Thursday 16 July 2020

EU quietly add to the draft treaty text

The news this morning is all about Julian Lewis displacing No 10's chosen candidate as chair of the ISC Committee, Chris Grayling. If the machinations surrounding his 'appointment' are an indication of the 'genius' of Dominic Cummings then Johnson isn't going to last another year. The whole thing was almost comical and since Lewis has now lost the whip and is a close friend of John Bercow, I assume we will see the Russian report sooner rather than later.  But I want to look at something else that happened yesterday.

The EU quietly published some more draft text to add to their draft Future Relationship treaty. It's 32 pages of stuff about road transport of people and goods after December this year. The title says it is "substituting certain placeholders in Title XII and Annex ROAD-1 of the draft text of the Agreement on the New Partnership with the United Kingdom."

It's not clear if it was agreed with UK negotiators or is a unilateral proposal by the EU. It says it was "transmitted to the United Kingdom on 15 July 2020, following consultation with the European Parliament and Council. It was presented to the Council Working Party on the United Kingdom on Friday 26 June 2020."

I can see it replaces a series of blank "placeholders" that were in the original 440 page text published back in March. This is on page 195 with an annex, Transport of Goods by Road, on page 368.

The original draft treaty merely set a basic rule that neither side could "reject or prohibit the use in its territory of a vehicle undertaking a journey referred to in Article ROAD.4 [Transport of goods between and through the territories of the Parties] if the vehicle complies with the requirements set out in Part C of the ANNEX to this chapter."

The new text published yesterday sets out the terms the EU will demand of UK hauliers and coach operators. It is quite a document. I don't know if the conditions are normal for British trucking companies and drivers, in which case not much will change. But some of the requirements seem extremely onerous.  For example:

"The natural or legal person [the haulier] shall demonstrate, on the basis of annual accounts certified by an auditor or a duly accredited person, that, every year, it has at its disposal capital and reserves: – totalling at least EUR 9,000 (or the equivalent in pound sterling) when only one motor vehicle is used, EUR 5,000 (or the equivalent in pound sterling) for each additional motor vehicle or combination of vehicles that has a permissible laden mass exceeding 3.5 tonnes used and EUR 900 (or the equivalent in pound sterling) for each additional motor vehicle or combination of vehicles that has a permissible laden mass, exceeding 2.5 tonnes but not 3.5 tonnes"

This might be achieved by a bank guarantee or an insurance policy.  But what about this one about the qualifications of drivers - I pick few at random:

"The knowledge to be taken into account by the Parties when establishing the driver's initial qualification and periodic training must include at least the subjects in this list. Trainee drivers must reach the level of knowledge and practical competence necessary to drive in all safety vehicles of the relevant licence category. The minimum level of knowledge may not be less than the level reached during compulsory education, supplemented by professional training.

1. Advanced training in rational driving based on safety regulations

1.1. Objective: to know the characteristics of the transmission system in order to make the best possible use of it: curves relating to torque, power, and specific consumption of an engine, area of optimum use of revolution counter, gearbox-ratio cover diagrams."

1.5. Objective: ability to load the vehicle with due regard for safety rules and proper vehicle use: forces affecting vehicles in motion, use of gearbox ratios according to vehicle load and road profile, use of automatic transmission systems, calculation of payload of vehicle or assembly, calculation of total volume, load distribution, consequences of overloading the axle, vehicle stability and centre of gravity, types of packaging and pallets; 

3.4. Objective: awareness of the importance of physical and mental ability: principles of healthy, balanced eating, effects of alcohol, drugs or any other substance likely to affect behaviour, symptoms, causes, effects of fatigue and stress, fundamental role of the basic work/rest cycle. 

There are all sorts of things about the training required, the amount of time the training should take (280 hours) and subsequent periodic training (35 hours worth every five years) and so on.

I ask myself what's behind it. Is it something we have negotiated?  Is it something the EU have proposed to put even more pressure on the UK?  Will the UK demand the same of EU27 companies? You can be sure that the authorities in the EU will take a particular interest in the quality of our drivers and operators, the few allowed to enter the EU after January. Without a deal this will use the EMT permit system which is less than 5 per cent of our needs.

Perhaps they think they have a comparative advantage over us in road haulage. 

I assume the RHA and the FTA will soon be commenting if it puts British hauliers and coach operators at a disadvantage.  The RHA are not impressed with the government's handling of it so far. Rod McKenzie policy director at the RHA is quoted by Politico in this tweet:

And I note that Shanker Singham has been commenting about all the extra cost and friction that the new Border Operating Model will impose using an article in Global Vision to suggest it may not be as much as £7 billion. He chairs Global Vision which is just another anti-EU website it seems to me.

However, in the article Singham shows that not only does he know little about trade, he knows even less about business and not that much about human nature. He thinks the cost burden of maintaining borders will shift from the taxpayer to companies. He doesn't seem to realise they will pass it on to the customer - the taxpayer.

And while the cost may be less (it may be more as Sam Lowe suggests below) it is the friction itself which is the problem. Why would an EU27 business import stuff from the UK with all the hassle and paperwork when they might be able to obtain the same goods or services elsewhere without it?  This won't affect some businesses - where are Airbus going to find a wing supplier? - but at the margin, where time or costs are important, you can bet we will lose out.
Singham is going to find it ever harder to defend what he has been arguing for for years.
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