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Why a no-deal Brexit is nothing to fear – The Spectator – 4 August 2018
A viable alternative to an EU trade deal is ready and waiting
Warnings by Remainers about the consequences of a ‘no deal’ Brexit are beginning to resemble a game of oneupmanship worthy of Monty Python’s Yorkshiremen. Not content with claims that the M20 to Dover will be gridlocked with lorries waiting to undergo customs checks and that the North Ireland peace protest will break down, Doug Gurr, Amazon’s chief in the UK, apparently told Dominic Raab at a recent meeting that there will be ‘civil unrest’ within a fortnight of Britain leaving the EU without a deal. Next, they will have us living 150 to a shoebox.
Those who peddle this relentless doom-mongering fail to understand the protections which will remain in place for the UK under international law. Far from ‘crashing out of the EU’, failing to secure a free trade deal with the EU simply means that the UK will trade with the EU on terms set out by the World Trade Organisation (WTO).
The pundit class tends to scoff at the WTO option. They dismiss it as a recipe for chaos. But that is to ignore the huge progress that this body has made in promoting global trade over the past two decades. The government should from the beginning have presented the WTO option as a viable counterpoint to the EU’s hardline, all-or-nothing stance.
The WTO oversees a system of trade rules for its 164-member countries, which together account for no less than 98 per cent of all global trade. Under the WTO General Agreement on Tariffs and Trade (the GATT), tariffs on most manufactured goods between the UK and the EU would stay quite low, averaging around 3 per cent.
While EU leaders like to threaten us with hints that our exports would be unsellable in the EU, the fact is that non-tariff barriers such as arbitrary health and safety inspections and borders would be prohibited under the WTO’s Sanitary and Phyto-sanitary (SPS) and Technical Barriers to Trade (TBT) agreements. The UK intends to retain conformity with EU regulations following Brexit, at least for the time being, meaning that the existing low levels of health and safety risks to the public in UK products will not change in the days after Brexit. There would, as a result, be no grounds for the EU to exclude our goods from its markets.
The WTO’s new Trade Facilitation Agreement obliges the EU to maintain borders which are as frictionless as possible, using modern technologies such as pre–arrival processing of documents and electronic payments. Discrimination against foreign products through all sorts of internal regulations is forbidden. These rules are enforced by a well-respected international tribunal which has a high rate of compliance and cannot be overruled by the European Court of Justice.
While tariffs on some EU goods — agricultural goods and automobiles in particular — would be higher than 3 per cent, economic gains secured from an independent trade policy and a more pro-competitive environment should compensate UK consumers.
The WTO’s coverage of services is incomplete and would not grant UK firms the level of EU market access they enjoy under the single market, but the UK is well placed to take a leading role in developing the new Trade in Services Agreement, due to resume over the next few years, as well as multilateral negotiations for services at the WTO. Roberto Azevedo, the director general of the WTO, announced that he is looking forward to having the UK back as an independent champion of free trade.
Breaking free of the EU customs union will enable the UK to boost trade with other countries around the world, taking advantage of WTO rules which allow countries to offer preferential trading arrangements to nations with which they negotiate a Free Trade Agreement (FTA). In charge of its own trade policy, the UK should be able to roll over many of the EU’s 60-plus FTAs with third countries, some of which have already indicated that they intend to offer the UK terms as good as they did to the EU.
Canada has even suggested that the UK may get a better deal than that which was offered to the EU under the Comprehensive Economic and Trade Agreement (CETA) two years ago. The UK Department of International Trade has already begun discussions with several countries with which the EU has failed to do trade deals, most notably the US. Since 90 per cent of world GDP growth in the coming decades is expected to be outside the EU, it makes sense that the UK looks beyond this region, which now accounts for less than half of its overall trade. The UK will no longer be required, as it is at the moment under EU rules, to impose tariffs on products which it does not produce, such as tropical fruit — reducing prices for consumers and giving us leverage when it comes to negotiating trade deals. The country will be in a strong position to do trade deals faster than the EU has managed because it will not be encumbered by a long-winded ratification process involving 27 member states.
Why, then, has the government damaged its negotiating position by seeming to exclude the WTO option and giving the impression that it is desperate to extract a trade deal with the EU at all costs? The UK has approached the EU as a supplicant, or worse, a wounded animal. Theresa May’s Chequers deal would have us clinging to a weak version of the single market and customs union, which would deprive us of the freedom we ought to win through Brexit. Even that is not enough for Michel Barnier.
Yet it is the EU which has more to fear from these negotiations, being nervous about having a large, liberated, pro-competitive economy on its doorstep. The government should have initiated this process, proposing an FTA based on CETA but better, with deeper access for services such as finance, and lower tariffs on a broader range of products. At the same time, the government should have been making parallel arrangements for a no-deal WTO option.
Thankfully, there are signs that UK negotiators are now moving in this direction. The UK government announced recently that it has submitted its schedule of tariff commitments for certification by the WTO. The UK’s new Trade Remedies Authority — set up to regulate international trade disputes — will shortly be up and running and the ports are being built up to handle the minimal extra customs checks which will be needed.
In any negotiation, there is no strategy worse than giving the impression that you are desperate for a deal at all costs. With the WTO option as an entirely acceptable, workable alternative to a trade deal, the UK is truly in a position to walk away. And that’s a good place to be.
David Collins is a professor of International Economic Law at City, University of London.
The Government has now found a policy on the Brexit negotiations. It unearthed it, apparently, in the cool, panelled rooms of Chequers last night. The instant wisdom is that it is a victory for the “pragmatists”.
In British – in particular, English – public culture, anyone claiming to be a pragmatist tends to win the advantage. A pragmatist is supposed to be an open-minded person who sees the facts as they are. The opposite of a pragmatist is an “ideologue” and/or a “fanatic”. Who, outside the wilder reaches of Isil or Momentum, wants to be one of them?
In recent weeks, Remainer activists have skilfully grabbed the pragmatic label. Leavers are presented as the raving ideologues. Trying to avoid cheap jibes about how poor, wild-eyed Tony Blair, noisy Anna Soubry and preposterous Lord Hailsham seem strikingly unpragmatic, I would like to investigate what this supposed pragmatism really is.
It goes wider than the Brexit issue. Essentially, it is the default position of those who have power in this country. In the 1970s, pragmatists coalesced round the idea that Britain must have a prices-and-incomes policy and a tripartite structure of government, business and unions to prevent inflation and economic collapse. This was espoused, with fanatical moderation, by the then Prime Minister, Ted Heath. People who opposed this view were dismissed as crazy “monetarists” on the one hand, or union “wreckers” on the other. The pragmatists prevailed. We duly had rampant inflation and came close to economic collapse.
At the end of the 1980s, having had a thin time under Margaret Thatcher, pragmatic forces at last got back together and insisted that Britain must join the Exchange Rate Mechanism (ERM) of the European Monetary System. By semi-fixing our exchange rate with that of other European currencies, they said, we could impose the financial and economic disciplines we seemed not to be able to manage for ourselves. We joined. The pragmatists’ policy forced extreme rigidity upon our economy. After less than two years of punitive interest rates, and consequent austerity and business closures, the pound came tumbling out of the ERM on September 16 1992, and stayed out. Britain’s economic recovery began the next day and lasted until Gordon Brown’s premiership 15 years later.
In 2016, the pragmatists were unprepared for the EU referendum. They resented the very idea that voters should decide an issue that they considered far too complicated for them. Since they assumed that voters must dislike the EU only out of ignorance, their sole tactic was to frighten them about what they might lose. Despite (because of?) their disproportionate power in politics, big business, central banks, Whitehall and academia, they failed.
Two years on, they are trying essentially the same thing. You cannot blame a company such as Airbus or Jaguar Land Rover for asking the Government what on earth it is doing. All of us want to know that.
But all such companies’ claims about what they might lose from a “disorderly” Brexit assume no possible gains. They do not factor in the exchange rate. They equate a short-term problem with long-term disaster. They concentrate on (and exaggerate) what we might lose in exports to the EU, which make up 12 per cent of our GDP, rather than the opportunities our greater freedom might gain for the other 88 per cent. They equate comfortable arrangements they have made for themselves in Brussels with the general good. They present their fears for their own comforts as things that should frighten the rest of us. This is not impartial calculation, but vested interest getting all hot and bothered under its vest.
A true pragmatist thinks hard about the reality behind appearances. The Remainer pragmatists do not. They like the status quo. They do not try to imagine why so many of the rest of us don’t. In this sense, although they are full of information, they are impervious to the facts, which is a most unpragmatic state of mind.
They are also, did they but know it, in thrall to a powerful ideology. It goes back to Plato. It holds that rightly guided, educated people – “people like us”, as our pragmatists might put it – must run things. Its modern form is bureaucracy in the literal meaning of that word – power held by the bureau, rather than the elected representatives of the people.
National solidarity and representative democracy are based on the idea that all citizens have an equal right to choose their rulers. If they live under a system, such as the EU, which frustrates that right, they become profoundly alienated. People trying to reverse the referendum result, or empty it of meaning, may think they are applying common sense, but they are enforcing this anti-democratic bureaucratic ideology and increasing that alienation. If you do not understand why that matters, you are as unpragmatic as the ancien régime before the French Revolution, and may suffer the same fate. In the meantime, as the constituencies are starting to tell MPs, you lose the next election.
As the scene moves back to talks with Brussels, we shall all be reminded that the least pragmatic players in this whole, long story are the people with whom our pragmatists keep telling us to make a deal – the EU Commission. Two years of arguing with her own colleagues have brought Mrs May no closer to grappling with this, the most dogmatic body in the Western world.
No British pragmatist has even tried to explain why the pre-emptive cringes advocated, incredibly, as our opening bid in the trade talks will induce Michel Barnier to make the deal with Britain that has so far eluded us. Why should he be impressed by the “common rule book for all goods” that Mrs May seeks? He already has one: it is called the customs union. If he thinks she is weak, he will beat her down yet further. She has admitted in advance that her latest plan makes it impossible for post-Brexit Britain to make a trade deal with the US: that’s a funny triumph for pragmatism.
The true pragmatist’s approach to these negotiations should be based on an estimate of power. If they are structured – as Mrs May seeks – to obtain special favours for Britain, they will fail, because the power of favour rests with the Commission. What have we done to make it help us? If, on the other hand, Britain says it is leaving anyway, in letter and spirit, because that is what the referendum decided, then it cannot be stopped. Faced with that reality, the EU and Commission are forced to consider how to make the best of this – for them – bad job.
Compare the high Commission rhetoric about the inviolable sanctity of the open border with Northern Ireland with the new war of words about closing borders between Germany, Austria and Italy – contrary to the EU’s own Schengen rules – because of the migration crisis. The former is a goody-goody game; the latter is serious. Theoretical talk is quickly crowded out when reality becomes unavoidable.
In all this time, Mrs May has never got serious in our power battle with the EU. She shrinks from it. So she is gradually, pragmatically, losing.
A government sponsored charity called WRAP is a very valuable asset to councils, helping them wade through all the confusing legislation surrounding recycling. It also adds a degree of weight to the argument that it is the commercial sector and industry that needs to stop generating the amount of materials it does, that aren’t recyable and limit the use of those that are to the minimum.
However, WRAP is advisory, has a limited budget and has no powers that would allow it to make any real changes. It therefore doesn’t really help when they release a report stating the blindingly obvious – people are confused by recycling, by what can and can’t be recycled. It tells us that the rules are too complicated and ‘suggests’ that it’s councils that need to do more.
Hardly surprising that they would turn the spotlight away from their paymasters, but nonethelsss disappointing. It ignores the increasing funding deficit local government is experiencing and fails to offer any real solutions.
Suffice to say, councils are used to being dictated to by central government and told to fix problems created by them in the first place.
If householders want the convenience of throwing everything in the same recycling bin, they had better be prepared to pay dearly for the privilege of doing so.
Even then, paper, card and in particular newspapers and magazines, needs to kept completely clean and uncontamined throughout the process. We should at least be able to expect householders to cooperate on this. If not, we really are fighting a losing battle.
The only way we’ll get any improvement in recycling is to spend money. Believing you can do it by bullying councils by attempting to shift the blame on to them, is not only counter-productive, it’s pointless.
We’ve convinced a large element of the public that they have a duty to recycle, in order to save the planet, but the only way government has demonstrated their commitment, is by short term incentives, that then get withdrawn, or swallowed up in the inpeneratrable morass of the annual local government financial settlement.
The government also continues to behave in what can only be described as a cowardly and evasive way when it comes to showing any form of leadership on the major issues. Too much of the public believe that it is councils that somehow control and determine what does and doesn’t not go into their recycling bins.
Councils have a statutory duty, in law, to collect and dispose of household waste. These days, that household waste get collected in different streams, residual – the non- recyclable stuff and recycling.
In some areas, mainly rural areas, one council collects and another disposes. Large urban areas and cities tend to have unitary councils, that do both. However, the result is the same, once collected and ready for disposal, only the private sector has the infrastructure to process what needs to be disposed of.
Most non-recyclable waste goes into incinerating in the form of energy from waste plants, with less and less going into landfill sites.
Recycling is disposed of, by handing it over to the recycling industry, who have agreed a contract with the council based on what they can and cannot sell on. The volitilty of the recycled materials market, means that most of the contracts are short in length and, if the local authority insists on including materials the recyclers can’t sell, very expensive to the council and therefore their taxpayers.
Why include stuff the companies can’t sell? For exactly the reasons mentioned in the article. The public are already confused and annoyed by the recycling messages received from their councils. Imagine what the response would be if the list of recyclates changed every three or four years?
The Tetrapak issue is a perfect example of this issue. The only company in the country that was recycling these was based in Scotland and stopped operating over 5 years ago. However, because my own council told our residents that they could recycle them when it was all the fashion, we put in place a contract that requires these to be accepted as part of the mix.
If a company takes on a contract and accepts an item as recyclable that then becomes unsellable, that’s their financial loss.
If a council puts in an unsellable item, its the taxpayer that pays for this to be taken out. If the householder puts it in, despite being asked not to, its contamination and can see a complete freighter load written off and sent for burning, or to landfill.
The government’s threat to pass on the EU £500,000 a day fine for missing the 50% recycling target, to councils, will probably be retained in some form even post Brexit. The recycling target will be transposed into UK legislation and no doubt so will the threat of the fine.
if this does happen, I suspect we are going to see councils become far more bullish about recycling post Brexit and start pushing back on some of the highminded ideology that has been driving the whole agenda for far too long.
A couple of weeks ago now, I was in the company of a number of senior people from one of of our major national developers. We were all at attending a conference and they were representing the sponsor of that evening’s conference dinner.
it was fast approaching midnight in the bar and the mood was jocular and relaxed with plentry of banter between politicians and developers present, as one might expect. The conversation turned to the skills shortage and in particular the shortage of bricklayers in their industry. In another life one of the politicians had been a builder, so was quick to agree with the developers’ complaints about the national apprenticeship scheme used to train brickies.
I won’t bore you with the details of their complaint, but suffice to say, that anything involving the principles of good bricklaying, was totally pointless when it came to training bricklayers, in their collective opinions. As far as those in the know were concerned, it should only take a couple of months at the most to ‘knock out’ a capable bricky.
On the face of it, many people would sympathise with any employer who objected to paying for staff to be trained to a depth they believed would never be used ‘in anger’ so to speak, which of course is why these developers were complaining about apprenticeships for bricklayers.
However, if the belief that the absolute minimum will do when it comes to skills training, is common across all industries that make or build things in this country, we will always lag behind the rest of the world when it comes to increasing national productivity and therefore competitiveness.
The Germans have a far greater respect for non-academic skills than there has ever been in this country. A qualified engineer in Germany is given the title Herr Doctor to acknowledge their skill and training for example. Of course I’m not suggesting that all our young Waynes, Jacks, Jills and Johns should now be trained to the level of Herr Doctor Bricky.
However, if you give a young person a good grounding in their chosen career, then they are more likely to aspire to go further than where they started when they first started work. There are plenty of 30+, or even 40+ tradesmen and women out there doing exactly what they were doing when they were 20, but could now be doing so much more, had they had the right training at the start of their careers.
Teaching somebody more than just how to lay one brick after another in a straight line, until somebody tells you to stop and go back to the beginning and start again, should be welcomed as an investment in our country’s future, not resented as an annoying delay in building your bottom line at the end of the financial year.
Short-termism infects every area of government and private industry in this country – at least government has the partial excuse of the election cycle for this. This continues to put us on the back foot when it comes to competing with the competition globally.