Brexit: it ain't all bad

Wednesday 28 October 2020  

Updated, as of yesterday, is the government guidance medicine and healthcare organisations on the post-transition period.

Like aviation, the sector is highly regulated and, prior to the end of the transition period, has been bound by an extensive network of EU law, under the aegis of the European Medicines Agency (EMA) - now relocated from London to Amsterdam.

The UK replacement for the EMA is the Medicines and Healthcare products Regulatory Agency ((MHRA for short), working with a website, presumably pending the development of its own corporate website and branding.

Helpfully, the key changes to deal with Transend are summarised in an article in the pharmaletter, sufficient for a quick overview without having to fillet the official website, which sets out the new rules for January 2021.

One of the key points is that, for two years from 1 January, once the transition period after Brexit has come to an end, the UK will adopt decisions taken by the European Commission on the approval of new medicines in the community marketing authorisation procedure.

Something similar has been arranged for aviation, with EASA certification being recognised for the two years after Brexit. This carry-over device buys time for the UK regulatory agencies to get their acts together, and take over the roles formerly undertaken by EU agencies.

As for medicines and healthcare products, the guidelines announce that there are to be new routes for assessment, which will include an accelerated procedure and rolling review, with the UK promising to prioritise access to new medicines. The MHRA says that it is working with partner organizations in the UK to develop approaches to reduce the time to patient access for new products. Further details are promised by December.

On 1 January, the MHRA will introduce an accelerated procedure and will reach its opinion on approvability of marketing authorisation applications within 150 days of submission of a valid application. Meanwhile, the "rolling review" will be a new route for marketing authorisation applications, intended to enhance development of new medicines.

It is said that the latter mechanism will offer ongoing regulatory input and feedback, enabling applicants to get it "right first time" and ensure that applications can be approved as efficiently as possible.

This development is by no means bad news. Development of new drugs is expensive and slow, with a recent study estimating an average cost of €1.3 billion (US data). Anything that can cut costs and speed up the process (while maintaining safety levels) must be welcome.

Although direct regulatory costs – as approval agency fees – are relatively small part of the total, testing and trials mandated by regulators is usually a significant cost, and streamlining approval processes may trim substantial sums from overall development, and bring life-saving drugs into use quicker.

Here, the UK does have a very specific advantage, as the NHS provides an identifiable and coherent market, spending around £16 billion a year on pharmaceuticals, of which about £9 billion arises from GP prescribing and £7 billion from hospital treatment.

UK approval, therefore – even when separated from the broader European system – will still give access to a lucrative market, sufficient to incentivise drug companies to develop products for the UK market.

With the UK also adopting EMA decisions for two years, it will also have the power to take into account marketing authorisation decisions of EU Member States, accepting products which have been approved via the decentralised procedure, without waiting for the full approval process.

In some ways, therefore, this will improve the UK system of drugs approval, giving more flexible options for manufacturers to bring their products into circulation.

Much will depend, though, on the EU's attitude to the UK system, as it develops. If the EMA is instructed to ignore or otherwise discount UK approvals, treating applications for additional EU authorisation as blank sheet applications, then pharmaceutical companies may be wary of picking the UK as a development customer.

If, however, the UK and EU can reach some degree of agreement on equivalence (mutual recognition is out of the question), then a short-form procedure may be acceptable for a UK-approved drug to be cleared for use in EU Member States.

We hear nothing of this in the context of the current EU-UK trade talks and the EU notice to stakeholders is not particularly helpful. It tells us that, during the transition period, the EU and the UK will negotiate an agreement on a new partnership, providing notably for a free trade area.

However, the Commission says, it is not certain whether such an agreement will be concluded and will enter into force at the end of the transition period. In any event, it then adds, such an agreement would create a relationship which in terms of market access conditions will be very different from the United Kingdom’s participation in the internal market.

As it stands, marketing authorisation holders currently established in the UK will have to transfer their marketing authorisations to holders established in the EU.

This means that the addressee of the marketing authorisation decision changes to the new addressee. The transfer of the marketing authorisation must be fully completed and implemented by the marketing authorisation holder before the end of the transition period.

For new products, developed in the UK after 1 January, much the same procedure will apply, unless there is provision for agreement on medicines within any trade agreement. We would expect (and need) some sort of reciprocal agreement, where the UK continues to accept EMA market authorisations, in return for EU recognition of UK certifications.

Here, that very specific advantage of the NHS kicks in. European manufacturers will doubtless want continued access to that market, so there is much sense in the EU and the UK coming to an agreement. The big question is on what terms any agreement will be based.

However, there is a further issue for the UK. As well as EU recognition, if the equivalent recognition for the US FDA system can also be brokered, the UK could build itself a lucrative niche as a regulatory hub serving US and EU markets.

Thus, if handled correctly – and that is a very big if – the UK could create a promising environment for the pharmaceutical industry, improving on its current status in the Single Market.

In that sense, Brexit for once may actually prove to be advantageous – depending on how successful our negotiators are in brokering a deal. And that, we are told hangs in the balance, having hit "their most difficult stage".

One thing for sure, though – a no-deal would be troublesome for the UK pharmaceutical industry and would substantially add to costs, if regulatory approvals had to be duplicated here and in the EU. There is everything to gain from a deal, and we must hope that the current negotiations – even though limited – meet with success.

Also published on Turbulent Times.

Richard North 28/10/2020 link

Brexit: they still don't get it

Tuesday 27 October 2020  

The Financial Times is running a piece headed, "Aerospace chief warns delayed Brexit deal threatens industry", with the sub-head: "Industry trade body hits out at failure to prioritise aircraft certification standards".

According to this piece, Tony Wood, president of British trade association ADS and chief executive of aerospace supplier Meggitt, are complaining that ministers' failure to prioritise an agreement on aircraft certification standards in the EU-UK trade negotiations is threatening the future of the UK's £34 billion-a-year aerospace sector.

"We are now at that critical point where political decisions on the negotiating priorities with Europe need to be made", says Wood, adding that the aerospace industry "absolutely requires a comprehensive bilateral agreement with Europe if we are to preserve our position at the top table and number two position in the world".

As with other sectors, aerospace executives are frustrated that the government has focused on fishing rights in Brexit negotiations, hindering a wider trade agreement that would help protect the industry's more than £30 billion in exports.

Wood adds that there appear to be "higher political priorities in other industries", but asserts that it is "time to choose", adding: "The aerospace and defence industries underpin 375,000 jobs in the UK and they are some of the best-paid jobs in engineering and advanced manufacturing".

The FT piece then goes on to say that, "Many in the sector fear that failure to strike a bilateral agreement will add cost and complexity to the certification process, just as the industry reels from the effects of the coronavirus pandemic and embarks on the biggest technological change since the invention of the jet engine".

This, apparently, is in the context of aircraft and aero-engine makers investing heavily in hybrid-electric and hydrogen-powered flight, in an attempt to achieve the industry’s pledge to be net carbon neutral by 2050. Airbus has said it aims to launch a green aircraft by 2030.

But this is a bizarre statement. There are no ifs, buts or maybes. The absence of a bilateral agreement on aviation safety (BASA) will add immeasurably to the costs of the UK industry, and substantially limit its ability to operate in a competitive international sector.

The paper then goes on to assert that responsibility for certification currently lies with the European Union Aviation Safety Agency (EASA), then stating that it has mutual recognition agreements with regulators around the world.

This assertion, though, is so, so wrong. There are no "mutual recognition agreements" in aviation. This term has a very specific meaning: the parties to such an agreement set their own standards which are then recognised unconditionally by the other party, or parties.

What we actually have, as I pointed out earlier, is "reciprocal acceptance" of findings of compliance and approvals, when the parties agree that each party's civil aviation standards, rules, practices and procedures "are sufficiently compatible to permit acceptance of approvals and findings of compliance with agreed upon standards made by one Party on behalf of the other".

This is not pedantry. The "acceptance" is conditional. Reciprocal acceptance is a very different animal from mutual agreement, making the basis for a BASA considerably more demanding.

In the context of Brexit, since the UK has ceded much of its regulatory autonomy to EASA, it no longer has a comprehensive knowledge base, or the experienced personnel who can carry out the full range of regulatory functions.

Significantly, even the CAA gets it wrong, talking of "continued mutual recognition", and existing "mutual recognition provisions established under the EASA Basic Regulation". In terms of the latter, again there is no "mutual recognition". There is harmonisation of standards under the aegis of a common regulator, which again is a very different thing.

As regards new arrangements with the EU, there is no question of "continued" mutual recognition. You can't continue something you don't actually have. Any new relationship will have to be based on "reciprocal acceptance", which will require the EU to take a view on the post-Brexit capabilities of the UK's regulator, the CAA.

As it stands, however, the FT gets one thing right in stating that if there is no deal, all UK-designed parts, components and systems for aircraft will become invalid in the EU on 1 January. Better late than never, I suppose. I've been writing specifically about the need for a BASA since June 2018.

The FT notes that big companies such as Rolls-Royce have already shifted design functions out of the UK to the EU to avoid the extra cost. But, late in the day, it says smaller companies in the supply chain do not have the resources to set up EU-based design offices.

The paper also notes that the industry is anxious that once the transition period ends, the CAA will not yet have sufficient competence to certify the existing and new technologies, exactly the point made earlier in this article.

"In my view, it is going to take five years for the CAA to become as fully capable as Easa is today, in order to be mutually recognised", Wood says, getting it half right, but perpetuating an error that should not be made by such a senior executive.

Another senior aerospace executive backs up Wood on the competence issue, saying: "There is a question as to whether the CAA will be a good enough regulator in what will be a potentially transformational period for global aviation".

Needless to say, the CAA believes it is prepared for the demands of certification regardless of whether there is bilateral agreement. It says deals to ensure mutual recognition of safety inspections have already been signed with the US, Canada, and Brazil, although it says, these include a period of "confidence building".

Once again, the CAA gets it wrong, which in itself does not exactly build confidence. It should be talking of "reciprocal acceptance", which is largely conditional.

However, not all is lost. Tim Johnson, a CAA director, says that, "Since the 2016 referendum, we have been preparing to take over design certification responsibilities for UK companies as we leave the European system for aviation safety. We look forward to playing our part in enabling new and existing aerospace technologies in the future".

It does not help, though, that so many in the industry, including the regulators, just don't get it, having such a sketchy idea of the international regulatory scene. Even when agreements are made, they have no idea what they've actually got.

And for the CAA and the UK government, neither are in a position to mark their own homework. Having been a member of EASA, no organisation is better equipped to judge the residual regulatory capabilities of the UK. With that in mind, I suspect that an EU-UK BASA isn't going to be a slam-dunk.

It is going to be even more difficult, given that the UK government quite evidently hasn't got its act together.

Also published on Turbulent Times.

Richard North 27/10/2020 link

Brexit: frustrating times

Monday 26 October 2020  

Scanning the media commentary over the last 24 hours – in the absence of official statements on the progress of the EU-UK trade talks - I am seeing diverse reports, ranging from cautious optimism to studied neutrality.

In the latter event, we have AFP reporting that the UK and EU are still a long way from a deal, citing "several European sources". Both sides are preparing to resume talks this week and thus we are told: "The negotiations are progressing, but we are still a long way off".

The Times, on the other hand, seems particularly encouraged by the fact that Barnier is staying in London for intensive talks until Wednesday. This, the paper says, is "prompting hopes that a trade deal with the EU will be concluded".

The truth, of course, is no one outside the very tight circle of negotiators – and those to whom they report – has any idea of where the talks stand at the moment. Even those directly involved in the talks probably could not predict their outcome.

It seems a pretty safe bet, though, that there will be a deal of sorts, even if it is a "bare bones" tariffs and quotas deal, with the UK giving away the family silver and part shares in the kitchen sink in order to get something which will largely favour EU-based traders.

That is what Leo Varadkar is telling RTE, asserting that: "It's by no means guaranteed but I think on the balance of probabilities it will be possible to agree a free-trade agreement with the UK which means there will be no quotas and no tariffs".

At this stage of the proceedings, all that must matter to Johnson is presentation. Anything his negotiators get will be pretty thin gruel, so he needs something that he can big-up as a "victory", sufficient to keep his party on-side for the next few weeks, possibly carrying him over to the end of the year.

In this, he can rely on the combination of bovine stupidity and self-interest from his MPs, and the superficiality and short-termism of the media. Mostly, those organs which might be critical will be from the left of centre press, which can be safely ignored, while all can be safely relied on to move on to other issues once any deal is a few days old.

In any event, the time to have actually influenced the debate is long past. Offering an intelligent overview of the various exit options during the referendum campaign would have been a good start, and a serious analysis of what was meant by Mrs May's "no deal is better than a bad deal" would have done much to inform public opinion.

On both these accounts, the media failed dismally, and now all it has left is the role of spectator, filling space with speculation (and invention), for want of anything useful to report.

This reportage is being padded out with occasional articles which pick out some examples of the dire fate that awaits us once the transition period is over, without making any attempt to record the broader range of effects awaiting us.

The Telegraph, for instance, is carrying a story headline that: "Last-minute Brexit deal risks supermarket turmoil", although it does qualify the story by saying that, "grocers’ experience of pandemic stockpiling may help them prepare for a 'harsh' exit from the EU".

Actually, I don't see there being much of an immediate effect on retail prices or the availability of goods in the immediate aftermath of 31 December. The supermarkets in particular will – as the Telegraph suggests - be holding buffer stocks of key commodities, and imports to the UK will still be flowing.

The post-Christmas period, in any event, is dominated by what used to be called the January sales, but which now seem to begin on Boxing Day, or even Christmas Day.

Given that pre-Christmas sales will probably be depressed as a result of Covid – and the growing economic decline – there will most likely be plenty of stock in the shops (those which are allowed to open) – to fuel the sales. The growth in online sales will also confuse the picture.

In any event, the greater effect of Brexit is set to fall on our export business, and the damage there will probably not show up until the second or third-quarter figures, and even then the effects will be obscured by the Covid-induced recession descending into a structural depression.

Given that exports to the EU will take a hit, much will depend on whether we are able to build up exports with the rest of the world, and especially the United States. But here, as we have been recently discussing, much depends on the outcome of the presidential election – and the make-up of Congress.

Here, though, it is hard to see anything happening in a hurry. A worthwhile trade deal with the US might take years to conclude, and then a further while for Congress to ratify. And then, if Biden gets in and decides to favour the EU with a trade deal, our exports could decline.

The deal with Japan, for all the hype, will probably not deliver much in the way of increased trade in the short-term, and there is little else of substance on the horizon that could give us a short-term export boost. Realistically, even at best, we should be looking to things getting worse before they get better – and they will not necessarily get better.

As for the immediate future, Brexit news is going to be competing with the media obsession on the presidential election. With the media's general inability to report in depth on more than one subject at a time, we will probably find the coverage of any deal given less attention than it might otherwise have got – especially as there is also the ongoing drama of Covid to report.

Like it or not, Brexit is going to be forced to wait its turn, and much of the publicity may be reserved for the turn of the year when, traditionally, the media usually has little to report. By then, of course, it will be too late to influence events, and we will be consigned to the role of watching the train wreck unfold, as impotent spectators.

But we can't even guarantee that there will be a sharp political blowback. The inadequacies of the Labour opposition, and its reluctance to engage in Brexit – plus the obscuring effects of Covid on top of the slow-motion effects on the economy – might mean that media (and public) interest rapidly dissipates.

There again, even now there is the outside possibility of a no-deal outcome, especially if Macron, at the very last minute, refuses to give way on fish. But even if he does, there is Spain looming in the background, which also has strong fishing interests.

It is often the case in EU politics that one country will make the running – in this case France – while other Member States keep quiet as long as their interests are being served. Overcoming the French resistance, therefore, may simply expose a new level of intransigence, from the nation which brought us the Inquisition.

Nevertheless, a no-deal will provide the media with a new level of entertainment, and perhaps provoke a higher level of coverage. That might possibly briefly overtake the presidential election coverage.

For anyone particularly interested in EU-UK relations, though, the next few weeks may prove frustrating times.

Also published on Turbulent Times.

Richard North 26/10/2020 link

Brexit: Biden trumps Johnson?

Sunday 25 October 2020  

If Twitter is any guide (which it undoubtedly isn't), I must be the only person on this planet who doesn't have a view on the US presidential election. As a rule, I tend only to comment on things I know about, and I do not know enough about US politics to be able to offer an informed view. Thus, I feel, silence is my best policy.

Needless to say, there is an interface between US and UK politics but commentary then runs the gauntlet of conjecture on both sides of the Atlantic – guesses compounded by guesses.

Into this difficult territory, however, the stalwart figure of Ivan Rogers dares to tread, via the Observer.

He is telling us of a view prevailing amongst senior figures in European governments that prime minister Johnson is waiting for the result of the presidential election before finally deciding whether to risk plunging the UK into a no-deal Brexit.

This is certainly an interesting, if alarming perspective, as it suggests two things of Johnson. Firstly, despite seeking "independence" from the EU, he seems willing to allow events in the US to determine UK policy. Secondly, he is acting as if US and EU policies are "either or" options, rather than interdependent.

The outcome, according to Rogers, is a belief that Johnson will think "history was going his way" and opt for no deal if his friend and Brexit supporter Donald Trump prevails over the Democratic challenger, Joe Biden. On the other hand, he may conclude that a no-deal scenario is just "too risky" if Biden is heading for the White House. In that event, he will live with some highly suboptimal (for Johnson) skinny free-trade agreement with the EU.

With Trump back in power, the prime minister would be more likely to conclude he could strike a quick and substantial post-Brexit US-UK trade deal than if Biden emerged as president after the 3 November poll. By contrast, a Biden administration would prioritise rebuilding relations with the EU that have been damaged by Trump.

Whether relying on Trump is realistic, however, is a moot point. As far as I am aware, Congress has to approve any trade agreements signed by the president, and I have no idea whether Trump will have a majority in Congress. If he doesn't, then any ambitions Johnson might have could founder on the anvil of partisan politics.

But the bigger threat to Johnson's ambitions, according to Rogers and other former UK diplomats, is a Democratic administration under Biden. It would prove hugely problematic for Johnson and the UK government, threatening the so-called special relationship.

"I don't think either Biden or his core team are anti-British, but I think they are unimpressed by both Johnson and his top team", Rogers says – which might suggest that there is hope for us yet in American politics.

Of Johnson, "they believe him to have been an early and vigorous supporter of Trump, and that Brexiteer thinking – which they think has damaged the unity of the west – has many parallels with Trumpism". Thus, Rogers doubts there will be much warmth in the personal relationship. And Biden's would simply not be an administration which viewed European integration as a negative.

Piling on the agony, Rogers believes that the UK’s absence from the EU will make it less influential in Biden's administration because it can no longer lead European thinking on the geo-strategic issues – something rated as hugely important to Biden.

Thus, we are told, Biden will put Berlin and Paris – and indeed Brussels – back at the heart of US thinking, although not uncritically, because the US will still have serious issues with EU approaches on economic and security issues.

As well as Rogers, we also have input from Kim Darroch, a former UK ambassador in Washington, who quit the post in 2019 after the leaking of diplomatic cables in which he criticised the Trump administration as "inept".

He shares the view that Biden might even favour a US-EU trade deal over one with the UK. "Whoever wins in November the bedrock of the relationship – defence, security and intelligence collaboration – will remain as strong as ever", he says.

But if it's Biden, there are likely to be some issues. The Democrats don’t like or support Brexit. They may prioritise trade deals with the Pacific region or the EU over a UK/US deal. They will block a trade deal with us if they think we are putting the Good Friday agreement at risk.

Furthermore, the Democrats remember and resent Johnson's comments in 2016 about "the part-Kenyan president" having "an ancestral dislike of the British empire". And then there was Johnson telling US diplomats that Trump was "making America great again".

Another voice is Jonathan Powell, who served as a diplomat in Washington in the 1990s before becoming Tony Blair's chief of staff and taking control of negotiations that led to the Good Friday agreement.

He says Biden believes Johnson has imperilled the Irish peace process. "Biden is very proud of his Irish antecedents", he says. "He has always been active on Northern Ireland since before I was in Washington".

Biden apparently takes a close interest in the Northern Irish peace process and sees it as an outrage that Johnson has in his "cavalier manner" threatened peace in Northern Ireland for so little reason. So that is going to be chalked up against him.

And, it seems, there are long memories in Washington - plenty of foreign policy advisers around Biden who worked in the Obama administration and have not forgiven Johnson for his "part-Kenyan" comments.

This camp sees Johnson as part of the same populist phenomenon that brought Trump to power. And from the Democrats' point of view, the UK outside the EU will make it less important as a partner on the world stage.

Here, the Observer cites Ben Rhodes, Obama's foreign policy adviser. "In all these giant issues – tech and disinformation and China, and trade, the position of the EU on those issues is just a lot more important than the position of the UK", he says, "For these big ticket items I think that Brussels, Berlin and Paris are just much more in the middle of it all, than London will be".

As one might imagine, Foreign Office and Downing Street officials downplay the prospect of difficulties if Biden wins. They rely on their own mantra, that the UK will have opportunities to take the lead on the world stage and build relations with a new US administration.

They also cite the fact that the UK will chair the UN Security Council from February, and the rotating presidency of the G7 from the US, as well as hosting the 26th Conference of Parties (COP 26) on climate change in Glasgow in November 2021.

A British official believes that the climate issue is "really going to help because you've seen lots of comments from Biden about how important that is to him, and since we are leading on COP, it will be something where they will instantly recognise our value and our importance".

That, of course, tells its own story, as I recall an Open Europe study suggesting that one of the major areas of saving, once we leave the EU, would be in cutting back on climate change measures. Now we see, potentially, Johnson exploiting climate change to curry favour with Biden.

But, if climate change is front and centre for Johnson, one wonders how that will work out with Trump, who is not exactly a born-again Green. Will we see Johnson running with the hare and the hounds?

That said, the sooner this election is over the better. I very much take Pete's view that the candidates should be locked in a room for the duration and not let out until the votes are cast. Our own elections are bad enough without having to suffer the US contest by proxy.

Also published on Turbulent Times.

Richard North 25/10/2020 link

Brexit: an inability to understand

Saturday 24 October 2020  

An interesting article in the Mail tells us of claims that £1 trillion in financial sector assets have been shifted to Europe.

The trigger is, of course, the end of the transition, when financial firms based in the UK will lose their "passporting rights" which, hitherto have enabled them freely to sell funds, debt, advice and insurance to clients across the territories of EU Member States.

"City bosses", we are told, had hoped ministers could thrash out replacement deal with EU officials but have become increasingly frustrated over the lack of progress. They are now complaining that the UK's financial sector is the "forgotten child" in trade talks, playing second fiddle to smaller industries such as fishing.

Why they should be put out, though, is something of a mystery. We can go back to 20 November 2017 when Michel Barnier gave a speech to the Centre for European Reform on "The Future of the EU", in which he commented that, on financial services, there were UK voices suggesting that Brexit did not mean Brexit. But, Barnier said, "Brexit means Brexit, everywhere".

Some commentators, he observed, were saying that there would be no changes in market access for UK-established firms. They were saying that joint UK-EU Rules would be decided in a new "symmetrical process" between the EU and the UK, and outside of the jurisdiction of the European Court of Justice.

But that, said Barnier, would contradict the European Council guidelines of April 2017, which stressed "the autonomy of EU decision-making, the integrity of our legal order and of the Single Market".

Thus, he said, the legal consequence of Brexit is that UK financial service providers lose their EU passport. This passport allows them to offer their services to a market of 500 million consumers and 22 million businesses.

Barnier did offer a small crust, by way of compensation, saying that the EU would have "the possibility to judge some UK rules as equivalent, based on a proportional and risk-based approach", in those areas where EU legislation foresees equivalence.

In January of the following year, however, we saw reports that the EU had rejected a City plan for free trade in financial services, and that the industry was to lose out from leaving the Single Market.  Yet, as late as February of this year Barnier was rubbing this in, in no uncertain terms.

In an address to the European Parliament, he told MEPs that London should be "under no illusion" on financial services as there would be "no general, global, permanent equivalence" with Britain. He added, "I would like to take this opportunity to make it clear to certain people in the United Kingdom ... that they should not kid themselves about this".

It is rather perverse, therefore, that there still seems to be some expectation that things can go any other way. Yet still there are wibblers who seem to believe that there is a possibility of change.

For instance, Catherine McGuinness from the City of London Corporation complains that it was "'extraordinary" that ministers and EU officials appear to be spending so much time on fishing rights rather than our financial services industry – as if it would make any difference.

Then, Allie Renison of the Institute of Directors – always one to grab the wrong end of the stick – is saying: "Financial services really need to start being treated in negotiations for what they are: a huge contributor to the UK economy" – apparently unaware that the ship has long since sailed.

However, by no means all firms are living in cloud-cuckoo land. Wall Street giant JP Morgan has already switched £180 billion – or 7 percent of its global assets to Frankfurt. And Barclays is now the biggest bank in Ireland after switching £150 billion to Dublin.

Says the Mail, other big names – including Bank of America, Goldman Sachs and Morgan Stanley – have already prepared European hubs and shifted assets out of the UK to Ireland, Germany, and France. According to accountancy firm EY, assets worth £1.2 trillion have been switched from London to continental Europe since the Brexit vote in June 2016.

Since the referendum, 88 of the 222 firms it has tracked have earmarked at least one location in Europe where they plan to move staff. Frankfurt has proved the most popular destination, followed by Paris. And EY says that preparations have been stepped up in recent weeks as prospects fade for a financial services deal.

That there ever was any expectation is a testament to the unreality of the post-Brexit discourse, where despite constant repetition of the basics, crucial issues simply don't seem to sink in.

Much the same can be said of the Guardian article yesterday, which headlines: "UK presses for use of faster passport gates at EU airports post-Brexit".

Johnson, we are told, "has clashed with Brussels" over an 11th-hour attempt to save British passport holders from hours of delays at European airports from the end of the year, with the UK government seeking continued use by UK nationals of the automatic e-gates used by EU nationals at airports and Eurostar terminals.

The move, says the Guardian is seen by the European Commission as an attempt to keep Britons in faster lanes rather than having to queue up with the rest of the world after the end of the transition period. But the Commission is also adamant that giving UK nationals such a right would breach EU law.

We seem to be back where we were in November 2017 where there are still people – and many in government, including the prime minister, who still seem to think that Brexit does not mean Brexit, when this becomes inconvenient. But, as Barnier said then, "Brexit means Brexit, everywhere".

Thus, when it comes to UK travellers' convenience, we will have to take it as it comes. The Commission has advised the Member States that the e-gates could be used where a UK national is exiting its territory, but not on entry.

After the transition period end, Member State will have to have a national entry-exit system and passports of the British nationals will need to be stamped, reducing the benefits of use of the automated border control.

Officials at one of Europe's biggest airports, Schiphol in Amsterdam, through which roughly five million people travel from the UK each year, expect British travellers to face considerable delays. As it stands, Britons spend on average around 25 seconds at the passport control desk at Schiphol. It is estimated this will increase to 40-45 seconds next year due to the need for additional document checks.

With each person taking longer to get through passport control, it could take between 50 minutes and an hour more for a passenger on a busy flight to get through the system.

Such are the joys of Johnson's version of Brexit – something which never needed to happen but is now, effectively unavoidable. And there are many other examples to come, which the legacy media – and the politicians are just beginning to discover.

It really is a great pity that the media wasn't substantially more proactive earlier in the debate, letting people know the practical consequences of the different exit options. But, trivia and superficial analysis has too long been the fare of the media, and now we are paying the price.

Also published on Turbulent Times.

Richard North 24/10/2020 link

Brexit: going dark

Friday 23 October 2020  

It looks to be thin pickings for the next few days, or even weeks. With the negotiations starting up again, senior figures in Barnier's team have told EU diplomats not to leak details of their Brexit meetings to the press during the intensified negotiations.

Officials have been warned that leaks of sensitive information could derail the "delicate" talks and risk a no-deal which means that information might be hard to come by. On the other hand, the EU diplomatic corps seems so stuffed with "anonymous sources" that the whole system is as leaky as a sieve.

For the moment, though, we have to be content with Barnier telling us that Britain and the EU have a "huge common responsibility" to avoid a no-deal Brexit, his one great contribution to the knowledge of mankind as he arrived in London for the first day of "rebooted" trade talks.

Much to our surprise (not), we also learn that Number 10 is warning that "significant gaps" remain between the two sides. The usual culprits are involved: fishing, "level playing field guarantees" and enforcement (aka governance). Its view is that it is "entirely possible that negotiations will not succeed".

Talks have gone into the intensive phase and will continue through the weekend, resuming in Brussels next week. However – perhaps unsurprisingly – the not so silent officials are warning that there will not be a breakthrough this week.

Obviously not having been completely bound by their newly imposed vows of silence, EU diplomats in Brussels have predicted that fishing would be the easiest of the three outstanding issues to solve.

"All three issues remain open, but I would be more cautiously optimistic about fish," says another of these non-leaking EU diplomats. "But don't tell Paris", he adds. Another Brussels source says that the issue of fish was "symbolically big but practically small".

It is "politically difficult" but "technically possible" to balance UK demands for increased fishing opportunities and the EU need for access to British waters, sources said.

Macron, of course, is the key here, and there is talk of compromise in the air. He has even suggested paying for a fishing quota, although no sum has been mentioned. Dutch prime minister Mark Rutte – also with fishing interests - is meeting von der Leyen, in The Hague on Friday. This is fuelling speculation that a deal could be done, although speculation is cheap and not often borne out.

However, if speculation is all we're going to get, then we have to make the most of it, as they stretch out the tedium. Eventually, they'll get there – wherever "there" is. Meanwhile, we have the train wreck of Covid-19 to entertain us. Here, The Times is telling us that £2 billion has been lost to criminals in a furlough cash fraud.

HM Revenue and Customs have estimated that between five and ten percent of the £39 billion in payments made under the Treasury’s job retention scheme are likely to have been claimed fraudulently by organised criminals posing as legitimate businesses.

This brilliant scheme is brought to us by the tawdry mob which is now managing Brexit for us. With such dedicated minds at work, what can possibly go wrong?

Also published on Turbulent Times.

Richard North 23/10/2020 link

Brexit: thin gruel and sausages

Thursday 22 October 2020  

"What will not change", Michel Barnier told MEPs in Brussels yesterday, "is the framework we have set on behalf of the European Union for our ambitious partnership with the United Kingdom. That is in respect of our decision-making autonomy, the integrity of our internal market, and the preservation of our long-term economic and political interests".

"These principles", he continued, "have been stated by the Union since the moment when the United Kingdom chose - as was its sovereign choice - to leave the European Union more than four years ago. And these principles are naturally compatible with respect for British sovereignty, which is a legitimate concern of the government of Boris Johnson".

Thus, Barnier said, "What is at stake today in these negotiations is not the sovereignty of one or the other of the Parties. We said it in the Political Declaration: any future agreement will be done with respect for the decision-making autonomy of the European Union and with respect for British sovereignty. What is at stake is the proper organisation of our future relations after the divorce, which is now a given".

So here we have it again, respect for "the decision-making autonomy of the European Union". Nothing fundamental has changed, and nor will it change. But the fact that Barnier is prepared to bring his team to London on Thursday is enough for the Telegraph to crow that the European Union had "caved" to British conditions in what is termed a "significant" shift in the EU's approach to the talks.

As to the official reaction, a Downing Street release states that "We [the UK government] have studied carefully the statement by Michel Barnier to the European Parliament this morning. As the EU's Chief Negotiator his words are authoritative".

"The Prime Minister and Michael Gove", we are told, "have both made clear in recent days that a fundamental change in approach was needed from the EU from that shown in recent weeks. They made clear that the EU had to be serious about talking intensively, on all issues, and bringing the negotiation to a conclusion".

"They were also clear that the EU had to accept once again that it was dealing with an independent and sovereign country and that any agreement would need to be consistent with that status". And now, the statement continues:
We welcome the fact that Mr Barnier acknowledged both points this morning, and additionally that movement would be needed from both sides in the talks if agreement was to be reached. As he made clear, “any future agreement will be made in respect of the decision-making autonomy of the European Union and with respect for British sovereignty.

Lord Frost discussed the implications of this statement and the state of play with Mr Barnier earlier today. On the basis of that conversation we are ready to welcome the EU team to London to resume negotiations later this week. We have jointly agreed a set of principles for handling this intensified phase of talks.

As to the substance, we note that Mr Barnier set out the principles that the EU has brought to this negotiation, and that he also acknowledged the UK’s established red lines. It is clear that significant gaps remain between our positions in the most difficult areas, but we are ready, with the EU, to see if it is possible to bridge them in intensive talks. For our part, we remain clear that the best and most established means of regulating the relationship between two sovereign and autonomous parties is one based on a free trade agreement.

As both sides have made clear, it takes two to reach an agreement. It is entirely possible that negotiations will not succeed. If so, the UK will end the transition period on Australia terms and will prosper in doing so.
Still, Downing Street maintains the fiction that a no-deal outcome is equivalent to "Australian terms", despite the claim being almost universally debunked. Johnson's administration, as always, exhibits its usual tin ear, never, ever conceding that it might have got something wrong.

Interestingly, though, the statement finishes off saying that, "It is essential now that UK businesses, hauliers, and travellers prepare actively for the end of the transition period, since change is coming, whether an agreement is reached or not". At last, the message is being delivered, although no-one can yet know the full extent of the preparations needed.

For the rest, we have little option to go with this charade, just six days after Johnson had declared that the trade talks were over – something which lacked conviction and was never going to stand.

Now, it looks almost certain that we'll be seeing a deal of sorts, although for a long time we have been aware that, even at its best, it will be thin gruel. But a headline "victory" will suit Johnson, especially as it will be many months before the damage will become apparent.

In a move that will delight the "they need us more than we need them" Muppets, though, we see EU carmakers calling on Brussels to "reconsider" its Brexit stance, as they seek "less onerous restrictions on qualifying for trade deal benefits".

This is according to the Financial Times, which has Europe's car manufacturers wanting a less restrictive stance on future market access to the UK, warning that aspects of the EU's current position are "not in the long-term interests of the EU automotive industry".

Specifically, they seem most concerned about rules of origin, and are asking that the EU should lower the percentage of components in a car that must be either European or British for the vehicle to qualify for the benefits of any EU-UK trade deal. They also want a "phase-in period" of the new rules, to help industry adapt to the changed business environment.

Michel Barnier, however, has said that businesses should be prepared to accept "short-term adaptation costs" in the name of protecting the EU's "long-term economic interests". He argues that the EU should not sugar-coat Britain's decision to leave the EU Single Market and Customs Union.

On the face of it, though, it isn't the car industry which is going to have the hardest time of it. Another Financial Times story tells us that British sausage-makers are facing EU rules that require prepared meat imports to be frozen.

The instrument concerned is Commission Decision 2000/572/EC, which applies only to imports from third countries and has not, therefore, applied to the UK to date.

At the end of the transition period, this is a real problem, in the sense that historically the British meat industry is fully integrated with EU member states, particularly the Republic of Ireland, and has been for 40 years, says Peter Hardwick, trade policy adviser for the British Meat Processors Association, with the move "set to devastate UK trade".

The meat industry is hoping that UK negotiators can secure an exemption to the rules but fear that, if they do not succeed, EU customers will look elsewhere when they are seeking premium chilled products.

Yet Defra is not optimistic. It has raised the issue with EU negotiators but there is no appropriate certificate of exemption which currently exists in EU law. It looks very much as if the industry will have to take the hit.

Thus, Gavin Morris, the group veterinary manager for Dunbia, the meat processing company supplied by 30,000 British and Irish farmers, says the requirement to send frozen meat would put a "huge question mark" over many existing contracts.

"The view we've gathered", he says, "is that a lot of existing commercial contracts for products and preparations to go to the EU fresh will just stop". He adds: "The clients will say 'we don't want it frozen, thanks very much, we'll source from somewhere else'".

This is just another example of the trials and tribulations facing British industry once the transition period ends – deal or no deal. It wouldn't have been a problem if we'd stayed in the EEA, but there you go. The next generation of EU citizens is to be deprived the joys of chilled British sausages, and you don't get a greater disaster than that.

Also published on Turbulent Times.

Richard North 22/10/2020 link

Brexit: Burnham isn't business

Wednesday 21 October 2020  

"We've had more than four years to prepare for our now imminent rupture with the EU, but neither the government nor the business community seem to have used them well".

So says Jeremy Warner in another of those statements of the bleedin' obvious. But that's how the fourth estate seems to make (or lose) its money these days, recycling thoughts and ideas that have been churning around forever, and claiming ownership of them.

But, as a practical illustration of where we're at, there is not much better on the table at the moment than a series of reports about a "perfunctory" conference phone call with 250 business leaders, hosted yesterday by Johnson and Michael Gove on the end of the Brexit transition period.

The Financial Times has it that Johnson "fails to calm business concerns over Brexit", with "bosses" left disappointed after a phone call with the prime minister, while Politico has: "British business frustrated by 20 minute Brexit call with government".

In a parallel report, the Telegraph was actually more robust, headlining "'Brexit is like moving house' Gove tells business in 'disastrous' conference call'", having Ministers telling "industry to brace for no-deal in 'shocking, embarrassing and not constructive' call with 250 business leaders".

Staying with the Telegraph, we learn that the gist of the call was to warn UK firms to prepare for a possible no-deal end to talks with the EU, from which one business leader gained the impression that no-deal preparations "are in businesses' court now", amid growing fears that the government will seek to blame any disruption to trade on companies' failure to prepare.

Johnson spoke for ten minutes before leaving in what one person described as a "disrespectful" move underlining his lack of interest in business. Another source described the call as "anodyne" and a third said it was "shocking, embarrassing and not constructive".

One listener is said to have complained that "It felt like it was to rally business and tell us about the 'great opportunities to come' from Brexit the Government sees". He adds: "They didn’t use the phrase 'sunny uplands of Brexit', but that's what they were saying".

The call was "not bad tempered, there was no opportunity for it to be bad tempered", said another person, adding the event "was carefully stage-managed. Just three obviously pre-selected questions were taken".

Yet another source said: "It felt like an exercise so the government can say it has formally talked to business. The prime minister does not have a grasp of detail and that's what Brexit is about. It feels like only in the past few weeks they have realised this and it's incredibly scary, especially as we don't have a lot of time".

Then from one more listener came the view that they had learned nothing not easily accessible in the newspapers. "It felt like an exercise so the Government can say it has formally talked to business".

From the FT, we learn that "disappointed" business leaders had hoped for guidance about what to expect between now and the end of the year, with worries that a government campaign launched this week to inject urgency into Brexit preparations will prove too little, too late.

Many companies, the paper says, are struggling to survive the coronavirus pandemic and are still in the dark about the impact of leaving the EU, business groups and companies said.

Helpfully, the FT offers some direct comment from active business personnel, for instance Neil Clifton, managing director at Cube Precision Engineering, a Midlands-based group that makes products for the automotive and aerospace sectors.

He says he had been focused on adapting his workplace to Covid-19 related changes. "We are not naive enough to say that is going to be the same but no one knows the shape and size of the deal and what it means", he adds.

Rod McKenzie, head of policy at the Road Haulage Association, says 85 percent of UK hauliers were smaller operators who did not have the space to look ahead, while Adam Marshall, director-general of the British Chambers of Commerce, says the government was partly responsible for failing to impress on business the scale and urgency of the changes coming.

Marshall singled out the government's glossy "check, change, go" advertising campaign in July which focused on the hypothetical benefits of Brexit. "It presents it like it’s a routine MOT test but for a lot of businesses Brexit is more like co-ordinating a moon landing", he complains.

According to the FT, the BCC recently highlighted 26 outstanding key questions relating to the government's guidance on post-transition trade, including on UK-EU customs checks and rules of origin.

Then we get Craig Beaumont, chief of external affairs at the Federation for Small Businesses. He says that without positive news about a deal "the message still hasn't cut through". Many businesses are focusing on "surviving to Christmas" rather than what happens on 1 January.

"We don’t know what we are shooting for", says Mark Adams, managing director at Royal Leamington Spa-based furniture maker Vitsoe, which exports to more than 60 countries. Referring to the lack of clarity over VAT, he complains that: "We don’t know what price we are charging. We are watching still and thinking at what point do we sit down and plan what to do".

Adams claims he has done what he can, almost doubling stock in the run-up to the end of the year. But he points out that there is already "stress in the supply chain" with delivery times almost doubling in recent months.

For others, "stockpiles to help firms prepare for Brexit changes, that were previously purchased earlier in the year, have now been run down during the pandemic". That comes from Tamzen Isacsson, chief executive of the Management Consultancies Association.

"Some global head offices", he says, "have communicated that they are unwilling to dedicate more resources to another Brexit deadline … until the situation is clearer and talks have concluded".

Ben Fletcher, head of policy at Make UK, which represents the UK’s manufacturing industry, also said significantly fewer businesses were stockpiling compared to last year. "Their bandwidth has been occupied by Covid", he explains.

Fletcher adds that many companies were still expecting a last-minute deal, rendering "no deal" preparations unnecessary. "There is a presumption among some that this will all be fixed by 31 December - the big multinationals get it but it has not cut through lower down. The message is not landing".

And so it comes to pass that industry in general, so voluble before the referendum in supporting remain, has been comparatively quiet over which option it prefers for Brexit, while many are sticking their heads firmly in the sand, expecting it to be "alright on the night", with Johnson pulling off a last-minute deal, the nature of which they know not.

As for Johnson, he must be wishing that the EU was Manchester's mayor so that, when negotiations broke down, he could bully his way to a solution and impose it anyway.

But it is highly instructive that the prime minister claimed that he could not up Manchester's financial settlement, because extra spending might set a precedent, leading to other regions also demanding more money and starting a bidding war.

It's a pity Johnson can't apply this experience to the EU trade negotiations and understand that, should the EU make concessions to the UK, it might set a precedent leading to other third countries demanding the same. But then, as business is finding out, the prime minister does not have a grasp of detail and that's what Brexit is about.

His own personal tragedy is that, while he can bully Manchester's Andy Burnham to get his way, he can't do the same with the EU.

Also published on Turbulent Times.

Richard North 21/10/2020 link

Brexit: slender chance of agreement

Tuesday 20 October 2020  

Michel Barnier, as expected, was on the phone to David Frost yesterday, confirming that the EU "remains available to intensify talks in London this week, on all subjects, and based on legal texts".

Officially, Barnier now awaits the UK's reaction to what Michael Gove called a "constructive move on the part of the European Union", which he then welcomed.

Obviously, said Gove during yesterday's statement to the Commons, "we need to make sure that we work on the basis of the proposed intensification that it proposes", adding: "I prefer to look forward in optimism rather than necessarily to look back in anger".

Clearly – or so it would appear – Gove didn't get the memo. According to the Guardian, and other newspapers such as The Daily Mirror, Downing Street has refused to restart the negotiations, the No 10 spokesman insisting that there remained nothing yet, on which to base the resumption.

In full, the spokesman said: "This was a constructive discussion. The UK has noted the EU's proposal to genuinely intensify talks, which is what would be expected at this stage in a negotiation. However, the UK continues to believe there is no basis to resume talks unless there is a fundamental change of approach from the EU".

He continued: "This means an EU approach consistent with trying to find an agreement between sovereign equals and with acceptance that movement needs to come from the EU side as well as the UK. The two teams agreed to remain in close touch".

These sentiments were effectively repeated by David Frost in a – presumably coordinated – tweet, acknowledging that he had a "constructive discussion" with Barnier. He "noted his proposal to intensify work, as we have been asking. But the EU still needs to make a fundamental change in approach to the talks and make clear it has done so. We will stay in close touch".

What we are short of, however, is what precisely the UK government means by "fundamental change", the nature of which could mean expecting of the EU things it simply cannot give.

In any event, we are told that government's final response has caused some "bemusement in Brussels", with suggestions that this is motivated by the inability of Downing Street to reverse Johnson's suspension of the talks so quickly.

Gove himself was not without complaints about what he quite obviously felt was the EU's unreasonable behaviour. We have been clear since the summer that we saw 15 October as the target date for reaching an agreement with the EU, he said.

The Prime Minister and the Commission President Ursula von der Leyen agreed on 3 October that our negotiating team should work intensively to bridge the remaining gaps between us, and we made clear that we were willing to talk every day.

But, he said, "I have to report to the House that this intensification was not forthcoming. The EU was willing to conduct negotiations only on fewer than half the days available and would not engage on all of the outstanding issues".

Moreover, he complained, "the EU refused to discuss legal texts in any area, as it has done since the summer. Indeed, it is almost incredible to our negotiators that we have reached this point in the negotiations without any common legal texts of any kind".

Earlier, at the beginning of his statement, Gove had said that "we [the government] had hoped to conclude a Canada-style free trade agreement before the transition period ends on 31 December this year", adding that "We remain absolutely committed to securing a Canada-style FTA, but there does need to be a fundamental change in approach from the EU if the process is to get back on track".

And here it gets really obscure. It was in March of this year that the UK and EU exchanged agreement drafts, with the UK publishing its working text and annexes on 19 May.

We can assume that they were discussed because Gove says that the EU has refused to discuss legal texts in any area "since the summer", which suggests that they were discussed earlier.

In a letter to Barnier from David Frost of the 19 May, Frost asserted that "our draft FTA approximates very closely those the EU has agreed with Canada or Japan". Our aviation proposals, he claimed, "are similar to those the EU has agreed with other third countries".

However, when it comes to CETA and the broader EU-Canada agreements, there are very significant differences between them and the UK draft.

For instance, on the crucial issue of competition policy, the UK offers the equivalent of less than one A4 page, the CETA text cross-refers to the EU-Canada agreement on the application of their competition laws, which runs to an additional 12 pages.

Thus, the two agreements must be read together, to make the whole. Yet, the UK has offered no equivalent text, which means that there is very little in common between the two offerings.

In other respects, as I pointed out yesterday with the aviation proposals, there are important conceptual differences. By and large, in terms of product regulation, the EU looks to establishing equivalence, on a case-by-case basis, while the UK is looking for "reciprocal acceptance", which is a very different thing.

Now that the EU has agreed to negotiate on the basis of legal texts, one must assume that the published drafts will be back on the table. But, as they stand, there are many areas which could not under any circumstances, be acceptable to the EU.

On the other hand, if in expecting a "fundamental change of approach from the EU", the UK is expecting these drafts to be accepted, it is going to be seriously disappointed.

What we really need of this process, therefore, is for the UK to come clean and admit to the extent of the divergence between its proposals and a Canada-style free trade agreement that Gove says the government wants to conclude.

This, of course, is not going to happen, which leaves the UK effectively demanding access to the EU's Single Market on its own terms. But, as Barnier reminded us on 21 September 2017 – the day before Theresa May's Florence speech - it is not – and will not – be possible for a third country to have the same benefits as the Norwegian model but the limited obligations of the Canadian model.

And naturally, he said, " any agreement must respect the regulatory autonomy of the EU, as well as the integrity of its legal order". Since this essential requirement is not fulfilled, the chances of any agreement look increasingly slender.

Also published on Turbulent Times.

Richard North 20/10/2020 link

Brexit: no point in more talks

Monday 19 October 2020  

There are times when the Financial Times is ahead of the Brexit field, with genuine insight on developments. This story isn't one of those occasions.

Headlined, "Time is running short to resolve the Brexit drama", this is one of those "statement of the bleedin' obvious" stories, with the paper telling us: "A path to a UK-EU trade deal exists, but theatrics risk a breakdown".

For sure, there is no need to dispute its general conclusions when it says that "theatrics and brinkmanship have become a wearyingly familiar part of Brexit". Indeed they have, and we're all bored witless with it.

But then, like most of us, the paper has seen through these particular "theatrics", sensing that Downing Street's declaration on Friday that talks on a future trade accord were "over" appears a reprise of Johnson's tactics in exit talks a year ago: threaten no-deal, use that as political cover to make concessions, then sell the final agreement as a triumph for toughness.

Thus, the paper says that Johnson's claim that the UK is ready to go it alone when the transition period ends in December "is surely a bluff". Brussels knows that, it says. The danger is that miscalculations blow up the talks despite both sides’ desire for a deal. That would be worse for the UK - but, on top of a resurgent pandemic, it would damage the EU too.

In the FT's view, both parties share blame for the current impasse. Johnson had raised the stakes by threatening to "move on" if there had been no agreement by last Thursday's European Council.

When a deal remained elusive, EU leaders called his bluff but the received wisdom is that the "colleagues" fumbled the diplomatic footwork. The Council conclusions "implied" all concessions must come from the UK.

What made the story was that the pledge to intensify talks, introduced in the first draft, was changed in the final version. The paper thinks this last-minute change was to avoid the EU and Barnier, appearing to be dancing too much to Johnson's tune.

It is there, however, that things are perhaps not so "bleedin' obvious". As always, the devil is in the detail. For instance, when we reported the change, we noted that the draft originally read as inviting Barnier "to intensify negotiations" – which is what the UK wanted, with the aim "of ensuring that an agreement can be applied from 1 January 2021".

But it the statement finally emerged as inviting Barnier to continue negotiations in the coming weeks, and calling on the UK "to make the necessary moves to make an agreement possible".

While the FT's "take" on this is compatible with the events, one must also recall that the European Council had pronounced on the talks, noting "with concern" that progress on the key issues of interest to the Union "is still not sufficient for an agreement to be reached".

In my view, this phrasing must not only be taken into account, it must also be put in context. If we go back to the third round of the Article 50 negotiations, and Barnier's comments on 31 August 2017, we find him observing that the UK wanted "to take back control", wanting "to adopt its own standards and regulations". That was fine but, he complained, "it also wants to have these standards recognised automatically in the EU".

That is what, he said UK position papers had asked for, to which he responded: "This is simply impossible. You cannot be outside the Single Market and shape its legal order". And this is actually a crucial point, a deal-breaker.

If the UK was allowed to dictate its own domestic standards and the EU was unconditionally to accept those standards as sufficient to allow products free circulation within the Single Market, then the UK would be effectively setting standards acceptable to the Single Market as well. To do so would, in Barnier's terms, breach the EU's autonomy of decision-making, something which could not possibly be allowed.

Now fast-forward to yesterday's piece where we see in the UK's proposal for aviation safety exactly the same dynamic of which Michel Barnier complained back in 2017.

Consistently, we see such expectations expressed by government figures or figures "close to government". And when we look to the CAA Website on Brexit, we see references to the absence of UK-EU aviation safety agreements and "no continued mutual recognition".

The CAA thus tells us that its "contingency planning is based on a scenario in which the UK Government and CAA take all reasonable steps within their control to reduce disruption to the aviation industry if a mutual recognition arrangement is not agreed".

Here, one would have thought that a government agency would know what it was talking about, but apparently not. There is no "mutual recognition" agreement with the EU – we have harmonised our standards, which is an altogether different thing. And not under any circumstances will the EU permit mutual recognition arrangements. They are simply not on offer.

And this somewhat illustrates the EU's problem. If British negotiators and officialdom continue, after all this time, to seek "mutual recognition" solutions to access the Single Market, then the EU's only response must be to refuse. To allow them would breach the EU's autonomy of decision-making.

But if this is the only solution that the UK is offering, then the negotiations have nowhere to go. Unless and until the UK is prepared "to make the necessary moves to make an agreement possible" – as specified by the European Council – there is little chance of negotiations succeeding.

It is perhaps because of the futility of carrying on the negotiations on the current basis that the European Council firmed up its message and demanded that the UK made the "necessary moves".

Perhaps also, it is no coincidence that Manfred Weber, leader of the European People's Party (EPP) in the European Parliament, is recorded by Zeit online as accusing Johnson of irresponsibility. He calls for him to start "negotiating seriously", noting that the European Union will never give up the integrity of its internal market.

This latter phrasing is more or less the same as the sentiment expressed by Barnier, which really does suggest that the negotiations have a long way to go. If the UK does not take note of this, the talks truly are at an end.

Thus, it is pointless Michael Gove saying that the door is "still ajar" for more talks, while expecting the EU to "change their position". If things haven't advanced since 2017, then more talks are not going to make a lot of difference.

Also published on Turbulent Times.

Richard North 19/10/2020 link

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