It's over, time to move on

You might wonder why I'm writing a postscript on Brexit. Well, I'm wondering too...but I'm hoping this will be my last post on Brexit for a very long time. There shouldn't really be anything much more to say for a while. Should there.....?

Well, there will inevitably be columns written for years on whether we are better or worse off. And (I fear) on why we should apply to rejoin. But they will mainly be easy to ignore. I expect few people will have any appetite to engage in such debate. Wolfgang Munchau, the eurozone commentator who "speaks like a German but writes like a Brit" argues that Sir Keir Starmer is very wise to make clear that, for Labour, the Brexit issue is closed. He wants to fight the next election on the future, not the past. He wants to move on and Munchau feels the EU must also move on and resolve its dilemma between cohesion and integration as reflected in the views of Chancellor Merkel and President Micron.

The integration drive was effectively the cause for euroscepticism, a word invented by the British. Munchau argues that the UK's Brexit debate was an absurd "category error" between Leavers who opposed integration and Remainers who were in denial integration was occurring:

"While I favoured Remain in the 2016 referendum, I was troubled by the Remain leaders’ reduced view of Europe. The union they wanted to remain a member of was not the same union I ever experienced. I understood the eurosceptics...at least we agreed on what the EU is."

It will be interesting to see whether integration within the EU accelerates without the brake of UK membership. As for the UK, does the end result of many years of aggro - I nearly put four and a half but that is just since the referendum - make any sense? Well, what was the alternative?

I recently came across a book I bought in 2017 which I can now consign to the recycle: Nick Clegg's How To Stop Brexit (And Make Britain Great Again). Intrigued by the title - and it was already on cut price offer shortly after publication - I'd bought it to try to understand the rationale behind a democrat denying democracy. After reading it I still couldn't fathom it.

To be fair, I had expected that, the year following the Gina Miller Article 50 court case, that the book would be full of rearguard spoiling tactics, legal action and brigading the support of the egregious and not lamented ex-Speaker John Bercow and the House of Lords that Nick had been so anxious to reform. But no. He seemed to think that, by simple reassertion of the points that had not been telling in the referendum, folk would realise they should think again and would change their minds. And that this could be followed by a process to back off from Brexit. It was touchingly naive. 

The early chapters, about how the EU was now heading in the direction of a two speed Europe, we've heard before and it hasn't happened. Anyway I'm not interested in getting to the same place at a slower rate. The middle chapters feature conspiracy theories about a cabal of think tanks and wealthy business people who Clegg claims influenced right wing Tory MPs with their vision of turning the UK into Singapore on Thames. The businessmen he names include Peter Hargreaves of the financial services company Hargreaves Lansdown, Anthony Bamford of JCB, Boris Johnson's latest unsuitable political peer Peter Cruddas, Aaron Banks and others. Besides the fact that a very low tax, low regulation economy was never going to happen, none of this explains or even acknowledges that the Vote Leave campaign tapped into a strong vein of national pride in ordinary people in neglected areas of the country. Though for that Clegg blames a "small group of newspaper owners and editors". His pantomime villains are Rupert Murdoch (for the Sun but not the Times group, thereby ignoring how much editorial independence Murdoch has always allowed), "UKIP supporting Richard Desmond" of the Express and the "billionaire Barclay brothers" owners of the Telegraph. And, of course, Paul Dacre who is the odd one out as he was editor of the Daily Mail, not owner, though Clegg is very keen to describe him a "secretive multi-millionaire who claims to stand up for ordinary people".  Who knew newspapers were so influential, when only 40% of the population ever read them?

But it was the closing chapters, that I've just re-read, that turned my stomach. Deploying the stale old argument that the only way ahead was more Europe not less and that pooling our sovereignty is the way to increase our power, Clegg made clear that his vision was for a Europe without the UK's a la carte arrangement which he described as complex and unfair. He quoted Guy Verhofstadt "... a new Europe, a Europe without rebates, without complexity, with real powers and with unity".

I thought that was enough to make me want to throw up, but then I read Clegg's masterplan for how to achieve his vision. Just how would he kick start discussion of a Europe of concentric circles and get everyone's buy in? Easy: a joint UK-EU convention should be formed, removed from "the bungling hands of government ministers and elevated above party politics" and handed the task of sketching out a future arrangement. It would be chaired by serious and experienced figures from either side of the channel. Clegg also proposed who those people should be: Sir John Major and the Dutch PM Mark Rutte, who would work to a short timescale. The concept of giving some unelected people, who we can't get rid of by voting them out, the job of deciding how we move forward in an undemocratic federal club run by politicians also we can't vote out is beyond parody. But bizarrely Clegg didn't say at any point how this would actually extract the UK from Brexit. "Once Article 50's point of no return has been successfully delayed or paused, the discussions must not drag on" he said, without saying by what process the UK government would set aside the referendum result and ditch Article 50.

Clegg argued that "now that we can see what Brexit really means why wouldn't we change our minds? Don't let anyone tell you that we can't". Well Nick what we can see now is people haven't changed their minds, at least not substantially. The Sunday Times has had a panel of 52 leavers and 48 remainers through the whole period and, while views have shifted within the camps of leave and remain not a single person has switched sides. Larger opinion polls give results which depend on the specific question but none show a substantial collapse in support for leaving.

Clegg closed his book by saying "Brexit does not have to be hard or soft, clean or messy or even red, white and blue. In fact Brexit does not have to mean Brexit at all." From a man who called himself a democrat. Wow.

We can leave Clegg to cry into his beer and worry about the US government's anti-trust suit against Facebook. For ardent remainer/rejoiners in general Brexit can never make sense but, given that there was a referendum on a simple majority basis and the result was to leave, we have a result that is undoubtedly Brexit. Even Nigel Farage hasn't popped up to say it isn't a real Brexit. But I don't think we'd have got there without the change in course when Captain May was ditched for Captain Johnson. Nor would we have done so if we hadn't found some principles we were prepared to die in a ditch for. Whether the UK, in the limit, was prepared to opt for no deal mattered far less than whether the EU believed it would.

During May's convoluted negotiations - on the withdrawal agreement, remember not the trade deal - I felt that the UK was not standing up to the EU enough and I argued that we should walk out of the negotiations early in order to reset the tone. While everything was one way at that time with, for example, various concessions on rights of EU nationals residing here given up in the vain hope of immediate reciprocation, with hindsight I suspect that tactic would have failed at that time. Part of the problem was that the UK saw Brexit in purely transactional terms: it wanted the closest to single market membership that it could get and it assumed the trade balance in the EU's favour meant they would want continuity as well. However, unlike the UK at that point, the EU side had principles that mattered to it more than short term economic optimisation. To be fair to them the integrity of Margaret Thatcher's brainchild, the single market, was paramount. If you have no principle to walk out over it's hard to walk out.

But the real problem was that the EU leaders felt they could trample all over May who was too desperate to clinch a deal. That was visibly evident in the manner of the serial humiliations they subjected her to, especially at the Salzburg EU summit. Who can forget the pictures, which looked uncomfortably like sexist bullying:

There was also the Donald Tusk tweet "cake? No cherries" which led to him being accused of mocking the diabetic May, apparently to his humiliation, though the intention clearly was to humiliate May and the UK.

However, even had the EU gone for May's Chequered compromise - her attempt to keep as close as possible to Europe and secure frictionless trade - it's not clear how she ever expected to get it through Parliament as many of her own MPs would never have supported it and, at that stage, neither would Labour, which was set on making life difficult for the government rather than securing a solution. It was politically incoherent. The whole doomed enterprise only started to stand a chance when the Tories went for Johnson. In contrast to May the EU leaders seemed only to pleased to be photographed back slapping with Johnson when the transition deal was agreed in October 2019:

Truly charisma is a strange and powerful quality

Once Johnson got his majority he was able, unlike May, to credibly threaten no deal on trade. The asymmetric nature of UK-EU trade - we buy more than we sell but for each individual EU country the total volume of stuff they sell to us is far smaller than the share of our exports that goes to the EU - implies much more pain for the UK from no deal than for any individual EU country. I thought this might mean our bluff would be called over no deal. But in the end it was the EU that blinked. I accept many commentators say that wasn't the case. David Smith, for one, says that the "thin" trade deal secured was always on offer. Personally I don't believe it was. At least not without level playing field constraints and unacceptable dispute resolution provisions. The EU's insistence, until the closing throws of the negotiations, on being able to control the playing field and the arbitration of whether that control was fair were points that they could never sustain in a trade negotiation with almost any third party country and so were, for me, too much to swallow. So when Lord Frost, in the first trade deal negotiating session in March, outlined the UK's key demand, that the it "be treated as an independent nation" one British official said Michel Barnier responded with a "hilarious meltdown", launching into a "massive rant" in which it is claimed he said "why do you keep mentioning 'sovereignty'? All you do is mention this word". In another meeting an enraged Barnier apparently shouted "I am calm!" leading the British officials to refer to his outbursts as "Michel's calm and serene moments".

A fundamental point of the EU is that nations pool sovereignty for mutual gain. The whole point of Brexit is that the UK was opting out of that concept. It had found some principles at last. However, EU leaders apparently believed Johnson had backed Brexit only to further his career and had never studied his reasons. Apparently it was a book by his then wife, Marina Wheeler, that originally convinced Johnson that leaving was the only way to make our laws entirely British. As a result Wolfgang Munchau frequently commented that he felt the risk of no deal was vastly underestimated in EU national capitals. 

Johnson and Frost were convinced May had accepted too willingly that the price of tariff-free access was that Britain had to agree to rules written in Brussels. Johnson is said to have told Frost to play "ultra-hardball" even if it put noses out of joint. When Barnier published a graphic suggesting the UK had to remain in the EU's orbit, Downing Street pointed out that he had previously told May that she should seek a Canada-style trade deal, the model Johnson now wanted. "Now they say that's not on offer at all. Michel Barnier, what's changed?" tweeted the 10 Downing Street account.  "We trolled him from government accounts" an official recalled. "The Commission went absolutely tonto". But by June the EU had accepted no role for EU law, or the ECJ, in the trade treaty. 

Nevertheless I still feel that the EU's about face on whether it would offer a Canada style deal was tantamount to bad faith. And this still left the level playing field issue, with the EU proposing an "equivalence" clause under which, if the UK's rules did not rise and fall in line with the EU's, retaliatory tariffs could be instantly applied on anything they chose. Again not a condition that would be normal or readily accepted in a trade deal. The EU also proposed that, under no deal, the EU should be able to dictate what goods would need to be checked at ports on the Irish Sea and which might have to pay tariffs. One wonders what part of "no deal" they didn't get. It was this that led to the controversial Internal Market Bill. Frost met EU criticism about the potential breach of aspects of the Withdrawal Agreement by stating that it reflected the PM's "determined view to protect the integrity of the country". When the EU announced after its October summit that it was entirely up to the UK to make "the necessary moves to make an agreement possible" Frost and his deputy, Oliver Lewis, argued that only by walking away could they create enough drama to get EU leaders to override Barnier's remit. Johnson agreed and told them not to go back to Brussels.

At last - and at the right time - we had walked away from Rene. EU officials admit this had an effect. They "never, ever believed May would go for no deal...with Johnson 5 to 10% of you thinks he might do it - and that changes the nature of the game". Oliver Lewis, in proposing the Internal Market Bill, reckoned that the EU had to believe that Johnson was mad enough to implement it and go for no deal. This "madman" strategy is one I recognise having once had my commercial manager say "we're not really going to do that are we?" My response was all that mattered was that the client looked us in the eyes and believed we would. (It worked, though it may not have done me personally any favours. As it touched on national security I'm saving the story for my memoirs).

Frost's gesture was a stay away rather than a walk out but it had the right effect, as arguably did the Internal Market Bill that caused such ructions about the potential to break international law. Personally I think it was clever to threaten to do something drastic that would not be needed if there was a deal. Like many I was uncomfortable about it at the time but such is the way in a negotiation with the gloves off. There was a risk that it would cause long term ill feeling, but only if the negotiation was ultimately unsuccessful. What all those who campaigned against no deal failed at every turn to appreciate was that removing no deal inevitably meant a crap deal when the other party was so steadfast in pushing not for a good or a fair deal but for the deal that suited them the most. A deal that left the UK under some form of EU control.

The other point about Frost's stay away was that, while EU national leaders refused to directly engage with Johnson, EU President von der Leyen intervened by sending her political adviser Stephanie Riso, a former deputy of Barnier, to take over the talks. "Suddenly there was serious engagement and dialogue" a no 10 source told Tim Shipman. "She sat there doing all the work, the EU team huddling round her while Michel played on his phone".

Even once dialogue restarted the EU attempted to introduce clauses giving the EU the right to introduce lightning sanctions in any area if Britain diverged from EU rules, which Frost described as a "baseball bat to bash us into alignment with EU law forever" and at a later stage to retaliate across the board, in this case if Britain sought future reductions in access to its fishing waters, a so-called "hammer" clause. Frost negotiated away the former threat with Riso, sustaining the argument that retaliatory tariffs should be proportionate and that the clause should give each party equivalent protection. The fishing hammer required Johnson to call EU President van der Leyen on the evening of Monday December 21st to say "I cannot sign this treaty, Ursula. I cannot do something that is not in the interests of my country." Talking in her language Johnson is reported to have said "viel hummer, kein hammer" (lots of lobster, no hammer), which led to the final horse trading on just how many years the fishing transition period would last.

It always seemed bizarre for the deal to hang on fish, when the contribution of one department store to the UK economy exceeds that of fishing. (Mind, that department store is Harrods). But as one British aide put it "it's not about fish, it's about freedom". Even after the principle was agreed, Frost stayed in Brussels, going line by line through the revised quota plan for each of a dozen species of fish. The fact that the British lead negotiator needed to do this reveals how little trust there was right to the end, though I've previously read that the EU have a tendency to try to slip through changes in the detail of final drafts. Not good behaviour.

The final result is that neither side seems to have "won" the negotiation. And neither claimed to have, which would have been inappropriate and unseemly anyway. It seems a reasonably balanced outcome, which was by no means guaranteed. Had we settled for whatever we could get the deal would have been far worse. It undoubtedly delivers a proper Brexit, fulfilling the promises to take back control of borders, money and laws. From my point of view a key red line of freedom from the yoke of the European Court of Justice has been met. If anyone believes the ECJ is a proper court independent of politics perhaps they can explain why the number of ECJ rulings against the UK has fallen from double figures annually to low single figures since the referendum. It's a weird legal system that responds in that way to a plebiscite, though my main issue has always been that the fundamentally different UK and European legal systems implied an incompatibility which meant arbitration would always tend to be skewed.

The fact that, when it came to the closure of the deal, criticism of it was so muted confirms that the deal is coherent and makes sense. When Labour speaks up for the City and complains that financial services was not included when no-one expected it to be included in this round and the City wasn't squealing that loudly you know that there isn't much to criticise. Of course the small band of passionate advocates of our EU membership will be sad but the referendum swung partly on how small that group was and its failure to convey any positivity in the 2016 campaign.

While it seems that the deal does meet the EU's primary goal of protecting its single market, Munchau argues that the EU did not do itself any favours with the deal as he sees the EU lagging the US and China in most high-tech areas:

"I am moderately confident that the UK will carve out niches in a few sectors like artificial intelligence, genetic research and fintech. But I worry about how the EU will cope in the digital 21st century. I would have preferred an agreement to strengthen joint innovation in high-tech areas rather than one that focuses on protecting legacy market shares."

Johnson was undoubtedly right to put a guillotine on the timetable for negotiations and resist all calls for an extension to avoid no deal. The whole point was that no deal had to be a real possibility. Extension would have prolonged the misery for no improved chance of success as the basic facts on the points at issue weren't changing. Indeed most of them were crystal clear at the outset. But all the aggravation confirmed just how naive Liam Fox's comment about the "easiest trade deal in human history" was. Fox assumed that what mattered was the starting point, when all regulations are in line, rather than the direction of travel and divergence, which was what concerned the EU. Whether it was fair for them to attempt to sustain their point that we could not be treated like Canada just because of our geographical proximity is now, fortunately, moot. Well not fortunately, actually, thanks to Frost and his team whose grit was in stark contrast to May's team of appeasers. In the end there was probably not much more or less aggravation than I feared when deciding that the pain of the transition would be too much and I opted, against my instincts, to vote remain. Though remember, while the negotiations and the official transition period have completed, the transition for British companies has only just started. And my fear about the impact on markets and the value of my pension has not borne been borne out - so far - though only because of quantitative easing and the ongoing backwash from the financial crisis which has now morphed into the pandemic crisis, all of which has dwarfed Brexit.

So while the guillotine was necessary, the anguished calls in mid-December for us to avoid the risk of no deal when a deal was 98% agreed were based on faulty judgement. The point was argued strongly and eloquently by the ever misguided Ed Miliband, saying that it was nonsense to risk the certainty of tariffs on everything over possibility of punitive tariffs on some items in the future. Andrew Marr gave Miliband a pretty good going over on TV on 13 December so I was shocked when Andrew Neil, whose views and logic I can't normally fault, collapsed into hyperbole a few days later arguing that it would be ludicrous to fail to agree with 98% settled and that no deal would be a "nail in the coffin of western democracy".  "Why not suck it and see?" said Neil, failing to recognise that the 2% mattered. After all chimps and humans share 98.8% of their DNA and, at that stage, the deal was still a chimp.

Neil did recognise the problem that the talks had been soured by the desire of the Brussels elite to punish Britain for having the temerity to leave, to encourage others not to do so. And that the EU position was always illogical, viewing Brexit as an act of self-harm while also wanting to confine post-Brexit Britain so that it could not go too far out on its own. "Just why a country they thought was heading for basket-case status needed to be so shackled was never explained".  Neil suspected that the real fear was that Britain would make a success of Brexit. Which remains to be seen: it might, but it might signal a long term decline. But May's solution of staying within the EU orbit would certainly have led to long term decline: the EU would have seen to it.

So can British business make a success of Brexit? Now the real transition has started Johnson's apparent total misunderstanding about the importance of non-tariff barriers either revealed naive ignorance or that the "fuck business" comment he refused to deny making in June had substance. Johnson ludicrously claimed that the deal had no non-tariff barriers when it actually ladles red tape onto business. Nevertheless, I feel the problems have been exaggerated. The BBC is always looking to run stories on the lines of "it's a disaster and it's all the government's fault" but it has been able to find few such stories in the immediate aftermath of 1 January. It ran a story about the problems faced by Scottish fishing companies and I saw a graphic showing a process of nearly 30 steps for them to export to Paris. However, most of the steps did not seem complicated and will become copy and paste repetitive. And several of the steps were always there, including the one labelled "catch fish".

Most businesses sell the same things over and over and they will soon get on top of the paperwork. Yes it's an additional overhead. But on the other hand it might encourage companies who previously only exported to Europe to look for new markets, once they've got the hang of exporting for real.

I was worried at the outset about financial services, as it represents 11.5 % of our employment tax revenues and nearly 7% of our GDP (fishing is said to constitute 0.1%). The EU undoubtedly has its eyes on stealing London's lunch. After all it is ridiculously dependent on London, with 90% of some euro based transactions occurring there. But there's a rub. London is ranked as the world's number two financial centre scoring 766 on the Global Financial Centres Index compared with 770 for New York (so make that equal first within the measurement noise). On that list there is no EU city in the top 10, though on another index Frankfurt sneaks in to 10th place. London will lose business to Paris and Frankfurt - and maybe more to New York - but the idea that the EU can insource much of that activity on any forseeable timescale is surely for the birds. Moreover, many have argued that our reliance on financial services makes for an unbalanced, London-focused economy. If the combination of Brexit and covid security of supply issues, together with the freezing of UK-China relationships, encourages UK companies to invest in more home based manufacturing some helpful rebalancing (and levelling up) might accrue.

Business does not always respond as politicians expect, as we have seen from empty supermarket shelves in Northern Ireland. It has been reported that some mainland based businesses decided they couldn't be bothered with the extra paperwork for the supposedly non-existent border in the Irish Sea. But the fact that there have been few such stories, apart from the odd one from Scottish fishermen, the bizarre Scottish seed potato blight (they can't export to the EU including Ireland, major market for the product) and the stories of overzealous Dutch customs officials confiscating legal vegetarian sandwiches along with illicit meat sandwiches, would appear to indicate that things are actually running fairly smoothly. You can bet we'd hear if they weren't from the "it's all a disaster and it's all the government's fault" brigade.

That supposedly non-existent border in the Irish Sea does bother me but then I always said there had to be a border at the border or in the Irish Sea. The cunning solution was to have a bit of both while pretending it was neither. And as the Irish free travel area has always bothered me I can live with that. Indeed, Northern Ireland may be uniquely placed to benefit from being in the UK and EU single markets. In which case the Brexit end position might not provide a push towards a united Ireland.

The end point is that the UK found it's principles and Johnson delivered a coherent Brexit that lived up to the promise of the Leave campaign: control of borders, money and laws. The principle is we are an independent country.

Which leaves the Scotland problem. For another day.

Sources:

https://www.theguardian.com/politics/2019/jun/30/excluded-isolated-humiliated-history-theresa-may-visits-brussels

"Madman" Johnson gets his Hollywood ending. Tim Shipman in the Sunday Times, 27 December 2020

No deal would be a nail in the coffin of Western democracy and celebrated by Russia and China. Andrew Neil, Daily Mail 15 December 2020.

What Boris Johnson's mistake tells us about our future. Faisal Islam 24 December 2020 https://www.bbc.co.uk/news/business-55442982

Moving On. The UK needs to move on from Brexit but so does the EU. Wolfgang Munchau, Eurointelligence https://www.eurointelligence.com/column/moving-on

As I was saying - entangled or walk away?

A good column by Dominic Lawson in yesterday's Sunday Times, "Careful, Taoiseach: we could just walk away" and subtitled "Leo Varadkar's exploitation of the key Brexit issue could backfire badly". Of course, I say that because it's basically a better written and argued version of a number of my blogs since September, in particular Reasons to be Cheerful - or Entangled? (8 December, in which I expressed concern about the text concerning Ireland in the joint report on the first phase of the negotiations) and Don't Walk Away Renee (17 September, in which I said every party to a negotiation has to have its 'walk away' points, or it may just get drawn inexorably into a bad deal).

Summarising Lawson's points, he says

• Theresa May foolishly conceded on 'sequencing', agreeing up front to the divorce bill without a comittment for a trade deal in return. Lawson says that, in Brussels, the 'bloody difficult woman', as she has delighted in calling herself, is known as 'Madame No - until she says yes'
• The EU has ruthlessly exploited the Irish border issue, spuriously citing the Good Friday agreement, to get Mrs May to abandon the aim of taking the UK out of the customs union and single market. (Lawson notes this is spurious because the open border preceded the Good Friday agreement by 5 years)
• He reminds us that the deputy director general of Swedish customs reported that reliance on technology should be sufficient for the Irish border
• There are significant differences in income tax, VAT and excise duty which are currently managed without checks at the Irish border, a situation that has been maintained by close contact between British and Irish officials. But the Republic has ceased much of that co-operation. Work by Irish civil servants on an electronic border was stopped and meetings with Northern Irish officials cancelled
• He alleges Taoiseach Varadkar's motives are personal and political. He needs to be seen to be sufficiently 'green' (anti-British in an Irish context) and has ambitions to become Ireland's first president of the European council
• The EU side can just keep saying 'non' to our border proposals because we signed up to the fallback of 'alignment'. Lawson, being classically educated, says this is like Achilles in Zeno's paradox - we move as quickly as we can to try to catch up with the EU tortoise, but never get there. Having been trained to design chemical plants (and therefore watch football, drink beer and listen to rock music) my analogy was the lyric from Genesis's Entangled
• Labour's position that it is necessary to remain only in a customs union to solve the Irish border issue is tosh. The EU has said that leakage of non-compliant goods must be prevented. This is a single market, not a tariff-related customs union, issue
• But staying in the customs union would make a nonsense of 'Brexit means Brexit'. Therefore, in the limit, May may just walk away, causing far more damage to the Republic than the Northern Ireland or the rest of the UK.

I said as much back in September. We may have to walk away to make them call us back in a more compliant mood. If they don't, it's not clear to me why we are worse off.

Lawson hopes May made the point to Varadkar (or the smirking tea-shuk, as I called him in December) when they met on Thursday.

When Lawson describes Varadkar's position as green in an Irish context, I am sure what he means is it is an attempt to lever Northern Ireland towards a united Ireland and away from the United Kingdom. That is, of course, a valid political objective but I consider using Brexit for that purpose unprincipled. Especially when the use of cameras already deployed in monitoring the border is branded unworkable, as the Irish/EU contingent seem to be saying.

So, what should we do? Put it like this. Faced with a menacing gang of, say, 27 thugs what should you do? A good tactic is to pick on one of the weaker ones. That is Ireland. They need a deal more than we do. So we say we are walking away unless they get committed to sorting the border issue by one of our proposed solutions. We have to make Ireland choose between max fac and hard border/ WTO rules. When Ireland say it works, Barnier has nowhere to go.

But we must mean it: we walk away from all the negotiations until sense breaks out. I know that the use of technology in the ways and on the scale proposed for the Irish border is untested and, where trusted trader schemes similar to that proposed are deployed they are limited in scope and do not remotely produce what could be called frictionless trade. But guess what? The trade across the Irish border is so limited that it doesn't really matter. It's a perfect candidate to pilot such a scheme and iron out the problems. It's really only needed for the benefit of the local population.

Oh and if this doesn't work we pick on some of the other smaller EU countries as well. Just because they are in the EU doesn't mean we can't apply selective sanctions to them post Brexit. These could be completely arbitrary but designed to randomly hurt. No students allowed from country X for example. Remember if the EU retaliate it hurts them more than us in total, though I accept there is some asymetry: our exports to the EU are nearly half our total whereas for any individual EU nation their exports to us probably represent less than 10% of their total. It is a mutually assured destruction that won't happen - provided we are prepared to use it. Yes, we need to think of it in the same way as for a nuclear deterrent.

Basically we need to start standing up for ourselves and showing we won't just cave in. Though that is what we have been doing so far.

After all, there is no point whatsoever in staying in the Hotel California, checked out but never leaving. The reason I am adamant about that is this: if we stay in a customs union, or the single market, via the EEA or another mechanism, as well as not really being 'out' we condemn ourselves to a situation that is definitely worse than being a full EU member. While no nation state has total freedom in the modern global economy, a customs union would inhibit or indeed prevent the UK from achieving its potential as an international trading and financial centre. I accept we might not be better off than being in the EU. But I am confident that we could be. It would be up to us.

While there is a short term argument that we would be better of in a customs union this is a temporary transitional issue. I didn't fancy the transition which is why I voted Remain. But if we are leaving it makes no sense at all to me to bind ourselves to the EU more than is necessary.

Many folk who want us to stay in a customs union actually just want us to stay in the EU. As with the Irish issue, that is a valid political ambition. But what none of them say is they want to keep us as close as possible, part way in, to facilitate rejoining. That, of course, is because - however you count it - around half the population think 'leave means leave'.

Over to you Mrs May. You've got a nuclear button but the other side have to be made to realise you will use it.

Second referendum? There's no question, it's madness

In the sporadic debate about a second referendum, Wolfgang Munchau has made some valuable points. Firstly*, he notes that what Simon Jenkins calls the "second referendum adventists" are "as mad as the the flat-earth leavers" and goes on to quote Andrew Duff**, who says 

"The EU would not simply say: "great, come back, all is forgiven". Time has moved on. The European Commission has an action plan until 2025. David Cameron's deal will not be revived. On the contrary, the EU will want the UK to recommit to the principle of ever closer union. The UK would need to accept an end to the British rebate, and an end to several opt-outs (Munchau agrees with Duff that this would probably not affect the opt-outs on the euro or Schengen). But the various opt-outs on the charter of fundamental rights, and on a common immigration policy, would all have to go. Oh yes, the UK would be under pressure to join the banking union, too. All these things would have to happen for the European Council and the European Parliament to accept a British revocation."

I've been saying much the same in my posts. Moreover, second referendum advocates seem to assume that the UK could just revoke article 50 unilaterally, but Munchau notes that formal assent of the EU would be required. The UK could appeal to the European Court of Justice, which would probably stop the clock while it ruled, but 

"In normal circumstances, stopping the EU clock is an honourable practice and often leads to crisis resolution. When it comes to Brexit, however, almost anything could happen. A hypothetical British decision to stop Brexit in its tracks would be a highly calculated risk."

So none of that is going to happen. While Munchau thinks a second referendum is a total non-starter anyway, he has identified a specific reason he claims only he seems to have pointed out -  there can't be one because there isn't a way of drafting a simple question with a yes-no answer:

"The question proposed by advocates of a second referendum - do you accept the withdrawal agreement or do we you want to stay in the EU - does not qualify as people can logically reject both."

Munchau notes that it is impossible to ask a question that is binary, not a repeat of the last one, and that keeps the UK in the EU. Giving more than two options is never considered in a referendum. It's not that the electorate is too dumb for multiple choice, it's more a matter of how the result could be implemented if, as likely, there was no overall majority for the most popular choice. Sure, you could have a single transferable vote system. I was quite a fan of that system when I was a student. But I realised the downsides when I gave my wife and her parents, along with myself, STV ballot papers for us to decide which snack we were going to open: crisps, hoola hoops or quavers I think was the choice (this was the 1970s or 80s youngsters, pringles and doritos didn't exist). The outcome of this real ballot was that no-one got what they really wanted and the scales fell from my eyes.

The real threat to Brexit isn't a second referendum, of course. It's the Lords/Commons but, even more likely, the fact that there isn't a concensus in the Tory party about what the future beyond the transition should look like.

I do worry about the perfect storm of a Brexit collapse and a Corbyn government. Project Fear? Project Apocalypse Now more like!

*The Brexit Revocation Madness, eurointelligence.com, 19 Jan 2018

**Andrew Duff's discussion paper "Brexit: what if Britain changed it's mind?" is published by the EU-funded European Policy Centre at http://www.epc.eu/documents/uploads/pub_8208_brexitwhatifbritainchangesitsmind.pdf?file=pub_8208_brexitwhatifbritainchangesitsmind.pdf

***On The Real Hurdles For Brexit Revocation, eurointelligence.com, 22 Jan 2018

Death of the second referendum

The day after Donald Tusk came over all soppy ("Our hearts are still open for you" - oh, do give over! - and stop making mischief) the pro-European academic's blog I am addicted to reading, eurointelligence, carries a good summary today of the status of the debate over a second referendum in a post titled "Labour smashes No Brexit dreams"*. They pick up on what Keir Starmer, Labour's Brexit spokesperson, has said:

“But there are a number of obvious difficulties [with a second referendum]. I don’t think we’re going to know what 'out' looks like [until] 2021 at the earliest. And therefore the only point you’ll be able to measure out is in several years’ time, but we will have exited the EU in 2019; and therefore 'in' is no longer an option.”

And they remind us that the still to come Commons vote is essentially academic:

Many trade-related issues will be left open by the time the UK parliament has its "meaningful vote" on Brexit, a euphemism since the real meaningful decision was to trigger Article 50. The vote cannot undo Brexit - all it can do is trigger the nuclear option of a no-deal Brexit. 

However, there is still a debate in Labour about what I call the Hotel California (checked out but never leaving, in the single market and customs union) Norway option, with some MPs arguing that, if Labour came out in favour, it would have a majority in the Commons and country. I'm not sure about that and neither is eurointelligence. They recommend that, to understand "the deeper politics" behind Labour's Brexit endorsement, a blog by "working class academic" Lisa McKenzie is helpful**. It summarises a paper she published in the British Journal of Sociology based on extensive research into working class opinion. In it, she noted that people followed the EU debate in much greater detail than is widely acknowledged. And she comments:

"Working-class Leavers were derided as turkeys voting for Christmas, but it is the middle-class Remainers who have been running around like headless chickens since the vote. Like Henny Penny, they think the sky is falling in, but whether the sky falls in or not, Brexit has made a difference to working-class people dubbed ‘the left behind’. They have become visible for the first time in generations, and to some extent feared."

The working class votes for Brexit in the referendum have certainly made the Labour party think hard at every turn about how to hold its constituency together. Their preference to stay at least half way on the fence about what Brexit should look like means that both the major parties are influenced more by holding themselves together and maximising their chances in the next election, even if it means avoiding serious debate on some of the largest issues the country has faced in our lifetimes.

Never mind - the LibDems, bless them, are prepared to say what they mean. Even if it commands next to no support. That is surely what the other parties fear. So we are left with a government and opposition who won't come clean and are both trying hard not to blink first.

That is actually easier for the government as there is no point in them spelling out something that time proves to be impossible to negotiate with the EU. So they keep taking baby steps forward, feeling their way as they go. To be fair, that's probably all they can do. I once asked a boss of mine, who was in the midst of a fiendishly complex company merger negotiation, how you could ever plot your way through it. "You can't" he said. "All you can do is bear in mind where you are trying to get to in the long term and try make progress in the right general direction in the short term." I thought this sounded very wise and pragmatic at the time, though later I thought it risked leaving "showstoppers" to emerge and kill the deal. Which is why, the EU would say, they identified the showstopper issues for resolution first. Except the Irish issue was fudged - d'oh!

P.S. in case you were wondering (ok, I know you weren't) how did my boss's fiendishly complicated negotiation pan out? After more than a year of negotiations, it collapsed, of course. There was some benefit because not only did I get a major chunk of his responsibilities after he left, I was able to sell our chunk of the proposed merged outfit to the other party. However, it took another 18 months as was total pain of a transaction. When I think about my opposite number in the negotiations I empathise with and have significant sympathy for David Davies....  But the good news was that, despite a lot of scepticism, it worked out well for the employees, just as Brexit can work out well for British citizens in our de-merger. 

*http://www.eurointelligence.com/public/?t=1&cn=ZmxleGlibGVfcmVjc18y&refsrc=email&iid=23d79f1135894c3ea6da6b72ccd8d997&uid=247826759&nid=244+272699400

**Lisa McKenzie's LSE blog is at http://blogs.lse.ac.uk/europpblog/2018/01/16/we-dont-exist-to-them-do-we-why-working-class-people-voted-for-brexit/

Je ne regret rien

I followed a link to an interesting item by Anthony Wells, of the polling organisation yougov, titled "On measuring support for Brexit".

He notes that people with an axe to grind get very excited about poll results supporting their viewpoint, a recent example being a yougov poll which partisan writers claimed backed Brexit by 48% to 39%. That result was actually the GB element of a an EU wide poll which was mainly aimed at finding out whether other EU countries still wanted us to stay. (For the record most Germans, Danes, Swedes and Finns want us to stay. The perfidious French are evenly divided).

Wells notes that people get three different questions tangled up:
Question 1. How would you vote in a new referendum held tomorrow. This question tends to show a lead for Remain of typically one to four points. But Wells points out that you then have to assess whether people would actually vote. After all, most of the polls showed the same thing before the referendum. And it's academic because there ain't a referendum tomorrow.
Question 2. Whether Brexit was the right or wrong decision. Tracks of polls asking this question show a slow drift towards regret, with slightly more people thinking the decision was wrong than right over the last few months. But that doesn't mean people think Brexit shouldn't happen - as that is...
Question 3. Whether people think we should now go ahead with Brexit or not. YouGov have a semi-regular tracker that asks how the government should proceed with Brexit, which this month found 52% thought the government should go ahead with Brexit, 16% that they should call a second referendum, 15% that they should stop Brexit and remain in the EU. Wells says "The reason for the difference in these questions is that a substantial minority of people who voted Remain in 2016 consistently say that the government should go ahead and implement Brexit (presumably because they see them as having a democratic duty to implement the referendum result)."

Wells concludes: "It is true to say that more of the public now tend to think Brexit was the wrong decision than the right decision, and say they would vote against it in a referendum. It is also true to say that most of the public think that Brexit should go ahead. Neither measure is intrinsically better or worse, right or wrong… they are just asking slightly different things. If you want to understand public attitudes towards Brexit, you need to look at both, rather than cherry pick the one that tells you what you want to hear."

So, according to Wells my view (voted remain, but believe the government should get on and implement the referendum result without another referendum) is very much part of the public opinion picture.

Sorry you Germans, Danes, Swedes and Finns. We might regret it but we're still determined to snub you and leave.

*You can read the full article, posted on 27 December, at  http://ukpollingreport.co.uk/blog/archives/9962

So how important was that Government defeat on the EU Withdrawal bill?

Now we know that the single market isn't that important (post of  20 December), how important was the government's defeat in the Commons last week? This was, of course, amendment 9 to the EU Withdrawal Bill and it means there has to be a vote in Parliament on the terms negotiated with the EU. The answer is equally unimportant.

I found the initial press view here, that the vote meant a soft Brexit was more likely, surprising. That view changed over the next few days but in the meantime Eurointelligence pondered why a vote that made it dramatically easier for MPs to veto the Article 50 withdrawal agreement reached with the EU was thought to be good news for a soft Brexit. The conclusion was that people who think this, including some of the MPs who voted for Dominic Grieve's amendment, "do not have a clue about the EU's decision making procedures....only focus on UK politics" and "have probably not even read Article 50". They reported a comment by Danuta Hubner, who heads the European Parliament's constitutional affairs committee:

“Once it is finalised and it is signed by both parties, then any change to it means reopening negotiations, meaning we will not make it within the two years, meaning there is a hard Brexit.”

 They go on to say that, while the Tory mutineers might hope for something different:

"Like the Scottish separatists in 2015, and the Catalan separatists in 2017, they believe the EU will come to help them. That won't be so. There is no way the EU will reopen negotiations after an agreement is signed. The rebels may hope that the ensuing political chaos in the UK would unseat Theresa May, trigger elections, and get another leader into 10 Downing Street with an explicit mandate to hold a second referendum. We have heard suggestions that Jeremy Corbyn may base his entire campaign in a hypothetical election on the claim that he would get a better deal. It will take Jean-Clauder Juncker, Donald Tusk, and Hübner, only seconds to debunk such nonsense, should it ever come to this."

So, as I thought, all the Tory rebels have done is increase the chance of a Corbyn led government in the near future. If their actions were relevant to Brexit it was only to increase the likelihood of a hard Brexit - exactly what they say they don't want! Ironic really, as they have shown that, for some in the Tory party, Brexit (whether hard, soft or not at all) matters more than whether they are in government. As the Tory party has traditionally been thought of as the UK's purest political machine in terms of winning and keeping power over the last hundred years - with the exception of the Blair years - that is quite something. Whatever happens as Brexit unfolds the scars in the Tory party will run deep for a generation. It's 20 years since John Major's "bastards" and it could be another 20 before the bad blood between the Tory factions has run its course.

Meanwhile Labour has cast aside all principle to make mischief over Brexit, regardless of the impact on the country, as it tries to position itself to win power at any cost. But remember the cost is irrelevant to them as John McDonnell wants to smash the system anyway.

The new year sees talks moving on to the transition, which the EU has said will last till the end of 2020, not quite the full 2 years expected. And, maybe by Easter, trade talks which won't be easy as we want a bespoke, "Canada plus plus plus" deal and the EU only want to offer Norway or Canada dry. But at that point things might get interesting as the EU 27 definitely do not speak with one voice on trade. Then, when the clock is running down, the Irish problem will re-emerge. And apparently Brussels will insist on some sort of UK-Spain agreement over Gibraltar.

So this could end stuck between a hard place (Ireland) and a rock (Gibraltar).....

*The eurointelligence piece is at http://www.eurointelligence.com/public/briefings/2017-12-15.html?cHash=6c3b1505ff78fef255f1d6c0c177ffa7

How important is the single market?

The surprising answer is "not much" as, according to a study of some standing publicised by Adam Tooze of the Wall Street Journal, the long term impact of the single market is "negligible"*. The cumulative impact on gdp growth of the single market, averaged over the number of years since each EU member state joined the single market is a totally underwhelming 0.79%. Not 0.79% a  year, 0.79% in total. Even Germany's economy has benefited by a total of only 1.55% since the single market started in 1993. I picked up on this from the website eurointelligence (a pro-EU source, note) which said**:

For a policy to boost GDP per capital by 0.79% on average over a period of 25 years, essentially means that it has had virtually no effect. The slightest measurement error would blow this result out of the water. And even if the numbers are correct, expect there to be real losers as a result of a massive re-distributional effect that resulted from the single market - from smaller to larger companies and from the periphery to the centre. 

Some countries, like the Baltic States and Romania, have only benefited by about 0.1% and for Greece the single market has been negative.

I found this conclusion gobsmacking. I had taken it for granted that the single market had brought enormous benefits. My economics guru, David Smith, waxes lyrical about its impact. So I checked out the background for myself. The study was carried out by London Economics, one of Europe's leading specialist policy and economics consultancies. (Who says so? They do, on their website). The London Economics report was commissioned by the American Chamber of Commerce to the EU (which snappily calls itself AmChamEU), a body which says it "speaks for American companies committed to Europe on trade, investment and competitiveness issues. It aims to ensure a growth-orientated business and investment climate in Europe. AmChamEU facilitates the resolution of transatlantic issues that impact business and plays a role in creating better understanding of EU and US positions on business matters." The report is 136 pages long (I didn't read it all) and can be downloaded free if you want to read it for yourself***. But, to save you the trouble, it says that:
"The Single Market has brought jobs, opened new opportunities for citizens, consumers and businesses, made their life easier and this study shows it in detail. The contribution of the Single European Market to people’s wellbeing is significant. The researchers calculated how many new jobs were created thanks to being in the Single Market, how much more money consumers could spend and companies could invest and how much the wealth of each one of the EU countries has increased."

Reading on, it quantifies the extent of this enormous wellbeing: "The resulting estimates show that EU GDP per capita is 1.0% higher than it would have been without an increase in integration since 1995." Wow! Double wow! That is is the noise in terms of the accuracy of economic data. It's two-thirds of sodall (sorry, nothing at all)!

The report does say that "the single market has brought jobs": there are estimated to be around 1.9 million additional jobs. Wow again! That doesn't sound very much either! So I checked for myself - and you can look up the EU eurostat website**** also if you are sad enough. Most of the stats are about employment rates but after a fascinating few minutes I found that, of the EU's total population of 510 million in 2016, 219 million are aged 15-64 and in employment. There will be a small number of over 64s in employment but, to a first approximation only around 2 million of 220 million employed  people owe their jobs to the single market.

I tried to understand how the analysis had been done. They used an "econometric model" (me neither) to try to distinguish the benefit from the greater integration provided by the single market. So my take on the study is that it is attempting to assess not the benefit of being in the EU, but rather the marginal benefit of the "frictionless" single market compared to the previous status quo, effectively the customs union. As there are disbenefits as well as benefits from the customs union (for example, we pay tariffs on satsumas to protect fruit growers in Spain) I'll take the conclusion at face value. The single market is actually a bit of a raspberry.

 The surprising take away conclusion, as I said at the start, is the single market doesn't seem to have added very much to Europe's prosperity, though with the caveat that the larger countries (like Britain) have benefited the most, though still not that much.

That doesn't mean our transition away from the single market will be painless, but my opposition to a very soft Brexit has just hardened. And I think a lot of other people would think the same if this amazing statistic gets broader publicity.

* The reference to the Wall Street Journal is https://www.wsj.com/articles/from-german-faucets-to-italian-chocolate-trade-barriers-are-rising-again-in-europe-1513185466?mod=djemlogistics&mg=prod/accounts-wsj but I haven;t read the piece as it's a subscription only site. However the original source document by London Economics is referenced below.

**http://www.eurointelligence.com/public/briefings/2017-12-15.html?cHash=6c3b1505ff78fef255f1d6c0c177ffa7

*** https://londoneconomics.co.uk/blog/publication/eu-single-market-impact-member-states-december-2017/ full document is at
http://www.amchameu.eu/sites/default/files/publications/files/amcham_eu_single_market_web.pdf

**** EU employment stats are at http://ec.europa.eu/eurostat/statistics-explained/index.php/Europe_2020_indicators_-_employment#Data_sources_and_availability
The detailed table showing the number of people in work aged 15-64 is at http://appsso.eurostat.ec.europa.eu/nui/show.do?dataset=lfsa_pganws&lang=en

Reasons to be cheerful - or entangled?

So, while I was urging our negotiators to have some backbone (Part of the Union, 7 December), David Davies's civil servants were scurrying around finalising the wording of an agreement (it's called a joint report actually) so Theresa May, having had to walk out of her lunch with Juncker, could get on a plane at stupid-o-clock this morning to go and have breakfast with him and seal the deal. Is this a Reason to be Cheerful?*

Well, I'm sure a decent deal would be better than no deal. But we won't know if this paves the way for a decent deal for some time. I suspect it doesn't. The reason is, rather than presenting the EU and Ireland with a crunch and trying to get them to take at least joint ownership of the problems, an enormous dollop of fudge has been applied and we've kept the problems of finding solutions all to ourselves.

Having read the report* for myself (go on, it's only 14 and a bit pages!) it's pellucidly clear that the EU side has succeeded in all its main objectives for the first phase of the negotiations. Those objectives started with making us agree up front on the things that we could otherwise potentially use for leverage in the broader negotiation, especially the financial settlement.

However, the biggest problem I have is over the Irish border. I quote here the relevant paragraph in full (it's paragraph 49):
The United Kingdom remains committed to protecting North-South cooperation and to
its guarantee of avoiding a hard border. Any future arrangements must be compatible
with these overarching requirements. The United Kingdom's intention is to achieve
these objectives through the overall EU-UK relationship. Should this not be possible,
the United Kingdom will propose specific solutions to address the unique
circumstances of the island of Ireland. In the absence of agreed solutions, the United
Kingdom will maintain full alignment with those rules of the 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. (My emphasis in bold)

So the onus remains entirely on us to bring forward ideas to fix the potentially unfixable. The EU side can just refuse to agree to anything they or the Republic don't like. They don't have to do anything other than say "non". In Ian Dury's song, sometime after repeatedly singing "why don't you get back into bed?" (which surely Theresa May was thinking this morning) he sings "yes, yes, dear, dear, perhaps next year, or maybe never". And, potentially to infinity, the UK is trapped maintaining "full alignment" with the single market and customs union. This gives the EU side the most enormous lever in future negotiations. I'm sure they won't hesitate to use it.

This all puts us firmly waiting in the lobby of the Hotel California, with the Eagles singing:
'Relax' said the night man,
'We are programmed to receive.
You can check out any time you like,
But you can never leave!'

Though, as of today, I'm feeling it's more like the Genesis song Entangled:
"Well, if we can help you we will,
Soon as you're tired and ill.
With your consent
We can experiment further still.
Well, thanks to our kindness and skill
You'll have no trouble until
You catch your breath
And the nurse will present you the bill!"

The bill being around €50 billion it seems. Both Hotel California and Entangled have a nightmareish quality...

Our only get outs are that the word "alignment" is apparently not defined legally in the EU and that paragraph 5 of the agreement has the caveat that nothing is agreed until everything is agreed.

I am thinking hard and trying to identify anything, however small, that the UK side has won the argument over in the negotiation to date. The only thing I can think of is that initial reports were that the EU was looking for a financial settlement of €100 million, which may well have been the number Boris Johnson said they could go whistle for. I don't count this as a "win", as it feels to me like the EU took the number they actually wanted and leaked double that number to put the wind up the other side. So Brussels has got us to commit to paying everything it wanted. And agreeing on everything else. Which just goes to show how weak a position we are in and how desperate we are to get a deal.

If we were always going to cave in on everything, why didn't we just save time and do it 6 months ago, one might ask. Except that the 6 months of hassle were necessary for the government to get its Brexit hardliners on board, everyone had to see for themselves how difficult it was. Remember, this whole thing has always been - and will be through to the end - about the Tory party trying to keep itself in one piece.

I've written the above after reading the joint report but without looking at what other commentators are saying. But I couldn't resist looking at what the Times has to say just now. Oliver Wright refers to "carefully phrased fudge" over the Irish border. "So what we have is no regulatory barriers between north and south and no regulatory barriers between east and west while in Westminster Mrs May insists that Britain will be free to change EU regulation after Brexit to strike free trade deals. Frankly, whichever way you look at it, it really doesn’t stack up in the real world." However, he says that doesn't matter as both sides have essentially agreed to kick the can down the road because the problem can't be fixed independently of the future trading arrangements. (D'oh! Of course, that was always obvious, wasn't it?) He concludes "But that is not the same as saying the ultimate problem has gone away. It hasn’t and frankly it is as divisive and difficult to solve as it has always been."

Sam Coates, also in The Times, writing under the headline "Theresa May's weakness becomes a source of strength..." notes that Mrs May's position as Tory leader remains safe for a while yet. "The fight endlessly postponed by Mrs May is coming soon, however. The party faces a choice between keeping Britain closer to European rules or whether it is better to allow divergence. Alternatively the party may choose a third way: continued fudge and the promise of the ability to pull away in certain sectors at different speeds in effect left to future generations of politicians, meaning that EU negotiations go on for decades. That could see Mrs May clinging on for longer."

I don't care about Mrs May, but negotiations going on for decades is exactly my concern. Entangled indeed.

PS 1020 pm update. Watching the smirking Irish Tea-shuck (sorry, too much wine on a Friday, can't be arsed to look up the proper spelling) on the BBC tv news, quoting Churchill at us ("end of the beginning") prompted me to throw something at the tv.....

*Reasons to be Cheerful part 3 was, of course, a big hit for Ian Dury in 1979. When I get back to writing about more enjoyable things a piece of nostalgia about the gigs I've most enjoyed is in the back of my mind. The Ian Dury and the Blockheads gig we saw in 1979 would feature prominently in any list of either mine or Mrs H's

**The Joint report from the negotiators of the European Union and the United Kingdom Government on progress during phase 1 of negotiations under Article 50 TEU on the United Kingdom's orderly withdrawal from the European Union is at https://ec.europa.eu/commission/sites/beta-political/files/joint_report.pdf

Part of the Union?

Not the Strawbs song (sorry) but the Union of Great Britain and Northern Ireland. And the implications of that Union being in or out of the EU customs union.

I'm grateful to the eurointelligence website for a link to an article in the Irish Times by Kevin O'Rourke which goes into the background of the British/Irish customs union of 1923, the Anglo-Irish free trade area of 1965, the implications of the EU customs union and single market together with a discussion of "alignment" or "regulatory convergence" and what these concepts mean in terms of the EU and UK obligations to the WTO. The eurointelligence item* is a summary of the article for those who just want the headlines.

The story starts with the Irish Free State leaving the UK customs union in 1923. Customs posts immediately appeared. They remained despite the signing of the Anglo-Irish Free Trade Area Agreement in 1965. The UK abolished most tariffs on Irish exports, while Ireland started reducing tariffs on UK imports. But while Ireland had agreed to that it hadn't agreed to reduce its tariffs on imports from elsewhere. Free trade areas necessarily involve border checks to ensure that goods from third countries are not given the preferential treatment enjoyed by the countries that are party to the agreement.

In 1973 Britain and Ireland joined the EEC and its customs union. Customs unions don't just abolish tariffs between member states: they surround those states with a common external tariff. By adopting a common trade policy there is no need to check where products entering a member country (say Ireland) from another member country (say Britain) originated from. As long as it entered the customs union legally it will have paid the same tariffs as if it had been imported directly.

So there was no need for customs controls at the border. But controls persisted at the Irish land border. EEC members retained the right to set a variety of regulations on what goods could legally be bought and sold in their countries, so there was still a need to check whether importers were respecting these rules. In 1992 the single market (for which the EU can substantially thank Mrs Thatcher) ensured that what could legally be sold in one country in the bloc could be sold in all of them. So, from 1 January 1993 trade-related border checks between Ireland and Northern Ireland ceased, as they did across the EU. Of course, at the time border controls were retained at the Irish land border for other reasons.

But the point is that getting rid of border controls depended on having both the customs union and the single market. So Norway is a member of the single market but not the customs union, hence there are border controls between it and Sweden. So the logic is that, unless both Northern Ireland and the Republic retain equivalent regulations (the purpose of the single market) the result would be a need for border controls.

According to the Irish Times, the "deal" that Theresa May had to pull out of stated that "in the absence of agreed solutions, the UK will maintain full alignment with the internal market, customs union and protection of the Good Friday agreement". If true I'd say it's a good job we pulled out of that as there would be no incentive for the EU side to agree to anything else: they'd have us hooked for good.

The Irish Times also said that the suggestions that regulatory alignment would only be required in some sectors doesn't work. They say all traded goods would have to be covered to prevent a hard border. Moreover, they say that if the UK were to strike such sectoral deals with the EU, both  the UK and the EU would be in breach of their obligations to other WTO members not to discriminate against their exports, an obligation that can only be waived in the context of free trade agreements covering "substantially all" trade. Oops. Surprising that no-one else has realised that, or that the WTO haven't pointed it out. But it does sound logical, I must say.

So Mr O'Rourke of the Irish Times concludes the Brits have moved a lot and so are desperate for a deal (tell us something we don't know). He also predicts that the EU will become even more reluctant to consider bespoke negotiations and more determined to offer only off the shelf arrangements. Hence the talk in some circles of arrangements like "Canada dry" (in other words just like Canada's deal, I suppose). Eurointelligence agrees, saying it's Canada or EEA, not bespoke. O'Rourke says "it's beginning to look a lot like single market and customs union. Here's hoping".

For reasons I have outlined at length before I'm hoping this will not come to pass as I think it would be hopeless for the UK. And I don't believe it needs to come to that. But the crunch is coming soon. It doesn't need to come to that because we can point out that the Irish border is not just our problem. Or even our problem at all. It's the Republic's problem. We have promised no hard border. But we can't control what the Republic does. As trade across the border and with the UK is more important to the Republic than to the UK we can just say "we're out, but we aren't instituting border controls. Your call Messers Barnier, Juncker and Varadkar." After all, there would be no need to protect ourselves from goods coming in from outside the EU, as we can offer lower tariffs than the EU customs union, so there would be no point in bringing those goods in through the EU. We would only need to institute customs controls if the EU put tariffs on our goods and we choose to retaliate. So it would be their fault.

I suspect David Davies has known of these problems all along: it's why he was urging "flexibility and innovation" from months ago. He presumably worked out long ago that the off the shelf arrangements don't work and that there isn't an answer to some of these issues without new ideas. And it's why we must get the EU side engaged in fresh thinking and understanding that off the shelf doesn't work for them either. By planting the problem in their laps. In that old management jargon canard, we need to get them to "own the problem".

So, time to call their bluff. Have you got it in you May, Davies, Johnson, Gove and company? I wonder.

Oh, but if we could turn back time I still would have voted Remain, because I always thought the separation would all be rather difficult, leading to short to medium term economic impacts and distracting the government of the day from doing just about anything else. And I'll still vote leave if we were to be asked again. As I said on 20 October, for Ozzy's "medical reasons".

PS interestingly the Eurointelligence article agrees with the point David Davies made when he told the Parliamentary Select Committee that economic models can't cope with paradigm shifts so there would be no point in completing or publishing Brexit impact assessments. They say "the impact of Brexit will depend on factors that are themselves uncertain - like the nature of the final agreement and, most importantly the future economic policies of the UK". An eloquent lady from the Institute of Economic Affairs made similar points on Question Time just now, saying that all this was just political point scoring and it was more important to focus on negotiating a good deal, rather than making spuriously accurate predictions for futures that probably wouldn't come about. And we can negotiate that deal best, right now, by making the other side engage by making it clear it's all at least as much their problem as ours and it's time for them to start to scratch their heads.

*Eurointelligence, What the (failed) agreement on the Northern Irish border tells us, 7 December 2017. http://www.eurointelligence.com/public/?t=1&cn=ZmxleGlibGVfcmVjc18y&refsrc=email&iid=7943295d9c424ca3ab3194936871c81a&uid=247826759&nid=244+272699400

**Irish Times, 6 December 2017. Kevin O'Rourke, Britain wakes up to the reality of free trade. https://www.irishtimes.com/opinion/kevin-o-rourke-britain-wakes-up-to-the-reality-of-free-trade-1.3316849#.Wif3mprUvvk.twitter

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Soft or hard boiled?

With the clock ticking and the UK wanting to get on with talking trade the crunch time has come on the Irish border and Brexit. Which is why half the news these days seems to be about hard or soft, be it borders or Brexit.

The biggest surprise for me in the events of Monday 4 December, at least as they were reported, was that Theresa May seemed not to have made sure for herself that the DUP had been squared off before going to break bread with Juncker. After all, she had relied on what her chief whip told her after the election and went and told the Queen she had a deal when it turned out she hadn't actually got it pinned down. It didn't hurt the chief whip's career - she made him defence secretary recently. But to apparently make the same mistake again and have to interrupt her cosy lunch seemed incredible. I wonder what post the new chief whip will get promoted to? Though some reports are saying that the deal that wasn't only ever concerned aligning regulations on specific aspects of the Good Friday agreement, like transport, energy and agriculture, with the Brits wanting to say "now can we move on to talk trade?". After all, there's a catch 22 on customs issues until trade is discussed, surely? Those reports are also saying it was the EU side who jumped the gun, briefing that a deal had been reached, possibly trying to bounce May but also spooking the DUP. Nevertheless, if the communications between the DUP and Tories were working, surely it wouldn't have panned out this way.

As usual I'm going to say I had predicted these difficulties - see my posts of 22 Nov and 17 Sept, the latter referring to a Gordian knot and issues "laden with political and emotional implications" in terms of the border. But it didn't take a crystal ball really, did it?

Unless the EU and Irish are prepared to consider the UK's suggestion of using "technology and innovation" (no, I don't know exactly what that means in this context either, let alone whether it could work) one is left with limited options: a border in Ireland, a border between Northern Ireland and the UK, Northern Ireland staying in the customs union when the rest of the UK doesn't (a suggestion that inevitably made Nicola Sturgeon pipe up with "we'll have some of that") or all of the UK staying in the customs union. None of these options really work, unless you are a Remainer who wants to go for the last of these, the "soft" (for which read soft-headed in my view) or Hotel California Brexit, as I called it on 17 September, where we check out but don't leave the single market, customs union or the embrace of the ECJ, still pay into the EU budget but have no representation in the EU's institutions and still have freedom of movement imposed on us, which some argue - reasonably convincingly when you look at the numbers - is the real cause of our housing crisis. Niall Ferguson was even more caustic about this, likening it to being a child bride under sharia rather than a divorce.

Ferguson also noted that there is no way back to the "status quo ante". He was referring mainly to the UK's EU membership condtions, with rebates and opt outs. But the point holds in spades for the Irish border. The "soft" border we had from the 1920s pre-dated both the Republic and UK being in the EU. They joined together in 1973. One country being in the EU and the other outside is a new situation, which surely was always going to mean that continuing the soft border arrangements needed a new solution. And, of course, people have got used to virtually no border recently - the soft border of the free travel area wasn't actually that soft in the days of watchtowers, was it?

Bertie Ahern, a former Taoiseach, suggested an old solution: have a hard border and just ignore it, don't police it. This is surely the daftest thing anyone has said yet on this issue. I can't imagine the EU ever sitting by while Northern Ireland became a massive version of Gibraltar in terms of smuggling stuff into the EU and"laundering" it through the Republic to other countries.

There are some things that could be done to ease the obvious problems a renewed border would pose to the Irish folk who have got used to crossing it freely in either direction for myriad reasons including access to health care, education, employment and shops. One report highlighted a road that crossed the border multiple times in a few short miles. The border could, of course be rationalised to make sure that each road crosses only once for example, that is if you could get anyone there to talk about such a thing rationally (I expect you can't).

All of this was pretty obvious before we had the referendum, let alone got into the article 50 negotiations. However, it looks like the only option left for solving it is to send for International Rescue......

Though actually, it occurs to me that's not the only solution. I was irritated hearing on the radio today that the EU had tweeted that it was ready to talk further as soon as the UK was. And I heard an EU spokesman saying that the problem was between the Tories and the DUP. No, chum, it's not. The biggest problem actually belongs to the Irish Republic.

Trade with the UK is vital for both parts of Ireland. 12% of the Republic's exports of goods and 18% of services go to mainland UK. Only 1.6% go to Northern Ireland. And it is the rest of the UK that matters to the north as well: two-thirds of Northern Ireland's economy is internal trade, exports to the rest of the UK make up 21%, those to the Republic 5% and the rest of the EU 3%. Which explains why it's the link to the rest of the UK that matters to the DUP.  Indeed, some say that even if the Tories had got a majority of 100, a border between Northern Ireland and the rest of the UK would never have flown, so it's nonsense in my view to lay any of this at the door of the DUP.

So, if we are at an impasse (which is not necessarily the case yet), I think it's time to walk away from Rene and say ok, if you lot aren't prepared to play ball at all, always saying it's our problem, never engaging with any ideas of your own, we are getting ready for no deal. Specifically on Ireland, we won't do anything about the border; as far as we are concerned it will carry on post-Brexit as it is now, no customs posts, no passport control, whatever. If you (the Irish government and the EU) want to change the arrangements, go ahead. When you've got any ideas to share, we are ready to listen to you. We should just turn the tables and sit tight.

That might also make German industry sit up. I read recently the reason most German companies that export to the UK are relaxed is because they don't think Brexit is actually going to happen. Time to wake them up.

It's also about time the trouble-making Irish government stopped freeloading on the UK. Indeed, it may have to, to some extent. The eurointelligence website notes that the republic has been overly reliant on the UK as an ally in EU negotiations and as a source of information on what is happening in the EU as well as a buyer of its goods and services.  Once we leave the the EU, the Republic won't be able to piggy back on our civil servants' work and our media's analysis, as we will be outsiders. Perhaps because it has so little footprint and influence in the EU outside of the UK, or in places like Africa, Ireland has - bizzarely - applied to join Francophonie, a club of French speaking states, though as an observer not a member*. The same source says that French is growing as a language in Africa and, if population grows as forecast, French "could even overtake Mandarin, English or Spanish as the world's most spoken language". Hmm, I don't think I'll need to hold my breath on that one, Freres Jaques and Patrick. But Ireland will certainly have an adjustment to make after Brexit. So we should say it's their problem. They might actually think of something instead of just throwing stones.


*Ireland in search of its own path in the EU is at http://www.eurointelligence.com/public/?t=1&cn=ZmxleGlibGVfcmVjc18y&refsrc=email&iid=4cab67e29af841ccb87e7c5bda73f5eb&uid=247826759&nid=244+272699400

The German crisis gets worse and what it means for Brexit

Isn't it fascinating how governments can lose authority seemingly overnight and then stumble from crisis to crisis? So it's been here and so it now is in Germany.

Yesterday's news was that Merkel's most important foreign policy adviser, Christopher Heusgen, who only recently became Germany's ambassador to the UN, used his influence to get his wife a job there. Commentators are wondering whether Merkel personally intervened to assist.

Interesting enough but in a further topical twist this news came from a leak by Fancy Bears, the Russian hackers who gave us the low down on Bradley Wiggins's therapeutic use exemptions. So the Russians continue to destabilise western governments. How unsurprising. And the Western governments don't actually seem to need much help on that score anyway.

Heusgen sent an amazing email to the UN Secretary General, even specifying the appropriate pay grade:

"If you consider which contribution Germany renders to the UN, it could be attractive for you to have someone in your staff (at the salary level P5, which as I understand is appropriate for Ina [Heusgen's wife]), which has both: a direct connection to the chancellor's office and to the office of the foreign minister (and to Germany's future UN ambassador [referring to himself], who has the ambition to sit in the security council in 2019/2020."

Frau Heusgen didn't get that post, but she did bag another at the UN, albeit funded by the German taxpayer. I learned this from the Eurointelligence blog - it doesn't seem to be on our mainstream news media yet.

And what does Mutti Merkel's difficulty in forming a government mean for Brexit? Jacob Rees-Mogg and other Tory Brexiteers have got all wound up, thinking it changes whether we should reduce rather than up the ante on our EU divorce settlement. Setting aside the obvious fact that we shouldn't give in to blackmail and agree to pay money up front without any commitment on the future relationship, I can't see why the German situation makes much difference myself. Eurointelligence agrees, saying it would only come into play if the German crisis goes on into the spring, in particular if new elections lead to another impasse. At that point the EU might decide it can only handle one politicial crisis at a time. Though they do say that "A hard Brexit shock, while worse for the UK than for the EU, will end the economic recovery in the eurozone, which is so important for its stability."

So we are not without cards in the negotiation, we just don't seem to have the gumption to play them properly. Though it may be that David Davies is actually playing a game of "chicken" - brinkmanship in the run up to the next big round of Eurotrash (sorry I mean the European Council meeting on 14 -15 December) as we are indicating we will pay more, but won't make a formal offer until the EU agree to talk about trade. So the EU will have to decide whether to stick to its guns on resolving the three priority issues before the negotiations broaden.

Of the other two issues, citizens rights always seemed the easiest to solve, though the EU insistence on continuing involvement of the ECJ is a problem for me as well as many others.

The third issue has also been in the news, with the DUP's Arlene Foster joining me in telling the Irish  republic to button it* over the border issue (see Don't Walk Away Renee, 17 September). I've been struggling from the outset to see how the soft Irish border issue can be resolved without a hard border within the UK or between Ireland and the EU, but can conceive that the UK's suggestion of an electronic system is workable, given that is how customs declarations are apparently made now. While I won't accept the Ireland tail wagging this dog of a negotiation, the real problem is that the EU has set the negotiation up to fail by insisting that the Irish border issue is resolved before the trade and customs arrangements are even discussed, a ridiculous catch 22.

I guess we'll see in December if the EU actually want the negotiation to fail, as posited by Yanis Varoufakis (also in post of 17 September), or whether they blink. We mustn't, if only because our political crisis - I couldn't see May surviving Tory backbench outrage at a large unconditional financial settlement - would then trump Germany's.

In the meantime we can at least indulge in schadenfreude about Merkel and the Germans. How appropriate that wonderful German word has "eu" in the middle.

For both news items on Germany, see the Eurointelligence blog for 21 November at http://www.eurointelligence.com/public/?t=1&cn=ZmxleGlibGVfcmVjc18y&refsrc=email&iid=31fdc16b77b04ee886a301778cd230d3&uid=247826759&nid=244+272699400

*Irish PM should know better over Brexit, says Arlene Foster: http://www.bbc.co.uk/news/uk-politics-42064743