second concern, Pannick suggests that ministers should not be giving themselves power to regulate a fundamental aspect of our legal system – this is not something in which Ministers should interfere.

Deciding which of our courts should no longer be bound by these precedents, he says, and what test judges should apply, is a matter of principle for parliament to determine, after full debate, especially in a system that values the separation of powers between the judiciary and the executive.

Pannick then goes on to add that the parentage of clause 26 is "unknown". It certainly does not look like a child of the Ministry of Justice and the attorney-general’s department, he says, leaving us to wonder why it was inserted when the hazards are so evident.

One suspects, however, that doctrine rather than legal sense is at work. And the implications are even more profound than even Pannick indicates. When we are entering a process of negotiation where the degree of alignment will determine the level of access we are given to the Member State markets, this will undoubtedly assume that conformity with EU law includes conformity with relevant ECJ judgements.

Where, however, these judgements can be overturned by the lower courts, and even tribunals, often without the knowledge of Ministers, in a process they themselves have initiated, the EU would be entitled to take the view that the UK is no longer in a position to police or enforce any trade treaty it secures. At the very least, it might make any treaty agreement conditional on the removal of the amendments introduced by Clause 26.

Should the Clause amendments survive, the UK could in future, find its own trade agreement with the EU undermined by its own courts, and be forced to intervene to reverse their judgement, in order to preserve the integrity of the treaty.

This is not really a situation in which the government wants to place itself, as there will be, no doubt, break clauses built into any new treaty, operable in the event of non-compliance by any party. The government could find itself continually fire-fighting, just to maintain the status quo.

Richard North 13/01/2020 link

Brexit: media incontinence

Sunday 12 January 2020  

Caught between the royal soap opera and the downing of the Ukrainian Boeing 737, legacy media incontinence is steadily drowning out the Brexit agenda, no doubt assisted by the Johnson administration which seems to be doing its best to starve the debate by keeping silent on the detail of its intentions.

YouGov is reduced to rehashing a 2017 survey on the most important ingredient in a full English breakfast, with a tweet that gets 155 retweets and 456 "likes", attracting 190 comments – as opposed to my latest tweet which gets 14 retweets and 13 "likes".

The Independent on Sunday, on the other hand, is resorting to something equally fatuous, asking the UK public whether it wants to remain in EU. For the record, the poll shows that "remain" is backed by what the paper calls a "highly symbolic 52-48 margin", despite the finding having no political relevance whatsoever.

The only Brexit-related article of substance appears in the Observer, which carries the headline, "EU may threaten 'to block' City's access to its markets".

But the only thing new about this is that it comes from Croatia's prime minister, Andrej Plenkovic, whose country has just taken over the EU's rotating presidency. Apart from that, it simply rehearses something we knew already, recognising that a divergent UK is unlikely to get easy access to the Single Market.

Bluntly, if this is the best we can do on one of the most important policy issues of our time, when the Sunday Times is carrying on its front page the legend, "Prince William on Harry and Meghan crisis: 'I've put my arm around my brother all our lives. I can't do it any more'", as the "Queen calls family crisis summit", I fear for the very survival of our democracy.

This is no longer just a question of a venal media, obsessed with trivia, and a dysfunctional political system. It also encompasses the infantilisation of a population which seems unable to focus on matters of any weight, and needs to be sustained by a constant diet of lurid headlines.

This is one of the reasons why the likes of the fanboy gazette produces no fewer than seven "royal crisis" stories to lead its website. It knows full-well that a large proportion of its readership will go no further than reading the headlines, without opening the linked reports.

We thus have "storytelling by headline" with a large proportion of the adult population having no greater appreciation of the news agenda than can be gained from a quick scan of the headlines delivered by favoured media sources.

One can hardly blame the legacy media for this, if it perceives that this is where the public interest lies, with "clickbait" being the dominant genre, and page impressions are everything if advertising revenue is to be maintained.

That said, when accessing some media stories on a wide screen, with the copy topped and tailed by adverts, which also extend to the sides, one gets the impression of peering down a tunnel as one fights for concentration against the auto-start videos and the lurid, animated adverts.

Reading this type of presentation on a smartphone is near impossible, with the ever-present possibility of incompatible software on different platforms crashing the system, which it does with unfailing regularity. Even those who genuinely seek information find it hard to capture useful material.

One also gets the constant reinforcement of the impression that the legacy media only speaks to itself, illustrated by a report in the Guardian with the headline "Labour’s heartlands may be gone for ever. It needs to find new ones", and the standfirst telling us that the northern towns have changed.

We did this weeks ago, not least in this piece which I headed: "Politics: the North has changed", which goes to show that, while we read (some of) the legacy media, they rarely reciprocate. This means that, with their input and ours, we end up better informed, often well ahead of the field.

Interestingly, the paper uses as its source, the think-tank co-founded by the Labour leadership candidate and Wigan MP, Lisa Nandy, referring to "revealing but little-noticed research". But, if it was on the ball, it would have come to the same conclusions from its own research, days after the election.

Therein lies another problem. In having to cope with the 24-hour news cycle, cut-backs in the workforce and widespread deskilling, few journalists have the time or ability to do anything that resembles serious research. Hence, we have seen the growth of the think-tank industry, which churns out prepackaged "think" pieces to fill the holes in the media coverage.

When access to the media is then determined by celebrity (or notoriety) and "prestige", with a strong emphasis on the "human interest", quality and depth take a back seat as entertainment replaces news and analysis.

One can pull down endless articles from the media, such as this, telling us that "a free press is the lifeblood of democracy", with the invariable rider that "journalists must not be silenced".

But what also comes to mind is Humbert Wolfe who in 1930 wrote: "You cannot hope to bribe or twist, thank God! The British journalist. But, seeing what the man will do unbribed, there's no occasion to".

This problem has been with us a long time and, if there are constraints of what the legacy media delivers, many of these are self-inflicted and journalists pursue the superficial and the trivial, while failing properly to inform themselves on issues of substance.

Here, it is well-known and has been widely reported that the Johnson administration would like to remove the word "Brexit" from the public discourse, in its attempt to perpetrate the illusion that he is getting Brexit "done".

Yet, it takes no real understanding to appreciate that Brexit cannot be considered "done" until the future relationship is concluded with the EU. Attempting to project Brexit as complete, simply because we have concluded the first phase of withdrawal, is a political fraud – and a transparent one at that.

There is no need, therefore, for the legacy media to go along with the fraud. In fact, a truly free press, concerned with the health of our democracy, would go out of its way to keep Brexit in the public eye, purposefully resisting government attempts to play down the issues.

But this is not the British media. It talks the talk, but rarely walks the walk, ever willing to ditch serious analysis in favour of the hystérie du jour.

Then, given that the public respond so favourably to the diet of trivia with which they are fed, and fail so often to inform themselves, we cannot be surprised at the media stance. Newspapers, specifically, are not public services – they are business which need to follow the money.

However, as I am so fond of saying, democracy is not a spectator sport. If we are willing to allow ourselves to be distracted by media incontinence, letting them dictate the agenda, then we deserve what we get.

Richard North 12/01/2020 link

Brexit: in the hands of Congress

Saturday 11 January 2020  

It doesn't take a lot to work out that an early trade deal with the United States is not really on the cards. That much I took from Jeremy Warner and delved further in my own piece.

However, a core issue – according to Warner is that Trump , even if he was inclined to expend the political capital on talks with the UK, his mandate to negotiate, by virtue of the Trade Priorities and Accountability (TPA) Act of 2015 is about to expire. It certainly looks that way if you misread the date on this article, which tells us that the mandate expires on 1 July, unless the TPA is extended by Congress.

However, the Act refers to 1 July 2018, on the tail end of a convoluted procedure when President Trump had submit a report to Congress by 1 April, formally requesting an extension. The report had to contain a description of the trade agreements that have been negotiated so far under the current TPA and the schedule for submitting those agreements to Congress.

It had also to include a description of the progress in achieving Congress's negotiating objectives described in TPA and a statement that such progress justifies continuing negotiations. Additionally, there had to be a statement of the reasons why extension is needed to complete negotiations.

There were two other reports to Congress required, which had to be lodged by 1 June last year. The Advisory Committee for Trade Policy and Negotiations (an advisory committee to the president on trade issues) had submit a report giving its views on the progress in achieving Congress's negotiating objectives described in  the TPA and on whether the TPA should be extended. Then, the US International Trade Commission had to submit a report reviewing and analysing the economic impact of the agreements implemented so far under the current TPA.

Anyhow, just over a year ago, the President managed to tear himself away from Twitter long enough to make his extension request. The additional reports were lodged and the TPA was extended to 1 July 2021. That is just as well because the extension could have been blocked if either house of Congress has passed an extension disapproval resolution. As it stands, any Member of Congress may introduce such a disapproval resolution which meant that last year's April deadline came and went without much drama, despite being cited as one of the most significant dates this year for US trade policy.

Had it not been extended, this would effectively put on hold the United States' ability to enter into any new trade agreements until Congress passed a new authorisation for TPA - a politically challenging task. And this would likely have shelved any potential trade agreements with the United Kingdom.

However, Trump is not out of the woods yet. Even if a deal is concluded under this procedure, Congress must approve an implementing bill, bringing it into force. That is not a foregone conclusion when the Democrats have a majority in the House of Representatives and, in any case, this is an election year, which slows down the progress of the US government.

From a UK perspective, Johnson has a clear run to negotiate with the United States, although there is no certainty that a deal can be concluded as the end of the year approaches. Given that ratification can require 90 days in congress, the deal would need to be wrapped up by September.

It looks, therefore, that "team Johnson" could be in a position, if it so decides, of playing the US against the EU without knowing for certain that a US trade deal awaits at the end of the process. If he chooses to throw his weight behind a US deal, keeping to his truncated programme for the EU talks, he could find himself on 1 July, committed to that path, as after that date he will be unable to extend the transition period with the EU, in order to secure a better deal there.

The conundrum, though, is somewhat moot, if Johnson is maintaining his position that there will be no extension of the transition period. Nevertheless, before he burns his bridges completely, it would be helpful if he had some idea of where he stood with the US - and especially Congress - even if there can be no guarantees that the talks will be a success.

And, given that the negotiating objectives are substantial in effect, and talks can only start once the UK has left the EU, both parties will have their work cut out.

And that might explain the headline in the fanboy gazette which has Trump's ambassador to the UK, calling for the parties to work "day and night" to secure a trade deal.

This comes from a man who also, coincidentally, bears the surname Johnson, although he rejoices in the full name of Woody Johnson. He claims that an early deal will strengthen the UK's hand against the EU, which is unlikely to be the case. If anything, the more comprehensive the putative deal with the US, the less likely it is that we will get any concessions from the EU. The balance of advantage on an early deal is entirely in the US favour.

Unsurprisingly, therefore, "Woody" is describing Trump as "bullish" about the UK's post-Brexit chances, declaring that the President wanted a trade deal and that UK negotiators should "take him at his word". He adds: "Having a trade deal with the US and maybe the five eyes… will strengthen your hand when you are negotiating with your, you know, your closest geographically trading partner, which is the EU".

The Ambassador was also at pains to quash the claims made by Labour during the general election campaign that the US wanted to "buy" the NHS, asserting in a radio broadcast, "No, no and double no".

But any idea that this strengthens the UK position or, as prime minister Johnson appears to believe, applies pressure on Brussels, is strictly for the birds. As I recorded yesterday, Michel Barnier is entirely clear as to what he expects from the EU-UK negotiations, and is not likely to entertain a "bidding war" with the US.

Yet this is exactly how the situation is coming over. It is almost as if prime minister Johnson feels he can use a deal with the US as leverage, to extract better terms from the EU. But, if that is his perception, he could not be more wrong.

EU negotiators will themselves be fully aware of the constraints affecting the US and they will also be aware that they are able to offer a much firmer position than can the Americans, as a straight trade deal will not require ratification by the Member States. This actually gives the EU considerable leverage, perhaps even enough to force Johnson's hand on extending the transition period.

The thing here is that the EU is able to be far more flexible than the United States, trimming its ambitions to the time available, with a view to starting up fresh negotiations once the transition period has ended.

On the other hand, the United States is locked into seeking a comprehensive settlement, which is hardly attainable by September.

All of this hardly adds clarity to a complex field, where disinformation from the commentariat is rife, and the ignorance of some of the high-profile pundits is profound. Ironically, though, for all of the much-vaunted idea of taking back control, we are now at risk of being caught by competing priorities on different sides of the Atlantic.

Even with the best possible construction, the fate of a US deal lies entirely in the hands of the US Congress, with the House of Commons a mere spectator. No wonder Rees Mogg is giving MPs an extra four weeks off this year. The real power lies elsewhere.

Corrected text to account for the wrong date being used in the original.

Richard North 11/01/2020 link

Brexit: battle lines emerge

Friday 10 January 2020  

Well, we're that much closer. After three days of proceedings, the Withdrawal Bill has cleared its third reading, with the Commons voting 330 to 231 in favour. Predictably, all 330 supporters were Tories, relying on their general election victory to get their version of Brexit "done".

The Bill now goes to the Lords, where it is expected to get an easy ride. There was some talk earlier of Lib-Dems making a stand, but that doesn't seem to have materialised. Attempts might be made to lodge amendments but a Commons majority will soon sort that.

Meanwhile, Michel Barnier is subtly stoking the fire with a speech in Sweden at the Commission's Representation in Stockholm, setting out the battle lines for the coming negotiations.

It was there that he noted that 2020 marks "a new beginning in the EU's relationship with the UK", conceding that "it is now clear that the UK will leave the EU at the end of this month". He is looking forward to forging a new partnership with what he calls "this great nation".

He also noted that, because it will cease being an EU member at the end of the month, the UK will no longer participate in the EU institutions. This, Barnier says, "is not our choice. It is the UK's choice". But it will remain in the Single Market and the Customs Union until the end of 2020. During this transition period, free movement of people, goods, services and capital will continue to apply.

Interestingly, having raised the issue in ad hoc comments after von der Leyen's speech on Wednesday, Barnier again reminded us that the UK will "automatically, mechanically, legally, leave 600 international agreements". We will have, together – EU and UK, and the UK for its part, alone – to rebuild everything, he says. "That is what is at stake for the next stage of the negotiations".

Failure, he went on to say, would mean that the transition period will end on 1 January 2021 without any arrangements for a new future relationship in place. This would herald "the return of tariffs and quotas: a total anachronism for interconnected economies like ours", not something the EU wants but "a scenario that everyone must continue to prepare for", at EU and national level.

Here, then, we start to get some detail of what the EU is looking for. Barnier refers to "a partnership that goes well beyond trade and is unprecedented in scope: covering everything from services and fisheries, to climate action, energy, transport, space, security and defence". But then he concedes that this is "a huge agenda". We simply cannot expect to agree on every single aspect of this new partnership in under a year, he says.

Referring to the 36 pages of the Political Declaration, he bluntly warns that "if we want to agree on each and every point" in it – which would lead to an unprecedented relationship – "it will take more than 11 months". Thus, the Commission will have "to prioritise on what we can do in 2020".

Speculation here, from a variety of sources, including this one, has it that the parties will opt for sector-by-sector agreements, making as many incremental, stand-alone deals as possible, securing them before the shutters come down.

But if that is supposed to be the game plan, there is no hint of it from Barnier. With his feet firmly on the ground, he puts as his first priority new capacity building, setting up mechanisms and institutions that will enable the EU and the UK to work together in the future.

Secondly, he wants to build "a very close security relationship", enabling both the EU and the UK to improve their security policy "by looking beyond their borders and building alliances". This would again suggest that much of the effort will be devoted to capacity building, with the EU looking very much to post-transition developments.

Only then does Barnier get to the "economic partnership" and immediately he links this to the "level playing field". Europe, he says, is proud of its reputation as a global leader on labour rights, consumer protection and environmental sustainability.

As the world goes digital, there is growing demand for a "European way" of regulating new technologies. On the other hand, he says, "Competing on social and environmental standards can only lead to a race to the bottom that puts workers, consumers and the planet on the losing side".

With that, we effectively get a glimpse of the "red lines" that are going to frame the negotiations. "We will insist", says Barnier, "on making our economic partnership subject to a level playing field on environmental and social standards, state aid and tax matters". There is no messing here, no equivocation and no room for compromise.

Backing that, we also see the iron fist in the velvet glove. The UK represents nine percent of all EU-27 trade, Barnier concedes. "But more significantly, the EU-27 account for 43 percent of all UK exports and 50 percent of its imports". So, he says. "it is clear that if we fail to reach a deal, it will be more harmful for the UK than for the EU-27".

This is all the more so, he adds, "because EU Member States can rely on each other or on the many other partners that the EU has free trade agreements with". Thus, the EU "will insist on a trade partnership with zero tariffs, zero quotas, but also zero dumping". Again, we see a remarkable lack of equivocation.

Clearly, this does not speak to talks on sectoral deals, indicating that the EU might be going for nothing more than an over-arching, cross-sectoral trading framework. If we can tack on to that an MRA on conformity assessment, we will probably have to count ourselves as fortunate.

For the rest, I expect the Commission to rely on upgrading its contingency plans, forged to deal with the possibilities of no-deal outcomes. These will keep the show on the road until, after the end of the transition period, we will see talks resume. It is then, and only then, that we can expect the EU to entertain detailed sectoral deals.

As to timetabling, the Commission will be ready to propose a mandate for the negotiations to EU Member States by 1 February. As long as that is approved, it expects to launch negotiations at the end of February or the first days of March.

Then, obviously giving Johnson a chance to recant on extending the transition period, the aim is to make as much progress as possible by June, allowing the EU-27 and UK leaders "to take stock of the negotiations".

"Nobody should doubt the determination of the Commission" – and his determination, says Barnier, "to continue to defend the interests of the EU-27's citizens and businesses and to defend the integrity of the Single Market".

Making it abundantly clear where he stands, he then treads familiar ground. "The Single Market is much more than a free trade zone. It is an ecosystem, with common laws, common standards for the environment, rights for workers and consumers, common regulations, common supervisions, and on the top of this, a common jurisdiction: the Court of Justice".

"To be clear", he concludes, "the integrity of the Single Market – the four freedoms – has never been, and will never be, negotiable", ending up with the declaration that: "This is the spirit in which I will work in the next 11 months, at least".

Yet, whether this message is getting through seems highly dubious. In the Johnson fanboy gazette we are still getting "hard Brexit" rhetoric which defies reality. Under the headline, "City grandees call for London to distance itself from Brussels after Brexit", we see Nigel Wilson, chief executive of FTSE 100 insurer Legal & General, asserting that the insurance industry is one of those that could stand to benefit most from a relaxation of rules.

British insurers, we are told, spent hundreds of millions of pounds last decade readying themselves for stringent capital requirements introduced under the EU's Solvency II regime.  Yet instruments such as the "Solvency II" package, on capital requirements, have international dimensions. Specifically, it implements recommendations from the International Association of Insurance Supervisors, the International Accounting Standards Board, the International Actuarial Association and nine other agencies alongside the World Bank and the IMF.

Bound by international agreements as we are, the UK would find very little difference once we leave the EU, while the direction of travel is towards greater international involvement. Reality, though, seems to be taking a well-earned break. Given what's coming, it will need the rest.

Richard North 10/01/2020 link

Brexit: nothing makes sense

Thursday 9 January 2020  

Newly appointed Commission President von der Leyen hardly told us anything new when she addressed an audience at the London School of Economics yesterday, just hours before a "positive" first bilateral meeting with Johnson.

"During the Withdrawal Agreement negotiation", she said, "there was always the uncertainty around whether Brexit would happen. It was an uncertainty that made the negotiation inevitably tense".

As to the "fresh negotiation", von der Leyen  noted that it would "take place against a backdrop of clarity and mutual interest in making it work". The European Union, she said, "is ready to negotiate a truly ambitious and comprehensive new partnership with the United Kingdom. We will make as much of this as we can. We will go as far as we can".

But then came the "money quote" which the legacy media have picked up to make their stories. "But the truth is that our partnership cannot and will not be the same as before", says the Commission President.
And it cannot and will not be as close as before – because with every choice comes a consequence. With every decision comes a trade-off. Without the free movement of people, you cannot have the free movement of capital, goods and services. Without a level playing field on environment, labour, taxation and state aid, you cannot have the highest quality access to the world's largest single market.
Then she adds:
The more divergence there is, the more distant the partnership has to be. And without an extension of the transition period beyond 2020, you cannot expect to agree on every single aspect of our new partnership. We will have to prioritise. The European Union's objectives in the negotiation are clear. We will work for solutions that uphold the integrity of the EU, its single market and its Customs Union. There can be no compromise on this.
In effect, she is simply reiterating that which I wrote in my previous piece, echoing the sentiments of Telegraph writer Jeremy Warner, who points out that, if the UK government sticks to its plans for regulatory autonomy and insists on allowing divergence, any trade deal "may be quite limited in scope".

The story is amplified in the Guardian with add-on comments from Michel Barnier, who was also at the LSE event. He warned in an impromptu exchange that leaving the EU was not a simple process and involved renegotiation of "600 international agreements" as well as a new free trade agreement.

This "600 international agreements" issue is an interesting one, to which I alluded to nearly a week ago when I noted that, when the transition period ends, so do the 977 bilateral agreements the EU has made with the rest of the world. So far, I wrote, "very little progress has been made on reforging those severed links and, for an unknown number of them, matters will need to be settled with the EU before any progress can be made".

Now, it seems, the Commission is thinking that about 600 of those will need to be addressed once we have left the EU, representing a significant burden for the UK's negotiating teams.

With that in mind, it is unsurprising that von der Leyen is saying that, if Johnson insists on curtailing the transition period: "It is basically impossible to negotiate all". In an attempt to deal with a very difficult situation, she said the EU would prioritise the elements of a deal, doing what is necessary to prevent the UK crashing out on WTO rules. Obviously, though, the closer the UK could remain to the EU, the better the chance of a deal that would avert a cliff edge.

It is here that we now see a game of two halves. While von der Leyen and Barnier both are warning of the consequences of regulatory divergence, we have departing governor, Mark Carney, talking to the Financial Times about – amongst other things - the City's prospects after Brexit.

But, in a puzzling intervention, he argued that there was no point in London, as a world financial centre, being a rule taker from Brussels. Instead, he urges the UK government to avoid aligning its financial regulations with those in the EU in the hope of better trade terms after Brexit.

"It is not desirable at all to align our approaches, to tie our hands and to outsource regulation and effectively supervision of the world's leading complex financial system to another jurisdiction", he is cited as saying.

It is this "rule-taking" aspect which, according to Bruno Waterfield, is the reason why Efta/EEA option was a non-starter in Whitehall, killed off by Treasury hostility.

But what's puzzling about this is that it has been a long time since the UK was a rule-taker from Brussels. Increasingly since the 2008 crisis, financial crisis has been coordinated on a global level, through G20. And, as I pointed out in Flexcit, at a technical level, this organisation works through the Financial Stability Board.

Founded in April 2009, it has a mandate "to coordinate at the international level the work of national financial authorities and international standard setting bodies and to develop and promote the implementation of effective regulatory, supervisory and other financial sector policies".

It brings together national authorities, international financial institutions, sector-specific international groupings of regulators and supervisors and committees of central bank experts. It counts as its members the Basel Committee on Banking Supervision (BCBS); the Committee on the Global Financial System (CGFS); the Committee on Payment and Settlement Systems (CPSS); the International Association of Insurance Supervisors (IAIS); the International Accounting Standards Board (IASB) and the International Organisation of Securities Commissions (IOSCO).

This, in effect, is the standards setters' standards setter, positioned at the centre of a web of international bodies concerned with regulation at a global level. And, significantly, until recently, it was chaired by Mark Carney, the very same man who is complaining about the UK being a rule-taker from Brussels.

Currently, when one looks at the FSB's Regional Consultative Groups (RCGs), the co-chair for Europe, alongside the Deputy Governor of the Sveriges Riksbank, is none other than Katharine Braddick, Director General of Financial Services at HM Treasury.

Basically, while Carney is in line with Johnson about avoiding regulatory alignment, what he is saying – and Johnson for that matter – simply does not fit in with the way the real world works.

With standards regulation generally originating from global bodies, the EU is the rule-taker. And where the UK has its feet under the tables of these bodies, it has a central role in determining the rules that the EU will adopt, then to pass down to its Member States.

I cannot believe that Carney is unaware of this dynamic, so one really does wonder about the game he is playing. As for the likes of Johnson – and many of those around him – their horizons tend to stop at Brussels, failing to understand the global dimension of standard setting.

At stake, though, is a halfway reasonable settlement with the EU and, in their ignorance – or perhaps for more Machiavellian reasons – "team Johnson" seems to be willing to discard the concept of regulatory alignment when, in or out of the EU, we will all end up sharing the same global rules.

Nothing of what we're being told, therefore, makes any sense, and neither do the actions of our masters. We are being led up a blind alley, with only one certainty: this doesn't end well.

Richard North 09/01/2020 link

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