Tuesday, 31 January 2017

A wasted opportunity

I have little to say about the Article 50 debate this evening save to say it was not a debate. It was a queue of people waiting for their turn to emote, rehash old arguments and raise alarm over subjects they have no knowledge of. What should have been an opportunity to assert itself, Parliament pretty much resigned itself to going with the flow. The government now has a free hand to make a massive pigs ear of it. So much for parliamentary scrutiny.

Hitherto now you will have seen me making dire warnings of what could go wrong, particularly with regard to the "walk away" option where critical systems stop functioning. If by now this has not dawned on you then I have no interest in your opinion.

I get the impression though that very few people understand the complexities of the system, and how much more complex it is outside the EU than in. They are set to rip the UK out of the EU, leaving the bleeding tatters of administrative systems which will no longer function - without the first idea of how to fix them. Even if we get a negotiated settlement we still have to devise our own regulatory systems and make them interface properly with those of the EU.

As much as regulations are specifications and standards they also grant rights and recognise various authorities. Behind that are elaborate systems of governance that protect against all manner of problems in supply chains from people smuggling to food fraud. This is why we should be extra cautious of blissfully ignorant Tory free trade mantras.

Worse still we have yet to even recruit key negotiators and understanding of regulatory systems is thin. Even if we avoid a cliff edge there is no way Brexit will be smooth sailing. There is major potential to do enormous economic self-harm. The complacency within government and industry makes that a near certainty.

Whatever happens though, our eventual settlement will be a patchwork of existing agreements because the people tasked with change don't want the system to change and in a lot of respects I don't blame them. Since Brexiteers refuse to acknowledge the difficulty or the complexity the entire debate over what form the new regime should take is very much in the hands of remainer technocrats. All the same people with all the same powers - just located in London rather than Brussels. Rather than simplifying the system, Brexit will likely make it more incomprehensible.

If there is to be a revolution in politics it will not happen by way of a renaissance in lawmaking or deregulation. More than likely it will come as an expression of public anger over an inept establishment which has avoidably made people poorer. Food and medicines are likely to be more expensive, energy projects will be delayed and public services will be hit.

The positives are to be found in the chaos and confusion it creates within government where it will be so swamped with major problems the day to day running of things will have to be devolved and the usual meddling will have to take a back seat. It's almost worth it just for that because it will badly taint the Tories. Especially when those free trade deals don't roll through the door. Don't get me wrong, there are upsides to Brexit - but you'll have to look hard to find them for the time being. Any economic advantages have been squandered by moronic Tory bigots.

The rise of know-nothingism

One of the reasons stated by Trump for dropping TPP is that it contains a number of measures that threaten US jobs and surrenders too much US sovereignty over domestic policy-making. Except that these such trade deals are aimed specifically at eliminating unfair competition. How can your shipping industry compete if Filipino seafarers are operating on $3 an hour? That is why these trade deals give effect to International Labour Organisation conventions on minimum wage. It is a means by which a signatory state can bring complaints against other members.

Moreover, the insistence on a level of qualification in trades ensures that the industry is not open to abuse by what are effectively slave drivers. Crew abandonment is a significant issue in global shipping. They use a crew for a single voyage then dump them without pay.

These agreements actually serve as a means of facilitating protectionism to ensure a level playing field rather than a misplaced sense of commercial advantage. Withdrawing from them effectively means there is no framework for trade disputes. The sovereignty argument is bogus since all modern treaties and agreements have unilateral safeguard measures.

It would seem that the trend is moving away from a global rules based order in favour of bilateralism, unilateralism and a return to undeclared trade wars.

Now you can argue that "protectionism is baaaad m'kay", but without an agreement in baseline regulation you are pretty much facilitating a black market in labour and consequently trade in illicit goods - from fraudulent food to fake medicines - all of which have expensive externalities. It also takes waste management out of the regulated sphere leading to environmental problems.

This is why we have a complex and sophisticated system of regulation - which is simplistically characterised by conservatives as "meddlesome red tape". Free market conservatives fall back on the traditional dogma that those working in governance are not part of the productive economy. This overlooks the fact that regulatory innovation eliminates red tape and delays at borders thus increasing the productivity of supply chains. As much as an unregulated free-for-all is messy, it is also expensive for business.

Underlying all this is the conservative desire for the world to be far less complicated than it is - to go back to a time of imperial weights and measures and British jam. It wants to wind the clock back on globalisation and return to the heady days of colonial mercantilism. This underpins much of the popular Brexit thinking. Nineteenth century ideas in an internet world.

In that regard, Donald Trump is a fellow traveller, It's why Brexit speaks to him on his level. More harmful than any executive order is the know-nothingism that drives his knee-jerk policy-making which is in effect a declaration of war on the order established by GATT and the WTO. It may well bring about a new era in world trade, but not a pretty one and not one the masses can win from. Trade wars make everyone poorer. For that reason it is essential that the UK keeps the USA at arms length. You can be a global Britain or you can be Atlanticist. You cannot be both.

If Brexit ultimately delivers on the globalist rhetoric then it is a journey worth making, but if we throw our lot in with an authoritarian issue illiterate ape then we stand to destroy all the potential of leaving the EU. If you thought it was bad being run by remote technocrats, wait until the morons are let loose.

Monday, 30 January 2017

Leaving Euratom: a mixed bag

I still have only provisional thoughts about the UK leaving Euratom. There is more to it than anticipated and it gets messier the more you dig into it. There is room for much confusion here in that Euratom also refers to the EU research programme which is a subset of the Horizon 2020 programme. As yet, no public announcement has been made on that.

Peaceful cooperation on nuclear energy within the EU is governed by the 1957 Euratom Treaty which established the European Atomic Energy Community (Euratom). While Euratom is a separate legal entity from the EU, it is governed by the EU's institutions.

In context though, as far as the UK is concerned, leaving the EU means leaving the Euratom Treaty. The EAEC is the treaty organisation responsible and we will be terminating our participation in that. Future participation will be by way of a cooperation agreement with the EAEC.

The Euratom research programme, however, is open to non-EU members and it grants us access to various research projects which we presently finance via the EU. That will be part of the Article 50 talks, as will any wider cooperation to replace Treaty aspects.

The big issue will be grandfathering cooperation agreements the EAEC has with other countries. That will be a matter for individual signatories. Something else for the FCO to get busy with. Unusually the EAEC makes its own agreements. It shares the same institutions such as the Commission but when the Commission negotiates agreements, it does so with its "Euratom" hat on.  

As to leaving the treaty, I spoke to couple of regulatory experts in the nuclear sector today and their view was that if it were managed well there is no real downside to becoming independent - though that is the front line view paying little regard to the wider context. Curbs on freedom of movement might well complicate participation but since the industry expands beyond the confines of the EU, that's really not a big deal.

That though is a secondary consideration. Whether or not it is a good idea is not really up for debate as the decision is already made. How we go about it is what really matters. Like most other concerns, the whole system starts to implode if we walk away from the table. It will need to be done in stages and it will not happen fast.

One of the issues is what we are calling "regulatory decontamination". Taking the UK out of the EU is hard. Taking the EU out of the UK is much more problematic. Though Brussels doesn't make all our laws, our own independent laws recognise the EU as a legal entity and our laws empower certain EU decisions and bodies. All of our industry specific laws will have to be reviewed and amended. This will have to happen in conjunction with any broader repeal bill. It is a massive undertaking.

One such example is any planning applications presently in the system where permissions are granted on the proviso that they adhere to specific EU regulations and treaty obligations that will no longer be in effect. Additionally under Articles 41 and 43 of the Euratom Treaty – developers of certain nuclear projects in the UK are currently obliged to notify the Commission in advance of any investment. Given this notification requirement originally related to pre-qualification for Euratom loans it could disappear once the UK withdraws from the EU.

One thing in the UKs favour, in terms of Euratom - is that unlike many other areas, the UK is not short of regulatory expertise. As far as European nuclear is concerned France and the UK are the main drivers. We are sector leaders at the moment and we can very easily wrest the regulatory agenda away from Brussels by reinforcing global bodies. That snatches it out of the hands of the Commission and the NGOcracy. I won't lose any sleep over that.

As with everything else though, the industry might well be in for a surprise. The double coffin lid problem very much applies. As soon as you get rid of the EU you find much of the global regulation is similar or merely implemented by the EAEC. This is one of those instances where it is widely assumed that cutting out the middleman is good for the sector.

There are aspects of EU membership that seem superficially sensible and the NGOs love it, but the industry largely regards it as an expensive nuisance. I have some sympathy with that view in that it involves rounds of consultations with countries who have no direct stake.

What we can say is that remainer screeching is not founded in rational analysis. They have yet to make the distinctions between research and the wider treaty concerns. No assessment of actual value has been made. It's just a knee jerk reaction. It's not the end of the world, the nuclear sector will still be heavily regulated and Brexit might be a shot in the arm for the UK sector. That though, depends on our government not making a massive pigs ear of it. That much is still a very pressing concern.

If you're not talking about regulation, you're not talking about trade

One reason people assume the EU is in bed with environmental NGOs is because the EU itself is concerned with environmental protection. One visit to a Greek beach anywhere near a shipping terminal and you'll know that isn't true. The real reason is that there's nothing like a public health scare as a basis to block imports that might compete with your own. If you haven't got a rational reason then a good old health panic is your best bet and there's no shortage of paranoid pseudo-science from Friends of the Earth to lend it weight.

One such talking point is chlorinated chicken - or rather chicken carcasses washed with chlorinated water from the USA. Opinion is sharply divided on this subject. There nothing harmful in the use of these treatments as the trace amounts are measured in parts per million (much like the acrylamide scare).

The EU opposition is based on the belief that, with proper hygiene and handling throughout the total food chain, there is no need for these pathogen reduction treatments - which is an entirely reasonable view - but not in my view reason enough to stall a major trade agreement.

This is ultimately the folly of bundled deals and if we could establish a global standard then there would be no legitimate reason to let this be a blocker. It's a problem that really should not be an issue - but because it is an issue that makes any future UK trade agreements with the US and elsewhere problematic.

If we unilaterally agree to accept chlorinated water washed chicken then that puts a red flag on the EU customs systems where any processed food products or ready meals will have to supply a list of ingredients and their origin. This could lead to refusal of entry or a tariff and most likely increase the number of physical customs inspections.

So the UK has a number of choices. If it relaxes its regulatory standards then it most certainly will complicate EU trade. Further to this, until we know what Brexit looks like we don't know what our baseline regulation will be. More than likely it will remain very close to the EU standard in order to maintain existing preferential access to the single market. That limits the options for a deal with the USA. If we are closely linked to the US regulatory system along with its different attitudes to the precautionary principle then we are deviating from global standards which complicates trade even further.

This is why the policy wonks are saying that you can either be in the US sphere or the EU sphere. You can't really be both and a comprehensive deal with the USA most likely does limit options for trading with the rest of the world whose standards still tend to be Brussels-centric. America is not geared for comprehensive agreements because it doesn't want them and doesn't need them. We do.

In effect, if we want liberalised trade with the USA then we need to pressure the US into regulatory harmonisation along with global standards rather than pandering to its peculiarities. To eliminate the disparities we have to work through global bodies to establish an agreed baseline so that differentials in standards can no longer be used as trade barriers. It will take a global effort to bring America to bear.

This is why I don't believe a comprehensive US deal is likely to succeed nor do I believe it is in our immediate commercial interest. And yes, we do need a debate about how far we are willing to lower our standards in order to get trade moving again. The EU very much is protectionist but then so is the USA. The former is our most important market, not least because it is the closest. How much of that are we willing to risk for the flimsy notion of trading with the rest of the world. Moreover you should not that with tariffs being as low as 2%, tariffs are clearly not the issue. As I have said from the outset, the essence of trade is now regulation and if you're not talking about regulation then you're not talking about trade.

This is something the Tory Brexiteer morons do not and never will understand and this is why their approach is wholly wrongheaded. There is no sweeping deregulation and tariffs are the very least of our problems. There are trade offs in trade and it requires a long and careful process. Sweeping unilateralism could very well trash our existing trade agreements. For the time being, all we are likely to get from the USA is an extension of the multiple agreements the USA has with the EU - on the proviso that we do not deviate or that we make concessions which most certainly will reduce trade with Europe.

Saturday, 28 January 2017

Article 50 must not be a suicide pact

Most of my best guesses have been wrong on this blog. Sometimes your hopes become projections and at other times you just overestimate the competence of politicians. As far as that goes my new year's resolution was to stop betting against stupid. Plan for stupid and give them room to make it worse.

But then when you write a blog almost every day you assessment is very much governed by mood and the political backdrop of the day. Every day brings a little more information that forces a minor course correction. Sometimes I am given over to optimism, but on other days I can't see Mrs May making anything other than a pig's ear of Brexit.

What troubles me is that there are no indications that the government has a handle on it. David Davis does not inspire me with confidence, Mrs May is woefully under-informed, the spads are political appointees from the Toryboy chumocracy and the think tanks are producing total garbage. Meanwhile select committees are not getting good information, there is no hint of a plan and the few drops of insider gossip I get are not encouraging.

Worse still the internet debate is incredibly shallow. There are a few remainers dedicated to Brexit watching but they're getting hung up about WTO schedules, rules of origin and any future deal with the USA. While these are not insignificant, it's bicycle shed syndrome and they keep going over old ground because that is what they are comfortable with. It's a nice little routine to dine out on.

Meanwhile, the leavers have become ever more polarised willing to retweet anything from The Daily Express to Brexit Central - pretty much anything which reinforces the same old dogma. Very few are getting stuck into the detail or providing any substantive material that stands on merit. Even former Flexcit advocates are drifting back into the bog standard Brexiteer mold.

What further troubles me is that major voices who should be speaking up are only making a very superficial contribution. Airbus has in passing mentioned the need for customs cooperation and the need to avoid tariffs but they have potentially far bigger problems and I don't get the feeling that the technical issues are being taken as seriously as they should be.

As we note, there are significant problems with transposing law in the Great Repeal Bill, and MPs are too distracted with the sideshow of the Article 50 vote. There are few green or white papers on the issues, and if there is any serious effort going into interim and replacement policy then the government is being extremely tight lipped about it. I am not personally assured that any real work is in the offing because at that level the system does leak and we would by now be getting some idea of what the plan is.

All we have is a list of demands and aspirations form May and Davis, accompanied by the buffoonery of Johnson. It looks like we are surrendering major ground without even putting up a fight while having no contingency measures in place. Letting go of the EMA is a very serious business and I think the government is seriously underestimating the scope of how much influence EU agencies have.

People tell me I am being overly negative or exaggerating, and maybe I am, but I do have a degree of subject knowledge, albeit jumbled at times, and I am not seeing any indication that the government has much of a clue. No doubt we have some very bright people working in the Brexit department but without a plan and direction, they are just as in the dark as anyone else. Assets are only as good as your deployment strategy.

My working assumption was that as we got closer to the date of invoking Article 50 the Sir Humphreys would be whispering in ministerial ears and telling them the score but it increasingly appears that our "Rolls Royce civil service" is something of a myth. It would appear that dissenting voices have been shut out and expertise is thin on the ground.

Now you could read this as me having a galactic ego thinking I am superior to everyone else, and that once more I'm going to be proved wrong, and I sincerely hope I am, but even being as fair as I possibly can be, I don't get the feeling that the fullest extent of Brexit is being explored either in the public debate or the one behind closed doors. There are some good people making some worthwhile contributions here and there but mainly on the well travelled paths.

In that regard, when it comes to the Article 50 vote, MPs really need to step up to the plate. They must forget the politics of it for a moment. Yes there has been a decision to leave, and yes that must at some point be upheld, but MPs are the ones closest to government. They must use their sources to discern if the government has a handle on this.

Unless they can truthfully say Theresa May has a convincing grasp of the substantive issues, they must, as a matter of public duty, vote against Article 50. I want to leave the EU as much as any Brexiteer - but this is too important to casually wave through out of resignation. They warned us all that Brexit would be a leap in the dark yet now they are about to rubber stamp it. Given the grave consequences of failure, is that not a dereliction of their obligations?

Damp squib Brexit

You might have noticed that this blog has not been all that kind to Mrs May of late. She has set herself up for a fall and seriously increased the risk of a trainwreck Brexit. What should be noted though is the conciliatory tone coming from the Member States. I think for the moment that it's generally accepted that a bungled Brexit is a lose-lose scenario for all concerned. I seriously hope that will shape the outcome.

By now the aviation industry, the automotive industry and the entire haulage and freight sector have said that their red line is tariff free entry and "frictionless customs". Even David Davis hopes to get an agreement which gives us the same benefits as single market membership. If the government has understood this much then we are still looking at extensive integration even if we are not calling it single market membership.

The reason we have "frictionless" customs is because customs authorities make certain assumptions based on the various front and back end systems which guarantee a degree of conformity to a standard. If that is not the EU standard then it will necessarily be the global export standards and those systems, if not part of the EU framework, will effectively be the same thing but re-badged as British. It will have to be a whole economy approach rather than sectoral.

For the time being we haven't the domestic capability to take on many areas of policy so a long phase out period with an option to extend will be required. So the concept of the single market as a transitional mechanism is not necessarily dead - we'll just be calling it something else. Britain will seek to maintain its passenger rights and there is no question of an immediate breakaway from REACH, and there is zero likelihood of taking back fisheries and agriculture in a single bound.

What form the agreement will take is anyone's guess at this point but the fact is that we will be asking a lot, so we can expect the EU to lean on us to ensure our immigration system is flexible and remains fairly liberal. The real question is whether the government has understood how much it will be asking to retain. If it has not yet fully comprehended the depth of integration, that will become apparent during negotiations. This is when the hardline Brexiteers are whacked with the reality of our predicament.

No doubt a late realisation will waste time and we most likely will need to extend talks - which will mean surrendering a good deal of leverage. I think Theresa May will pay for that in the polls. This is where the EU will play hardball on settling the bill and setting the terms for further cooperation. By this time it will dawn on the government that the EEA would have saved them a lot of trouble.

One thing is for certain though, Mrs May is in for a big surprise if she thinks we will no longer be making payments to the EU and though we very well may leave the single market, her promise of not being "half in, half out" and "not holding on to bits of membership" will come unstuck.

So long as reality does intrude then there is a good chance we will be bound by the EU for a long time to come. It will be a wanton act of self-harm to pursue any other avenue. Mrs May might well be spectacularly out of her depth but she is not electorally suicidal. Yes, I know, I'm being optimistic!

I have previously suspected this might well be the direction of travel. Politically the single market is a tainted concept so it'll really be down to the government to try and sell a huge compromise as a full exit. I think we can expect a lot of spin about how we have maintained a high level of cooperation in the interests of friendship and though the Brexiteers will be privately enraged, they will fall into line and back the PM and congratulate her on a job well done. They'll do that in any scenario - even if the EU takes us to the cleaners.

What we can expect to see is Mrs May caving in on a number of key areas, taking an unnecessary hit, not least the European Medicines Agency just to demonstrate that we are going all the way out. This is where politics will override good sense.

What this does mean is that we will still be heavily dependent on the EU regulatory framework for a long time, possibly permanently and if we want access for UK services I expect we'll make heavy concessions on fishing rights and financial services. It will mean that we won't have the free hand in trade that many Brexiteers expect and demand - and our global obligations make relaxation of standards legally and politically difficult.

In effect, the complexity of Brexit is the ultimate firewall against full separation. It may be our stated intent to leave the single market but the Hotel California effect will be just as relevant where we will be less bound than Norway but more bound than Switzerland. We'll go the long way around, patching the holes with future concessions and eventually forced by circumstance to relax any curbs on freedom of movement. I have a feeling that the Brexit process is not going to settle for more than a decade after the conclusion of Article 50.

In that respect remainers should take some comfort in that the hard Brexit the Brexiteers think they are getting will be nothing of the sort and very probably it won't be the catastrophe they expect it to be. What our approach does mean though is a far riskier exit process and we will pay a higher price than we ever needed to. We are creating more uncertainty than is necessary and there will be a price for that.

Between now and then though, accidental Brexit is still on the cards, and we should be alert to that very real possibility. We also stand to make a pigs ear of Brexit by way of failing to secure proxy access to EU deals and bungling when we attempt to replicate them. The toryboy fixation on fantasy alliances and bilateral deals, particularly over the Atlantic, means that we will likely not see an integrated or coherent trade strategy. We will neglect more pressing strategic concerns while failing to exploit the multilateral opportunities available to us.

As I see it, we are are unlikely to see Britain thriving as it should for a long time. The current government is not up to the job, the opposition are nowhere close to taking power and we will have to put up with the Tories for a while yet. It will take a change of government then a change back to the Tories for the system to expunge the dross - particularly the Brexiteers. By then we should have obtained some kind of institutional knowledge in trade and will have made a few mistakes to learn from.

Ultimately, Brexit has been driven by people so blinded by determination to leave the EU they never had any vision as to where to go next save for dismal clich├ęs about "trading with the world" and an Anglospheric alliance. It is that lack of vision and the complete obliviousness to the developments outside of the EU over the last two decades that will mean Brexit is a damp squib.

Having said that though, I have never been especially convinced by the Brexiter arguments for leaving. I have always seen Brexit more as having a profound effect on UK domestic politics and policy making, and to a large extent economics takes a back seat. Brexit most certainly has exposed the incompetence of our establishment and it has not gone unnoticed that Westminster is in a pretty shabby state. If we have the sense to do something about that then all of this will have been worth the trouble. I hope we don't pass up the opportunity.

US trade is not the priority

What the foaming Toryboys do not understand, and likely never will, is that trade is not some grand marketplace where we haggle over tariffs on smoked salmon. It is a meticulous and difficult process of agreeing standards and practices that facilitate free passage of goods and services. A big part of this is mutual recognition of classification systems.

One such example of this is health/treatment classification codes. There is a global system but unsurprisingly the US has its own and it is well established. If we concoct a deal with the US on say cosmetic surgical implants, a lot is going to depend on what is culturally viewed as cosmetic and what is viewed as a medical necessity. The WHO definitions are hotly disputed by the US as their insurance system does not equate well-being with medical necessity.

That means some products within the sector could fall under categories that we would not accept and vice versa. By way of recognising their system of classifications we could very well be opening up our markets to products we view as unsafe or products that we would classify another way and have protectionist tariffs on. That's where lobbying interests come in.

Now your average toryboy has it in his head that "protectionism is baaad, m'kay". Except that we might very well maintain a particular definition not to close down a market but instead to ensure we maintain compatibility with other markets - not least the EU.

If we allow produce which does not meet reseller export specifications then customs risk assessment views us as a weakness in the chain thus opening us up to more customs inspections on the frontier with the EU. This is something we don't want.

So something that is seemingly straightforward becomes intensely political and if bundled up into a broader trade deal may cause the whole enterprise to stall. That is why TTIP took so long and ultimately the cause of its failure.

For sure, out of the EU there are fewer defensive concerns but you can't do a deal with the USA until you know what the basis of your EU relationship is and what has the potential to spark EU penalties.

If at this point I have lost you, don't worry. This stuff is complex - and that is the take home point. It's a balancing act and one that requires a good deal of scientific and political input - and in the case of healthcare, there are religious considerations too. Every prodnose has an opinion which must be accounted for.

This then gets expanded to cover the bacterial mitosis rate in soft cheeses and the maximum permitted levels of formaldehyde in furniture. This ultimately marks the folly of leaving the single market. Most of this has already been addressed in terms of EU trade.

In that regard, what is more important than a US deal is maintaining frictionless trade with the EU, and by proxy all of the deals we enjoy as members. Australia, Canada, Japan, New Zealand, the USA, Israel and Switzerland all have MRAs on conformity assessment with the EU. China also formalised an MRA on AEOs and other areas of customs co-operation, considerably easing the flow of trade between China and the EU. We're about to bin all this in the hope of a "prosperity zone" and a deal with the USA which is just as likely to fail as TTIP.

The bottom line is a comprehensive deal with the USA is highly unlikely. Theresa May will get a deal, it will likely be asymmetric in US favour and it won't begin to compare with the single market. It will be constrained by reality. That though will not stop the Toryboys hailing it as a great success even if May comes home with only a carrier bag full of damp dishcloths. Global Britain it is not.

Like it or not, what we are witnessing is a propaganda show and one that is really not a priority for the UK. Effects based foreign policy aimed at tackling immediate threats such as the global migration crisis is where our focus must be. First and foremost comes our trade relationship with the EU and the proxy arrangements we have, second comes Africa and after that comes the USA which is not something we should bet the farm on. Certainly not until we know what Brexit looks like.

Howsoever, there is no point in trying to explain this to a toryboy. They have a factory reset button when you stress their belief system too much and then they go back to square one. It's a complete regression as if you'd never said a thing. It was a mistake to ever believe I could influence such people. Devotion to tribal scripture is too deeply engrained. With all idiots wedded to one single idea, incapable of taking on board conflicting information, all you can really do is laugh.

Trump's quest for a better yesteryear

I'm reading quite a bit of Chad P. Brown at the moment. The Peterson Institute for International Economics is light-years ahead of any of the London based think tanks. Not least because the Tory ones tend to either be plagiarists or dogmatic followers of scripture. They do no thinking of their own.

Brown has it that "before the Obama administration entered office in 2009, most American workers were forced to rely exclusively on employer-provided health insurance. This made it more difficult for a worker to seek out a new job, and it also made involuntary job loss of any kind more disruptive.

The 2010 Affordable Care Act (ACA) was the largest expansion of the US social safety net in decades, and informed trade proponents hold it up as reducing one important impediment to worker mobility. Obamacare was a long overdue policy that supported the 21st century economy by making the US labour market more responsive to all forces of change".

Hardly the work of a "socialist" - and when you think about it, it makes perfect sense. Meanwhile the Tories here in the UK have piled ever more obligations on employers, not least auto-enrolment into pension schemes which makes no sense at all to me. In most respects the Tories have been pretty weak on labour market liberalisation and through there are EU factors to consider we have never needed any help from the EU in bureaucratising employment.

In fact, if the Tories were genuinely interested in deregulating and liberalising the labour market there was very little to stop them before Brexit. I certainly won't miss the agency workers directive but the tax code is long overdue an overhaul and that's very little to do with the EU.

What marks the Affordable Care Act out as an interesting intervention is that the relationship between employment and healthcare is one that has evolved as a result of union action and goes back to the time of mass industrialisation and employment. It's a piece of calculated intervention which breaks up old fashioned and ossified structures that will ultimately give both employers and employees more freedom.

It would appear that when you scratch the surface, Obama was very much a liberalising force, not least with an executive order on regulatory cooperation. In that regard the populist backlash against globalisation is very sad indeed. Even the largest estimates, according to Brown, find international trade has caused only a fraction of the US economic dislocation - including that likely suffered by Trump's key voters. There is much truth in this.

The Trump delusion is that the US can close itself off to competition and return to a Gran Torino world of white working class men in full employment, joining the ranks of the middle class as they go. Robots, progression in technology and changes in demand have had more of an impact on jobs. The net result of closing down trade generally means inferior and more expensive produce.

This is what makes the UKs symbolic alliance with the USA problematic. Now is the time when we need to be strengthening multilateral efforts to streamline trade. Bilateralism undermines it and if the USA and the UK weaken their commitment to trade liberalisation then the rest of the world will likely follow.

Theresa May has repeated her commitment at Davos to work within the global rules based trading system. These words are incompatible with US policy. We need to decide very carefully how we pick our alliances. We cannot ride two foreign policy horses. Either we are committed to a global Britain or we become a client state of the US and a dumping ground for US surpluses. I might think it worth it if it came with freedom of movement to and from the USA but I guarantee it won't.

If there is any reason that the USA has suffered it is because it has not modernised as quickly as it should and efforts to change the regulatory culture have fallen flat. Regulatory barriers are still the chief barrier to trade and too many vested interests are keen on keeping it that way. Trump will reinforce this, not least with his cretinous approach to deregulation inspired by kipperish allergies to common rules. This promises only to exclude US produce from the global marketplace. The EU will look liberal by contrast.

Because Brussels has for quarter of a century pretty much dictated the global regulatory agenda, the global standard is now one and the same meaning that those now complying with EU and global standards are more at liberty to trade with Europe and each other, with the USA being the odd one out. This explains why others have an easier time of securing trade with the EU when efforts to bridge the Atlantic have failed for nearly fifty years. 

This is not by any means an endorsement of the EU or indeed Obama, in that both have used the global system to plunder Africa - and both must be criticised for their murderous and hypocritical trade policies, but regressive change for its own sake should not be hailed as progress. If the system that evolved from GATT folds then we are back to a free for all where there are no winners.

The death of expertise

Genuine expertise on trade is hard to find. The discipline is broken up into several specialisms where functionaries within the machine have no idea how the whole of the machine works. There are plenty of economists knocking about and there's a cottage industry devoted to bickering about tariffs but that's really all they know. Seemingly that is all the LSE teaches which means few in the London set have really grasped what they are talking about. Regulation is spoken of but not really understood.

Very occasionally I will stumble across real expertise (which tends to be American) - and when you see it you can instantly see the difference. When you look at the people the government is consulting, mostly you see tribalist chancers and posers making a name for themselves. People who six months ago didn't know what a non tariff barrier is - and now that they do, they're dining out on it. And that really explains why government is not getting good information. 

It's really quite troubling looking at Twitter today. Any time there is a select committee meeting it is assumed that it is the government taking expert advice, thus what is said by witnesses becomes established as fact by reporters unable to tell the difference. One such example is the meeting earlier this week whereby various head honchos in the haulage and freight sector were talking about the delays they might experience at customs if we left the customs union. 

As you should know by now, customs cooperation is a wholly separate concept to the customs union which basically governs the common external tariff. Consequently, far from moving forward, the debate is actually regressing and MPs understanding of the issues is getting worse - with misconceptions becoming entrenched. They really need to be talking to EU constitutional experts - of which there are very few.

Worse still, egotism will fiercely fend off genuine expertise, especially if such expertise had a Remain tendency. If they have preferential access to politicians they will make damn sure nobody else gets close. When real experts have no shortage of offers, why would they waste their time with politics? 

Thus, the people close to government are dismal self-regarding parasitic toryboys who produce error strewn PDFs to share between the party faithful so they can all tell each other how marvellous they are. The stuff coming out of the right wing think tanks about Brexit deregulation is actually embarrassing to read.

MPs have now lost sight as to what real expertise even is having so very rarely encountered it. This week the international trade committee is taking evidence from Allister Heath - a Telegraph hack who wrote during the referendum that the IMO makes "naval regulations". You would really struggle to find anybody who knows less about trade. He can knock out a half decent polemic, but that's about it.

Half the problem with this discipline is that the very last people you should be talking to is economists. There are plenty of headline absurdities in the trade system they take issue with, but as with everything else in government, if something seems absurd there is likely a reason - and sometimes a good reason. In this it really helps to go back and learn who made the decisions and why. A good analyst must be part historian.

What we find is that the more puzzling quirks of the system are the by-product of it which, for the most part, works quite well and to fix one thing means breaking something else. That's why legacy problems remain untouched after many years. As a whole, efforts to bring down tariffs have stalled which is why we see a shift in focus to trade facilitation, looking to make savings in the supply chain which can offset tariffs. Sometimes the best way to deal with a problem is to go around it. 

This dynamic is ultimately why I think Britain will struggle to make good of Brexit. As the global rules based system has matured the scope for sweeping solutions and "bumper deals" just isn't there. Advancements in trade are made by microsurgery, not hacking with an axe. Everybody is looking for the big fixes while ignoring the potential of minor increments. Politicians seeking big results and flagship deals don't want to get bogged down in the minutia of trade nor is there anything especially glamorous about debating standards for formaldehyde testing on furniture. 

If we are to break the deadlock in trade then we need sophisticated joined up policies as part of an overall foreign and trade strategy. Instead we see the usual suspects blathering about prosperity zones and CANZUK alliances without any reference to the myriad of obstacles that stand in the way of these blue sky fantasies. 

It's a fine thing to be aspirational and sometimes politics can sweep aside the ossified systems we work in - and sometimes that kind of creative destruction is exactly what is needed, but what I suspect will happen is that the UK will be mugged by reality. As much as anything Brexit has started a trade space race with the EU, which is now ultra keen on concluding deals in the works, not least to save face. Brussels has clout in can bring to bear meaning that we will be dancing to their tune for a while yet. 

Between that and the various global accords Britain will find that it does no have much wiggle room and bilateral deals will bring little reward, nor will they do much to replace that which we have voluntarily surrendered by leaving the single market. We will learn the hard way that there are no shortcuts and like everyone else we will have to go to the top tables and put the work in. There are sunlit uplands eventually but they won't come automatically by leaving the EU.

Standing between us and progress though is an odious establishment locked into simplistic and old fashion ideas, and because it's so completely sealed off from genuine expertise it is setting itself up for a fall. The good ideas won't get an airing until all the bad ones have been tried. For the time being, all we can really expect is bewildering incompetence. 

Before Britain shines there is a learning process to go through and we will have a few bloody noses before we get the hang of it. The Westminster system is rotten and the firewall between government and reality is too strong. The feedback mechanism is broken and institutional knowledge is thin on the ground. We will pay a price for that. This is what you get for downgrading Westminster to the status of a toothless talking shop.

During the referendum the suggestion that the public are sick of experts rang true, but it isn't expertise we see most of the time. More often than not we are witnessing flatulence from party hacks and nonentities with an economics degree from LSE. The system values prestige over knowledge. Until MPs learn the difference we can only expect more of the same mediocrity and gullibility.  

Friday, 27 January 2017

Not much to choose from

Over the last couple of years I have developed some (almost) cordial relations with various policy wonks all of whom at one time have had a connection with Brussels. What they tell me is that UK intuitions have never had any real problem influencing the EU. That is why they backed remain and that is why they insist the UK is very influential in the EU. And I can see what they think that.

If you work for a largely EU funded body or one that indirectly receives taxpayers money then you are part of the self-lobbying mechanism. The EU has an agenda and grants preferential access to organisations who want the same things. That means if you have ambitions of any kind your fastest ticket to Brussels is to join an NGO group. Of course you have to think exactly like them to get anywhere but that is how you end up with a soft left liberal consensus/groupthink throughout.

In this, Brussels is regarded as being secretive. There are a lot of areas which are off limits to MEPs and, fortunately for the Commission, most MEPs are too stupid and incurious to go poking around in things that, as far as the Commission is concerned, do not concern them. MEPs generally don't know how the system works and are easily herded. They are heavily dependent on instruction from staffers and can be very easily manipulated. The EU has very well established ways of containing dissent and scrutiny.

This is why the EU parliament is mainly a token affair to present the illusion of democracy. It has a PR utility but generally speaking, unless MEPs are pro-EU activists, MEPs are, understandably, treated like scum of the earth. In this there is increasingly less common ground between the commission and the parliament as each crop of MEPs tends to be ever more eurosceptic and from the political fringes. They are seen as a threat to be contained.

And you can sort of see why. Proportional Representation for a job without much in the way of prestige tends to attract pondlife. If you thought Ukip MEPs were thick you should see some of the continental ones, particularly from Eastern Europe. There is a weird dynamic in populism where know-nothingism is rewarded. This is how Trump ends up as POTUS.

Consequently the liberal establishment circles the wagons and becomes ever more detached fRom any kind of feedback mechanism and even moderately conservative voices are treated with extreme suspicion. The net result is a system of European governance which is profoundly elitist and highly meritocratic - just so long as you believe what they do. Eurocrats are anything but stupid.

The problem with this is that the idealism of the left, particularly in regard to climate change and sustainable development becomes the driving concern in legislation and economic policy. Some of it is entirely laudable in its aims but ultimately has no grounding in reality or practicability since these individuals seldom rub shoulders with ordinary people and have never worked in industry. The product of all this is a remote, paranoid and profoundly anti-democratic system with a phobia of accountability.

Because the EU is highly influential in international standard setting and there are multiple crossovers with the EU, the entire edifice of global governance is subject to the same groupthink. In many ways it is corrupt and wide open to manipulation by corporates through their charitable foundations and think tanks. Just follow the money.

And though these people genuinely do want a better, cleaner, wealthier world, the unintended consequences of their ideas are often devastating. This is why we are seeing a worldwide backlash against NGOs in authoritarian developing countries.

As the system has become more remote we have seen increasing opposition to it, with anti-establishment politics taking root everywhere. We are now faced with a choice between the liberal world order, whose foot-soldiers promote destructive identity politics or the likes of Trump and the Brexiteers who seem to take tremendous pride in knowing so little. They who would destroy the system rather than attempt to shape it and redefine it. This is the dilemma of our age, where picking a side is impossible. It's either the madness of the mob or the condescension of the elites. I think I may retreat to a cave in Siberia.

Thursday, 26 January 2017

Deregulation? Not so fast!

What most people do not understand about Brexit is that it isn't a factory reset on the system. In or out of the EU or the single market there is a rules based trading system which depends on a number of interdependent agencies and subsystems. Pulling out of the EU does not give us a free hand to rewrite those rules. More to the point, we don't want to.

To understand why regulation is such a big feature of this debate you have to go back to 1992 and the Single European Act. The Single European Act (SEA) was the first major revision of the 1957 Treaty of Rome. The Act set the European Community an objective of establishing a single market.

What this did was replace all UK technical and industrial regulation to the European standard. This was to create a level playing field - to prevent regulatory disparities being used as an excuse to block imports.

Rather than introduce it gradually, the government took the view that it was better to swallow it whole and get the job done. This was a mistake and one which pretty much made Brexit an inevitability. Le grand project was henceforth tainted.

The problem was that bad regulation was taking the place of better regulation, imposed by inexperienced officials who were quite brutal about it and deeply unfair. There was no system of appeal. It had been decided.

The transition costs that finished off small and medium sized operators from slaughterhouses to electronics manufactures. Conformity, training and equipping for a new regime is no small undertaking and in the case of small producers, too much to ask. John Major did to small businesses what Thatcher did to the mines.

Arguably it was a revolution that needed to happen. We were entering a new age of globalisation and what was founded then was the basis of what is now a global system of regulation designed to facilitate free and fair trade the world over. Whatever you may think of it, what is done is done. 

Now that we are leaving the EU, we discover that as these rules have been refined, they are intrinsically interwoven with a number of customs and surveillance systems designed to protect against illicit trade, counterfeiting and food fraud. It doesn't always work and like counter-terrorism efforts we only ever hear of the egregious failings rather than the many invisible successes. That makes disengagement from the EU a tricky business. More so since we are leaving the single market.

One of the negotiating objectives of leaving the EU will be to grandfather many of the trade deals we have via the EU. These are not simple agreements on tariffs. They can comprise of mutual recognition agreements on conformity assessment to memorandums of understanding on regulatory cooperation. 

In the decades since the formation of the single market, many of the technical standards and practices invoked by EU regulation have become the global benchmark for nearly all comprehensive trade deals including TTIP, CETA and TPP. Below the surface there are thousands of smaller agreements which each take their cue from international standards bodies and global regulators. That means Brexit deregulation is a slow and meticulous process where each strand must be examined for legality and relevance.

In that regard we are looking at thousands of regulations, many of which are entirely valid and we would not see any value in deviating from them. Then there are those regulations which give effect to EU institutions and systems and confer specific rights on EU member states. 

That means Mrs May's Great Repeal Bill (GRB) is not so straight forward. The intent of the GRB is to avoid a regulatory cliff edge. A degree of continued conformity is required to avoid significant disruption to trade and to avoid lumbering industry with costs and confusion.Were we to suddenly declare all of it null and void then systems would rapidly cease to function, certifications and insurances would become invalid and and qualifications would no longer be recognised. 

This is why Brexit necessarily requires a transitional period. As discussed previously, simply porting all EU regulations word for word is not going to be enough. We can have regulatory equivalence but there is nothing that compels the EU to recognise that - and even if it did there would need to be an independent mechanism to ensure continued mutual recognition, be it a court or a secretariat - or in the case of Efta, both. 

Suffice to say untangling this mess is no easy feat, it cannot happen in a rush and if we wish to continue participating at the global level we must honour our commitments as a WTO member. That means the continued adoption of global regulations, standards and guidelines. The deregulation potential of Brexit has been wildly overstated. More of it comes from Geneva than Brussels and even Brussels is a recipient of regulation. Increasingly the EU has ceded control of the regulatory agenda and is no longer the centre of the regulatory universe. Cutting out the middleman is one of the many reasons why Brexit is worthwhile. 

This phenomenon is what we describe as the "double coffin lid" where we get rid of the "inner lid" only to find global rules stand between us and liberation. We face a choice of continued participation in the global trading order or complete withdrawal from it. The latter would put us more in line with the USA and would likely see a return to tit-for-tat trade wars, messy bilateralism and protectionism. 

Some would have it that unilateral deregulation and removal of tariffs is the silver bullet. I am not convinced by this. As much as tariffs exist to protect strategically important industries, they exist to prevent competitors dumping their produce and collapsing markets. Unilateral deregulation would likely lead to fewer opportunities to trade, higher tariffs and more non-tariff barriers. Such shock therapy for the UK would be wildly unpredictable, destabilising and probably very destructive. It would most likely hurt the bottom two deciles the most. 

Some argue that a little creative destruction might go along way. It is a seductive thought. Many on the extreme economic right and left find this notion attractive in that it brings about a contest for an entirely new order. The question though is whether that is what people voted for, and whether the nuclear option is really necessary. I don't think it is. 

In most regards the regulation we now get is eminently sensible. The issue I have is that we have never had sufficient scrutiny or power of veto. Brexit resolves that to a point. Moreover, the UK tax code has 10 million words and that's mostly a British achievement. When it comes to red tape, we are a leading producer. Technical regulation is to facilitate trade whereas domestic regulation is more about social manipulation. Leaving the EU dispenses with much of it but culturally we are still predisposed to telling people what to do and how to live. Brexit doesn't really cure that. It is part of the national psyche. 

In any eventuality the process of de-merging from the EU is a messy business. Regulation is far from the only consideration. Just the process of establishing ourselves and an independent customs entity is tricky and unscrambling agriculture and subsidies will take on a life of its own. The ironically named repeal bill (or something of its type) is a means of parking the regulatory issue until such a time as there is the political runtime to evaluate it with the care that it deserves. 

Disestablishing the single market is a mighty task that will require armies of officials and wider consultation with industry. That is not something we should seek to complete in two years lest we repeat the mistakes of 1992. Big business can manage. SMEs however, will be hung out to dry.

Brexit is seismic enough as it is even on a superficial political level. The very last thing we want to do is create more work for ourselves and shoot ourselves in the foot. The mountain of red tape is not going to get any smaller and attempting to reduce it without understanding it will likely create more. It may be a disappointment but there is no clean Brexit. Only degrees of messy. It's up to us to decide how much of a headache we wish to make for ourselves.

The fault is yours, Mr Kinnock.

A procession of MPs on Twitter today, including Helen Goodman and Stephen Kinnock, are outraged that the Article 50 bill has not been give sufficient time for a proper debate. You will have to help me out here because I don't understand this. We were told that the supreme court case was not to overturn the decision to leave the EU. Broadly speaking the issue was whether Mrs May had the right to invoke Article 50 without a parliamentary vote. The court has ruled that she doesn't have that right. Ok then. Let's accept the rule of law and take Ms Miller at her word.

So what is to debate? The decision has been taken, parliament has already backed a motion on the timing so why do we need an extensive bill and what is there to debate? There is nothing that stipulates how Mrs May should invoke Article 50, be it in person or over the phone and though Mrs May very often looks ridiculous there is no dress code for the procedure.

If the intent is to steer the negotiating objectives then you've had seven months for parliament to act. Instead we have seen a procession of Labour MPs unable to adequately define either the single market or the customs union or indeed make an honest or credible case for either.

Opposition has been disingenuous, incoherent, lazy and, worst of all, submissive. Even as a Brexiteer the very last thing I wanted to see was a Tory wet dream Brexit yet the Commons couldn't organise itself even into forcing Mrs May to reveal her plans. Helen Goodman accuses the government of showing contempt for parliament. Tell me Mr Kinnock, is it deserving of anything else?

You had your chance to get rid of Corbyn yet you presented us with Owen Smith. You chose to absent yourselves from the debate and instead had a civil war and fixated on Trident submarines. You're the ones who brought us to this pretty pass. Now suck up the consequences.

Brexit: back to basics

I spend a lot of time berating the Tories these days. They have made it necessary. They don't have a handle on Brexit at all. They are out of their depth.

In voting for Brexit I voted for a completely different relationship with the EU. As messy and expensive as Brexit is I think this is an important and worthwhile process to bring power over decision making back to the people. Too much of what the EU does happens out of the public eye and it does not give us sufficient powers of veto.

Britain, economically, culturally, geographically is very different to the continent and though there are many commonalities I believe we are sufficiently different to need a legal system more suited to our country. For those on the continent, especially in the north west of Europe, crossing borders is a part of every day life. There are many frontiers and much physical commonality. It makes all the sense in the world for them to work to a uniform set of policies.

Britain isn't like that. For most Brits it is rare to leave our shores because it's not as simple as just driving to work. There is either a ship, a train or plane involved and crossing borders costs a notable chunk of the average monthly income. Consequently crossing borders is not second nature to us. For business we have one main pipeline to the continent and that's it.

It is my belief that one size fits all policies will for the most part be adequate for the EU, but Britain, with all its systemic distinctions, will always be the reluctant partner and will always be asked to make some of the most bitter compromises. So we need a different system.

Like Tory Brexiteers I voted for a relationship focussed largely on the functional trade relationship, believing the added Europe was trespassing on our democracy. We want free and open trade with the EU but collectively we consider some things to take precedence. We want more control and we are willing to pay a price to get it.

The question now is what should that price be? Where does the axe fall? The problem with the Tories is that they want a trade only relationship, which is all very well, but even a trade relationship in a modern and increasingly technical world necessarily will be comprehensive. Further to that it must be established on a set of common rules.

In addition to common rules it needs systems of administration and since we share many goals a high level of cooperation is still required. We want bio-security, safe goods and wherever possible hassle free movement of people, services and goods. It makes life better. To get that though, there must be continued diplomacy and the system must evolve in order to adapt to new threats and challenges. That means that even a basic trade relationship with the EU necessarily will be wide in scope, comprehensive and complex. There is no getting away from that fact.

Like most Brexiteers I want this taken care of quickly, I don't want to see needless delays and I would like it to be simple. But then this is the real world and we are dealing with not just one government but twenty eight. It is not realistic to expect anything will be quick or simple.

Voters have made it quite clear that they do not want to see a common EU army, tax harmonisation, or any further control to be ceded to Brussels. I accept this. I agree with it. It has gone too far for my liking and enough is enough. We should not have given up control of fishing and agriculture and I think landscapes and habitats have been damaged because of it. The mindset of central economic planning and wealth redistribution has weakened British industry and in the end has cost all of Europe. It's better if some nations are going different ways than over the cliff together.

The problem though is that there is no clear line of delineation between what is necessary for the free and fair exchange of goods and services and what is political idealism. It is difficult to tell the difference between integration for its own sake and integration that would happen naturally as a consequence of technology and globalisation.

The problem with the EU model is that it gives all of the power in deciding where that line is to the Commission and the ECJ. Countless decisions are made without any real national scrutiny and for all our politicians pay attention to it, the system might as well be on autopilot.

The symptoms of this are there for all to see. In grappling with Brexit it is clear that our politicians do not comprehend the scale of integration or even when or why it happened. We have no national institutional memory or even a record of why things are the way they are. Having given up control of critical decision making they have filled the void by confiscating ever more powers from local authorities, making our local democracy inert. The consequence of that is unresponsive and remote government and a widely despised political class. Economically, culturally, politically, we are ready for a rethink.

In this, what we most certainly do not want to do is throw the baby out with the bathwater. The single market as a model is one that has proliferated world wide and the principles form the basis of emerging compressive regional trade pacts the world over. They protect against dumping of surpluses and removes the worst externalities of trade. It at least attempts to create a level playing field in the knowledge that cooperation is in the greater good and nobody wins from tit for tat trade disputes.

What that does mean is that trade is governed by the rule of law and consequently nobody gets to do exactly as they please. You can have full sovereignty but if we break agreements we must expect that there are penalties. We cede some control because there are economic and social benefits in cooperation. In this, the general rule is that we should never sign up to anything we cannot later chose to walk away from. That is why the EU was a mistake.

Many people point to the many other global bodies like the WTO and compare them with the EU. The distinction is that the WTO are not binding in the same way that EU supranationalism. We can ignore the WTO and accept the penalties. Observance is largely voluntary and we do so because we respect the rule of law and honour our commitments. Not so with the EU. We do as we are told because we have given the EU direct authority. So much so that we cannot walk away from it without devastating consequences. We are legally intertwined in ways that are impossibly complicated.

This is why Brexit is no walk in the park. There is no factory reset button on half a century of political integration. To attempt to do it all in one go is is to inflict considerable damage on the EU and the UK. Brexit must be a careful, rational, forensic process taking into account the multiple of policy areas now under EU control. This, though, is not what is happening.

What is driving our Brexit policy is a woeful incomprehension of what is involved made worse by dogmatic idealism which has never been tested against the realities of the world as it is. Theresa May doesn't understand what is involved, the Brexiteers don't, and the remainers are not much better off either. They are engaged in opposition for its own sake, preferring the perpetual political slumber of EU membership.

This means the political establishment is entirely out of its depth, ill equipped to cope and incapable of bringing any clarity to it. Some see Brexit as an opportunity to hitch their hobby horse politics onto what really is a technocratic and legalistic process where the pursuit of perfect stands in the way of achieving the adequate.

Politically there are red lines but unless you approach Brexit in the full knowledge that there will be hefty compromises then you are setting yourself up to fail. The debate is now one of how we square the circle of unrealistic and contradictory demands of voters with the reality of our predicament.

Unless our government realises that there is no carte blanche Brexit it is on course for failure. In the pursuit of total control we stand to lose that which was worth keeping while taking on avoidable costs. Without a change of direction Brexit Britain will turn out to be everything we Brexiteers said it wouldn't be; insular, protectionist, isolated and poorer. That is not what any of us voted for.

Wednesday, 25 January 2017

Theresa May is winging it - and it's starting to show

Today a perfectly reasonable question regarding the status of the European Medicines Agency (EMA) was asked of the Prime Minister. A convincing reply was not given. Mrs May is clearly not on top of her brief and is improvising. It's all very well saying that we are leaving the EMA and we can take some comfort that there will be a transition but the question remains; what are we transitioning to?

In terms of impact assessment and what is required in resourcing any such replacement, information is scant. I also do not believe that adequate consideration has been given to veterinary medicine.

More worrying is that behind the scenes in the Home Affairs Committee we hear supposed expert testimony from the road haulage industry. There is still widespread confusion over the difference between the customs union ans customs cooperation - and with MPs and ministers being unaware of the distinction it is entirely possible we will end up seeking a customs agreement when our intent is to secure customs cooperation.

The problem with seamless customs is that it relies on a number of sub-systems ie standards and mutual recognition and disease surveillance - governed by agencies which we apparently do not want membership of. 

So, we will be negotiating workarounds for that which probably means increased border inspections OR we make such a hash of the negotiations that we drop out without an agreement then the whole thing goes to hell in a handcart overnight. We could end up with a pigs ear entirely by accident. By now I have learned not to bet against stupid so I am increasingly worried.

From a brief exchange with the Freight Transport Association we learn that it costs approx £1 a minute to run a 44-tonne truck so a one hour delay at Dover is queue of around 250 trucks - so that costs the sector £15k an hour. So, if there are 10,000 trucks a day going through Dover and the Channel Tunnel, and they are all subject to a one hour delay, that costs the industry £600,000 a day or £219 million a year. That's what happens if we do not have a seamless customs cooperation agreement. That's assuming ONLY an hour a day. At the Russian border into the EU trucks can take 3-5 days to clear.

While we can talk about the billions involved in various financial transactions, it's actually these smaller sums that worry me because that's real money in the real economy on sectors which are already under pressure. 

What we are seeing is government seeking consultation from people who, as of six months ago, had never even considered the structures and frameworks that facilitate free movement of goods and now we find that as much as our politicians are out of their depth, many people whom you would expect to be informed are also struggling to grasp the basics. 

That though I suppose is a moot point since it does rather appear that government is not paying the slightest bit of attention to select committees, and to be be fair I don't blame them. But then that's only really reassuring if the government is taking sound advice and on present from it would appear that good advice is in short supply. 

To me it now seems inevitable that in negotiations the government will be laughed out of town for its ignorance and presumption. They have underestimated the depth and complexity of Brexit and hold the belief that the EU will be all to happy to dismantle or amend its systems in order to accommodate the UK. 

In this I wouldn't be at all surprised if the EU objects to the selective opt-in approach and gives us an ultimatum of EEA or nothing. If it comes to such an ultimatum then our own parliament must make a serious effort to assert itself. If parliament allows Theresa May to walk away from the table it will be a travesty. On present course we are likely to hit the rocks. At no point since the referendum has good sense prevailed.

Tuesday, 24 January 2017

Trump: a nail in the coffin of the CANZUK delusion

I don't comment on US affairs generally unless they affect the UK. The decision by Trump to pull out of the trans-Pacific Partnership qualifies. Without a major superpower, TPP becomes more akin with a Pacific Efta. I don't think it will die because too much has been invested and the benefits are fairly obvious for the willing remaining parties. What that means though is that any Brexiteer fantasy of a CANZUK alliance is stone dead. TPP has its own customs protocols and though it will share a similar regulatory base it will likely be incompatible with our own. Moreover, trade imbalances exist with these countries for good reason. We do not necessarily want to be open to NZ competition on lamb.

But what does this mean globally? Effectively Trump has written the USA out of the script and turned inward. It will no longer pursue multilateral solutions and will focus entirely on bilateral deals. This is viewed as a major step backwards by the media but as I understand it, it's not much of a deviation from the norm. The US has always had a keenly patriotic and strategic trade policy and thanks to its size and diversity it can pick and choose. Multilateral efforts have tended to ignore the USA as a lost cause. African states are looking elsewhere and the failure of TTIP shows that the US is not amenable to trade liberalisation. America is protectionist because it can afford to be.

That is why the UK must resist calls from the right for unilateral free trade because that's effectively a free licence for US dumping of surpluses - and the UK, being run by gullible atlanticists will not bring any complaint to the WTO unless pressured by European corporates, most of which will soon be divesting gradually from the UK. We should be most cautious of a deal with the US for its own sake.

I take the view that we should take the Trump administration as a half time intermission. America has gone on pause for a term while it sorts itself out. America can afford to be ignored for a while and we cannot waste our time pressing for a comprehensive deal that isn't going to happen. We must seek our fortunes elsewhere.

Our trade strategy must be geared toward our most pressing strategic concern which is to slow the flow of migrants from Africa lest we see all of Europe destabilised - which is not in our interests. We need to give Africans a reason to stay where they are and that means investing and stimulating trade. We cannot afford to do this alone so we must still work closely with Europe and other interested parties because what needs to be done requires that we do it together. We don't have the money to do it any other way. If we want to benefit from trade then we have to invest first to bring infrastructure up to scratch.

Free trader fantasies about a glorious English speaking union may sound superficially appealing but in the real world they simply won't fly. We can have preferential customs, visa and tariff arrangements and nobody is going to complain about that but the geography and legacy commitments make any kind of comprehensive union implausible - even if it were based on the Efta model.

The short of it is, Brexit or no, we are still better looking across the Channel than the Atlantic. For the time being, we cannot count on the USA for anything - especially when Trump is taking Europe advice from one N Farage. All we can do is enjoy the entertainment and hope our septic friends emerge from their darkest hour having had a rethink. Sooner rather than later is preferable.