No Deal Means No Brexit

We must keep No Deal on the table, they tell us, or the EU won't take us seriously. If you've ever negotiated anything, they tell us, you have to retain the option to walk away or they'll just wait until you're desperate enough to take whatever crap old deal they want to offer.

Graham Brady, the failed Prince Andrew impersonator who rises to stardom every few years because he claims he has a safe in which he keeps Tory MPs' poison pen letters to their leader, is the most recent purveyor of the secondhand car argument.

"It's like walking away from buying a secondhand car," he argued three weeks ago when he managed a bonus few hours in the limelight by tabling the vacuous "Brady amendment" that was then put together with the ramshackle "Malthouse compromise" to produce something that made lots of Tory MPs ask themselves "Is that really what I voted for?"

****

If you go in ready to buy a car, and you decide the one which looked so attractive through the window is actually not what you wanted, you politely say "No thanks" and you walk away. And what have you lost? Nothing. You go home in the clapped out old banger you arrived in, and go back to surveying the sales sites.

That's not where we are though. That's not what we're doing.  We're in a process where we lose the car we turned up in when the dealer shuts up shop at 6pm, whatever we decide. So if we don't go for anything in the showroom, we're walking home.

There's also the slight problem that the other side considers that the haggling is over. And they think that... because you've agreed a deal with them, and you've shaken hands with the other 27, and you've told them it's great, and you've taken it home where your cabinet has also approved it.

Then you have to face the world again when the Parliament which also has to vote for it, the Parliament you haven't bothered, haven't dared, to keep involved, just tells you to piss off.

****

There is an option which allows you to walk away and lose nothing, drive home happily in the old banger and tell the kids that something better will turn up next week.

It's called revocation.

48 days to go - do we want to be alone?

"We'll have up to 40 [free trade agreements] ready for one second after midnight in March 2019," was Laim Fox's pledge to the Conservative party conference in October 2017. So it must be true. Even if he didn't specify that he meant 29 March. And 23:00, since May & co have even capitulated on the time zone - Brexit happens to Brussels time.

But now the Financial Times tells us "UK government has told businesses it cannot guarantee the British economy will be covered by 'most' of the EU’s global network of trade agreements immediately after Brexit - even if parliament approves Theresa May’s divorce deal with Brussels".

The Withdrawal Agreement May has agreed with the 27 other member states includes an undertaking by the EU (in a footnote on page 203) that it will ask its (currently our) trading partners to continue to act as if (= pretend) we are still a member state and therefore covered by all these agreements during the transition period.

I await Fox's statement of which countries will go along with this, and some of those at the briefing reported by the FT say the same. One of them observed "I am particularly worried about small businesses, who may not even know that their trading depends on some of these agreements".

Occident

We're used to Trump's "trade doctrine" that any new trade must reduce the U.S. trade deficit, strengthen manufacturing and boost growth, and we know on some measures the UK has a trade surplus with the US.

Tread carefully.

Before Trump was even inaugurated, his incoming Commerce Secretary Wilbur Ross was telling Cyprus (where he'd served as vice-Chairman of the Bank of Cyprus and with which he has some interesting Russian links) to exploit the "God-given opportunity" to steal business from the UK.

The doctrine was expressed in the run-up to renegotiating a NAFTA trade agreement that "triggers renegotiation whenever the US develops a trade deficit with Canada" but not, perhaps, vice versa.

Talking about UK trade, the threat of chlorinated chicken has become a joke, but US lobbyists want rather more than that from any trade deal with the UK. To take a handful of demands from the 30 which Huffington Post listed:

• Scrap the safety-first approach to food quality and standards
• Stop people knowing what they're eating is genetically modified
• Change how the NHS buys drugs
• Ensure Brits' data can be transferred to foreign countries
• Allow foreign businesses to sue the British state
• Legalise dangerous pesticides

Davis and Paterson's expenses, and who paid them

You have to ask what contribution David Davis MP, Owen Paterson MP and Shanker Singham (of Legatum, the Institute of Economic Affairs, then... who knows, as the Charity Commission catches up with him) made to the same case.

But those aren't the only demands coming from the US. Irish foreign minister Simon Coveney was in Washington on Wednesday and received strong backing from "US politicians with affiliations to Ireland" who "wield great influence over US trade policy".

"Peter King, a Republican representative from New York, said it was 'important' that the current unmanned 'soft' border on the island of Ireland be maintained 'if the British want to consider any kind of trade agreement with the United States'." And "Brendan Boyle, a Democratic representative from Pennsylvania on the House ways and means committee, said it was 'hard' to get trade agreements through Congress. He added: 'Trust is important, and if you are about to enter a trade negotiation and you’ve gone back on the backstop and you’ve gone back on the Good Friday Agreement, then that will certainly be remembered'". Ireland has friends on both sides of the Atlantic. Do we still...?

Orient

The EU-Japan Economic Partnership Agreement entered into force on 1 February, building the largest open trade zone in the world, with 635 million people and getting on for a third of the world’s GDP. Apart from trade provisions the agreement sets ambitious standards on sustainable development and includes a specific commitment to the Paris climate agreement.

"Under the pact, Japan will remove tariffs on 94 per cent of all imports from the EU, including 82 per cent of farm and fishery products. For example, the deal scraps Japanese tariffs on gouda and cheddar cheese - which are close to 30 per cent - as well as on wine, which faces duties of 15 per cent on average. Beef and pork exports are also likely to rise. For its part, the EU will eliminate tariffs on 99 per cent of imports from Japan. It will abolish tariffs on Japanese cars and trucks in the eighth year and televisions in the sixth year following the pact's implementation."

The UK is part of this agreement until 23:00 on 29 March 2019. Nobody yet knows what happens after that, but some of the options are:

• If the Article 50 period is extended, for whatever reason and for whatever period, we remain a member of the EU and a beneficiary of this arrangement during that period.
• If some version of the current withdrawal agreement is ratified, we enter a transition period and EU trading partners will be asked to treat us as if we are still a full member (see above). According to Faisal Islam's Google translation of a letter from Japanese customs, they assume that everything will stay the same if there is a transition period.
• From the same letter, if there's no deal, and therefore no transition period, the UK and Japan will deal with each other on WTO Most Favoured Nation terms - the tariffs we used before 1 February 2019. We will have been parties to a preferential trading agreement for less than two months.
• If the Article 50 notification is revoked, we will continue as a member state of the EU, all this will have been a bad dream, except that people will look at us strangely when leaders meet, and we will not be thought of as the same steadfast, sensible pillar of the world order that we'd like to think we are.

For the future, transition period or not, we will have to do our own deals, and the FT tells us "Tokyo is confident that it can secure better terms from the UK than it did in negotiations with the much larger EU, and is not willing to duplicate the existing treaty precisely in either a bilateral deal or in talks for the UK to join the Trans-Pacific Partnership group". Who's surprised?

Shopping in Myeong-Dong, Seoul.
Photo: Uwe Schwarzbach via a CC-BY-NC-SA 2.0 licence

We have a trade agreement with South Korea as well, at the moment. Jim Pickard of the FT tells us "business sources tell me South Korea is also hoping to use its leverage to extract concessions from the UK over a new trade deal: for example only letting UK count EU industrial parts in "rules of origin" calculations if Seoul can count Chinese parts". Again, who's surprised?

Nobody who keeps up with the LSE blog on Brexit will be surprised. In a post entitled "Can ‘Global Britain’ forge a better trade deal with South Korea? This is why it’s unlikely" we see (I resisted the temptation to include lots of lovely data and analysis):

1. The UK outside the EU will be a ‘second tier’ player when it comes to negotiating free trade agreements, considerably weaker than the ‘big three’, of the US, the EU, and China;
2. It will be easier for the UK to sign trade deals with the 53 countries with which the UK already has free trade agreements, via its current EU membership;
3. One of the countries high on this list will be South Korea, which has a very comprehensive FTA with the EU, covering services and non-tariff barriers, which has already reaped important benefits to both the UK and South Korea;
4. But, South Korea will be reluctant to replicate the terms of the EU-South Korea FTA for the UK, because it would expect a better deal with the UK than it managed to negotiate with the EU (because the EU has an economy 10 times larger than South Korea, whereas the UK economy is only twice the size of South Korea);
5. If the UK fails to reach an agreement with South Korea, this would lead to the re-imposition of tariffs on UK-South Korea trade, and would jeopardise the significant services trade that has developed between these two economies; and
6. Even if South Korea and the UK could agree to replicate the terms of the EU-South Korea agreement, the “rules of origin” in the deal could mean tariffs on many manufactured goods from the UK (such as cars) as a result of the large content of parts from elsewhere in the EU, which would count as made in a “third country” once the UK has left the EU.

And finally

"It’s wonderful to see Liam get his own platform in the digital world,” an aide to the business guru Fox told LCD Views, “and here I was thinking he wasn’t even up to the job of being a shoehorn for someone putting on flip flops. Shows what I know!”

Laim Fox has found his true level as a frequent flyer feature writer for TripAdvisor, we are informed by LCD Views.

Alternative alternative arrangements

The withdrawal method

This morning on the Marr Show Sajid Javid called the Commons vote on the Brady amendment "an acceptance of [May's] deal subject to a change, alternative arrangements¹ for the backstop". The plan is to "try and find an alternative arrangement². And Steve Barclay, the Brexit Secretary will be leading on that".

This is a reasonable reading of Graham Brady's vacuous amendment (see Tuesday's Commons Order Paper, top of page 21). In interviews after the vote, Brady suggested "there could be a binding addendum to the withdrawal agreement which puts a time limit on the backstop. This could either stipulate it will end by a certain fixed date, or that it could last for no more than a certain period of time" and possibly "a provision that allows for either side to withdraw from the backstop under certain conditions as a means of breaking the Brexit impasse".

And back to Javid: "The Attorney General, Geoffrey Cox, will be leading on another very important strand of work, which is to see if it’s not an alternative arrangement³ can there be a hard time limit to any backstop, or a proper exit mechanism".

So the Attorney General's job is to look for a time limit to, or an exit clause from, the backstop if the Brexit Secretary fails to find... an alternative arrangement which might be a time limit to, or an exit clause from, the backstop. My waffle meter is twitching.

Javid wasn't done. He then told us "in terms of an alternative arrangement⁴, it can be done. In my own department I’ve got Border Force. And I asked Border Force months ago to advise me, to look at what alternative arrangements⁵ are possible, and they’ve shown me quite clearly you can have no hard border on the island of Ireland and you can use existing technology. It’s perfectly possible. The only thing that’s missing is a bit of goodwill on the EU side".

Leaving aside the poundshop mafia threat in "all we need is a bit of good will", what's he saying here? These alternative arrangements¹²³⁴⁵ really aren't the same thing.

Border Force is "a law enforcement command within the Home Office [which] secure[s] the UK border by carrying out immigration and customs controls for people and goods entering the UK". And they told Javid months ago that this was a non-issue. Apparently.

Has he only just realised the significance of what they told him? Has he not passed the good tidings on to his boss? Because other people have, including various members of the European Research Group and their favourite customs expert Hans Maessen, Brexit adviser at SGS Government and Institutions Services.

I don't discount Mr Maessen's experience, but he has failed to convince the prime minister so far, or indeed Michel Barnier, both of whom you would assume to have the best institutional advice at their beck and call.

But never mind, at PMQs the day after the Brady vote May covered all the bases. She told Jeremy Corbyn she had heard "proposals such as a unilateral exit mechanism or a time limit to the backstop", and "the political declaration already refers to alternative arrangements and raises a number of proposals that can be addressed, such as mutual recognition of trusted trader schemes". She's considering all the alternative alternative arrangements.

The legally binding withdrawal agreement (Protocol on Ireland/Northern Ireland, page 303) refers back to "the Joint Report from the negotiators of the European Union and the United Kingdom Government on progress during phase 1 of negotiations" from December 2017, which "outlines three different scenarios for protecting North-South cooperation and avoiding a hard border," and states "this Protocol is based on the third scenario of maintaining full alignment with those rules of the Union's internal market and the customs union which, now or in the future, support North-South cooperation, the all-island economy and the protection of the 1998 Agreement, to apply unless and until an alternative arrangement implementing another scenario is agreed". That's the backstop, to apply unless and until something better comes along to do the same job.

The non-binding political declaration (Articles 26 and 27) talks of "making use of all available facilitative arrangements and technologies... to consider mutual recognition of trusted traders’ programmes, administrative cooperation in customs matters and mutual assistance, including for the recovery of claims related to taxes and duties, and through the exchange of information to combat customs fraud and other illegal activity... Such facilitative arrangements and technologies will also be considered in developing any alternative arrangements for ensuring the absence of a hard border on the island of Ireland on a permanent footing".

Letting the clock do the work

Not exactly definite is it? Another government could do pretty much what it liked with the political declaration, but it's that "unless and until" in the withdrawal agreement that Brady has to deal with.

May, Javid & co are telling us nothing. We know they don't think we deserve to know anything, but could it actually be because they have nothing to say?

Meanwhile...

I'm reminded by BBC Brexitcast that Craigavon-based Almac, Northern Ireland's biggest pharmaceutical company, has opened a new factory south of the border. Most of the company's business is with the Republic, and there's a risk that products will have to be certified twice, for sale in the EU and outside. The development has been "supported by the Department of Jobs, Enterprise and Innovation through Ireland’s inward investment promotion agency IDA Ireland" and "will be utilised by Almac Pharma Services and Almac Clinical Services, both of which are already registered to operate in the Republic".

And the Border Delivery Group, led by HMRC, has cancelled a briefing meeting with NI business for a third time, because they have been given no political direction on No Deal.

And the head of the Northern Ireland civil service (with no more to go on than a two-page memo from Arlene Foster and the late Martin McGuinness) has warned Westminster and Whitehall that "businesses are going to vote with their feet" because nobody knows how the border is going to operate if there's No Deal.

And finally...

Again from Brexitcast, leaders of EU member states are off to Sharm el Sheikh for a get together with African leaders on 24 February, which seems like a good opportunity to have a special EU Council meeting on the side. But May might need two special council meetings...

One perhaps to authorise the Union Chief Negotiator to pursue this path as could require new negotiating guidelines if backstop to be excised - the other to sign off on any agreed text

— William Bain (@William_Bain) January 29, 2019