Friday, 3 February 2017

The Brexit white paper is uneducated guesses and blind assumptions

So, the White Paper. I've selected a few bits which should be of interest to readers of this blog.

"It is in the interests of the EU and all parts of the UK for the deeply integrated trade and economic relationship between the UK and EU to be maintained after our exit from the EU. Our new relationship should aim for the freest possible trade in goods and services between the UK and the EU. It should give UK companies the maximum freedom to trade with and operate within European markets and let European businesses do the same in the UK. This should include a new customs agreement with the EU, which will help to support our aim of trade with the EU that is as frictionless as possible."

8.2 We do not seek to adopt a model already enjoyed by other countries. The UK already has zero tariffs on goods and a common regulatory framework with the EU Single Market. This position is unprecedented in previous trade negotiations. Unlike other trade negotiations, this is not about bringing two divergent systems together. It is about finding the best way for the benefit of the common systems and frameworks, that currently enable UK and EU businesses to trade with and operate in each others’ markets, to continue when we leave the EU through a new comprehensive, bold and ambitious free trade agreement.

8.3 That agreement may take in elements of current Single Market arrangements in certain areas as it makes no sense to start again from scratch when the UK and the remaining Member States have adhered to the same rules for so many years. Such an arrangement would be on a fully reciprocal basis and in our mutual interests.

8.42 There are a number of EU agencies, such as the European Medicines Agency (EMA), the European Chemicals Agency (ECHA), the European Aviation Safety Agency (EASA), the European Food Safety Authority (EFSA) and the European (Financial Services) Supervisory 46 The United Kingdom’s exit from and new partnership with the European Union Authorities (ESAs), which have been established to support EU Member States and their citizens. These can be responsible for enforcing particular regulatory regimes, or for pooling knowledge and information sharing. As part of exit negotiations the Government will discuss with the EU

The highlighted bit are of interest here. We do not seek a model already enjoyed by other countries. Ok fine. But we do want "frictionless customs".

What makes for frictionless customs is the systems at each end of the supply chain. For that to happen there must be common standards - which are now mandated by the WTO agreement on Technical Barriers to trade. There must also be inspection systems, testing regimes and compatible IT systems for market surveilance.

In order to maintain present levels of market access it is going to be necessary to carry over participation in the EU agencies for at least as long as it takes to devise an alternative. In some respects there is no sense in leaving and certainly no commercial advantage. We will wish to retain air passenger rights, the ability to sell chemicals and be part of the Europe wide food safety system.

In this white paper we have an admission of sorts that a high level of single market particpation is required at least for the time being - and that we won't have a free hand in deregulating and we will make concessions in order to ensure free movement of goods and services. So we are back in cake and eat it territory where the UK seeks to pick and choose the bits of the single market it wants without paying "significant sums to the EU" and taking back total control of immigration.

Effectively we are seeking to negotiate an entirely bespoke agreement which is pretty much single market membership only  we're not calling it single market membership and we're only going to keep the bits we like. All in two years as well.

Except, of course, one of the problems with negotiating compatibility between similar systems is ensuring that they remain compatible in the future. To take food safety for example, it is about to undergo a major overhaul. The goalposts are moving all the time thus, although we have regulatory convergence on day one, as the EU changes and updates its systems, we see increasing divergence unless there is a mechanism for continuous updates. That would have to be something akin with the EEA secretariat - and would likely need an independent court of its own unless we simply abide with diktats from Brussels.

I'm not going to spend too much time dissecting this document because it quite clearly is a calculated insult, knowing that the media doesn't have the wit or the subject knowledge to take it apart in any meaningful way and will not point out the obvious errors, not least the complete lack of understanding as to what the custom union is.

In essence, the government has a wonderland scenario in mind that bears no relationship with reality and thinks all of this will just fall into place without some heavy compromises. It doesn't really address how they intend this system to work nor is there any real indication they understand that they are negotiating a system rather than a flat trade deal. What we have a is a re-hash of the Lancaster House speech announcing that we shall have rainbows and kittens and the EU will bend over backwards to help make that happen.

As much as the EU won't be so accommodating there is absolutely zero chance of negotiating a framework in two years simply because you have to negotiate the scope and nature of the institutions that govern it - unless you opt for systems that already exist. Except that David Davis has said: "membership of EFTA would put us within the reach of European regulations and the European Courts. Frankly, that would take away what influence we do have".

So somehow we have to untangle the Gordian knot of doing what we please while also maintaining convergence with the EU without giving any effect to a body to do that. Presumably by a process of telepathy? Clearly the government has not understood how the system works.

How this will translate in negotiations is anyone's guess. When the cold baseball bat of reality smacks them in the face they will need one hell of a plan B. If it isn't Efta/EEA and Mrs May is sincere about walking away from the table then hard Brexiteers will get their wish after all - and all the misery that goes with it. 

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