Sunday, 31 July 2016

What economists will never understand about Brexit

On my reading list this week is "Accountable to no-one" by Simon Jenkins. He argues that despite conservative propaganda the 1980s and early 1990s saw a great increase in the centralization of power. Despite privatisation, deregulation and devolution, the government asserted its control over schools, universities, the courts, local government, and the NHS. The book describes the situation, and asks what this means for democracy. I suspect it will be one of those books I skim read because this is exactly what's at the heart of Brexit.

I'm only just old enough to have a memory of how it all started but we have seen a gradual shifting of the state into private hands. We are told this is "free markets" when what it actually is is outsourcing. Now it must be said that I am no socialist. I don't really care who owns what too much so long as we get what we pay for. But we don't. Outsourcing is supposed to save money so we get more efficient public services so that we can either be taxed less or enjoy a greater variety of public services, spending the money some other way.

Except this is not happening. We are paying more in council tax for fewer and seemingly worse services over which we have no control. Take for example the picture above. Most people have ordinary wheelie bins outside their homes. A dear friend of mine, though has that contraption bolted to the ground outside her house. It stinks, it has become a dumping ground and it doesn't solve the problem it was designed to address. It just makes the street's problem her problem. It was put their without her consent, councillors cannot remove it and nobody is accountable for it routinely looking like a slum.

There was a time when the name of the district sanitation official was written on the side of the bin lorry. Not so now where you may ring the council to speak to some educationally subnormal drone who might enter your complaint onto a database somewhere only for it to be passed around and ignored if it even sees the light of day. And I can't think of any example which so perfectly encapsulates why Brits are so pissed off. 

So what's this got to do with Brexit? Simples. Everything. During the Blair era we so the continuance of this drift toward the corporatisation of government and we saw the quangofication of social enterprises and charities. What isn't regulated by the EU is then funded by the EU. It makes services dance to the EU agenda and if they want the grants to keep flowing, they must answer to the EU, not the public. 

If I wind the clock back to about 1998, I remember working as a database developer in a disability charity. In a short time I saw it close its high street charity shop (formerly a major source of funding). I saw it close its doors to community activity to become primarily a fundraising and grant chasing organisation. Any actual community work directly for disabled people went on the back burner. And by taking over some of the statistics gathering functions of social services it become a quasi-corporate enterprise with full time staff, most of whom performed administrative functions. I have watched the same happen to dozens of charities ever since.

And just recently I took a drive out with dad to our favourite walking spot. We have been going there since I was very young. Spurn Point at the mouth of the Humber. The land is owned by an EU funded quango. It has executives on handsome salaries but as yet there is no funding to repair the road washed away by a tidal surge. Incidentally, it's the road that connects the one full time RNLI station to the mainland. 

And then there's things like childcare. It used to happen on a community basis. Playgroups and cubs groups were commonplace. But then everybody suddenly become a criminal or suspected paedophile and everybody had to go on a database at their own expense. We saw the professionalisation of childminding which then meant registration, certification and real world adult wages. Soon after childcare become an industry and it ruled young mums out of taking part time work. If you work, you need expensive childcare. The response to this was another bureaucratic voucher system consuming vastly more money. 

This gradual appropriation and regulation of just about every facet of life has destroyed the voluntary ethos and in so doing has destroyed communities and made people entirely dependent on mechanisms of the state. Our welfare policy is an extension of this. The nationalisation of poor people. 

There are visible cosmetic consequences to this too. The park where I grew up now has expensive reinforced fences around the disused tennis courts, the park furniture is dilapidated, the pond is now a green swamp,  and the local primary school has a fourteen foot high fence around it with razor wire round the gutters. Meanwhile, should you attempt to clean up litter form the park you get a fly tipping fine. 

This really says something. It says that money is spent for the purposes of disposing of money (after all  budgets have to be spend), there is no consultation as to what people want it spending on, and those things people value are neglected in favour of those political agendas imposed from elsewhere. The fences also tell you something. Government mistrusts the people. The permanence and robustness of the security fences also tell us that the state is more interested in fencing things off than maintaining when sporadic acts of vandalism occur. That may mean savings for the council but it makes for a less hospitable park. It looks like Guantanamo Bay. 

They tell us this is for our protection. We can no longer have open spaces because things are supposedly more dangerous for children than they were when I grew up and people are less trustworthy. To a point, this is true when you are importing perverts and men who view women as property from the back hills of Pakistan. But hey, that's all cultural enrichment. Now look at our police force. They are rude, indifferent and dressed like paramilitaries. They are just footsoldiers of a massive occupation force serving vast areas and have no connection to the locality. 

Meanwhile we have council executives taking away salaries that far outstrip most salaries you see outside of the private sector. Golden hellos and revolving doors have been a permanent feature of local politics for as long as I can remember. I have observed this phenomenon for many years. Insult after insult while nothing is done about it. The backdrop to this in Northern towns is long disused mills rotting into the ground. They're not repurposed for industry nor are they converted to residential use. What matters to us rots. 

The problem is, on paper, on the spreadsheets of accountants and economists everywhere is that this all makes sense. The highly paid HR wonks insists councils need CEOs and the headcounts conform to this or that model - and the balance sheets show that KPIs are met and SLAs upheld. 

This was tolerated for the time just before the financial crash. We had just enough cheap chinese imports and access to cheap money not to mind the government pissing money away. Now though, the party is over. The mentality hasn't changed, the habits have not changed. Government is rearranged not to better serve the public but to make it more convenient for those who work within it. It is remote, soulless, impersonal and inept at handling anything out of the ordinary. 

A good system is measured not by how it handles the baseload of its work. A good system is measure by how well it copes with crisis and discrepancy. What we find when there are complaints is that the system closes ranks and puts you into the "fuck off loop" where your problem stays your problem at your expense. We have a total absence of functioning democracy. We have voting rituals but that does not affect anything in any meaningful way. 

Over the last three decades we have engineered a bureaucratised cage for ourselves where government no longer serves us. We feel it on the local level but it is part of a mindset exemplified by the EU. It is a system that believes government works better with less public intervention. It is part of a ruling paradigm in governance. 

Whether or not Brexit fixes this I really can't say. But as a gesture and a line in the sand, it is a big one and it does turn a corner. This technocracy is all very well in the creation of a sanitised single market where we can rely on the system to bring us ever cheaper high quality goods that we can buy with confidence, but there comes a point where everything is done of our protection whether we want protection or not. From the food we eat to the health choices we make. Contrast our supermarkets with those in the USA or mainland Europe. Everything is in cellophane under fluorescent lighting and everything has a barcode.

At this point you might well be thinking this is a litany of complaints from a Mr Angry, but all of these issues are in some way connected to a prevailing mindset in governance. The notion that people are there to be managed and coerced rather than governed. It is the idea that people are superfluous to governance and it goes to great lengths to exclude particpation. We no longer own it, we are not in control of it yet we are forced to obey it and forced to pay for it even when it does things we hate.

And when you look at things like the Waste Framework Directive or the Water Framework Directive or any number of binding constraints on government we see our hands tied in ways we can innovate in policy. Attempting to change local policy is futile because it is EU policy. It is completely unresponsive. Where the delineation between local government obstinacy and EU incompetence is I can't say, but all too often the EU is their excuse. They won't challenge the system because they don't want to. 

Meanwhile objections to this are written off and scorned as a rejection of modernity by stupid people who don't know what is good for them. And it's telling that is a very London attitude. London is a wealthy city and in terms of public services and facilities, for the most part, what London wants, London gets. London is constantly reinvented as it grows. All the while, Liverpool becomes our own Detroit and regeneration is just when the developers come to town to make cosmetic changes for a hefty reward. 

So when the great and the good tell us not to slaughter their favourite milk cow, the machine that underpins the status quo you can see why folks would vote to leave. An election isn't going to change anything but if anything can then it's Brexit. There is no undoing globalisation and there is no bringing the mines and shipyards back but nowhere does it say we have to tolerate being treated like cattle and be told what to do by London and Brussels. 

For a long time power has been draining away from the people. More so in Scotland where we have recently seen the amalgamation of Scottish police forces and the Named Person scheme. Down here in England we may be alarmed by Scottish illiberalism but we are not that far behind. We have already amalgamated our police forces to cover similarly vast regions and we fine parents for taking their children on holiday. We can now break a dozen laws just by leaving the house. 

Everything is touched by it. Every waterfront in the country is now plagued by identikit yuppie flats, turning industrial waterways into "urban marinas", every high street is the same, and everything that makes anywhere distinct is given over to corporatism. Brexit is not a rejection of modernity. It's as rejection of homogenisation. Brits are saying enough is enough. We want our country back from the mechanised system of government and the parasitic corporates who thrive off it and we want to be treated with respect. We want the right to say no to our government. 

Culturally, there is something deeply sick in Britain. Brexit is a matter of the soul. It doesn't register on any balance sheet and all the statistics show that everything is better but there's a massive gulf between what the metrics show and how we feel about the world around us. There is a feeling that nothing is sacred and we are not in control. If it takes an act of political vandalism to put things back on track then that is how it must be. All the cheap goods in the world cannot compensate for the intolerable lack of democracy.  

Brexit is only the beginning if we want democracy

Pretty much the last thing I want to do on a Sunday night after a superb weekend is write about Brexit. And I suppose for the time being there is very little point. We are in a phoney war. War has been declared and not a shot has been fired as yet. In the meantime everybody has an opinion, everyone's an expert and anyone trying to compete with the volume of white noise is wasting their breath.

Ideally there should be a movement making demands of the government and specifying what Brexit should mean and what we want thereafter. We don't have that. Ukip has folded, the Vote Leave campaign has nothing of value to offer and others are busy fetishising Article 50.

Some have it that the government has been given an instruction to leave and should get on with it but without a movement pushing a strong definition of outcomes which satisfy the reasons for leaving we will watch helplessly as Brexit is defined for us. 

As it happens, I now think that is exactly what will happen. There is no such movement and there is no time to build one with coherent ideas and even if we could, a grassroots movement would have no particular leverage. When it comes to Brexit, leavers are as diverse in their incomprehension as economists. There are many debates with no real conclusions. There is not going to be a common agreement on how to proceed.

The central reason for this is a simplistic idea of what can be achieved and this is largely a result of a shallow understanding of how far EU integration has gone. The EU is not a trading arrangement with a few tacked on extras. It is a government and it is one that governs systems, products and services which didn't even exist in 1975. People seem to think that by walking away from the EU we walk away from technicalities, bureaucracy and complications. Not so. The world does not get any simpler just for being out of the EU.

It seems that campaigners want to reduce any action to a single sentiment like "Invoke Article 50 now", but all that does is start the clock ticking. It doesn't say what out looks like and it gives sole authority to government to define it.

But there's another problem. Even if we could agree on demands for Brexit we have a political establishment which is largely deaf to the possibilities and sees the Brexit negotiations as an exercise in damage control. Their need is to satisfy the literal criteria of being out of the EU without disrupting their grand schemes or distracting them from their preferred displacement activity. 

They could attempt to subvert the Brexit process in full view of the public but that would ensure the issue would grind on for years. Their way to settle this is to agree a Brexit In Name Only (BINO). As much as that satisfies the base criteria it also parks the issue. I will go as far as saying it is a near certainty that this is how they will do it. If not through malevolence then through incompetence, lack of vision and lack of political will. 

Many in our political establishment see no advantages to leaving the EU and the advantages put forth by Vote Leave and Ukip are largely illusory. The benefits of Brexit thus far appear to be largely fantasy proposals along with some less tangible effects on public discourse. The latter may be encouraging but we can't go to the bank with it. 

In the end though, I think it incompetence that will deliver a BINO we have a number of hardline leavers who exert just enough influence to force the government's hand in negotiation for an unrealistic mode of exit which will waste crucial runtime leaving us with only a very short time to agree an emergency transitional agreement. This will be stacked in the EU's favour as any extension will be thanks to the good graces of member states. They will be in no mood to loiter while we get our act together. Another good reason for taking our time in invoking Article 50.

The problem with that is that a transitional agreement means the onus is on the government to continue the transition process. Some of it will necessarily require continued divergence but some areas of policy could, without external impetus, stay exactly as they are. That is where we need a new movement to keep up momentum.

That said, it is one thing to demand "action now" but with a political establishment so well insulated from ideas from the outside, they will not make a move unless there are better ideas. But here we add another problem. Some things are settled at the European level because there is little sense or value in doing them any other way. 

To "take back control" of certain things would add very little value so any new movement is going to have to think long and hard about what they actually want in the longer run. And if they want to be listened to they will have to come up with the goods on how to do it. This is what Vote Leave should have done, but instead of pushing a plan, they have folded and vanished into the woodwork leaving an ideas vacuum.

All of us want to see real momentum on this and the word on everyone's lips is "democracy" but the act of simply leaving the EU does not achieve this. By leaving the EU without a destination in mind we are simply exchanging one remote technocracy for another with only marginally more influence over it. Brexit alone does not address what many feel is wrong with our politics. 

So what's to be done? For starters we can abandon any hope of influencing the Brexit process. We're out of time and the path before us is depressingly predictable. Technical and legal reality will force us into an annexe of the EEA with perhaps a nod to the desire to control freedom of movement and Brexit will probably turn into a lame duck where most people struggle to notice any difference at all. 

We will see a few domestic measures aimed at boosting the morale of the public to make them feel like they have been listened to and when combined with the fact that on paper we will have left the EU many will buy into the illusion. After that the political pressure dissipates. The opportunity is already wasted. So it seems to me we really need to start asking what happens after we sign our Article 50 settlement. Here it will become apparent just how little Brexit solves. 

There are differing opinions of what Britain should evolve into afterwards. It seems the primary reason for leaving is wanting some control over the laws that affect us - but there is no clear idea of what that actually means. Most technocratic law does not really affect us in any noticeable way. There is just a feeling of unease that government is a business done without our consent so what we should be looking at is a two pronged movement. One which deals with the technical evolution out of the EU based on a broader vision and one which addresses the core of the problem. The basic lack of democracy.

This is where The Harrogate Agenda comes in. It is one thing to recover powers from the EU but the power still then resides with the remote political class in Wesminster over whom we have only limited checks and balances. As much as we need extensive democratic reforms we need measures in places to ensure they do not again take us into projects like the EU without our consent.

More than anything Brexit is about power. Who has it and who wields it. Our objective is to recover power and once we ourselves, the people, hold the power, we can then attend to the many problems and injustices that plague modern society. But without power, there is only protest – and we achieve nothing of any lasting value. 

To help us acquire power, we are adopting the original strategy of the Chartists. Like them, we felt it was vital to frame a very limited number of achievable demands – six in number. These are listed below.
1. Recognition of our sovereignty: The peoples of England, Wales, Scotland and Northern Ireland comprise the ultimate authority of their nations and are the source of all political power. That fact shall be recognised by the Crown and the Governments of our nations, and our Parliaments and Assemblies;
2. Real local democracy: The foundation of our democracy shall be the counties (or other local units as may be defined), which shall become constitutional bodies exercising under the control of their peoples all powers of legislation, taxation and administration not specifically granted by the people to the national government;
3. Separation of powers: The executive shall be separated from the legislature. To that effect, prime ministers shall be elected by popular vote; they shall appoint their own ministers, with the approval of parliament, to assist in the exercise of such powers as may be granted to them by the sovereign people of England, Wales, Scotland and Northern Ireland; no prime ministers or their ministers shall be members of parliament or any legislative assembly;
4. The people’s consent: No law, treaty or government decision shall take effect without the consent of the majority of the people, by positive vote if so demanded, and that none shall continue to have effect when that consent is withdrawn by the majority of the people;
5. No taxation or spending without consent: No tax, charge or levy shall be imposed, nor any public spending authorised, nor any sum borrowed by any national or local government except with the express approval the majority of the people, renewed annually on presentation of a budget which shall first have been approved by their respective legislatures;
6. A constitutional convention: Parliament, once members of the executive are excluded, must host a constitutional convention to draw up a definitive codified constitution for the peoples of England, Wales, Scotland and Northern Ireland. It shall recognise their sovereign status and their inherent, inalienable rights and which shall be subject to their approval.
These are the kind of reforms we need to see. Ambitious and sweeping. Exhortations like "invoke democracy now" is a meaningless slogan. It is merely a command to instigate Brexit. But Brexit alone does not achieve a fundamental alteration to the status quo. It gives us a few more tools but restoring power back to Wesminster still leaves the power in the hands of the few. 

More to the point, it is this kind of campaign where ordinary people can make an impact. Much of the thinking that should have been done about how we steer Brexit has been neglected and it is only now people are turning their attention to it. It's already too late. But after we leave we can capitalise on the momentum and we can convert Brexit into something more meaningful. The field is presently wide open for new and radical ideas.

In the meantime we won't see anything imaginative from the usual players. Various think tanks and pressure groups will propose yet more tinkering with the House of Lords and yet another pointless tweak to the voting system. This does not address the fundamental fault with our so called democracy. We can tinker with the voting system til the cows come home but it still means electing a drongo MP to execute power on our behalf. It is a modern day feudalism. What we can have instead is a vibrant democracy where the kind of participation we saw during the referendum will be a permanent feature of politics - where public debate actually influences the decision making.

We can have all the meetings we like about Brexit between now and the act of leaving but since there is no movement we are wasting our time. If we wanted to shape Brexit we needed to have done the thinking a decade ago. Now though, is the time for thinking about how we really do take back control so that we have the powers to undo what the government does to us in the Article 50 negotiations.

Anybody who though Brexit was the end of it is sorely mistaken. It will take twenty years or more to leave the EU and another twenty before we get anything like reform. But that only happens if there is a movement with focussed demands and attractive ideas. Without that, we are just talking amongst ourselves for no real purpose. 

A lack of Brexit direction

On Thursday I spoke at the Invoke Democracy Now event. Very glad to hear some rational and sensible thinking from Lee Jones. Such is in short supply at the moment.

Sadly, much of the debate was given over to when Article 50 should be invoked. It is a pointless discussion. Bicycle shed syndrome methinks. It is not going to happen this year. Procedure and process forbid it and there is no tactical value in accelerating the process. Getting caught up in that debate distracts from other more urgent matters.

For my part I hoped to bring some idea of how complex the process is and some idea of the traps following Brexit. I don't think I succeeded in that there really isn't any way to do the subject justice in fragmented segments with time constraints.

We heard from Luke Gittos of Spiked Online telling us that we should invoke Article 50 now and hang the consequences, and in the process he dismissed the technical issues I attempted to raise. His view is that "it's not rocket science to negotiate an exit in two years".

Not wishing to be rude but if you think that, you haven't even begun to understand what the EU is, how the system works or the gravity and scale of Brexit. In dismissing the technical challenges involved one dismisses the very nature of the EU. The machine turns on technicality and technocracy and there are serious ramifications for getting it wrong.

Regulation may seem like peripheral minutia but it is at the very core of trade and single market functioning and will be a huge aspect of Brexit negotiations. Reconciling technocracy with democracy is the core cultural conflict in this whole debate. To dismiss this kind of detail is to retreat to the comfort zone of populism which can very easily be identified, ridiculed and ignored. Any movement wanting a seat at the table will have to have credible and tangible demands.

It seems that people are so used to hearing from remainers that Brexit could have severe consequences that they will dismiss such complications even when a leaver is saying it.

What is clear is that there is only a very thin understanding of the process, what can be achieved and what we expect to gain from Brexit. We are all agreed that pressure must be exerted on the government but without a coherent set of demands the government gets to define what Brexit is and what it looks like.

The government has an instruction to leave the EU but to simply demand an exit without purpose is to reduce it to a transactional process. If leaving the EU is not part of a wider agenda then the government will seek a path which is merely damage limitation rather than setting about more ambitious and revolutionary ideas. We won't be any better off for it.

There is clearly an energy to the debate and people are keen to capitalise on the political opportunities Brexit presents, but there is no real consensus on what those opportunities are or how to exploit them. That in part is down to a superficial understanding of what the EU is and the extent of integration. There is an ideas vacuum and no direction to the debate. It's like people have been unplugged from the matrix and their political muscles have atrophied. Politics is a lost art it seems.

The people behind Invoke Democracy Now are motivated by a fear that Brexit will not happen. My fear is that it will happen, but without real objectives in mind and then the Brexit process coasts into a cul-de-sac with no idea where to go next. That is more likely, and if that is the case then we really might as well not have bothered.

Every moment we waste bickering over Article 50 is time we could have spent exploring what Brexit really means. If we can't decide what we want then somebody will decide for us and we will have wasted a once in a generation opportunity.

Sunday, 24 July 2016

The revolution that never was

Things are not as clear as we would like them to be. Britain has voted to leave the EU. Nobody has any good answers to what should happen next. Even the foremost experts are divided on how to proceed. Worse still, the government is completely unprepared for Brexit having never expected to lose.

That would be bad in itself but the Eurosceptic movement has disintegrated and has no credible ideas of what they want and no seat at the table. Our departure from the EU will be rudderless and technocratic in nature and those in charge will treat it as a damage limitation exercise resulting in what many are now calling BINO. Brexit In Name Only.

What that will likely entail in continued membership of the single market, continued participation in the many cooperation agreements and continued payments into the EU budgets. It will also likely mean continued freedom of movement albeit with some fringe restrictions. And though I am an avid Brexiteer, I think I prefer this to the idea held by the Tory right who would have us leave the single market and break off as many relations with the EU as possible.

As much as it would be a pointless act of economic vandalism, it is born of a simplistic understanding of what the EU is and what it does. They are fighting the battles of forty years ago, ignoring everything that has happened since. The notion that we can have full control over our own borders and make all of our own laws is not only obsolete; it’s not even possible if we wish to participate in the emerging global rules based trading system.

The Tory right believes that Brexit leads to sunlit uplands where Britain becomes a buccaneering free trade nation, carving through EU regulation to become free of “red tape”. This ignores that nothing functions well without regulation and it doesn’t especially matter who makes it so long as it works. My dispute with the EU is that the rules are made at the global level and that membership stifles our influence over them. What we need is better regulation, not less. But the quasi-libertarians of the right believe that regulation in any form is necessarily bad. This is a delusion.

Ordinarily there would be no real reason to worry in that the worst of them number around twenty in the Conservative Party. That said, they are ideologue zealots who, if faced with the prospect of continued single market participation could well threaten to bring the government down. The government’s majority is less than twenty MPs which means that a small cabal of ideologues have serious leverage that could see a seriously risky Brexit proposal on the table that would be of no benefit to anyone.

When it comes down to this kind of politicking there is very little point in trying to read the runes because anything could happen. Labour is presently in a real mess, threatening to split, and if something like a hard right Brexit is on the table we could see seismic shifts in the party system. We could see a new super party emerging to snatch the power away from the fringes on each side. It really is anyone’s guess.

In the end I believe the fringe elements will be defeated and the Brexit we get will be a somewhat pedestrian deal with Britain shoved into an annexe of the single market with little in the way of further development out of the EU and our political class will return to business as usual within the familiar framework. Brexit as a revolutionary idea will have been thwarted.

That should disappoint me and sadden me, but given the alternatives and the lack of intellectual capital on the leave side, a BINO scenario would at least put the issue back into stasis until a competent new movement is fashioned to take us the rest of the way out. The obvious ramifications for that is that leavers will have a hard time reigniting the issue since voters will wonder what any of the point was since it made no difference to immigration, makes zero impact on what we pay into the EU budget and leads to no deregulation of substance.

Were I to take any positives from this it would be that the political gesture makes further EU integration politically impossible and it allows the EU to forge ahead with consolidating the Eurozone economies, but without an injection of fresh ideas and new approaches our trade policy will be to simply think along the same lines as usual trying to patch up the damage done. Instead of looking at the bigger picture of what is happening in multilateral forums we will be back to making patchy trade agreements for very little overall gain. It will be a massively missed opportunity.

More to the point, the Brexit we end up with will do very little to heal the vast gulf between London political sentiment and that of the rest of the country. Looking at how the votes were distributed it rather looks like the regions ravaged by globalisation have turned on London. The mills, the shipyards, the mines and the steelworks have all gone, and though Northern cities have superficially benefitted from cosmetic investment, the economic imbalances and the lack of social mobility are still as acute as ever they were. Some say it is worsening.

In that regard nobody seems to have any answers. Jeremy Corbyn seems oddly fixated by privatising railways at a time when I couldn’t think of anything less of a concern to the North and the regions. Even if we did leave the single market, automation and modernisation means the old jobs are not going to come back and though manufacturing may return, the jobs will not go to low skilled labourers. They will go to robotics engineers and project managers. Many recruited from overseas.

I now take the view that the single market was something the UK should never have agreed to but now that we are in the process of leaving it would be as painful as joining it and in the end it doesn’t answer any of the underlying issues. Across the world we are seeing a rejection of the current political orthodoxy and the post war dynamics of world politics are collapsing. Nobody can quite say why or say which way it will go.

Meanwhile, I see a number of small organisations turning their minds to the possibilities that Brexit presents. And there could be many opportunities, but at this point the government is more concerned with securing a business as usual agreement with the EU and what the public thinks matters even less now than it did before. My view is that if people had specific demands of a Brexit settlement then the ideas needed to be there long before the referendum. Even if good ideas emerge from this process, there is a long road to travel to get governments to adopt fresh ideas and without political leverage there is little chance of succeeding. We will require a fresh political movement and it is difficult to see where that will come from.

It will be some months before we get a true idea of what Brexit will look like. Much of what is said by European leaders is for the time being merely political signals to their own electorates now that Hollande and Merkel are facing re-election. There is always a gulf between what politicians say and what is technically feasible. Most politicians are blissfully unaware of just how complex and procedural the process is and any ideas they may have about fundamental restructuring of the EU will be kicked into the long grass by time constraints.

Crucially though it will be the political manoeuvrings within the Tory party that define how this goes. Labour may be in a mess but when it comes to treachery nobody does it quite like a Tory. Mrs May putting various politicians from the leave campaign in charge of the process may be as a means of insulating herself from the mess they will inevitably make of it, keeping her own hands clean for when she steps into salvage it.

In that regard, I will not be watching PMQs or even paying that much attention to the words of the EU commission. It will be in the back rooms and select committees where Britain’s fate is decided. That is where I will be watching. What I have seen thus far is not encouraging.

As it happens I was never expecting that we would win the referendum and I am prone to pessimism so it is worth taking my opinions with some caution, but in this, it was the British public who gave me a pleasant surprise. When it comes to the politics and the politicians though, I have a feeling my pessimism will prove to be better placed. Brexit may well be the revolution that never was.

Wednesday, 20 July 2016

Brexit: taking the power back

A Public Accounts Committee report this week says that household energy efficiency schemes put public money at risk and must not be repeated. The Committee's report concludes take up for the Government's Green Deal loans scheme was "woefully low" because the scheme was not adequately tested.

The forecast of demand for Green Deal loans was excessively optimistic, says the Committee, and "gave a completely misleading picture of the scheme's prospects to Parliament and other stakeholders". It raises concerns that while taxpayers provided £25 million - more than a third of the initial investment in the Green Deal Finance Company - to cover set-up and operational costs, the Department of Energy and Climate Change had no formal role in approving company expenditure or ensuring it achieved value for money.

And who is actually surprised by this? Who didn't think this was baloney from the beginning? The politicians, that's who. This is totemic of the Blair-Cameron regime; firehosing money at largely useless initiatives where the beneficiaries are mainly middle class homeowners at the expense of everyone else.

As much as it was totemic of the casual disregard for public money it is also an example of the political hubris that ultimately resulted in Brexit. Following the global financial crisis energy prices went through the roof. Meanwhile our politicians were signing up to new climate goals, and instead of axing wind turbines and other such fanciful schemes, Ed Davey and Chris Huhne took to the airwaves to tell the renting public to insulate their homes or switch providers at a time when there was virtually zero benefit in doing so.

Ultimately these are the people we rejected when we voted to leave and the EU is one of their vanity instruments. These are the same people who want to overturn the referendum. They whom we call "the establishment". Our politicians have been in thrall to a metro-liberal agenda that really has nothing to say to ordinary people struggling to pay the bills. When we hear of such initiatives we collectively roll our eyes knowing full well we're looking at a massive waste of public money and there is absolutely nothing we can do to stop them. (See wind turbines).

And now that these people are in opposition having lost the referendum we see a new cross-party movement for progressive liberalism to endorse candidates in favour of the EU and immigration at the next election set up by politicians, celebrities and intellectuals. they ain't going quietly and will do whatever they can to overturn the referendum verdict.

The initiative has the support of Jonathon Porritt, the environmentalist, Caroline Criado-Perez, the feminist writer, and Luke Pritchard from the band Kooks, as a space for people who want a voice for openness and tolerance. It also has the backing of Lord Ashdown, the former Liberal Democrat leader, and has been discussed across party lines at Westminster. All the very worst people with all the very worst regressive ideas.

Meanwhile, I'm sure you haven't been following UNCTAD14 this week because you all have a life unlike me. This is the fourteenth session of the United Nations Conference on Trade and Development. It's where we send our PPE graduates as political functionaries. Leftists with a head full of climate change bilge a lot like the late Jo Cox. It links in closely with the WTO's Trade Facilitation agenda which exists to remove technical barriers to trade.

Now I am huge fan of trade facilitation. It's clever, it's super interesting and it's the part of globalisation that delivers for everybody. Until the UN gets its hands on it. UNCTAD exists to inject UN Sustainable Development Goals (SDG) into trade policy. That's where they basically screw everything up and make everybody poorer. It's the part of the global agenda that says people in poor countries must trade in their paraffin lamps for useless and cheap solar panels they can't get serviced and can't pay for. They tell people in flip flops made from cardboard that they must evolve their business models in carbon neutral ways.

Not all of it is bad in that nobody really objects to the loftier ideals of clean water for everyone but when those other goals interfere with the creation of infrastructure making it more expensive then we have a problem. Policies designed to eliminate poverty become so leaden that they have the absolute opposite effect. Kenya is pressuring thousands of expat NGO workers and volunteers to go home. A former British colony and one of the largest hubs in Africa for international charities and NGOs, manifestations of the so-called “White Savior complex” strike a particular chord in Kenya.

And it's interesting there should be a rejection of them in Kenya about the same time we have rejected those exact same people - New Labour liberal NGO types who have done pretty much to Kenya's poor what they did to ours. Impoverished them and made them dependents.

This is all the more reason why we need our seat back at the top table to drive them out of the UN circles as well. The Sustainable Development Goals agenda is working its way into global regulation and is becoming a rent seeker's paradise. It's turning African states away from trade facilitation like UNCTAD when it could be the silver bullet.

It is at this level of global politics where ex-prime ministers serve in an elite club exalting the virtues of UN SDG's. Gordon Brown especially. You can't get rid of them. And when it comes to global climate accords you get virtue signalling auctions where they attempt to outbid each other in a competition to see who can impose the most moronic and costly target on their own country.

And this is also why Labour has absolutely nothing to say to working class people because their stock of MPs, a lot like the loathsome Jo Cox have never worked outside of this system. They genuinely think that the baloney like "Fair Trade" (a 2003 idea if there ever was one) is the sort of thing that will win elections. That is why Labour is increasingly the domain of brattish trustafarian socialist types who will never have a real job so long as they live.

Those who succeed end up working at the UN or in some lefty think tank, the ones who don't end up working in a wildlife quango in Cambridge. Or worse, a local authority executive. Ultimately Brexit is the process of removing these virtue signalling narcissists from positions of power and influence and that is why even after Brexit, there is still much to do. These people don't listen to the public, won't be told anything and continue to nurture their vanity with our money.

Monday, 18 July 2016

Brexit presents a massive opportunity for global trade

Each of us had very different reasons for voting to leave the EU. I can't nail it down to any one thing but in the end I voted with the UK's long term economic prospects in mind. After China there are few more difficult markets to enter than the EU. I am not alone in describing the EU as an iron curtain on trade. I think even the EU understands this. The EU is not globally competitive and as the rest of the world catches up in terms of wealth and education, it is declining in global relevance. It won't be calling the shot on regulation forever.

The EU's answer to this is CETA and TTIP. To my mind TTIP is an extension of the single market ethos but since the USA has a well established regulatory system the work is in reconciling the vast systemic differences. As I understand it many trade experts expect it will fail. EU member states may well vote it down and if they don't the USA most likely will. Years of work up in smoke. If it does pass it will be thinner agreement than was hoped but it still represents an extension of the iron curtain. The EU, driven by french and German defensive interests such as manufacturing will never fully open its doors to competition. Britain suffers because of that.

Listening to the economic conversations among Africans the view is increasingly that the EU is simply too expensive to trade with and comes with too many strings attached, not least because of the EU's social agenda attached to any trade deal. Many have concluded China is a more relevant market or that better links with India and South America are more achievable since the regulatory sphere is less well developed. The EU's response to this has been to do nothing.

As much as the EU suffers from its own bureaucratic inertia, interests within often mean that a well intentioned EU simply cannot secure political permission to liberalise. This is a bad approach to trade. The EU has exclusivity over all trade to the point where we have no trade negotiators of our own. All member states are prevented from strengthening ties with their natural and historical allies. Though there are advantages in pooling our economic might we lose all agility for dogmatic reasons.

There are areas where there is every advantage in harmonising with Europe and no sense at all in diverging. But the flip side of that is that there are sectors where we do little trade with the EU and there is no purpose at all in harmonisation to the cost of other opportunities. The idea of a geographically fixed single market in all things for its own sake flies in the face of modernity. The internet has reinvented trade and it is people who decide who our closest trade partners are, not the EU Commission. The EU is swimming against the tide and it does so because of the fundamentalist ideals at the heart of the EU. It's no good.

More to the point, you can only go so far with harmonisation of trade in goods before things reach a plateau. It's for the same reason the basic configuration of the Boeing 737 remains the same today as it was thirty years ago. Good design makes for incremental improvements over the years but the essence of what it is has not changed and is unlikely to do so for many years to come.

The next challenge in trade is that of services where, thanks to the internet, geography is less relevant than ever. In terms of services is comes down to issues of intellectual property rights movements of money and cash transfer services. In procuring services customers are more likely to look at other English speaking countries in the same way that Portugal is more likely to trade with Brazil. Consequently efforts to harmonise trade must happen at the global level or be tailored for what actually happens rather than what the EU would like to happen.

This is where Brexit changes everything. As much as anything it is a swift kick in the complacency for the EU. After Brexit there can be no business as usual for the EU if it wants to survive. Free of Britain, the EU can reshape according to its needs and the UK, primarily a service economy can do likewise. As to our role in Europe, the settled narrative is that Norway has the worst of all worlds in being half in and half out of the EU. It has become an article of political certainty, despite the fact that Norway enjoys most of the benefits of the single market while also being able to act independently or as part of Efta.

There are disadvantages that most are now familiar with in that a significant body of law still comes from the EU, but the fact is that Norway does get to pick and choose according to its own economic preferences. And if that is true for Norway, then that goes double for the UK with a richer and more diverse economy. In any case, as I have rehearsed countless times, the essence of EU regulation is devised at the global level and it matters not one jot that it has an EU stamp on it. The core of EEA regulation is really not that big a deal and the hassle that comes with transitioning to a different regime is more expensive that sticking to what we have.

There are those who would like to slash and burn at regulation and see Brexit as a mandate to turn our backs on technocracy but these are people who just want the world to be simpler than it is. The truth is somewhat different in that the world is becoming even more complex and with that goes regulation. It's a fact of life. Death, taxes, regulation. But what comes next?

Britain cannot expect that world leaders will be banging at the door for a trade deal with the UK. We have heard encouraging signals from well meaning allies but the nuts and bolts of trade tend to throw a spanner in the works as some trade aims are in conflict with deals and treaties already in place. The chances are we will carry over some of the deals we have as part of the EU which will necessarily exclude carte blanche deals elsewhere. And this is without even looking at the usefulness of such deals. For instance, what use a trade agreement on tyre exports to New Zealand if we don't send any tyres there?

As much as the UK needs to be scouting around the world for trade opportunities it also needs to have concurrent conversations with UK business, particularly IT and data services and asking them what the barriers are to trade. In most cases it will be regulatory compliance where we are best focussing our efforts at the International Telecommunication Union in Geneva rather than Brussels.

For the purpose of intelligence gathering we may even need a new branch of the Department for International Trade. It already does a pretty good job of speaking to businesses around the country but conversations are not well focussed and in the past have been Brussels centric meaning innovations reach a dead end. Free of the EU we are able to put our own submissions to Codex, UNECE and the IMO.

One thing we do not want to do though is have the government guessing at the agenda. To get more effective industry intelligence we may well be advised to promote and if necessary make compulsory, membership of trade guilds which can monitor global regulatory developments both as an early warning system and as means of influencing the conversations.

The UK also needs to look very closely at trade facilitation. We already have a good deal of this work in progress and DfID is actually quite good at it in terms of identifying opportunities. There are two problems with our approach though. Firstly we don't spend nearly enough on it. It is an accessory to our activities when it should be central to it. Secondly, it is seen more as a branch of aid policy for the do-gooder set with the government sharing much of its pooled expertise with Oxfam. It is largely divorced from the regulatory sphere and seemingly operates independently of the Department for International Trade.

The elephant in this particular room is the EU where much of our aid spending is simply directed to the EU which in turn passes it along to NGOs. We have three disparate agendas not working to any strategic objectives and certainly not in the direct national interest.

If Britain wants to be a leader in global trade then it is going to have to build trading opportunities from the ground up, working with Codex and UNECE to proliferate the global rules based trading system and nurture expertise in target countries. We have have a mandatory obligation to spend 0.7% of GDP on aid, but there is nothing to say it cannot be spend in the national interest. If we view aid as a trade and development tool and we can say that it is a worthwhile investment for the UK then there is absolutely no reason why we should not spend more if needs be.

Further to this, we need to end our propensity to rely on NGOs to deliver aid on our behalf. Humanitarian aid is good as far as it goes but in many respect is unaccountable and of limited use except for immediate disaster relief. Instead there is no reason why some of the aid budget should not be redirected to the Royal Navy to purchase hospital ships, floating power stations, desalination equipment and all purpose container ship based platforms for aid operations.

Out of the EU we should reintegrate trade and aid, with a larger role for our forces but connecting the dots between UK exporters, along with exploring the global regulatory dimension. This is key to the removal of non-tariff barriers. It also goes some way toward addressing immigration push factors.

As members of the EU, this has been impossible and we have been riding three foreign policy horses at once. Now we get to decide what our foreign and trade policy is and gear the mechanisms of state to advancing our own interests and governing for the betterment of the UK. We will expand our influence in the global sphere by investing in international development. There is no reason at all why we cannot do this and every advantage in making it happen.

We now need a major national conversation on how we redesign domestic governance and foreign policy with a view to extending our global reach. The key to this is understanding the many global multilateral forums where gradual increments are worth far more to us than any bilateral agreements or "free trade deals". It is how things get done now and all the while the EU is stuck in the last century with deals like TTIP, we can be forging ahead using state of the art trade practices. If we are not talking about regulation and trade facilitation then we're just not talking about trade. Our politicians need to wake up to this amazing opportunity and to stop fixating on bilateral deals. Things are done differently now and it's time to get with the programme.

Sunday, 17 July 2016

Global trade: don't get excited just yet

Australia has called for a free trade deal with Britain following its exit from the European Union. Britain could also take advantage of CETA even after it has left according Canada’s trade minister.

I wouldn't get too excited just yet though. You would struggle to find any politicians with an adequate grasp of what that actually entails. Britain is at a disadvantage in a lot of talks because we are already one of the most open economies there is. We do not have many barriers except for "behind the border" barriers like regulations. We won't be trading those away any time soon because our regulation is on the whole pretty good and conditional on EU single market access even if we leave the single market.

To simply agree to a removal of tariffs does not necessarily boost trade. To trade in another country means navigating its rules and regulations and conditions of trading which often comes at significant cost, so even if we do manage to get rid of 3% tariffs it still doesn't mean trade is necessarily attractive. The cost of compliance can be high and while we could ask for harmonisation of regulation we would have to do it in line with what the EU is doing. Also as we are already quite open there is not a lot we can offer in terms of reciprocity.

A lot of people, politicians included, think that trade deals are just a matter friendly like for like agreements between allies. They're not. They are complex, detailed, often contradictory and not always beneficial even when dealing with friends. What we are hearing from our allies is signals of intent which are political gestures and signals to the markets that Britain is not friendless and isolated - but it does not follow that there will be a deal ready to sign the moment we leave the EU.

Some have it that EU exclusivity means that we cannot formally negotiate trade deals until we have left but there is nothing at all to stop us having scoping talks so we have a clear idea of what a deal would look like but it is unrealistic to expect that we will have anything comprehensive put together between now and leaving the EU and it is unlikely they will be formalised this side of 2020.

Where our politicians have got it wrong is their insistence on bilateral deals when really we need to be taking a very close look at UK industry and talking to exporters, working up a list of non tariff barriers they experience the world over and instead of focussing on trade deals we should be going to all the major regulatory bodies globally and using our soft power to push through reforms.

We probably won't though because nobody in the Westminster is even aware of this dimension. We are not recruiting for it and because we have been in the EU for forty years we have no departments capable of dealing with it.

I'm not exaggerating when I say there is absolutely no competence in this field and the likes of David Davis and Liam Fox haven't even begun to grasp how trade works. Davis wants a Canada style agreement for the UK to access the EU but that goes nowhere even close to answering the question of how we unpick forty years of integration. I have a nagging feeling we are going to pay dearly for their childlike naivety as we struggle to replace any trading advantages we lose by leaving the EU.

Friday, 15 July 2016

Brexit is far more than just a trade deal

To pick just one example, the European Medicines Agency (EMA) is a decentralised agency of the European Union (EU), located in London. It began operating in 1995. The Agency is responsible for the scientific evaluation, supervision and safety monitoring of medicines developed by pharmaceutical companies for use in the EU.

Leaving the single market puts into question whether it can continue to be based in London. Even staying in the EEA puts this into question unless we negotiate to retain it. EEA members have no voting rights and only limited management rights.

It is wholly separate to the matter of trade but if we want to keep it there are several questions over our involvement. If we want to gain management rights and voting rights then all other EEA members will want management rights too. This is unlikely. Thus, with a weakened UK, the Commission might (under pressure) move the agency and we might lose it altogether. A huge blow for the UK pharmaceutical industry.

Then there is also the continuance of leases, procurement contracts, existing joint projects within it and staffing issues. If we want to keep it we will have to pay for it and we will have to make concessions in unrelated areas, possibly agricultural quotas or something nobody up to press has even thought of. There are almost forty of these agencies from the European Chemicals Agency (ECHA) to the European Food Safety Authority (EFSA) and the European Union Intellectual Property Office (EUIPO). There is also Frontex and EASA. Inside these agencies are academic research programmes tied in with EU academic cooperation agreements.

Just imagine how pissed off Europe is going to be with us if we suddenly pull the plug on all of this. Without UK funding much of it disintegrates. You would think that gives us leverage but it doesn't. We have signed contracts and agreements and we would wreck our international standing should we simply rip them up and walk away. If we have funding agreements going to 2025 then we will stick to them.

So we shouldn't expect any draw down in budget contributions any time soon nor can we expect to pull out of these agencies without first developing our own domestic ministries to hand such affairs. In some cases we will want to do that as soon as possible but I don't see any value at all in replicating work on medicines at massive cost.

So Brexit is really a question of deciding how much of a relationship with the EU we want in the future and which elements we will phase out. None of this is going to happen quickly and not of it is going to happen without a negotiated departure.

So when you hear the likes of David Davis prattling on about a Canada style deal on tariffs, you just know the man is away with the fairies. A deal on tariffs doesn't even begin to address the process of unpicking forty years of integration. Not forgetting agencies under Common Security and Defence Policy. We won't be joining any European army but we most certainly will want joint operational capability with the EU whether it develops its own army or not.

If the EU steams ahead to become that superstate then it is a neighbour and an ally, and not something we can expect to close the door on even if we wanted to. There are going to be thousands of questions submitted to the government regarding all of these areas that affect just about every walk of life. You have to be naive in the extreme to believe this is just about trade and tariffs and whether or not we are going to comply with EU regulations.

We are going to need an army of technocrats going over absolutely everything with a fine tooth comb. One small decision has massive practical ramifications. Just one small disagreement over something like the European Banking Authority securing, selective opt outs, could stall the process for years.

With that in mind you have to be extremely cautious of what trade experts say and even specialist constitutional lawyers like Professor Michael Dougan haven't grasped the scale of it at the granular level. By attempting a bespoke deal we are opening up several Pandora's boxes all at once, introducing massive risks into the system along with multiple stalling points and delays. The only way to avoid this is to swallow the lot as is under the EEA agreement if only to reduce the risks and simplify the negotiations. The negotiations are already complex as it is with WTO transition to consider. Nobody in the field thinks that will be straightforward or without risk.

Were it as simple as just agreeing mutual recognition of standards and regulations with a wider agreement on tariffs then we could wrap this up in a couple of years, but the politicians involved at the moment simply haven't the first clue - especially not David Davis or Boris Johnson. They are dangerously clueless. These people are willing to introduce massive risk entirely unnecessarily for the sake of taking back "full control over our borders" for very little actual gain.

The danger for leavers is that the Tory right will steadfastly refuse to acknowledge reality and will push for their fantasies despite a mountain of evidence that suggests a non-EEA option would be seriously stupid. They will encounter the political realities during talks instead of before them - and when they hit the reality crunch they will have to dash back to the drawing board in a hurry. That could mean that the process will be aborted leaving everybody feeling sour with seriously dented relations with the EU. Nobody wins from that.

Theresa May as a remainer might well have pulled a serious fast one on the leavers by putting it all in the hands of Johnson, Davis and the rest of the Vote Lave idiots. The leavers will be delighted that these morons are in control and then May gets to walk away unscathed when they make a pigs ear of it.

In the end, we may not end up leaving by way of having to push the emergency stop button on Article 50 talks specifically because of the vacuous fools who campaigned to get us out. That might well be the genius of Theresa May. She has seen that the people most likely to keep us in the EU are the leavers themselves through their own ignorance and incompetence. A political masterstroke.

That is why pushing the Article 50 button now is wholly moronic. We at least need to win the battle about what sort of Brexit we want before we do. If at this point you are still thinking we can simply hit the button and see what happens, and that some sort of bespoke deal is a walk in the park then you are simply not using the sense you were born with.

It takes more than five minutes to understand Brexit

Ian Dunt of Politics UK invites Brexiteers to respond to his five minute explanation of the Brexit negotiations. I won't fisk it line by line because it's a tiresome pursuit. Regular readers might as well skip this post because it's nothing you haven't known for many months.

To understand the situation we face you have to wipe the slate clean and appreciate a few caveats. Firstly there is a massive gulf between what politicians and various sources are saying now and what they were saying before the referendum. The chances are that everything said before the referendum is tainted by politics and wishful thinking on both sides. You have to treat this week as ground zero and ignore much of what has previously been said.

Secondly there is a massive gulf between what the politicians are saying and what is actually possible. For instance, David Davis wants a Canadian style agreement. This deals mainly with tariffs and says nothing of regulatory harmonisation and doesn't even begin to approach all the other areas of cooperation from air travel to food safety, space policy, defence cooperation, academic cooperation and Europol.

If we wanted a CETA agreement that would only be a minor fragment of the entire Brexit process. Since we lack the domestic capacity to take over many EU functions we will want a transitional agreement on all the rest of it. It doesn't tackle the complexity of unpicking forty years of technical and political integration. What we end up with will look nothing at all like a CETA agreement. There is nothing economically desirable about it either.

David Davis will rapidly be disabused of his fanciful notions after a month in his new post. If we are still hearing noises like this after a months we can only assume the civil service has been stripped of any expertise and that Mr Davis is just not showing up to the various select committee meetings.

Then there is the WTO option. If we elect to leave the single market without an agreement the EU erects tariff barriers, not out of spite, but because it has a common external tariff. That's just the legal default. We become a third country. The EU has a common external tariff that it must apply to all third countries. If we match it in reciprocation, under non-discrimination rules, we have to impose tariffs on all our other trading partners. That creates havoc, so we end up not imposing tariffs on the EU while they impose tariffs on us.

Put simply, it is completely out of step with reality. As much as we don't want it, that would be the default position should talks fail. Nobody gains from that. Nobody will let it happen. Listening to various select committee meetings and experts on both sides, nobody serious proposes this option. More to the point, the EU doesn't want it either. 

So, Switzerland. There isn't a single agreement between Switzerland and the EU. There are several. 120 in all. And they are problematic. It took several years to get to where they are and nobody is happy with it. To replicate it would require opening up several silos for minute level of debate which would add unnecessary complications and delays. It's not practical.

Frankly, with all the information in the public domain it's a wonder any of our politicians are still stuck on any of these ideas. The single market is the largest and most complex entity of its type in the world. We are not negotiating access from scratch. We are talking about negotiating an exit which is an entirely different kettle of fish. 

Politicians have yet to grasp the scale and complexity and the real world ramifications for what they propose. Only when they begin to realise the scale will the realise the need for a transitional agreement based on the EEA. I do not see any other way of doing it without causing major harm to the whole EU economy. 

But then the EEA does not go far enough either. It does not include fishing and agriculture. To unpick that alone will take several years and there is no putting things back how they were. To say it is complex is an understatement. And so we will have to append the CFP and the CAP to the EEA agreement with a further agreement to revisit it later. The Article 50 negotiations will have to focus on producing agreement that deals with the basics only. We do not have the diplomatic not administrative capacity to take it on all at once. 

So why are we even talking about leaving the single market? Immigration. Throughout much of the referendum debate, it has been assumed that, in order to continue participating in the Single Market, we would have to accept freedom of movement. Any number of high-ranking Commission officials have warned us that this is "non-negotiable". But this is not strictly true. There is a good deal of wiggle room using the EEA Article 112 "safeguard measures" as leverage to broker a permanent amendment to the EEA Agreement which permits the adoption of a quota system on EU/EEA immigration. Some are calling this the Liechtenstein solution.

Some have questioned whether this is possible. That is a debate we have yet to fully explore. We have seen it denounced by Professor Michael Dougan, but he is not the only expert on the block and there is an element many experts are blind to. Politics. If all parties agree to a particular framework as a precedent by consensus then it can be used. The debate then becomes one of probability, not possibility. That all depends on what leverage we have or what we are prepared to pay for it.

If this cannot be achieved, it may have to be a political fudge on freedom of movement, exalting the virtues of the existing EEA safeguard measures. We may be able to leverage some other concessions but we will pay a price for it. A big one. In the end, with all political realities considered, and especially if parliament is in any way involved, they will insist on an EEA option. Not least since single market membership will be a red line for Scotland.

Where I take issue with Ian Dunt is his later literal interpretation of Article 50. He asserts that "the two year Article 50 timetable doesn't even apply to trade. Article 50 only applies to constitutional and legal arrangements. And more importantly it only applies to ending your current arrangements - not building ones for the future."

The origin of this nonsense started with a statement from Cecilia Malmström. I can only assume that she is either sending out a political signal or that she simply doesn't know what she is talking about. Or both. Article 50 actually states:
2. A Member State which decides to withdraw shall notify the European Council of its intention. In the light of the guidelines provided by the European Council, the Union shall negotiate and conclude an agreement with that State, setting out the arrangements for its withdrawal, taking account of the framework for its future relationship with the Union.
It's that latter part that matters here - "taking account of the framework for its future relationship with the Union". If we are talking about EEA accession then we are talking about trade. Inside this we will also look at grandfathering EU trade deals and access rights to extended agreements in the same way Norway negotiates its access and exemptions to TTIP. I suspect nothing I say will disabuse Dunt of this notion so I won't dwell on it, and he can simply apologise for getting it wrong when negotiations are underway. As it happens, there are already scoping talks in motion with non EU nations.

But there's a downside, says Dunt. "Norway still has to abide by the major single market rules, like freedom of movement, but without any say over them". This is one of these dismal political memes which refuses to die. As much as Norway, as part of Efta, is fully consulted, Norway does have a veto. If, however, it exempts itself from certain rules by way of a reservation then it must pay tariffs for market access on certain products.

There is always a penalty. It is, though, Norway's own parliament which gets to decide whether the trade off is worth it. That would be that "taking back control" thing. If Norway did not have its own protections on agriculture, the chances are that it would not have an agriculture sector.

More to the point, single market rules and regulations are not made by the EU. The EU is a law taker, not a law maker. The substance of the rules is made by Codex, UNECE, UNEP, ILO and the IMO. Codex Alimentarius, for example, makes most of the international standards regarding the production and marketing of food. Not only is Norway an independent member of Codex, it even hosts the all-important Fish and Fisheries Products Committee. Thus, it is the lead nation globally in an area of significant economic importance to itself.

When it comes to trade in fish and fishery product, Norway is able to guide, if not control, the agenda on standards and other matters. The EU then reacts, turning the Codex standards into Community law, which then applies to EEA countries, including Norway. But it is Norway to some extent, not the EU, calling the shots. In all respects, Norway has greater say in Codex Alimentarius affairs than does a UK which is isolated in "little Europe".

By leaving the EU we regain our own veto and right of reservation and can vote independently of the EU. Dispensing with EU exclusivity on trade and regulatory negotiation is one of the most attractive arguments for leaving. This is also why concerns about bilateral trade deals moving forward is less of an issue.

If you have learned anything about trade over the course of this referendum it is that tariffs are less the issue as the removal of technical barriers to trade and the harmonisation of regulation at the global level. We are moving past the era of bilateralism and into the realms of multilateralism. The WTO Agreement on Technical Barriers to Trade makes it clear. "Where technical regulations are required and relevant international standards exist or their completion is imminent, members shall use them, or the relevant parts of them, as a basis for their technical regulations".

That is, in short, the EU's redundancy notice. The rules and standards for the functioning of the single market shall henceforth be decided at the global level through a process of multilateral talks are various global forums. We are seeing the emergence of a global single market where bilateral deals become less relevant than ever. If you can use these platforms to eliminate technical barriers to trade then the cost reduction could well be greater than that of eliminating tariffs. This is where reintegrating our own trade and aid policy could be a major boost to global trade.

Then there is the issue of the two year cliff edge under Article 50. Dunt has it that "We're like a man being thrown out of a plane into the sea with no lifejacket. Seriously. I'm not making this up. It's scary". To put it bluntly, this is silly histrionics. For this to happen talks would have to fail. And for them to fail there would have to be the political will to let them fail. That's not going to happen.

Dunt is right in that the consequences would be unimaginably serious. Our goods would have to be directed through ports equipped to take goods from third countries. Ports with the proper inspection facilities. Overnight we would be redirecting lorries to international ports like Southampton. Think Operation Stack by a factor of ten. As bad as that is for the EU it has massive ramifications for French and German manufacturing and would likely set off a global recession, putting the Eurozone in further peril. That is why, even if we approach the cliff edge, the big three will use all their might to suspend the talks or extend them.

Like I say, it isn't helpful to take anything in this process too literally and it is wrong to assume the EU will be adversarial. It will stand up for its interests but one of its interests is a prosperous UK come what may.

There is a lot more to discuss about WTO accession and agricultural subsidy and if you really want to get to grips with that you would be well advised to watch the treasury committee meeting from Wednesday where there is a broad consensus from three leading experts on trade that WTO accession will be tricky but not impossible. What we're seeing from Ian Dunt is a wilfully negative view, preferring to accentuate all the risks as political certainties.

He is right to point out that the claims made by Boris and Vote Leave will not come to fruition, but Vote Leave does not speak for me, nor does the Tory right and I still want to leave the EU. Dunt is also looking at the EEA as a destination rather than a stepping stone. This is a misconception.

The EEA with added CFP and CAP likely means that when we finally leave the relationship with the EU won't be hugely different to how it is now. We will adopt most if not all EU regulation for the interim, but we will have the freedom to change them in the future - if not unilaterally then by using our new found right of initiative to go to the top tables where the rules are made.

Brexit will be a long process that may take more than twenty years to fully complete. We will not be wrapping it up in two years and and Article 50 will not be the end of it. Brexit is a process, not an event. And though the EEA is suboptimal it is the path of least resistance and the safest landing pad from which to evolve our relationship with the EU and the rest of the world. The naivety of Ukip and the Tory right is that we can leave the EU in a single bound. It's not going to happen and there are no sunlit uplands for quite some time.

Ian Dunt's article won't be the last of its type in fatalistically painting the process as utterly bleak with no advantages, but political realities will soon work their way through the white noise and we will be forced to choose between a ideologically pure but suicidal path or a measured EEA exit. Good sense will probably prevail.

The danger for leavers though is that the Tory right will steadfastly refuse to acknowledge reality and will push for their fantasies despite a mountain of evidence that suggests a non-EEA option would be seriously stupid. They will encounter the political realities during talks instead of before them and when they hit the reality crunch they will have to dash back to the drawing board in a hurry. That could mean that the process will be aborted leaving everybody feeling sour with seriously dented relations with the EU. Nobody wins from that.

On the whole it is good to see that some in the media are finally getting to grips with the magnitude of the process and highlighting some of the traps, and I would not disagree that leavers have unrealistic expectations and woefully inadequate command of the issues but doom mongering is wholly uncalled for. Just because it is large and complicated does not mean it cannot be done and there are still serious advantages to look at outside of the euro-centric debate.

Crucially though, Brexit has revealed the inadequacy of our politicians in dealing with serious matters - and that in part is a consequence of EU membership as our aptitude for governance has gradually atrophied. I think that alone is reason enough to leave. If we lack the necessary competence then that is our own fault and we will have to learn the hard way. If politicians did not want us to pay this price then they should never have done this to us without our consent in the first place. Taking us in on the proviso that it would be too scary to come out was their hubris. It backfired spectacularly. Now suck up the consequences.

Wednesday, 13 July 2016

Treasury Committee: further thoughts

I've actually learned quite a lot today. What I know about trade is largely theoretical drawing on the experience of trade officials found in snippets from various texts. Today we learned from two elite technocrats a few of the political realities. I feel at liberty to disagree with them on some points because what we are proposing to do has never been done. Brexit is completely without precedent and there are multiple logic traps that even the best can fall into. Trade officials are used to engineering trade deals. The nature of Brexit is engineering a reversal. The differences are slight but significant at the same time.

As far as opinions go, though, what we saw was a selection of pretty much the best there is. What is now clear to me is that theoreticians like us lacking any practical hands on experience can all too often take some consequences at face value and interpret law too literally, forgetting that politics can take over and fill the gaps. By that I mean pragmatic politics - ignoring the letter of the law in the greater good.

The remain side have also been guilty of that in assuming accession to the WTO can only be done one way, but we learned today that the nature of the WTO is to overcome hard scripted laws by agreement and find ways to facilitate trade. Had we seen this kind of testimony beforehand the referendum debate would have looked a lot different.

And that troubles me. Why did this committee in particular seek out the testimony of know-nothings like Arron Banks, Patrick Minford and Dominic Cummings while neglecting to consult serious voices? Simply it was about demolishing the case for Brexit rather than illuminating the debate. In that regard our MPs failed us. And today they failed us again by indulging in the Iraq debate while only five MPs bothered to turn up to listen to some of the most compelling evidence yet submitted.

And though I have had some of my arguments confirmed, that we will be more agile in trade talks without EU caveats holding us back and that TTIP is dead in the water, we will have to work doubly hard to compensate for any loss of EU trade or trade from EU extended agreements which cannot be easily replicated for the EU. We do not as yet know what all these are and will have to examine all of them on a case by case basis.

We are looking at either an extremely risky path or a safe one which will likely see no real change in budget contributions and not much in the way of reduced immigration. These are points I have made time and again but to hear dispassionate post-referendum observers making the same points really hits it home. The hard fact is that there are no sunlit uplands to Brexit. There is no renaissance of global trade to be had in the short to mid term. The benefits as promoted by the official campaign are simply untrue. All of them. And constitutionally that could prove to be quite poisonous later down the line.

Now I am starting to think that the chance of seeing Brexit benefits inside fifteen years are slight and if we manage to secure a deal that does not massively disrupt the economy and damage our international standing then it will be a small miracle and a massive achievement. In the short to mid term I think the benefits are mainly cultural and morale related. To get the full benefits of Brexit we will have to push ideas into the mix that are simply not being explored presently. As I say, MPs are not nearly serious enough about what lies before us. They have a blissful naivety of what Brexit entails and precisely what they have got us into.

If we cannot plant new ideas into this impenetrable system then Brexit could even be a lame duck. A lot of hassle and expense and a recession to simply get back to the levels of growth we are presently experiencing - which are negligible. The only difference being that we are out of the EU with a much bigger civil service. I still think though that's a good thing and even if there is no net profit then it still had to be done. We had to have that democratic correction to undo what was done in our name. If politicians did not want us to pay this price then they should never have done this to us without our consent. Taking us in on the proviso that it would be too scary to come out was their hubris. It backfired spectacularly.

The problem we have is that some of the ideas we set out in Flexcit are not as technocratic as some believe. Flexcit is a fundamentally different approach to trade focussing on the WTO trade facilitation agreement, using vehicles like UNECE. Some of these ideas were casually dismissed today because our experts see these options as destinations rather than the beginning of a journey. That is really when we need to part ways with the pure technocrats and start demanding they turn their wits to what we can do rather than what we can't.

There has been some debate before and since the referendum on the usefulness of experts. We have seen some complete disregard for any kind of expertise which is both healthy and unhealthy depending on the context, but the approach of politicians is to see expertise as the master and not the servant. That is the culture we have to challenge; turning politics away from the timid can't-do attitude to something a little more spirited.

In the meantime we desperately need the entire nation to wake up to the enormity of what lies ahead. Politics is not properly engaging in it and has yet to comprehend the fact that this goes far beyond trade and regulation. Collectively we are not even off the starting grid.

Meanwhile we have seen David Davis appointed as Brexit minister, and we see an article from him with some very vague ideas and without reference to the fact we have to unpick 43 years of integration. He ventures that Article 50 could be triggered before the beginning of next year. I believe this to be a naive position and he is coming at it from a position of complete ignorance. These eurosceptic MPs have never been confronted with the realities before. Pre-referendum it was easy for them to dismiss complexities as remain hysteria. Now they are about to find out what is and what isn't a possibility.

I am still of the view that an EEA based interim solution is absolutely essential as a departure lounge, not least because moves to leave the single market will see major disapproval from Scotland. That is a complication we do not need. Bearing in mind that the very suggestion of leaving the single market will trigger market fluctuations. I have argued that we shouldn't be slaves to the markets but we should still be mindful of them.

I am unconvinced by the case of a liberal free trade zone based on selective commonwealth lines as some proposed, especially since from a regulatory perspective it deviates from our main export market when widening global trade probably will not compensate for any loss of access to the single market any time soon.

In that regard the other trade experts contradict themselves. The option does allow for some selective divergence and deregulation but I think the merits are overstated and I don't think they will necessarily result in a more competitive economy as added regulatory complexity and the transition involved is sure to cause headaches. 

I think for now we need safer more familiar moves and slow the process down to a pace we can manage. Keep in mind we have closed down much of our domestic competence and the talent we draft in is not necessarily going to be working in the UK interest.

Moreover, the reason many would have us leave the single market is not out of any genuine impression that it is better for the economy. Mostly it is a smokescreen excuse ending of freedom of movement which I believe would be a serious mistake. I don't have objections to Efta level controls on it but to give up on it completely would be a terrible shame.

Some believe ending single market membership will lead to a more egalitarian globally focussed immigration system but we know that will not happen. It will be taken as a mandate to further close down freedoms. It is better to expand on the freedoms that exist rather than close them down.

I expect we have a very long road ahead of us with much more detail to hammer out. It is going to require even closer scrutiny than was given to the arguments during the referendum. It is deeply troubling that our MPs are not up to the job and not treating the issue with the necessary seriousness, and all the harder for me to have to peel away from it in order to earn a living. As blogger The Boiling Frog asks, "Why oh why are unpaid bloggers having to make the running in this most important of issues regarding the UK's role in the world in the 21st century?"

The media will scarcely mention today's events. Again it is reduced to Boris Johnson, cabinet reshuffles and all the usual fare for our media who think it's business as usual. At what point do they start taking their obligations seriously? 

Treasury committee: first thoughts

Having watched the treasury committee meeting today we are now seeing a lot of the debates we should have had prior to the referendum and it really shows just how shallow the debate was. I have been saying it was more complex than complex. Well, it's more complex than that. Really refreshing to hear genuine expertise about trade from new faces, adding another dimension to the arguments.

The general impression from the whole panel is what we said from the outset. CETA and WTO options are completely out there. For the birds. And though the expertise we heard today was extremely valuable in adding to our understanding we still see a deformation professionelle at work as our trade experts tend only to look at it from a trade perspective, neglecting to take into account, defence, cooperation programmes, aviation and the rest of the EU institutions.

We can say that the meeting was wholly inconclusive. All we can hope for at the moment is terrain mapping, giving politicians an idea of scale and disabusing them of some of their more surreal ideas.

What was noteworthy was the low attendance from MPs. These hearings were packed when the amateurs like Cummings and Banks were giving evidence pre-referendum, but now, the most serious and difficult issues don't pack seem to attract any interest. MPs instead piling into the Chilcott to rake over old ground. They are less interested in the here and the now and not engaged in what Tyrie calls the biggest political crisis since Suez. In many respects he is right.

I won't go too much into the technical details. It will take some time to sink in and understand but this is the kind of stuff which is essential to understanding the timetables. Nobody with a grasp of the issues thinks invoking Article 50 any time soon is a good idea without having an idea of the landing zone and the exact path we want to pursue with the EU. The only way we can consider pushing the button is by getting an up front agreement to extend the talks to five years. Not sure if this sunk in as a possibility.

Philip Hammond has suggested the process could take six years, but the whole process is looking more like twenty years with all things considered. Consequently there is very little rush to press the button.

There seems to be some disagreement as to how much we can take on in the initial Brexit talks with other experts suggesting that we can explore concurrent talks with non-EU nations. Though I think this is ill advised when we don't know what shape the EU agreement will look like.

What we did get was a broad consensus that there is no real obstacle to WTO accession but it is not without complexity when it comes to agriculture. We already knew this but it's good to know this much is out in the open. The debate is now centred around the order in which we do things as much as it it what kind of landing zone we have when we leave. On some issues there will be extensive disagreements on how to proceed, with some MPs like Rees Mogg hanging on to simplistic notions. It's good to see that Tryie is an impartial realist.

It was mentioned that grandfathering EU trade agreements on tariffs with third parties presents no great difficulty and can be sorted out in a short time frame. Regulation however presents some major headaches. Hosuk Lee-Makiyama see potential for regulatory divergence free of the single market and thinks the politics make an EEA agreement to high a cost. That however, is a political decision, not a technocratic one. I think when it because clear that there are more than just trade considerations we will see sense prevail. This does mean we will be paying roughly the same into the EU budget, if not more. Something we have also said from the outset. Vote Leave have created a lot of problems by overselling expectations.

The consensus is that the UK could well benefit from being out of the EU in that we do not have the same protectionist concerns or "defensive interests" which makes us a more agile trading partner for the US. Although we should not expect inroads into services to be any easier. It seems we won't lose out on TTIP as it is now widely assumed that TTIP is dead in the water.

I did notice a slightly adversarial undertone directed at one particular member of the panel, but I am sure it was mutual. On the whole though, it has given all concerned much to digest. The idea of a staged exit seems to be an emerging consensus view. Even after that though we will still have to restate that case as I don't think the enormity of it has quite sunk in.

What is clear now is that this is very much the domain of technocrats who are now stuck with trying to get the best deal for Britain while also making way fro some of the political demands, some of which are wholly irrational and do us no favours. Only when we have a refined set of options to put in front of the politicians can we introduce politics into the process. This stuff is well above their paygrade and when it comes to financial sector regulation even the best of us are all at sea.

In the end I think trade and continuity will come first and we will make many concessions in order to avoid opening up various Pandora's boxes. Brexit hard liners are not going to be at all happy with virtually none of their exceptions met. We will get some concession on freedom of movement but nothing to write home about. But that's a good thing. Unhappy Ukippers AND out of the EU. Works for me.