Wednesday, 13 July 2016

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.

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