Brexit: the end to austerity

Robert Oulds

Friday, 23 June 2017

Taxation

Unlocking the benefits of leaving the EU

By Bob Lyddon

Bob is the author of The UK’s liabilities to the financial mechanisms of the European Union for the Bruges Group, and the Brexit Papers for Global Britain – www.brexitpapers.uk

23rd June 2017

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The current Government led by Theresa May has noticeably failed to bake any “Brexit dividend” into its policies for the coming 5-year Parliament. This is concerning because it may indicate either that they have not yet figured out the sources and extent of the financial benefits from Brexit, or that they are not going to pursue the negotiations with the EU in order to garner them, or both.

The guideline financial benefit is £50 billion per annum, or £961 million a day: almost three times the “battlebus” figure of £350 million a day, and approximately the size of the black hole in the Labour Party manifesto pledges for the recent election.

The keys to garnering the difference between the two figures lie in structuring a fair deal on the EU economic migrants already in the UK and on the taxation of corporate profits. “Fair” means fair to the UK population as a whole.

Talk of “a breakthrough” supposedly achieved on the first day of negotiation in the matter of the rights of EU citizens living in the UK must be a concern if this turns out to mean that the status quo is preserved for the 3.6 million citizens of other EU countries now living in the UK, since this heading contains the single largest amount of money connected with these negotiations.

It is vital that real “reciprocity” on this matter is achieved: the same amount of money flowing in both directions and for the same amount of time.

This is not the same as striking a deal that has an equivalence in words but not in figures, applying equally to EU citizens here and UK citizens living elsewhere in the EU. There are only 1.2 million UK citizens so affected, and these bald figures do not reflect either the annual cash value of the services delivered in the UK to EU citizens as compared to those delivered to UK citizens in other Member States, nor the age demographic: for what period will these services need to be provided?

Research based on the UK government’s National Labour Survey and issued by Global Britain indicates that the UK subsidises the public services obtained by each of the EU citizens in the UK by just under £10,000 each per annum. This figure is the difference between (i) their direct and indirect tax payments and national insurance contributions on the one hand and (ii) the costs to the UK state deriving from their usage of public services on the other.

In other words, the annual cash cost to the UK state of the 3.6 million EU citizens currently in the UK is £30 billion per annum. If the trade proposed by the UK government involves the exact same cost per head being spent by other EU Member States on UK citizens, then the annual cash cost on that side would be £10 billion, resulting in a net detriment to the UK under this heading of £20 billion per annum.

There is also the question of demographics: if the average UK citizen involved is a pensioner living in Spain and the average EU citizen in the UK is aged 25, then the cost to the UK will be of far longer duration than the cost to the other EU Member States. Mr Davis’ travelling direct to Spain from the first day of negotiations in Brussels could be taken to indicate that it is exactly this type of UK citizen that constitutes the average, and that the main country with whom a deal needs to be done is Spain.

Whatever has actually transpired so far, the UK government needs to now justify whatever position it has taken in the negotiations by qualifying the computations around which it is proposing a “trade” on this issue, based on:

Confirmation of numbers of people involved
Age demographic – to indicate for how long the people will be contributing funds and drawing benefits
Analysis of usage of public services:

o in the UK, this would indicate whether the consumption per annum per head is more or less than the £10,500 average

o in other Member States the figures would need to account for the actual cash value of the public services usage and not assume that the level of the service or the cost are the same as the provision in the UK

Analysis of contribution of direct and indirect taxes and national insurance contributions

That analysis will then deliver two figures:

Confirmation, or not, of the estimate above that there is a cost to the UK of £30 billion per annum, and for how long that cost will persist;
The equivalent figure for the 1.2 million UK citizens living in other EU Member States and for how long that will persist. The assumption made in this article that there is a parity of cost-per-head on both sides is no more than that, although the costs on the UK side are based on research undertaken for Global Britain.

These figures can then be expressed as a Net Present Value, and we can then see what money should flow from other EU Member States to the UK as a lump sum, or in the other direction, for the status quo to be maintained.

There are, of course, other ways of doing it, to ensure reciprocity, but also to cap the liabilities of the rest of the citizenry of the UK. For example, the rights of EU citizens to continue to live here could simply be curtailed as of March 2019, along with their rights to UK benefits and pensions, beyond a single pension transfer payment that buys as many years of entitlement in the state scheme of their home member state as they have paid NI contributions for into the UK scheme:

o They do not retain an entitlement to the UK state pension;

o They get as many years’ entitlement in the state system of their home member state as they paid for into the UK scheme.

If this approach were to be adopted, the transfer value of UK citizens’ contributions into the state schemes of other member states must be offset against it and those UK citizens awarded as many years of the entitlement in the UK scheme as they accrued in their host member states while abroad.

Another alternative would be for the 1.2 million UK citizens living elsewhere in the EU to apply for nationality in the member state where they are now living, and to continue to accrue rights in the state system there; when they get foreign nationality, they would surrender their UK passport and the UK would pay over a transfer value to buy them as many years of state pension in their new home country as they had accrued while working here.

Were this to be the arrangement, then the 3.6 million EU citizens would be free to apply for UK nationality, and the UK would have to have a scheme to adjudicate whether those applications are accepted. If they are not, the person would be obliged to return to their home member state, and the transfer value of pension rights would be paid over.

The first key point here is that no-one will have dual nationality. The second key point is that there is always a third-party to the tests of fairness of the arrangements, beyond just the UK government and the individual involved. The third-party is the UK taxpayer, who should not be called upon to subsidise any economic migrant. This has been one of the major failings of the EU from a UK perspective and a main cause of the failure to eliminate the public spending deficit.

After the Eurozone debt crisis of 2011 the UK rose in attraction as a place of employment, and the previous Conservative/LibDem government made great play on the increase in numbers of people employed and the increase in GDP that resulted. Unfortunately, and as the National Labour Survey has shown, these were mainly low-skill/low-wage jobs taken by EU economic migrants, and each such job has cost the country money.

In order to block every breach in the financial dam, the UK’s negotiators need to make sure there is a comprehensive exit on several other issues including:

Release from all the contingent liabilities associated with (i) the 2013-2022 Multiannual Financial Framework for the EU Budget and for all preceding budget periods; (ii) the European Central Bank; and (iii) the European Investment Bank – EUR1.3 trillion in all;
Buying out the European Investment Bank’s loans into the UK and then offsetting - against the reimbursement to the EIB - the UK’s book of Student Loans to citizens of other EU Member States who have studied in the UK, taken a UK student loan, and returned to their home countries or elsewhere without repaying it;
No further payments into the EU Budget after March 2019.

If the EU does not agree to all of the above and to one of the approaches outlined regarding citizens living outside their home EU Member State, the UK’s fallback would be to open the issue of the past – as well as the future - costs of the 3.6 million migrants and their benefits and pensions. If they are to stay in the UK, their home member state should pay that cost in cash every year, with a mechanism to adjust it annually, and make an upfront payment of the retrospective costs that the UK has already shouldered.

For the future we have to have it in our own hands to define our migrant worker regime for workers from anywhere in the world, and the start point can be a fairly easy one:

1. A maximum six-month visa for seasonal and contract workers, with no access to UK public services: the employer would need to show an insurance policy for healthcare during the worker’s stay in the UK and pay – and show they had paid – the premium upfront;

2. A work permit for a permanent, salaried position, as long as the salary is on a PAYE basis and is a minimum £50,000 per annum. The person would have full access to UK public services and the direct and indirect taxation and national insurance would certainly be above the £10,500 average consumption of public services.

As for the other elements of the UK’s financial relationship with the EU going forward, these come down to the terms-of-trade.

The two essential elements here are:

What replaces our current membership of the customs union and Single Market;
How we protect ourselves from predatory tax practices of other EU Member States.

The guiding principle is that it is impossible to remain part of the customs union and Single Market and also preclude predatory tax practices.

To solve the latter issue, the UK needs to rewrite its domestic corporate tax code by drawing up industry templates for cost/income ratios through which HMRC could run the group-wide figures of the likes of Google and Amazon, and the many other companies who benefit from the Freedom of Establishment and the sweeteners embedded in the domestic corporate tax codes of Ireland, Luxembourg and the Netherlands in particular.

Whatever the appearance these companies might present about the extent of their UK business, HMRC would be accorded the right to look through to the substance, and extrapolate the profits of their UK business from the company’s group-level sales and from a template of costs that would apply to a UK company undertaking the same business from a 100% UK base, and not with the activities split between the UK and other EU Member States.

This splitting of activities is underpinned by the implementation of odorous “transfer pricing” that lands the costs in the UK and the profits in Ireland, Luxembourg or the Netherlands. Instead the UK needs a new regime:

HMRC can make assumptions about the group’s UK sales from the group’s global Profit&Loss account;
Then HMRC can derive their UK costs and their UK pre-tax profits through applying the industry templates for 100% UK-based companies undertaking the same activities;
Whatever the company says is the profit of the UK subsidiary, HMRC would then respond with the UK’s official version of their profits, on which they would pay 16-17%, or whatever the standard rate is;
HMRC would send the company an Advance Payment Notice for the difference between what is in their own tax return and the UK’s computation, regardless of what tax the company had paid in Ireland, Luxembourg or the Netherlands.

The remaining issue is import/export tariffs. These can be negotiated in the knowledge that the UK exports approximately £280billion of goods and services to the EU now and imports about £360billion, an annual trade deficit of £80billion (Source: Walbrook Economics).

Given this imbalance to the UK’s detriment, the UK should have no qualms about going onto World Trade Organisation terms. If tariffs of on average 10% were applied by other EU Member States to the UK’s exports under these terms, this would amount to a detriment of £28billion per annum. However, the detriments caused by EU membership fees (net £9billion), Freedom of Movement (net £20billion) and Freedom of Establishment (£11billion) total £39billion, and outweigh the tariffs that would be imposed on UK goods and services under WTO rules.

By the same token, if the EU imposed 10% average tariffs on UK goods and services, the UK could do the same in return. In that case HMRC would receive £36billion in customs revenues, enough to subsidise all of our EU exports:

Assume an export was to be made for £50,000 and the EU tariffs would have raised this to £55,000;
The UK government sets up a scheme allowing the UK exporter to still quote a £50,000 all-in price, but composed of a cash price of £45,454 plus 10% EU import duty of £5,454 = £50,000;
The UK government reimburses the UK exporter with the £5,454 of duty so the impact of the duty is neutralised;
Even if EU governments did the same in return, the UK as a whole would still be better off by £8billion per annum: 10% of the UK’s negative trade balance with the EU.

On top of that the UK would be able to strike trade deals with non-EU member states at lower tariffs than apply now, when they are set at an EU level.

There is, however, one proviso to the above. The UK government should only reimburse EU import duties to UK exporters where the UK goods and services being exported into the EU have a minimum of 70% UK content. There would be an exclusion where goods/service are prepared mainly outside the EU, imported into the UK for finishing, and then re-exported as UK product i.e. as an EU product. This kind of “trade deal shopping” adds little value to the UK. Where the Confederation of British Industry lobbies for continued access to the Single Market, it would be interesting to know how much usage their members are making of the UK as an entrepot to “game” the Single Market rules, as opposed to their investing and creating proper jobs in the UK: the latter deserves UK government support, whilst the former does not.

The main penalties, then, of the UK negotiators failing to reach any kind of agreement with the EU negotiators by March 2019 can be summed up as:

1. EU import tariffs being imposed on the UK’s exports of goods and services, which, for purposes of illustration, we have put at a detriment of 10% of £260billion, or £26billion;

2. The necessity of providing public services for 1.2 million UK citizens living in other EU Member States now, at an assumed cost of £10billion per annum based on parity of cost with that the UK bears now for providing public services to the 3.6million citizens of other EU Member States;

3. Loss of estimated £5billion per annum of grants from EU bodies into the UK.

The total detriments would thus amount to £41billion per annum.

Were the negotiations to fail in that way, the financial benefits to the UK would be:

1. Imposition of tit-for-tat import duties on EU goods and services, at the same level as imposed by the EU. If that were at 10% and on the current level of EU imports, the UK would book £36billion of import duties;

2. Cessation of payment of £14billion per annum EU Member Cash Contribution, out of which the £5billion per annum of grants from EU bodies back into the UK are funded;

3. Cessation of the need to bear the cost of the public services for the 3.6million citizens of other EU Member States currently in the UK, which is £30billion per annum;

4. New revenue in Corporation Tax on tax-efficient EU business models where profits are currently concentrated in Ireland, Luxembourg and the Netherlands, calculated by the author for Global Britain at £11billion per annum.

The cash benefits amount to £91billion per annum, as contrasted with the cash detriments of £41billion – a net cash benefit of £50 billion per annum.

The difference expressed as a Net Present Value may well be far higher if one were to calculate the relative periods over which public services would need to be provided to EU citizens in the UK compared to UK citizens in the rest of the EU, based on age demographic.

In addition, the failure of negotiations and the UK’s exit from the Treaty of the Functioning of the EU would release the UK from EUR1.3 trillion of contingent financial liabilities. In order to ensure this release, the UK government should buy out all of the European Investment Bank’s loans into the UK:

Adjusting the payment in the EIB’s favour for their loss on redeployment of funds, where the EIB has funded its loans at higher interest rates than prevail now (the loans will be set to those higher rates so the UK would earn this adjustment back over the life of the loans);
Offsetting the value of the Student Loans to students from other EU Member States.

This last point could be of course be challenged, with the UK’s position being that allowing these students to study here and take out a student loan here were part-and-parcel of the UK’s membership of the EU and should not survive the UK’s withdrawal.

Apart from that, the UK could simply enact the remainder without striking a Brexit deal in negotiation. This should then be the baseline: the negotiation needs to achieve a better outcome for the UK than the result if no negotiation were undertaken at all.

Since the “no negotiation” route can be expected to deliver £50billion per annum cash benefits and release the UK from (i) EUR1.3trillion of contingent liabilities and (ii) a liability to provide public services to EU citizens of a far longer duration than the likely need to take over public service provision for UK citizens currently in other EU countries, the UK negotiating position is straightforward: the above is a minimum outcome and is completely acceptable. The negotiating task is to improve on that, and walk away if that is all that can be achieved.

The walk-away can deliver £50billion per annum cash benefits: 2/3rds of the UK’s public spending deficit and enough to bring austerity to an end, and without Labour’s Land Value Tax and financial conjuring tricks.

By Bob Lyddon

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The Future is Another Country: Brexit, CAP and the Future of British Agriculture

Robert Oulds

Wednesday, 21 June 2017

Alternatives to the EU

A Brexit-driven reconfiguration of the UK’s food and agricultural sector suggests that a period of significant transformation lies ahead; but if mapped successfully, can be a positive one.

Richard Ferguson

21st June 2017

Read the full research online

The possibility of a Brexit-driven reconfiguration of the UK’s food and agricultural sector suggests that a period of significant transformation and structural adjustment lies ahead. Set against an industry already in the midst of rapid technological displacement, value-chain disruption and regulatory change, a transformative event such as Brexit appears to add to existing uncertainty.

However, while the potential institutional, financial and operating frameworks that will arise from Brexit suggest a wide range of possible outcomes, the process, if mapped successfully, can be a positive one. The UK’s current position is not unique. In the 1980s, the government of New Zealand instigated a reform programme to transform the country’s food and agriculture sector, the results of which were immediate and painful as well as long-term and beneficial.

At the core of the transformation that shook New Zealand’s agriculture sector in the 1980s and 1990s was a pressing need to access new markets in the face of external economic shocks and structural adjustments, such as the UK’s decision to join the then European Economic Community (EEC) in 1973. While there are obvious direct parallels between the New Zealand case study and Brexit, both situations remain distinct and unique. The first section of this report “The past is another country” considers the New Zealand experience and argues that an agenda focused on long-term goals can deliver significant economic and social benefits, but may come with considerable short-term costs. The battle about to commence is set to be as brutal, complex and ideological as that which determined the direction of the British economy in the late-1970s and early 1980s.

The second part of this report “The here and now” considers the Common Agriculture Policy (CAP), the defining policy feature of the UK’s agriculture landscape over the past few decades. The design of any new policy-making framework has to begin with some macro considerations, not least: how relevant is a subsidy-based system of payments in the modern era? Moreover, what is the relevance of food security in a country with a structural trade deficit in food? We must also consider to what extent environmental considerations should influence the policy-making agenda. What is the role of government in terms of regulation, environmental compliance, bio-security and food trust? Alternatively, can a free-market, liberalisation agenda deliver wider social, political and environmental objectives as well as economic goals? Can the UK use its fledgling – and flourishing – agtech knowhow to raise productivity, build exports and deliver value added to the British economy?

The third part of this report “The future is another country” peers into the future, and presents some innovative and strategic thoughts. As a study it is neither exhaustive nor academic, but it does cover many of the key and very real issues that come up time and again in our daily work with clients. It simply considers some of the strategic directions that the UK should consider if it wishes its food and agriculture sector to prosper. A global imperative is: how do we feed a world of 10bn people within a generation when its current needs are delivered by an army of unsophisticated and undercapitalised smallholders? We contend that the Department for the Environment, Food & Rural Affairs (DEFRA) and the Department for International Development (DFID) need to shift their respective – and parallel – focuses on agriculture subsidies and development aid to collude with the Department for International Trade (DIT) and the Foreign & Commonwealth Office (FCO) to bring much of the UK’s technological, commercial, developmental and diplomatic ambitions in food and agriculture under a joint strategy.

Read the full research online

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Government Agrees to EU Military

David Banks

Wednesday, 14 June 2017

Defence

Five concerns for the UK arising from the EU Defence Union

14th June 2017

There are five main areas which the EU has been pursuing in order to establish what it calls an ‘EU Defence Union’ across the 28 EU countries, including the UK.

1. Procurement policy and incentives

2. Finance

3. Intelligence, Battlegroups and PESCO

4. UK defeat over HQ

5. Contradicting statements over UK involvement.

Since 23^rd June 2016, the UK has made commitments in each of these above areas of defence with no debate in the British Parliament. Each one is described in more detail below:

1. Procurement policy and incentives

The UK has agreed to…

More power for the EU to enforce EU-wide tendering in defence contracts
An expanding remit for the EU over defence industrial strategy and joint-built assets
An expanding remit for the EU in purchasing and conduct of joint-owned assets
Incentives for UK defence companies to engage long-term with the developing EU-wide industrial strategy

The only reason the UK is permitted to build its own aircraft carriers is by using an exemption to the EU Procurement Directive. The exemption is known as the security clause (Article 346) and is permitted when a member state feels there is a national security reason to reserve production for its domestic market. The European Commission is tightening application of the clause following a review in 2016 and has gained the consent of member states to do so.

(EU Council Conclusions, 14 November 2016)

The EDA and EU Commission have a benchmark of achieving 35% pan-EU equipment procurement.

(EDA Benchmarks)

UK ministers have approved measures that allow the European Defence Agency to have a greater role in standardisation and certification.

(EU Council conclusions in Security Defence, 18 May 2017)

These measures would amplify EU influence in the trading conditions of the defence sector and an additional tool for the enforcement of policy. For example, certification and mutual recognition of standards might be used as a barrier to entry to UK exporters in years ahead in the same way that EU ‘standards’ produce a barrier to non-EU exporters in other sectors. Conversely, certification and standards could be used as an incentive for UK manufacturers and policymakers to adhere to EU policy. Either way, the changes bring a measure of additional control to the European Commission.

The EU refers to EU defence industrial strategy as the European Defence Technology and Industrial Base (EDTIB) and has more recently started using the term ‘Single Market for Defence’. With the objective of ‘reducing duplication, the EU intends to integrate this market under coordinated joint projects and an EU-controlled policy environment. The aim is for the resulting combined EU defence industrial strategy to serve the needs of the EU’s ‘new level of ambition’ in a military context.

This above agreement on standardisation and certification is an additional method of directing the integration of the EDTIB beyond the two already mentioned previously: 1. enforcement of the pan-EU Procurement Directive and 2. financial incentives via the European Defence Fund.

The EU Commission could conceivably tell the UK after Brexit that ‘access’ to its newly coordinated ‘Single Market for Defence’ requires adherence to the Procurement Directive. Also, now that UK participation in the European Defence Fund’s imminent incentive programmes is being concluded, UK ‘withdrawal’ could be viewed by the EU as an act that warrants retaliation or requires UK concessions.

2. Finance

The UK has agreed to…

The creation of the EU's first central military budget, the European Defence Fund
The use of European Investment Bank money (16% UK shareholding) for the European Defence Fund
The creation of a Cooperative Financial Mechanism (CFM) to augment the European Defence Agency
The creation of a Coordinated Annual Review of Defence (CARD), a mechanism which sees the EU offer financial incentives for adherence to EU planning over member state defence budgets.

The European Defence Fund will begin with a budget of only a few billion euros, but this money will be dangled in front of policy makers and defence companies to steer them towards joint activity and a policy environment that is under EU authority.

Millions of euros have already been placed into an "unprecedented level of engagement" with defence companies including defence industry conferences in the UK financed by the EU Commission, which started in April (Southampton) and are continuing throughout 2017 (Bournemouth etc).

UK companies are being invited to bid for the first tranche of European Defence Fund money in June 2017, via an EU Commission / EDA programme known as PADR (Preparatory Action for Defence Research). The programme is even being promoted by the UK Defence Solutions Centre, a UK-Government-funded unit which was formed to boost output of UK defence companies.

According to the EU Commission and EEAS, the Cooperative Financial Mechanism “will strengthen the European Defence Agency” as a central EU defence capabilities tool. The mechanism appears to be separate to the European Defence Fund. It is designed to manage member states’ money in a joint budget and will be spent on EDA research projects, military units conjoined under Permanent Structured Cooperation and joint assets.

This added financial firepower for the EDA overrides many years of policy by UK ministers who argued that the EDA’s scope and budget should be restricted.

(European Defence Agency ministerial steering board, 18^th May 2017)

The UK Government has a 16% (EUR 39 billion) stake in the EIB, the same as Italy, France and Germany (the four largest shareholders). The EU Commission is changing the lending criteria of the EIB to ensure it supports the European Defence Fund. The EIB is an instrument of the EU and operates in adherence to EU policy. There has been no confirmation of whether the UK will withdraw from the EIB, but to remain a shareholder would mean a level of participation in EU policy. The EIB has placed funds into infrastructure projects in the UK including Crossrail and the Manchester Metrolink.

The UK’s consent to EIB funding for UK defence industries provides the EU with additional locks on UK participation in EU defence policy and on its EIB shareholding. These additional locks were made after the UK’s referendum on EU membership and add to the task of unravelling these links after Brexit.

3. Intelligence, Battlegroups and PESCO

The UK has agreed to…

An increased size, scope and infrastructure of the EU’s military intelligence agency as a central ‘hub’.
Participation in a 2019 EU Battlegroup under EU Council control. Approval given pre-referendum. No confirmation from MOD about whether it is cancelled or continuing.
Drop objections to Permanent Structured Cooperation (first version of permanent military unification) by willing member states. MOD will not confirm whether the UK is staying out or not.

The European External Action Service (the EU’s ‘foreign ministry’) has put forward plans to grow the role of its intelligence agency known as the Single Intelligence Analysis Capacity (SIAC). (EU Council conclusions in Security Defence, 6 March 2017 and 18 May 2017).

SIAC is composed of the EU Military Staff Intelligence Directorate and the 'civilian' EU INTCEN. The EU Council agreed to develop them as an EU "hub for strategic information, early warning and comprehensive analysis".

Member States, including the UK, have been asked to consider initiatives and ways to interact with these plans. (Security and Defence Implementation Plan, 14 November 2016).

The UK was scheduled to lead an EU Battlegroup in Jan-Jun 2019. The MOD will not state whether Britain’s participation will be cancelled or proceed.

4. UK defeat over the HQ

The UK has agreed to...

The reordering of EU agencies to include ‘permanent planning’ of EU defence missions and a ‘coordinated military command chain’.
The creation of a permanent military HQ with staff responsible for strategy and operations. It was kept as a non-executive function of the EU, but executive power over EU military developments rests with the EU Council and EU Commission.
Drop its objections to the wordings that describe the new HQ (May 2017) because previous approval in March 2017 had made later objections invalid.

The EU Council, with UK consent, has agreed to reorder the European External Action Service to "develop the necessary structures and capabilities for the permanent planning and conduct of CSDP missions and operations" with "distinct but coordinated civilian and military chains of command".

These will work under the political control, strategy and leadership of the EU Council's Political and Security Committee.

(EU Council Conclusions, 14 November 2016, with UK ministerial approval. Confirmed by EU Council heads of government conclusions, 15 December 2016)

The plans include the creation of an operational HQ, the Military Planning and Conduct Capability (MPCC). While the UK made an issue of the MPCC being prevented from having executive powers, this was a pointless fight as the executive power over the MPCC’s deployments already resides with the EU Council.

(EU Council Conclusions, 6 March 2017. Confirmed by EU Council conclusions, 18 May 2017)

5. Contradicting statements over UK involvement.

The UK has agreed to...

Participate in measures that apply to UK defence without the approval of Parliament, nor even a debate.
Participate in developing plans until at least March 2019, possibly March 2022 or even longer.
Provide the EU with several new powers over UK defence and a new bargaining chip for the EU.
Accept measures that mean a more complicated and time-consuming withdrawal process that the UK didn’t face before the first of the EU Defence Union agreements in November 2016.
Provisional statements on PESCO (Permanent Structured Cooperation) while keeping open the prospect of UK participation in PESCO and the EU Council-controlled EU Battlegroups in 2019.

Each time new agreements are made, additional hours will need to be spent on severing EU ties and controls. New agreements are currently being formed in finance, intelligence, regulation, procurement strategy, joint assets, joint missions and research. This will impact upon several departments of government.

The duration of UK involvement might be expected to be until March 2019 (the anticipated end of Britain’s membership) and possibly March 2022 (end of a three-year transition deal which requires adherence to EU policy) and potentially even longer. Until then, even adhering to new EU measures (in finance, intelligence, regulation, procurement strategy, joint assets, joint missions and research) will add complexity to the UK’s exit negotiations, potentially extending the duration of the exit process.

Not a single one of these agreements at the EU Council has ever been mentioned in the House of Commons, let alone subject to a vote by MPs. All defence agreements at the EU Council take the UK further down the road of military integration and have had an immediate effect regarding UK participation. The EU Commission immediately embarked on a dialogue with UK defence companies about incentives to participate in EU defence integration projects.

EU Council conclusions are considered by the EU commission to have been co-authored by UK diplomats. Therefore, if a minister does not raise objection during an EU Council meeting, conclusions are considered to represent a joint direction, or consent, of all member states.

The EU Commission has stated that agreements the UK enters as a member state “must be carried out in full” while the UK remains subject to the EU’s treaties.

In addition, the EU has said it is not willing to even begin to discuss UK withdrawal from EU defence arrangements until a withdrawal agreement has been settled and “all other matters” agreed, because defence is “too important to be a part of the main negotiations”. This means the UK will be obliged to adhere to these rapidly developing measures for at least two years to 2019 and there is a real possibility of the UK being tied in for an additional transition period of three years up to 2022.

The Foreign Office minister Sir Alan Duncan wrote to the European Scrutiny Committee chairman in December 2016 to inform the committee of the plans and agreements the UK was entering, as is required under UK Parliamentary protocols. Sir Alan Duncan told the committee there were parts of the Security and Defence Implementation Plan (SDIP) which his team 'liked' and no decision had yet been made over the quantum of UK involvement and for how long. This may be contrasted with the Foreign Secretary's October and November statements that the UK did not wish to prevent the EU27 from participating in agreements in which the UK had no interest itself in participating.

The European Scrutiny Committee marked Sir Alan Duncan's letter and corresponding agreements as 'politically important' to have them discussed in the relevant Parliamentary Select Committees of Foreign Affairs, Defence and Exiting the EU.

Meanwhile, the EU Commission will know it may now employ all of the UK’s recent set of agreements in defence as a bargaining chip, a threat, a delaying tactic and a deepening ‘binding agent’ to EU membership. It is conceivable that EU officials will cite the example of UK defence companies who have the promise of European Defence Fund money as a means of influencing or undermining perceptions among UK observers or negotiators in the realm of defence.

Finally, an answer we received from the MOD (19 May 2016) said that the British government had not ruled out joining PESCO in spite of its control by EU Council and CSDP:

“Decisions on UK engagement with CSDP after we leave the EU, including with initiatives such as PESCO, will be part of the wider negotiations.”

A UK Rep spokesperson had earlier (18 May 2016) told us the UK might participate in the EU Battlegroups after Brexit, which is also controlled by the EU and CSDP.

By David Banks, Veterans for Britain

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EU security and counter-terrorism control after Brexit

Robert Oulds

Monday, 05 June 2017

Defence

Dominic Grieve, the Conservative Chairman of the Commons Intelligence and Security Committee, argues that the UK must retain membership of the EU’s law enforcement agency (Europol) after Brexit, even if this means “accepting EU rules and judicial oversight for the European Court of Justice (ECJ).” This is not real Brexit and nor will it make us safer, in fact quite the reverse.

5th June 2017

Security is the new defining issue of both British and European politics. Even the United States is concerned that Europe’s problem is a danger for us all. It will also form the key issue in the Article 50 Brexit negotiations, or at least so the Government hopes. According to The Daily Telegraph, the Cabinet meeting of 7^th March 2017, which approved the strategy for PM Theresa May’s opening gambit in her soon to be sent Article 50 letter mentioned security no less than 11 times.

This was seen as using ‘blackmail’ and ‘threats’ and taking advantage of the fear of Russia. The governments thinking is that security is the ‘defining issue for the EU.’ And that the government believes that this issue gives Britain a ‘very strong hand’ in its forthcoming negotiations with Brussels.[i] It is surprising that a Conservative Government would see benefits in the fact that the EU’s eastern frontier is unstable and, in the view of some, vulnerable to Russian aggression.

Theresa May has not been alone in taking a robust approach to the EU and playing the security card. The Home Secretary, Amber Rudd, has said that the UK could stop co-operation with Europol. Perhaps the British government may even come out of the European Arrest Warrant… but that may be too much to hope for.

The flip side of the Government’s perceived threats not to participate in security measurers, if no trade deal is forthcoming, is that if the EU does acquiesce to Britain’s demands then the UK will support and participate in Brussels ambitions in this area.

The benefit of the European Arrest Warrant and EU led police, judicial and intelligence cooperation is itself highly questionable. There are other ways with which a post-Brexit UK can still cooperate with other nations, and attempt to keep its citizens safe. Click here to read a recent article which details how this can be achieved.

There is a presumption that intelligence and data sharing via the EU is a good thing. This is not necessarily so. Compelling the UK to share information breaches the cardinal rule of intelligence, control over that information. Indeed, the US intelligence agencies drew the ire of the British government after they leaked information on the Manchester terror attack. The BBC reported that police stopped passing America information on the Manchester attack.[ii] Yet, even bigger issues are at stake. The effectiveness of how best to protect people is at stake and the independence of our security services from Brussels.

Dominic Grieve, the Conservative Chairman of the Commons Intelligence and Security Committee, argues that the UK must retain Europol membership after Brexit, even if this means “accepting EU rules and judicial oversight for the European Court of Justice (ECJ)”.[iii] In these times, the European Union is being touted by some unformed remainers as an answer to Europe’s terror threat.

In the referendum, they warned that Brexit will mean that the UK will be outside of Europol. This would not be a bad scenario as its officers are ‘immune from legal proceedings in respect of acts performed by them in their official capacity’. Yet, the Director of Europol, Rob Wainwright, recently stated that a post-Brexit UK can indeed still cooperate with the EU’s law enforcement agency. So, the arguments used by Remain in the referendum were clearly false. Yet, is the EU and coordination of security the answer to our safety? Some would argue that it has exacerbated the terrorist problem we now face.

EU Freedom of Movement was described by Ron Noble, the Head of Interpol, as “like hanging a sign welcoming terrorists to Europe.”[iv] He is not alone in his criticism. Sir Richard Dearlove, the former head of MI6, stated that Brexit is a security gain as it will allow us to have "greater control over immigration from the European Union."[v] Indeed EU Directive 2004/38 stipulates that an immigrants criminal record is not grounds to refuse entry to the UK.

Sir Richard’s assessment of EU security agencies is that "...though the UK participates in various European and Brussels-based security bodies, they are of little consequence." Ultimately his assessment is that these bodies have no operational capacity and are mainly forums for the exchange of ideas.

Just because these bodies are ineffectual is not the only problem. The even more significant issue is that EU led intelligence will detract from Britain’s participation in global bodies such as the ‘Five Eyes’ Intelligence-sharing partnership.[vi]

Another layer of EU bureaucracy taking over intelligence is no substitute for effective national control. Yet this emerging bureaucracy, indeed it has several new tiers, is exactly what Brussels is putting into place. And perhaps even keeping a post-Brexit UK tied into their structure. The EU has created Eurojust, the European Union's Judicial Cooperation Unit, and in 2010, as a part of Europol, they established in 2010 the European Cybercrime Task Force (EUCTF).

Charles Michel, the Prime Minister of Belgium has called for “A European CIA (Central Intelligence Agency).” This is just the beginning the European Commissioner for Migration and Home Affairs, Dimitris Avramopoulos, also called for a pan-European spy agency.[vii] The President of the European Commission is also in favour of the EU coordinating member states secret services.[viii]

What is not realised by many is that these plans are already underway. The EU Intelligence and Situation Centre (EU INTCEN) came into being in 2011 and is the intelligence body of the European Union. It operates under the European External Action Service (EEAS). Along with the European Union Military Staff (EUMS) which handles military intelligence, EU INTCEN is part of the EU’s Single Intelligence Analysis Capacity (SIAC). These bodies are not effective.

Richard Walton, Head of Counter Terrorism Command at New Scotland Yard from 2011-15, is adamant that Britain’s counter-terrorism capability will not be harmed by Brexit.[ix]

Sir Richard Dearlove dismissed the relevance of Brussels security bodies such as Europol, stating they were “of little consequence”. In fact, they are worse, as the fear of leaks is ever present. According to Sir Richard Dearlove British information is not shared throughout the EU as its members are potentially a “colander” for intelligence.[x]

The EU does not have a great track record on security. The EU’s Focal Point Travellers initiative, which seeks to coordinate investigations into foreign terrorist fighters in Europe from places such as Syria and Iraq only has information on 2,000 suspects which is less than half the foreign fighters known to individual EU member-states security services. And of course, this is just a fraction of both the number of people who have recently arrived in Europe from the middle-east and those homegrown people that sympathise with the jihadis. There is an intelligence black hole at the heart of Europe Union.[xi] Europol’s European Counter Terrorism Centre is not making us any safer.

Currently the dead hand of the European Union has been of little benefit tackling the problems that emerge out of places such as Molenbeek, Malmö and the suburbs of Paris, and clearly in the UK as well. Our safety cannot be outsourced to the EU as the likes of Dominic Grieve suggest. Nor is there the need. The UK is an intelligence leader and does not need the control of the European Union. Other states will, and do, want to share intelligence with Britain.

Britain’s intelligence services, along with our armed forces, are areas where we have an important resource which the EU is seeking to co-opt. Brussels is not stopping at the EU developing an intelligence arm. It is also building its military capacity, to back up its foreign policy[xii] and no doubt to establish its power at home and abroad. The plans are already underway.[xiii]

In the Brexit negations, which start on 19^th June, the British Government must stand firm against EU attempts to take a measure of control over our excellent military and intelligence resources, and certainly not offer them up as part as some deep and special arrangement with Brussels. We can cooperate with global bodies and individual nations, but more EU bureaucracy in this important area is an unwelcome distraction.

[i] http://www.telegraph.co.uk/news/2017/04/01/revealed-cabinet-plotted-exploit-eus-defence-fears/

[ii] http://www.bbc.co.uk/news/uk-politics-40040210

[iii] https://www.theguardian.com/politics/2017/may/27/eu-theresa-may-combat-terror-brexit-europol

[iv] https://www.nytimes.com/2015/11/19/opinion/europes-welcome-sign-to-terrorists.html?_r=0

[v] http://uk.reuters.com/article/uk-britain-eu-security-idUKKCN0WQ0NE

[vi] http://www.pbs.org/newshour/rundown/an-exclusive-club-the-five-countries-that-dont-spy-on-each-other/

[vii] http://www.euronews.com/2015/11/30/belgium-s-pm-michel-calls-for-a-european-cia

[viii] http://www.euractiv.com/section/global-europe/news/juncker-warms-to-the-idea-of-an-eu-intelligence-agency/

[ix] https://www.thesun.co.uk/news/3676254/former-counter-terror-chief-says-britains-security-wont-be-harmed-by-brexit-because-of-our-spooks-global-reach/

[x] http://www.telegraph.co.uk/news/2016/03/24/quitting-the-eu-would-help-our-security-former-mi6-chief-suggest/

[xi] http://www.politico.eu/article/europes-intelligence-black-hole-europol-fbi-cia-paris-counter-terrorism/

[xii] http://www.bbc.co.uk/news/world-europe-31796337

[xiii] http://www.consilium.europa.eu/en/infographics/eu-global-strategy/

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The deals that may be worse than no deal

Robert Oulds

Friday, 02 June 2017

Renegotiation

How a compromise agreement may keep Britain subject to aspects of the EU.

2nd June 2017

Introduction

Here we answer your questions on the Article 50 UK/EU Withdrawal Agreement.

- Would it be one big treaty with lots of articles, so one cannot repudiate one article without denouncing the whole treaty?

Article 50 of the Treaty on European Union (TEU), which was introduced by the Treaty of Lisbon (and came into effect with the rest of that Treaty on 1^st December 2009), provides that the EU and the departing Member State are to enter into an agreement governing withdrawal. However, the Article does not specify very much about the content of the agreement. It is thus possible to conceive of minimalist and maximalist approaches to the content of the agreement. Article 50 TEU states:

2. A Member State which decides to withdraw shall notify the European Council of its intention. In the light of the guidelines provided by the European Council, the Union shall negotiate and conclude an agreement with that State, setting out the arrangements for its withdrawal, taking account of the framework for its future relationship with the Union. That agreement shall be negotiated in accordance with Article 218(3) of the Treaty on the Functioning of the European Union. It shall be concluded on behalf of the Union by the Council, acting by a qualified majority, after obtaining the consent of the European Parliament.

The wording of Article 50 refers to ‘taking into account the framework’, this is all it says prescribing the content of the withdrawal agreement. Understood textually, this seems to indicate that the withdrawal agreement should set out or at least reflect a general framework of future relations. This seems to indicate the agreement could tend toward a minimalist approach, setting out certain fundamental features of the future relationship, but not necessarily addressing the detail.

The closest precedent in the context of the EU is the secession of Greenland and their subsequent withdrawal in the 1980s from the then European Economic Community (EEC). The resulting agreement between the then EEC (now the EU) and Greenland was quite short, just setting out some basic principles. The EEC/EU later into entered into separate agreements in specific areas with Greenland, mainly to do with fisheries. This practice is consistent with the wording of Article 50 TEU and may well have informed it.

- Or can we have a series of different agreements, perhaps separate treaties on specific areas or a Memorandum of Understanding(s)?

As discussed above, this option seems open. A main advantage of this option would be that it could help localise disputes in future between the EU and UK, in case a comprehensive treaty would lead to a situation where a dispute between the UK and EU could be used to cast doubt over the continuing validity of the entire Treaty, which could introduce uncertainty into future UK-EU relations.

Any such withdrawal agreement would be subject to the general rules of public international law on treaties. In international law, a dispute about one term or part of a treaty does not generally invalidate or suspend the entire treaty. Normally, in international law, when a State or organisation violates a treaty obligation, the victim state can respond in a proportionate way by suspending its own adherence to relevant obligations (under the law of counter measures and reprisals). There are relatively well established grounds for legitimate repudiation or suspension of the entire treaty, which are quite narrow (they are set out in the Vienna Convention on the Law of Treaties 1969 or ‘VCLT’). However, treaties can provide for this issue by specifying that breach of one provision does not justify repudiation of the entire treaty (see Article 44 of the VCLT). It would be advisable for the UK to specifically deal with this issue in the text of the withdrawal agreement, whether or not the agreement is meant to be comprehensive or just to set a framework for relations between the UK and EU.

An important related issue here is the dispute settlement procedure that the withdrawal agreement would adopt. The comments just made in the previous paragraph (about repudiation/suspension and countermeasures/reprisals) relate to the normal or default rules of international law, but the withdrawal agreement could substitute its own dispute settlement procedure (just in the way the EU Treaties establish their own dispute settlement procedures, chiefly by giving a key role to the Court of Justice). If the UK wants to maximise its influence over the future dispute settlement procedure, it should ensure that the Court of Justice of the EU is not given jurisdiction over future disputes about the withdrawal agreement. The agreement between the EU and New Zealand contains the following dispute settlement clause, which could be a model or precedent for the withdrawal agreement:

Article 54

Modalities for implementation and dispute settlement

1. The Parties shall take any general or specific measures required to fulfil their obligations under this Agreement.

2. Without prejudice to the procedure described in paragraphs 3 to 8 of this Article, any dispute relating to the interpretation or application of this Agreement shall be resolved exclusively through consultations between the Parties within the Joint Committee. The Parties shall present the relevant information required for a thorough examination of the matter to the Joint Committee, with a view to resolving the dispute.

3. Reaffirming their strong and shared commitment to human rights and non-proliferation, the Parties agree that if either Party considers that the other Party has committed a particularly serious and substantial violation of any of the obligations described in Articles 2(1) and 8(1) as essential elements, which threatens international peace and security so as to require an immediate reaction, it shall immediately notify the other Party of this fact and the appropriate measure (s) it intends to take under this Agreement. The notifying Party shall advise the Joint Committee of the need to hold urgent consultations on the matter.

4. In addition, the particularly serious and substantial violation of the essential elements could serve as grounds for appropriate measures under the common institutional framework as referred to in Article 52(1).

5. The Joint Committee shall be a forum for dialogue and the Parties shall do their utmost to find an amicable solution in the unlikely event that a situation as described in paragraph 3 would arise. Where the Joint Committee is unable to reach a mutually acceptable solution within 15 days from the commencement of consultations, and no later than 30 days from the date of the notification described in paragraph 3, the matter shall be referred for consultations at the ministerial level, which shall be held for a further period of up to 15 days.

6. If no mutually acceptable solution has been found within 15 days from the commencement of consultations at the ministerial level, and no later than 45 days from the date of notification, the notifying Party may decide to take the appropriate measures notified in accordance with paragraph 3. In the Union, the decision to suspend would entail unanimity. In New Zealand, the decision to suspend would be taken by the Government of New Zealand in accordance with its laws and regulations.

From the internal perspective of EU law, Article 344 of the Treaty on the Functioning of the European Union might cause a problem. It states that “Member States undertake not to submit a dispute concerning the interpretation or application of the Treaties to any method of settlement other than those provided for therein.” This has bene interpreted extensively by the Court of Justice in its caselaw, and it cannot be excluded that the Court of Justice would decide, irrespective of the text of the future EU-UK withdrawal agreement, that it (i.e. the Court of Justice) should decide any disputes between the EU and UK over the withdrawal agreement. This would be very strained conclusion, but it is certainly possible in light of the overall approach of the Court to legal reasoning. Although the UK would no longer be a Member State at that point, the Court of Justice could not impose its judgment, but it would be a complicating factor for UK-EU relations.

- Can this be done via the Withdrawal Agreement which should follow the Article 50 negotiations?

It seems it could be done by having a general withdrawal agreement and then separate agreements regarding particular policy areas.

- Or can it be done via the EU itself under its legal personality, or requiring the of all member states national Parliaments, and perhaps even referenda in some EU members?

Article 50 TEU sets out the procedure for the withdrawal agreement. If separate agreements were to be adopted in specific policy areas, it would depend on the decision-making procedure in that area of the Treaty. It is up to each Member State to decide how its positon at EU level is to be determined first at national level. Where unanimity amongst the Member States applies in the Council (of Ministers) (which it generally doesn’t since the Treaty of Lisbon), the EU in its decision-making is to a certain extent hostage to the idiosyncrasies of national procedures (e.g. if Belgium required the consent of the Walloon Parliament or one of the other two regional Parliaments).

Links:

Database of EU bilateral agreements with other countries:

http://ec.europa.eu/world/agreements/searchByType.do?id=1

By Gerard Conway

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Co-operation after Brexit in the spheres of Justice and crime prevention

Robert Oulds

Tuesday, 30 May 2017

Defence

The UK should not seek full Europol membership or participation in the flawed European Arrest Warrant scheme.

30th May 2017

Introduction

One unavoidable fact about the modern world is that criminal gangs and terrorist groups work across national borders.

A concern raised during the EU referendum campaign was that if the UK left the European Union, the UK would not be able to co-operate with other countries and their police forces in these vital areas.

In the wake of the recent terrorist attack in Manchester, it has been claimed by figures such as Dominic Grieve, the Tory chair of the Commons intelligence and security committee; that the UK must retain EUROPOL membership after Brexit, even if this means “accepting EU rules and judicial oversight for the European Court of Justice (ECJ)”.[1] While Sir Hugh Orde, former chief constable of the police service of Northern Ireland has stated that:

“If we don’t have all this, it makes it a lot more difficult to do this crucial work. It is vital that we get to a situation as close to what we have as members of the EU as possible, though it is difficult to see how we do that.”

In this report we will explain how co-operation will indeed continue after Brexit without the need for Europol membership.

Key bodies

The UK has a long record of working internationally with other nations in the fields of Justice and Crime prevention; via the relevant global and regional bodies. In addition, the UK works with other NATO members to detect and prevent terrorist activity.[2]

keybodies

The UK is currently a member of/signatory to:

The International Criminal Police Organization (ICPO)/INTERPOL[3]
International Criminal Court (ICC or ICCt)/Rome Statute[4]
United Nations Office on Drugs and Crime (UNODC)[5]
World Customs Organization (WCO)[6]
Organization for Security and Co-operation in Europe (OSCE)[7]
EUROPOL The European Police Office[8]

The UK is also a member of the:

Commission on Narcotic Drugs[9] and:
The Commission on Crime Prevention and Criminal Justice (CCPCJ)[10], both of which are subsidiary Bodies of the United Nations Economic and Social Council (ECOSOC).

Also, the UK is affiliated with the NGO ‘The International Center for the Prevention of Crime’ (ICPC).[11]

Finally, the UK participates in The Council of Europe’s Committee of Experts on the Operation of European Conventions on Co-operation in Criminal Matters (PC-OC).[12]

Of these bodies, clearly the most important is Interpol. Originally established as the International Criminal Police Commission (ICPC) in 1923 it now has 190 member countries[13] and branches in all corners of the globe.

Interpol has huge databases containing millions of criminal records which member states can access 24 hours a day via a system called I-24/7.[14]

To quote their website:

“I-24/7 is the network that enables investigators to access INTERPOL's range of criminal databases. Authorized users can search and cross-check data in a matter of seconds, with direct access to databases on suspected criminals or wanted persons, stolen and lost travel documents, stolen motor vehicles, fingerprints, DNA profiles, stolen administrative documents and stolen works of art. I-24/7 is the foundation of information exchange between the world's police.”

europolmap

In addition to all the bodies already mentioned, the UK is also a member of the ‘Five Eyes’ Intelligence-sharing partnership.[15]

fiveeyes

Co-operation between bodies

The bodies we have mentioned already are connected to each other via a bewilderingly complex web of agreements and partnerships.

Interpol signed a Memorandum of Understanding with Europol in 2011[16] in order to “establish and maintain co-operation between the Parties in combating serious forms of organised international crime…In particular, this will be achieved through the exchange of operational, strategic, and technical information, the co-ordination of activities”[17]

Europol has signed a Co-operation Agreement with the United Nations Office on Drugs and Crime (UNODC) in order “to facilitate co-operation between UNODC and Europol in combating serious forms of crime”[18]

Similarly, Europol has also signed a Co-operation Agreement with the WCO.[19]

Likewise, Interpol has signed an ‘Arrangement on co-operation’ with the UNODC[20] and has signed various agreements with the International Civil Aviation Organization (ICAO), World Customs Organization (WCO), Organization for the Security and Co-operation in Europe (OSCE) and the American Federal Bureau of Investigation (FBI).[21]

OSCE

The Organization for Security and Co-operation in Europe has 57 participating States[22] including all current EU member states[23]. OSCE dedicates much of its efforts into terrorism prevention.

osce

As the OSCE website states:

“The OSCE promotes a co-operative and co-ordinated approach to countering terrorism at all levels, including co-ordination among national authorities, co-operation among states, co-operation with relevant international and regional organizations.”[24]

EUROPOL

Amber Rudd, the Home Secretary has said that: “Europol has played an important role in keeping us safe and we will be having discussions about how to continue some form of involvement within the agencies of the EU that help to keep us safe.”[25]

This does not necessarily mean however; that the UK should seek to continue as a full member of EUROPOL after Brexit.

europol

Several non-EU countries have signed agreements with EUROPOL and so the UK could likely do the same. Examples include the USA, Switzerland, Norway and Canada.

As the EUROPOL website states:

“In general, there are two types of cooperation agreement that Europol can enter into with states and other entities outside the EU: strategic and operational agreements…both types of agreement are aimed at enhancing cooperation between Europol and the country concerned”[26]

At any rate, the importance of Europol is exaggerated. Formed in 1998 it is a relatively young organisation that relies heavily on UK involvement and expertise.

According to media reports:

“Britain is the largest contributor to Europol, sending 35,000 messages last year, and the UK leads the way in Europe in clamping down on cross-border child sexual exploitation and money laundering.

Around 40 per cent of all Europol cases have some kind of UK involvement.”[27]

Conclusions

The EU’s member states are in fact obligated to work with the UK on Transnational Organized Crime as they are signatories to the United Nations Convention Against Transnational Organized Crime (agreed in 2000).[28]

[Interestingly, under Article 103 of the UN charter, in the event of a conflict between the obligations of the Members of the United Nations under the Charter (and by implication, UN Conventions and protocols) and their obligations under any other international agreement, their obligations under the UN take greater precedence.]

The UK is signed up to the world’s pre-eminent crime fighting organisations already. Given the very real threat of terrorism, the EU will seek a new reciprocal bilateral solution with the UK in order to ensure maximum co-operation.

The UK should not seek full Europol membership or participation in the flawed European Arrest Warrant scheme. Instead it should sign a co-operation Agreement with Europol and then either sign a bilateral extradition treaty with the EU or investigate whether we could fall back on the pre-existing European Convention on Extradition (ECE).[29]

Co-operation with the EU’s member states on crime and terrorism prevention will continue largely as it does at present – but there may be a small shift in focus and emphasis from co-operating via EUROPOL to co-operating via INTERPOL and the OSCE.

[1] https://www.theguardian.com/politics/2017/may/27/eu-theresa-may-combat-terror-brexit-europol

[2] http://www.nato.int/cps/en/natohq/topics_77646.htm

[3] https://www.interpol.int/Member-countries/Europe/United-Kingdom

[4] https://asp.icc-cpi.int/en_menus/asp/states%20parties/western%20european%20and%20other%20states/Pages/united%20kingdom.aspx

[5] https://www.unodc.org/

[6] http://www.wcoomd.org/en/about-us/wco-members/membership.aspx

[7] http://www.osce.org/participating-states

[8] https://www.europol.europa.eu/partners-agreements/member-states/united-kingdom

[9] https://www.unodc.org/unodc/en/commissions/CND/index.html

[10] http://www.unodc.org/unodc/commissions/CCPCJ/

[11] https://www.unodc.org/unodc/en/commissions/CCPCJ/PNI/institutes-ICPC.html

[12] http://www.coe.int/en/web/transnational-criminal-justice-pcoc

[13] https://www.interpol.int/Member-countries/World

[14] https://www.interpol.int/INTERPOL-expertise/Data-exchange/I-24-7

[15] http://www.pbs.org/newshour/rundown/an-exclusive-club-the-five-countries-that-dont-spy-on-each-other/

[16] https://www.europol.europa.eu/newsroom/news/interpol-and-europol-agree-joint-initiatives-to-enhance-global-response-against-transnational-crime

[17] https://www.europol.europa.eu/sites/default/files/documents/agreement_between_Interpol_and_Europol.pdf

[18] https://www.europol.europa.eu/partners-agreements/other-agreements

[19] https://www.europol.europa.eu/partners-agreements/other-agreements

[20] https://www.interpol.int/About-INTERPOL/Legal-materials/International-Cooperation-Agreements

[21] https://www.interpol.int/About-INTERPOL/Legal-materials/International-Cooperation-Agreements/National-Institutions

[22] http://www.osce.org/participating-states

[23] http://www.osce.org/partnerships/european-union

[24] http://www.osce.org/countering-terrorism

[25] http://www.express.co.uk/news/uk/709745/What-is-Europol-Will-UK-sign-up-EU-police-after-Brexit-european-union-leave

[26] https://www.europol.europa.eu/partners-agreements

[27] http://www.express.co.uk/news/uk/775300/Brexit-terror-border-control-security-Europol-Interpol-European-Union-Tim-Loughton

[28] https://www.unodc.org/unodc/treaties/CTOC/#Fulltext

[29] http://www.coe.int/en/web/conventions/full-list/-/conventions/rms/0900001680064587

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Norwegians reject the 'Norway option'

Hjörtur J. Guðmundsson

Wednesday, 03 May 2017

European Union Alternatives to the EU

More Norwegians want to see a bilateral comprehensive free trade agreement with the EU replacing Norway's membership of the European Economic Area (EEA) than those who want to hold onto the country's EEA membership according to a new opinion poll. The poll was produced last week by the polling company Sentio for the Norwegian organisation Nei til E...

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Can Brexit be a success?

Hjörtur J. Guðmundsson

Tuesday, 02 May 2017

European Union

Reportedly the President of the European Commission, Jean-Claude Juncker, says Britain leaving the European Union cannot be a success. Well, that is quite understandable from the EU's point of view. After all Brussels' idea of a success is not entirely the same as what most Britons have in mind. The most successful outcome of the Brexit talks ahead...

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Scotland, Separation and the Brexit Question

David Roach

Sunday, 23 April 2017

Democracy

The SNP has abandoned ‘True Independence’ and Sturgeon is forcing Scotland to choose between a more powerful Scotland inside a Federal UK, or a less powerful one inside the EU and most likely the Eurozone.

David Roach

23rd April 2017

I remember the SNP’s 2015 manifesto commitment very clearly: the more seats they won in Westminster, the more powers they would get back for Scotland. It was not their most original manifesto commitment, but it was consistent with the main theme of Scottish politics for the past few decades: that devolution should bring power closer to the people of Scotland.

It is not an idea which most of us who support devolution tend to argue with, nor was it the majority of Scottish voters who, on 7 May 2015, returned 56 SNP candidates out of a possible 59 to the House of Commons.

It puzzles me therefore, in this Brexit age, why Nicola Sturgeon was so counterintuitively against the United Kingdom leaving the European Union in the referendum last year, and why she is fighting so hard for Scotland to secure a bespoke deal on membership of the EU’s Single Market.

Of course, the First Minister is trying to manufacture a pretext for a second referendum in Scotland. Forget that for a moment: Nicola Sturgeon is playing political games. She has a ‘Party management issue’ following the influx of die-hard nationalists who swelled the SNP’s membership figures after their referendum defeat in 2014. Also, forget (but only for a minute) that since occupying Bute House the SNP has sought to find differences with England wherever there aren’t any; it's all part of the drive towards so called ‘independence’.

I always imagined that the First Minister after a Leave victory would have been “champing at the bit” to empower her own office and Scotland. After all, she has a manifesto commitment to keep… Alas, no.

Constitutional observers will have noticed in recent years how the SNP has instead empowered the Scottish Government by centralising almost everything – from policing to planning for wind turbine projects – away from local government and into the hands of Edinburgh. Their attack on localism is an idiosyncrasy I fail to understand given their commitment to bring power “closer to The People”. But equally difficult to understand is the SNP administration’s shunning of the opportune moment that Brexit presents to “grab” yet more power.

Perhaps Nicola Sturgeon genuinely believes she can win the second referendum on so-called ‘independence’, despite recent opinion polls consistently showing Scotland would vote to stay part of the United Kingdom. Indeed, the Leader of the Scottish Conservatives Ruth Davidson, in a recent interview in The Daily Telegraph’s Scottish edition, warned the SNP that they would lose a rerun of the 2014 vote by an “even larger margin”.

Yet, despite a recent opinion poll by BMG Research showing that only one in four Scots want a second independence referendum before Brexit talks are complete, the Scottish Parliament voted through a request for a Section 30 order from Westminster, giving the Scottish Government the power to hold a legally-binding referendum on so-called ‘independence’ between the Autumn of 2018 and Spring of 2019.

Theresa May is adamant that there won’t be a second referendum… at least not until after the Brexit negotiations have been completed, and the United Kingdom has left the European Union… So another referendum could still yet take place at some point in the future.

For the sake of this paper, let’s imagine Nicola Sturgeon eventually gets her way, and the UK Government grants the Scottish Parliament’s request for a Section 30 order. What would a second referendum look like?

Timing is everything… And so is the question…

Regardless of your views on ‘independence’, it must surely be fair to both sides of the argument, and most importantly to the Scottish people, that voters be able to make their choice at the ballot box based on full knowledge of how Brexit will work.

As First Minister Alex Salmond was more or less allowed to dictate the terms of the first referendum on Scottish ‘independence’ which was set out in the Edinburgh Agreement of 2012.

I recognise that the Agreement was signed at a time when the SNP had a majority in the Scottish Parliament so it must have been hard for the then Prime Minister David Cameron to reject the Nationalists’ mandate to hold a referendum following the Scottish Parliamentary elections in May 2011. Two crucial things however did disadvantage the Unionist cause.

The first was effectively allowing Alex Salmond to hold a two-year referendum campaign which gave him the time he needed to build support for a Yes vote; a calculation which almost paid off.

The current occupier of Bute House is presumably pushing so hard for a second referendum now because she hopes to benefit from a similar time advantage. Sturgeon has an enthusiastic base of core supporters left over from three years ago, and she no doubt wants to put them to good use instead of waiting, possibly beyond 2020, for her second bite at the cherry.

This time the Nationalist calculation is that a snap poll in the middle of what will of course be challenging Brexit negotiations can exploit apparent ‘uncertainty’ and deliver them victory – before Scotland is ‘dragged out’ of the European Union ‘against her will’.

The UK Government’s position is therefore right. It not only takes away the initiative of the SNP to ‘gerrymander’ the timing in their favour, but it also ensures that any second referendum in Scotland is based on fairness and experience of an independent United Kingdom after Brexit.

The second crucial thing was the question; ‘Should Scotland be an independent country?’ The very word ‘independence’ has a positive and proactive meaning which handed the argument to the Nationalists.

Objectively, few of us would ever choose to be ‘dependent’, and yet as you will read later, it was completely disingenuous for the Yes campaign to argue in the positive that Scotland would have been ‘liberated’ or ‘emancipated’ when ‘true independence’ was never actually on offer.

Undoubtedly, the question handed Nationalists the advantage. Voters were given a binary choice between another Nationalist positive, and a Unionist negative: ‘Yes’ and ‘No’. It was a loaded question, which is exposed as such when compared with the process undertaken to compose the question for the EU referendum.

After much debate, and representations from all sides, the UK’s Electoral Commission ruled that a simple ‘Yes’ or ‘No’ vote would not be fair, nor indeed suffice, in a complex and multifaceted debate on whether we should ‘remain’ or ‘leave’ the European Union. In the end, they came up with a neutral, unemotional question which handed neither ‘Leave’ nor ‘Remain’ the advantage.

And so it must surely be right that if Scotland does hold a second crucial referendum on our constitution, the UK Electoral Commission be handed the responsibility again of writing the question.

The situation is now different from that in 2011: the SNP has no mandate to pursue another referendum, nor a majority in Holyrood. This time, Downing Street is just as entitled to have a say on the timing and question as Bute House.

The UK Government should make it clear that Scottish voters have a right to experience life in a truly independent United Kingdom, both the pros and cons of life after Brexit.

If there is to be a second Scottish referendum, it should only be held two or three years after the United Kingdom has left the European Union. And only then!

But whatever decision the Scottish people make in that ballot, the choices before them will be much more nuanced than last time.

The choices before the Scottish people

At this point it is important to clarify what the SNP mean by ‘independence’. Cast your mind back to the Scottish Government White Paper in 2014 and you will remember that they proposed a formal currency union with the rest of the United Kingdom in the event of a ‘Yes’ vote.

This was soon rejected by the then UK Chancellor George Osborne, forcing the Scottish Government to propose the ‘Sterlingisation’ option which meant unilateral use of the Pound, but with the disadvantage that Scotland would have no control over monetary policy, nor have a Central Bank which could act as a lender of last resort.

In short, what the Yes campaign proposed on the ballot paper was separation, with dependency on the impulses of a foreign power Scotland would have spurned.

Scotland would have been unable to set interest rates, print money, or devalue. Ceding the fundamental levers of power which shape your economy does not allow you to claim true independence.

‘True Independence’, the preferred option of ‘more committed’ Nationalists who make up a significant tranche of the SNP's grassroots, means full fiscal and monetary autonomy; a Scottish currency with its own central bank and interest rate; and the ability to levy taxes and borrow money.

A ‘True Independence’ supporter resists membership of global institutions such as the European Union, some even NATO, and demands a Scottish Armed Forces made up of whatever the UK Government agrees to share with Scotland once she has left the Union. For them her own territorial waters, including the much-discussed North Sea oil and fishing, a land border with the UK and her own immigration policy, are an important part of reclaiming Scottish sovereignty.

Without EU membership, a ‘truly independent’ Scotland would of course not be part of the EU’s Single Market to which she exports £12.3bn of goods and services, but free from the rulings of the European Court of Justice. Perhaps more crucially in financial terms, she would no longer be a ‘member’ of the UK's ‘Single Market’ where her exports are worth £49.8bn.

The path to ‘true independence’ is rocky, and the SNP know this!

It is why when a Currency Union and then Sterlingisation was rejected by the UK Government in 2014, they announced that the latter would be a transition currency. But a transition to what? Official SNP policy up until the 2008 Financial Crash had always been for an ‘independent’ Scotland to join the Euro.

The SNP has rather bashfully always put great faith in the idea that the best path to ‘freedom’ is to separate Scotland from the UK and join a Federal United States of Europe. Its belief has always been that the rights of its citizens, security and economic future can be protected inside a Federal Europe, but you could be forgiven for not knowing this. It's not a policy they advertise with any great enthusiasm.

In fact, since the then First Minister Alex Salmond was forced to drop his much-vaunted idea of an ‘Arc of Prosperity’ (the proposed economic and trading alliance between Ireland, Iceland and Norway), and then subsequently drop formal plans to adopt the Euro, the SNPs silence has been deafening.

Before a second referendum takes place in Scotland, the SNP will need to come clean. If ‘True Independence’ is left off the ballot paper again, then they need to be clear what exactly it is they will be asking the Scottish People to vote for.

To me the choice they want to offer Scots is becoming more and more apparent:

- Separation from the UK and dependency on the EU

A second Scottish referendum could end up being a hybrid plebiscite, not so much debating ‘independence’, but answering a refined Brexit question. And that is no bad thing for Unionists.

Assuming the Scottish Government were successful, and Spain did not veto their membership, re-entering the EU would mean adopting the Euro – taking the SNP back full circle to 2008; a more honest time for manifesto promises.

There is no avoiding the fact that Scotland would have formally to adopt the currency. Scotland would be forced to inherit the European Central Bank’s interest rate, and a monetary policy geared towards maintaining the success of the German economy. Much like Greece, Scottish jobs and inflation would be secondary concerns.

But all this assumes that Scotland could meet the convergence criteria of a less than 60% debt to GDP ratio, and reducing the deficit to GDP ratio below 3%. Such a feat is likely to take the Scottish Government years. According to the TaxPayers’ Alliance in 2015/16 Scotland had a deficit to GDP ratio of 9.5% – the highest in the EU, twice that of the UK, and even higher than that of Greece. Scotland under the SNP is some way off meeting these targets.

If the timetable remains on track, in two years the United Kingdom will leave the Common Fisheries Policy and Common Agricultural Policy, both of which have caused significant damage to Scotland’s fishing and farming communities. It is clear from reading the Scotland Act that competency over rural affairs and fishing, not to mention the environment, business regulation, and transport, rests with the Scottish Parliament.

There can be no doubt that powers and responsibilities returning from Brussels in these areas are going straight to Scotland. The UK Government is committed to this aim, and I am encouraged that it is right, and will happen.

Having already created the most powerful devolved Parliament in the world, Brexit is going to make the Scottish Parliament even more powerful.

It seems extraordinary therefore that a Party which said in its manifesto, and has argued for decades, that it wants more powers for Scotland, is now committed to giving them away. At a time when the SNP could empower the Scottish Parliament, they are preparing the ground for a referendum which would see them giving newly returned powers back to Brussels. It is a bizarre paradox.

Make no mistake, ‘independence’ would not be on the ballot paper. A vote for the SNP’s interpretation of ‘independence’ would be a vote to make Scotland less powerful. Scotland would be anything but an ‘independent nation’, but instead a small separated one with hardly any voice inside the EU and Single Market, while losing access to the UK’s Single Market and the trade deals which the UK is seeking to sign with the more prosperous parts of the world.

It is why, following the EU referendum in which pro Leave SNP MPs and MSPs were allegedly ‘gagged’, Eurosceptic Nationalists are finding their voice. The SNP’s former Deputy Leader Jim Sillars has said he would not vote for so-called ‘independence’ in a second Scottish referendum if it meant re-joining the EU after Brexit. In a recent interview with The Herald newspaper he said he would abstain and believed many SNP supporters would follow suit:

“I do not want to be run by an unelected, self-serving elite… I, for example, could not vote Yes if on the ballot paper it said, ‘We wish the Scottish state to be a member of the European Union’, and I’m not alone in that… One of the biggest miscalculations by Nicola Sturgeon is to believe that the 1.6m Scots who voted Remain would automatically then vote to go back into the European Union… That means Ruth Davidson, the leader of the Tory party, and all the Tories who voted to Remain, would in fact vote to leave the United Kingdom and take a Scottish state into the European Union. I think that’s fantasy.”

Jim Sillars is not alone. Survation estimates that 34.9% of surveyed voters who backed the SNP in last year’s Holyrood elections voted to leave the EU in the UK-wide referendum, presenting Sturgeon with a difficult conundrum.

As a Leaver, I share Jim Sillars sentiments towards the EU, and as a Unionist I part company with him over ‘independence’. But as someone who fought hard in 2014 to preserve our precious 300-year-old Union I believe the UK Government must do all it can to find a new settlement that Scotland and the Scottish people can be comfortable with; a settlement that has broad support, and longevity.

This is where the second option on the ballot paper can play a significant part in answering the Brexit Question.

- Staying in an independent Federal UK

This second option should be an invitation to Scottish voters to empower their Parliament through Brexit. Scotland is a divided country so this invitation needs to be open to both Nationalists and Unionists alike. With 45% of voters demonstrating very clearly in 2014 that they are not content with the status quo, it will be hard in the future to maintain the Union without reforming the way that it works for all its people.

The second option needs to say that if it is independence you crave then look no further than the United Kingdom which, having invoked Article 50 on 29^th March 2017, is well on the path to regaining hers, and is committed to sharing sovereignty among the family of nations.

The UK constitution has undergone dramatic changes in the last twenty years which has seen the creation of devolution in Scotland, Wales and Northern Ireland, and since then further powers devolved.

The Scottish Parliament is the most powerful devolved parliament in the world. In financial terms, it is more powerful than most federal states with comparative legislatures, including Germany, the United States and Australia.

Brexit presents Scotland with an opportunity to repatriate to existing institutions even more powers over fishing, farming, the environment, business regulations, transport, and the law.

Should Scotland choose this second option she would naturally keep Sterling and continue to be part of the decision-making process which sets interest rates and determines money supply.

She would be protected by HM Armed Forces, remain a member of the Commonwealth, NATO and have access to the 30 or so trade deals on offer to the UK which amount to roughly 60% of the world’s GDP. She would also continue to benefit from the Barnett Formula.

But if Scotland is to benefit from Brexit by staying in the United Kingdom, then others within the family of nations should benefit too by having the same powers and responsibilities.

After years of patchwork reform, we have ended up with a constitutional ‘dog’s breakfast’; an unfair and unclear system where the West Lothian Question remains unanswered and political and democratic inequality exists between the nations.

In November 2014, the Conservative MP Andrew Rosindell sought to rectify this by introducing a Ten-Minute Rule Bill in the House of Commons to create a federal United Kingdom, with separate parliaments for each of the four nations, leaving the UK Parliament responsible for defence, foreign affairs, national security, and the macroeconomy. Unfortunately, his Bill didn’t make progress.

Many nationalists in Scotland however, and not just those who voted Leave, would be attracted by a second option which incorporates this thinking. Federalism would constitutionalise the existing and newly repatriated powers of the Scottish Parliament, and further enhance its role in deciding policies which the governing party believes will directly improve the lives of the Scottish people.

The attraction of the second option to those who up until now have identified themselves as ‘Yes’ voters is an obvious one, as a federal constitutional arrangement inside the UK is a more empowering alternative to the emasculating option that separation and EU dependency offers.

Brexit and Federalism can save the Union

In a post-Brexit, independent Federal UK, the new beginning a second option offers would address the problem of our politics being far too centralised, and our country being far too divided.

Federalism would clearly set out in statute the powers and responsibilities of the Governments of each federal state, be it England, Scotland, Wales or Northern Ireland, and of course the principle of pooling resources across the nations of the UK.

There could be no disputes from nationalist governments in the Celtic fringes playing a game of divide and rule with Westminster, and where there might be disputes, these could easily be resolved by The Supreme Court. We would move towards a more harmonious constitutional settlement.

Post-Brexit federalism would see off divisive nationalism and set the glue that would bind us together as one People sharing this new unique island at the centre of the world, and which we all call our home.

So, before Nicola Sturgeon calls for another referendum on so-called ‘independence’, let the people of Scotland, and indeed all the peoples of the nations of the United Kingdom, first experience a newly reformed federal country outside of the European Union, at least for a significant number of years. Let Scots experience just how great it could be, before the SNP plunge them back into a divisive, dishonest referendum.

Like any Conservative, Unionist, or Leaver, I am optimistic about our country’s future; eternally optimistic that our best years are yet to come. And as I weigh up the opportunities that Brexit will bring, I am filled with great optimism that if we combine it with federalism, we won’t just keep our country together, we will have strengthened it for generations to come.

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The truth only Europhiles can tell about the EU

Hjörtur J. Guðmundsson

Thursday, 30 March 2017

Democracy

The EU is on the road towards a single state and is already largely there.

30th March 2017

The European Union is an attempt to unify Europe under one centralised authority in a fundamentally similar fashion as tried for instance by the Roman Empire and Napoleon Bonaparte. The difference is that this time it's being attempted through a different method.

This is not a reference to the words of some eurosceptic as someone might assume. Like for instance a supporter of Britain leaving the EU. This is on the contrary a reference to a speech by former French President Valéry Giscard d'Estaing, the main author of the European Constitution which was later renamed the Lisbon Treaty and is today the EU's supreme legislation.

The former French President delivered his speech on 29th May, 2003 in the city of Aachen, Germany while accepting the Charlemagne Prize for his contribution to EU integration. His words were meant to describe the EU's future with the then proposed European Constitution in place:

"Our continent has seen successive attempts at unifying it: Caesar, Charlemagne and Napoleon, among others. The aim has been to unify it by force of arms, by the sword. We, for our part, seek to unify it by the pen. Will the pen succeed where the sword has finally failed? In the scales of history, will the feathered quill outweigh the bloodstained blade?"

Last year, during the British EU referendum campaign, now Foreign Minister Boris Johnson pointed out pretty much the same thing while interviewed by the Sunday Telegraph. However, unlike in the case of Giscard d'Estaing Johnson's comments were condemned by EU proponents.

Johnson said European history had seen repeated attempts to unify the continent under a single authority. People such as Napoleon, Adolf Hitler and others had tried this with tragic results. Now it was being done through a different method. While Giscard d'Estaing did not refer to Hitler directly he clearly did so indirectly with the words "among others". Whether intentional or not.

Giscard d'Estaing went on saying he thought this time the unification of the European continent would succeed "because our success today is based on the free choice of the peoples of Europe to organise their common future. We shall have the answer in the months to come."

The EU got an answer when the European Constitution was rejected in referendums in France and the Netherlands in 2005. How did Brussels react to that free choice of the French and Dutch peoples? They decided that the voters of other EU members should not be asked and the European Constitution would be re-branded as the Lisbon Treaty and implemented anyway.

The main force driving the EU integration has indeed been the centuries old desire to create a single European state. With or without public approval. It's actually quite hard to find an EU leader in the last thirty years or so who hasn't called for a single state in one way or another.

This ultimate objective has already largely materialised. While the EU is not yet formally recognised as a single state it can be argued that in many ways the bloc is today more politically centralised than some formal states such as Switzerland. In fact it has been pointed out that in certain areas the Lisbon Treaty entails more centralised authority than the United States Constitution.

However, not everyone can obviously point this out in the eyes of EU proponents. This point can be made in order to justify further EU integration but not to criticise it. That, however, doesn't change the fact that the EU is on the road towards a single state and is already largely there.

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Simplifying Brexit: Maintaining third-party trade deals after Brexit

Robert Oulds

Wednesday, 15 March 2017

Trade

Memorandums of Understanding, or exchange of notes/letters, can form a key part of the necessary transitional arrangements as the UK moves from being an EU member state to an independent nation.

15th March 2017

In our report What it will look like: How leaving the EU and the Single Market can be made to work for Britain[1] we explained that it should be relatively easy for the UK to maintain interim tariff-free trade with the countries who have signed deals with the EU, after Brexit.

‘The very worst case scenario is that the parties, UK and the [third party country] just need to deposit notification with the UN, or just [formally] inform the other parties if it’s not deposited at UN, that the treaties will continue and apply to UK after our secession. In other words, all these trade treaties don’t need to be renegotiated by an independent UK. Trade with other nations around the globe will continue as before.’

Back in December 2016, we also wrote that legal ‘devices’ such as MoU’s and ‘exchanges of letters’ could be extremely useful to the UK, the EU and ‘third countries’ during the Brexit process:[2]

‘A Memorandum of understanding (MoU) is an established device in public international law; less official that a treaty but more than a gentleman’s agreement. MoU’s can take various forms and can serve wildly different purposes. They can be short and cover one specific issue or be lengthy, covering a range of topics.

‘While they lack the legal certainty of treaties, the semi-official nature of MoUs means that one (or several relating to different areas of co-operation) could likely be signed quickly, without extensive consultation, parliamentary chicanery or ratification delays – as opposed to a potentially lengthy Free Trade Agreement (FTA) ratification.

‘These interim documents could help avoid a potential ‘cliff edge’ scenario as the 2 year article 50 period draws to a close in 2019.’

A recent report by the House of Commons Foreign Affairs Committee confirms much of what we said.[3]

In the report, representatives for The Bar Council Brexit Working Group, Professor Derrick Wyatt QC and Hugo Leith stated that: “There are 30+ countries to which the UK exports tariff-free under agreements between the EU and non-EU countries.”

But the Bar Council evidence suggests how this trade could be maintained after Brexit:

“In the event of an unplanned Brexit, the EEA agreement will cease to provide a basis for tariff-free trade between the UK and those three (EFTA/EEA) countries. It is likely that in the longer term, the UK will conclude a free trade agreement with these three EFTA states, in similar terms to those which it agrees with the EU. In the immediate aftermath of an unplanned Brexit, however, the UK would wish to carry on trade with these countries as if the EEA agreement were still in force.

“The UK might achieve this by an exchange of notes, in the international law sense (That is to say, a binding international agreement in the simplified form of an exchange of correspondence containing or incorporating by reference the terms of agreement), with the countries concerned, agreeing to conduct their trade by reference as far as possible to the EEA agreement, as if it were still in force between the parties concerned. This would in effect amount to a transitional arrangement as regards the UK and the three countries concerned, to be superseded in due course by a free trade agreement between the UK and the EFTA countries.”

They also suggested that when it came to relations between the UK and third countries, the UK and the third countries might wish to “put the arrangement on a sounder legal footing. It might achieve this by agreeing in an exchange of notes (in the international law sense) with country C to continue trade after Brexit on the same terms as before, referring to the agreement in question, and to any clarifications or modifications necessary to ensure continuity of performance of the trade obligations under the treaty. By such means, the UK might avoid WTO trade on the one hand, and putting a wholly new trade agreement in place, on the other, which would take time, and would not be achievable before Brexit.”

In short then, there is no need to assume that the UK will lose access to the trade deals that we have taken part in during the period we have been members of the EEC/EC/EU.

As the UK Government website states:

‘Like a treaty, an MoU can have a variety of names and can also be either in the form of an exchange of notes or a single document. However, the formalities which surround treatymaking do not apply to it and it is not usually published. Confusingly some treaties are called memoranda of understanding.’[4]

MoUs, or exchange of notes/letters, can therefore form a key part of the necessary transitional

arrangements as the UK moves from being an EU member state to an independent nation.

[1] https://www.brugesgroup.com/component/content/article/8-papers/1243-what-it-will-look-like-how-leaving-the-eu-and-the-single-market-can-be-made-to-work-for-britain?Itemid=101

[2] https://www.brugesgroup.com/blog/mou-the-key-to-a-smooth-brexit

[3] https://www.publications.parliament.uk/pa/cm201617/cmselect/cmfaff/1077/1077.pdf

[4] https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/293976/Treaties_and_MoU_Guidance.pdf

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A challenge to the TED talks: Brexit is ending the control of outmoded hierarchies

Robert Oulds

Monday, 13 March 2017

Rebuttals

Technology is driving changes that remote bureaucrats have yet to imagine. Brexit is about openness. It’s about people realising their global role and forging new links with counties and other people. The British people, through Brexit have embraced what made this country so dynamic; freedom of information and limited top down control.

13th March 2017

As reported in the Memo Chris Anderson, Founder of the renowned TED talks series of lectures has criticized Brexit and poured cold water on the possibility of Brexiteers speaking at his events. Stating that TED are pro-globalisation. Clearly he has jumped to the wrong conclusions about Britain’s EU exit and perhaps has globalisation very wrong.

Some cannot distinguish between internationalism, working with others, and the brand of globalization being pushed by supra-national institutions. Organisations like the EU are, in the words of Dr Anthony Coughlan in Tackling the EU Empire, ‘imperial arrangements like the Austro-Hungarian Empire, once known as a “prison-house of nations”, where different countries are ruled by a centralized bureaucracy in a far-away imperial capital.’ That model failed then and will fail again.

Supranationalism, what Chris Anderson must be confusing with Globalisation, is according to Dr Coughlan ‘the opposite of internationalism, which is a benign and progressive concept. Internationalism – from Latin inter, “between” – implies the pre-existence of sovereign Nation States. It refers to relations of co-operation between the States that constitute the international community, but with each controlling and deciding its own domestic and external affairs in accordance with the wishes of its people. Recognition of States based on the right to self-determination of nations and peoples is a basic principle of modern democracy and international law.

‘Supranationalism, in contrast to internationalism, implies a hierarchy, with the supranational level on top. Internationalism implies legal and political equality between the parties. Properly understood, internationalism is opposed to all forms of chauvinism and xenophobia. It implies coexistence among progressive “nationalisms” – that is, broad nationalisms rather than narrow, using the positive rather than the negative sense of that word in English. It implies patriotism and love of country, combined with respect for the many national communities into which humanity is divided and admiration for their varied cultural and other achievements.

‘Internationalism delights in the diversity of nations. Supranationalism seeks to erode national differences, either because they threaten the dominance of a particular ruling power or they make it more difficult for transnational big business to establish a world of homogenized consumers and employees. Supranationalism seeks the erosion of State sovereignty. Internationalism seeks to establish and maintain it.

‘The glory of European civilisation has been the diversity of its national components – in culture, science, political institutions, economic actors, legal systems, education systems, tax codes, fashion. In classical Europe emulation and competition between nations, communities and individuals spurred creativity and innovation.’

Britain always has been global, we are fully with the modern world. We invented modernity and took it around the globe. The British, instinctive believers in free trade, understand this and behind Brexit was a desire to reenter the rest of the world free from the Byzantine grip of a sclerotic EU. Britain tried european union, found it not to our tastes and are now seeking new opportunities over-seas.

The EU, just like the trans-national empires of the past, is not permanent. If any time line is extended long enough the chances of survival become zero. An organism, or organisation for that matter, must adopt or die. In the referendum, the British people rejected the EU’s inflexibility and its failure to adapt.

Top down, rent seeking, institutions are the past. Those holding onto the supranational institutions are desperately trying to support a system that kept the old cartels in power. Technology and the people’s legitimate rights to have a government of their own people will sweep away suprantionalism.

The greatest trend in world politics is the near universal demand for diversity and decentralization of decision making and power. Ever more countries are being born and taking their seat at the United Nations, an international body that has at its very core a respect for the nation state.

Whilst transnational empires will fail and new states will be born, there is also the beginnings of a trend towards not just smaller political units but economic empowerment of individuals. Using technology people are becoming free from the tired cartels that cling to supranational governance. Whilst global value chains are growing, people will no longer have to be passive receivers of the proceeds of growth as if they were in some feudal system. 3D printing is just the start. Indeed, even financial institutions may themselves have to adapt to deal with the challenge from crypto currencies and peer-to-peer investment models.

Top down information flows are the past, by rejecting the hierarchical organisation of the EU, Brexit has shown how we can live the information revolution. In the UK, centralisation is out, we have embraced the new world of horizontal information channels. In this exciting age of technology and easy communications across the globe, it is absurd that our lives were being managed by grey men in their ivory towers in Brussels.

Technology is driving changes that remote bureaucrats have yet to imagine. People are deciding how to live their own lives for themselves. Brexit is about openness. It’s about people realising their global role and forging new links with counties and other people. The UK has re-joined a world we helped to shape. The British people, through Brexit have embraced what made this country so dynamic; freedom of information and limited top down control.

If TED wants to remain relevant then it needs to be open to the new ideas at the heart of Brexit. This may require Chris Anderson to take a leap of faith and be open to the ideas that are driving the most exiting political movement in a generation – Brexit. Chris Anderson needs to look beyond the pseudo-globalisation of political, corporate and market hierarchies attempting to ensnare us in their web, whilst masquerading as enlightened progressives. The TED talks need to embrace the coming Cambrian explosion of devolution, fewer hierarchies, more markets and more information channels.

How we choose to live our lives and interact can no longer be controlled by old structures like the EU. It is not the big that beat the small, it is the fast who beat the slow.

If we can question the old tired structures of supranational governance, which come from the early 20^th Century, and break free from it, then Chris Anderson can step up to the plate and listen to what Brexiteers have to say. It may take him out of his comfort zone, but I suspect that he will realise that despite the inevitable bumps on the road we point the way forward.

The French economist, Professor Jean-Jacques Rosa, in the Bruges Group publication, Saying No to the Single Market, summed up what is so wrong with the supranational version of globalization which the EU personifies. His arguments are summarised below. The EU is little more than organisational sclerosis.

The attempt to construct a third superpower by combining the former imperial nations of France, Germany, Italy and possibly even Great Britain was intended to reinforce and consolidate the Western Alliance. But the last quarter of the century saw a sea change in organization, coming from the information and communication technological (ICT) revolution.

The organizational trend underwent a complete reversal from the mid-1970s onward, changing the structure of most hierarchical organisations, and boosting the development of markets everywhere. I claim that the optimal organisation of the public sector and also of private businesses has been revolutionized by an informational tsunami during the past three decades in favour of smaller hierarchies and larger markets. And that is the reason why the old project of centralizing Europe by building an additional level of political organization above that of the nation states is now not only obsolete (the remnant of a former era) but also moving more and more afar from the modern (information era) optimal political organization. For that reason, it is deeply detrimental to growth and economic dynamism.

A problem of Centralisation
The single market itself is another step in that wrong direction, alongside with other centralising policies, whether effective, such as monetary policy (the creation of the euro) or projected, such as a single tax policy intended to suppress tax competition among governments. They all belong to the general category of anti-competition policies.

The single market really means European-wide centralisation of national regulations, a regulatory centralisation that decreases competition and consumer welfare.

It creates huge new rents for centralized European regulators and for business interest groups and oligopolies.

The centralisation of regulation ignores the difference of tastes in various countries. It also ignores the difference in economy conditions, such as the local (national) elasticity of demand, the elasticity of supply, the density of population in various countries, and so on. These factors explain the differences in the demand for environmental regulations from one country to another. Fixing the same standards for the whole of Europe ignores these differences in demands: one size does not fit all and the consumers are less well served. Thus, centralising regulation distorts competition instead of increasing competition.

Interest groups versus consumers
A regulation in fact is a tax plus a subsidy. The question is: is the centralisation of regulation increasing the overall volume of regulation? I say yes of course.

Why? Well take the European Union. The total population of the 28, soon to be 27, countries is about 500 million people. A large enough firm will now have its former lobbying budget available to lobby not 28 regulatory bodies but just one central authority and with greater outcome. It becomes more worthwhile to lobby. So there is an overall increase of the money spent lobbying and of course the regulatory authorities are influenced by the spending of lobbies and that’s what the late Professor and Nobel Prize winner George Stigler showed and called the “capture” of regulators by the regulated firms and their lobbies. The regulatory authorities are not completely independent of the actions and spending of the lobbies. Bureaucrats controlling access to a 500 million people are obviously more actively lobbied than bureaucrats controlling a market of 18.5 million people.

Rent seeking will increase and that’s bad news for consumers. That’s good for some businesses, that is good for the bureaucrats, but it is bad news for consumers. And so, the incentives for forming cartels, the collusion between firms, are much increased. As we know, cartels are good for business and bad for consumers: they result in higher prices and lower quantities.

There is a second important real effect of the centralisation of regulation, it comes from the dilution of democratic control. The formerly hard won national democratic control is reduced through the extension of the voting area and voting population, and that’s exactly what happens in business firms when you dilute the capital by the creation of new shares. You increase the capital and you dilute the power of the former owners (voters or shareholders). The control that these “owners” can exert on managers, that is, in this example, the politicians and bureaucrats, is lowered in the same proportion. Accordingly, the politicians all over the EU are not going to resist the trend towards more centralisation. On the contrary, they receive some personal benefits and increased independence vis-à-vis the electorate by that very diluting process.

My conclusion is that the centralisation of regulation brings about an extension of the size of central bureaucracies and this is the case even more when you consider that existing bureaucracies usually do not disappear when new ones are created.

Look at the European Central Bank. The ECB has been created and is now working in a huge expensive building in Frankfurt. But the French Central Bank still exists, it didn’t decrease its employment or budget and I suppose it’s the same for other national central banks in the Eurozone. So there is a net addition of monetary bureaucracies with the centralisation of monetary regulation and the creation of one more level in the political hierarchy, which results in an increase of the overall size of bureaucratic Europe.

On the business side of that process, the development of lobbies mainly benefits existing established firms because they are the only firms that can create a lobby. “Potential” firms obviously cannot, nor do the new entrants. The extension of lobbying thus favours existing firms. Existing firms are large firms, and the older they are the larger they are. It follows that centralisation of regulation and increased lobbying promote the concentration of business firms and business interests and that’s not really an advantage for consumers either.

This is not good for the creation of new firms and for the general dynamism of the economy. Indeed, it is the source of sclerotic organisation in the EU. It enforces and enhances the rents of large, older business firms and bureaucracies and freezes the hierarchical structure of both industry and political production at a moment when innovation, new small firms, and lighter government are required. It is a recipe for accelerated decline.

Organisational sclerosis
During the first three quarters of the 20^th century there was a trend towards centralisation, concentration, increase of the size of hierarchies both public and private (big firms, big states). Industrial organisation economists call it the “fordist” era after the name of the American carmaker that invented the continuous production line, but it was also the era of socialism and centralisation of the state and of the increase of the size of state bureaucracies everywhere, including in the democratic “market economies”.

But from the mid-70s on, a reverse track upset organisational structures everywhere. Big conglomerates disappeared in the following decade, very large and inhomogeneous countries dissolved: the USSR first and then Yugoslavia, Czechoslovakia, while regionalist and secessionist movements multiplied in Spain, Italy, and elsewhere in the world.

Something big happened in the 1970s: that was the dawn of the information era. Suddenly information costs fell vertically because the drastic fall in the cost of storing, processing and communicating information due to the microchip, the computer, and radio transmission of the internet. An economist would say that when the cost of information is going down more information should be used. But a more intensive use of information is going to impact profoundly the structure of organisation of all productions.

When the cost of information goes down dramatically as it did in the 1970s, then the market becomes more efficient than the hierarchies. So hierarchical Europe is to shrink its hierarchies: they should be divided and reduced, and at the same time markets should expand, and that’s what happened in the 1980s, worldwide. It was even more the case in highly centralised economies such as the USSR. They simply went broke because their organisational structure had become uncompetitive and obsolete. They did not take advantage of the sudden fall in the cost of information. They did not realize that a new and abundant resource (information) was available for maximizing growth. Or if they did they weren’t able to change their outdated organisational structure to benefit from the new cheap resource and they lost to information intensive competition from the U.S.

Adam Smith called attention to the invisible hand of the market and the American economist Alfred Chandler explained in a symmetric fashion that the “visible hand” of the big corporation, the existence of large hierarchies, was characteristic of the 20th century businesses. What one could observe today is that since the last quarter of the past century large hierarchies are shrinking: the information era is the era of the “shrinking hand”.

Against this general background what are we doing in Europe? The EU is still extending the public (or political) hierarchies and contracting markets, a directly dysfunctional and unproductive strategy. The relative prices of factors and information tell us that they should be doing the opposite. We live in an extraordinary abundance of information, and the deluge is increasing.

The current European orientation towards increased centralisation is itself increasingly questioned and will be reversed just as in the last part of the 19^th century, the previous British trend towards free trade and small hierarchies was replaced by a new trend towards centralisation, including both big firms and big state. I think that current European policies are a legacy of this period (the 20^th century) but that they are counterproductive in the new era of the information age. What we need to avoid a growing organisational sclerosis is a radical about face of policy, a great reversal if you like.

A uniform union-wide regulation (and the underlying model of centralisation of everything) is just like the Ford Model T: the choice of the car paint is up to every buyer, provided it’s black. This could be a productive, wealth enhancing, policy in the price context of the past century. But it won’t do today.

With the falling costs of information, centralisation is out, variety is in and centralisation becomes directly unproductive and will lead to failure in a very short term as the information revolution proceeds at an accelerating pace.

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Another nail in the coffin of the Single Market

Robert Oulds

Friday, 10 March 2017

Trade

Last month, an event occurred which got little fanfare, but is likely to have a significant effect on the future of the UK, especially after Brexit. What happened was that the WTO Trade Facilitation Agreement has now entered into force.

10th March 2017

The Single Market

Lord Lamont, the former UK Chancellor of the Exchequer wrote in The Telegraph: wto

‘The single market is open to all advanced economies, in exchange for paying a relatively modest tariff of 3 to 4 per cent, something that evidently does not stop non-EU countries from selling within it.

‘Every developed country has access to the single market. The EU has a relatively low external tariff with the exception of certain goods such as agriculture.’[i]

When taken prima facie, Lord Lamont’s comments are seemingly correct. Only those countries who are essentially rogue states or have violated international agreements don’t have the ability to conduct trade with the EU, and the EU’s external tariffs are fairly low.

But Tariffs are only half of the story.

The problem of tariffs could be easily addressed by the UK signing a goods Free Trade Agreement (FTA) with the EU. Given the high volume of UK- EU 27 trade, this is seemingly a given.

A basic FTA need not take long to complete. The EU’s earlier iteration the European Economic Community (EEC) concluded basic FTAs in the early 70’s that took 6-7 months to agree, sign and come into force.

But the other half of the story relates to non-tariff barriers (NTBs), sometimes called "Non-Tariff Measures (NTMs)". These comprise everything else that can slow down trade or make it more expensive or complex.

The European Commission describes the Single Market as:

‘…one territory without any internal borders or other regulatory obstacles to the free movement of goods and services. The Commission works to remove or reduce barriers to intra-EU trade and prevent the creation of new ones so enterprises can trade freely in the EU and beyond. It applies Treaty rules prohibiting quantitative restrictions on imports and exports (Articles 34 to 36 TFEU ) and manages the notification procedures on technical regulations (2015/1535) and technical barriers to trade.’[ii]

So the Single Market goes beyond tariff reduction, and encompasses far more than just a Free Trade agreement. This is why the ‘remain’ side in the EU referendum campaign were so concerned about the UK leaving the European Union’s Single Market.

‘Remainers’ believe that after Brexit, even if the UK does get a Free Trade Agreement, our importers and exporters will be deluged with red tape, endless forms, checks and other barriers to entry as we will be operating outside the Single Market.

These are valid concerns, but we believe they are largely exaggerated – and here are the reasons why:

The EU has signed up to the WCO

In July 2007[iii], the EU signed up to the World Customs Organization (WCO) which works to enhance customs co-operation between signatory countries and works to simplify issues such as Rules of Origin (ROO).

From the European Commission’s own press release:

‘On 30 June 2007, the Council of the World Customs Organization (WCO) decided to accept the request of the European Union to join the WCO as of 1^st July 2007. This decision grants to the European Union rights and obligations on an interim basis akin to those enjoyed by WCO Members.

‘The WCO plays an important role in promoting international customs co-operation and addressing new challenges for customs and trade. It is deeply involved in designing and implementing policies worldwide that integrate measures, which help ensure supply chain security, combat counterfeiting, promote trade and development, as well as guarantee efficient collection of customs revenues. Membership of the WCO highlights and confirms the central role and competence of the EU in international discussions on customs issues including customs reform. EU involvement in the WCO will focus on the full spectrum of customs issues, in particular the following broad areas:

Nomenclature and classification in the framework of the Harmonised system;
Origin of goods;
Customs value;
Simplification and harmonisation of customs procedures and trade facilitation;
Development of supply chain security standards;
Development of IPR enforcement standards;
Capacity building for customs modernisation and reforms, including in the context of development cooperation;
Mutual Administrative Assistance for the prevention, investigation and repression of customs offences.

‘The EU is a contracting party to several WCO Conventions, and contributes to the work of this organisation, including by ensuring presence and coordination with the Member States in defining and representing EU positions in the relevant bodies managing these conventions.’

The UK signed up to the WCO in the 1950’s and is a signatory in its own right, so will be able to address customs issues with the EU via this body after Brexit.

Harmonisation with EU rules

The UK’s rules and regulations are already synchronised with EU/EEA (European Economic Area) regulations and standards after decades of membership. This will also be true on the day after Brexit due to the Great Repeal Bill. Hence a strong (if not overwhelming) argument for ‘rules equivalence’ can be made.

The WTO Agreement on Rules of Origin (ROO)

This agreement encourages WTO countries (including all EU countries) to have fair and transparent rules pertaining to Rules of Origin:

wtostructure

These rules state that:

‘Rules of origin shall not themselves create restrictive, distorting, or disruptive effects on international trade. They shall not pose unduly strict requirements or require the fulfilment of a certain condition not related to manufacturing or processing, as a prerequisite for the determination of the country of origin….rules of origin are administered in a consistent, uniform, impartial and reasonable manner’.[iv]

Guidelines in the EU treaties

treatylisbon Article 8 of the Lisbon Treaty states that:

‘The Union shall develop a special relationship with neighbouring countries, aiming to establish an area of prosperity and good neighbourliness, founded on the values of the Union and characterised by close and peaceful relations based on cooperation.’[v]

As the UK will become a new ‘neighbouring country’ after Brexit, the EU is compelled to deal with us according to the Article 8 terms.

WTO Technical barriers to trade Agreement

The TBT agreement is key – it means that signatories (again, including the EU) agree to abide by rules about international product and technical standards. From the European Commission’s website:

‘The TBT notification procedure helps prevent the creation of international technical barriers to trade. It was introduced by the Agreement on Technical Barriers to Trade (the TBT Agreement), a multilateral agreement administered by the World Trade Organisation (WTO). It gives participants advanced knowledge of new technical regulations or conformity assessment procedures envisioned by other countries. The EU’s participation in the TBT Agreement helps businesses in EU countries access markets outside the EU.’

Aim of the TBT notification procedure

To avoid any potential technical barriers to trade, WTO Members submit national legislation at draft stage to other members of the TBT Agreement. They can then assess the impact on their exports and identify any provisions breaching the Agreement.

While allowing all WTO Members to maintain their right to adopt regulations, the TBT Agreement aims to:

prevent the creation of unnecessary and unjustified technical barriers to international trade;
prevent the adoption of protectionist measures;
encourage global harmonisation and mutual recognition of technical standards;
Enhance transparency.[vi]

The commission somewhat downplays the TBT agreement, however. What it actually states is that:

‘Members shall ensure that in respect of technical regulations, products imported from the territory of any Member shall be accorded treatment no less favourable than that accorded to like products of national origin and to like products originating in any other country.

‘Members shall ensure that technical regulations are not prepared, adopted or applied with a view to or with the effect of creating unnecessary obstacles to international trade.

‘Where technical regulations are required and relevant international standards exist or their completion is imminent, Members shall use them, or the relevant parts of them, as a basis for their technical regulations. Members shall give positive consideration to accepting as equivalent technical regulations of other Members, even if these regulations differ from their own, provided they are satisfied that these regulations adequately fulfil the objectives of their own regulations.’[vii]

Since UK regulations and standards will be equivalent to their EU counterparts from day one, and will continue to meet international standards going forward, it will be extremely difficult for the EU to reject UK products sold into the EU market.

WTO Trade Facilitation Agreement

The most recent agreement, the WTO Trade Facilitation Agreement (TFA) will further increase trade co-operation.

As the WTO website states:

‘The TFA contains provisions for expediting the movement, release and clearance of goods, including goods in transit. It also sets out measures for effective cooperation between customs and other appropriate authorities on trade facilitation and customs compliance issues. It further contains provisions for technical assistance and capacity building in this area.’[viii]

Perhaps especially important for Northern Ireland post-Brexit, the TFA also states that:

‘Each Member shall ensure that its authorities and agencies responsible for border controls and procedures dealing with the importation, exportation, and transit of goods cooperate with one another and coordinate their activities in order to facilitate trade.

‘Each Member shall, to the extent possible and practicable, cooperate on mutually agreed terms with other Members with whom it shares a common border with a view to coordinating procedures at border crossings to facilitate cross-border trade.’

The WCO welcomed the ratification of the TFA agreement in their press release of 22 February 2017, in which they wrote:

‘The World Customs Organization (WCO) congratulates the World Trade Organization (WTO) on the entry into force today of the WTO Trade Facilitation Agreement; an agreement that will expedite the movement, release and clearance of goods, including goods in transit, and which sets out measures for effective cooperation between Customs and other authorities, as well as provisions for technical assistance and capacity building in this area.

‘The WCO takes this opportunity to highlight that it will continue to seek improvements throughout the global supply chain to obtain the highest levels of safety, security and integrity, which will enhance trade facilitation for compliant actors. This will ultimately have a positive effect on the relationship between all border agencies and the Private Sector.

‘The entry into force of the Trade Facilitation Agreement (TFA) is an important milestone for the international trade and Customs community, coming about as a result of the fact that it has been ratified by 110 WTO Members, which pushes it above the threshold needed to take effect, namely ratification by two-thirds of the WTO’s 164 Members.’[ix]

In conclusion:

The volume and UK and EU will likely at least sign a basic goods FTA; meaning tariff-free goods trade will continue.
The UK’s rules and regulations are already synchronised with EU regulations and standards. This will also be true on the day after Brexit.
The UK and EU are signed up to the WCO, which exists to help simplify and resolve customs issues.
The WTO TBT agreement prohibits the EU from banning UK goods that meet international standards.
The WTO agreement on Rules of Origin means that the EU will have to ensure rules of origin are administered “in a consistent, uniform, impartial and reasonable manner” when dealing with exports from the UK.
The WTO Trade Facilitation agreement means the EU must co-operate with the UK on issues around the “movement, release and clearance of goods”.

When we combine these factors together we see that after Brexit, UK trade with the EU will be very similar after Brexit as before Brexit.

The EU has signed up to many agreements and treaties which in effect reduce the uniqueness of the single market.

Britain can therefore essentially have almost duplicate trade relationship by falling back on these international agreements (if necessary) which would mean that the UK could have the majority of the benefits of Single Market membership, but be free to choose which rules to obey when not exporting to the EU 27 countries or for domestic sale.

The TFA might not then be the final nail in the Single Market coffin (it is still useful to EEA members), but it is one substantial step towards reducing the importance of the Single Market to a post-Brexit UK.

[i] http://www.telegraph.co.uk/news/2016/06/13/not-only-can-britain-can-leave-the-eu-and-have-access-to-the-sin/

[ii] https://ec.europa.eu/growth/single-market_en

[iii] https://ec.europa.eu/taxation_customs/business/international-affairs/international-customs-cooperation-mutual-administrative-assistance-agreements/world-customs-organization_en

[iv] https://www.wto.org/english/docs_e/legal_e/22-roo_e.htm

[v] http://www.lisbon-treaty.org/wcm/the-lisbon-treaty/treaty-on-european-union-and-comments/title-1-common-provisions/6-article-8.html

[vi] https://ec.europa.eu/growth/single-market/barriers-to-trade/tbt_en

[vii] https://www.wto.org/english/docs_e/legal_e/17-tbt.pdf

[viii] https://www.wto.org/english/tratop_e/tradfa_e/tradfa_introduction_e.htm

[ix] http://www.wcoomd.org/en/media/newsroom/2017/february/wco-welcomes-entry-into-force-of-the-wto-trade-facilitation-agreement.aspx

Recent Comments

Robert Oulds

Thank you for your comment. That was covered first in the Bruges Group paper What it will look Like: https://www.brugesgroup.com/m... Read More

Thursday, 16 March 2017 23:31

Robert Oulds

Earlier we also covered those points here: http://www.brugesgroup.com/blog/trade-issues-which-must-be-solved-by-david-davis-brexit... Read More

Monday, 20 March 2017 10:09

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Norway's Progress Party set to reject EU membership

Hjörtur J. Guðmundsson

Wednesday, 08 March 2017

Foreign Affairs

The Progress Party of Norway seems set to reach a significant milestone at its national congress in May when it comes to the party's policy on the European Union.

8th March 2017

To this day the Progress Party has in fact not had a policy whether the country should join the EU or not. The party has simply had the policy that the Norwegian people should decide whether to join the bloc or not.

However, this seems about to change fundamentally in May. A Progress Party committee, tasked with drafting the party's foreign policy for the national congress, has suggested adopting the policy of rejecting EU membership. Furthermore the committee has also suggested reviewing the EEA Agreement which Norway has been a member of for almost a quarter of a century.

The leader of the Progress Party, Siv Jensen, said at a party meeting last Saturday according to the Norwegian daily Nationen that she had voted for Norway to join the EU back in 1994 when the country last voted in a referendum on whether to join the bloc or not and rejected membership. However, she said that should there be a referendum today she would say no.

This is also a milestone in the sense that this will be the first time a Norwegian centre-right political party will reject EU membership. The traditional centre-right party in Norway, the Conservative Party (Høyre), is the party most in favour of joining the EU. The fundamental reason for this is quite simple. It has to do with the fact that Norway is in many ways a very socialist country.

The centre-right political parties have traditionally considered EU membership as a way to make Norway somewhat less socialist. However, this viewpoint is in fact based on the outdated notion that the EU is simply about economic cooperation and trade. As Jensen recognised in her speech last Saturday that is simply not the reality anymore as others have realised before.

The leader of the Progress Party said the EU wasn't about trade and less regulations anymore (when was that?) but more regulations which were furthermore beyond the power of the nation states. The trade and peace project, she said, had become a bureaucratic project. This is of course something which happened a long time ago and has since then moved fast in that direction.

Things have developed differently in Iceland. There the traditionally largest political party is the conservative and eurosceptic Independence Party while in Norway the traditionally largest party has been the Labour Party. Unlike in Norway centre-right voters in Iceland believe EU membership would among other things move the country further to the left making it more social democratic.

The milestone, which seems about to be reached by the Progress Party, is also important for those who reject EU membership since to this day there has in fact never been any organised opposition to joining the bloc on the centre-right in Norway. The cross-political eurosceptic organisation Nei til EU is almost entirely made up of people on the centre-left of Norwegian politics.

Whether the Progress Party actually will alter its policy on the EU or not in May remains to be seen. But even if it doesn't happen this time it is probably just a question of when. The party has to this day referred to the will of the people. For the last twelve years every single opinion poll published in Norway has had a vast majority against EU membership or around 70-80 percent.

However, if the Progress Party will adopt a policy rejecting EU membership that will without doubt put much pressure on Høyre as the opposition to joining the bloc is widespread on the Norwegian centre-right just as most everywhere else in the country. Even though Høyre remains in favour of EU membership the majority of the party's voters are not and have not been for a long time. With a new policy the Progress Party would become an alternative for eurosceptic Høyre voters.

Hjörtur J. Guðmundsson is an Icelandic historian. He holds a master's degree in international relations with focus on European, defence and security studies. Twitter: @Hjortur_J

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Will the Netherlands be the next domino to fall?

Robert Oulds

Sunday, 26 February 2017

Alternatives to the EU

Opinion poll shows Dutch opposition to the EU is strong and can win.

56% = Support Nexit (EFTA + FTA)

Only 44% = Support for EU

26th February 2017

A new Dutch poll commissioned by the Bruges Group, carried out by www.peil.nl, shows that more Dutch people prefer the alternatives to the European Union than they do EU membership. As the alternatives are already gathering more support than EU membership a concerted campaign in the Netherlands, which could force a referendum[1], will mean Holland voting to leave the EU.

The Dutch general election will take place on 15^th March and the question of the EU is becoming increasingly important. The Netherlands’ terms of EU membership are already being questioned by an increasing amount of political parties; namely the Centre Democrats (Netherlands)‎, ChristianUnion, Party for Freedom‎, Party for the Animals, Libertarian party, Reformed Political Party, and Socialist Party (Netherlands). Which can make gains. The issues are immigration, who makes law, and size of the Dutch financial contribution.

A new party, Forum voor Democratie (FvD)[2], which helped organise the recent Dutch Ukraine referendum is a supporter of exiting the EU and joining the European Free Trade Association:
https://forumvoordemocratie.nl/standpunten/europese-unie

Across the continent of Europe and beyond people want to take back control of their lives. A concerted campaign for Nexit, along the lines that we saw in the UK, can overtime, just like it did in Britain, move the Netherlands towards the exit. Britain will welcome our allies, the Dutch people, in a new post-EU Europe.

The question asked respondents which of 3 options they preferred, the results are below:

39% = EU

23% = EFTA (European Free Trade Association)

27% = FTA (Free Trade Agreement)

11% = Don't Know

Without Don't Knows

56% = Nexit (EFTA + FTA)

44% = EU

1,174 people were polled over 14-15/2/17

The results show also (without Don't Knows):

Men 56% Nexit (EFTA +FTA), 44% EU

Women 57% Nexit (EFTA + FTA), 43% EU

Also all age groups 25 and over support Nexit options

And all regions prefer Nexit, even in the large cities a majority prefer the alternatives to EU membership.

In past referendums in the Netherlands, people have voted for less EU:

61.6% said Nee in 2005 to the EU constitution and 64% voted against the EU-Ukraine Association Agreement in 2016.

[1] Referendums, known in Dutch as volksraadpleging (people's consultation), can with political pressure, as in the UK, be held.

[2] FvD Press contact: Jeroen de Vries

Number: +31 642807493

Email: This email address is being protected from spambots. You need JavaScript enabled to view it.

Read the full question in Dutch

Read the results in Dutch

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Youth activists talk with leading Brexiteers

Robert Oulds

Friday, 24 February 2017

Interviews

Leading businessmen, politicians and academics talk with Paulina Sienniak and Ben Michael about how Brexit will work and what it means.

24th February 2017

Rt Hon. Peter Lilley MP, Former Secretary of State for Trade and Industry, and Social Security.

Peter Lilley talks to Paulina about the single market.

Johan Eliasch, Co-Founder of Cool Earth and Chairman and CEO of HEAD.

Paulina talks to Johan Eliasch about Brexit.

Morten Dam of Denmark's FolkeBevaegelsen Mod EU (People's Movement against the EU).

Morten Dam discusses the EU.

Richard Tice, businessman and founder of Leave Means Leave, and co-founder of Leave.EU.

Paulina Sienniak speaks with Richard Tice.

Christie Davies, author of the Mirth of Nations, Professor Emeritus University of Reading.

Ben Michael talks to Professor Christie Davies.

Click here for the What Brexit Means! conference

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Why Brexit Should Be Accompanied by Irexit (Ireland exit)

Robert Oulds

Wednesday, 22 February 2017

Papers

Ireland’s political Establishment is only now realising that Brexit really does mean Brexit and that the case for an accompanying Irexit is overwhelming. Irish opinion is likely to move in this direction over the coming two years and UK policy-makers should encourage that.

Dr Anthony Coughlan

22nd February 2017

Read the full research online

For forty years from 1973 the Republic was a major recipient of EU money through the Common Agricultural Policy. Since 2014 the Republic has become a net contributor to the EU Budget. In future money from Brussels will be Irish taxpayers’ money recycled. This removes the principal basis of Irish europhilia, official and unofficial.

If Dublin seeks to remain in the EU when the UK leaves it will have to pay more to the EU budget to help compensate for the loss of Britain’s net contribution. A bonus of leaving along with the UK on the other hand is that it would enable the Republic to get its sea-fisheries back - the value of annual fish-catches by foreign boats in Irish waters being a several-times multiple of whatever money Ireland got from the EU over the years.

As regards trade and investment, the Republic sends 61% by value of its goods exports and 66% of its services exports to countries that are outside the continental EU26, mostly English-speaking. The USA is the most important market for its foreign-owned firms and the UK for its indigenous ones. Economically and psychologically it is closer to Boston than Berlin and to Britain than Germany.

ireland1 ireland2 ireland3

Read the full research online

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The UK is stuck in a quagmire over EU Defence Union

David Banks

Wednesday, 15 February 2017

Defence

EU Defence Union has gathered pace since late 2016 and the UK is deeply involved. Ministers have so far failed to explain why they are agreeing to the plans and how they will regain control.

15th February 2017

A senior EU Commission official boasted in January that the EU "has done more in defence in the last seven months than in the previous decades".

It certainly looks like they have stepped up the pace since the Brexit vote.

Two major plans outlining military union were released in November and approved by EU Governments in December, including the UK under advice from Sir Ivan Rogers, who was until January the top UK diplomat in Brussels who was so admired by pro-EU politicians.

Anyone who thinks these plans won't affect the UK could be in for a nasty surprise.

The plans create a central EU defence budget for the first time, make a grab for defence industries and procurement strategy, they plan for the acquisition of EU assets in space and surveillance, they invite EU member states to conjoin their defence forces permanently under an EU banner, they place obligations on member states’ intelligence services and they assert the "defence autonomy of the EU from NATO".

The EU uses typical guile, complexity and sheer volume of words so it's no wonder the media have barely picked up on them - as a journalist, where would you even start? Then there's the complexity of how the EU is turning the plans to reality, which is advancing daily and involves the EU Parliament, think tanks, defence industry and the EU’s deep reach into member states’ defence structures.

Veterans for Britain first spotted what was happening when on 15 November 2016 Federica Mogherini presented the first of the plans, known as the Security and Defence Implementation Plan, to a combined EU Council meeting of foreign ministers and defence ministers. The UK, represented by Sir Michael Fallon and Boris Johnson, approved this plan to “avoid playing dog in a manger”, i.e. avoid preventing other countries from participating when the UK had no desire to do so.

There are a few immediate problems with this stance.

Firstly, agreement places obligations on signatories to be involved – even if the UK has no desire to be involved it will be involved at least for the duration of its remaining membership.

Secondly, when we unpick what was said by ministers in the days after the EU Council agreement, we find that Foreign Office minister Sir Alan Duncan had written to MPs saying that the UK had signed not because it didn’t want to be involved, but because it might want to be involved – a clear contradiction to what Boris had said on the day of the agreement.

Thirdly, the agreement has certain repercussions for the UK beyond Brexit in 2019, most notably UK defence industries and control of defence procurement, while other post-Brexit implications in intelligence, military structure, funding and assets are only ‘likely’ to affect the UK, but depend on the UK Government’s desire in 2019 to claw back the control it has just given away.

Fourthly, the EU is not considering special exemptions or caveats for the UK. All the talk of a combined EU defence output includes figures which could only include the UK, such as a 100-billion-euro defence industry.

When Mogherini’s SDIP was approved by the UK, the defence correspondents of national newspapers had all been conveniently flown to Iraq for a week by Sir Michael Fallon’s MOD, to be embedded with UK forces. Any defence journalists who were still in the country on 15 November might have been forgiven for thinking that SDIP hadn’t been approved by the UK at all. At Veterans for Britain, we weren’t sure so we phoned the EU Council’s staff to find out. They told us that Sir Michael Fallon and Boris Johnson had indeed subscribed to the plan because they had offered no objection to the joint conclusions that the UK representative Sir Ivan Rogers had co-authored with his counterparts. In EU Council contexts, joint conclusions by member states in support of a document constitute agreement.

It’s useful to look at some of the details of Ms Mogherini’s SDIP. It calls for EU member states to enter ‘Permanent Structured Cooperation’ in defence (PESCO), an idea which has been lurking in the Lisbon Treaty and is described by its EU federalist architects as “the foundation for an integrated EU Armed Forces”. SDIP also calls on member states’ to propose new ways their intelligence services might correspond with a new central EU intelligence agency known as the Single Intelligence Analysis Capacity (SIAC), and proposes a new focus on the EU’s military intelligence body known as INTCEN.

Two weeks after SDIP was announced and approved, the EU Commission released a report, titled the European Defence Action Plan (EDAP), which includes an explanation for how EU officials propose to fund Ms Mogherini’s plans.

An EU Defence Fund will divert cash towards joint EU military units and EU defence research. It will be funded by the European Investment Bank, in which the UK is joint top shareholder. The EU Commission will also invite member states to contribute, with the promise that any such payments will not be governed by EU-imposed austerity rules. Apparently a great way for poorer EU nations to divert cash from their own militaries and still meet the NATO 2% requirement.

By the way, we know these EU plans sound outlandish to anyone who’s not heard about them before, which is why we at Veterans for Britain always take copies of the EU’s plans into meetings so that politicians and journalists know that we’re not making it up.

Mr Juncker’s EDAP describes EU’s push “towards Defence Union” and the creation of a single market for military equipment, which sounds fine until you realise it comes with the imposition of centrally-coordinated defence industry strategy and points to the removal of the member states’ current right to build their own ships and safeguard domestic defence supply.

Even more worrying is that Juncker’s EU Defence Fund (starting at five billion euros) will be in a position to offer free money to UK companies who want to participate in EU-led procurement projects, therefore putting a financial incentive on UK defence industries to demand involvement in the EU-controlled ‘defence single market’.

Mogherini’s SDIP and Juncker’s EDAP appeared on the agenda of the 12 December EU Council heads of government meeting, as point number 2 under the more generalised topic of ‘Security’.

The 28 heads of government including PM Theresa May were asked if they agreed with the previous agreement made by their foreign and defence ministers and Mr Juncker’s EDAP. They all did agree. Once again, there were no complaints, exemptions or caveats for the UK.

The UK's approval means it has signed up to at least two years of military integration with the EU and faces an ever bigger task after exit to unravel itself from the EU military equipment market or prevent UK intelligence services’ relationship with the Five Eyes network being compromised by demands to provide information to the EU’s SIAC intelligence service. There has so far been no statement from defence ministers to explain how the UK will extricate itself from EU decision making in two years’ time or whether it will resist potentially far-reaching changes in military structure, procurement, intelligence and funding between 2017 and 2019.

These plans had been preceded by three statements which created the mood music around defence union: the Merkel-Hollande-Renzi joint statement on the deck of an Italian aircraft carrier; a Mogherini statement in July on the forthcoming EU Global Strategy; and Juncker’s State of the Union address which alluded to a desire to expand the EU’s role in defence.

The EU Commission’s activity since SDIP and EDAP reflect their intention for an "unprecedented level of engagement". In January, they appointed administrative teams to implement every strand of the two plans and liaise with military and defence industry counterparts.

Ms Mogherini, who simultaneously acts as Vice President of the EU Commission, head of the European Defence Agency and head of the European External Action Service (the EU’s ‘foreign ministry’) is expected to announce the first EU member states participating Permanent Structured Cooperation (PESCO) on 25 March, the 60^th anniversary of the 1957 Treaty of Rome which created the European Community.

At the end of January, the EU Parliament carried out a flanking operation in support of PESCO in which MEPs called on their national parliaments to be involved. In the same breath they went several steps further, calling for the ‘technically-intergovernmental’ European Defence Agency and the forthcoming PESCO to be annexed under the EU Commission’s remit. They also called for the EU Battlegroups to be considered part of PESCO, which will be worrying for the UK as British forces have participated four times as a lead nation on a rolling deployment since 2005.

What is happening in the UK following SDIP and EDAP? The EU has named two ‘hubs’ in the UK as part of the EU Network of Defence-Related Regions (ENDR) and one of them ‘Marine South East’ will specialise in ‘dual use’ robotics and maritime technology. Marine South East has been paid by the EU Commission to host an event in April featuring EU Commission, MOD and defence industry staff to explore what ‘More Europe in Defence’ will look like.

At the same time, pro-EU groups in the UK such as the Centre for European Reform and the (EU Commission-funded) Royal United Services Institute are going into overdrive either promoting the case for Defence Union or running down the UK’s prospects in defence autonomy.

Meanwhile, MPs will eventually hear a snapshot of what is contained in the EU’s military union plans when they are discussed by the Foreign Affairs Committee, Defence Select Committee and Exiting the EU Committee in the weeks ahead. They will have this opportunity because Sir Alan Duncan’s aforementioned note was escalated and marked as ‘politically important’ by Sir Bill Cash’s European Scrutiny Committee.

By David Banks, Veterans for Britain

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A Global Education System

Robert Oulds

Thursday, 09 February 2017

Education

How the UK should reorganise its university and research programmes

Robert Yee

9th February 2017

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The UK has the ability to leverage current networks, continue to fund its current research programmes, and expand funding for scientific innovations. Going forward, the country will have to restructure its funding and knowledge-transfer programmes with its EU allies, and maintain an open environment with visas for people working on high-impact research projects. Furthermore, and almost simultaneously, the UK will need to look to partners in the US and the rest of the world for new programmes as well. Thus, a three-pronged approached is necessary for the UK for the future:

1. Encourage study at UK universities for both EU and non-EU countries

2. Promote international collaboration and innovative research ideas

3. Provide funding and financial aid to programs covered in #1 and #2

The government should support universities and research projects and prove that the country is willing and able to become a key powerhouse of academic prowess for the twenty-first century.

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Brexit and the Supreme Court

Robert Oulds

Wednesday, 25 January 2017

Democracy

The Supreme Court has no jurisdiction in preventing the Prime Minister from invoking Article 50 to leave to EU. Its ruling is wrong. Jurisdiction was passed to the People, who have primary authority, by Parliament.

25th January 2017

One must now wonder whether in his memoirs Lord Neuberger, President of the Supreme Court will say, of the unintended consequences of the Court’s Brexit decision, “Of course, the People had made a valid decision to leave the EU but at the time it seemed the right thing to send it back to Parliament.”

We are now ruled not by law but by legalisms.

Lord Neuberger and those Justices who voted with him are wrong. Parliament is not sovereign. Parliament is an administrative system for carrying out the will of the People. In the final analysis, the People are sovereign. That was established by the French revolution of which the French are justly proud. In this county, for better or worse, Oliver Cromwell acted for the People at the time of a useless Parliament and an extravagant King.

Similarly, it is the role of the Courts to codify the will of the People. It was not the Courts that, in their love of justice, forced legislation to give women the vote or to abolish slavery on a protesting People. If the Supreme Court is to create law as it is said to have done in this instance, it must be in accord with the wishes expressed by the People.

Brexit is a matter in which the Courts have no jurisdiction. The Attorney General should not have stipulated that they had jurisdiction following Parliament’s clear decision to mandate the People to decide the matter. One can hardly expect such august, learned and powerful men to draw limits to their own powers. The Courts lost jurisdiction when Parliament handed the Brexit decision to the People and implementation to the Government. That was what the People were told and that is the position. David Cameron said publicly that in the event of a referendum vote to leave the EU he would give Article 50 notice the next day. Clearly, he expressed what Parliament intended and his powers in the matter. That he resigned rather than give Article 50 notice speaks of his ethics rather than the legal position.

Let us be plain about the situation. The Prime Minister, Theresa May, underestimated the degree of disdain for democracy in this country. Delay in giving Article 50 notice while combatting the whining, demands and invective of the Remainers permitted time for the rich and influential to devise means to keep a system from which they benefit but the People and the United Kingdom do not. The Prime Minister is acting with honesty and integrity, with the good of the Country and the People’s wishes in mind. Unfortunately, honest persons often underestimate the duplicity and unscrupulousness of the rich and powerful who seek only their own interests.

It was always foreseeable with whom the Supreme Court would side. Its statement that Parliament is sovereign is a smoke screen. Parliament unequivocally passed an unqualified, simple, majority decision to the People by the 2015 Act and statements by Government Ministers. All the evidence is that this is so; there is nothing to the contrary. The Supreme Court has failed to uphold democracy, the consequences of which are not clear, but they will not benefit the country. The Court has permitted an opening for delay and manoeuvre by those who wish to remain in the EU. I understand that their Lordships have considered this matter, by intention, without consideration of the possible consequences of their ruling. I would inform them, unqualified in law as I am, that law is always about consequences. That is its purpose. We have the case of the Iraq war as an exhibit.

It was clear the day after the referendum result on 23 June 2016 that a situation like this would occur when the Remainers immediately said that the referendum was ‘advisory’. On 12 July I wrote a letter to the Chairman of the Treasury Select Committee that was considering the referendum result. Perhaps inevitably it counted for nothing, but it was clear what had to be done. The position is unchanged. The Court is wrong. Here is the letter:

* * *

It is a sad and extraordinary day when one must say that our Supreme Court is wrong. We are experiencing events indicating that we are living in extreme and unstable times. We must deal with the times with confidence in our abilities and culture against the trouble-makers and back the Prime Minister in doing so. There is no-one else remotely capable of doing it.

By Christopher King MSc DipM DMS

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Its also bad law. The ECA 1972 was amended when the Lisbon Treaty was put through Parliament to incorporate Article 50, it was cle... Read More

Thursday, 26 January 2017 22:49

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Independence or incoherence? Why the Scottish government is misleading Scots

Robert Oulds

Monday, 23 January 2017

Democracy

Scotland’s former First Minister Alex Salmond and (then) Deputy First Minister Nicola Sturgeon in 2007, at the launch of Choosing Scotland’s Future – a White Paper on a possible independence referendum. Picture by The Scottish Government.

Scottish First Minister Nicola Sturgeon has commented on several occasions in recent weeks on the subject of a second Scottish independence referendum. She first warned that she was not “bluffing” about calling another referendum, should the United Kingdom also leave the European single market. She then ruled out holding such a vote in 2017, effectively holding the threat of it over the British government as it moves ahead with Brexit.

There’s nothing wrong with many in Scotland, as in other European regions like Catalonia, wishing for independence. Indeed, notions of sovereignty, identity, and more representative democracy were all integral to Britain’s vote to leave the European Union (EU). Where such movements lose coherence, however, is in their insistence on remaining in the EU.

Why?

Many, many laws pertaining to the UK, including Scotland, originate in Brussels. Though the exact proportion of British laws stemming from the EU is hotly contested, it is likely quite large, with some estimates ranging up to 62%. What is more important, however, is how significant some of the EU’s competencies are. An “independent” Scotland within the EU would face the same quotas on its fisheries, abide by the same agricultural policy, honour the same trade deals signed devised in Brussels, and have absolutely no control over its borders. Its government also intends to continue using the British pound as its currency. In this sense, the stated intention of being “in the driving seat of [Scotland’s] own destiny and to shape [its] own future” loses its meaning. Without full control over essential areas like borders and monetary policy, a nation is not independent.

Moreover, the EU has always made clear that to secede from a member state is to secede from the Union. As such, Scotland deciding to leave the UK in order to retain its EU membership is not only impossible, but dangerously misleading to Scots.

Beyond the glaring incoherence of the Scottish government’s position, Scots have already decided on the matter of independence, and it is irresponsible for the Scottish government to use the threat of a future referendum as a political shuttlecock. It is common practice to hold referenda once in a generation, especially if their results are as decisive as the last time Scots were consulted, in 2014 (55% in favour of remaining in the UK). Sturgeon’s postponed threat of another Scottish vote depending on how “hard” Brexit ends up being is more of a bargaining chip than a true expression of Scotland’s will. This cynical approach to politics serves no one. Scots wishing to remain in the UK are under constant threat of a second referendum, while Scots wishing for independence are being manipulated for narrow political gains.

The desire for independence is unambiguously good. All willing nations deserve to gain their sovereignty, including most recently the United Kingdom. The Scottish government’s position rejecting Westminster while embracing Brussels does not reflect a genuine yearning for independence. Rather, it smacks of political opportunism. The people of Scotland –both for and against independence– deserve better.

This article first appeared on http://theeurosceptic.com

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What it will look like: How leaving the EU and the Single Market can be made to work for Britain

Robert Oulds

Tuesday, 17 January 2017

Trade

The PM, Theresa May, must focus on eliminating tariffs and clearing the EU's burdensome barriers to trade

17th January 2017

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The Bruges Group report What it Will Look Like: How leaving the EU and the Single Market can be made to work for Britain details the potential challenges the UK faces when it leaves the EU. The report also explains how these problems can be addressed by Her Majesty's Government, ahead of Theresa May's planned Brexit speech on Tuesday 17th January 2017.

Only by knowing the potential pitfalls can the Prime Minister hope to mitigate and eliminate the EU’s burdensome trade rules and bureaucracy. The UK can then take advantage of the global opportunities that await us.

Drawing upon decades of research and analysis, this report clearly explains how:

There is no such thing as a truly 'Hard Brexit' - but there are significant obstacles.
A UK-EU trade agreement, focused on tariff reduction and clearing customs, could take just 18 months to complete.
The UK's bargaining position is stronger than many commentators believe.

This report deals with the top ten issues of withdrawal from the EU. It explains that specific, easily reached agreements on the mechanics of trade in both goods and services will not only resolve any problems that may arise when exporting to the EU but such arrangements will also protect and enhance our trade with the EU.

Theresa May needs to address in her EU speech the solutions outlined in this report. Brexit negotiators can draw on the findings of this new Bruges Group study which sets out a bold vision for Brexit and how exiting the EU, and even the single market and the customs union, can be made to work.

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Freedom of Movement and the Cruelty of the Euro

Robert Oulds

Monday, 09 January 2017

Euro and Economy

To escape the damage caused by the euro, and the resulting problems of mass migration, Brexit is essential for the UK

9th January 2017

Summary

1. The euro prevents EU countries with weak economies using currency exchange rates to adjust their competitiveness within and external to the EU. The EU therefore has a policy of ‘rebalancing’, or ‘internal devaluation’. Rebalancing relies on the failure of uncompetitive industries. The result is unemployment, lower wages and lower prices together with austerity justified by high levels of sovereign debt. These pressures on the population are intended to force the creation of competitive trading industries and reduce non-trading activities.

2. Regional EU payments are bureaucratically allocated and managed. They are inadequate, inappropriate and inefficient compared with simple and automatic floating exchange rate adjustments.

3. Freedom of movement theoretically reduces the unemployed population by moving labour to stronger economies that have labour shortages. This is the reason for its importance to the Euro model.

4. Rebalancing involves severe dislocation and widespread hardship. The relief of hardship by EU welfare provision is inadequate and counter to the desired pressures to bring about rebalancing. The EU policy of rebalancing is entirely unethical, repressive and manipulative. It is a cruel policy reminiscent of Stalin’s forced 1930/40s population transfers. Moreover, in practice it does not work and therefore nor does the euro.

5. By contrast, Brexit is ethical and traditional in seeking to develop local economies without dislocation and with whatever support is needed. It incorporates normal exchange rate adjustments and acceptance of skilled persons of any origin through controlled immigration. Many who voted for Brexit voted for jobs and standard of living. The characterization of controlled immigration through Brexit as racist and discriminatory attempts to disguise the cruel nature of EU internal ‘rebalancing’.

* * *

Freedom of Movement and the Cruelty of the Euro

1. It is a false accusation that the UK’s wish to control immigration is racist and discriminatory. That accusation is intended to disguise a vicious and cruel EU policy. Freedom of movement is asserted by the European Union to be a privilege and great benefit. That is not true. Its fundamental purpose and the reason for the EU’s insistence that the UK accepts it as a condition of market access following Brexit is to enforce use of the euro.

2. It is well known that prior to adoption of the Euro the weaker economies of Southern Europe, such as Greece, were able to maintain rough competitiveness with the stronger states such as Germany by currency exchange rate movements. After adoption of the Euro this was no longer possible, either within the EU or in relation to countries outside the EU. The IMF, ECB and European Commission therefore adopted a policy of ‘rebalancing’.

3. The rebalancing or ‘internal devaluation’ model assumes that when competitive trading differences arise between countries, the less competitive industries will fail. There will be unemployment, less demand and a consequent fall in wages and prices. Austerity is a tool to reinforce this process. Where these conditions occur, the countries affected must develop more competitive production methods and move resources from non-trading activities to trading production. Those persons made unemployed by this process or who cannot find work should be able to emigrate to EU countries that are more competitive and where there are labour shortages. This is the reason why freedom of movement is essential to the EU. It reduces the economic pressures that are desirable for rebalancing.

4. Unemployment, euphemistically called ‘labour shedding’ is regarded as essential to rebalancing. The ECB at present purchases company debt to sustain the financial markets since even negative interest rates and money printing have failed to give growth. The EU regional funds that are given to Greece and Spain for social and economic purposes are inadequate, inappropriate and are inefficiently bureaucratically allocated and managed. In practice they do not materially reduce the pressures for rebalancing/internal devaluation. The only large scale assistance offered is more debt, additional to the debt that is a major part of their economic problems in the first instance.

5. The traditional simple and automatic rebalancing of competitiveness by exchange rate movements involves little or no drastic economic reorganization or social disruption. That is not the case within the Eurozone. Eurozone rebalancing is driven by closure of industries, unemployment and migration. The creation of new competitive industries is merely an aspiration. The notion that competitiveness can be equalized between Greece and Germany, for example, by these means is absurd.

6. The simple unemployment rate does not, of course, reflect the quality of employment taken up by employees from failed industries. Their first option will be to take whatever employment is avalable, which will probably be at a lower income and living standard. This is part of the ‘rebalancing’ process.

7. The closure of uncompetitive industries with theoretical development of new competitive industries is euphemistically called ‘structural reform’. In the real world, uncompetitive industries within the Eurozone definitely close; in competition with Germany and other Northern states, competitive industrial development of the southern EU states definitely does not and can not occur. This is the source of the present imbalances within the EU.

8. Apparently, the EU rebalancing policy has developed from a United States model. If so, it is wholly inappropriate. The United States is homogeneous for language and culture. Even so, unacceptable within-country imbalances have occurred as they also have in the UK. It is these that have given rise to the protest votes for Donald Trump and Brexit. The EU is not homogeneous for language, culture and many other factors. For these reasons, Europeans are much more attached to their locality of origin than Americans.

9. In any country, a major rigidity is that the unemployed usually have low skills. They cannot afford to move or are unwilling to leave an uncomfortable but manageable situation where housing, family and familiar support networks exist and move to another country having a different language where there are great uncertainties.

10. Persons who are skilled and have money will regard freedom of movement as beneficial, for holidays, or retirement for example. Many of these would wish to relocate for career reasons in any case. They would be welcomed by receiving countries, as the UK welcomes such persons from any country and would do so following Brexit. Young persons with qualifications and without family will also emigrate readily, although their loss disadvantages their countries of origin. It is evident however, that those often older persons who are displaced from failed industries will be least able or willing to emigrate. This is what can be seen in practice.

11. Adoption of the euro has therefore generated economic imbalances that will not be rectified automatically. Worse, the rebalancing policy based on the euro has created hardship for millions of people in Southern Europe and the Republic of Ireland. It is a cruel policy that ignores human welfare and rather than encouraging prosperity, is indifferent to the pain that it causes.

12. The human cost of the EU’s rebalancing policy, that is driven by industry failure and unemployment, has always been known to the institutions of the EU but they have chosen to ignore it. The UK’s Brexit is based on positive policies to create employment by assisting existing industries and developing new ones with, of course, exchange rate adjustment of external competitiveness. Not only is the EU’s rebalancing policy an ethical disgrace, the attempt to disguise its true nature and purpose by labelling those who do not accept it as racists is despicable.

13. Together with these considerations, many EU states have very large public and private debt that will never be repaid. This requires separate consideration but, briefly, debt permits control by the EU central institutions, particularly the ECB and IMF. Its most obvious outcome is the sale of state assets, further weakening states that are undergoing ‘rebalancing’ stress. It is these destructive debts knowingly given by the banks and underwritten by the ECB and IMF that provide the rationale for austerity. Austerity is intended to reinforce ‘rebalancing’.

14. There may be said to be four broad groups of people affected by Brexit:

i. People who are aware that they are suffering, or at least are not benefiting, due to EU policies. They tend to support Brexit because their local industries have vanished and they want jobs and a reasonable living standard. They are often not well educated and do not understand the technicalities of the Euro or how the EU functions. Although not articulated in these terms, their views contain implied strategic factors as well as self-interest. They identify uncontrolled immigration as evidence that the UK no longer controls its own economy and their destiny. This enables pro-EU activists to label them as ignorant, racist or espousing ‘the politics of hate’.

ii. Educated and well-informed persons who understand that the EU is undemocratic, administered by a super-rich elite with dependent politicians, a large dependent bureaucracy and a dysfunctional currency. They understand that the BIS, ECB and banks generally control the EU. They might know, for example, that Mario Draghi came from bankers Goldman Sachs, achieved Presidency of the ECB and after his term of office returned to Goldman Sachs. They might know that Goldman Sachs conspired with Greek politicians to hide Greece’s debts in order to obtain EU entry, so laying the foundation for the present economic misery of the Greek people. They may view the EU to be on the path to tyranny, which would not be unusual in some EU countries.

iii. Usually middle class persons who support the EU and believe that it is beneficial because their jobs depend on EU trading, are publicly funded or EU funded. These apparently do not understand how the EU operates or do not care. Their evaluation is based on their immediate interests rather than whether the EU system is democratically legitimate or benefits the UK.

iv. The rich and high level executives in international companies, banks, the ECB and IMF who understand the EU. They will fight to retain the euro because it is they who have designed it in their own interests to make them richer and to give them political control of the EU through its economy. This group believes in ‘realpolitic’ rather than democracy and will support tyranny as it has in the past.

13. Because it is clear that the existing banks are hostile to Brexit, a priority for Brexit planning must be to organize a banking system independent of the ECB and the existing big banks. Ideally local mutual units would be best for SMEs with a large central unit for major development and export finance. The role of the Bank of England needs close examination. The recent actions of the Royal Bank of Scotland in asset-stripping vulnerable SMEs indicates where the interests of all bankers lie. It is noteworthy that Richard Branson who cultivates his image as ‘a man of the people’ has recently publicly opposed Brexit and is financing an opposition group. The EU operates for the very rich.

14. Those who designed the EU’s euro ‘rebalancing’ policy view people as theoretical economic units without human needs, feelings and attachments to family and locality. Theoretically, it is not desirable to give welfare to because this would lessen the economic pressure that is essential to rebalancing. In any case, the levels of welfare assistance would be impossibly large for the EU to accept. This neglect of welfare is to the extent that in Greece large numbers of people are homeless and actually starving and in Spain youth unemployment is 45-50 percent. ‘Rebalancing’ is not based on a democratic, egalitarian view of society. It is a policy of repression and manipulation without any ethical content. For this reason the euro does not work and nor does the EU.

15. The creation of the EU and Euro is a far development from the Common Market that the UK joined. The Common Market has moved from national directly elected parliamentary democracies to a centralized bureaucracy managed by a political and economic elite. This elite, most visible in central banks, the ECB and IMF has little if any connection with or responsiveness to the immediate needs of the population. It is not at all clear that the first priority of the EU is the welfare of its population.

16. Brexit has a democratic and ethical foundation based on centuries of trading, economic development experience and the democratic development of society. It will be traditionally designed to give benefits with the minimum of dislocation possible, to develop local skills and industries and to welcome skilled workers from all other countries.

17. It is the writer’s view that on present trends, full EU integration based on the euro and supremacy of the banks over the public interest can only be achieved by political repression and a police state, that is, tyranny. That is a form of government that often occurs in Europe. The EU and UK parliament have permitted the spying and financial infrastructure of tyranny to be assembled under the guise of fighting terrorism. The democratic Brexit decision is now being labelled ‘tyranny of the majority’ (John Major) and ‘populism’. It is a bad sign.

By Christopher King MSc DipM DMS

Most of the following are discussion papers, not official ECB or IMF papers.

Official IMF report 2015 http://www.imf.org/external/np/pp/eng/2015/110915.pdf

http://voxeu.org/article/rebalancing-eurozone-internal-adjustments-won-t-be-enough )

http://www.imf.org/external/pubs/ft/sdn/2014/sdn1407.pdf

https://www.imf.org/external/pubs/ft/wp/2014/wp14130.pdf

http://www.economonitor.com/blog/2013/11/europe-the-failure-of-internal-devaluation/

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Will Donald Trump save or kill the Euro?

Robert Oulds

Wednesday, 04 January 2017

Euro and Economy

The EU's single currency, the Euro, is being unbalanced by the strength of the German economy. The undervalued Euro is used by Germany in a beggar-thy-neighbour policy to expand its exports; hurting not just the other members of the Eurozone but also countries further afield, including the United States. If the USA forces Germany to abandon this policy, it will mean Germany leaving the Euro. This will either be the end of the single currency experiment, or its salvation.

4th January 2017

During the election campaign Donald Trump highlighted a structural flaw in the US economy, namely, the country’s huge structural trade deficit, which he claimed is hurting many Americans. Trump’s message was very simple: if instead of importing products the US exported them there would be more highly paid jobs in the US. Trump claimed that not all of the US’s trading partners are trading fairly with the US. The implication being that some countries are taking US jobs unfairly. Angela Merkel was clearly worried about this rhetoric. Although Trump did not name Germany, she is clearly concerned that Germany will be exposed as having an unfair trading advantage with the US because it is benefitting from an under-valued Euro.

Although no one would claim that Germany abandoned the Deutschemark in favour of the Euro in 1999 to gain an unfair trading advantage, this is undeniably what has happened. As can be seen from the following table this has increased Germany’s current account surplus with the rest of the world.

Germany’s exports are now 30-35% cheaper in US dollars than they would have been if the country had retained the Deutschmark. This calculation is based on the assumption that the Deutschmark would have maintained its value against the Swiss franc. And, it ignores the fact that Switzerland has intervened in the foreign exchange markets from time to time to depress the value of the Swiss franc against the US dollar and other currencies. The Euro has become a disguised form of protectionism for the German economy, by making its exports cheaper and imports more expensive. Moreover, this is not a problem that is likely to disappear. The longer the Euro exists, at least in its current form, the greater the problem will become. The question is what, if anything, will the new Trump Administration do about Germany’s unfair trading advantage and its ever growing current account surplus with the US.

Under the Obama administration, the US enacted the Trade Facilitation and Trade Enforcement Act 2015. One of the purposes of this Act is to identify those countries which are trading unfairly with the US. This Act focusses on individual EU member states rather than on the EU as a single entity. Title VII focuses on currency manipulation (sections 701-2). Section 701(a)(2)(A)(ii) seeks to identify any major trading partner of the US that has:

(1) a significant bilateral trade surplus with the US (economies with a bilateral goods surplus of at least $20 billion (roughly 0.1 percent of U.S. GDP) are regarded as having a “significant” surplus);

(2) a material current account surplus (current account surpluses in excess of 3 percent of GDP to be “material”); and

(3) engaged in persistent one‐sided intervention in the foreign exchange market (net purchases of foreign currency, conducted repeatedly, totalling in excess of 2 percent of an economy’s GDP over a period of 12 months to be persistent, one‐sided intervention).[i]

In its October 2016 report, the US Treasury Department identified seven countries as satisfying the first criterion (China, Germany, Japan, Mexico, Korea, Italy and India), four countries as satisfying the second criterion (Germany, Japan, Taiwan and Switzerland) and two countries satisfying the third criterion (Switzerland and Taiwan).

Germany satisfies the first two criteria because it has a bilateral goods surplus with the US of $71.1bn, which represents 9.1% of its GDP, well above the thresholds of $20bn and 3% respectively. Germany would only fall foul of the third criterion if the ECB sold Euros on a persistent basis in the foreign exchange markets. Germany would fail to satisfy the third criterion even if the Euro conferred a much greater advantage to the Germany economy than it does today. This is because the Obama administration has adopted the definition of currency manipulation which is used by the IMF. This definition predates the formation of the Euro zone. It assumes that the only way in which a country is able to artificially reduce the value of its currency to gain a trading advantage is by intervening in the foreign exchange markets. This fails to recognise that another way of achieving the same objective is to join a currency union, such as the Euro. What is important is not how a country achieves an under-valued currency, but rather whether it has one, or not.

Ideally, the IMF would take the lead in addressing the deep seated structural problems of the Euro zone, and the serious threat which the Euro zone will ultimately pose to the global economy. Unfortunately, this is a problem that the IMF is unable to view objectively. This is because European countries enjoy a disproportionate share of the votes on the IMF’s board. This is illustrated by the fact that the IMF is currently headed by Christine Lagarde, a former French politician, and the previous ten managing directors of the IMF have all come from EU countries, with many being former politicians.

The new Trump administration, namely, Steven Mnuchin (Treasury Secretary), Wilbur Ross (Commerce Secretary) and Robert Lighthizer (US Trade Representative) cannot expect any help from the IMF in addressing the unfair advantage that Germany has in its trading relations with the US, and other countries. This is most unfortunate because it means that if the US wishes to address this problem it would have to take unilateral action on what would be a politically sensitive subject with an important European ally. However, if the new Trump administration is able to show beyond any reasonable doubt that Germany is benefiting unfairly in its trading relationship with the US from being part of the Euro zone it will have the moral authority to take action. In such circumstances, Donald Trump is also more than capable of highlighting the shortcomings of the IMF in not addressing this problem. The question is: what action could a new administration take to address this problem?

An obvious answer is for the new administration to change the definition in the third criterion of section 701(a)(2)(A)(ii), so that it captures any country that is benefiting from a persistently under-valued currency against the US dollar. If this change were made Germany would fall foul of all three criteria. In such circumstances the Act states (section 701(b)(1)(A-D)) that the “President, through the US Treasury Secretary, shall:

(A) urge implementation of policies to address the causes of the undervaluation of its currency, its significant bilateral trade surplus with the United States, and its material current account surplus, including undervaluation and surpluses relating to exchange rate management;

(B) express the concern of the United States with respect to the adverse trade and economic effects of that undervaluation and those surpluses;

(C) advise that country of the ability of the President to take action under subsection (c); and/or

(D) develop a plan with specific actions to address that undervaluation and those surpluses.”

If the US is unable to persuade Germany to take steps to address this problem the President is able to take the following limited action under the Act (section 701(c)(1)(A-D)), and in particular (C) and (D):

(C) instruct the US’s Executive Director of the IMF to call for additional rigorous surveillance of the macroeconomic and exchange rate policies of that country and, as appropriate, formal consultations on findings of currency manipulation, or

(D) instruct the US Trade Representative to take into account, in assessing whether to enter into a regional trade agreement with that country or to initiate negotiations with respect to a regional trade agreement with that country, the extent to which that country has failed to adopt appropriate policies to correct the undervaluation and surpluses described in subsection (b)(1)(A).

As mentioned, the new US administration cannot expect any assistance from the IMF in this matter. The subject of Germany benefitting from an under-valued currency could be another reason for the Trump administration not signing T-TIP, as to do so would undermine its bargaining position on this subject.

More generally, if both President Trump and Congress wished to escalate this dispute they could take the ultimate sanction of increasing duties/tariffs on German goods to counter the benefit which this country is receiving from an under-valued currency. Although the President and Congress do not currently have the requisite authority to take this action they could acquire this authority by passing the necessary legislation. It has been suggested that the US might target currency manipulation by imposing a countervailing duty. Germany and the EU would no doubt complain to the WTO about the US’s action, but such disputes tend to take a long time to resolve. Furthermore, there is some ambiguity as to how such a dispute would be settled.

If the Trump administration were to focus on Germany’s unfair trading advantage it is likely to negotiate in a tough, but realistic manner with Germany and the EU. They know that Germany and the EU are unable to solve the problems associated with the Euro zone overnight. They will no doubt want Germany to make concrete proposals that will address the problem of the country’s every growing trade surplus with the US. At present, the IMF is doing Germany’s bidding and only requiring the Club Med countries in the Euro zone to embrace structural reforms. The US will no doubt want Germany to also make structural reforms, because its current economic policies are supressing domestic demand, which means that its economy is overly dependent on the demand from other countries such as the US. It can be expected that the US will urge Germany to adopt policies to boost domestic demand. Initially, Angela Merkel and Wolfgang Schäuble will no doubt resent the interference from the Trump administration into their domestic affairs and will find their proposals deeply unpalatable. However, on reflection they will hopefully see these proposals as a constructive way of easing the tensions in their trading relations with the US, and also benefitting their EU partners. Angela Merkel being a pragmatist will appreciate that the Trump Administration could force Germany to leave the Euro. This could be achieved by either imposing a countervailing duty on German goods or by removing Germany’s most favoured nation status and imposing tariffs on German goods. Germany would then be faced with a choice of either remaining in the Euro and suffering a duty/tariff on their exports to the US, or leaving the Euro. In either event, Donald Trump’s intervention on the issue should be welcomed as addressing an unsustainable structural flaw in the global economy.

[i] https://www.congress.gov/114/plaws/publ125/PLAW-114publ125.pdf (Trade Facilitation and Trade Enforcement Act 2015)

https://www.treasury.gov/resource-center/international/exchange-rate-policies/Documents/2016-10-14%20(Fall%202016%20FX%20Report)%20FINAL.PDF (Foreign Exchange Policies of the Major Trading Partners of the United States, Report to Congress, US Department of the Treasury Office of International Affairs, October 2016)

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Robert Oulds

Germany has been amongst the biggest distorters of world trade unbalancing the Euro, even breaking the EU's rules in their search ... Read More

Thursday, 05 January 2017 13:12

Robert Oulds

You are right, Germany (Angela Merkel) complains about him. She is trying to position herself as the last line of defence against ... Read More

Thursday, 05 January 2017 19:35

Robert Oulds

Thank you

Monday, 30 January 2017 09:32

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MoUs – the key to a smooth Brexit?

Robert Oulds

Monday, 19 December 2016

Trade

Whichever form Brexit eventually takes, whether ‘hard’ or ‘soft’; most parties would like the transition to be as painless and smooth as possible. To ensure that the Brexit process runs seamlessly, the UK and the EEA countries could agree a time-limited transition deal as a temporary ‘stepping stone’ to the final outcome.

19th December 2016

The deal need not be an official treaty but could take the form of what is called a Memorandum of understanding or MoU.

As the UK government website states:

“An MoU records international "commitments", but in a form and with wording which expresses an intention that it is not to be binding as a matter of international law. An MoU is used where it is considered preferable to avoid the formalities of a treaty – for example, where there are detailed provisions which change frequently or the matters dealt with are essentially of a technical or administrative character; in matters of defence or technology where there is a need for such documents to be classified; or where a treaty requires subsidiary documents to fill out the details. Like a treaty, an MoU can have a variety of names and can also be either in the form of an exchange of notes or a single document. However, the formalities which surround treatymaking do not apply to it and it is not usually published. Confusingly some treaties are called memoranda of understanding. Although an MoU is not legally binding it should be no less carefully drafted than if it were a treaty, given that it is always the intention to perform all HMG's commitments, whether legally binding or not.”[1]

An MoU is an established device In public international law; less official that a treaty but more than a gentleman’s agreement. MoU’s can take various forms and can serve wildly different purposes. They can be short and cover one specific issue or be lengthy, covering a range of topics.

Examples include the Memorandum of Understanding on Trade and Investment (MOUTI) Between the Government of Canada and the Governments of Costa Rica, El Salvador, Guatemala, Honduras and Nicaragua[2] and the Memorandum of Understanding between the Council of Europe and the European Union[3]

While they lack the legal certainty of treaties, the semi-official nature of MoUs means that one (or several relating to different areas of co-operation) could likely be signed quickly, without extensive consultation, parliamentary chicanery or ratification delays – as opposed to a potentially lengthy Free Trade Agreement (FTA) ratification.

These interim documents could help avoid a potential ‘cliff edge’ scenario as the 2 year article 50 period draws to a close in 2019.

Once agreed, the document (or documents) should be signed by the Secretary of State for Foreign and Commonwealth Affairs on behalf of Her Majesty's Government, representatives of the European Council and European Commission (including the High Representative of the European Union for Foreign Affairs and Security Policy) on behalf of the EU and a representative from the EEA Council.

The text of the ‘deal’ should be officially sent to the FCO Treaty Section, The European Commission and The EEA Council. We would then receive their signed copies in exchange, under the established procedure of international law called ‘Exchange of Letters/Notes’.

As a sign of good faith, the MoU(s) (signed by all parties) could then be deposited with the Secretary-General of the United Nations. This would not make the document any more or less binding, but it would be a show of good faith and would reassure businesses and concerned groups that all sides were committed to a stable transition. MoU’s could therefore go a long way towards bridging the gap between our current EU membership and our final negotiated arrangement.

Below is a brief outline of what we believe the UK-EEA MoU could look like.

Memorandum of Understanding

The purpose of this Memorandum of Understanding (hereinafter referred to as "MoU") is to maintain co-operation and secure free trade in goods and services between the signatories of the European Economic Area (EEA) agreement and the UK.

This MoU is intended to maintain where possible the Status quo ante in terms of trade until a more permanent agreement can be reached between the Parties.

This Memorandum of Understanding is not legally binding on the Parties. This MoU is agreed in good faith between the signatories, on the basis that it is a fair and honest representation of their intentions.

Duration and Term

This agreement is intended to last for a period of two years from the date of signature. It may be renewed once, for a period of 12 months if all Parties agree.

Memorandum of Understanding on Trade and co-operation between the United Kingdom and the EEA

BETWEEN THE UNITED KINGDOM OF GREAT BRITAIN AND NORTHERN IRELAND, OF THE ONE PART, AND THE SIGNATORIES OF THE EEA AGREEMENT:

[THE KINGDOM OF BELGIUM, THE REPUBLIC OF BULGARIA, THE CZECH REPUBLIC, THE KINGDOM OF DENMARK, THE FEDERAL REPUBLIC OF GERMANY, THE REPUBLIC OF ESTONIA, IRELAND, THE HELLENIC REPUBLIC, THE KINGDOM OF SPAIN, THE FRENCH REPUBLIC, THE REPUBLIC OF CROATIA, THE ITALIAN REPUBLIC, THE REPUBLIC OF CYPRUS, THE REPUBLIC OF LATVIA, THE REPUBLIC OF LITHUANIA, THE GRAND DUCHY OF LUXEMBOURG, HUNGARY, THE REPUBLIC OF MALTA, THE KINGDOM OF THE NETHERLANDS, THE REPUBLIC OF AUSTRIA, THE REPUBLIC OF POLAND, THE PORTUGUESE REPUBLIC, ROMANIA, THE REPUBLIC OF SLOVENIA, THE SLOVAK REPUBLIC, THE REPUBLIC OF FINLAND, THE KINGDOM OF SWEDEN, ICELAND, THE PRINCIPALITY OF LIECHTENSTEIN, THE KINGDOM OF NORWAY], OF THE OTHER PART, hereafter jointly referred to as the “Parties”:

RECOGNISING the longstanding alliances between the UK and the nations of Europe;

COMMITTED to renewing their close and lasting relationship that is based on common values, namely respect for democratic principles, the rule of law, good governance and free and fair trade;

DESIRING to maintain currently high levels of trade and investment and seeking to avoid future barriers to mutual trade and investment;

RECOGNISING that UK as a European country shares a common history and common values with the Member States of the European Union (EU) and the member states of the European Free Trade Association (EFTA);

RECOGNISING the importance of International trade and economic cooperation;

COMMITTED to combating organised crime and money laundering, to reducing the supply of and demand for illicit drugs and to stepping up cooperation in the fight against terrorism;

HAVING REGARD to the outcome of the 23^rd June 2016 UK Referendum on EU membership;

BUILDING on their respective rights and obligations under the Marrakesh Agreement Establishing the World Trade Organisation, done on 15 April 1994 (hereinafter referred to as the ‘WTO Agreement’) and other multilateral, regional and bilateral agreements and arrangements to which they are party;

HAVE AGREED as follows:

CHAPTER I:

ARTICLE 1 DEFINITIONS

General definitions

For the purposes of this Agreement and unless otherwise specified:

GATS means the General Agreement on Trade in Services, contained in Annex 1B to the WTO Agreement;

GATT 1994 means the General Agreement on Tariffs and Trade 1994, contained in Annex 1A to the WTO Agreement;

Parties means, on the one hand, the European Union or its Member States or the European Union and its Member States within their respective areas of competence as derived from the Treaty on European Union and the Treaty on the Functioning of the European Union (hereinafter referred to as the 'EU Party'), and on the other hand, the UK;

TBT Agreement means the Agreement on Technical Barriers to Trade, contained in Annex 1A to the WTO Agreement;

TRIPS Agreement means the Agreement on Trade-Related Aspects of Intellectual Property Rights, contained in Annex 1C to the WTO Agreement;

UK-EEA Joint Committee means the UK-EEA Joint Committee established under Article 5.1 (The UK-EEA Joint Committee);

Vienna Convention on the Law of Treaties means the Vienna Convention on the Law of Treaties, done at Vienna on 23 May 1969;

WTO means the World Trade Organization; and

WTO Agreement means the Marrakesh Agreement Establishing the World Trade Organization, done on 15 April 1994.

ARTICLE 2 OBJECTIVES

1. The Parties hereby establish a free trade area on goods, services, establishment and associated rules in accordance with this Agreement.

2. The objectives of this Memorandum of Understanding (hereinafter referred to as "MoU") are:

(a) to liberalise and facilitate trade in goods between the Parties, in conformity with Article XXIV of the General Agreement on Tariffs and Trade 1994 (hereinafter referred to as ‘GATT 1994’);

(b) to liberalise trade in services and investment between the Parties, in conformity with Article V of the General Agreement on Trade in Services (hereinafter referred to as ‘GATS’);

(c) to provide appropriate protection of intellectual property rights, in accordance with the highest international standards, in conformity with TheAgreement on Trade-Related Aspects of Intellectual Property Rights(hereinafter referred to as ‘TRIPS’);

(d) to work to reduce non-tariff barriers between the parties, in conformity with the Technical Barriers to Trade (‘TBT’) Agreement;

(e) to promote peace and security for all Europeans.

Article 3 Relation to the WTO Agreement and other agreements

The Parties affirm their rights and obligations with respect to each other under the WTO Agreement and other agreements to which they are party.

Article 4 Customs duties

No new customs duty on imports shall be introduced in trade between the EEA states and the UK. Parties shall not institute any new taxes or other measures having an equivalent effect imposed on, or in connection with, the exportation of goods to the territory of each other.

Article 5 Joint Committee - establishment

1. A UK-EEA joint committee is hereby established, which shall be responsible for the administration of the agreement and shall ensure its proper implementation. For this purpose, it shall make recommendations and take decisions in the cases provided for in the agreement. These decisions shall be put into effect by the contracting parties in accordance with their own rules.

2. For the purpose of the proper implementation of the agreement the contracting parties shall exchange information and, at the request of either party, shall hold consultations within the joint committee.

3. The joint committee shall adopt its own rules of procedure.

Article 6 Joint Committee - constitution

1. The joint committee shall consist of representatives of the EEA and its signatory states, on the one hand, and of representatives of the UK, on the other.

2. The joint committee shall act by mutual agreement.

3. The joint committee shall meet at least twice a year in order to review the general functioning of the agreement, with the meetings alternating between Brussels/Strasbourg and London.

4. The joint committee shall, in addition meet whenever special circumstances so require, at the request of either contracting party, in accordance with the conditions to be laid down in its rules of procedure.

5. Each contracting party shall preside in turn over the joint committee, in accordance with the arrangements to be laid down in its rules of procedure.

6. The joint committee may decide to set up any working party that can assist it in carrying out its duties.

Article 7 political dialogue

1. The parties shall hold, by mutual agreement regular meetings at Foreign Minister level.

2. The parties shall take full and timely advantage of all diplomatic channels between the Parties, including within the United Nations (and specifically the UNECE), the Council of Europe, the OSCE and other international fora, to work towards resolution of shared problems.

3. Other procedures and mechanisms for political dialogue, including extraordinary consultations, shall be set up by the Parties by mutual agreement.

Article 7 Combating crime and terrorism

1. The Parties agree to work together at bilateral, regional and international levels to prevent and combat crime and terrorism in accordance with national and international law.

2. The main focus and instrument of this co-operation shall be via INTERPOL

3. The UK shall sign an operational agreement with EUROPOL

4. The Parties agree to co-operate closely via the United Nations Office on Drugs and Crime (‘UNODC’) and World Customs Organization(WCO).

5. The Parties agree to exchange information on terrorist groups and their support networks;

Article 8 Facilitating trade

1. The Parties agree to work closely on customs matters in order to facilitate legitimate trade and to ensure the integrity of supply chains.

2. The contracting parties also recognize the need for minimizing the incidence and complexity of import and export formalities and for decreasing and simplifying import and export documentation requirements.

3. The Parties agree to work closely to minimize difficulties caused by rules of origin (ROO) and that on the importation of products from the territory of a contracting party into the territory of another contracting party, the production of certificates of origin should only be required to the extent that is strictly indispensable.

Final Clauses

1. This Memorandum of Understanding may be amended by the written concurrence of all Parties.

2. The Memorandum of Understanding comes into effect upon signature and will remain in effect unless terminated by consensus. Any Party may withdraw from this Arrangement with previous written notification, twelve months in advance to the other Parties.

Authentic texts

This Agreement is drawn up in duplicate in the Bulgarian, Czech, Danish, Dutch, English, Estonian, Finnish, French, German, Greek, Hungarian, Italian, Latvian, Lithuanian, Maltese, Polish, Portuguese, Romanian, Slovak, Slovenian, Spanish, Swedish, Icelandic and Norwegian languages, each of these texts being equally authentic.

This agreement will be approved by the contracting parties in accordance with their own procedures.

Done at Brussels on the first day of May in the year two thousand and nineteen.

For the United Kingdom of Great Britain and Northern Ireland:

Für die Bundesrepublik Deutschland / For the Federal Republic of Germany:

Thar cheann Na hÉireann / For Ireland:

For the European Union / Pour l'Union européenne:

For the EEA Council:

References:

[1] https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/293976/Treaties_and_MoU_Guidance.pdf

[2] http://www.international.gc.ca/trade-agreements-accords-commerciaux/agr-acc/other-autre/ca-ac.aspx?lang=eng

[3] https://eeas.europa.eu/sites/eeas/files/mou_2007_en.pdf

[/pb_text][/pb_column][/pb_row]

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Robert Oulds

Thank for your comment. Very helpful. If he EU decides that the withdrawal agreement needs to have the status of an Association Ag... Read More

Tuesday, 03 January 2017 20:00

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Brexit: UK now able to tackle tax havens

Robert Oulds

Saturday, 17 December 2016

Taxation

The EU is a dysfunctional organisation in the area of corporate tax

17th December 2016

Summary

The EU is a dysfunctional organisation in the area of corporate taxes because:

1. the EU Commission is not able to prevent EU countries such as Ireland, Belgium and Luxembourg operating as tax havens (this is because member states have not conferred legislative competence on the EU over direct taxation), and

2. the Court of Justice of the European Union (CJEU) has developed the fundamental freedoms in its case law to prevent other EU countries tackling the artificial diversion of profits to these tax havens, unless the arrangements are “wholly artificial” (please see the CJEU’s decision in the Cadbury Schweppes case (C-196/204)). The CJEU applies the most liberal, even extreme, interpretation of Organisation for Economic Co-operation and Development (OECD) tax rules to allow multi-national corporations to avoid taxation.

One of the advantages of the UK leaving the EU is that the UK will be free to prevent UK companies from shifting their UK taxable profits to EU tax havens, such as Ireland, Luxembourg and Belgium, and non-EU tax havens.

Background

Tax avoidance is costing the UK billions, and the UK Government is powerless to address the problem all the time the UK remains in the EU. This is because of the supremacy of EU law over English law. Consider, for example, the CJEU’s decision in the Cadbury Schweppes case (C-196/204). The case states that companies are free to shift their taxable profits to tax havens within the EU to reduce the burden of taxation in their host state unless the arrangements are “wholly artificial”. Given that companies are able to ensure that their tax avoidance activities are not “wholly artificial”, this means that the UK is powerless to prevent UK based multi-national companies from engaging in tax avoidance in the other 27 member states.

Large UK based multi-national companies are not only aware of the opportunity which the CJEU’s decision has created, they are readily exploiting this decision for their own advantage. This is one of the reasons why so many large UK based multi-national companies were in favour of the UK remaining in the EU. They know that if the UK leaves the EU, there will be no restriction on the UK Government from tackling tax avoidance.

Countries remaining in the EU can only solve this problem by conferring on the EU authority over direct taxes, to determine the tax base and the rates of tax, so that tax havens no longer exist within the EU. If this were to happen, companies operating within the EU would not be able to gain an advantage by shifting their taxable profits to the member state offering the lowest effective tax rate, or exploit the asymmetries between the bases on which member states levy tax. Such a proposal is on the EU Commission’s agenda, because it recognises that it is impractical to have a single market where member states compete against each other for the taxable income of companies. The only winners in such an environment are large multi-national companies.

The EU Commission has made proposals to remedy, one aspect of this problem, namely, for member states to have a common tax base (please see the Commission’s reports entitled A Common Consolidated EU Corporate Tax Base (2004), analysed first by the Bruges Group, and A Fair and Efficient Corporate Tax System in the EU (2015)). If the EU Commission’s proposal were implemented it would solve part of the problem. To solve the other part, the EU would need to be allowed to set the rates of tax for all companies operating within the EU.

In an environment where member states are able to compete for taxable income, the smaller EU states, such as Ireland, Belgium and Luxembourg, will always be able to offer the lowest effective rates of tax. This is because they have less to lose than the larger member states from offering lower rates of tax to their domestic companies. As a consequence, the EU has become an area for companies to seek out the lowest effective rate of tax for their taxable income. This problem is particularly acute where income arises from mobile capital, such as finance and intellectual property, which for many large multi-national companies is their main source of income. It is not as though the smaller states benefit from this situation, because the amounts of tax which they collect are negligible. The big winners are the large multi-national companies.

This is not a problem that critics of the EU have invented. One only has to read the following comments by the EU Commission to realise that this is a real problem:

“unfettered tax competition which facilitates aggressive tax planning by certain companies creates competitive distortions for businesses, hampers growth-friendly taxation and fragments the Single Market.

However, the co-existence of 28 different tax systems in one integrated market has also resulted in strong tax competition between Member States. As a consequence, Member States have progressively lowered their corporate tax rates, in order to protect their tax bases and attract foreign direct investment.

…….as corporate tax planning has become more sophisticated and competitive forces between Member States have increased, the tools for ensuring fair tax competition within the EU have reached their limits.

Differences in corporate taxation between countries are the driving force for corporate profit shifting”.

This is not a problem that was confined to Euro zone states, it applied to the UK. This is one of the reasons the UK Government has had to cut the rate of corporation tax to 17% by 2020. Because of the structural flaws mentioned above, all the time the UK remains in the EU it is engaged in a “race to the bottom” in corporate tax rates.

Somewhat disturbingly, the EU has no power to tackle the problems mentioned above. As the EU Commission states in its report the only way in which it is able to address this problem is by peer pressure:

The Code of Conduct for Business Taxation Group is composed of Member State representatives to deal with harmful tax competition in the EU, in a non-binding way, on the basis of peer pressure.

To tackle these problems the EU needs to have the unanimous backing of member states.

The flaws mentioned above have arisen because of the manner in which the EU operates. The aim of the EU is to create a Federal States of Europe, akin to that which exists in the US. The language of the EU Treaties, and in particular the fundamental freedoms, is open ended, which has allowed the CJEU to interpret these freedoms in an expansive manner. The CJEU has applied them in a much wider range of scenarios than was ever intended. For example, the Treaties were never intended to apply in the field of direct taxation, but the CJEU has not only applied them in this field more recently but also has prioritised the fundamental freedoms over domestic laws tackling tax avoidance. In contrast, the EU Parliament has been unable to enact a common corporate tax rate and basis for charging tax across the Union, because it has been unable to obtain the necessary support of all member states, as required. To date, the smaller member states have been unwilling to support such measures because they would remove one of their competitive advantages. However, the financial position of many member states is now so perilous that this has become a priority for the EU to address. As a consequence, pressure may be exerted on the smaller member states to withdraw their objection to the EU Commission’s proposals for a Common Corporate Tax Base.

State Aid

The EU is able to take action against any member State offering “sweet heart” tax deals to specific companies. This is because this type of behaviour distorts competition and violates the EU’s rules on State aide. However, countries such as Ireland, Belgium and Luxembourg is able to circumvent the EU’s State aide rules by simply making the “sweet heart” tax deal available to all companies.

This is yet another example of how the EU does not have the power to effectively tackle tax avoidance.

Recent Comments

Robert Oulds

Thanks for your comment. You can see below a series of articles that show how the ECJ has continually been making decisions that a... Read More

Tuesday, 03 January 2017 19:56

Robert Oulds

Hi Gary. We should have a competitive tax regime and encourage businesses to operate here. The EU problem is that companies which ... Read More

Tuesday, 17 January 2017 10:32

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The trade issues which must be solved by David Davis’ Brexit Department

Robert Oulds

Monday, 05 December 2016

Trade

Any withdrawal agreement must look at these issues and find practical solutions to make sure that goods enter the EU as seamlessly as possible.

5th December 2016

Brexit negotiations must aim to prevent the complexities of trade slowing the free flow of goods after Britain leaves the EU. Any withdrawal agreement between the EU and the UK, must look at these complexities and find practical solutions to make sure that trade enters the EU as seamlessly as possible.

The Bruges Group has already explored the solutions to ease the trade in services, click here to read the research. In this piece the practicalities of trade in goods is explored.

The biggest challenges to resolve are the practical logistics. Few, if any, so far, have looked at these issues from the perspective of eliminating, or at least mitigating, the real hurdles that would appear after Brexit.

Inside the EU, exporting to Berlin is effectively not any different from sending goods to Birmingham, just that the transportation will, due to the distance involved set a slightly greater logistical challenge. There is no requirement for burdensome bureaucracy when moving goods between EU member states. When goods from Britain are transported to the EU, just like those destined to our shores from the European Union, they come and go via our ports, be they channel ports like Dover or airports such as Heathrow. Presently this is with no let or hindrance. No administration is involved. In fact, national borders in terms of trade can be said to no longer exist within the European Union. At least some red-tape, has been eliminated. Yet, without a practical agreement businesses that are involved in either exporting to the EU, or importing from it, will face costly delays.

The enormous mutual dependency, between British and continental firms, rightly cited by many as a reason why an agreement will eventually be reached on issues such as trade tariffs, have, however, not considered that the high volume of trade can be a source of problems. This centres around the fact that all imports to the EU must go through customs posts.

The UK’s trade in goods with third countries outside the EU is often relatively unfettered because it is in bite-sized portions. The trade from Britain through the many customs posts of the numerous states around the globe to which Britain exports is in manageable quantities. However, the sheer scale of goods going through for instance French ports is staggering. Quite simply they do not have adequate facilities in place to deal with the enormity of post-Brexit trade. Ports in the UK and Europe are not up to managing the high volume of freight, they lack the necessary infrastructure. The UK does not at present have the capacity to dramatically improve the UK’s customs facilities to deal with trade coming from the remaining EU states. Planning for what would be a series of major construction projects has not yet begun, and nor have the financial resources been allocated. Serious question marks exist over France’s ability, let alone willingness, to upgrade their facilities to deal with trade coming from the UK. Furthermore, a special UK-EU agreement on customs clearance must be in place by Spring 2019. Without such an agreement there will be trade gridlock.

Tariffs in themselves are not the issue, time is. The cost of collecting the customs duties, a set percentage of their sale price agreed with the WTO and charged to the importer, makes any financial benefit for the EU almost irrelevant. Any ‘benefit’ comes from increasing rivals' costs to protect EU producers. However, with increasingly interdependent markets, with global value chains where the genesis of a manufacture rests in many nations which have supplied the numerous parts, such a strategy makes little economic sense.

The real advantage of eliminating tariffs for the exporter, and the business importing the product, is not the removal of this tax on trade. The main benefit is that without the need to produce the paperwork and payments to meet these customs duties, the item will be subject to less delays at customs posts.

Before solutions can be found to ease the process of trade the hoops and obstacles need to be explored. All non-EU companies that send good to the EU must either pay tariffs, complete paper work, and clear customs; sending the goods to be approved via what is known as a designated port of entry. Even if a free trade agreement is in place customs officers checking products and making sure the necessary bureaucracy is complete is a common place occurrence.

The trade process

Designated port of entry

When exporting goods to another territory the host nation can stipulate a designated port of entry for the product. At present Britain and the European Union are one trade zone the UK has free access to any and all established places where both people and produce can be admitted. The EU has the hypothetical ability in the short term to prescribe a port of entry, and terms, that are inconvenient for British exporters. However, this will be a serious breach of international trade law. Articles XI:1, XIII:1, V:2, V:6 and I:1 of the 1994 General Agreement on Tariffs and Trade now administered by the World Trade Organisation. Under these rules one country cannot be treated less favourably than any other state in the export and transit of goods. What is more, as both businesses and consumers on the continent depend upon British imports there is no reason to believe that such problems will arise. Regardless of how the UK leaves the EU it should be business as usual via the existing ports of entry. Indeed, Brexit negotiations should seek to expand them to include more destinations accessible via HS1, the Channel Tunnel.

So far so good. However, there are other serious issues.

Exporting to the EU from outside is not bureaucracy free

Exporting into the EU requires a convoluted process to be completed. Goods must have assigned to them an identification number, inputted at the port of destination. The larger importers find the process easier. They can make their declarations at the end of the month. Those who export less to the EU will, however, be faced with bureaucratic hurdles.

Clearance for use, allowing the product to go into circulation to be sold in the UK, or an EU country, needs to be obtained. The process for assessing this, even in the EU, will differ from country to country. Mostly, however, this is often just a theoretical problem, rarely do customs officials demand compliance with national standards and rarely do they conduct a strict examination of documentation declaring that an item conforms to national or EU standards. It is legally possible to detain goods on the grounds of differing standards, but in practice this only usually applies to items that are deemed to be dangerous, illegal, or subject to anti-dumping duty (a tax on products suspected of being sold substantially below their normal value).

Still, the process of shipping goods to and from the EU is not without other bureaucratic impediments. The freedom of the items is also strictly regulated. From outside the EU, any goods entering the EU, if not cleared at port, which can be a laborious process, must be stored in a bonded warehouse, also known as an Enhanced Remote Transit Shed (ERTS) warehouse. Until they are declared to customs for an approved treatment or use.

Transhipped cargo not in free circulation will also require what is known as a CMR document. The CMR is a consignment note with a standard set of transport and liability conditions, which replaces individual businesses' terms and conditions. It confirms that the carrier (i.e. the road haulage company) has received the goods and that a contract of carriage exists between the trader and the carrier. It derives from the Convention on the Contract for the International Carriage of Goods by Road.

The process of clearing customs is increasingly becoming electronic. Systems used by exporters that integrate with the British customs system are the CNS and Destin8 computer systems.

The VAT hurdle

Value Added Tax (VAT) is often charged on imported goods, that is in addition to any customs duties. The details must be entered onto the Customs Handling of Import and Export Freight (CHIEF) system. This system records the declaration to the customs authorities details of the goods whether they are transported by land, air and sea entering or leaving the UK/EU. It allows importers, exporters and freight forwarders to complete customs information electronically. This is not without charge.

If there is no prior agreement for each consignment, going to a specific destination, to clear customs the importer must produce customs records for each, pay VAT and the customs duty, if any. This will be calculated per the value of the item at its final point of sale. The VAT rate will differ from country to country, and even item to item. In some cases, a product will be exempt, VAT will not apply. In other cases, an item will be zero-rated, requiring the documentation to be completed but with no final payment. Even where tariffs are eliminated when importing from outside of the EU there is still the requirement to pay Value Added Tax. If the exporter is registered for VAT then this can be claimed back but only if they registered. There is also a requirement for an input VAT certificate to be completed.

Remaining in the EU’s customs union, bit being in the EU, does not eliminate the requirement for form filling to be completed. The requirement to clear customs and complete documentation, known as an ATA Carnet, to validate the origin of goods and confirm that they are free from tariffs even applies to Turkey. This country is considered part of the EU’s customs union and therefore has tariff free access for industrial products; but it is not bureaucracy free access.[i]

The EEA is not the answer on its own

The EU’s internal market, open to the EFTA states of Iceland, Liechtenstein and Norway, have sought to resolve some of the problems through the European Economic Area agreement. Beyond granting the theoretical access to the single market in services and the right to bid for public procurement, the EEA seeks to remove all technical barriers to trade. There is regulatory conformity and most importantly the European Economic Area has the mutual recognition of standards. Regulation EC 764/2008 of 9^th July 2008 demands that all members allow goods that are legally sold in one country to be sold in another EEA state.

One of the main benefits of being part of the single market comes through the principle of mutual recognition. This allows businesses to export to the entire European Economic Area, the internal market, without having to seek standards approval. As the Single Market is still not complete some member states still have differing standards. The principle of mutual recognition is that if a product has been approved as safe and saleable in one member state then it can be sold in all. This bypasses potentially costly and time consuming safety and regulatory checks in each country where the good is sold.

The EEA agreement also abolishes customs duties between the states participating in the single market. However, EFTA/EEA members must still go through a customs clearance process and outlay for VAT. These time-consuming procedures apply even to states such as Norway. Britain renouncing its EU membership but retaining, through membership of the European Free Trade Association, its status as a part of the European Economic Area will not on its own answer the practical and bureaucratic trade hurdles.

Tariff free trade

Whilst every possibility exists of there being an agreement(s) on reducing tariffs between the UK and the does not in itself eliminate all the bureaucratic hurdles.

If a business is sending produce to the EU from a country that has a free trade agreement it must prove that they were mostly manufactured or re-worked in a country that had a free trade agreement with the EU. If the business cannot confirm the origin of the goods, then the tariffs will apply. This can be sidestepped by making some modifications to the products in the exporting state, yet this may be subject to investigation. This is a rare occurrence, yet the need for paperwork to prove it is not rare.

Rules of origin

If the goods are of UK origin and if Britain has a free trade agreement, namely no tariffs to pay, importing into an EU country may require a Certificate of Origin to show its provenance. If its tariff free origin cannot be proved, a customs charge will be applied. Certificates of Origin can be obtained from a relevant countries chamber of commerce, they are however, expensive to obtain.

Anything that is already inside the customs union that has originated from a non-member will have been charged at its original port of entry and can therefore circulate freely within the EU. At present, as the UK is an EU customs union member, British exporters to the other 27 do not have to prove that they comply with the EU’s rules of origin. As supply chains are becoming increasingly globalised the need to demonstrate an item’s origins can be a complex burden.

The Trade Policy Research Centre argue that ‘the process of adapting to rules of origin based duty-free trade under a new UK-EU free trade agreement would be tedious, costly and disruptive to trade.’[ii] However, some developments are making this concern less relevant. The reduction in tariffs, where many goods are zero rated, reduces the need to complete the administrative duties. The EU has extended the area in which origin can be accumulated to not only cover more states but also to allow for an item to be obtained and manufactured in a number of countries without the final product losing the benefit of being tariff free when it enters the EU. This system has been in existence in the EU and European Free Trade Association since 1997 and for Turkey since 1999. Over time the EU does grant greater allowance to other countries to claim exception from rules of origin. And from 2017 under World Customs Union rules the procedure declaring a products origin will be simplified.

These are hurdles but they can be overcome, through effective negotiation. Furthermore, the application of these rules does present opportunities for Britain. If a tariff free trade agreement is in place UK businesses can corner the profitable market for business assembling goods. The now complex supply chains that dominate global production can create jobs in the UK. Gate way Britain.

Britain obtaining tariff free access to the remainder of the EU, along with measures designed to speed the passage of goods through customs, and developing trade links with the third countries around the world, will benefit Britain. Having a more liberal regulatory regime and tariff free access to the EU’s single market will make the UK a base by which third country producers, who have entered preferential trade deals with Britain, can access the EU without being subject to tariffs.

Within Britain value can be added to goods and re-exported from the UK to the EU. This will allow exporters to sidestep the EU’s rules of origin regime. Britain will be able to become a regional value added production hub. The British economy will therefore not only benefit from the additional bilateral trade with other territories but will also capture a number of benefits:-

1. Increased trade

2. Increased freight and haulage through the UK as a pass through onto final destination

3. Increased assembly and manufacturing within the UK (to meet rules of origin that require a declaration to be made that at least partial reworking has occurred to the produce)

4. Increased economic activity and employment and the resulting fiscal benefits

5. Increased use of a made in Britain mark makes the UK’s regulatory regime more internationally relevant

Even in the EU, technical requirements on import processes as well as standards will differ from each country. However, the fear that EU legislation prejudicial to the UK may queer the pitch against British sales to the continent is probably unfounded. As Britain conforms to EU standards at present there is little, if any, divergence. Further, as an increasing proportion of technical standards originate from global bodies, agencies of the United Nations, or relate to international agreements on technical barriers to trade, there will not be a sudden deviation from permissive regulations. These international agreements are designed to encourage cross border trade. It is worth reiterating the fact that rarely do customs officials demand compliance with national standards and rarely do they conduct a strict examination of documentation declaring that an item conforms to national or EU standards.

David Davis’ Department for Exiting the European Union must, however, focus on addressing the bureaucratic trade hurdles that can cause delays at customs posts. The alternative will be even worse congestion on the M20 after Brexit than that which exists at present.

[i] http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=OJ:L:2006:265:0018:0038:en:PDF

[ii] Ronald Stewart-Brown and Felix Bungay, Rules of Origin in EU Free Trade Agreements, Trade Policy Research Centre, 2012

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Asking Parliament to Vote on Article 50 TEU for the Third Time?

Robert Oulds

Monday, 05 December 2016

Democracy

The very purpose of the referendum was to establish a decision-making procedure for leaving the EU. This procedure was implemented by the June referendum.

5th December 2016

In R (Miller) v. Secretary of State for Exiting the European Union [2016] EWHC 2768 (Admin) (3^rd November 2016), the Divisional Court determined that the government may not trigger Article 50 of the Treaty on European Union (TEU) without legislation being passed by Parliament. Article 50 states:

1. Any Member State may decide to withdraw from the Union in accordance with its own constitutional requirements. … 3. The Treaties shall cease to apply to the State in question from the date of entry into force of the withdrawal agreement or, failing that, two years after the notification referred to in paragraph 2, unless the European Council, agreement with the Member State concerned, unanimously decides to extend this period.

The claimants were members of the public described by the Divisional Court as “parties … whose interests are potentially affected in different ways” (para. 7 of judgment in Miller). The essential reason for the conclusion of the Divisional Court that legislation is needed was that triggering Article 50 TEU will inevitably have the effect of changing domestic law because those elements of EU law which Parliament has made part of domestic law by the enactment of the European Communities Act 1972 will in due course cease automatically to have effect.

The judgment seems open to criticisms on a number of grounds, chiefly the following: (i) it fails to adequately take into account the relationship between the UK legal system and the international legal system, understood here to include the European Union legal system, and the doctrine of dualism that applies to the incorporation of the EU Treaties into EU law; (ii) relatedly, its fails to adequately take into account the manner of incorporation of the EU Treaties into UK law by a method of reference or incorporation, and in particular, by reference to the entire body of EU law; (iii) the distinction drawn between categories of rights under EU law does not establish that some rights protected by UK law will be set aside in way contrary to the European Communities Act 1972, and (iv) and the judgment does not fully consider any constitutional effects of the European Union Referendum Act 2015.

Parliament will need to vote on how to replace EU law in UK law when Brexit actually happens. The Miller judgment requires that Parliament votes to being the process of Brexit too. At a political level, the Miller judgment is very significant in that the House of Lords may well vote against triggering Brexit, and it would take one year for the House of Commons to be able to bypass the House of Lords under the Parliament Acts 1911-1949.

(i) The relationship between the UK legal system and the international legal system, understood here to include the European Union legal system, and the doctrine of dualism:

The essential argument made by the Divisional Court to sustain its conclusion in Miller was that triggering Article 50 TEU would mean that the UK could leave automatically after 2 years and that leaving the EU would undermine or alter the effects of the European Communities Act 1972 (‘ECA 1972’) and change or reverse the rights of individuals created by the ECA 1972. The Divisional Court noted the principle of parliamentary sovereignty as common ground: “Parliament can, by enactment of primary legislation, change the law of the land in any way it chooses. There is no superior form of law than primary legislation, save only where Parliament has itself made provision to allow this to happen. The ECA 1972, which confers precedence on EU law, is the sole example of this.” (para. 20). However, this includes the way in which ordinary EU legislation (i.e. EU legislation other than the Treaties, in the form mainly of Regulations and Directives) is passed at EU level. Legislation under Article 288 of the Treaty on the Functioning of the European Union is adopted in Brussels by the EU Council (of Ministers), with UK ministerial participation, as envisaged in s. 2(2) ECA 1972 (as noted in paras. 52-52 of the judgment). This procedure does not involve any vote by the UK Parliament, yet clearly changes UK law on a regular basis. This can only be because, as the Divisional Court says in paragraph 20 quoted above, Parliament has allowed this to happen.

The issue in Miller could thus be expressed as whether or not Article 50 TEU has also already been enabled by legislation in a similar way. Despite the Divisional Court conclusion in Miller, arguably the answer is yes.

The Divisional Court continued that “An important aspect of the fundamental principle of Parliamentary sovereignty is that primary legislation is not subject to displacement by the Crown through the exercise of its prerogative powers” (para. 25) and the Court noted that this predated the Glorious Revolution of 1688 and could be found in The Case of Proclamations (1610) 12 Co Rep 74. Further, the Divisional Court noted that “Another settled feature of UK constitutional law is that, as a general rule applicable in normal circumstances, the conduct of international relations and the making and unmaking of treaties on behalf of the United Kingdom are regarded as matters for the Crown in the exercise of its prerogative powers”(para. 30). Thus, the executive exercises the power to engage in foreign and international relations, but it cannot do so in a way that has an effect on legislation passed by Parliament.

Concerning the relationship between international law and UK law, the principle of dualism should first be clearly explained. The principle of dualism is recognised within the international legal system as one of two ways in which national legal systems can interact with the international legal system. The other is monism. Monism and dualism differ in the manner of incorporating international treaties or conventions into the national legal system. In a dualist system, which indeed the UK is, two steps are needed for an international treaty or convention to become part of UK law: (i) signature and ratification by the executive (in a monist approach, ratification also incorporates treaties into national law) and (ii) followed by incorporation into national law by Parliament. The argument of the Divisional Court – that because triggering Article 50 TEU would affect rights exercisable under EU law, it would therefore deprive the ECA 1972 of its effect and, thus, required an Act of Parliament to appropriately amend or repeal the ECA 1972 – seems reasonably persuasive at first, but this is so only because the judgment in Miller really does not take into account (i) the difference between producing effects in domestic law and producing effects at European/EU level and (ii) the way in which parliament has incorporated by reference the whole body of EU law into UK law.

Triggering Article 50 TEU would indeed produce legal effects at EU level, but it would not amend or repeal the ECA 1972. This is especially so when it is taken into account that the ECA 1972 has been amended by the European Union (Amendment) Act 2008, which was enacted specifically to give effect in UK law to the Treaty of Lisbon, and the Treaty of Lisbon included in it Article 50. This is the first occasion on which Parliament has already in effect voted on Article 50 TEU. The wording of the European Union Amendment Act 2008, which was not quoted in the Miller judgment, helps illustrate this. Seciton 2 of the European Union (Amendment) Act 2008 states:

Addition to list of treaties

At the end of the list of treaties in section 1(2) of the European Communities Act 1972 (c. 68) add— “; and

(s)the Treaty of Lisbon Amending the Treaty on European Union and the Treaty Establishing the European Community signed at Lisbon on 13th December 2007 (together with its Annex and protocols), excluding any provision that relates to, or in so far as it relates to or could be applied in relation to, the Common Foreign and Security Policy;”

This is important, because the Divisional Court in Miller specifically referred to the importance of parliamentary control as evidenced by the listing of the Treaties in s. 1(2) ECA 1972 (para 93(8) of the judgment):

Finally, we have already drawn attention to the significance of the fact that the principal EU Treaties which are given effect in domestic law are specifically listed in section 1(2). Section 1(3) provides for parliamentary control before any ancillary treaty can be made and regarded as a “Treaty” for the purposes of the Act, and hence given effect in domestic law. The Crown cannot simply make and ratify ancillary treaties in the exercise of its prerogative powers and thereby create legal effects in domestic law. It is not compatible with this degree of parliamentary control – listing the main “Treaties” in the ECA 1972 itself and providing for a high degree of Parliament control by way of approval by resolution of both Houses before an ancillary treaty qualifies as a “Treaty” for the purposes of the Act – that Parliament at the same time intended that the Crown should be able to change domestic law by the simple means of using its prerogative power to withdraw the United Kingdom from the Treaties.

Yet now the Treaty of Lisbon, which created Article 50 TEU, is listed under s. 1(2) of the ECA1972 (as amended by the 2008 Act), but the Divisional Court did not attribute any significance to this. The method of incorporation that was chosen by Parliament to give effect to EU law – incorporation by reference – confirms that triggering Article 50 TEU will not change UK law, but simply apply a procedure set out in the ECA1972 itself as amended.

(ii) The manner of incorporation of the EU Treaties into UK law by a method of reference or incorporation:

The wording of s 2(1) of the ECA1972, which is the clause of the ECA 1972 that incorporates EU law into UK law, is broad enough to cover both the incorporation of individual rights and other procedures:

(1) All such rights, powers, liabilities, obligations and restrictions from time to time created or arising by or under the Treaties, and all such remedies and procedures from time to time provided for by or under the Treaties, as in accordance with the Treaties are without further enactment to be given legal effect or used in the United Kingdom shall be recognised and available in law, and be enforced, allowed and followed accordingly; and the expression“enforceableEUright”and similar expressions shall be read as referring to one to which this subsection applies.

In its judgment, however, the Divisional Court speaks as if only individual rights were incorporated and not Article 50 TEU, when both are subject to the same principle of incorporation by reference (see e.g. para. 62 et seq). What incorporation by reference means, is that instead of re-enacting all of the individual provisions of EU law in the form of UK Acts, instead, EU law is globally incorporated by a single provision of UK law, s. 2(1) ECA 1972, with the relevant Treaties thereby incorporated being listed in s. 1(2) ECA 1972. Thus, both the original Treaties and all amending Treaties, including the Lisbon Treaty, have been incorporated in the same way. Seen in this light, the reasoning of the Divisional Court becomes problematic. The Divisional Court suggests that triggering Article 50 will denude the ECA 1972 of its legal effect:

As Parliament contemplated, it was only if it enacted the ECA 1972 (and then amended it to refer to later EU Treaties) that ratification of those Treaties could occur. The reality is that Parliament knew and intended that enactment of the ECA 1972 would provide the foundation for the acquisition by British citizens of rights under EU law which they could enforce in the Courts of other member States. We therefore consider that the claimants are correct to say that withdrawal from the European Union pursuant to Article 50 would undo the category (ii) rights which Parliament intended to bring into effect, and did in fact bring into effect, by enacting the ECA 1972.(para. 66)

However, this is to suggest that Article 50 is in some way in conflict with the ECA1972: that triggering Article 50 will end up in a situation where the ECA1972 will no longer apply, yet it is exactly because the ECA 1972, as amended, has provided for Article 50 TEU to be a part of UK law that this is not so. Article 50 TEU is a part of the overall body of EU law that the ECA 1972 has incorporated. Article 50 needs to be seen as a part of this body of EU law and as something applies across the whole of EU law. By triggering Article 50, the government is providing for a procedure in EU law itself. The relationship between Article 50 TEU and the rest of EU law should be seen in the ordinary way in which different legal provisions relate to each other. Article 50 is lex specialis (specific law) and lex posterior (recent law) in regard to the rest of EU law. It is lex specialis or specific law in the sense that it provides for the particular or specific situation of leaving the EU. It is lex posterior or more recent law in that in effect amends EU law so that EU law itself provides for its own dis-application to a Member State, i.e. it amends the EU Treaties to this effect.

Contrary to what the Divisional Court suggests, there is no inherent or unresolvable conflict between Article 50 and rights created by EU law. Article 50 TEU regulates how EU rights are to be dis-applied. When Article 50 TEU is triggered, there will not be any provisions of UK law that have been left on the statute book, but which now have no legal effect. Yes, EU laws that have become part of UK law will be automatically dis-applied after the 2-year period (unless the UK and all the Member States agree to extend the period), leaving gaps in UK law. These gaps will be for the legislature to fill by replacing the ECA 1972, when Brexit actually happens, with an Act of Parliament that specifically sets out what rights previously set out in EU law to be continued in UK law.

(iii) The distinction between categories of rights under EU law:

The parties and Divisional Court agreed on a distinction between three categories of right that would be involved in the triggering of Article 50 TEU:

- Category (i) rights capable of replication in the law of the United Kingdom, e.g. EU rules on maximum working hours

- Category (ii) rights enjoyed in other Member States of the EU by UK citizens, e.g. free movement rights

- Category (iii) rights that could not be replicated in UK law, e.g. the right to stand for election to the European Parliament.

The Divisional Court suggests that triggering Article 50 would undo category (ii) rights. Triggering Article 50 would undo all of these rights. The Divisional Court seems mistaken in characterising, in para. 59, references by national courts Article 267 TFEU as a ‘right’, where decision to make a references to the Court of Justice are decided upon by national courts according to the criteria in the caselaw of the Court of Justice, and individuals cannot require a reference to be made as a right. But the same argument as above applies here concerning the undoing of rights: Parliament has provided for the undoing of these rights by incorporating Article 50 into UK law already.

(iv) The European Union Referendum Act 2015:

The Divisional Court was very brief in its discussion of the effect of the European Union Referendum Act 2015, which can be seen as the second time Parliament has voted on Article 50 TEU. The Divisional Court’s conclusion is hard to reconcile with the parliamentary and institutional facts surrounding the passing of the Act. Referenda are a relative novelty at UK level. Apart from the referendum on the Alternative Voting System held in 2011, the last referendum at UK level was also on the EU, or European Economic Community as it then was, in 1975. Both the legislation proving for the 1975 and 2015 referenda simply stated that there would be a referendum on membership, i.e. the legislation did not say anything about the effects of the referendum. However, this does not seem to justify the conclusion of the Divisional Court that the referendum held in June 2016 was purely ‘advisory’ unless very clear language to the contrary is used in the referendum legislation in question (para. 106). In support of its conclusion, the Divisional Court did not cite any authority. It did refer to “a background including a clear briefing paper to parliamentarians explaining that the referendum would have advisory effect only” (para. 107). However, this does not seem sufficient to dispose of the constitutional effects of the referendum. It is clear from the House of Commons debate on the European Union Referendum Bill that the government intended that the decision of the people in the referendum would determine the issue of UK membership. The then Foreign and Commonwealth Secretary, Philip Hammond MP, stated on the European Union Referendum Bill:

This is a simple, but vital, piece of legislation. It has one clear purpose: to deliver on our promise to give the British people the final say on our EU membership in an in/out referendum by the end of 2017. (Hansard, Vol. 596, 9^th June 2015)

Giving the people the final say means that Parliament must accept the referendum result. This is reflected in the fact that the vote to leave precipitated the resignation of the then Prime Minister, David Cameron MP.

When legislation is ambiguous, the rule of statutory interpretation in Pepper v. Hart [1992] UKHL 3 allows the courts to refer to Hansard, the official record of debates in Parliament, to help determine its meaning:

In my judgment, subject to the questions of the privileges of the House of Commons, reference to Parliamentary material should be permitted as an aid to the construction of legislation which is ambiguous or obscure or the literal meaning of which leads to an absurdity. Even in such cases references in court to Parliamentary material should only be permitted where such material clearly discloses the mischief aimed at or the legislative intention lying behind the ambiguous or obscure words.In the case of statements made in Parliament, as at present advised I cannot foresee that any statement other than the statement of the Minister or other promoter of the Bill is likely to meet these criteria.(Lord Browne-Wilkinson, p.22 of Bailii judgment text)

At the very least, the question of the status of the referendum seems by no means as straightforward as the limited discussion in the judgment in Miller suggests. In her judgment in Jackson v. Attorney General [2005] UKHL 56, Lady Hale indicated that Parliament might be bound by a provision of legislation requiring a referendum to be passed:

If the sovereign Parliament can redefine itself downwards, to remove or modify the requirement for the consent of the Upper House, it may very well be that it can also redefine itself upwards, to require a particular Parliamentary majority or a popular referendum for particular types of measure. In each case, the courts would be respecting the will of the sovereign Parliament as constituted when that will had been expressed. But that is for another day.(para. 163 of judgment in Jackson)

The Divisional Court in Miller refers to a briefing paper, but pays no attention to the clear statement above from the lead member of the government advocating the passing of the Bill. Under Pepper v. Hart, it was clearly open to the Divisional Court to refer to Hansard, and the above quoted statement by Philip Hammond is quite clear that the very purpose of the referendum was to establish a decision-making procedure for leaving the EU. This procedure was implemented by the June referendum.

By Gerard Conway

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EU tax law creating £55 billion black hole in UK finances

Robert Oulds

Saturday, 03 December 2016

Taxation

HMRC has set aside £55 billion to cover the potential cost of payments, including interest, which the European Court of Justice will force upon the British taxpayer.

3rd December 2016

EU law and direct taxes

The UK, in common with other EU member states, has not conferred any authority on the EU for direct taxes. The Court of Justice of the European Union (CJEU) assumed this authority in the late 1990s by adopting a more expansive interpretation of the fundamental freedoms.

The staggering cost of EU law tax litigation
One of the consequences of being a member of the EU is that EU law is superior to English law. Large UK based companies are, therefore, able to use EU law, and EU courts, to retrospectively challenge the legality of the tax laws enacted by Parliament. This is highly profitable form of activity for large UK companies and their advisors, which is costing the UK Government tens of billions. When UK companies challenge the legality of the UK’s tax laws under EU law they know they are “knocking at an open door”, because the CJEU is keen to expand its authority over Member States under the guise of “ironing out inefficiencies” in the operation of the single market.

HMRC has set aside £55bn to cover the potential cost of the litigation in which it is involved. There are two reasons why this figure is so large. First in a number of cases involving EU law, UK companies are able to reclaim corporate taxes, dating as far back as 1973. Second, EU law requires the UK Government to pay compound interest on these claims. In the Littlewoods case, a claim of £208m, covering the period from 1973 to 2004, cost the Exchequer £1.2bn when compound interest was included. The UK Government had previously estimated that the Franked Investment Income case (C-362/12) would cost £5-7bn. However, this case could easily cost the Exchequer £30bn when compound interest is included, as it covers the period from 1973 to 1999.

European Career Politicians as EU judges
Each EU Member State is able to nominate an EU judge. In 1995, Belgium nominated its Deputy Prime Minister, Melchior Wathelet, to be an EU judge. Although Wathelet had studied law as a student, he had been a career politician from 1977 to 1995. This raises questions about both his competence and his impartiality.

Wathelet was subsequently appointed as an Advocate General. When a case comes before The Court of Justice of the European Union (CJEU) it is usually heard by at least five judges, one of which will be an Advocate General. The Advocate General is responsible for writing a legal opinion on the case under consideration for the benefit of other judges. In the majority of instances, the CJEU decides cases on the basis of the Advocate General’s opinion. This is what happened in the Franked investment Income case (C-362/12), a case that will cost the UK Government in the region of £30bn. Wathelet wrote the legal opinion and the other judges agreed with his opinion.

What did the UK Government do “wrong“ in the Franked Investment Income (FII) case (C-362/12) so as to breach EU law.
The simple answer to this question is: the UK Government did nothing “wrong”. The reason the UK was held to have breached EU law is because the UK is a common law jurisdiction, rather than a civil law jurisdiction. In fact, the UK is the only large common law jurisdiction in the EU, as the other common law jurisdictions are Ireland, Malta, and Cyprus. All of the other EU member States are civil law jurisdictions. This means that the EU commission is staffed, for the most part, with people from civil law jurisdictions, and the Court of Justice of the European Union consists mainly of civil law jurists. This meant that in FII the UK was adjudicated on the basis that it is a civil law jurisdiction, notwithstanding that the facts of the case are unique to a common law jurisdiction.

In a civil law jurisdiction, only the State is able to create a restitutionary remedy against itself. This means that the State has the opportunity to set an appropriate limitation period at the same time it creates a new remedy. It is not possible for the UK Government to set an appropriate limitation period at the same time the English courts announce their decision to create a new remedy. This is because the UK Government and the English courts operate independently of each other. This means that the UK Government has no prior knowledge of the decisions of the English courts.

The reason the UK Government was held to have breached EU law was because the facts of FII were adjudicated by the CJEU on the basis that they arose in a civil law jurisdiction, notwithstanding that the facts are unique to a common law jurisdiction. The FII case is another example of the “one size fits all” philosophy, which prevails in the EU.

The UK Government and the BBC working together to conceal the truth regarding the EU
One of the Vote Leave claims was that the UK Government would have to repay £43bn in taxation because of EU law.

The BBC’s response to this claim on its Reality Check site was:

‘HMRC say: “There is no question of this amount or anything close to this amount [£43bn] ever being repaid as the figure is based on our losing every single case currently being litigated, which is not going to happen. In reality, HMRC wins most cases at Tribunal.”’

At the time HMRC gave this response to the BBC, it had produced its accounts for the year ending 31^st March 2016, although they had not been published. HMRC knew that the figure of £43bn was an under-estimate of the potential costs, because it had increased the figure in its latest accounts to £55bn. Moreover, HMRC knew that the increase related to claims for breaches of EU law.

There are several other comments that one can make about the comment HMRC gave the BBC.

1. Why did the BBC ask someone who reported to George Osborne to make a supposedly “impartial comment” on the Vote Leave’s campaign?

2. HMRC does not have to lose every single case for it to have to pay-out £43bn. HMRC has already lost a number of important cases involving EU law that will require the UK Government to repay taxes dating as far back as 1973, together with compound interest. These cases alone could cost the UK Government £43bn, or possibly more. HMRC has consistently under-estimated the cost of settling these and other legal cases in which it is involved.

3. The courts decide who wins the cases in which HMRC is involved, not HMRC.

4. It is of no significance that HMRC wins most cases at Tribunal, because such cases are for trivial amounts.

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Protecting the City of London After Brexit

Robert Oulds

Wednesday, 30 November 2016

Financial Services

For the City of London membership of the European Union is a double-edged sword. Here the Bruges Group explains how this important industry can thrive after Britain leaves the EU.

30th November 2016

Coming with EU membership is, for what it is worth, full access to the single market in services. Whilst this market is far from complete; being part of it, also known as the European Economic Area, is one of the ways Britain can have full unencumbered and automatic access for the sale of services into the EU. This right, that does not require setting up a subsidiary in the EEA nor the need to gain authorisation from each single market state, is known as passporting.

The ability of British based financial institutions to trade with countries on the continent is clearly a great benefit to the economy. At the same time, the EU’s reticence at making trade agreements, an exclusive EU competence, with emerging markets around the world that include access to their services markets is holding the UK back. EU membership has meant that Britain could not make agreements that allowed our great strength, the services industry, to fully engage with other markets around the world. Instead of looking at the enormous opportunities that Brexit presents, the debate so far has focused on the risks of losing access to the EU’s single market.

Prior to the Brexit referendum, the government sought to claim that the EU’s services market could of particular benefit to the British economy. The government argued that if the EU completes the Single Market in services – opening-up all member states to competition – the UK’s economic output could be boosted by as much as 7%.[i] The completion of the single market in services always was a very big if. Indeed, it is illusory. Many EU states have still have not properly implemented the EU’s services directive and are unlikely to do so. Keeping in place restrictive practices and barriers to entry.

That said, the services industry is still an especially important part of the UK’s economic links with the EU. In 2011 the UK's trade in goods with the EU was in deficit by around £43 billion; however, trade in services was in surplus by £16 billion. This reduced the overall deficit to approximately £28 billion.[ii]

The UK’s entire financial services sector, which supports the resulting and even larger international business services, is however threatened by the UK’s membership of the EU. These businesses sell their services much further afield than the continent, yet inside the European Union they will still be subject to the whims of EU laws proposed by the Commission and agreed by qualified majority vote without the UK having a veto.

EU regulators, the European Banking Authority, the European Insurance and Occupational Pensions Authority and the European Securities Authority have been established to regulate the industry across the EU. Some in the EU do not look kindly upon this very Anglo-Saxon industry. Under the European Systemic Risk Council and the European System of Financial Supervisors control, enforcing the writ of the European Commission, the City of London may have faced its biggest test. These new bodies have the power to close a financial institution. The EU bureaucracy has already began interfering in UK financial affairs.

Research by the economist Professor Tim Congdon CBE has concluded that this threatens the UK’s position as a world leader in international business services. These businesses are highly mobile and can easily relocate to more welcoming climates; taking their tax revenue and employment with them.

Research published by the Bruges Group found that ‘in the fourth quarter of 2013 business services accounted for 1,517,000 jobs in London, which was 28% of all London employment. (Their proportion in UK employment as a whole was 15.7%.)

‘These businesses are based primarily in or around the capital. London-based international business services (i.e., both financial and non- financial services) employ about 5% of the UK’s working population and produce perhaps 8% - 10% of its national output, with most of that output exported. Continued growth of these activities at above the growth rate of output as a whole would be positive for the UK’s average living standards.’

Since the 1960s financial services in Britain enjoyed stellar growth. It was the most dynamic part of the British economy. This has now ended, and Professor Congdon sees EU interference as being partly to blame. He argues that the EU’s regulatory structure is less efficient than Britain’s previous national system and the EU’s rules are in effect anti-growth. The 40 years of rapid expansion is now at an end, with some responsibility resting with the EU.

If Britain is to remain a prosperous nation, the UK must follow a path that will both protect businesses from the harmful effects of EU regulators whilst preserving full access to the EU’s single market. What can be done to achieve this?

There is the example of the Swiss, like Britain they have a strong financial services industry. Although they have a series of free trade agreements in goods these do not cover the export of services.

Swiss-based companies do not have the right to sell their services to the EU unless they establish a subsidiary inside the European Economic Area. This is not an insurmountable problem but should be avoided. Multi-national companies, by definition, can and do establish themselves in different jurisdictions. However, small and medium-sized enterprises will find creating subsidiaries burdensome. Restricting opportunities to tap into the EU’s internal market.

The Swiss experience is that rules that would deprive British financial service firms from operating inside the remaining EEA can be sidestepped. A Swiss report found that 'Though extremely cumbersome this does give them full access to the EU market.'[iii] However, if the subsidiaries are based in the EU they will be subject to the same heavy handed bureaucracies.

The UK can leave the EU, freeing businesses from the European Commission’s quangos, and keep full access to the Single Market. This can be achieved by Britain rejoining the successful and non-authoritarian European Free Trade Association (EFTA) and thus remain a member of the European Economic Area (EEA), also known as the Single Market.

Aligning the UK with EFTA will at a stroke free Britain’s financial services industry from control by: -

The EBA (European Banking Authority)
European Insurance and Occupational Pensions Authority
European Systemic Risk Board
European Securities and Markets Authority (ESMA)
Community Programme for Financial Reporting and Auditing

EFTA/EEA nations not only enjoy freedom from EU financial oversight, they also have the benefit of being able to run their economies as they see fit. They are free from EU debt risks and are not subject to European Union tax law, an area which the EU law is steadily expanding into. The City of London will also free from an EU Financial Transaction Tax. As a member of EFTA, Britain will also be able to veto the regulations that threaten pay within the financial services sector, such as; ‘Recommendation on remuneration the financial sector 32009H0384’.

Remaining in the single market, popular with the City and many that in the referendum supported remain, is becoming increasingly unpalatable to many leavers; even people at the top of the British government which once lauded the single market. The Lichtenstein model, one of restricting immigration whilst having full access to the single market, first outlined by the Bruges Group in 2013 has not settled the matter.

There is however a new hope. This is driven by mutual self interest.

According to Mark Carney, the Governor of the Bank of England;

“Banks located in the UK supply over half of debt and equity issuance by continental firms, and account for over three-quarters of foreign exchange and derivatives activity in the EU.”[iv]

Quite clearly, businesses in the EU need the City of London. However, despite this powerful incentive for the EU to keep in place Britain’s passporting rights there are still procedures that must be followed. It could be granted through the withdrawal agreement that would in theory emerge from the Article 50 negotiations. That is presuming that any agreement does not become regarded as one that needs the approval of all EU member states Parliaments, as an Association Agreement would so require.

There are still ways to resolve this issue. If the UK follows the same regulatory framework as businesses in the EU, then the European Commission can grant what is known as equivalence. This should not be too difficult for the UK. Presently, Britain follows the same regulations as the rest of the EU. What is more, according to a report by the House of Lords the UK would have implemented 41 of 42 EU financial services regulations even if Britain was not an EU member. The exception was the Alternative Investment Fund Managers Directive (AIFMD). This is not surprising, the genesis of many of these rules comes from global bodies. For instance, the WTO, OECD, IMF, the Bank if International Settlements, and the Financial Stability Board. Indeed, Mark Carney is the Chairman of this body and guides the development if its regulations. Through his international role, the Governor of the Bank of England, has been developing global rules on financial services, putting Britain firmly at the top table.

The EU rules that can grant financial firms based in the UK access derive from Article 46(1) of the The Markets in Financial Instruments (MiFIR). It grants non-EEA based firms the right to provide investment services in the single market without the need to establish a subsidiary in the EEA and without the provider being under the control of an EU member states national regulator.

To have this special passport, according to DLA Piper, there are a number of requirements:

(i) the firm is authorised in its home country and subject to supervision and enforcement by the relevant regulator (eg by the Financial Conduct Authority)
(ii) a positive equivalence determination from the European Securities and Markets Authority (ESMA) that the legal and supervisory arrangement of the third country have equivalent effect to the prudential and business conduct requirements under MiFID II
(iii) cooperation arrangements between ESMA and the third country authority specifying the exchange of information mechanism, the prompting notification for breaches and the coordination of supervisory activities, and
(iv) registration with ESMA (which is dependent on the above having occurred).[v]

Access for non-EEA alternative investment fund managers is also granted by Article 35, 39 to 41 of the AIFM directive; as long as they are operating under an equivalent jurisdiction. This again is subject to the ESMA.

This route may however prove to be a lengthy process, requiring registration and there is no guarantee that the politics of Europe will be easily obliging to a post-Brexit Britain.

There is however another way that the City’s interests can be protected. The World Trade Organisation, through its General Agreement on Trade in Services,[vi] is seeking to create international agreements that will dramatically open-up access to service industries.[vii] [viii] What is more, the EU is fully engaged with these negotiations. In time, an independent UK should be able to take advantage of WTO proposals for a streamlined “single window” through which businesses can trade their services across national boundaries.

The City of London brings capital to this country financing wealth creation as well as pubic services throughout the land. It attracts skills and other business supporting the wider British economy. Yet, the EU restricts the opportunities open to the City. At the same time, leaving does present challenges. The solutions, however, just like the opportunities, are global.

The UK’s financial services industry has a global role and should not be hemmed into little declining Europe. The City of London should not be afraid to make the switch. Not only do great prospects await it, there is the real likelihood that Britain’s financial services industry will, through the many routes open to it, be able to keep its access to the EU’s single market.

[i] Department for Business Innovation and Skills, BIS Economics Paper No. 11, The economic consequences for the UK and the EU of completing the Single Market, February 2011, page vi

http://www.bis.gov.uk/assets/BISCore/economics-and-statistics/docs/E/11-517-economic-consequences-of-completing-single-market.pdf

[ii] http://www.theyworkforyou.com/lords/?id=2012-11-14a.1507.0

[iii] Centre for Swiss Politics, University of Kent, Switzerland’s Approach to EU Engagement: A Financial Services Perspective, City of London, April 2013, page 4

[iv] http://www.telegraph.co.uk/business/2016/11/30/mark-carney-warns-eu-faces-financial-drought-cuts-uk-overnight/

[v] https://www.dlapiper.com/en/uk/insights/publications/2016/07/no-more-passporting-post-brexit/

[vi] https://www.wto.org/english/docs_e/legal_e/26-gats_01_e.htm

[vii] https://www.wto.org/english/news_e/news16_e/serv_05oct16_e.htm

[viii] https://www.wto.org/english/news_e/news16_e/snegs_14nov16_e.htm

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Rather than trying to stop Brexit, elites should focus on making it a success

Robert Oulds

Monday, 28 November 2016

Democracy

Article 50 will be triggered, and the UK will leave the EU

28th November 2016

royal_courts_of_justice_-_wide_angle_front — The Royal Courts of Justice (London) where October’s High Court ruling that only Parliament can trigger Brexit was delivered.

The latest twist in the Brexit tale is the legal limbo hanging over who can trigger Article 50 of the Lisbon Treaty, signalling the United Kingdom’s departure from the European Union. Following a lawsuit filed in the summer, the High Court ruled on October 13 that the British government cannot trigger Article 50 without Parliament’s permission. This decision was immediately appealed by the government, who are anxiously awaiting the Supreme Court’s final word in December.

Rule of law is one of the foundations upon which Britain’s success over the centuries was built, and must be respected. However, I, like many people, was surprised by the message the High Court’s ruling was sending –that Parliament supersedes the will of the people, not the other way around. After all, isn’t Parliament supposed to reflect the will of citizens? Don’t all MPs, from the lowliest backbencher, to the prime minister, work for us?

In any case, I am not terribly worried about this court battle. If the triggering of Article 50 does end up going to Parliament, there will be enormous pressure on MPs to vote in line with their constituents, leading to a crushing majority in favour of leaving the European Union (EU). It is true that most MPs, across all parties, favoured remaining in the EU prior to June’s referendum, but not aligning with their electorate on this subject could very likely cost them their jobs next election. This threat is especially true for Labour MPs, many of whom saw constituents in northern “safe” seats reject the party’s advice advice by voting to leave the EU.

richard_branson_pic_4 — Virgin Group founder Sir Richard Branson has been, and continues to be an outspoken opponent of the UK’s departure from the EU.

Where there is greater cause for concern, however, is in the growing pushback by elites opposed to Brexit. The following three examples are among the most publicized, but by no means the only instances of such pushback:

Gina Miller: Following the referendum in June, a legal battle was launched by investment manager Gina Miller, challenging the government’s intention to trigger Article 50 without parliamentary consent. As mentioned above, the High Court ruled in favour of Mrs. Miller and her co-claimants, spurring the government to appeal the decision in the Supreme Court. Miller claimed that this ruling was about preserving parliamentary sovereignty, an important motivator for many Leave voters. However, one wonders why she or any of the other claimants did not defend Parliament while its powers were being stifled by institutions in Brussels.
Richard Branson: The Independent recently revealed that former Labour ministers have received funding from Sir Richard Branson’s Virgin Group in their efforts to build a campaign opposing Brexit. Office space and legal advice were also committed, indicating preparations to launch a sophisticated drive to frustrate the British government’s efforts to sever ties with the EU. Branson was an outspoken opponent of Brexit during the referendum campaign, and seems not to have accepted June’s result by opposing the government’s effort to deliver it.
Tony Blair and John Major: Former prime ministers Tony Blair and John Major have made statements in recent days on the possibility of a second referendum being held on Britain’s EU membership. Amid rumours floating about some form of political comeback, Blair recently suggested that Britons should “keep our options open” regarding a second referendum. He appears to ignore that options were open prior to the referendum, and that a clear choice was subsequently made to leave.

Timely debate is an essential tenet of functioning democracies, especially in the case of major decisions like continued EU membership. And indeed, such a debate was held in the months and years leading up to June’s referendum. Both sides debated vigorously, and the people of Britain have made their decision. Article 50 will be triggered, and the UK will leave the EU. Rather than trying to undermine voters, pro-Remain elites should focus their energies on how to help Britain make the most of the opportunities presented by Brexit.

This article is from The Eurosceptic

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Fishing: The forgotten industry and the acid-test of Brexit

Robert Oulds

Sunday, 20 November 2016

Fishing

Does Brexit mean Brexit, with the change that we need, or will it just be business as usual

20th November 2016

The EU's Common Fisheries Policy is a drain on the British economy. A condition of entry into the EEC, as it was then, the British government was required to surrender control over its fishing waters on 1^st January 1973. Under United Nations rules a country now has the right, even the responsibility, to control the sea around its coast stretching out for a total of 200 miles or until the median line between two adjacent nations.

The European Commission opened UK waters to all other member states fishing fleets, apportioning fishing rights as they see fit. The Common Fisheries Policy costs Britain more than £3.7 billion per year caused through the EU depriving the UK of its valuable fishing grounds.

In 2012 UK fishing vessels landed 627,000 tonnes of sea fish (including shellfish) this yearly catch has a value of £770 million.[i] This is 13% of the value for the total EU catch.[ii] In 2012 British vessels account for approximately 12% - 13% of the total size of the EU catch.[iii] This figure remains relatively constant. In 2010 the total EU catch amounted to 4,923,000 tonnes, the share of this going to UK fishermen is 608,000 tonnes.[iv] The British catch in 2010 was again approximately 12% - 13% of the total for the EU.

This means that the EU fishing industry is worth £6.4 billion. Approximately 70% of this catch is taken in what were once British fishing grounds, now governed by the EU and open to vessels from other EU member states. This means that if these waters were fully reserved for UK fishermen, which would be legal under international law, then British fishing vessels would be able to land nearly £4.5 billion worth of fish. Yet the clear majority is being lost to our competitors in the EU, with British fisherman only being able to land £770,000 worth of fish.

Other estimates suggest that 80% of the total EU catch comes from what are, by United Nations standards, British waters. This would put the figure of the total resource taken from UK control by the EU at more than £5 billion.

The problems of the CFP are not just economic. The EU’s quota restrictions have had a disastrous environmental impact. For decades, if a vessel landed more than its allotted amounted they must then discard the fish that exceed the EU’s legal limit. The result was that as much as two thirds were returned to sea dead. Subsequently fish stocks declined significantly; further reducing the bounty of the sea. This policy has turned the once abundant North Sea into an ecological crisis zone. After more than four decades there has finally been some change, but the discard ban will only address the symptom of the EU’s disastrous free for all policy, the discarding of fish, rather than the actual cause, the EU’s control over quotas. The British fishing fleet will again be decimated as vessels must stop fishing when they exhaust their quota allocation.

The devastation on this industry can be measured by its human impact. In 1970 there were 21,443 fishermen in the UK; by 2012 that figure had been cut back to just 12,445.[v] The loss of jobs and the once active fishing fleet also had a detrimental effect on secondary industries that supported the fishing fleet and benefitted from the proceeds from this once sizeable business.[vi]

The effect of EU control via the Common Fisheries Policy has been to seriously damage a once strong industry. Landings into the UK have fallen from 1,039,100 tonnes in 1970 to just 489,100 in 2012. This steady decline has led to a growing dependency upon imports. In 2010, a total of 687,054 tonnes of seafood worth £2.23 billion was imported into Britain.[vii] That is British people having to buy back our own fish form foreign competitors. This must change, and with Brexit it should, but will it…?

This subsidising of foreign fleets by British consumers could be reduced if UK fishermen had their exclusive rights restored to them. There must be the full repatriation of UK resources and a fit for purpose UK policy implemented to allow the rejuvenation of this multi-billion-pound industry.

However, it is proposed by the Prime Minister Theresa May to incorporate the entire body of EU law, known as the Acquis Communautaire, into UK law. This will be via the so-called Great Repeal Bill. Yet, all EU law will include the legislation that underpins the Common Fisheries Policy (CFP).

The CFP is a reprehensible policy, both in terms of conservational and in operation. It would be expedient and advisable diplomatically and politically, that no facet of it is replicated, transposed or continued into UK law. Doing so would be to risk recognising in UK law the mechanisms of the EU’s policy – especially EU “equal access” and resources shares. That would be an abject betrayal of Brexit.

The CFP is constructed entirely of Regulations (direct EU law). Under the terms of Article 50, section 3, “the treaties shall cease to apply”, consequently so will the regulations and therefore the entire CFP and all mechanisms of it. The UK would revert to full control of our waters and all resources therein under international law (UNCLOS 3), with a clean slate to implement our own policy like Norway, Iceland and the Faroe Islands successfully manage.

The proposed Great Repeal Bill, as it stands, however, would negate this by adopting the CFP onto the UK statute book. This may prevent us from rebuilding and rejuvenating the industry and our long suffering coastal communities. If Parliament passes a bill that adopts into UK law the Common Fisheries Policy, along with all its iniquities, then our Members of Parliament will be betraying the industry again, just as they did in 1972 when the European Communities Act was passed into law.

To make sure that our fisheries are protected, the adoption of EU law into British law must exclude the Common Fisheries Policy. It is an area where UK law, and a sustainable policy for the benefit of our home fleet, should be put into place as soon as we leave the European Union. There must be no transition, it must be instantaneous.

Future policy must scrap all EU mechanisms, move to a Days-at-Sea, keep what you catch system, that is applicable to mixed fisheries – the Faroe Islands set this precedent in 1996.

The UK’s fishing industry could be a triumph for Brexit and Britain. The fishing industry and the communities that depend upon it can be saved as long as the Government exempts fisheries from the Great Repeal Bill, and puts into place our own policy. Indeed, British fishing can thrive as a world leader alongside other independent nations who fish the North Sea; Norway, Iceland and the Faroe Islands.

The British fishing industry was betrayed and bartered as expendable by Edward Heath when he sought to join the EEC. Fishing has become a microcosm and epitomises both the disaster of EU interference and incompetency. Due to this, fishing will be symbolic of withdrawal and will be the acid test of whether Brexit mean Brexit, with the change that we need, or will it just be business as usual.

Fishing could be held up as a beacon of the Government’s resolve and whether they can make a success of Brexit. As a nation, we should be bold. Aside from the London Convention of 1964, which granted rights to those who had habitually fished between the 6 and 12-mile limit for the 10 years prior to 1964, there is no provision for historic rights under international law on fisheries for the fishing limits from 12 to the 200-mile limit. It is the 200-mile limit that was snatched by the EEC as the price for admission into what became the EU. All current ‘rights’ for other EU fleets, and anyone else the European Commission has sold access to fish in our waters, comes via EU law. We can take back control from those interlopers, unless we are foolish enough to put those same regulations into force ourselves.

We need a British fishing policy ready to replace the failed EU system.

With the assistance of Fishing for Leave, Save Britain’s Fish

[i] http://www.marinemanagement.org.uk/fisheries/statistics/documents/ukseafish/2012/final.pdf

[ii] The European Fishing Industry, Struan Stevenson MEP, President of the Fisheries Committee of the European Parliament, page 9 http://epp.eurostat.ec.europa.eu/statistics_explained/index.php?title=File:Total_catches_in_all_fishing_regions,_2000-2010_(1_000_tonnes_live_weight).png&filetimestamp=20121022153701

[iii] http://www.europarl.europa.eu/aboutparliament/en/displayFtu.html?ftuId=FTU_5.3.9.html

[iv] http://epp.eurostat.ec.europa.eu/statistics_explained/index.php?title=File:Total_catches_in_all_fishing_regions,_2000-2010_(1_000_tonnes_live_weight).png&filetimestamp=20121022153701

[v] UK Sea Fisheries Statistics 2007, Marine & Fisheries Agency, 2012, page 24

http://www.marinemanagement.org.uk/fisheries/statistics/documents/ukseafish/2012/final.pdf

[vi] Batten, Gerard, How Much Does the European Union Cost Britain? 2008, the Bruges Group

[vii] http://www.seafish.org/media/486918/faqs%20web%20version%20010711.pdf

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Robert Oulds

This article argues that first, by accepting the Exclusive Economic Zone (EEZ) regime, coastal States have given up any claims the... Read More

Monday, 12 December 2016 20:27

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Europe, America and the Tectonic Plates

Robert Oulds

Saturday, 19 November 2016

Foreign Affairs

An earthquake in EU / US relations

19th November 2016

For those who decry the United States, its politics and political culture comes straight out of the European enlightenment and Anglo-Celtic notions of economic, religious and political liberty. The system of governance, based on classical ideas from Sparta, owes an equal amount to Lycurgus as it does to Locke. It is of European origin.

Slowly, however, just like the tectonic plates which created the Atlantic, there was a growing separation between Europe and America. In the case of the Republic of Ireland, this divide never emerged. The Irish economy was more linked to America than continental Europe. It was on the same economic cycle as the United States, that is until the Eurozone crisis. With regards to Britain, despite the best efforts of Barrack Hussein Obama, the UK and the US remain close.

There have been times when superficially there seemed to be a gulf between the EU and the USA. At times, some elements in the EU seemed to take an anti-American position. That however was just a brief period and has long since been forgotten. The close relationship that has existed between the EU and the USA goes back an extraordinary way. In some respects, the EU is the creature of the United States of America and its foreign policy. The student has become the master.

There will soon, however, be a major shift taking place. One of seismic proportions. There will soon be a President in the Oval Office, and New York, that supported Brexit and correctly called the referendum result. This caused consternation in Brussels. President Trump will also support the UK in its post-EU future.

The shift is enormous. If President-Elect Trump continues with his scepticism of the EU it will mean much more in geopolitical terms than the end of an effectively dead trade deal, the much-reviled Trans-Atlantic Trade and Investment Partnership (TTIP).

It is worth here looking at the change, by looking at what had gone before and the important supporter which the EU will soon be missing.

The USA was the first modern supra-national state. Merging together separate, albeit similar, states and commonwealths. The idea of overarching federal institutions ruling over once democratic nation states was imposed on many countries in Western Europe. Even Britain was pushed to join. Kennedy was behind Harold Macmillan’s failed application to join in 1961.

The United States originally saw the EU as a bulwark against Soviet Communism. Since the collapse of the USSR, which cannot be attributed to the EU, Russia’s former satellite states have either become part of the European Union or Brussels’ Eastern Partnership.

Henry Kissinger, the former US Secretary of State, is reported as saying “Who do I call if I want to call Europe?” In fact, he has denied that he said this.[i] Yet the EU is indeed slowly developing one voice and regional influence.

This has the support of the American government. The US President, Barack Hussein Obama, certainly supported the UK’s continued membership of the European Union. In fact he saw it as a guarantee of American interests. On 13^th May 2013 the US President said in answer to a question from the BBC’s James Landale during a discussion on Britain’s continued EU membership that “we believe that our capacity to partner with a United Kingdom that is active, robust, outward-looking and engaged with the world is hugely important to our own interests as well as the world.”[ii]

This expanded on a statement by the US Assistant Secretary of State for European and Eurasian Affairs, Dr Philip H Gordon, who on 9^th January 2013 said that Britain’s “voice within the European Union is essential and critical for the United States… ”[iii]

The United States of America also supports the Single Market. This is perhaps not surprising as American firms export more to the EU than the UK does. Its total EU exports in goods alone amounted to more than $265 billion, with a further $9.9 billion coming in terms of the sale of agricultural products. In terms of services the figure is $194 billion. Clearly the US sees the EU to be in its commercial as well as its geopolitical interests. It is noteworthy that both the EU and the European Central Bank have followed and enforced US sanctions against Iran.

The EU’s myth of origin: All States and aspiring States have their “myth of origin” – that is, a story, true or false, of how they came into being. The myth of origin of the European Union is that it is essentially a peace project to prevent wars between Germany and France, as if a collective tendency to go to war were somehow genetically inherited. In reality the EU’s origins lie in war preparations – at the start of the Cold War which followed the end of World War 2 and the possibility of that developing into a “hot war”, a real military conflict between the two victorious post-war superpowers, the USA and USSR.

These two had been allies in defeating German Nazism and Italian Fascism but became bitter rivals after the World War ended in 1945. Europe was then divided between East and West. As fear of communism internally and externally stalked war-ravaged Europe, American policy was to push the continent’s former imperial powers towards closer economic and political integration with one another, pressurising them at the same time to abandon their colonies. US interests could then move in on these.

In 1947 the two Houses of the US Congress passed a resolution that “Congress favours the creation of a United States of Europe”. That same year US economic aid to revive Western Europe under the Marshall Plan was premised on the recipients supporting economic and political integration. In 1948 the American Committee on United Europe was established. For years this body channeled CIA (Central Intelligence Agency) money to the European Movement. That Movement’s national sections in each country became the main non-governmental propagandists for further EU integration and have remained so to this day.

In 1949 the USA wanted a rearmed West Germany inside NATO on that military alliance’s foundation. This greatly alarmed France, which had been occupied by the Germans just five years before. Jean Monnet, who was America’s man in the affair, came up with the solution. He and other technocrats had been pushing schemes of federal-style supranationalism for Europe since the end of World War 1. These had had no effect in preventing World War 2, but in the new situation post-1945, with the USA now supporting Euro-federalism as a bulwark against communism in Europe, Monnet and his colleagues saw their opportunity. To assuage France's fears of German rearmament Monnet drafted the Schuman Declaration, called after France’s Foreign Minister, proposing to put the coal and steel industries of France, Germany and the Benelux under a supranational High Authority as “the first step in the federation of Europe”. This led to the European Coal and Steel Community Treaty of 1951.

A federation is a State, so the political aim of establishing a European State or quasi-superstate under Franco-German hegemony has been there from the start. The preamble to the German Constitution, adopted in 1949, speaks of Germany as “an equal partner in a united Europe”. Far from European integration being a peace project, therefore, the truth is that the first step towards supranationalism in Europe, the European Coal and Steel Community of 1951, was advocated and supported by the USA to facilitate German rearmament in the early years of the Cold War, and to reconcile France to that fact.

The EU celebrates 9^th May 1950, the date of this Schuman Declaration, as “Europe Day” each year. Jean Monnet became secretary of the supranational High Authority which ran the Coal and Steel Community. This was the predecessor of today’s Brussels Commission.

Following the Coal and Steel Community Treaty and against the background of the Korean War, the French Government, again pushed by the Americans, produced an ambitious plan for a European Defence Community (EDC). As Monnet put it in his Memoirs,¹”Now the federation of Europe would have to become an immediate objective. The army, its weapons and basic production, would all have to be placed simultaneously under joint sovereignty. We could no longer wait, as we had once planned, for political Europe to be the culminating point of a gradual process, since its joint defence was inconceivable without a joint political authority from the start.” This proposed Defence Community was to have a European Army, a European Defence Minister, a Council of Ministers, a common budget and common arms procurement under the overall aegis of a European Political Community. The treaty establishing the EDC was ratified by the German Bundestag, but it caused a political storm on both Right and Left in France and the French National Assembly narrowly rejected it.

Alerted by this setback the Euro-federalists decided henceforth to play down their ultimate goal of political integration and from then on to stress economic integration as the supposed route to prosperity. From 1954 onward “building Europe” was to be presented to Europe’s peoples as essentially a matter of economic growth and jobs. This would make political supranationalism more easily sellable to the different national publics. Supranationalism is the essence of the EU’s ideology.

A spin-off from the Cold War: Historically therefore the EU is a spin-off of the Cold War, which was pushed by the USA and its allies in the 1950s and subsequently to provide an economic underpinning in Europe for the NATO military alliance. Following the 1956 Suez debacle, when the USA foiled the attempt of the British, French and Israelis to overthrow the Egyptian government by force, the Americans urged British Conservative Prime Minister Harold Macmillan’s government to apply to join the EEC. By doing that Britain would regain America’s favour, as well as obtain from America the guided missiles which alone would enable her to continue as the world’s third thermonuclear power. Britain had detonated her first H-bomb in 1957, but had no independent means of delivering atomic weapons to possible targets.

Pressed by the Americans, Britain applied to join the EEC in 1961. Ireland and Denmark applied to join simultaneously because of their dependence at the time on British trade. As a major food exporter France wanted the Common Agricultural Policy to be fully in place, with its big subsidies for French farmers, before admitting food-importing Britain, which would want lower food prices, not higher ones. This led French President Charles de Gaulle to veto British membership of the EEC in 1963 and again in 1967. Britain did not finally join the EEC, together with Ireland and Denmark, until 1973. American proponents of Euro-federalism also advocated a European monetary union from an early date. In 1965 a US State Department memo advised the then Commission Vice-President Robert Marjolin to pursue a common European currency by stealth. It recommended suppressing debate until the point at which “adoption of such proposals would become virtually inescapable”.

In those years of the Cold War between the West and Russia “Euro-federalism” became the creed of a host of intellectuals on the Right and Left across the continent, disillusioned with the failed ideologies of the 20th century. On the political Right fear of communism made people comply with American advocacy of integration. On the Left traditional antagonism to “nationalism”, identifying that with imperialism and chauvinism, provided the rationale for theories which proclaimed capitalist supranationalism to be the forerunner of supranational socialism. In the meantime, there were lucrative careers to be made in pushing the integration “project”.

The euro as a response to German Reunification: Forty years after the 1951 Coal and Steel Community and the 1957 Treaty of Rome setting up the European Economic Community(EEC) which followed, another major shift occurred in Franco-German power. This was Germany's reunification as a side-effect of the collapse of the USSR in 1991. It led these two countries to establish EU Economic and Monetary Union (EMU) and its single currency, the euro. Eurofederalist circles had for years been canvassing a currency union to give the EU bloc this essential features of statehood. West Germany’s absorption of East Germany and the establishment of a unified German State now gave the political opportunity.

This would give Germany a central role in running a potential EU world power. France in turn hoped that the euro would give it a political lock on Germany. A Franco-German army brigade with joint officers and a joint command was simultaneously established as symbol and prototype of the European army of the future. Belgium, Luxembourg and Spain have since joined this common “Eurocorps”. American support for German reunification was contingent on the reunified Germany remaining a member of Nato, even though Nato’s counterpart, the communist-bloc Warsaw Pact, had vanished with the dissolution of the USSR and the end of the Cold War. America’s involvement in European affairs was thus continued through Nato, and its continued support for further EU integration. The US pushed Nato military bases into the former Warsaw Pact countries.

The election of Donald J Trump could well be of earthquake proportions in EU / US relations. Separation has begun. No more will Washington and Brussels be as thick as thieves stealing our democracy. A new administration will be more favourable to Britain than to Germany. The US State Department may well be instructed to support emerging independent nation-states in Europe, the first of which will be the UK. The decades of American support for European integration is at an end.

Arguably it was always inevitable that this break would happen. The EU has pretentions for military power that will undermine Nato. And as American power retreats from its post-World War II zenith there would have been growing resistance to those who see the EU as a collective junior partner of the USA in world politics. People no longer want their country to be subsumed in an inward-looking out-of-date bureaucratic bloc whose post-Second World War raison d’etre has long passed into history. The shock of there being an anti-EU American President is nonetheless still great. The EU may soon loose its biggest and most influential supporter, the United States of America.

Research courtesy of Professor Anthony Coughlan from Tackling the EU Empire: Basic critical facts on the EU/Eurozone

[i] http://www.businessweek.com/ap/2012-06-27/kissinger-says-calling-europe-quote-not-likely-his

[ii] http://www.whitehouse.gov/the-press-office/2013/05/13/remarks-president-obama-and-prime-minister-cameron-united-kingdom-joint-

[iii] http://www.state.gov/p/eur/rls/rm/2013/jan/202650.htm

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The Obsession with Regulation

Robert Oulds

Tuesday, 15 November 2016

Euro and Economy

The European Commission does not just propose regulation affecting its own internal market but also aggressively seeks to export its rules beyond its own borders

15th November 2016

The European Commission predicted that the once much-heralded Transatlantic Trade and Investment Partnership (TTIP) will boost EU GDP by 0.5% which will annually add €120 billion to the economy.[i] The gains seem significant but they represent little more than a rounding error in the calculation of economic output.

The speculative benefits are unlikely to be realised. TTIP is effectively dead. Its future looked bleak even before Bernie Sanders rose to prominence in the United States, acting as the bête noire of corporate interests, and long before the election of Donald J Trump. It was EU intransigence on regulatory issues that caused the gridlock and not the public’s overwhelming opposition to the Investor State Dispute Settlement (ISDS); the courts where nation-states can be sued and punished for policies detrimental to corporate interests.

The fact that agreement on regulation and the precautionary principle was never reached caused the TTIP to be cast aside; another casualty of the EU’s obsession with regulation. Now that there will be a new President who was elected, not just on a ticket of opposition to trade agreements that export US jobs, but also, on a platform of removing job destroying regulation, the gulf is now wider than ever. A President Trump aims to achieve the proverbial bonfire of regulation.

Such promises, which aim to restore an economies competitiveness, are often made yet rarely delivered. An aspect of this is no doubt the international angle, an increasing amount of regulation comes from global bodies that are agencies of the United Nations. Repealing them will require a country to breach international agreements. Trump, however, is prepared to do this. The EU, however, will not.

There is an international dimension at work and remains behind the initiation of many EU rules. There is a plethora of UN sponsored standard setting agencies which produce proposals for legislative standardisation across continents and beyond. An increasing amount of what we know as EU legislation is originating above the EU.[ii] The EU recognises as part of the case law underpinning the workings of the European Union recognises that international law is to be incorporated into EU law which therefore, via Brussels, becomes the law of each and every member state. The legal decisions of the European Court of Justice which confirm this are: Case 104/81, Kupferberg, Case C-192/89 Sevince and Case C-277/94 Taflan-Met.

Whilst the EU does passively receive some from upstream global sources such as the United Nations Economic Commission for Europe. The EU is not just a passive receives of diktats from the international organisations that sit above Brussels and are incidentally even more opaque than the arcane workings of European institutions. Global UN bodies are not the only source of regulation. The EU is still a source of much red-tape woe. What is more, Brussels seeks to export its regulations beyond its own borders. Pushing them onto its neighbours, over-seas through free trade deals and up to the global bodies; spreading the anti-competitive drive.

The European Commission does not just propose regulation affecting its own internal market but also aggressively seeks to export its rules beyond its own borders. Instead of liberalising the Single Market the EU is looking to raise rivals’ costs. This includes the most important potential trade deal in EU history. Instead of allowing European businesses to innovate more freely the Commission was attempting to make the USA apply what is known as the ‘precautionary principle.’

According to Professor Ragnar Löfstedt the Director of King's College London Centre for Risk Management whenever a new endeavour or products is proposed the European Commission can decide to ban a product until its producer demonstrates that it poses no (or an acceptable) risk. This attitude is at the heart of EU regulation and largely responsible for the growing complexity and rigidity of European Union law. Its use has been upheld by the European Court of Justice in legal cases including Pfizer Animal Health SA v. Council 1999 E.C.R. II-1961.[iii]

The precautionary principle stymies innovation and harms economic growth. It is this well-intended in theory, but pernicious in practice, belief that is responsible for the march of health and safety legislation.[iv]

The stubborn requirement for this and not allowing free access to goods which do not comply with the precautionary principle had the effect of scuppering the Transatlantic Trade and Investment Partnership between the EU and the USA. The United States of America has a different approach to risk-management which is more open to innovation.[v]

From the European Commission perspective, free trade agreements are not just to encourage the export of goods but also exist to export its regulations. A condition of tariff free trade access and the faster transit through customs is for the non-EU state to apply common technical and health and safety standards. Compliance with EU environmental rules and a commitment to ensuring that competition is not being distorted by state intervention is also mandated. As is the protection of intellectual property rights and that public procurement will be open to all.[vi]

Some even demand that in exchange for tariff free trade with the EU countries sign up to the EU’s human rights agenda. For the EU trade is politics by other means. There is a price to be paid for accessing the EU’s internal market from outside the EU. So what is the basis of this regulation and is it a burden on businesses?

A case can be made that common standards boost trade and make it easier for both service providers and manufacturers. Value is added to goods through an increasingly complex chain of production over many jurisdictions, with different parts and programmes originating in several countries. Global production, it is argued, requires global regulation. The Brussels bureaucracy is not the only organisation that promotes this position. It is even shared by some in the United States of America and is espoused by the influential US group the Council on Foreign Relations.[vii]

What is more, the setting of different standards in one country can be used as a protectionist measure that makes it more difficult for one country to produce products for the recipient’s market. This is especially the case if the exporter must pass costly and time consuming safety checks.

The standardisation of regulation will therefore remove these technical barriers to trade. Certainly, it is the case that supply lines are always improved if there is interoperability. The difference between domestic and export markets will also be reduced making it easier for businesses to operate in one environment.

The arguable increase in trade does not consider the probability that some businesses can reach agreement themselves making the regulation unwarranted. The desire for regulation also fails to consider that the costs of compliance. The level of interference has reached a point where it becomes excessive. Standardisation is also monotonous and impinges on creativity harming innovation.

There is substantial evidence which suggests that overregulation is holding back economic growth. A report on the burdensome cost to business was commissioned by the pro-EU Prime Minster, Tony Blair, during his time in office. The 2005 report by the Better Regulation Task Force for the then premier estimated that regulation cost the British economy 10-12% of GDP. That amounts to approximately £150 billion per annum. This cost is divided between, administration which entails 'familiarisation, record keeping and reporting, including inspection and enforcement.' This accounts for around a third of the burden with the remainder coming from the 'costs directly attributable to the policy goal.' At least half of this regulation, and therefore at least half the costs, originate from the EU; with this amount steadily growing. Half the cost equates to £75 billion pounds per year.

Other arms of the state have, however, come to different conclusions with civil service impact assessments reaching a different figure. These have been analysed by the British Chamber of Commerce in their Burdens Barometer 2010 report. According to this the annual cost of EU regulation is £7.5 billion per year, still not an inconsiderable sum.[viii]

Who is correct?

The figure derived from the British civil service may well underestimate the costs of regulation. Their impact assessments have been criticised by the Better Regulation Task Force. This report argued that the evaluations by Whitehall are inadequate. They lack a full cost benefit analysis of how the regulation is to be implemented and enforced. What is more, the impact assessments do not include nor fully explore other, less costly, alternatives to regulation.

The EU also produces its own impact assessments on the advantages and disadvantages of its own regulations. Just as the EU regards that the appropriate level for law making is at the European level it also regards its rules as beneficial with affordable costs. The fundamental floor at the heart of EU impact assessments is the fact that the Commission, the body which produces the legislation, also conducts the cost/benefit analysis of the proposals.[ix]. The bureaucracy, which incidentally leaves implementation to the EU’s arm’s length agencies and the member states, are unlikely to consider their own ideas as defective.

What is more, the monitoring of the legislation once in force also rests with the European Commission, the same body that has the monopoly on introducing the directives and regulations.

The Roman poet, Juvenal, in his satires famously asked Quis custodiet ipsos custodes? This translates as “Who will guard the guards themselves?" Or "Who watches the watchmen?" When it comes to law making in the EU the answer is that the EU is its own guardian. The future of enterprise in Europe rests with the benevolence, or perhaps, malevolence of the European bureaucracy.

Even supporters of the EU and some senior figures in the European Commission have admitted that the overregulation of business is harming the economy.

Peter Mandelson, as Secretary of State for Trade, told the Confederation of British Industry conference on 8^th November 2004 that the cost of EU regulation amounts to holding back GDP in the EU by as much as 4%.[x] He was soon to become the EU Commissioner for Trade, taking up that post just two weeks later. This regulatory burden did not decrease during his time at the centre of the EU.

Those in the UK that believe that EU regulation is seriously to the detriment of enterprise are not alone. The Netherlands has also concluded that the EU is bad for business. As long ago as 2002 the Dutch government estimated that the administrative burden of regulation alone, which they define as ‘the costs imposed on businesses when complying with information obligations stemming from government regulation’ cost them 3.6% of GDP.[xi]

Other Dutch reports have come to similar conclusions. In 2004 a report commissioned at the request of Gerrit Zalm, the then Dutch Deputy Prime Minister who also served at that time as the Netherland’s Finance Minister, estimated that the administrative burden on business in his country cost 3.7% of economic output. These conclusions were supported by the Organisation for Economic Co-operation and Development (OECD). In 1997 they predicted that regulatory reform in the Netherlands could boost Dutch GDP by 3.5%.[xii]

Like the UK, not all Dutch regulation, comes through the imposition of European Union directives and regulations. In the Netherlands, it is estimated that the EU element amounts to 40%. The proportion for the UK is higher, now as much as 60%.

On 10^th October 2006 Günter Verhuegen, the European Commissioner for Enterprise and Industry and a Vice-President of Commission stated that,

"Many people still have this concept of Europe that the more rules you produce the more Europe you have. The idea is that the role of the commission is to keep the machinery running and the machinery is producing laws. And that's exactly what I want to change."

Verhuegen’s bid for reform was, however, blocked according to the Commissioner by the EU’s administrative culture.[xiii] Even the Vice-President could not stop the legislative avalanche.

Günter Verhuegen also estimated that the annual cost of EU regulation across the EU amounted to €600 billion per annum (around 5.5% of GDP), while the benefits of the Single Market amount to only €160 billion: therefore the costs exceeded the benefits by a staggering €440 billion.[xiv] Later, in a letter from Commissioner Verhuegen to Bill Newton-Dunn MEP, on 18^th June 2007, the Commissioner gives the overall figure of just the administrative burden of EU level legislation as costing 3.5% of GDP for all member states and this sum would be similar for the UK.[xv] What is more, the figure of three and a half per cent actually excludes the costs that directly relate to the policy goal making the final figure much higher.

It appears that even these, now former, Commissioners have a better recognition of the harm that EU rules have on competitiveness than British civil servants whose analysis of the costs of regulation in their impact assessments clearly underestimate the burdens that are being placed on businesses. Yet they could stop the ever-growing amount of EU rules. If the EU has not changed this damaging practice after more than a decade of governments recognising there is a problem what hope is their of change now… ?

All measures of the cost of EU regulation show that there is indeed a significant price that business and therefore consumers have to pay as a result of EU rules. Across the EU enterprise, production and entrepreneurship have been replaced with regulation, inspection and compliance. Even the Confederation of British Industry mentioned in a report on the European Union that, ‘The EU has moved too far from ‘adding value’ to ‘adding functions’, resulting in ‘mission creep’ in several areas.’[xvi]

Yet why at this difficult economic time is it still in place and continually being added to? Or, more specifically, cui bono; who benefits from the EU?

The reasons for EU regulation

Apart from the precautionary principle there are also other factors that have led to the growth of regulation.

Sir John Robert Seeley, the historian and writer on religious affairs, in his 1883 book the Expansion of England wrote of the British Empire that ‘we seem, as it were, to have conquered half the world in a fit of absence of mind.’ The Empire of the European Union, a realm of regulation, has conversely been deliberately established. It is not a free trade area that has been on an accidental legislative binge. The higher authority of the EU uses law to achieve its goal; that is the building of a monolithic system of political control that is aimed, rightly or wrongly, at reigning in the excesses of the nation states. By implication the nationalist passions of the citizens of its member states are also kept in check. Or so the thinking goes. Building Europe requires the establishment of a body of law known as the acquis communautaire. A new political power cannot be said to exist unless it is an active law maker. The European Commission recognises that its political governance cannot be established in an absence of law.

Whilst the EU is largely immune to influence from national democratic institutions it is very much open to lobbying for new legislation from both environmental groups and multi-national businesses alike. Small and medium sized enterprises, who suffer most from red-tape, do not have the finances the time nor to defend their interests. This is not surprising; since 2010 there have been 3580 new EU rules on business that would take 92 days to read.[xvii] Naturally the bigger the business the greater the resources it can spend on both being consulted by Brussels on future legislation and on lobbying for laws that are in their interests. This can include regulations that add costs on to competitors. Despite the apparent quest for harmony between the people of Europe, EU law making can also be manipulated to raise the costs of a rival country.[xviii]

The City of London and the UK’s financial services industry has borne the brunt of this assault. Recent regulations concerning; Credit Rating Agencies, and the establishment of the European Systemic Risk Board, the European Banking Authority, the European Securities and Markets Authority the European Insurance and Occupational Pensions Authority are prime examples. As is the Alternative Investment Fund Managers directive.

The expansion of the EU is also another factor. The accession of the once Soviet dominated states did not lead to a new European paradigm where excessive regulation would be resisted. Far from leading to a liberalisation of the EU the eastward expansion became another excuse for yet more law making. In the opinion of the Commission the former communist states of Eastern Europe had insufficiently developed law for a capitalist free market. Apparently their economies were in need of stewardship by the EU. The standardisation that followed led to even greater EU interference.

The former President of the Czech Republic, Václav Klaus, said, during his time in office that, "every time I try to repeal some Soviet-era directive, I'm told that whatever I am trying to scrap is a requirement of the European Commission."

The European Commission is not the only EU institution that is adding to the legislative morass. A member of the Commission Legal Service blames another branch of the EU, the European Parliament. ‘The European Parliament, under the co-decision [ordinary] procedure, is allowed to propose uninformed, irrational, impractical amendments, safe in the knowledge that they have no responsibility for implementation.’[xix] Other EU institutions are also part of the problem as any ambiguity is clarified by the European Court of Justice who inevitability add evermore complexity to EU law; which once in place is extremely difficult to repeal.[xx] EU rules resemble the complicated financial devices bankers use like their debt swaps and derivatives. Few in the banking sector understood how they operated in practice let alone the risks involved. Complex EU law is equally economically damaging.

Excessive EU regulation is a cost too far. The European Union is most definitely in relative, if not actual, economic decline largely because of excessive regulation.

It is only fair to leave the last word to the EU. According to a report by the European Commission titled Global Europe 2050 in the year 2000 the EU accounted for 25% of world economic output. However, by 2050 its share of global GDP will be ‘as low as 15%.’ The EU’s own report goes onto say that, ‘By 2050, Europe’s share of global economic product may be lower than it was before the onset of industrialization, hardly a trend leading toward global economic dominance.’[xxi]

This article was in Commerce Review

[i] http://ec.europa.eu/trade/policy/in-focus/ttip/

[ii] North, Dr Richard, The Norway Option: Re-joining the EEA as an alternative to membership of the European Union, the Bruges Group, 2013, pages 10 - 28

[iii] http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=CELEX:61999A0013:EN:HTML

[iv] Mason, William, The Costs of Regulation – and How the EU Makes Them Worse, the Bruges Group, 2008

[v] http://www.truthabouttrade.org/2013/07/03/u-s-eu-trade-agreement-and-the-precautionary-principle

[vi] http://ec.europa.eu/trade/policy/countries-and-regions/agreements/#_europe

[vii] http://www.cfr.org/trade/better-regulation-freer-trade/p28508

[viii] UK-EU economic relations – key statistics, House of Commons Library, SN/EP/6091, 13^th February 2013, page 6

[ix] http://ec.europa.eu/governance/impact/index_en.htm

[x] Financial Times, 8^th November 2004

[xi] Regulation - Less is More: Reducing Burdens, Improving Outcomes, A BRTF report to the Prime Minister, 2005 http://www.bis.gov.uk/files/file22967.pdf

[xii] Review of the Dutch Administrative Burden Reduction Programme, World Bank Group, 2007 http://www.doingbusiness.org/~/media/FPDKM/Doing%20Business/Documents/Special-Reports/DB-Dutch-Admin.pdf

[xiii] http://euobserver.com/economic/22610

[xiv] http://www.worldcommercereview.com/publications/article_pdf/66

[xv] http://www.publications.parliament.uk/pa/cm200607/cmselect/cmeuleg/519/519we10.htm

[xvi] CBI, Our Global Future: The business vision for a reformed EU, November 2013

http://www.cbi.org.uk/media/2451423/our_global_future.pdf

[xvii] http://www.freebritain.org.uk/_blog/Free_Britain/post/newrules/

[xviii] http://www.brugesgroup.com/SpeechByRolandVaubel2010.pdf

[xix] Bellis, Robin, “Implementation of EU legislation. An independent study for the Foreign & Commonwealth Office, 2003,

[xx] Mason, William, The Costs of Regulation – and How the EU Makes Them Worse, the Bruges Group, 2008

[xxi] http://ec.europa.eu/research/social-sciences/pdf/global-europe-2050-summary-report_en.pdf

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The EU, Lichtenstein and Immigration

Robert Oulds

Monday, 14 November 2016

Immigration

In 2013, writing for the Institute of Economic Affairs, Robert Oulds of the Bruges Group, first explained that Britain can remain fully engaged with the Single Market and still have restrictions on immigration.

14th November 2016

The media would have it that events are moving towards a clean Brexit. Yet it is still worth considering that Britain does have other options. And these are not as weighted towards the interests of Brussels and Berlin as our European competitors mistakenly believe.

Other EU leaders should bear this in mind, their demands for continued free movement in exchange for being a part of the Single Market, or a free trade agreement, are not only unreasonable but also unenforceable. Not only do other countries have trade agreements without the obligation for free movement, even in the Single Market one small, yet notable, country has opted out from freedom of movement.

A core principle of the European Union is the free movement of peoples between member states of the EU. This is one of the main areas where people will see the effects of EU membership. The rules governing this are contained within EU Directive 2004/38/EC.

Under its rules deportation can only happen when ‘The personal conduct of the individual concerned must represent a genuine, present and sufficiently serious threat affecting one of the fundamental interests of society.’ It also states that, ‘Previous criminal convictions shall not in themselves constitute grounds for taking such measures.’[i]

Other areas on controversy concern the economic impact of migration. One a half million non-British citizens of other EU member states work in the UK, this constitutes around 5% of employment in Britain.

According to the respected think tank specialising in issues relating to immigration, Migration Watch UK, an immigrant will have to earn approximately £27,000 to make a positive financial contribution to the British economy. This figure is based upon the average earnings in Britain with an additional amount added on to make up for the cost of the additional infrastructure to support the new entrants into the UK. The need for extra provision in housing and education are issues. Naturally, an increase in demand without a corresponding increase in supply will drive up both rents and house prices. Immigration also influences depressing the average wage of existing British residents.[ii]

The least well of existing residents lose the most from immigration. For each 1% increase in the number of working age immigrants there was a 0.6% decline in the pay packets of those in the bottom 5% of the pay scale. The lowest paid ten per cent suffered from a 0.4% decline in their wages.[iii] What is more, the least skilled existing British workers had a reduction of 0.5% in their salaries.[iv] Over time salaries should increase, especially as inflation has been marginally going up.

Another cost of immigration is the transfer of money that migrants have earned in the UK back to their

country of origin. According to the World Bank each year $1.2 billion is sent from Britain to Poland alone.[v]

This is money that is leaving the UK and benefitting another state. This transfer of funds out of the UK to family in home state their home state, or to fund investments in their country of origin, is of enormous economic importance to many who reside in Eastern Europe.[vi]

Much of these costs, however, rely on the immigrants being economically active. According a report by the European Commission the number of non-working immigrants from the EU had risen from 2006 – 2012 by 42% to more than 611,779. According to the same report between 2008 and 2011 there was a 73% increase in the number of people from the EU coming to Britain without a job.

Dry economic numbers are not the only considerations when assessing the impact of immigration from the EU to the UK. There are also social considerations and matters of community cohesion. The former Labour Home Secretary, Rt Hon. David Blunkett MP, warned on 11^th November 2013 that the influx of Roma from Eastern Europe may cause riots on the streets.[x]

Though there is much discussion about migration from the rest of the EU to the UK, 1.8 million UK citizens live in other EU states. They take advantage of the free movement of persons - a right enshrined in EU treaties. Those that have established a residency, which will include both living and owning property, in an EU member state will have their rights protected upon withdrawal.

This entitlement is known as an ‘executed right’. Article 70 b. of the Vienna Convention states that the withdrawal from a treaty ‘Does not affect any right, obligation or legal situation of the parties created through the execution of the treaty prior to its termination.’ This view is supported by the constitutional expert Lord McNair. He concluded that such rights established by a treaty will remain in force even if the agreement is terminated by Britain’s exit. In law they are considered to be executed by the treaty and “have an existence independent of it; the termination cannot touch them.” Their status will be guaranteed because of the “well-recognised principle of respect for acquired [vested] rights.”[xi] Furthermore, it is a legal norm and the Oxford Journal in its year book on international law argues that Acquired Rights are Customary Law and therefore take precedence over national law at the international level. And will be regarded as such by the International Court of Justice in The Hague.

Indeed, any attempt to cancel the right of French and German citizens already in the UK live and work in Britain would be diplomatically contentious. London has a large French population. According to a November 2013 report by the Centre for Research and Analysis Migration, between 2001 and 2011 immigrants to the UK from the EEA contributed 34% more in taxes than the British state spent on supporting them.[xii]

Therefore the impact of Britain leaving the EU will not be that great for those EU citizens already resident here or for British citizens living abroad. The difference will be felt by those who move to a different state after British withdrawal.

These issues surrounding immigration are used by both sides in the on-going debate as to whether Britain should remain in the European Union. Some argue that Britain should leave to control immigration from Europe, on the other side the issue of the free movement of persons is intrinsically linked both politically and legally to free access to the EU’s Single Market. That has been made clear by the German Chancellor Angela Merkel and should Britain choose to leave the EU free movement will be a condition on any new free trade agreement.

Yet there is another way. Britain can leave the but keep full access to the EU’s Single Market by re-joining the European Free Trade Association and remaining in the European Economic Area. This will also allow for some action to be taken to control immigration.

Liechtenstein, an EEA member with less potential influence than Britain, continues to use clauses in the EEA agreement to restrict the movement of persons. Article 112(1) of the EEA Agreement reads: ‘If serious economic, societal or environmental difficulties of a sectorial or regional nature liable to persist are arising, a Contracting Party may unilaterally take appropriate measures under the conditions and procedures laid down in Article 113.’ The restrictions used by Liechtenstein are further reinforced by Protocol 15 (Article 5 – 7) of the EEA agreement. This allows Liechtenstein to keep specific restrictions on the free movement of people. These have been kept in place by what is known as the EEA Council.[xiii] Last year Lichtenstein gave residency to just over 70 people. At present, in the EU, Britain is obliged to accept hundreds of thousands each year.

There will also be greater latitude to restrict non-British EU citizen’s access to benefits and to deny residency to those who are deemed to not have sufficient resources to support themselves. The current debate in Britain on immigration largely ignores the role of the European Court of Human Rights and the European Convention.

Article 3 of the Convention (inhuman or degrading treatment or punishment) and Article 8 (private and family life, his home and his correspondence) would also be relevant to the issue of immigration. These two articles are often taken together, especially in cases of repatriation.

EEA/EFTA states are outside Article 6 of the EU’s Treaty on European Union, which states:

2. The Union shall accede to the European Convention for the Protection of human Rights and Fundamental Freedoms. Such accession shall not affect the Union’s competences as defined in the Treaties.

3. Fundamental rights, as guaranteed by the European Convention for the Protection of human Rights and Fundamental Freedoms and as they result from the constitutional traditions common to the Member States, shall constitute general principles of the Union’s law.

Immigration into the UK cannot tackled properly until the, non-EU, European Convention is interpreted with greater diligence. There is scope for this through exiting the EU but remaining in for the time being the European Economic Area.

The EEA relevant rule relating to freedom of movement has qualifications, conditions and limitation.

(10) Persons exercising their right of residence should not, however, become an unreasonable burden on the social assistance system of the host Member State during an initial period of residence. Therefore, the right of residence for Union citizens and their family members for periods in excess of three months should be subject to conditions.

(12) For periods of residence of longer than three months, Member States should have the possibility to require Union citizens to register with the competent authorities in the place of residence, attested by a registration certificate issued to that effect.

(22) The Treaty allows restrictions to be placed on the right of free movement and residence on grounds of public policy, public security or public health.

Article 7, 1 b)

(b) have sufficient resources for themselves and their family members not to become a burden on the social assistance system of the host Member State during their period of residence and have comprehensive sickness insurance cover in the host Member State.[xiv]

No right is absolute, and neither is freedom of movement within the EEA. What is more, EEA rules only apply to EFTA nations after they have assessed the relevant legislation and applied it according to their own interpretation of what freedom of movement means.

Much can be done unilaterally. As an EEA member outside the EU, the UK will also can re-write EEA relevant rules. Whilst they must still broadly conform to existing legislation it will grant some latitude to make sure that British interests are better served.

Iceland unliterally opted out from the free movement of capital after its crash in 2008[xv], Lichtenstein is outside the free movement of persons. Britain can do the same. Knowing this tells us that the EU’s negotiating position is a weak one. We will have our cake and eat it, and apportion it to our own citizens and residents first.

This article was in Commerce Review

[i] http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=OJ:L:2004:229:0035:0048:en:PDF

[ii] Anthony Scholefield, Warning: Immigration Can Seriously Damage Your Wealth, the Social Affairs Unit, 2007

[iii] Christian Dustmann, Tommaso Frattini and Ian Preston, CDP No 03/08, The Effect of Immigration along the Distribution of Wages, 2008

[iv] Gavin Thompson and Daniel Harari, The economic impact of EU membership on the UK, SN/EP/6730, The House of Commons, 17^th September 2013

[v] http://www.theguardian.com/global-development/datablog/2013/aug/09/remittances-britain-data

[vi] http://blog.euromonitor.com/2011/09/regional-focus-remittances-inflows-crucial-for-many-eastern-european-consumers.html

[vii] Congdon, Professor Tim, How much does the European Union cost Britain? 2013

[viii] http://www.telegraph.co.uk/news/worldnews/europe/10375358/True-scale-of-European-immigration.html

[ix] http://niesr.ac.uk/blog/benefit-tourism-commission-gives-us-some-facts#.UoJIi5hFB2t

[x] http://www.telegraph.co.uk/news/uknews/immigration/10442352/Roma-migrants-could-cause-riots-in-cities-warns-Blunkett.html

[xi] Lord McNair, The Law of Treaties, 1961, pages 531 – 532. And, Leaving the EU, House of Commons Research Paper, 13/42

[xii] http://www.cream-migration.org/publ_uploads/CDP_22_13.pdf

[xiii] EEA Council Decision No. 1/95, Official Journal of the European Communities, 20^th April 1995, pages L 86/58 and 86/80

[xiv] DIRECTIVE 2004/38/EC OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL of 29 April 2004

[xv] Official Journal of the European Communities, 3 January 1994, pages L/28, 176-8 and 562.

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Nobel Laureates - Britain leading the world

Robert Oulds

Thursday, 10 November 2016

Comment and Analysis

Remoaners should not doubt our abilities as a nation

10th November 2016

Remain campaigners spent much time saying that we British must stay in the EU, as if we are not clever enough to exist without the help of the EU bureaucrats.

They seem to have forgotten that it was British engineers and entrepreneurs that developed the Industrial revolution that gave power to the world first with steam and then electricity.

Engineers such as Watt, Faraday and Brunel started the tradition. From 1812 the London Stock Exchange enabled industrialists to raise the money to build and develop inventions that would benefit the population.

By the later part of the eighteenth century most homes in cities and large towns had access to pure water, and because of the work of Joseph Bazalgette sewage systems were built to further protect the population of London (3 million) from disease and infection.

Our inventiveness has contributed to safety regimes in many industries, Davy lamp was one of the first. Radar has provided security in peace and war in the air or on the sea. The theories of mathematicians from John Napier to George Boole have been vital support to scientists and engineers.

Travel has been safer and faster since roads were paved by MacAdam. The jet engine and internal combustion engines, the compression engine was patented in the UK two years before Diesel in Germany.

The British contribution to improvements in healthcare specifically anesthetics, inoculations and vaccines have helped to ease the suffering and prolong life. This work is continuing with DNA and the Genome project.

In 1901 The Nobel Institute inaugurated a way to recognise outstanding work in science medicine and literature around the world by awarding Prizes each year. To count up the number of prizes won gives an indication of education and abilities of the inhabitants of the countries of the world. According to the Nobel website Britain scores well compared with other countries. Our first Nobel laureate was Randal Cremer who won the Peace Prize in 1903. In 1904 we won the Prizes for both Chemistry and Physics, Ramsay and Rayleigh respectively. The most recent being for Physics, Economics and Chemistry in 2016, in 2013 for work with the Hadron Collider at CERN, Medicine in 2012 and in 2015 Economic Sciences. Through the Twentieth Century our population, of now 64 million, has earned 80 Nobel Prizes. Germany has won 72. Present population 80 million whilst USA has the poorest record of 257 from a population of 316 million.

Despite this historic and ongoing success Remoaners still do not have faith in this country’s capabilities.

A major part of the argument put forward by proponents of the EU is about trade, which somehow ignores the fact that Great Britain has existed as a unique entity for one thousand years, and it became the most successful nation in the world and the power house of industry for the whole world. Although, there are, of course, some facts regarding out activities in the world during that period that we would like to forget they are eclipsed by the immense sacrifices that the people of Britain and its, then, empire made in fighting tyranny across the globe. Including two ruinous world wars; the endeavours, of which, resulted in our financial demise.

For some reason, in Great Britain achievement and especially industrial achievement are a type of conversation to be avoided, and very few people are actually aware that we have accounted for very much internationally. Indeed, if you were to stop an average British person on the streets and ask them to name the ten top British inventions, or discoveries of world wide significance, you may get a radar from some of them and even the jet engine from slightly less. But, you are more likely to get the Beetles, or Manchester United from most ! Having lived in two countries in the present EU, including Germany, I am aware that they are proud of their industrial heritage and delight to recount it for you.

All the above has resulted in a lack of belief in our own abilities, and a belief reinforced by the Stay In the EU supporters who insinuate that Great Britain could not survive on its own. So I have set about finding out just what Great Britain has given to the world, and you would be surprised . I admit when you come to sports that there were always people who kicked something or hit objects with a stick, but it is the nation that recognises this as a sport and lays down the rules for it, that truly turns kicking the odd stone, into the game of football, or hitting stones with sticks to becoming the game of golf etc.. Indeed, a Japanese survey into which nation had contributed the most worldwide adaptable inventions concluded that the British were responsible for 40% of all of them.

World’s top three nations for Nobel Laureates:

America            270 Laureates    Population         324,464,680      = 1 per 1.2 million
United Kingdom 109 Laureates    Population         64,542,000        = 1 per 0.59 million
Germany           76 Laureate       Populatio           82,506,000        = 1 per 1.085 million

As you can see the American population is c. 5 times greater than the UK.

Why then do the Remoaners doubt our abilities as a nation?

So just what were these gifts to the world that Great Britain invented. The list below is not exhaustive but it probably includes all the major inventions and discoveries: -

Steam engines.

Railways.

Industrial revolution.

Flying shuttle.

Iron ships.

Screw propeller.

Worldwide cable networks.

First radio signals sent/received from these shores.

First public radio broadcasting service.

World’s first radio factory.

The jet engine.

Radar.

Antibiotics.

Vaccination.

Splitting the atom.

The (not so attractive socially, but nevertheless the atom bomb was invented by America, Canada and Great Britain, in partnership).

The world’s first commercial nuclear power station.

Television.

The English language.

Darwin.

Newton.

Military tank.

Electronic programmable computer.

Mechanical programmable computer.

The internet.

Consistent winner of world land speed and water speed records.

Many of the world’s racing cars, including Mercedes are engineered here.

Currently building the Sabre engine (space/air) engine.
Carbon fibre.

Graphene.

The G-nome.

Structure of DNA.

Threshing machine.

Iron Bridge.

Percussion ignition (firearms).

Electromagnetic induction (The electric motor/dynamo).
Steel.

Jump jet.

Hovercraft.

Postal system.

Bolean algebra.

The light switch.

Electric light bulb.
Cats eyes.

DNA profiling.
World’s first SMS message.

Power loom.

Rugby (forerunner to American football).

Modern golf.

Modern tennis.

Modern football.

Sewing machine.

Cricket.

Self-winding watch.

Electric vacuum cleaner.

Thermos flask.

Lawnmower.

Float glass.

Electric telegraph.

Pneumatic tyre.

Fax.
Hypodermic syringe.

Reflecting telescope.

Disc brakes.

Steam turbine.

Marine chronometer.

Modern torpedo.

Glider (First heavier than air machine).

Seed drill.

Modern Cement.

Stainless steel.

The principle of the electric transformer.

Waterproof material.

Photography.

Tin can.

Smallpox vaccine.

Hydraulic press.

First purpose built fighter aircraft.

Diagnostic ultrasound.

Rubber band.

Electric clock.

Electro plating.

Stun grenade.

Corkscrew.

Anaesthetic.

Hydrogen-oxygen fuel cell.

Blood circulation.

Electromagnet.

The proton (discovery).

Valve (radio).
Submarine.

Adjustable spanner (wrench).

Modern crane.

Two stroke engine.

Compression ignition (the system used for diesel engines).
Toaster.

Chobham armour.

TarMacadam (road surfaces).

Asdic.

Carbon arc lighting (this preceded the electric light bulb).

Bailey Bridge.

Vulcanisation.

Ophthalmoscope.

Davy lamp.

Research by Vernon J Yarker

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Interview with Kristiina Ojuland

Robert Oulds

Tuesday, 08 November 2016

European Union

Estonian Foreign Secretary (2002 - 05) talks to the Bruges Group

David Wilkinson

7th November 2016

Understanding the Central European Revolt
Kristiina Ojuland, the Estonian Foreign Minister who took her country into the EU, has since had a somewhat Damascene conversion. Despite being the Foreign Secretary who negotiated Estonia’s accession to the EU, she is now a Eurosceptic having recently and even described the EU as a failed state and a betrayal of everything European.

Kristina explains the growing revolt against the EU that is emerging in Eastern Europe, their fears regarding mass migration and concern over another empire to the east. Kristiina Ojuland is particularly concerned about the devastating effects in countries like Estonia of de-population, the brain-drain and family break-up caused by people emigrating to countries like Britain. She, along with others in Eastern Europe, is concerned about the replacement of their absent population with EU quotas of migrants.

Listen to the full interview below.

The Podcast

Kristiina Ojuland

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Tax Reform - Post-Brexit

Robert Oulds

Monday, 07 November 2016

Taxation

Tax simplification for Brexit

Flat taxes to drive economic growth

Sir David Roche

9th November 2016

The sole aim of Tax Reform is to get in more taxes.

The UK is running a large deficit between what it receive in taxes and what it spends on services. Albeit money is cheap, it cannot go on for ever. With money so cheap it is an ideal time to make changes.

The tax code is now very complex and needs to be thrown out and replaced with a very simple model all can understand.

The reason it is so complicated is that successive, Labour and Conservative governments have given ‘tax breaks’ to their supporters to get elected. They have stayed in the code while new ones get invented.

The Hall Rabushka model is a place to start. This book on Flat Tax was published in 1985. It suits a closed continental economy like America but would need some changes for the English Economy. The difference being that getting in more taxes is competitive. It has nothing to do with ‘International cooperation on tax avoidance’.

However, the principal is that a tax return should be done on a post card is a good one. The post card looks like this: [with some simple numbers]

Total Annual Income £110,000

Tax free allowance 10,000

Net taxable income 100,000

Tax @ 25% 25.000

Post Tax income 85,000

The big note is that other than the tax-free allowance to keep the lowest paid out of the tax threshold there are no other allowances. The other reason to have a tax-free allowance is that it is expensive employing people to collect small amounts of tax.

The tax payer can do what he likes with his post tax income. He can give some of it to charity; save some for his pension or spend it. Whole industries like the pension industry, the charity industry, the ISA industry will not like it and do its best to stop it. The number of tax collectors and accountants who calculate tax will be reduced dramatically. They will not like it either. But the taxpayer will.

The Daily Telegraph did a tax computation on this taxpayer some years ago. By the time they used the current tax avoidance schemes, pension, ISA, EIS etc. They got his tax paid down to about £4,000. “Aggressive Tax Avoidance” is caused by Governments.

‘Trickle down’ and ‘Net Immigration’

When Mrs Thatcher reduced the top rate to 40% this idea was that this rich people with more money to spend would spend it in England so it will trickle down into the economy. What happened was ‘trickle out’. Net immigration is the difference between poor people coming into the country and rich people leaving it.

Tolerance and the Treasury model.

England is the most tolerant country in the world but there is an intolerance to ‘high earners and bankers’. As they must live in England to bank or play football they all pay tax. The Rich are in fact the business owners who live in Monaco or Switzerland. We want them back because we want their money. A straw poll of Verbier residents, who currently pay no tax, would pay 25 to 30 percent of their world-wide income for the right to live in England on the above model, subject to no inheritance tax. The Treasury model is a closed system and does not include this vast store of wealth that could be tapped.

Inheritance tax; in 1979 Mrs Thatcher abolished exchange control which was designed to stop money flowing out of the country. The result was that so much money flowed into the country that the Bank did not know what to do with it; and at $2.40 to the £.

Inheritance Tax currently produces about 3.5% of total revenue, and it costs an estimated 40% to collect. It is not much compared to the flow of money into the country if it were abolished. If we get these people back, we get 20% of all they spend. Trickle Down would finally work.

Chancellor Osborne always knew about this but was been too frit to do it. He had a go at limiting tax relief to charities and got roundly beaten. He wanted to reduce corporation tax but fears abolishing it on the Estonian model:

Siim Kallas in Estonia found that company tax was yielding the least revenue and abolished it. But with a twist! No company tax was to be charged on company profits that remained in the company or its subsidiaries, but taking money out of the company by way of dividend, director’s entertainment, cars etc was subject to the flat tax rate, then 26%. This was done by simply adding an extra line to the monthly VAT form. This had two magical effects; firstly, revenue came in immediately instead of an 18 month wait and as companies did not have to depress their profits, which any accountant can do, to avoid tax. They declared as much as they liked and in a year, this doubled the country’s GDP.

Nothing had changed but the GDP pundits thought it must be a great place to invest, which they did, making it a self-fulfilling win, win situation.

With the confidence that comes from having available new computer models it is the time for a body in the City to research and run it on a simplified basis on a totally fiscal and non-political basis.

The current guide to taxpayers is here.

Sir David has been an advocate of Tax Reform for some years. Most notably in Estonia, Slovakia and more recently to an African country that has hopes of being the ‘Dubai of Africa’. With the Tax Payers Alliance he contributed to the Forsyth Commission. He has had contributions in these efforts from the leading Tax Chambers in London and a leading City economic Think Tank.
Sir David served as a Director of private companies in the sectors of energy; leisure, shipping, and Eastern European property. He represented Siemens Wind Energy on the Board of The British Wind Energy Association, and advised on Estonian, Czech & Slovak, and Balkan investments. Sir David has been the Chairman at Plaza Holdings Ltd since 2002 and a director and founder of Neasden Aggregates in the cement industry at present. He has been the Chairman of the Board of Directors at Strategic East European Fund . He held various positions including serving as the Chairman to Carlton Real Estate Plc and as a Member of the Estonian Government Tax Reform Commission from 1993 to 1994. Sir David is a regular commentator on the BBC, other television networks. Sir David qualified as a Chartered Accountant with Peat Marwick Mitchell, (now KPMG). He is also an FCA. He was senior manager UK Banking at Samuel Montagu, (now. HSBC)
Sir David was educated at Wellington and Trinity College Dublin.

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Obituary: Betty Simmerson

Robert Oulds

Friday, 04 November 2016

European Union

Martin Page Remembers Betty SimmersonLovers of freedom everywhere and supporters of the struggle to restore Britain`s national independence and sovereignty will be saddened to learn of Betty Simmerson`s death ( on 21st October at the age of 89 ), and yet inspired to learn, or learn more, about her life. Coming from a modest background in Britain, s...

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A Deeply Troubling and Wrong-Headed Decision

Robert Oulds

Friday, 04 November 2016

European Union

When it comes to using the prerogative for "less Europe", there are implied limitations which do not seem to exist for "more Europe".On 3rd November 2016 the Divisional Court handed down its judgment in R (Miller) -V- Secretary of State for Exiting the European Union [2016] EWHC 2768 (Admin). The court has, to the surprise of most informed observer...

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Leave Means Leave

Robert Oulds

Thursday, 27 October 2016

European Union

Richard Tice, Chairman of the Leave Means campaign, will be speaking at the Bruges Group conference on Saturday 5th November. Here Richard gives a summary of what he will be telling us.
Please see below details about our forthcoming conference:

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Frequently Asked Questions

Robert Oulds

Tuesday, 21 June 2016

European Union

What you need to know to navigate your way throught the referendum debate.

21st June 2016

Economy

How much would the UK actually save if we left?
Haven't Brexit fears affected the value of Sterling? Will the value if the Pound in my pocket suffer if we vote to leave?
I work in financial services. Would my job be at risk?
How much would the UK actually save if we left?
Would leaving the EU affect property prices?
Are there economists that favour leaving the EU?
The Government says that the cost of living and prices in the shops will go up if we leave the EU. What are the facts?
Why is the prospect of leaving causing business so much uncertainty?

Jobs

Are jobs at risk if we leave the EU?

Trade

Would it be more difficult to secure trading deals without the EU behind us?
How would we preserve trade with the EU and the rest of the world if we left?
Would our exports (e.g. motor vehicles) face steep tariffs if we left the EU?

Law and Order

What is EU law?
Does the European Arrest Warrant make us safer?

Britain and the UK

Would leaving the EU cause the break-up of the UK?
How long would it actually take to leave the EU?
Would we keep an open border between Northern Ireland and the Republic of Ireland?

Post-Brexit

How long would it actually take to leave the EU?
Would UK nationals lose the right to live in the EU state in which they currently reside?
Name one public figure who has said that Britain could prosper outside the EU?
If we left, would we lose the ability to influence the standards of the Single Market?
Why can’t we stay in and reform the EU?
Would leaving the EU be “a leap in the dark”?
If we left, would I have to face longer passport queues at airports?
Would the EU try to punish us for leaving?

Worker’s Rights and Trade Unions

Would workers lose their rights outside the EU?
Should a trade unionist be for or against the EU?

Investment

Would leaving lose us Foreign Direct Investment (FDI)?

Environment

Why do some environmental groups support the EU?

Peace and Security

Is the EU about peace?

Students

How does the EU help the young in the UK?
Is the Erasmus programme for student exchanges open to non-EU citizens?

. Mobile Phones

Shouldn’t the EU get the credit for suggesting that mobile roaming charges be reduced?

. Media

Can I trust the BBC’s EU coverage?

Economy

How much would the UK actually save if we left?

The net government EU contribution for 2015 is effectively £8.5 billion.

Read on...

Haven’t Brexit fears affected the value of Sterling? Will the value of the Pound in my pocket suffer if we vote to leave? .
There are been several factors, including low UK interest rates, and trader caution in the light of wider global economic pressures. However, economists at the private bank Berenberg believe that there is a low probability of a Sterling crisis post-Brexit. However, there is separate evidence that the EU faces massive difficulties of its own in the year or so ahead, which could impact the euro on markets, putting it into relative decline.

Forecasting is not an exact science, but Sterling could see pressure regardless of the referendum, due to US interest rates and the UK’s large current account deficit. Investors are also said to think that UK interest rate rises will occur much faster following a Remain vote than a Leave vote.

I work in financial services. Would my job be at risk? .
Some financial services within the EU require a financial services ‘passport’ to supply. Current rights could be preserved by retaining membership of the wider Single Market (EEA) or by specific agreement with the EU. .

It is EU agencies that threaten jobs in financial services and associated businesses.

Read on...

Would leaving the EU affect property prices? .
There may be no 100% clear-cut answer. The recent slowdown has been more due to changes in Stamp Duty; the EU referendum has not hit consumer confidence. International buyers have also been put off by strict regulations. Prices reflect demand which cannot currently be met by supply. The market reflects the wider economy, which could be positively affected by Brexit or many other factors, including London’s relative attractiveness as a location and affordability pressures.

Are there economists that favour leaving the EU?

Mark Carney of the Bank of England, Christine Lagarde of the IMF, and the Treasury and Mr Osborne have all come out saying that a vote to leave the EU would be a disaster for the UK, Europe, and the world. Don’t you think this is something we should take serious notice of?

We have been here before, when Prime Minister Tony Blair arranged for very important persons, one after the other, to give similar warnings if the UK did not join the Eurozone. Is the same thing happening now?

When Mark Carney gave a speech on 21 October 2015 at Oxford University, it was accompanied by a report that cited a number of economic forecasts. The average forecast was that there would be little or no economic difference if the UK leaves the EU. What has changed so suddenly to make Mr Carney ramp up his forecast to something much more dismal

In contrast to Mark Carney, Christine Lagarde, and George Osborne, a group of independent economists came out in April 2016 with a report titled The Economy after Brexit – in which they do the numbers, give their assumptions, and explain their reasons. They say that if the UK leaves the EU:

1. our international trade will increase,

2. UK productivity and economic output will increase,

3. international competitiveness will increase,

4. employment will increase, and

5. real wages will increase.

There are independent economists, not spokespeople for the Government. The group is comprised of Roger Bootle, head of Capital Economics, a global economics consulting firm, Ryan Bourne, Head of Public Policy at the Institute of Economic Affairs, Professor Tim Congdon, CBE, formerly on the Treasury’s Panel of Independent Forecasters, Warwick Lightfoot, formerly Special Advisor to the Chancellor of the Exchequer, Dr Gerard Lyons, Chief Economic Advisor to the Mayor of London, Neil MacKinnon, Senior Advisor to City of London firms, Kent Matthews, Professor of Banking & Finance at Cardiff University, and Patrick Minford, Professor of Applied Economics at Cardiff University. .

Indeed, wages overall are likely to go up, because there will be controlled migration and downward pressure on wages overall will slow down or even will stop. According to the Bank of England, the EU harms working people.

Read on…

The Government says that the cost of living and prices in the shops will go up if we leave the EU. What are the facts?

If we leave the EU the cost of living will go down, and wages are likely to go up overall.

Here are the reasons why the cost of living and prices in the shops will go down if we leave the EU:

Our contributions to the EU Budget, plus Budget top-ups, plus other, hidden contributions to the EU will stop. This will mean that the cost of UK government will go down, which means rising government debt and the interest payments on it can be contained, and taxes can be reduced or at least contained.
Mass EU migration into the UK can be controlled, which means that the increase in rental/housing costs, due almost entirely to net immigration pressure on prices, will be contained:

For example, Londoners now spend two-thirds of their income on rent compared to about half five years ago (Official figures released in January 2016).

EU protective import duties on imports such as food, machinery, shoes, clothing, and other items will be eliminated, reducing prices in the shops.
Getting out of the EU Common Agricultural Policy will again reduce food prices, since the whole point of CAP is to apply protective tariffs (up to 50%) against food coming in from outside the EU. .
VAT, which is an EU sales tax, is unlikely to be eliminated but the proportion of it that we have to send to the European Commission, can be eliminated.

Why is the prospect of leaving causing business so much uncertainty? .
Not everyone considers Brexit to be even a significant risk. Some economic models show practically no ill-effects and many benefits. Indeed, instead of talking Britain down we have much to be positive about.

Read on…

Jobs

Are jobs at risk if we leave the EU?
Remain claim that millions of jobs are at risk. The three million jobs claim goes back to a study done for the National Institute for Economic and Social Research (NIESR). Dr Martin Weale, Director of the NIESR, said the claim was “pure Goebbels”, referring to the Minister for Propaganda in Nazi Germany. Professor Iain Begg of the LSE, author of the report, said: It has always been a bit of a false perspective to say that three million jobs would be lost. .

There are a number of reasons why, at first, there will be little or no change in the level of employment if we leave the EU. There have been a number of economic reports all saying this: little or no change in the short term. But in the medium to long term employment is likely to steadily rise if we leave the EU.

See more…

Trade

Would it be more difficult to secure trading deals without the EU behind us? .
EU trade deals have previously been held up over French interests. Non-EU countries like Switzerland have secured more deals than the EU, and the USA has concluded about 20 deals with countries smaller than the UK. There is evidence that future international deals will be open to for other countries to join.

Read on...

How would we preserve trade with the EU and the rest of the world if we left?
The UK and all EU members are committed to World Trade Organ

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Bruges Group Blog

Unlocking the benefits of leaving the EU

By Bob Lyddon

Bob is the author of The UK’s liabilities to the financial mechanisms of the European Union for the Bruges Group, and the Brexit Papers for Global Britain – www.brexitpapers.uk

23rd June 2017

A Brexit-driven reconfiguration of the UK’s food and agricultural sector suggests that a period of significant transformation lies ahead; but if mapped successfully, can be a positive one.

Richard Ferguson

21st June 2017

Five concerns for the UK arising from the EU Defence Union

14th June 2017

5th June 2017

How a compromise agreement may keep Britain subject to aspects of the EU.

2nd June 2017

The UK should not seek full Europol membership or participation in the flawed European Arrest Warrant scheme.

30th May 2017

The SNP has abandoned ‘True Independence’ and Sturgeon is forcing Scotland to choose between a more powerful Scotland inside a Federal UK, or a less powerful one inside the EU and most likely the Eurozone.

David Roach

23rd April 2017

The EU is on the road towards a single state and is already largely there.

30th March 2017

Memorandums of Understanding, or exchange of notes/letters, can form a key part of the necessary transitional arrangements as the UK moves from being an EU member state to an independent nation.

15th March 2017

13th March 2017

Last month, an event occurred which got little fanfare, but is likely to have a significant effect on the future of the UK, especially after Brexit. What happened was that the WTO Trade Facilitation Agreement has now entered into force.

10th March 2017

The Progress Party of Norway seems set to reach a significant milestone at its national congress in May when it comes to the party's policy on the European Union.

8th March 2017

Opinion poll shows Dutch opposition to the EU is strong and can win.

56% = Support Nexit (EFTA + FTA)

Only 44% = Support for EU

26th February 2017

Leading businessmen, politicians and academics talk with Paulina Sienniak and Ben Michael about how Brexit will work and what it means.

24th February 2017

Ireland’s political Establishment is only now realising that Brexit really does mean Brexit and that the case for an accompanying Irexit is overwhelming. Irish opinion is likely to move in this direction over the coming two years and UK policy-makers should encourage that.

Dr Anthony Coughlan

22nd February 2017

EU Defence Union has gathered pace since late 2016 and the UK is deeply involved. Ministers have so far failed to explain why they are agreeing to the plans and how they will regain control.

15th February 2017

How the UK should reorganise its university and research programmes

Robert Yee

9th February 2017

The Supreme Court has no jurisdiction in preventing the Prime Minister from invoking Article 50 to leave to EU. Its ruling is wrong. Jurisdiction was passed to the People, who have primary authority, by Parliament.

25th January 2017

The PM, Theresa May, must focus on eliminating tariffs and clearing the EU's burdensome barriers to trade

17th January 2017

To escape the damage caused by the euro, and the resulting problems of mass migration, Brexit is essential for the UK

9th January 2017

Summary

Freedom of Movement and the Cruelty of the Euro

4th January 2017

19th December 2016

The EU is a dysfunctional organisation in the area of corporate tax

17th December 2016

Any withdrawal agreement must look at these issues and find practical solutions to make sure that goods enter the EU as seamlessly as possible.

5th December 2016

The very purpose of the referendum was to establish a decision-making procedure for leaving the EU. This procedure was implemented by the June referendum.

5th December 2016

HMRC has set aside £55 billion to cover the potential cost of payments, including interest, which the European Court of Justice will force upon the British taxpayer.

3rd December 2016

For the City of London membership of the European Union is a double-edged sword. Here the Bruges Group explains how this important industry can thrive after Britain leaves the EU.

30th November 2016

Article 50 will be triggered, and the UK will leave the EU

28th November 2016

Does Brexit mean Brexit, with the change that we need, or will it just be business as usual

20th November 2016

An earthquake in EU / US relations