Monday 6 April 2020

The 'transition' period

The PM was hospitalised last night because of what is being called persistent coronavirus symptoms. I think all I can say is we must all hope for the best, whatever you think the best is, and leave it there. The number of deaths from the pandemic dipped slightly yesterday while the cases of new infections went up, as did hospital admissions across most of the country. We are still on the upward part of the curve.  Italy and Spain both showed a fall, indicating they are on a downward path as we will be in a week or so, God willing.

Raab is going to give today's press conference as Johnson's replacement and in the continuing and glaring absence of Home Secretary Priti Patel. I assume she is being kept in a secure location. You can't deliver sombre news with a permanent, fixed smug grin can you? You might look like some kind of psychopath.

Nick de Bois, described as an ally of Raab is reported by The Sunday Times calling for an extension to the transition period. I suspect this has the appearance of preparing hard Brexiteers for the shock of a decision that has already been taken. Although the PM's spokesman hasn't yet been informed and stuck steadfastly to the old Downing Street line, denying claims that we are moving towards accepting a delay.  Don't worry, we are.

On that topic, we keep hearing about the 'transition' period as if it will be a period to be used to smooth the change in the fundamental trading relationship with our main supplier and biggest customer. I cannot see how that is going to work.

Theresa May negotiated a political declaration which would have delivered a close relationship with the EU to avoid serious disruption to trading links as far as possible. Had she been able to get it agreed in March last year, we would be well on the way to a deal that delivered as near to frictionless trade as possible during what she used to call the implementation period. This would probably have required a bit of extra time to prepare anyway. You can't 'implement' or 'transition' to something unless you know what it is and the details would not have been clear or certain until the end of the negotiations.  In other words, it was in truth never going to be a transition or an implementation period but an opportunity to complete the trade talks.

Johnson's plans involve a far more distant relationship and if anything will require much longer to prepare for something which at present is far from clear and probably won't be agreed until some time late in 2021. To imagine that industry will adapt overnight is delusional. 

You have only to look at the NI protocol, where there is an actual text agreed. It is still being argued about. How is business supposed to get ready for checks at points of entry (the EU position) or no checks (our position)? Do port authorities start to build customs posts and begin recruiting officers or not? What are they transitioning to?

For other ports, notably Dover and Folkestone, there isn't even an agreement to argue over.

No, after the phony implementation period there will need to be a real one.  If the coronavirus pandemic has taught us anything it's the fragility of our supply chains. Shelves are always groaning under the weight of every kind of clean, cheap (often too cheap!) well packaged foodstuffs and every other conceivable thing, 24 hours a day, seven days a week as if it's a natural occurrence akin to rainfall. It isn't. The process involves millions of people making billions of decisions every day.

It happens because supply is carefully balanced against demand, usually with a bit of over capacity to take account of the odd glitch. If you can't get just what you want from Morrison's you go across the road to Tesco or Sainsbury's. The Supermarkets do the same with their suppliers.  This controlled bedlam works because at least two things are normally relatively constant or predictable, supply and demand.

Coronavirus upset demand, increasing it significantly as everybody stockpiled for the lockdown or fearing shortages.

An abrupt Brexit in December or in 2021, with or without a loose deal of the kind Johnson wants, will disrupt supply and we will see shortages and rationing far worse that we experienced a few weeks ago. There was no disruption to supply chains in March, which just took a week or two to ramp things up a bit.

Imagine the scenes when everybody knows things will be in short supply for a long period as the trucks queuing in Dover and Calais fill our TV screens. It doesn't bear thinking about. Empty shelves will become a daily experience.

What does all this add up to?  Firstly, put out of your mind the idea we can leave without a trade deal. If it was ever possible, after the coronavirus experience you can rule it out altogether. No government could risk it.  This is without even considering the state of the economy when the pandemic is over.

And this leads on to the corollary. If we can't seriously threaten to leave without a deal it's obvious we will be forced to accept whatever is on offer. All the EU have to do is stick together and follow the mandate. As I expect them to.

Thoughts are turning to what is being called the exit strategy, how we lift the lockdown and get the economy moving again. At the moment, nobody seems to know how that is going to happen without sparking off a new outbreak. It is not going to be easy.  Life will not be returning to how it was in 2019 for a very long time.