Wednesday, 16 August 2017

Really Stupid

It's getting much, much harder to write about the idiotic behaviour of the UK government at the moment. Honestly, they are just going round and round in circles, repeating the same mistakes over and over.   Watching it and thinking about and writing about it is a painful and frustrating activity.  You know, it's actually hard to engage with this level of stupidity. It would be easier if the daftness was less repetitive but it isn't like that. Instead of fresh and interesting "proposals" that require forensic analysis and documentary rigour, what we get instead is the entry level inanity of last autumn repackaged for a summer audience. As a consequence, I've become aware that this blog is now repeating itself. A quick analysis of my posts leads me to the conclusion that Brexit logic follows a 9 month cycle. That means we should all be on the look-out for the ungainly return of  "cake and eat it" Brexit.   Oh, and there it is, right on time.  Yup, there it is in the form of the opening chapter of an epic fantasy novel about the EU Customs Union.  Read it at your peril.

What exactly are Brexit HQ up to with their latest harebrained wheeze?  Well, the government have decided to rush release their madcap imaginings for the UK's future customs relationship with the EU.  I fully recommend taking a short break from this blog to read Ian Dunt's pithy response because it tells you pretty much everything you need to know about the delusional fantasy bubble that protects David Davis from the harsh realities of the real world. Follow the link, read it at your leisure, and we'll meet up again in paragraph 3.

Welcome back.  That was quite a post, wasn't it?  What more can I add?  Well, I thought it would be fun just to take a single sentence from the government's position paper and see where the madness leads us.  I know I've done this before a few times but here I am doing it once again.  I did say this blog is repeating itself, didn't I?  I'm fairly certain that any sentence will lead to a self-inflicted skull trepanation but, for no particular reason, I like the sound of this one:
As a first step, we will seek continuity in our existing trade and investment relationships, including those covered by EU Free Trade Agreements or other EU preferential arrangements.
The UK is going to leave the EEA and the EU Customs Union on 31 March, 2019.  There's not much we can do about that because all of the treaty agreements governing the EU will immediately exclude the UK when it exits the EU.  Leaving the EU Customs Union means that the EU now treats the UK as a third nation and will start imposing tariffs on all goods entering the EU from the UK.  This will have a catastrophic effect on British business because UK exports will just get snarled up in huge queues at Calais and Hamburg.  Even if the UK can come to an agreement with the EU about goods originating in the UK there is still the thorny problem of goods entering the  EU through the UK.  Leaving the EU Customs Union, after all, means that the UK is no longer bound by the system of external tariffs that the EU has painstakingly assembled over the last 50 years through Free Trade Agreements (FTAs) and negotiated tariff schedules at the World Trade Organisation (WTO).  The EU will need to defend all of those tariff agreements and the only way it can do that is to check everything entering the EU from the UK independent of its source of origin.

What we all need is continuity until a new system can be implemented in a timely manner.  David Davis intends to salvage some sense of continuity with the EU by temporarily retaining all of the EU's tariff rates.  Those tariff rates include the 45 or so FTAs that the EU has negotiated in addition to the EU's tariff schedules at the WTO.  Tariff duplication is pretty much the only way that the UK could ever hope to convince the EU that there is no need for border checks on goods shipping to the EU from the UK.  If, for example, the EU imposes a 0% FTA tariff on Mexican ukuleles but a 12% WTO tariff on Nicaraguan ukuleles then the UK needs to make sure that those tariffs persist at the UK border.  Mexico will have every right to be furious if they learn that Nicaragua (and everyone else) is able to sneak its ukuleles tariff-free into the EU simply by redirecting them  through UK ports.  They will start wondering about the value of the FTA because they could just as easily copy Nicaragua's loophole and redirect everything through Kent.  EU luthiers will also be furious because their business will suddenly face all sorts of unplanned competition from global ukesters. All that fury will force the EU to start checking goods entering from the UK so that they can make sure the correct tariffs are applied.  If that happens UK businesses will immediately find their goods snarled up in lengthy border queues. The only way to avoid that is for the UK to maintain the EU's system of external tariffs at the UK border.

The problem that faces the UK is that it will no longer participate in any of the FTAs that the EU has with Mexico and South Korea and Canada.  In the absence of any FTAs, it is unilaterally proposing to maintain low or zero tariffs on goods from all those countries.  More than that, it is unilaterally maintaining its side of the standards bargain.  Of course, any of those countries might choose to enter a FTA with the UK but that is years and years away.  In the meantime, they get guaranteed tariff-free access to the UK and a continuation of all rights to market access without having to give anything in return.  If they want to stop the import of UK paint due to a row about standards they will have every right to do that.  If they want to resort to WTO tariff schedules for UK goods then they have every right to do that, too.  They can literally do anything they want because the UK has given up all of its negotiating power. This is taking back control.

Can it get any worse?  Well, yes, it can.  The UK cannot legally apply preferential rates to some nations but not others without first agreeing a FTA that conforms to WTO rules.  It is simply not in the interests of any nation to sign a FTA with the UK during the transition period for all the reasons described above.  Even if it turned out that Mexico was desperate for a FTA, the UK is really in no position to sign any trade deals with anyone until it stabilises its WTO schedules and completes a FTA with the EU.  We all know that FTAs take years and years to come to fruition.  In the meantime, the UK will have reverted to trading with the EU's trading partners under WTO rules but will have taken the unprecedented step  of unilaterally applying the tariffs and quotas and standards of the EU's FTAs for a period of time. Does that sound discriminatory?  Yes, it does.  Nicaragua will be perfectly within its rights to lodge an appeal that the UK is discriminating against its ukulele industry by applying preferential rates to Mexican and Canadian ukuleles.  The only outcome is that the UK will be forced to apply its WTO tariffs to all WTO members until it can agree about 45-50 FTAs with the EU's existing trading partners.  The logical outcome here is that the UK can't uphold the EU's external tariffs without being a member of the EU Customs Union. Something, somewhere has to give because the UK cannot revert to WTO rules and uphold the EU's system of external tariffs.  

The UK is going to drop out of about 45 FTAs that it currently enjoys as a member of the EU.  David Davis thought that was worth just one sentence.  He didn't provide any details about how he might convince 45 global partners to maintain the status quo when it clearly isn't in their interest to do that.  He didn't speculate on how long it might take or how he would reach formal agreement with everyone involved before the UK exits the EU.  He didn't consider why anyone would enter a temporary agreement with the UK as it struggles to leave the EU only to have to rip that up for a more permanent one at an unspecified date in the future.  He didn't ponder on the legality of the UK's position or how it might open the UK up to further WTO dispute at a time when it needs stability more than anything else.  He literally didn't think about any of this at all.  I'm pretty confident I could have written a thousand words on the logical and practical failings of almost any sentence in his proposal.  Meanwhile, the UK still hasn't published a position paper on the more pressing issue of the exit bill.  All musings on future trade with the EU will be filed in the bin until we agree on the bill, Northern Ireland and citizens' rights. Why didn't he engage his peanut brain on the stuff that really needs attention?

Over and out,

PS "What we all need is continuity until a new system can be implemented in a timely manner."  I love sarcasm.

PPS I've been a bit quiet lately but a) it's summer and b) I thought I'd take advantage of the quiet before the Brexit storm.


  1. As usual you hit a whole packet of nails on the head. On the R4 Today programme this morning James Brokenshire, idiot Secretary of State for Northern Ireland, was Bing airily confident about how it's going to be fine there, just because.....well, just because.

    I see M. Verhofstadt has called this position paper on Customs arrangements a fantasy. I think he is being kind.

    Another great analysis Terry. Wish me luck when I'm trying to explain round the pub later to the "it'll all be fine" brigade.

  2. Thanks!

    The good news is that the UK will not actually do any of this because a) the EU will not agree to it b) the proposal is impractical on almost level.

    The NI proposal came out today. If I can make it to the end without drilling a hole in my own cranium out of sheer frustration then there might be a follow-up. I suppose I shouldn't prejudge it but ... let's face it we probably should.

    1. Put down the drill & leave your skull alone, Terry. We need your brains intact to keep dissecting this Brexit nonsense.

    2. Not being the most practical type, the most dangerous tool I have at my disposal is a toothbrush.

  3. It's hard to know why we are still getting this nonsense from them.

    Of course none of them really thought 18 months ago that we would ever be in this position.

    And we know that absolutely no preparatory work was done for the eventuality that we would actually leave the EU.

    Why we ended up with an empty headed prime minister, I would guess, can be explained that no one of any quality actually wanted the job. After all, whichever way it works out, it's not going to be pretty. No one is going to end up satisfied.

    After the worst is over, is the time for potential leaders to make their pitch for the top job and I suspect that she will stay in post until she loses the next election and even her DUP mates won't be able to help her.

    Various theories have been proposed about May's choice of ministers and how dim they are. Johnson seems like the least likely candidate for the Foreign Office. And Davis and Fox are third rate by anyone's standards (and in the case of Fox, that's definitely a flattering rating). Did she appoint the weakest so that they's make a mess of it (becasue she's really a Remainer), or because next to them she might look reasonably bright?

    Is she even clever enough to think of that ploy?

    That her mantra for so long was "No deal is better than a bad deal", when no deal meant the country shutting down, indicates that she has absolutely no grasp on the situation.

    'Cake and eat it', which, as you point out, has reemerged clothed in slightly different words, is equally moronic.

    If I can see that that would set a precedent for the rest of the continent, surely she, or at least one of her advisers, can see it too.

    I've talked lightheartedly in the past about the Brits, lost in some ridiculous notion of empire, but surely ...?

    I know we all laugh at the stupidities that this government is perpetrating, but in reality, it's our lives these goons are messing with. I'm seriously uncomfortable with the idea that people who cannot produce a more coherent argument than the one you explain above, hold the whole future of Scotland in their incapable hands.

    And that there is little we can do about it.

    1. The amazing thing about this position paper is that it is actually quite well written. There are references to UK gov data and everything. Finally, they gave the task to someone other than the intern. The problem is that the whole Brexit idea is a muddle. Oh, and we're back to cake-and-eat-it. They are clinging to the idea that the EU will let us stay in EU agreements but without the obligations.

      I think this has gone so far that this is no longer about the competence of those involved. There is simply no way to solve the problem. The government can't legislate to protect its EU trade and at the same time make its own arrangements. It can't leave the EU and retain its rights to trade the Euro in Canary Wharf. No one seems ready to admit this in public so what we get are 16 pages of jargon that are basically an appeal to the EU to do us a massive and costly favour with nothing to give in return. The EU's benevolence is the only way out but it is a pipe dream.

      When the EEC was being discussed in the 50s the UK didn't join because it considered that its own trade with the commonwealth was more important than with the EU. It did ask to have both but that was quietly rejected so never made any serious overtures to join. 60 years later and we seem to have resurrected a dead idea. This isn't even the first time we've tried this. Oh dear.

      I don't know how this will end. I just don't know enough about politics to now what people are thinking and how that connects to the advice they receive from the civil service. Maybe this intellectual rot runs all the way through Whitehall or maybe it is contained to the cosy chats that David Davis has with his chums. I have absolutely no idea. Ian Dunt always asks if it is better if they are lying or if they are stupid. I can't even answer that.


Bark, lark or snark