Wednesday, 22 February 2017

A free pass to a failing government

Returning to the report released today by the Institute of Directors, I have been asked to clarify why I think it littered with errors. First of all it is, to put it politely, blue sky thinking.

Brexit planning for businesses, says the report, is about building a roadmap. "They cannot plan on the basis of speculation and conjecture. The IoD welcomes the pursuit of a bespoke agreement, but for planning purposes this means more 'unknown unknowns'. Transitional arrangements therefore become more important". 

Erm. Ok. We don't want speculation and conjecture, but what else can a "bespoke agreement" produce, not least since we are faced with a white paper calculated to give as little detail as possible? The only thing the government has been clear on is that we are to leave the single market - encompassing thousands of regulations and policies - all of which now come into question. 

For a report that highlights the persistent demand of business for regulatory continuity, why would the IoD welcome a completely shambolic approach to Brexit, throwing the entire system into doubt? In fact, this whole report is speculation and conjecture. Amidst the motherhood and apple pie sentiments and the "no, shit Sherlock" we do not see any tangible solutions. 

I'm not going to go through the entire report for the benefit of the IoD, not least because I don't have the time, but let's pick a few points. The report has it that we must "Minimise customs checks by moving to set up a joint EU–UK customs committee as quickly as possible. The UK should join the Common Transit Convention, either through membership of the European Free Trade Association (Efta) or separate negotiations. The goal has to be to minimise the scope for crossborder consignment checks, particularly between Northern Ireland and the Irish Republic."

Fine. And what would that joint committee do? Minimal customs checks are done on the basis of risk assessment (which the report alludes to) which itself is heavily regulated by a number of EU and global instruments - administered by mature IT systems not designed to cope with increased volumes, many of which are locked into the single market acquis and require a high degree of regulatory conformity. Minimal customs checks are the beneficial outcome of masses of market surveillance systems involving many of the agencies that this government is committed to leaving. A joint committee doesn't even begin to cut it.

The report recommends that "Ensuring regulatory stability and predictability for businesses with respect to continuity of EU law through the Great Repeal Bill, with any changes in the short term to be gradual and kept to a minimum, removing the pressure of short-term EU-imposed deadlines."

Only had you never ever looked in any detail at EU regulations could you say this. Technical regulations, particularly in reference to trade in goods persistently refer to authorised bodies and EU agencies. They instruct Member States to provide market surveillance data and testing results along with any number of other requirements before we even touch the subject of standards and conformity.

To understand the relevance of the Great Repeal Bill, you have to understand the context in which it was suggested. It was popularised in Parliament as a concept by Owen Paterson (to much ridicule at the time). Paterson had come to this idea through Flexcit, which had, like him, advocated the EEA as an interim measure. It was since adopted in the same way that "point based immigration" was adopted by both Labour and the Tories. Our political bubble is very much an oral culture, where memes and factoids catch on. 

Thus, when it comes to the Great Repeal Bill, the Government is going to have great difficulty in separating out the functional aspects of the law and those dealing with the establishment of the EU systems, which are worked into the law. It will need to keep the one and remove the other. And that's not as easy as it looks. 

We've seen this with fishing, where the core regulation does not just regulate fishermen but also sets up the Common Fisheries Policy, empowering the European Commission to perform certain functions, and imposing the duty of co-operation on (multiple) Member States. 

Had the fisheries policy been written on the lines of Indian colonial legislation, it would have been framed by a "governor" based in London but appointed by Brussels, yet would have applied solely to UK waters. That we could have adopted, pro-temp, until we had something better. But Regulation 1380/2013, as it stands, is unusable without very substantial amendment. 

More recently, we've seen exactly the same type of problem with the Lift Directive. This is also dual-purpose regulation. Not only does it legislate for lift safety, it is one of the "New Legislative Framework" packages which sets up a Brussels-based system of control over a wide range of products. As such, once again, it empowers the Commission and places cooperative duties on Member States. 

We've been through many other examples, from chemical regulation to Air Traffic Management, and there are many more to come. But even now, it is evident that Government has vastly under-estimated the complexities of repatriation, and is not at all geared up to dealing with the problem.

A repeal bill does not really work without the EEA in that the EEA would still give legal effect to EU agencies and authorised bodies etc. It would mean considerably less re-engineering. Even a cursory glance at animal health rules would indicate just how nonsensical copying and pasting the rules would be without being in the EEA. 

This point is lost on the IoD (along with much else). The absence of EEA membership might well mean the concept of a repeal bill may well not work at all. You would think that the IoD would be very keen to point this out to the government. To bring any sense at all to it will be a massive undertaking and that work cannot begin until we know what mechanisms are in place for continued conformity and cooperation and when the take effect. 

This is where we get into the chicken and egg scenario as to how this dictates the timetable for negotiations. The government white paper has alluded to the fact that we will retain some unspecified participation in EU agencies and that is likely to influence the destination of any trade agreement. I could, like the author, take a punt at how this might play out but then we would be back to that "speculation and conjecture" - something the IoD, and business hopes to avoid. 

The point I would make is that you do not know what your transition looks like unless you know what the destination looks like - and that all depends on what the EU is willing to allow in terms of further participation. That then puts a huge question mark over the possibility of concurrent negotiations. Something the EU has already refused. 

Unlike most documents of its type, this report at least touches on many of the bases, but provides no real answers. The errors are less to do with the factoids therein as the conceptual problems. These are the same conceptual problems the government is likely to encounter by way of having decided to splice differing and incompatible mechanisms developed for different ends. We are only looking at surface level knowledge. 

The stock answer in these such reports is that magic "joint committee" which is an entirely meaningless, but superficially convincing notion. No thought has been put into whether the EU would wish to participate in any bespoke systems suggested given the administrative burden - and if we are to have our own bespoke means for maintaining conformity and dispute resolution then it is likely we who will pay for it. 

All this though seems to escape the author of this report which claims "One of the biggest trade-offs with a PTA ( preferential trade agreement) and any bespoke model is of course time needed to conclude the agreement, not least because of the unprecedented situation that Brexit entails. However, the fact that the starting point for the UK and the EU – in terms of tariff and non-tariff areas to cover – is uniformly the same and even harmonised in many areas should cut down on some of this. There is no real need for stocktaking exercises to identify where shared interests can be bridged, although the lack of clarity around article 50’s interpretation means a preliminary scoping exercise to set out parameters for negotiations is essential." 

No real need for stocktaking exercises? Really? This is pretty much in line with the view of David Davis as reported yesterday in The Guardian:
"Asked what the chief obstacles Britain faced in the coming negotiations were, Estonia’s chief Brexit negotiator, Matti Maasikas said: “Mr Davis maintained the line of the prime minister that they think that due to their regulatory convergence that the trade agreement can be negotiated in the two-year period. Everyone else is saying: ‘Do you really think that an agreement is negotiable in this time period?’ And the answer [from Davis] is: ‘We think it is feasible because we have regulatory convergence."
This is to totally misunderstand the process in its entirety. Brexit is the process of becoming a third country. Brexit is as much about rolling back a trade deal as it is entering a new one. It means asking and answering questions about established systems, some more than three decades old. In that time there have been considerable overlaps between EU and international rules. More to the point, there are no "preliminary scoping exercises". The EU and a number of Member States have been adamant that no such scoping will be undertaken - as Sir Ivan Rogers alluded to today.

Rogers told the Commons Brexit select committee that the EU was determined to keep trade talks separate from the article 50 divorce agreement, and suggested it could take until this summer “even to agree on what the negotiations should be about”. Worse still, so invested is the government in its simplistic notions of what is involved, from various reports we see than no real domestic effort is underway either. Something else all but the NFU have been deathly silent about. 

In its final recommendation, the report has it that "it is not enough for business to simply voice its opinion on what government needs to do to avoid the cliff edge of Brexit. Companies rarely wait for states to negotiate trade agreements before venturing into cross-border trade. Accordingly, business people must not wait for the outcome of negotiations before undertaking their own planning and consultation in an attempt to minimise the potential for disruption to existing commercial relationships". 

As it happens business has not even voiced its opinion on what government needs to do, nor indeed does this report bring any substance to it. It's all fluff. One would have thought that the purpose of a professional institution like the IoD would be to have a handle on these exact issues. It's a fine thing to say that businesses must not wait for the outcome, but with so many uncertainties in play there is little else they can do. That is why, one would have thought, that a body representing business would most certainly not welcome the government's wafer thin "bespoke" approach.   

One of the most incredible facets of the post-referendum debate has been a total unwillingness on the part of any of the trade bodies to push for answers. Recent efforts by the Road Haulage Association have been worthwhile but very late in the day. Speaking to a food exporter this week he reported that "I am a member of the FSB, and asked my representative about what they are doing about Brexit. He said "I don't do politics". And that really is the mentality we are facing. Mealy-mouthed and generic pleas to government to go easy on them (at best).

As I understand it, trade bodies in France and Germany are not pushovers in this regard. They exist almost purely for politics and demand to have their say. What hope is there when the IoD is welcoming the government's thin gruel Brexit "plan" leaden with heavy hints that they haven't the first idea what they are doing. That industry is letting them get away with it is a grave failure of politics - and that is where the real error in this report lies.

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