Thursday, 27 July 2017

Clucking Mad

I am a truly massive snob so being ahead of the curve has always been important to me. When I was young it was all about being into a band before anyone else, collecting all the early 7" singles, seeing them live in front of 50 people in an unglorified toilet. When they signed to Warner and made it to Top of the Pops I would likely just have yelled "sell-out" at the screen, complained about the commercial production on their new album, and looked around for another to follow. I don't want to blow my trumpet too loudly lest I become the Mr Bighead of Brexit but I'm happy to say that this blog was one of many that were ahead of the Brexit curve. The problem I now face is that Brexit has just signed with EMI and their powerful marketing department have splashed stories about their debut album "Chemically Washed Chicken" all over MSM. All the things that the cool kids were talking about 9 months ago have suddenly become massively popular with squares and suits and johnnycomelatelys. So what should I do now that MSM is regularly spewing out articles about FTAs, regulatory frameworks, harmonisation, investor-state disputes, EU technical agencies? What am I supposed to do now that Brexit scepticism has gone mainstream? Well, it turns out these mainstream stories are actually pretty terrible and often completely miss the point.

Liam Fox's recent trip to the US has led to a flurry of articles about how a US/UK FTA would force the UK to accept imports of chemically washed chicken. It would be fair to say that MSM is frothing at the mouth at the prospect of being forced to eat poisonous McNuggets. Michael Gove, in his role as Environment Secretary, has even been forced to unilaterally declare that the UK would ban chemical chicken. This is very much a chicken and egg problem because it turns that the US also has inferior standards on eggs. Their low standards on chicken husbandry means that dirty eggs need to be washed, dried and refrigerated to be fit for human consumption. Unfortunately, these processes breach the integrity of the shell and allow persistent bacteria to enter the interior of the egg.   As a consequence, the rate of salmonella poisoning in the US is more than 50 times the rate in the UK. We can thank the European Food Standards Agency for that because it forced farmers to raise their hygiene standards through a complete ban on egg washing. I'm confident we're going to see this pattern repeat itself across almost every agricultural product category. Michael Gove might not realise it but he just removed agriculture from the US/UK FTA. Liam Fox should be furious but he won't be because he won't have realised it, either.

The problem with agreeing a UK/US FTA is much, much deeper than just chickens and eggs and standards of animal husbandry. Literally every area of human commerce where the US and UK have different regulatory standards will lead to significant difficulties. It doesn't matter which side has higher or lower standards because that isn't what matters here. The only thing that matters is that the regulatory standards are different. Let's look at the egg industry to see the difficulties that arise from regulatory difference. That's right, the egg industry. This is exactly the kind of fascinating chat you get here. Eggsactly.

UK egg manufacturers will have made significant investments over the years to conform to EU standards. As a consequence, they're in a great position to have their produce included in a UK/EU FTA. After all, UK egg inspectors are already trained to EU standards, UK egg producers already meet the standards, and UK egg law already enforces the standards. It should be a simple step for the EU to recognise that the UK egg industry is equivalent to the EU egg industry. The UK can also easily recognise that the EU egg industry is equivalent to the UK egg industry. All of the egg boxes for a successful FTA are now ticked. Consumers can carry on shopping in the supermarket safe in the knowledge that they are unlikely to be poisoned by a meringue. Producers, too, can carry on manufacturing eggs safe in the knowledge that their investment in chicken hygiene is being put to good use and that their eggsport markets haven't been threatened.

"Andrew, you should see the size of the US mega-chicken. Eggs like footballs."
What would happen if Liam Fox signed a FTA with the US that allowed US eggs to be sold in the UK? The first thing he will have to do is change all UK legislation on egg hygiene and chicken maintenance so that it more closely matches the rules in the US. Egg inspectors will need to be trained in these new standards, egg manufactures will need to invest in washing and drying equipment, the egg logistics industry will need to move eggs around to new egg treatment centres. Egg delivery vehicles will be need to be adapted to include refrigeration. Supermarkets will also need to adapt their stores to keep eggs refrigerated. Their egg inventory system will also need to change because eggs will now have a different shelf life. This is an eggspensive and disruptive change for a relatively small industry. What are the benefits? Well, the first thing that will happen is that the EU will ban all UK eggs because the UK's equivalent egg status will be completely lost. Hey, that's not a benefit. What are the benefits? Well, the second thing that will happen is that imported eggs from the US will be able to undercut UK eggs because US manufacturers have already absorbed the cost of conforming to US/UK egg legislation. UK egg manufacturers will need to pay for all of this disruption to the UK egg industry, pushing up their unit cost. Supermarkets are going to buy as many US eggs as they can for the simple reason that they are cheaper than UK eggs. Cut off from EU markets, UK egg manufactures will struggle to sell even to their own domestic market. Hey, that's not a benefit. What are the benefits? I suppose UK egg manufactures can now eggsport their eggs to the US just in case there are any US consumers who like paying significantly above market rate for a standard egg. That's not a benefit, either. What are the benefits? The simple truth is that there aren't any benefits. Cutting yourself off from your biggest market by rushing egglong into a set of new regulatory standards doesn't have any benefits.

I chose eggs in the paragraphs above because repetition of the word "egg" always makes me laugh. Having said that, I could have literally chosen any area of human commerce where US standards diverge from UK ones and the UK decides to adopt the US version for the purposes of signing a FTA. I could have chosen financial services and discussed the regulatory complexity of the Dodd-Frank Act but it would have been too boring. I could have chosen pharmaceuticals and embarked on a long and tedious discussion of the Medicare Act but we all have lives to lead. I could even have chosen a comparison of the Volcker Rule in the US and the Capital Requirements Directive IV in the EU but it wouldn't have been as funny as eggs. In every instance the message remains the same: geography dictates that the EU will remain the UK's biggest export market; any legislative move away from EU standards limits the UK/EU FTA by destroying the UK's "equivalence" status; any move towards US standards comes at a significant cost to UK industry; the US has already absorbed those costs and therefore produces with lower unit cost; the maxim that trade halves with distance means that the prize of access to US markets is much, much smaller than the prize of a comprehensive FTA with the EU.

The problems I outlined above are eggsacerbated by the fact that the US is by far the larger partner and any compromise on standards is going to be closer to the US version than that of the UK. The UK is also politically desperate for a UK/US trade deal because it is relative easy to spin it in a positive light, even if turns out to have major flaws. That desperation makes any compromise even more likely to favour the US. Moreover, the ticking timebomb of the Trade Promotion Authority means that July, 2021 is the last chance the UK has to sign a trade deal with the US. After the TPA expires the UK will be negotiating live with 400+ Congress Representatives. That has never led to a successful outcome. The pressures just keep adding up on the UK to compromise away its ability to complete a meaningful FTA with the EU. Obviously, the sensible move would be to conclude the EU FTA first and then look further afield. In fact, it is the only sensible move.

If you're a regular reader of this blog you'll already have realised that this post is basically a repeat of a previous one but with some terrible egg jokes. In that old post I presented FTA negotiations as the mathematical optimisation of a contracting decision space: each FTA consumes the decision space, leaving less for the next. Compromise is a finite resource and should be used wisely, not frittered away on chemical chickens and dangerous eggs with a capricious partner half-way round the world. This is the real story that MSM is missing. Instead of asking Liam Fox why he thinks it is a good idea to willfully endanger the promised UK/EU deal, it bangs on about glowing hens and radioactive eggs.  If that's the competition, we're all ahead of the curve and we'll stay there until Liam Fox privatises it and starts charging us rent.

Over and out,


PS The stupidity of the UK's current political leaders if absolutely jaw-dropping.  They still don't understand the most basic points of international trade.  Even the idea that economic gains come at political cost is beyond them.  It's depressing to even say this but Fox is behaving as though he still believes trade agreements are entirely about tariff barriers and that disputes over standards harmonisation are tiny details to be ironed out at the end.  It's even more depressing to note that Gove thinks a comprehensive FTA can be a cherry-picked subset of product categories that he alone decides for his own advantage.

PPS I have very little confidence that a UK/US trade deal will be completed before 2021.  Anything after that requires Congress to agree an extension to the current TPA.  Besides, the UK will still be hammering out its FTA with the EU and trying to stabilise its tariff schedules at the WTO for years to come.

PPPS The UK might anyway be forced to accept food products banned by the EU.  The EU, for example, forbids the import of hormone-injected beef from the US.  The US took its case to the WTO and won.  In response, the EU kept the ban but compromised on increased quotas on beef from the US that does meet EU standards.  The US would be within its rights to lodge a fresh case against the UK if it chooses to uphold the ban.  Taking back control.

Friday, 14 July 2017

The Last Remaining Hope

The last remaining hope of the Brexiters is that the UK will be saved by signing trade deal after trade deal in quick succession immediately after the UK exits the EU.  Whatever happens, any trade increase made possible only by freeing itself from the slavery of EU membership will need to be greater than the drop in trade that arises from the aforesaid act of emancipation.  If that doesn't happen the UK will become poorer than it is today because it will export less and pay more for imports. Another bi-product of a failure to secure trade deals is that the UK will become less open and, as a consequence, less competitive.  I'm sure we can all see a vicious cycle that, once started, will be hard to stop.  It's imperative, therefore, that Liam Fox is a success in his role as Minister for International Trade. Do I hear laughter?  Stop that now!  This is a serious business.

Let's start with the scale of the problem that faces the UK.  It turns out that the EU has trade deals aplenty.  In fact, I counted 45 in total.  Headline figures, however, can be deceptive so we shouldn't just count the number of deals in place but also analyse their comprehensiveness.  It would be fair to say that some of these deals are no more than agreements that trade will be liberalised at some point in the future. The partnership and cooperation agreement with Russia, for example, probably isn't of much value, particularly since it hasn't been updated since 1997 and discusses the EU's relationship with Russia prior to Russia joining WTO Moreover, 4 members on the list are agreements with the EFTA nations.  There are also agreements with many former Soviet republics such as Ukraine and Georgia and Moldova. Geography and history dictates that these are of less value to the UK than they are to Poland and Austria and Romania. That leaves the really big deals that make the news:  Canada, South Korea, Japan, Singapore, Vietnam.  When the UK leaves the EU it will lose all of these trade deals or be unable to participate in them when they are finally implemented.   None of this is good news but the really bad news is that the UK will lose its trade deal with the entire EEA.  The EEA is the largest trading block on the planet: it has a GDP of $18 trillion and a per capita of $34,000.  Losing even a tiny fraction of that is going to be extremely hard to claw back.
Liam Fox's latest financial instrument.

What is the current plan to claw back all that lost trade with the EU and its partners?  If Brexit was a person it would be white, it would speak English with a regional accent and it would be very English in its outlook. It's not a surprise, therefore, that the focus has been on other white, English-speaking, Anglo-Saxon economies because nobody in the UK is all that interested in Vietnam or Cambodia. The really big prizes for Liam Fox would be Canada, Australia, New Zealand and the US.  The problem with this list is that Canada already has a comprehensive FTA with the EU. Moreover, Australia and New Zealand have both pledged to prioritise their discussions with the EU over the UK. In these 3 cases the UK will be working hard to match what it would have anyway gained as EU members.  That leaves the US.  A UK/US FTA would really knock the smug, self-satisfied smirk off every Remoaner's fat, ugly face.  How likely is it that will happen?  It turns out there are significant hurdles in the way and that these can all be found in the structure of the US political system.

Why does the US have so few trade deals? It has quite a few with countries in Central and South America but outside of that it has remarkably few.  The only trade deals that it has outside of the Americas is with Australia and Singapore. What's going on?  Well, it turns out that the US, despite being an open economy, is a bit of a nightmare on trade discussions because of the power that Congress has over every live detail
Taken from:
We've all heard about the difficulty in getting the EU to agree across all 28 members but it turns out the US has its own problems with representatives in Congress adding provisions at will that protect their own constituents.  The key point here is that, under the U.S. Constitution, Congress writes the laws and sets trade policy.  There are hundreds of representatives in Congress, each with their own woes and wants, making agreement on a moving target like a trade deal an impossibility. They are also renowned for their world-class filibustering skills when faced with something they don't like.  The US responded to this by introducing the Trade Promotion Authority Act.  This legislation temporarily removes Congress from the live negotiation and instead presents it with a Yes/No vote on the negotiated free trade agreement.  Not surprisingly, this was a controversial move.  Complaints about lack of scrutiny and unconstrained executive power have dogged TPA since its inception.

Most of the FTAs agreed by the US were negotiated under the so-called Fast Track system. The first fast track authority lasted a whopping 13 years fro 1974 to 1987.   When that ran out another was enacted to specifically negotiate NAFTA.  After 1995 the scheme lay dormant until 2002, when George Bush narrowly pushed another through Congress with a majority of just 3 votes.  The next five years  were a frenzy of activity with the US signing an incredible 8 trade deals.  That authority expired on July 1, 2007.  The Obama administration then started another fast track authority period in 2015 so that the US could negotiate TPP.  It's clear that the US relies on Trade Promotion Authority legislation to complete trade agreements; without a live TPA the US is simply unable to negotiate trade with anyone. 

What is the current status of the US? Does it have an active Trade Promotion Authority? Yes, it does.  The Obama administration pushed through a fresh TPA back in July, 2015.  It will run out in July, 2021 unless Congress votes to extend it before July, 2018.   Obama fought tooth and nail to implement a TPA so that the US could negotiate TTIP and TPP.  Both of these negotiations have now been cancelled but the TPA is very much still active legislation. 

The UK is obviously in a terrible position.  It cannot expect to complete a trade deal with the US by July, 2021 because it can only begin formal negotiations after it exits the EU in April, 2019.  The losses in EU trade would require a monumentally comprehensive trade deal with the EU just for the UK to tread water.  History tells us that 2 years simply isn't enough for that.  As a consequence, it badly needs the existing TPA to be extended.  Uh oh, that can only happen if Congress takes action in the next twelve months. 

What are the chances that Congress will extend the current TPA?  Previous TPAs were difficult to implement, to say the least, and required persistent pressure and advocacy from the President at the time.  George Bush, for example, made Fast Track a campaign pledge back in 2000.  He managed to push it through Congress with a majority of just 3 votes.  Obama started the process of TPA renewal in 2012 and finally got agreement on a diluted version of his original plan three years later.  The simple truth is that Democrats and Republicans are uneasy with the principle that Congress is denied its basic rights in the US Constitution.

In complete contrast to Bush and Obama, Donald Trump stood on a manifesto pledge of protectionism.  He promised to bring back jobs to the USA and he pledged to do that by cancelling TPP and NAFTA, increasing tariffs on Chinese imports, and categorising nations that run a trade surplus with the US as enemies.  TTIP was already on life support but it's likely he would have cancelled that as well in the event that the EU hadn't already walked away.  Is he likely to commit to pushing free trade legislation through Congress when he is clearly trying to steer the US towards more protectionist policy?  I don't think that is likely.  Even if he was minded to do this he has enough problems already pushing legislation through Congress. It  wouldn't be the smartest move to try to flex his flimsy grip on power with perhaps the most controversial bill he could imagine, especially not one that betrays his core supporters, contravenes his election promises and further alienates Congress.  It is extremely unlikely that Trump even has this on his radar. 
Brexit: The Neverending Story

I think it is unlikely that Congress will ever be asked to extend Obama's TPA.  The UK, therefore, has just two years to negotiate the deepest and most comprehensive FTA in the history of the known universe.  It will have to be deeper and more comprehensive than the UK's current relationship with the EU to even begin making up the losses that will accrue after Brexit.  In fact, even that wouldn't be enough due to the rule of thumb that trade halves as the distance doubles.  The UK/US trade deal would have to include new experimental legislative potions that eliminate the cost of geographical separation and time zones.  Let's face it, none of that is going to happen.  Instead, the UK is faced with another ticking timebomb to complement Article 50.   It will end up trying to do a deal with Congress and simply have to accept that every Democrat and Republican will chip in with a protectionist clause for their local steel plant or farm or chemical factory.  That is not going to end well for the UK.  To be honest, it will probably never actually come to an end. 

The US is simply not in a legislative or political position to complete notional trade deals. The trade deals it was negotiating have all been cancelled and the legislation that made those negotiations possible at all will soon expire.  Moreover, Donald Trump is a protectionist at heart.  He has made it his business to threaten German car manufacturers with punitive tariffs. In the same spirit he has repeatedly criticised countries that run a trade surplus with the US.  Germany is top of that list with an enormous imbalance of around $65 billion in its favour.  Trump's view is that those countries should spend more, specifically in the US.  If Donald Trump was to negotiate a trade deal with anyone the only way he could ever justify it politically is if he attempted to negotiate a settlement that improved US exports to Germany.  He even just about understands that a trade deal with Germany means a trade deal with the EU.  Is he likely to prioritise that over the UK?  Of course he is.  After all, everybody else is doing exactly the same thing. 

Over and out,


PS Everyone should listen to the Remainiacs podcast.  It's funny, informative, and unexpectedly uplifting.

PPS Many thanks to FT commenter "Pouca" for alerting its readers to the delights of TPA.

Monday, 10 July 2017

How Did We Get Here?

How did we end up in this mess? I know there was a dreadful referendum where politicians of all stripes lied about the EU.  Certain newspapers have been at it for years and years, whipping up a foul public mood of racism and xenophobia and English exceptionalism. There was also an entire class of people who were never invited to join the shiny post-industrial jamboree.  Apart from arguments about appropriate levels of benefits, there hasn't been a plan for these communities since the 1970s.  Well, they certainly got their own back.  Let's set aside all of that and instead think about how we started out on 24 June, 2016 and ended up in the mess we are in today.  We're about one year in to the process of implementing Brexit so the time is nigh to review the government's performance and see if we can work out what mistakes were made along the way.  Think of it as a kind of report card and it might be more fun than you imagine.

Customs Union

Theresa May committed the UK to a departure from the European Customs Union
as far back as 13th July, 2016.  Without a change of government this is an immutable decision that has never been discussed,  costed or agreed.  Hmm, but surely every decision is costed and debated and agreed?  Welcome to the world of Brexit.  In the world of Brexit decisions are made without any understanding of the institutions involved or the long-lasting consequences or their economic or political costs. As we proceed through today's report card we're going to come to recognise this as a familiar pattern.

What did Theresa May do on 13th July, 2016 that committed to the UK to a departure from the European Customs Union?  Well, she appointed Liam Fox as Minister for International Trade.   There is simply no need for a Minister for International Trade unless the UK leaves the European Customs Union.  As a consequence, Liam Fox's appointment set the UK on a course to leave the Customs Union.  That is a perfectly legitimate policy decision except, of course, that it wasn't a policy decision of any sort at all.  The rational timeline is to announce the policy and then make the necessary appointments to implement the policy.  Brexit logic means that you make the appointment first and then neglect to ever make a policy announcement because nobody in power actually understands the problem at hand.
July 26, 2016:
December 18, 2016:
Is the UK going to leave the Customs Union?  We all know the answer but let's have a look at the policy statements on this issue, starting at Tory Conference 2016.  There was literally no formal statement on the UK's future relationship with the Customs Union.  Amazingly, Liam Fox signalled that he backed leaving the CU at a fringe meeting.  That's right, despite his appointment being a cast-iron guarantee that the UK plans to leave the Customs Union even Liam Fox still thinks it is an open question.  What does he think his role involves?  Well, he seems to think his role involves changing his mind about Customs Union membership.  Just two months later, in an interview on the Andrew Marr show, he stated that membership was not a binary position and that it was a collective decision still to be made. I can't keep up with this chicanery, can you?  Happily, we have experts on hand who can confirm that FTAs are indeed binary propositions and that to behave otherwise is in breach of WTO rules.

Let's fast forward to the exciting days of December, 2016.  Liam Fox has been in his post for about 5 months and the debate about CU membership rages on within the Tory Party.  No joy there so let's zoom forward a few more weeks into the New Year.  Right, what about Theresa May's Lancaster House speech where she laid out the UK's position on leaving the EU?  Surely we can find clarity somewhere in there.  Think again.  If anything, the position becomes less clear with each reading.  She spluttered on about sectoral deals (more of that later), frictionless trade and associate membership but none of that is a definitive statement on the Customs Union and its membership options.

Can anyone in power answer this logical conundrum?  It's just as well Theresa May called an election because it finally gave her the chance to clear this up once and for all with a manifesto pledge. 
"As we leave the European Union, we will no longer be members of the single market or customs union but we will seek a deep and special partnership including a comprehensive free trade and customs agreement."
Finally, an answer to the riddle. Hallelujah.  Hang on a second, let's read that through one more time.  Right, ".. no longer be members of..." means that we're leaving the CU.  At last, some clear English we can all rally round.  Where's the confusion?  The problem is that, "... comprehensive ... customs agreement" doesn't mean that Liam Fox will have the freedom to go around signing trade deals with all and sundry.  In fact, the second part of that sentence flatly denies the existence of the first.  What exactly is the difference between a customs agreement and a customs union?  Aren't they pretty much the same thing?   Oh dear, this is a vexatious puzzle.

What about after the election? If there was a time for definitive policy statements it was immediately after Theresa May formed her new government.  Well, what do they have to say for themselves?  Oh dear, this is where it gets really confusing.  It turns out that Philip Hammond thinks the UK should remain a member, while Liam Fox is dead against it.  It looks like Hammond has even started crunching the numbers.  I'd go further than that and say that he has actually formulated a quantitative argument for the status quo.  In effect, he has laid down a challenge to Liam Fox to prove that future trade deals will be more profitable than the current ones.  What is Liam Fox's response?  We'll never know because a bout of shyness has led him to conduct his business indoors for the time being.  There's always the old chestnut about a customs union with the Customs Union but formal policy is as tangible as a fart in a wind tunnel.

What has Liam Fox been up to for the last 12 months?  He used to optimistically bang on and on about signing trade deals.  He even said that dozens would be in place as soon as the UK left the EU.  The problem he faces is that he can't do any of that without a formal policy on leaving the EU Customs Union.  Now, the UK has been signalling to the entire planet that it will be leaving the Customs Union ever since Liam Fox's appointment.  However, it has also been simultaneously signalling that it might choose any other option on the metaphorical table and is even considering options banned from the table under international law.  Make no mistake, the UK is on course to leave the Customs Union; it just doesn't know it yet.  They'll only know it when they wake up one day and there's a massive queue of lorries all the way to Kent.  

Who in their right minds would begin discussing trade with the UK without formal and definitive policy statements that it is ready to begin discussing trade agreements?  A quick perusal of Liam Fox's lonely diary will soon reveal the answer.



Where there was discord, let there be clarity.  The UK's position on the jurisdiction of the ECJ is crystal clear and easy to understand.  The timeline of that position, however, is harder to decypher so it's worth diving in to see how it all unfolded.

Theresa May was still grappling with the most basic issues of EU membership when she took to the stage at last October's Tory Conference to declare that the UK would leave the ECJ.  The clarity of the statement was entirely at odds with the rest of her speech. We need to remember this was a time when vague phrases like "non-binary decision",  "red, white and blue Brexit", "associate membership" and "a Brexit that works for all" were still being bandied around with abandon.  In the middle of all that vague sloganeering came a clarion call that was so unambiguous, so clear and so definitive that it stood out as rather odd.

Scarily, this is not as unbelievable as it sounds.
It's not clear that anyone in government understood the consequences of leaving the ECJ.  David Allen Green even speculated that May had confused ECJ with ECHR or that hard Brexiteers had pressured Theresa May into accepting this pledge without giving her the opportunity to analyse what it meant.  Whatever the reason, it is clear that the consequences were not understood at the time.  Anyone with a clear understanding of the consequences would have immediately invited representatives from the pharmaceutical industry to begin discussing a post-Brexit regulatory system.  They would have done the same with representatives from the UK airline industry, the Channel Tunnel, nuclear scientists and treasured jam makers. None of that happened.  Instead, the pledge was largely forgotten and barely mentioned again until January's Lancaster House speech.

The consequences of May's insistence on leaving the ECJ were spelled out for the first time a full 3 months after the initial pledge.  Those consequences, of  course, were that the UK would leave all EU regulatory bodies.  This is a huge undertaking.  Which Whitehall departments will take responsibility for the UK's replacement regulatory bodies?  Who will fund them?  What will it cost? What about legal enforcement of regulation?  Which courts will uphold regulations?  Which case law?  Which legislation?  What powers?  What about recognition of international agreements such as the Stockholm Convention? What about devolution?  Something as huge as this deserves at least a few words in the manifesto, right?  Wrong.  The Conservative Manifesto 2017 literally says nothing whatsoever about the consequences of leaving the ECJ.  There are some comforting words about the UK's legal system being the best in the world but that's your lot. 

It really does seem that a definitive pledge was made without first understanding its meaning.  Leaving all EU regulatory bodies is an unforeseen consequence of a rash decision made to placate a few press barons and a few thousand pensioners at Tory Conference.  Moreover, the decision was made in a way that leaves no wiggle room at all for a compromise solution.  Without any real ability to understand or tackle the unfolding problem, the UK is playing right into the EU's hands.  The A50 clock will just tick away like an unexploded bomb until David Davis has to plead with Michel Barnier to make it all go away.

Single Market

Here's a question if you ever find yourself bored on a long journey:  is the UK leaving the Single Market because it will be more prosperous outside the EEA or because it believes the political cost of membership outweighs the economic cost of leaving?  Stumped?  That's because it is a trick question.

Ending freedom of movement is another of Theresa May's red lines.  She has an unseemly obsession with reducing the immigration statistics no matter what that might cost.  It always strikes me as a personal battle, as though she can only prove to herself that she is a success as Prime Minister if she can turn around past failures as Home Secretary.   It doesn't ever seem to occur to her that immigration can be an indicator of a healthy economy or even be a contributing factor to the maintenance of a healthy economy.  Anyway, what about that trick question?  The policy to leave the Single Market is indeed a consequence of the red line on freedom of movement but it came long after the formulation of the red line.  For a significant period of time the UK government thought it could end freedom of movement but still retain all the benefits of the single market.   Brexit veterans will remember this as the fabled "cake and eat it" philosophy.

The basic idea of the "cake and eat it" philosophy is that the EU needs the UK more than the UK needs the EU and therefore will be prepared to trade its principles and rules for continued UK trade.  In this alternative universe German car manufacturers will be queuing up outside Angela Merkel's office to demand that the UK be given concessions on EU immigration rules so that they can carry on selling BMWs and Audis to boastful Brits.  David Davis even thought that the first port of call after a vote to leave the EU would be to Berlin to hammer out a deal with the German government.  In his own fevered imagination Brexit would be no more than a summer tour of European capitals making pleasant trade agreements based on national stereotypes. Literally nobody in the UK government understood that the EU is a political union that, like all unions, relies on unity.

The EU has been united in upholding the four freedoms,  German car manufacturers have been united in upholding the four freedoms,  national governments have been united in upholding the four freedoms.  Time and time again, the EU has consistently stated that the four freedoms are indivisible and that long-term integrity of the Single Market takes priority over short-term losses in trade.  It's just a shame that nobody was listening because a policy to end freedom of movement and retain Single Market benefits has ended up being just a policy to end freedom of movement.  That journey took the UK government 12 months and even now there are a few stragglers still trying to make their way to the nearest all-night patisserie for a feeding frenzy.

Let's be clear here: leaving the Single Market is an unintended consequence of ending freedom of movement.  It is an unintended consequence that is even now not fully accepted by the key players in the unfolding drama.  Let's hope they get there before it's too late because it has an enormous cost.

I've yet to hear a single economic benefit that arises from leaving the Single Market.  Has anyone? After all, nobody involved actually wants to leave it but leave it they will because they laid down their conditions then stood with their fingers in the ears for the next 12 months shouting "blah blah can't hear you, can't hear you" as loudly as humanly possible. 

Sectoral Deals

When does tragedy become farce?  I'm no theatre critic but it's something to do with a circumstantial inability to change course leading to a farcical repetition of hilarious errors.   Is Brexit a farce?  Let's find out using the invincible myth of sectoral deals as a case study.

In the context of Brexit, a sectoral deal is an agreement that allows a specific industry to effectively remain in the Single Market or Customs Union or both.  For example, a deal might be struck so that everything coming in and out of the Sunderland Nissan car factory is treated as though the UK was still a member of the EU.  All those worries about delays, tariffs, regulatory harmonisation and country of origin certification would just magically vanish if only the UK had a system of sectoral deals in place with the EU.   The Germans would be crazy not to want this, right? Won't they also benefit from sectoral deals?  Wrong.

Since last July the EU has been utterly consistent in its refusal to accept sectoral deals.  Theresa May herself even ruled out sectoral deals by rejecting the Swiss model.  Despite a universal lack of enthusiasm for sectoral deals, the Prime Minister eventually decided it was a good course after all and started to deploy various euphemisms to make it all sound better than it really was.  I don't know what happened but the dream seemed to die quite quickly in the early New Year.  Was it Ivan Rogers relaying his impressions of the EU to furious politicians? Did a fresh wheeze take priority? Did they finally listen to the cacophony of EU communications on the topic?  We'll never know but it was barely mentioned again until Jeremy Hunt brought it back to life in the pages of the Financial Times.

 Hallelujah, sectoral deals are back on the UK's metaphorical table.  We thought they were dead but they live on in our own minds like cyphers from the past.  It turns out that Jeremy Hunt and Greg Clark were so worried about pharmaceutical regulation that they wrote to the Financial Times laying out their plans for a sectoral deal on medicines. It's worrying enough that Cabinet debate is now carried out in newspapers but it's much more terrifying to learn that the most senior politicians in the land spend their days on fantasy island.  Poor old Michel Barnier had to reject it one more time.

I almost feel sorry for Michel Barnier.  He must be sick of this already and there's years left to go.
The really sad part in all this is that the EU has already published its legally binding negotiating guidelines for Michel Barnier and his team. They do not include sectoral deals.  Nothing more needs to be said.

General Election

This barely needs to be said but it would have made more sense to have had the General Election before delivering the Article 50 letter than after.  There is really no point in seeking a mandate for something that you did three months ago and that you claim is irreversible.

Row Of The Summer 


The lack of planning puts the UK in a dreadfully weak situation in its negotiations with the EU.  For example, it is not in the UK's interests to strictly order the negotiations so that trade is tagged on at the end, as proposed by the EU. The UK, of course, wants to immediately start discussing trade in parallel with the divorce settlement.  David Davis said this would be the "row of the summer".  The problem is that he was unable to offer an alternative to the EU's detailed itinerary.  After all, if there is only cheese in the fridge then I know what I'll be having for dinner even if I don't fancy it much.

As it stands, the UK's only negotiating position is to agree or disagree with the EU's proposals because David Davis has failed to make credible counter proposals.  Even that description adds nuance that isn't there: David Davis can agree or disagree with the EU's proposals all he likes but he will have to go right ahead and accept them because they are a) the only proposal on offer and b) the only route to a trade deal due to a) the lack of credible UK proposal.

The "row of the summer" is an artifact of a much deeper problem.  The issue is not just that the government have failed to plan for Brexit but that they are still arguing among themselves about what they want to achieve.  Philip Hammond and Liam Fox are arguing about Customs Union membership;  Jeremy Hunt and Greg Clark are arguing in vain about sectoral deals;  Davis and Hammond are arguing about the need for transitional phases; Boris Johnson still thinks he can have his cake and eat it. They are doing this in public view despite the accepted protocol of collective Cabinet responsibility. 

The UK truly is the laughing stock of Europe so I suppose Brexit has at long last turned from tragedy to farce.


Brexit strategy is a mix of unintended consequences, lies that spun out of control,  misunderstandings, stupidity, an inability to listen, an inability to comprehend detail, knee-jerk reaction to media pressure, a refusal to discuss trade-offs lest it upset the "will of the people".  What else can go wrong?  I'll do another report card in 12 months time.  See you all then.

This can all be avoided by voting Yes in a second independence referendum,


PS The Labour Party don't fare much better.  They didn't make the ECJ mistake but they are definitely still in the "cake and eat it" bakery. Just listen to their "jobs-first Brexit" and "Brexit for the many, not the few" and you soon get the idea.

PPS I'd like to make clear that today's mess is not an inevitability:  there certainly is a path out of the EU for any member nation.  It is guaranteed to be a long process of no less than 10 years with significant economic and political risk attached.  Maintaining political and public will to complete the process is a herculean task but it is achievable.  It almost certainly requires a callibre of political leadership lacking in UK politics today.

PPPS I didn't even mention Scotland. The way that Scotland has been treated in all of this is nothing short of a scandal.  Remember the Brexit hotline that nobody answered?  The lie that devolved parliaments would be involved? The complete lack of attention given to the Scottish Parliament's White Paper?  I didn't mention any of that because the average reader of this blog knows much more about it than I do.

Thursday, 29 June 2017

The Brexit Principles

I'd say that pretty much anything good in the man-made world is driven by a clear set of principles. Video games might be designed around the idea that the player is made to feel like a hero; websites might be designed around the principle that every feature is no more than 2 clicks away; mobile phones might be designed so that they easily fit in a pocket or can go 24 hours without a charge.  Even the heroic Human League worked on the principle that they would never use "real" instruments; every electronic epic they recorded stemmed from that basic idea. I've worked on projects that started out with a set of principles but then, for all sorts of reasons, the team lost sight of them along the way.  They didn't turn out well. I've also worked on projects that never had any principles to drive them along. Hmm, let's not dwell on those for too long. In my experience, the most successful projects are driven by a fixed set of clear principles from start to finish.  What happens when those principles are absent or abandoned?  Well, the sad death of myspace and the cluttered pages of hellish design it served up act as the perfect example.

Look at the state of this!  No wonder everyone took to Facebook.
What principles lie behind the recent proposals to safeguard the rights of UK/EU citizens caught up in the UK's departure from the EU? The EU's proposal is the easiest to decypher. They started with the principle that anyone exercising their right to freedom of movement in the EU should carry on being able to exercise those rights in perpetuity. Every page of detail in the EU's proposal flows from that basic requirement. They have done this to such a degree that we should criticise their proposal only on its ability to produce an outcome that meets the basic principle of continuing rights. Describing the document as generous or humane is to miss the point because it is the underlying principle that is generous and humane rather than the technical policy details that will uphold the principle. We can argue all we like about the detail but the only meaningful test is whether it does what they want it to do.

What about those UK proposals? Do they also represent a set of principles? That being the case, what might they be?  I've been through the whole document a few times now and I'm struggling to understand the principles that underpin it. In difference to previous UK attempts at Brexit policy, the UK's proposals are clear and professionally written. There is still significant detail to thrash out but it is relatively easy to understand what the UK Government want to implement. The persistent problem is that it is much, much harder to work out why they want to implement that specific proposal. I know what they want to implement but I honestly don't know what they are trying to achieve.

Here's an example to illustrate my point. The UK have set themselves up for an argument about the cut-off date for permanent residence status, which they euphemistically call "setttled" status. Instead of choosing a specific date they want to negotiate a cut-off somewhere in-between the delivery of the Article 50 letter and the final date of departure. Why do this? What principle is served by having a vague cut-off date? How does this add certainty to the lives of citizens caught up in this mess? I honestly don't get it so maybe we should look at another example. The UK proposes that an absence of two years from the UK will lead to the immutable ending of permanent residence status. Why? Why two years instead of three or one? Who gains from this? Again, what fundamental principle is upheld by this detail? After all, this is likely to affect those who are most economically active because it will push out workers on extended secondments for international companies, academics on sabbatical, and people who can afford extended career breaks. Is that the goal? What is the goal? I don't know.

The government's confusion is further demonstrated by their rejection of the ECJ. They quickly make the point that they would accept an international court to adjudicate on disputes but fail to outline the principles that would be upheld by the court. The EU, of course, insisted on a role for the ECJ because it was the only path that followed the basic principle of continuing rights for UK/EU citizens. This is not just a technical point: rights only have meaning when they are legally enforced. Removing the legal backstop that has enforced the four freedoms since their inception diminishes the value of those freedoms.  A new court can only continue to uphold those rights if it makes exactly the same rulings as the ECJ.  Those rulings, of course, would need to be based on accumulated legislation and case history, which, in turn, reflect a set of underlying principles. The UK are just about prepared to subject themselves to a "neutral" court but they are completely unable to describe the principles that would drive the court's rulings. Another way of putting this is that they know they don't want a role for the ECJ but they're unable to express any supporting reasons. They are unable to do that because they don't know what they want to achieve. Literally everything bad about Brexit flows from that uncertainty.
David Davis would get got an F on this test.  
The cynical part of my brain thinks that the main principle behind the government's proposals is to engineer points of contention that play well with the Daily Express and the Daily Mail.   Let's imagine that David Davis concedes on the cut-off date (which he surely will). He will spin that as a grand gesture and boast about how fair-minded he is. I can already imagine the congratulatory headlines. Let's then imagine that a compromise is made on the wording of the role of the ECJ. That might involve the creation of a new court with a new name but one that will ultimately uphold all ECJ legislation and case history pertaining to citzens' rights.   The UK tabloids will then rejoice that mighty Britannia won the day, even though the EU would be the only side that had actually achieved any of its objectives. In difference to the EU, the UK can never truthfully boast of achieving its objectives because nobody knows what they are.

It's true to say that the UK has upped its game with its proposals for UK/EU citizens rights. I'm actually surprised they managed to produce such a professional document, especially given their history of appalling and embarrassing white papers.  I'm even more amazed that they published it in full for amateur bloggers to pore over and criticise. The fundamental problem, however, remains. That problem, of course, is that the UK doesn't know what it wants and therefore cannot express its desires as policy detail. If the UK can't even agree on a set of principles on something as uncontentious as maintaining the rights of its own citizens how can it expect to formulate meaningful policy on Northern Ireland or non-tariff barriers?

Over and out,


PS I was going to write a post about the rights the UK Government plans to rescind for EU citizens. That would have been a bit pointless because a) I'm a bit late and b) there are plenty of excellent articles already on the topic.

PPS The role of the ECJ is extremely important and I will be surprised if the EU budges very far on this. In fact, I'm surprised that the UK doesn't insist on a role for the ECJ because there are countless cases where the court has enforced the right of UK citizens to be treated in a non discriminatory way. It's almost as if they don't care about their own citizens living in the EU and are prepared to sacrifice their own people to make a cheap political point. Here's an excellent link about the role of the ECJ in securing the rights of UK citizens living in the EU27.

PPPS I don't know how long it takes to appoint a court, set out the legislation it will uphold, list the case history it will consider, appoint judges, and define its working processes. I'm guessing David Davis thinks this can be done in the blink of an eye.   My guess would be at the other end of the spectrum.   Really, he should move on as quickly as possible to the rest of the exit negotiations because they are more important to the UK's immediate prosperity. Arguing about the rights of citizens is just a mean-spirited exercise in wasting time.

Sunday, 18 June 2017

The State That We Are In

The moment we've all been dreading has finally arrived.  That's right, we're sending David Davis and his cohorts to begin negotiating the end of his political career and our livelihoods.  On this momentous occasion in the history of international relations I think a quick summary of the situation might be in order.  Let's face it, we're in a right old state.

As I write this pitiful prĂ©cis the UK has no formal government and no hint of a plan.  To make matters worse a spate of resignations has left its negotiating team in disarray.  Despite all that our dear leaders plan to carry on as though they know what they are doing, even when they clearly don't.

The Prime Minister held a General Election solely to build democratic consensus for the hardest possible Brexit. She failed to get that consensus but decided to carry on as though nothing had changed.  The only tangible conclusion we can draw from GE2017 is that the specific flavour of Brexit proposed by Theresa May is not supported by the public.  It is not clear which flavour, if any, would find majority support but we know for definite that hard Brexit is not one of them.  The rational response would be to present a fresh set of options to parliament in order to buy in consent now that will be sorely needed later. There is nothing rational about the way Brexit has been managed so far.

Economic indicators since GE2017 have made clear that markets are much happier now they have reason to believe that hard Brexit is dead.  The problem is that Theresa May's coalition will  fall apart on any other path except for hard Brexit. The bizarre logic that arises from clinging on to power is that May will carry on the same path she was on prior to the election, despite the electorate having firmly rejected her flimsy plans. Hard Brexit might be theoretically dead because there is no democratic consensus for it but it isn't yet over in the eyes of May or anyone in her shaky cabal.  She fully intends to negotiate a position that will struggle to gain parliamentary support in the mistaken belief that she will not require that support.  The problem for May is that Brexit not only requires parliamentary support but also market and business support. A run on the pound followed by money taking flight to the safety of the Swiss Franc and the Euro would be enough to bring almost any government to a swift conclusion.

Special Brexit remix of "What's Your Flava?" by Bo Selecta hitmaker David Davis.

The UK has published nothing to formally indicate its red lines or its goals.  In fact, the UK has so far failed to participate in the formal exchange of briefing papers with the EU.  Given the disarray at the heart of UK non-government it would be surprising if they were anywhere near that level of preparedness. As it stands the UK will be limited to saying "yes" or "no"  to proposals put forward by the EU. I think everyone knows that is not the route to a successful outcome.  It's worse than  that, though, because Theresa May's pre-election red lines and her coalition deal with the DUP mean that  the UK can only say "no, nein, non".  The UK has literally nothing to negotiate because it failed to build consensus around an achievable target underpinned by a set of unambiguous principles. If you keep your cards too close to your chest sometimes you forget what's written on them.

The DUP will withdraw their coalition support for anything but the hardest Brexit. It will be impossible for David Davis to agree to almost any proposal put forward by the EU because it will violate the conditions of the DUP coalition and lead to the end of the government.  The conundrum is that the "negotiated" settlement that keeps the DUP on board will not ultimately find support from pro-EU Tory backbenchers.  Tory dissent would be manageable if they had a large majority but right now they don't have any majority.  Worse still, the Prime Minister looks weak and has lost the confidence of her own flock.  There appears to be no achievable outcome that isn't utter disarray.

The UK is woefully unprepared for what happens after it leaves the EU.  For example, the legislative void that awaits the UK is to be averted by the Great Repeal Bill, an enormous legal undertaking that will attempt to rewrite all UK legislation without reference to any European court, treaty or technical agency.  Unless this can completely clear the House of Lords and the House of Commons in time the UK will cease to function as a developed nation. To be honest, there is no chance at all that this will be ready in time and it doesn't look as though there has been much effort to achieve the deadline.  The UK's trading relationship is also in jeopardy.  On 31st March, 2019 all trading relationships enjoyed by the UK will cease. There will be a sudden introduction of tariffs and quotas on almost everything leaving and entering the country. Where are the customs officers, the electronic tagging systems, the infrastructure required to raise taxes or separate goods at their final destination from goods in transit? Actually, forget all that for a moment because the shock to the economy will be so painful it is hard to see how Sterling can remain stable. Foreign exchange dealers have already sent a shot across the bows but what will they do when confidence in the UK's ability to sell any good or service to anyone anywhere is completely undermined?

The UK's looming legislative void is further complicated by the need to sign more than 750 legal agreements with 168 nations just to tread water.   The reason behind this is that every single agreement that the EU had with a third party will be void for the UK after it leaves the EU.  One example might be the continuing presence of  UK nationals in sunny Switzerland.  What rights can I expect in a new treaty agreement?  Will there even be a new treaty agreement on continuing rights of UK/Swiss citizens?  This ought to be a top priority for Boris Johnson but he hasn't even once acknowledged the problem at hand.  To be honest, I'm not overly confident that the Foreign Office will get to grips with this in time.  Besides, we all know that Boris Johnson is the top priority for Boris Johnson.

The UK has already capitulated on the order of the talks.  The EU has maintained that trade talks can only start after the divorce talks have concluded.  The UK, of course, signed up to all of that when it agreed to the adoption of Article 50 and the legally binding processes that would be followed by any nation exiting the EU.  Nevertheless, as recently as a few weeks ago David Davis was still saying that the order of the talks would be the "row of the summer". Instead of picking winnable battles he opted to relentlessly batter away at a hopeless cause.  This makes him look stupid and weak but worse than that it makes him look as though he is entering the talks in bad faith.  Instead of building trust and consensus he has opted to send slogans straight to the front page of the Daily Express. And now he has lost.  What's next?  It might be the role of the ECJ, it might be the definition of permanent residence, it might be conditions of a transition phase.  It doesn't matter because every time he says "no" he takes the UK closer to the brink, while every time he says "yes" he takes the UK closer to the brink. Chess players call this Zugzwang.

The EU has published its negotiating guidelines in pain-staking detail.  It put together a working group, iterated on proposals, and sought democratic consensus from the Council of Ministers and the European Parliament.  The EU has also appointed an experienced negotiating team and granted them the legal powers set out in the guidelines.  Are we hearing about disarray, disunity and resignations from the EU side?  No.  Are they clear about what they are trying to achieve?  Yes. Given the agreed legal limits of the negotiating team is there likely to be EU consensus on the outcome?  Yes.  It all looks so easy when political dogma is removed from the equation.

The EU will regularly publish the progress of the negotiations.  If David Davis was hoping that a cloak of secrecy would cover the hopelessness of his situation then he got it wrong.  We will be treated to a real-time glimpse of what it looks like to knowingly take one of the richest countries in the world to the brink of economic and democratic collapse.

This can all be avoided by voting Yes in a second independence referendum,


PS I honestly can't see any positive outcome for Brexit.  Literally every path ends up in parliamentary deadlock but that won't do because the clock is ticking down to legislative chaos.  It doesn't matter if May is deposed or the coalition falls apart or Corbyn attempts his own coalition or an election is called and Corbyn wins it or an election is called and a different coalition takes power.  None of that matters because the fundamental problem remains the same:  it is impossible to deliver an outcome without first describing it and building consensus around that description.  Unless somebody can do that Brexit will either be cancelled just before the brink or it will go to the brink.   I don't mean to be too apocalyptic but this is a genuine challenge for the UK democratic process.

PPS David Davis has confirmed he will turn up in Brussels for talks but I'm not sure there is much point to that because he has no authority to negotiate anything and everyone knows that.  I publish my articles on a timer so anything might have happened in-between pressing the button to publish and actual publication.

PPPS Nothing serious is going to happen until the German election is over and the UK have something resembling a stable government. That's why tomorrow's talks are mainly lunch, a mysterious meeting called "working groups" and a press conference.

Tuesday, 13 June 2017

Everybody In The Labour Party (I Hate)

 I'm not usually stuck for words but I find myself completely lacking the vocabulary to express my anger at the current state of Brexit. I'm obviously angry at the Tory Party for creating this entire mess but I've made space for a special kind of contempt for Corbyn and McDonnell. In fact, my contempt for the inner circle dictating Labour policy is even greater than it is for Jack Straw. The election presented the Labour Party with the perfect opportunity to act as a genuine opposition to clearly harmful Tory policy but what have they done? What they have done? Well, they're propping up Theresa May and enabling her and her spineless puppets to carry on with the most extreme form of Brexit.

During the 2015 General Election both Labour and Conservative campaigned on a pro-EU policy. The EU referendum result pushed both parties to immediately reverse a policy that had been maintained without question over a period of several decades. They did this without properly asking their membership or their MPs. The Labour Party didn't even bother debating Brexit at their recent party conference. What kind of democracy is this? This is the unstructured logic of taking back control. It's bizarre to think that the Prime Minister and the Leader of the Opposition both campaigned to remain in the EU but are now fervent supporters of leaving the EU. In these circumstances it was right to have an election on the topic. In fact, it was the only democratic response. Obviously, they should have asked the electorate for their support before starting the exit process but that's the crazy world of Brexit for you. It might have been better, too, if the election had properly discussed the options and costs of various different approaches to leaving the EU. Oh well, another one will be along soon enough.

The electorate have rejected the form of Brexit proposed by Theresa May. She was quite clear that she sought a mandate for her policy and took the view that an increased majority would signify the will of the electorate. She didn't get that mandate but she's pressing on regardless. How can she do this? How is this possible in a mature democracy? After all, there are plenty of pro-EU MPs on the Tory benches who could easily derail any government that attempts to walk away from the Brexit talks. In fact, the Scottish Tories alone should be enough to bring hard Brexit to an end. In normal times this would result in government defeat and quickly lead to a vote of no confidence. Are we in normal times? No, because there is nothing normal in the illiberally stupid views of Corbyn and McDonnell. Instead of delivering a bloody nose to the government they are lending their support to the hardest possible Brexit. On their current path they will go down in history as the party that took the United Kingdom to a legislative and economic abyss.

The Labour manifesto on Brexit was vague and confused and, depending on your view, promised nothing to nobody or everything to everybody. It talked elliptically about "access" to the Single Market without ever specifying how that might be achieved. What about immigration policy? Nothing. Customs Union? Well, it is to be a "jobs-first" Brexit. Does that help? How about a policy on the continuing role of the ECJ and European technical agencies? Zilch. Farmers?  Dunno but something about "benefits" and "putting the economy first". Apart from a few pages of cheap sloganeering, it presented a world in which Brexit was barely important and was just another issue like council housing or police funding. None of this should be too surprising from the party that didn't even bother to debate Brexit at party conference. Did I mention that already?  From their relaxed attitude it would be easy to believe that Labour have a more positive view of Brexit and that they have left more options on the table. Anyone thinking that would be completely wrong.

It's easy to conclude that Corbyn is no fan of the EU. In fact, we only need to compare his limp efforts during the EU referendum with his animated campaigning during the General Election to understand that he doesn't much care for EEA membership. Viewing the entire world through a prism of outmoded class politics means he can only ever see the Single Market as a political fix for greedy capitalists.  He's also a politician so he's probably arrogant enough to think that he can single-handedly make it all better if only the UK would give him a chance to implement his policies on social and economic reform. Maybe he will make it all better (no, he won't) but eventually he'll be replaced by a Blairite or a Tory who will proceed to undo everything he just achieved. In this regard EU membership is the single mechanism that protects the UK from its own bungled attempts at legacy democracy. It provides a set of inviolable standards that are granted in perpetuity and cannot be reversed by the sudden swings from left to right and back again that are delivered by the FPTP system. Fall out of the EU and that is all gone.  In reality, the EU is the closest the UK will ever get to a constitution that sets out the rights and obligations of citizens and state.

We don't need to look for behavioural signals from Corbyn in order to conclude that Labour will support the Tories in facilitating hard Brexit. They didn't write down their policy anywhere but it certainly all dripped out over time. First, Kier Starmer made it perfectly clear that the ECJ would have no role in resolving disputes arising from citizens' rights. I can only guess that he means the UK will completely leave the jurisdiction of the ECJ. That position is perfectly aligned with Tory policy. If the UK leaves the jurisdiction of the ECJ then it also leaves  every EU initiative from Horizon 2020 to the Open Skies Agreement. Yup, that is also perfectly aligned with Tory policy. How about the Single Market? Well, McDonnell said he would never accept the freedom of movement of people. He said that about 9 months ago and he's still saying it now. That's right, a Marxist in the Labour Party is prepared to give more rights to capital than to working people.  Is that also perfectly aligned with Tory policy? Do I need to answer that one?

The Labour Party are useful idiots, which makes them dangerous idiots. If the Tories want to take us back to the 1950s, then Corbyn wants to take us back to the years of socialist reform of the years immediately after the end of the war. I have no desire whatsoever to travel backwards in time. That's bad for me because the gloomy choice of historical decade is all that separates Labour from Tory.

Over and out,


PS Class struggle is a fascinating topic. During Tommy Sheridan's libel trial I had lighthearted discussions with friends in which I would defend Tommy and his honour. I argued that Tommy had been stitched up by enemies he had made in the socialist movement. After all, socialists are always making enemies and falling out with each other. When he won his libel case he stood on the steps outside the court and said something like, "The working class members of the jury found me innocent of all charges". At that point I instantly knew he was guilty because instead of accepting the result as a triumph of the legal system he could only express it through it through the prism of class politics. Objective truth meant nothing in the face of class struggle. If we've learned anything from GE2017 it's surely that class politics are as irrelevant as a dial-up modem.

PPS Why are young people voting for Corbyn?  The one thing he shares with Theresa May is that his worldview is gloomy, depressing and outmoded.  I would genuinely welcome a leadership challenge. 

Friday, 9 June 2017

New Brexit, Same As The Old Brexit

I wanted to do a really short post about how the election result has fundamentally changed the course of the Brexit bus and how life as we know it will never be the same due to the surprise outcome.  Here's a quick summary of my thoughts so far:
Sorry you had to witness that outburst. I do feel better now but also a little ashamed that I let it all get to me.

Before I head off in search of a paracetamol and an emergency ukulele let's just peruse the facts of the situation for a quick second:
  1. Theresa May is still in place. 
  2. There are no real moves to depose her (yet).
  3. Fox, Hammond, Davis, Johnson are all still in place.
  4. Tory policy is still for the hardest possible Brexit.
  5. Labour and Conservative have policies on Brexit that lead to exactly the same conclusion.
  6. Nobody has properly considered the legislative void that follows the hardest possible Brexit. 
  7. The Brexit talks are about to start in 10 days time and the UK is just as unprepared as it was 12 months ago.
  8. Voters do not understand the decisions that are being made on their behalf because the UK's political leaders don't understand them themselves and refuse to engage with the problem.
  9. Alternatives to the UK's current path have willfully been ignored as though they don't exist.
  10. The election was the perfect time to do that but I suppose we'll have to have another now. 
Over and out,

PS Here is a pop song with semi-appropriate song title to help us all calm down and enjoy the weekend.

Thursday, 8 June 2017

Blog Post For A Future Generation

How exactly will Brexit be resolved?  How will all this mess be tidied up so that we can all get on with our lives? What can you expect from the next few years if you have a one-way ticket on the Brexit bus?  How will the next generation react when the harsh realities of Brexit become clear? Will we just end up exactly where we started?  Well, if you came looking for definitive answers to any of those questions you came to the wrong place.  Despite my lack of predictive power I'm going to have a right old go at answering some of these imponderables in a wildly speculative post. Enjoy.

Full disclosure: normally I plan out my posts paragraph by paragraph, exactly the way I was taught to at school. You might not believe it but it is honestly the case that some forethought is involved in these blog entries. This time, however, I didn't actually know what I was going to write in advance of writing it because I really don't know how Brexit will be resolved. Yes, I know, how very apt!  What follows are my thoughts as they happened in real-time.  Let's find out together if planning is a good or bad thing in a kind of internet literary experiment.  Right, that's enough of this meta-blogging.  Let's get cracking.

Catastrophic Brexit

A catastrophic Brexit is the outcome that has been threatened by David Davis on multiple occasions. In this scenario, the UK simply walks out of the exit talks with the EU.   As a consequence, all treaties with the EU and all associated agreements with third parties will lapse on 31 March, 2019 without replacement or extension. Every single one will be void. The UK will cease to operate with any of the international legal relationships that define the developed world. Planes will be unable to take-off or land; the Channel Tunnel will be forced to close; money transfers will cease; the legal frameworks that protect business and consumers will no longer function; nuclear fuel and hazardous chemicals will be stuck in transit; the rights of citizens caught up in this mess will be open to abuse. Normal life as we know it today will no longer exist.

Optimal Brexit per Gove is found at 1.76 Farage. Any more and it's a catastrophe.
This is not a credible option because the chaos it would create would result in the rapid fall of the government. Honestly, I cannot envisage any government surviving this mayhem. Even if David Davis did adopt this strategy there would be enormous pressure on him to alter course before his intentions become reality. That pressure would come from the money markets, it would come from business leaders, lawyers, supermarkets, his own colleagues, farmers, Heathrow Airport, and me. That's right, Terry Entoure would blog about it in the third person and walls will tumble. Ok, a currency crisis would obviously be more effective but in my own mind it would be all down to me and my powerful words. Read them and be afraid, Mr Davis!

Catastrophic Brexit is unlikely to happen because anyone who follows that path will be ousted by the simple rules of power and politics. Does anyone remember the UK's dalliance with the Exchange Rate Mechanism? The money markets started gambling against official Tory policy, forcing the UK to prop up Sterling at great national expense. That policy decision was abandoned after just a few days due to the spiralling costs. Brexit poses far greater challenges than simply propping up a currency so David Davis or his replacement will be forced to compromise and negotiate.  Brexiteers can complain about the democratic will of the people all they want but it won't diminish the power handed to foreign exchange dealers through market deregulation in the 1980s.

Will any of this deter David Davis from carrying out his threat?  I think he is actually stupid enough to think he can walk away from the talks but his successor probably won't repeat the error.

Hard Brexit

A hard Brexit is the offical route of the Brexit bus. It is barely less catastrophic than walking away in a huff because it guarantees exactly the same outcome: the UK would cease to have the international legal relationsips that define the developed world. The problem here is that the red lines of the UK and the EU are irreconcilable. The EU demands that citizens' rights are protected by the ECJ, while the UK rejects a continuing role for the ECJ in any form. In fact, rejecting any role for the ECJ means that the UK cannot participate in any EU initiative from the European Arrest Warrant to the Open Skies Agreement. The EU also demands that any transitional phase be subject to the legal obligations of EU membership, while the UK demands an immediate end to the four freedoms. In addition to these red lines, the UK has some extremely vague policy that has yet to be expressed in the form of sentences and words and punctuation. It will take linguistics academics and behavioural experts years of research to work out exactly what the UK intends across many areas of policy. The Customs Union springs to mind as a good example. Will the UK be in or out or in an exotic macroscopic quantum state? Agreement to vague demands is just impossible.
My slides on superposition Brexit states.  Yup, completely meaningless.
The hard-core Brexiteers want the talks to be conducted in secret. It doesn't take a genius to work out that they don't want a ticker-tape of bad news to undermine their objective of a hard Brexit. That is not going to happen because the EU has published its guidelines on transparency. Instead of secrecy, we are going to be treated to a steady stream of official reports on the progress of the Brexit talks from the EU. The currency markets will respond immediately to any report that the UK will soon leave the EU by stepping into a legislative void. By threatening economic chaos the markets will put pressure on the government to solve the problem the way they want it solved.

It's my view that governments cannot survive the economic chaos of a hard Brexit. It's also my view that governments cannot survive even the imminent threat of a hard Brexit due to the immediate reaction of powerful currency markets. Whoever is in charge will either need to change their approach before it's too late or they will be kicked out by their own backbenchers. It's worse than that because altering course might also lead to the fall of the government. After all, Tory and Labour campaigned on a clear policy of the most extreme form of divorce and there will be residual feeling that it ought to be delivered. The next government, of course, will merely inherit all the problems of the previous. That cycle can only ever be broken by the formation of a government that agrees to compromise on almost all of the UK's red lines in order to achieve an orderly Brexit. Until that compromise is reached all that will happen is a cycle of governments armed with the same dogma that led to the fall of the last.

The key point in all of this is that the EU has planned for Brexit; it has published legally binding policy documents; its message is consistent with its own treaties and with the legal templates it has forged with third nations; it is united; everything the EU said last July on Brexit remains valid today. The UK, on the other hand, has come up with nothing more than uncosted policy statements presented in the form of snappy slogans. It has flipped and flopped and stumbled towards an indecipherable position that makes no rational sense. The inherent weakness of the UK's position means it will be first to compromise. It didn't need to be this way but here we are.

Why won't the EU be forced to compromise to the same degree as the UK? Well, it will be forced to compromise from its initial negotiating position but the limits of those compromises are set out in a series of legally binding policy documents. Michele Barnier might even take the view that the EU should compromise further but there's not much he can do about that because anything he does beyond his legal powers will be rejected by the EU. The EU has taken some months to get to its current position: policy proposals have been published, debated by the European Parliament and ratified by the European Council of Ministers. It is doing exactly what it did during the Croatian accession talks, the CETA trade deal, the South Korea trade deal, and TTIP. This is how it conducts its business. A common criticism of the EU is that its democratic processes are time-consuming but that works to its advantage in the Brexit talks: once it has chosen a direction there is no way to change it in time. The UK, on the other hand, has no formal policy documents outlining its negotiating strategy. All it has is a couple of White Papers of dubious quality and some campaign slogans. It is also the only side that is able to change direction rapidly due to its insistence that strategy is dictated by an unaccountable team. The principle of least resistance dictates that the UK will cave first.

Orderly Brexit

Sooner or later there will be an accumulation of pressures from money markets, from businesses moving their headquarters to EU soil, and from the City of London losing its EU passporting rights. Perhaps the UK will be heading towards a self-inflicted recession. Maybe it will already be in recession. Maybe the problem will be a recruitment crisis in the NHS or a brutal downgrading of the UK's debt. It doesn't really matter what crisis acts as the tipping point: a time will come when the UK will be forced to compromise on its red lines. It will probably require a change of Prime Minister, maybe even a change of government, maybe even an emergency election laying out the available choices. All of this will take time that is already in short supply so the UK will be forced to take up the limited offer of a transitional phase on the EU's terms. The UK will take up that offer and effectively remain in the EU until at least 2022.

I didn't mean that sort of orderly but actually it sort of works.
This vision of orderly Brexit is not good for the UK because it makes it look weak and disorganised. That is not a good look for a nation that desperately needs to sign a trade deal with the EU, sort out its WTO schedules, agree renewed trading relationships with all EU partners, and sign 750 legal contracts with 160 nations on everything from airline safety to passport recognition. It needs to do all of that by 2022 just to tread water.

The "orderly" Brexit described here will do significant harm to the UK's economy. It will limit the ability of the UK Government to borrow money on favourable terms; it will lead to uncertainty in business; it will reduce the tax take from financial institutions that successive governments have relied on; it will place restrictions on trade not seen since the 1950s. The UK's international reputation as a place to visit, work and conduct business will be damaged for the next generation.   More than any of this it will be a severe test for the limits of democracy in the UK. None of this is good.  This is not an orderly Brexit but it is the best we can hope for right now.

The Future

What happens after Brexit? Historians might note that the UK intially rejected the vision for the EU laid out in the Treaties of Rome in 1957. Instead of joining a trading block with strong intentions of closer integration and cooperation, the UK joined EFTA. The UK's sluggish economy resulted in an attempt to abandon EFTA after just 1 year of membership. Attracted by the stellar growth of the EEC, Harold Mcmillan applied to join up back in 1961. That was rejected by Charles de Gaulle, as was Harold Wilson's attempt to join in 1967. By the 1970s the UK was the "sick man of Europe". It's eventual accession to the EU and the opportunities it presented turned the UK into one of Europe's most successful economies. Will history repeat itself?

There is no question that EU membership has been an economic success for the UK. In a few years time, after the current wave of xenophobia was blown over, the EU will once again appear a more attractive option than going it alone. It will take a new generation of voters and political leaders but that is the most likely outcome. Maybe it will start with small items like closer cooperation on the protection of fishing grounds or maybe the UK will want a slice of the Single Digital Market. It doesn't really matter how it starts but one day we'll look back and realise that Brexit was all for nothing. How much damage could have been avoided if only that realisation had dawned as early as 2017? That's a moot point because right now Brexit is a process that we all have to go through. Almost nothing can stop Brexit because it has just enough momentum that it can't be stopped in time.

If you're Scottish, of course, the wilderness years can be avoided by voting for independence. We must never forget that.

This can all be avoided by voting Yes in a second independence referendum,


PS I think the planned posts are better but I've always been one to prove a point even if it means a kick in the shins.  Can I be Minister for Brexit?

PPS Feel free to disagree with my analysis.  Maybe you think that the next government will stand firm or that the chaos will be containable. Please leave your views in the comments section.  If we still disagree then I'll see you in the car park outside Tesco at 8pm.  Oh dear, this always happens when planning goes out the window.

PPPS Switzerland took a hard look at their own equivalent of catastrophic Brexit and backed down long before it became a likelihood.  There's that famous European pragmatism.  Everyone used to think the UK were the kings of pragmatism.  What happened?