Wednesday 8 January 2020

The coming trade talks: an expert view

Ursula von der Leyen, the EU Commission president is in London today for preliminary talks with Brexit Johnson about the forthcoming trade negotiations. In the way of these things, Downing Street say this morning that Frau von der Leyen will be told by Brexit Johnson that trade talks can be concluded by the end of the year and the transition period will not be extended. No surprise there then as the government increase the size of the open goal, as Sir Ivan Rogers calls it, by another three feet.

The Guardian are reporting that the EU's draft guidelines setting out their objectives will be relatively vague when published, just headline points without any detail, to avoid an immediate clash when the talks finally get underway in March. The EU are trying to keep it all low key, which is probably wise when we are still in cake and eat it mode. This is in contrast to our position of studied belligerence. I assume they will want to let our chief negotiator, David Frost, down as gently as possible. 

Brexit Johnson has already said enough to damage his own chances of success so why offer him an easy target? But it would be a big mistake to think Brussels plan to go easy on us. The von der Leyen meeting comes just a day after French trade minister Jean-Baptiste Lemoyne gave an interview to Reuters where he made it clear:

“We’re going to have to work flat out, what’s certain is that content must prevail over timing. We can’t afford to botch some issues.

“Talks will certainly be tough, but we can’t give too much away or be negligent about certain rules that matter to us because there’s a tight deadline,” he added.

Which I think will be the message received by Brexit Johnson later today. Whether he understands it or not is another matter. Probably not. Frau von der Leyen will no doubt gratefully accept his senseless threat to time limit the trade talks. The EU were always going to win anyway but we are just making it so much easier, as we did on phase I, by being wildly over optimistic about our strengths and ignoring our weaknesses altogether.

David Henig, a trade expert who, unlike our PM, actually knows what he's talking about tweeted on Monday about our prospects:
One of the first areas to be settled is perhaps the most important one for The City of London, financial services. In the political declaration (PD) the question of 'equivalence' has to be agreed by June. Henig says, "according to the relevant EU documents there are 26 areas in which equivalence is judged, and not one country has been deemed equivalent in all of them. Even then equivalence falls a long way short of current levels of access".

Next is the highly sensitive subject of fishing where an agreement has to be in place by 1st July. despite Gove saying there won't be any trade offs on access to our coastal waters, expect trade offs and some very unhappy fishing communities.

By the end of 2020 the PD requires us to have in place a data equivalence agreement. Henig doesn't think our present data laws are a problem while we are a member of the EU but getting an equivalence agreement might well be. We shall see.

Then comes the NI protocol:
As he points out, the NI parties and business are trying to pass amendments to the WAB in parliament so they are clearly not happy with what has been agree so far. The full extent of the products affected and checks needed will have to be spelled out. Plenty of scope for problems there.

Remember this is all to be settled alongside or before the free trade agreement itself.  This will have to include level playing field measures covering at least environment, labour, state aid, competition, and quite possibly more as the EU demands.  Henig says even agreeing a tariff and quota free deal isn't simple. Rules of Origin will determine what products qualify, and if they don't suit UK producers the zero tariffs are of no use anyway. This means going through and agreeing RoO percentages on every possible product that might be shipped now or in the future between GB and NI.

Apparently, we could use a ready made protocol called Pan-Euro-Mediterranean cumulation and PEM Convention. In simple terms, these are standard rules of origin across Europe. But the UK would become a rule taker from Brussels, something Brexit Johnson says he won't do.

And ratifying the deal so it comes into force on January 1st 2021 means getting everything settled by October at the latest and this is extremely tight since the EU have legal procedures in place that can't be circumvented.

I assume (although Mr Henig does not say) that a bare-bones deal is NOT a mixed deal and so national and regional parliaments will not be involved, if they are you can forget January 1st 2021 anyway.

He ends by pointing out a couple of important things:

"Such a barebones trade agreement would say nothing about regulatory checks or provision of services beyond WTO and would be a huge change from the current trade situation. So problems for a port built next to hills handling 17% of the UK's goods trade" 

This refers to Dover which will face huge challenges. And:

"Domestically government and parliament are not yet set up coherently to manage all these negotiations [those with the USA and other as well], devolved involvement is unknown, and business have to prepare both for no trade deal and to lobby for their interests in a deal. Much more work there."

 To give us an idea of what problems lie ahead, the Australians have rejected our proposal for visa-free travel between the two countries as part of any free trade deal. It was only last September that international trade secretary Liz Truss, on a visit to Australia, announced that a plan to allow British citizens to live and work in the country visa-free could be just months away. The Aussies have now scuppered this because they were unhappy we would poach their highly trained professionals while sending them our low skilled, poorly qualified people.  Well fancy that!

Visa-free travel is something India will ask for when we sit down with them but which we have already rejected.

I note also Lord Kerslake, former head of the civil service, warns Brexit Johnson about Cummings' radical plans to overhaul the government's machinery in an article for Politics Home, saying:

"Cummings talks of deep changes being needed but expects his work to be done within a year, he says people must commit to working at least years on the project as he will will have to invest time in schooling them, but he reserves the right to dismiss them at will.

"All of this bombast risks the government going to war with the civil service when this is completely unnecessary."

What will eventually cause this pathetic government to fail is hubris. They are embarking on the most far-reaching reforms of society for at least two generations, with a clock that they themselves have set ticking down, while also revamping the machinery of government and beginning an 'infrastructure revolution' - all with a psychopath advising a buffoon of a prime minister to guide the way.

It would be virtually impossible with competent men and women in charge. With the present cabinet it is bound to fail.
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