THE MANSION HOUSE SPEECH

So the PM gave her speech at The Mansion House but I'm not sure we are much further forward. It's like taking fairy steps at the start of a marathon. The full speech is HERE. If one can begin to discern the semblance of a strategy it seems to be trying to bring the Leave and Remain sides together and that is probably a good thing. However, in the end it will probably please neither.

You have to laugh at the sheer chutzpah of Theresa May with The Telegraph HERE quoting her saying it's time for the UK and the EU to face the hard facts. The EU have been trying to make us do this since the referendum but have signally failed. The PM seems to have suddenly decided that she is the one to call for hard facts to be confronted. There must be utter exasperation in Brussels. You spend a year or more telling someone she must face facts and then as if the penny suddenly dropped, she says that BOTH of you must face facts, followed by a speech where she then demonstrably fails to face any at all. Especially on the Irish border question.

And far from facing facts, she demands things like the three baskets approach that the EU have already rejected. And the customs partnership proposed last year and described as just "silly" is back on the table. It must be maddening for our negotiating partners.

In the speech she said:

We are leaving the single market. Life is going to be different. In certain ways, our access to each other's markets will be less than it is now. How could the EU's structure of rights and obligations be sustained, if the UK - or any country - were allowed to enjoy all the benefits without all of the obligations?

So we need to strike a new balance. But we will not accept the rights of Canada and the obligations of Norway.

I am not sure we will be in a position to "not accept" things, but leaving that aside, what she is asking for is not the rights of Canada and the obligations of Norway but the rights of Norway and the obligations of Canada. This is the problem.

After Chequers we were told divergence had won the day, but it didn't look that way to me or to many others. Mrs May listed huge areas where we she wants to make commitments that,"in practice, will mean that UK and EU regulatory standards will remain substantially similar in the future".

Having voted to come out we are now looking to remain part of just about everything in the EU, in fact what May seemed to be describing was the EU itself. Close cooperation, arbitration mechanisms, regulatory bodies working together, ensuring fair competition and so on. It looks like we want the EU in all but name.

We want to maintain associate membership of various EU agencues including the EASA, EMA, ECA, and probably others too. These are agencies that we have just voted to leave.

We will be out of the customs union, but into a customs partnership. She raised one of the customs solutions from last year about the Irish border where we mirror EU tariffs but importers can reclaim the tariff if the imported item is used in the UK. This was at the time described as "just silly". It is a staggeringly complex system, including the traceability of all imports, which the HMRC said would take five years to implement at least - even if it was possible and acceptable to the EU.

More reaction is coming in and it's mixed. Brexiteers welcome it as sticking to her hard Brexit line (Matthew Elliot) while others think she is heading for the softest Brexit possible while still leaving the single market and the customs union. Personally, I think this shows just how clever the speech was with both sides taking what they want from it. However, I don't think it takes us any further forward because I don't see anything really new in it. Almost everything she said had been said before in one way or another. The CBI are still calling for a lifting of the fog.

Brexiteers have seen the position set out in her Lancaster House speech as the high water mark from which the tide has slowly but inexorably ebbed. At this rate we will remain in the EU and IDS will welcome it!!

The way she was talking about trying to stay as close as we can to the EU in regulatory standards and with associate membership of EU various agencies, it looks as if we will be almost the same as a member but without being one. It will be fascinating to see what the EU's reaction will be. 

If we do get associate membership of the EU agencies what will it cost? One can see the UK paying large sums, more than we were paying as a member. Wouldn't it be a laugh if we end up paying several billion into EU coffers?

The Irish border issue remains unresolved and in the questions at the end she offered no solution.

The speech talked about a "comprehensive system of mutual recognition" which built on David Davis' speech on Vienna. But she wants a system where products need to be approved only once and thinks Britain, outside the single market, would be able to behave as if it was inside the market. The only way at the moment in EU law that this could happen is if British companies followed the EU acquis and had their products approved by EU bodies in an EU member state. Mrs May is under the mistaken impression, as is Davis himself, that mutual recognition is of standards when it is not.

Imagine EU businesses who must follow every jot and tittle of the EU acquis, submit to the EU directives, regulations, market supervision, inspection, enforcement and judicial mechanisms accepting competition from British suppliers who do not. We might say that our regulations are substantially the same but this will cut no ice. They will say if so, why do you have different rules anyway? No this will never, ever be accepted but the PM seems to see it as the foundation of a future trade deal.

The EU is about harmonising standards across the bloc or it is nothing. If they accept for one second that a former member could have exactly the same access to the single market as now while not being in the EU ecosystem as they call it, it would be the end of the single market.

This idea of managed divergence, the three baskets idea where we maintain convergence in some areas, achieve the same results by different means in others and diverge in others is also central to Mrs May's speech, having been agreed by cabinet a few days ago. The problem is that the EU have already ruled this out about 24 hours before the cabinet met. The PM seems to think this is a bluff, an opening gambit by the EU instead of a fundamental aspect of what the EU is. 

She has the same idea as Cameron, that the free movement of goods, capital, people and services can somehow be circumvented. That we can get what we want, that is frictionless trade in the sectors important to us, and loosen the rules in other areas where we have no advantage. This is still cake and eat it stuff make no mistake.

It will be funny, if anything about Brexit is funny, if the EU simply dismiss it - as I fully expect them to. May thinks this is the deepest and widest free trade deal but it is actually the antithesis of what a FTA is about. The dominant partner is never going to permit privileged access to a third country in sectors where the third country has a comparative advantage without demanding a great deal in return. The EU knows the value of its market and is not likely to undersell it.

The cabinet may congratulate themselves on reaching an agreement but they have only been able to do it by suspending reality. As soon as the EU see her proposal the cabinet will have to reassemble in Chequers and think again, and this time make a choice. Are we in or out?

The Telegraph report reaction from Europe (HERE) with Merkel ally Manfred Weber saying we still have our head in the sand and Verhofstadt calling for more than vague aspirations. Politico saw the speech as aimed at three audiences (HERE).

I suppose if there was some positives it was the acknowledgement for the first time of several key things. First she said that, "there is no escaping the complexity of the task ahead of us" as if this had just dawned on her. Better later than never.

Secondly, she now accepts that "regulatory standards are themselves underpinned by international standards set by non-EU bodies of which we will remain a member - such as the UN Economic Commission for Europe, which sets vehicle safety standards. Countries around the world, including Turkey, South Africa, South Korea, Japan and Russia, are party to the agreement". So, we will still have to adopt virtually all the global standards ourselves anyway. According to EFTA, this is about 90% of EU product standards.

And finally, "neither of us can have exactly what we want". But what she described as the deep partnership still sounds like  having the cake as well as eating it.

But to get back to reality Peter Foster, The Telegraph's Europe editor tells Mrs May (HERE) to enjoy the weekend because the EU is going to spoil things on Monday by publishing its guidelines on the future EU-UK relationship. Had she made the Mansion House speech a year ago, it might have made a difference. But it's too late now. We're heading for a Canada style deal.