Let's pick up where we left off. Last week, a couple of trade reports came out which were roundly torn apart by various commentators. The fun didn't stop there. This blog from FlipChartRick looks at how the complexities of modern supply chains means that a focus on tariffs is dangerous. This blog from ex-Vote Leave staffer Oliver Norgrove is one of the clearest I've come across on why the Minford approach and the WTO option more widely should be thoroughly avoided.

We now have six position papers from the government, some of which are actually quite good. The enforcement and dispute resolution one in particular is very reasonable, and perhaps gives us some hope that the government is aware of the possibilities, putting particular emphasis on the enormously sensible strategy of re-joining EFTA.

The other papers we had last week were on specific issues and did not contain anything particularly controversial. Interestingly,  4 of the 6 papers we've seen are named "Future Relationship Papers" rather than position papers. They read like a menu of options and possible solutions. showing at least that our options are being explored. They will do little however, to actually assist during the upcoming third round of negotiations. EU officials are having to constantly reiterate their position that there must be "sufficient"progress on citizen's rights, the divorce bill and the Irish border issue, before talks can progress to things like trade. The issue of the Irish border is impossible to solve without us understanding the future customs and trade relationships, and even then, many argue it is impossible to solve at all. The 57-odd policy areas that must be negotiated are interlinked such that a conclusion on any one of them will be contingent on the progress of at least some of the others. Still, the EU wants to talk about the divorce bill, citizen's rights and the Irish border, and we are trying to force the issue on customs and trade. The fact that both sides are in disagreement as to how this needs to be done, is, as others have pointed out, very likely to lead to a stalemate, and yet the clock ticks on. The papers the government has released thus far, whilst specific on the objectives, only throw out possibilities rather than positions, and as we have seen by the reactions to the customs and Irish border papers in particular, the possibilities do not hold up to much scrutiny.

As we would expect, the response from Brussels, whilst appreciative of the effort, has not been very positive. One diplomat called the customs proposals a "fairy tale", Juncker said that he's read all of them and none were satisfactory, and Barnier said: “To be honest, I’m concerned. Time passes quickly, we need UK positions on all separation issues. This is necessary to make sufficient progress. We must start negotiating seriously. We need UK papers that are clear in order to have constructive negotiations, and the sooner we remove the ambiguity, the sooner we will be in a position to discuss the future relationship and a transitional period.” With the third round of negotiations about to begin, and the first public update due this Thursday, these comments do not inspire a great deal of confidence.

Here I once again will remind everybody that parking ourselves in the EEA under EFTA jurisdiction would remove us from the time constraint, solve most of these issues at least for the time being, and most importantly, would remove us from the EU. We are facing a gargantuan undertaking and forcing ourselves into a progressively weaker position for no reason whatsoever, with a solution that would deliver an exit from the EU and the commitment to ever closer union right under our noses. 
​
In other news, Labour's Keir Starmer has penned a piece laying out the party's new position that they would keep us in the single market and "a customs union" with the EU for a transitional period in order to avoid a cliff-edge. This goes one step further than the Tories' current line, but there is no detail whatsoever about how Labour would seek to achieve such a thing, certainly no mention of the EEA or EFTA. This does throw up the possibility of a parliamentary showdown though, if this is truly a position upon which Labour MPs will rally behind. It is still the position of the government that at some point the Brexit deal will go up for a vote, and there is also the lack of clarity around whether we must formally indicate our intention to leave the EEA. Whilst we are yet to hear from Corbyn or McDonnell on this issue, who have both said previously that SM membership is out of the question, this is potentially another spanner in the works for those seeing a Brexit on the harder side of things.

As I mentioned, we should ghave an update on the progress of the third round of negotiations on Thursday. In the meantime please do check out our podcast (or here for non-iTunes people). It's sounding better than ever and is the only place the really detailed discussions around these issues can be done justice.

​@GMCC_Alex

As they go, last week was a very eventful one. First of all we had the first two of the government's position papers on their plans for future customs arrangements and the Irish border. Then we had two ridiculous papers from the IEA and the Economists for Free Trade (ex-Economists for Brexit). All four of these papers were joyously torn apart on twitter. Thousands of words could be written on the failings of each one, so this week I'm going to let others do my work for me.

The customs paper was bizarre in many ways. The government put forward two highly imaginative suggestions, both of which raised many more questions than they answered. The paper gets a lot wrong. It gets the basic premise of what a customs union is wrong (They are for imposition of a common external tariff and the removal of internal tariffs, rather than removal of non-tariff-barriers[NTBs]), confusing it with customs agreements. It speaks about removal of NTBs (which the single market handles), without mentioning the single market once. It argues essentially for a position which is impossible according to the EU's rec lines, and would ultimately be pointless. The end result it would seem, is to move to a new, technically demanding system that will be an enormous effort to implement, in order to have things stay exactly as they are now, with no possibility of future change. Joe Owen from the Institute for Government does a good job explaining some of these issues ​(click the tweets to follow the threads):

​Richard North does another good fisking over on hisblog. Ian Dunt, I think he would agree, is a relentless pessimist on all things Brexit, but he gothis analysis of this paper totally right. Frances Coppola's take down of the paper's entire premise is razor-sharp.

The issue of the Irish border is inextricably linked to future customs policy, and is useful in illustrating some of the problems with the proposed plans. Both sides want everything to remain exactly as they are today, with there being for all intents and purposes, no border whatsoever. This will not work, because the border will provide a backdoor to the EU for goods and people, something the EU will absolutely not accept. In order for there to be an even remotely frictionless border then, we must align ourselves with the EU and never diverge, as Samuel Lowe explains:

It doesn't make any sense. Both papers not only ask for all the benefits that the single market and the customs union provide without us being in either of them, they necessitate that we bind ourselves to both in such a way that the whole thing is completely pointless. It's an enormous undertaking for no gain. The dangerous aspect of these papers in particular is that for some, any outcome that doesn't allow for things to continue as normal can be said to be the fault of the EU or Ireland, as the fact that we have said "please let's just continue as before" would now put the onus on the other parties to make it so. This is not the case. We voted ourselves into this position and it is up to us to figure out a way to achieve what we want that is acceptable from the point of view of the EU and Ireland. The unfortunate outcome of these papers however, is that the only thing to achieve is to keep things how they already are.

On to the trade papers from both the IEA and Economists for Free-Trade's Patrick Minford.  Both are frankly ridiculous and have been rightly torn apart. Both rely on on traditional libertarian economic trade theory, and take no account whatsoever of the realities of modern trade. The IEA paper in particular also makes some really bad errors around Most Favoured Nation (MFN) rules and what it will mean if we become a third country in trade terms. Both also focus on tariffs, with barely any mention of NTBs. Both hardly mention services, which account for 80%+ of our economy.  Follow the threads below. My favourite trade guy Samuel Lowe goes first. It really is worth reading these threads in full:

Ian Dunt doesn't take kindly to this telegraph coverage. Here he explains how this policy would decimate British industry, and how the policy of unilateral zero tariffs gives away any bargaining power we have in order to negotiate trade deals that remove the real barriers to international trade. It is worth pointing out that a complete decimation of our manufacturing industry is an accepted conclusion in Minford's earlier Brexit works.

Marcus Leroux from the Times points out an obvious error/oversimplification:

The Leave Alliance doesn't hold back on the IEA:

The second report came out over the weekend and was authored by no other than Patrick Minford, an expert in macroeconomics, not trade. Minford's last outing was thoroughly rebutted by many, including a full critique by members of the Centre for Economic Performance at the London School of Economics. Minford's model is heavily assumption based, relying upon pure economic theory without accounting for reality. It also includes a bunch of outright errors:

See here, here, here and here for more criticism of Minford's thinking. The most annoying and dangerous thing about these reports is how they have been routinely covered by media outlets like the BBC without anywhere near enough scrutiny. No serious analysts take this stuff seriously, but they are reported as such. Even more scarily, DexEU's Steve Baker MP immediately congratulated the IEA on their paper, probably because it tells the government exactly what it wants to hear, despite being at odds with reality. This really is dangerous stuff, and I'm glad to see it getting all the negative attention it deserves.

@GMCC_Alex

After last week, some EU officials have been quoted suggesting that the UK government’s approach to Brexit is so chaotic and confused that that it all must be part of some elaborate and cunning plan. One trade attaché said: “I think it’s tactics: they are playing for time on purpose under the pretext of chaos in London. In September they’re going to swamp us with [position] papers on the fault lines — exactly the issues where they know we [the other EU member countries] are divided.” Former diplomat Sir Simon Fraser meanwhile, has said that the negotiations have not begun well, and that cabinet splits are leaving our side without the possibility of a coherent strategy.

Interestingly, whilst I don’t believe that there is a cunning plan at work, the government is set to respond to the calls of incompetence by publishing up to 12 position papers over the next two months. The first two of these papers, on the issues of a transitional customs agreement and how to solve the issue of the Irish border are set to be published next week, and are currently being approved by the cabinet. The papers will begin what ministers are calling a “big push” to counter claims that we currently have no idea what we are supposed to be negotiating. Supposedly, a majority of the work was completed a while ago, although there has been a serious “pick up of the pace” in recent weeks.

If we are to learn about the proposed transition plans as early as next week, it follows that we finally have some agreement within the cabinet on this issue following the flip-flopping of the last few weeks. Bloomberg is reporting that even ardent Brexiteers in the cabinet now accept that a transition is unavoidable, but with the issue of continued freedom of movement still up in the air, how much detail we see next week will be interesting to see. Going on previous releases, there won’t be nearly enough of it. There is also the pretty big question of what exactly we are going to transition to, although the chances of anybody having a clue on that front are even slimmer.

As to the negotiations themselves, the third round is set to start sometime within the next two weeks, with the primary matter of citizens’ rights still unresolved. Despite this, it is the divorce bill which is grabbing all the headlines, with the EU apparently trying to rush through a bill of £36bn over three years whilst many members of the cabinet are on holiday. It is rumoured that Barnier has suggested that the negotiation rounds due for October may not be scheduled until this matter is sorted. The reporting of this has been a bit muddled, with early reports suggesting that we were ready to compromise on the bill in order to progress the negotiations. Downing Street then said that Theresa May "does not recognise" the figure, although her spokesperson did reiterate that a financial settlement is expected. Some hard-line Brexit MPs like John Redwood and Jacob Rees-Mogg however, still insist that we shouldn’t have to pay anything at all. It is all well and good publishing position papers on other issues, but until these two primary things are agreed upon the EU is reluctant to talk about anything else. I expect there to be a major compromise on the horizon, particularly on the issue of citizens rights, but likely also on the divorce bill, if the government wants to make any significant progress sooner rather than later. The clock is ticking.

Finally, the conversation around the possibility of EEA/EFTA membership continues to creep on. This piece in the FT does a good job at explaining the strategy but falls into some of the same traps that others continue to, namely around Norway being “a rule taker, not a rule maker” and continuing to pay into the EU budget. This paper from EFTA4UK is worth reading, doing a good job of showing why things aren’t that simple, and that Norway is in a better position than most realise.

@GMCC_Alex

 Okay, all bets are off. In my last blog I described how it seemed that ministers were adjusting their approaches and that a path may be developing. Last week however, with parliament in recess and Theresa May on holiday, there were a raft of announcements on our Brexit strategy that are almost so contradictory and difficult to draw meaning from that they are not worth analysing. One thing is clear: 13 months on from the referendum we are still nowhere near there being any agreement on Brexit amongst those ultimately in charge of it.

We had announcements last week that Fox and Gove were now accepting Hammond’s line on the need for a transition deal, and that free movement would continue beyond 2019. Now, Liam Fox has said that he has “not been party” to any such agreement with his colleagues and that continued free movement would defy the referendum result. Then, Boris had to deny that he was going to resign over disagreements within the cabinet. Then, yesterday morning, Downing Street attempted to clear things up by saying that there would be a transition, but that free movement would end in 2019. We are expecting some detail on new immigration systems at some point then, but the Prime Minister ‘spokesperson said that "It would be wrong to speculate on what these might look like or to suggest that free movement will continue as it is now”. Ian Dunt put it nicely:

It also seemed just a couple of weeks ago that we were moving closer to an “off the shelf” transition deal akin to the EEA/EFTA model. This message seemed to stem primarily from Phillip Hammond, who had apparently said something similar to business leaders. Now though, another statement from number 10 has said that the UK will not seek an “off the shelf model”, and that the details of any transition period will be a matter of negotiation.
I don’t see how any meaning can be drawn from any of this, except that we still clearly do not have an agreed position within the government. If this is the case, then what on earth is David Davis actually trying to negotiate? The prospect of everything that needs to be done by 29th March 2019 actually getting done by then is looking slimmer by the day, and any confidence I had last week has been swiftly eroded. It’s a shambles.

On the other side of the house, things do not look much better. There is absolutely no agreement within the Labour party on whether or not we should remain in the single market and the customs union, and a clear party line is becoming harder and harder to find outside of the manifesto. One thing that strikes me about this part of the conversation, is that the single market and the customs union are always approached like a package deal, where we should be in both or neither. This misses the point that “the” customs union (it isn’t the only one in the world, and they are all different) really isn’t as black and white as people think, and that there are a number of way for us to cooperate on customs whilst being free from the Common Commercial Policy (the best of these ways being through the EEA). For some Brexiteers, “the” CU is a red line because of the incorrect association with the Common Commercial Policy – which is a separate thing. Whilst for remainers, “the” CU is a red line because of the incorrect association with the removal of internal non-tariff barriers – which are more related to the SM and can be overcome in a number of other ways. Our ongoing customs relationship really isn’t a binary choice, and so it shouldn’t be discussed in such terms.
​
If this week is anything like the last one, I may not do a blog. Or I may just put my face on my keyboard and post that.

Last week's podcast was perhaps the best one yet. We spoke about the need for the EEA, trade, regulation, and chlorinated chicken. Listen here.

@GMCC_Alex