Just how good is the UK’s trade deal with the EU?

 The start of the new

It did not take long to spot worrying gaps in what the Prime Minister described as “a good deal for the whole of Europe.”  The ink on the EU-UK Trade and Cooperation Agreement had barely dried on Christmas Eve night as early scrutiny exposed glaring omissions from the new 1246-page trade deal.

Top of the list is the realisation that financial and other services, the 80% kingpin of the British economy, are not part of the deal.  An international correspondent explained[i] that as one of the 28 EU Member States the U.K. had profited from easy access to an integrated market.  That, however, looks set to change.

Britain’s massive surplus of $24 billion on trade in services with the EU in 2019 provides proof positive of what Britain is surrendering.  Compare this surplus with the new trade deal’s focus – the trading of goods - where in 2019 the U.K experienced an enormous deficit of $129 billion in its business with Europe.  

UK professional qualifications will no longer be recognised in the EU.[ii]  This makes it harder for UK citizens to work in the EU.  A similar deprivation is evident in further education where the UK will no longer take part in the EU-wide Erasmus university exchange programme.  Northern Ireland students, fortunately for us, will continue to participate in Erasmus, their fees being paid by the Irish Government. 

The deal diminishes Britain’s law enforcement apparatus.[iii]  Two examples illustrate the point.  One is that UK policing has forfeited its use of the Shengen Information Systems (SIS), the database with real-time alerts to locate serious criminals and terrorists.  Take a deep breath and consider this metric - when inside the EU, British police accessed SIS over 1.65 million times a day. 

The second example of a reduction in the UK’s policing is this.  Britain is losing its seat on Europol, the EU’s policing agency.  These SIS and Europol examples underscore security consequences of UK’s designation as a third country.  I’m reminded of the Albert Camus novel, L’Étranger (the outsider).

Another UK newspaper estimates that frictionless trade will be negated by the need for “massive” new paperwork.[iv]  British business can expect to complete 200 million customs declarations annually.

Recent developments

Subsequent woes experienced by Britain’s commercial trading interests validate the Office for Budget Responsibility’s analysis (the Government’s forecaster) that the deal will cost the U.K.4% in permanently lost GDP.  Scotland’s fishermen are angry about the barriers to unfettered access to its main market, the EU, and the existential threat to its coastal communities.  

The Government’s empathic response to the plight of Scotland’s fishing industry was represented by the Leader of the House of Commons[v] Jacob Rees-Mogg.  Using just a dash of jingoistic arrogance, he pronounced to Her Majesty’s Parliament that

“...the key thing is we’ve got our fish back... they’re now British fish and they’re better and happier fish for it...”

 If Scotland’s post-Brexit drive for constitutional change should ever need an upper class Conservative advocate, JRM could be the very man to influence public opinion without having to “walk 500 miles” from the shires.

A report by the national broadcaster describes the severe problems being encountered by UK meat exporters[vi] whose trade has reduced by 75% because of customs systems they argue are “not fit for purpose.”  The Brexit pledge to “take back control” is failing British business in the country’s first month of sovereign independence.  French meat importers are quoted as having to seek alternative suppliers in Spain and Ireland. 

The broadcaster’s report adds that HMRC is estimating the extra cost to UK business of customs declarations alone as £7 billion. Tellingly, it concludes that significant additional cost and complexity are here to stay (as opposed to being temporary teething problems).

Supportive evidence for the plight of exporters, this time from non-food sector, details the new export levies on British business.[vii]  In addition to one that EU customers must pay on receipt of British goods, there is a “Brexit charge” or export fee per item, a “deferment account fee,” and a “disbursement charge” which differs in each EU country.

Brexit is also causing collateral damage to its nearest neighbours.  Ireland transports most of its exports to Europe using Great Britain as a land-bridge.  Complaints from the Irish Freight Transport Association to Government have articulated warnings about disruption to supply chains. 

Irish reports rationalise the EU responsive attitude.[viii]  It is that Britain has received what it asked for in the negotiations.  Britain was offered a way to avoid onerous checks on animal and food products if it aligned with the EU.  It declined on the basis that the point of Brexit was to diverge.  Ireland has been told that Britain’s choices include the strict rules of origin that are impeding EU goods destined for Ireland if they come via a British distribution hub.

Already and with impressive alacrity, more and more of that passing trade is now being shipped direct to France and Spain on longer sea crossings from ports like Rosslare and Dublin.  Britain’s loss will benefit ports like Rosslare whose business seems likely to expand substantially.

Irish Times report 9 January 2021 LeaveEU migrates to EU

 

The same report[viii] referred to objections from British touring musicians and entertainers to the need for visas to perform in the EU.  Apparently the UK declined an EU offer to exempt performers from the visa requirements.  The report concludes that

“throughout the talks, it was Brussels that sought a closer relationship and London that insisted on the deepest break.”

This sounds like the proverbial hard Brexit.

Bonis nocet quisquis pepercerit malis

Regardless of it now being a fait accompli, literally and metaphorically, many adhere to the truth that Brexit remains a bad policy move for the UK and for its relations with Europe.  All of the authoritative empirical evidence during the referendum campaign demonstrated the point (see below[ix]), as in QED.  “Project fear” was the vacuous response to facts and datasets from Brexit supporters in Government.  Now that the UK has left, the signs from early monitoring are ominous for the impact on Britain’s economy. 

While some suggest that there’s nothing we can do about Britain’s new status in Europe, my civic conscience begs to differ.  The Latin phrase (above) occurs – he hurts the good who spares the bad. Paraphrased otherwise by the Dublin orator and statesman Edmund Burke - evil flourishes when the good do nothing.

Nobody here wants what happened in Washington on 6 January to be trumped elsewhere.  People here voted to remain in Europe, as did our “kith and kin” in Scotland.  Likewise did the residents of the nation’s capital - flatly rejecting the DUP’s expensive advertising on the national stage in 2016 to persuade Londoners to vote leave.  I debated the issues correspondingly with my MP, a capable lawyer, to explain the errors of her DUP party’s ways (before she lost her constituency seat in December 2019).

That is why after examining the evidence from various sources to inform the drafting this article, it comes as serendipity to read an experienced commentator’s heart-breaking description of what is now the case, “British industry in chaos.”[x]  Her numerous examples of the economic damage being wrought - from horse racing show jumping and motorsport, to fishing, to road haulage, the car industry and the fashion industry and more - none are good advertisements for Brexit.  Bleak is one word.

What Brexiteers proudly call “this great nation” deserves better, it was promised far more than chaotic sovereignty. 

 

©Michael McSorley 2021

 

Postscript:-

This Brexit series comprises of the following articles:-

Brexit 25 July 2016[xi]

Global Populism 27 Feb 2017[xii]

Brexit 14 Months On 30 August 2017[xiii]

Our Precious Union 29 August 2018[xiv]

Arguments for/against Brexit as Parliament debates UK/EU Deal  7 December 2018[xv]

Brexit Briefings to DUP MP Jan/Feb 2019 5 March 2019[xvi]

Brexit lampooned 27 April 2019[xvii]

How can the UK’s new PM resolve the Brexit conundrum?  23 July 2019[xviii]

Omnes ad Unum Conservatives and DUP 24 September 2019[xix]

Election Communication 8 December 2019[xx]

Leaving Britain Undone 31 January 2020[xxi]

Brexit Trade Deal: What Price Sovereignty? 30 December 2020[xxii]

Just how good is the UK’s trade deal with the EU?  22 January 2021

 

Bibliography and references

---

[i] Benjamin Mueller The New York Times updated 4 January 2021 “Brexit Deal Done, Britain now Scrambles to see How It will Work”

[ii] Oliver Wright The Times 26 December 2020 “How Britain and Europe agreed to differ”

[iii] Observer 27 December 2020 “The deal is finally done – but many crucial issues still remain unresolved”

[iv] https://www.independent.co.uk/news/uk/politics/brexit-trade-deal-contents-boris-johnson-b1778736.html

[v] The Independent 14 January 2021 https://www.independent.co.uk/news/uk/politics/jacob-rees-mogg-fish-brexit-b1787271.html

[vi] Simon Jack Business Editor BBC news 15 January 2021 “Post-Brexit customs systems not fit for purpose, say meat exporters” https://www.bbc.co.uk/news/business-55680315

[vii] Toby Helm and Michael Savage Observer 17 January 2021 “Shock Brexit charges are hurting us, say small firms”

[viii] Naomi O’Leary Irish Times 16 January 2021 “Irish companies’ mounting woes unlikely to convince EU to revisit new trade regulations”

[ix] https://michaelmcsorleyeconomy.blogspot.com/2019/07/how-can-uks-new-pm-resolve-brexit.html

[x] Polly Toynbee The Guardian 18 January 2021 “Brexiteers are waking up to the damage they’ve done” https://www.theguardian.com/commentisfree/2021/jan/18/brexiters-damage-horse-racing-fishing-haulage-industry-chaos

[xi] https://michaelmcsorleyeconomy.blogspot.com/2016/07/brexit.html

[xii] https://michaelmcsorleyeconomy.blogspot.com/2017/02/global-populism.html

[xiii] https://michaelmcsorleyeconomy.blogspot.com/2017/08/brexit-14-months-on.html

[xiv] https://michaelmcsorleyeconomy.blogspot.com/2018/08/our-precious-union.html

[xv] https://michaelmcsorleyeconomy.blogspot.com/2018/12/arguments-for-and-against-brexit-as.html

[xvi] https://michaelmcsorleyeconomy.blogspot.com/2019/03/brexit-briefings-to-dup-mp-jan-feb-2019.html

[xvii] https://michaelmcsorleyeconomy.blogspot.com/2019/04/brexit-lampooned.html

[xviii] https://michaelmcsorleyeconomy.blogspot.com/2019/07/how-can-uks-new-pm-resolve-brexit.html

[xix] https://michaelmcsorleyeconomy.blogspot.com/2019/09/omnes-ad-unum-conservatives-and-dup.html

[xx] https://michaelmcsorleyeconomy.blogspot.com/2019/12/election-communication.html

[xxi] https://michaelmcsorleyeconomy.blogspot.com/2020/01/brexit-leaving-britain-undone.html

[xxii] https://michaelmcsorleyeconomy.blogspot.com/2020/12/brexit-trade-deal-what-price-sovereignty.html

Brexit trade deal: What Price Sovereignty?

The last time I wrote about Brexit was on 31 January 2020.  That was the official date of the U.K.’s divorce from Europe and the start of 11 months of transitioning to something else.[i] 

All 12 of the pandemic articles that I have published since March have gone viral thanks to a Covid-19 setting.  The opportunity now is to bookend 2020 with another look at our place in Europe.  Symmetry might give an impression of order at the end of a chaotic year – to take back control?  Wishful thinking, probably.

Flash back 12 months to December 2019.  The U.K’s undervalued nurses in the underfunded NHS took the unprecedented action of going on strike.  And the Government with a new PM - the Conservative Party’s third leader in three years – called a pre-Christmas General Election in pursuit of the U.K’s quest for sovereignty. 

Just three months into Westminster’s new Parliament Covid-19 struck, gradually absorbing everybody’s attention month by month almost to the exclusion of all else.

Agreeing on a Deal

As deadlines for reaching a trade deal at Halloween came and went, continuing right up to Christmas Eve, it was looking a lot like Christmas Brexit would ring in the New Year with crashing alarms bells.  Britain wanted access to the EU Single Market, its largest trading partner, at the same time as keeping itself sovereign beyond the control of the European Court of Justice. 

A Brussels-based journalist[ii] explained the mutual exclusivity of Britain’s twin aims.  On 24 June 2016 when the Brexit referendum result was announced, the President of the European Council advised the 27 EU leaders that the U.K. would have to decide how many obligations it accepts to enjoy the rights of single market access.  This became known as the “level playing field.”  

Subsequently, in October 2019 Brussels and London published the Joint Political Declaration agreeing to the definition of that term.  Both agreed to uphold the common high standards in state aid, competition, social and employment standards, environment, climate change and taxation.  One recalls the rhetorical vassalage being projected by PM Johnson to complain about being bound by the rules it has no voice in making.

Fortunately the worst case prospect of a chaotic crash-out will not happen.  Literally at the eleventh hour, compromises were reached on the outstanding issues of the level playing field and of fisheries.  The EU was able to publish a 1,246 page tome late on Christmas Eve detailing the trade deal, with the U.K now recognised as a third country.

On Christmas Day the EU’s chief negotiator briefed ambassadors in Brussels about the deal. The next day, the U.K Government Minister Michael Gove with the imposing title Chancellor of the Duchy of Lancaster wrote an article in the Times[iii] about the great future ahead for the U.K.  In full rhetorical flow he wrote that

“the greatest prize is the chance to renew our country and help it recover from the ravages of Covid-19...to spread opportunity more equally across the U.K....with a good trade deal we can tackle the injustices and inequalities that have held Britain back...”

Pause for a moment to assess Mr Gove’s new objectives.  On the one hand, his ambiguities - either intentional or accidental - in connecting Britain’s EU membership with its handling of the pandemic and also to Britain’s north/south rich/poor inequalities are worrying.  On the other hand, it’s refreshing to hear a senior Minister admitting that he has

“made more than (his) share of mistakes or misjudgements through the past four years...” 

Two questions arise from Mr Gove’s declaration.  Firstly, could his confession of mistakes include the absurdity of his referendum campaign claim that U.K voters are sick of experts, used as an excuse to discredit empirical evidence of Brexit’s adverse consequences?  And secondly, how exactly is the so-called levelling-up agenda related to the U.K’s leaving the EU?  Action to address regional and other inequalities has always been a cornerstone of European polity.  The U.K. doesn’t have to wait to leave the EU before tackling domestic problems.

Give and take

The path to achieving agreement and an orderly exit has necessitated compromises.  The UK, for example, conceded on the PM Johnson’s “go whistle” taunt about not having to pay a divorce bill, the sum being £39 billion.  Another was PM Johnson conceding on PM May’s “threat to the UK’s constitutional integrity” by agreeing to keep Northern Ireland within the EU customs territory covering goods, resulting in customs and regulatory checks between Great Britain and Northern Ireland. 

A year ago Northern Ireland’s only pro-Brexit party, the DUP, dubbed Westminster’s Withdrawal Act as the “betrayal act” on the grounds that the UK Government signed up to “a border in the Irish Sea.”  Nevertheless, UK/EU agreement was eventually reached about the protocol’s detail in the closing weeks of negotiations, just ahead of the eventual sticking points - the level playing field and fisheries.

In the final days of negotiations, the reality of the U.K’s ability to take control of its borders as a sovereign nation was exposed by a non-Brexit matter.  A mutation of the coronavirus estimated to be 70% more contagious than the original was discovered in Britain.  As a result, one by one all EU countries closed their borders to British traffic to protect public health. This was an example of sovereign nations acting independently of each other.  It was not a good look internationally for the port of Dover as it wilted under enormous pressure to take control at the end of the nation’s transition.  

 

Press reaction

Reacting promptly to the deal, the journalist Max Hastings made some apposite comments,[iv] such as

·         questioning the PM’s assertion about taking back control – of what, he asks, since our vast service sector remains at the EU mercy;

·         Britain, he argues, will become progressively poorer than it would have had we retained EU membership.  This chimes with data from the UK Government’s forecaster, the Office for Budget Responsibility, which estimates that the UK/EU trade deal will cost 4% in permanently lost GDP;

·         exporters and importers will face a blizzard of new paperwork and red-tape costs;

·         we shall become less important allies for the US because of our forfeiture of influence in Europe;

·         we shall have no power to influence on new EU decisions on trade, environmental and health standards; and

·         our new-found independence does nothing to resolve non-EU immigration.

Two of these points chime with Fintan O’Toole’s analysis.  The one about losing international influence echoes the comment[v] about Britain’s “unique loss as a free country negotiating itself out of a position of influence to one of vulnerability;” and likewise his comments about powerlessness over EU decision-making on standards echoes O’Toole’s conclusion[vi] that “the trade deal ensures that there is no clean break, Britain is wedded to current EU standards.”

The first journalistic reaction which I read, and even quicker out of the blocks than Max Hastings, was the London correspondent of the New York Times.[vii]  He describes how

·         British distributors are scrambling with less than a week to prepare the first of thousands of new export certificates to allow meat fish and dairy to be sold to the EU.  Coincidentally Michael Gove issued unprecedented warnings (28 Dec) about having paperwork in order, or otherwise do not travel;

·         British food businesses now face the same burdensome checks as European imports from Chile or Australia;

·         Echoing Max Hastings, but with added quantification, he explains how Britain’s services sector was largely left out of the 1246 page deal despite accounting for 80% of British economic activity.  Britain sells $40 billion of financial services to the EU annually profiting from an integrated market.

·         Britain ran a surplus of £24 billion on trade in financial and other services with the EU in 2019 but a deficit of $129 billion on goods’ trading; and

·         he quotes the former director of the Institute for Public Policy Research who says that the EU retains all of its current advantages in trading especially with goods while the UK loses all of its current advantages in the trade for services.  

How can it be that the U.K. has omitted its largest business sector from the deal?  This omission sounds like a fatal flaw in the agreement.  How can Westminster claim that the U.K economy will prosper from 1 January 2021?

Miscellaneous points

Pundits predict that “the devil will be in the detail.” A flavour of this follows.

The Times policy editor reveals[viii] that

·         it will become harder for UK citizens to work in the EU because UK qualifications will no longer be recognised in the EU.  Is this a good thing?

·         higher costs for the transfer of animal products from the UK to the EU are likely because the EU did not agree to recognise UK standards as equivalent to theirs.  Is this a good thing for the UK?

·         the UK agreed to follow EU rules on road transport such as the hours allowed to be worked by drivers;

·         whereas the UK will no longer take part in the EU-wide Erasmus university exchange programme, Northern Ireland students can continue to participate with their fees paid by the Irish Government.  Given the DUP’s policy on regulatory NI/GB alignment, will they support this concession?

·         the UK can exchange information from the EU criminal records database without oversight from the ECJ, but will have to follow EU rules on the exchange of air passenger name records.

An analysis by the Observer of unresolved issues[ix] includes comment that

·         “Britain’s law enforcement apparatus is diminished (under the deal).”  This conclusion is based on two security matters; 

·         UK policing has forfeited its use of the Shengen Information Systems (SIS), the database with real-time alerts to locate serious criminals and terrorists.  On average, British police access SIS more than 1.65 million times daily;

·         the UK is losing its seat on Europol, the EU’s policing agency; 

·         The Observer also highlights the need to negotiate a deal for services which has been left out of the deal.

 

Parliament may have approved the rushed UK/EU Brexit deal with little scrutiny or evidence of taking control.  U.K. citizens are entitled to ask if this trade deal will best serve Britain’s national interest – never mind those of its neighbours.  

What price sovereignty?

 

©Michael McSorley 2020

 

Postscript:-

This Brexit series comprises of the following articles:-

Brexit 25 July 2016[x]

Global Populism 27 Feb 2017[xi]

Brexit 14 Months On 30 August 2017[xii]

Our Precious Union 29 August 2018[xiii]

Arguments for/against Brexit as Parliament debates UK/EU Deal  7 December 2018[xiv]

Brexit Briefings to DUP MP Jan/Feb 2019  5 March 2019[xv]

Brexit lampooned 27 April 2019[xvi]

How can the UK’s new PM resolve the Brexit conundrum?  23 July 2019[xvii]

Omnes ad Unum Conservatives and DUP 24 September 2019[xviii]

Election Communication 8 December 2019[xix]

Leaving Britain Undone 31 January 2020[xx]

The Price of Sovereignty 30 December 2020

---

[i] https://michaelmcsorleyeconomy.blogspot.com/2020/01/brexit-leaving-britain-undone.html

[ii] Tony Connolly RTE.ie “The level playing field: Brexit for slow learners”  12 December 2020

[iii] The Times 26 December 2020 Michael Gove “We have taken back control, now we can level up at home”

[iv] The Times 26 December 2020 Max Hastings “Brexit leaves more questions than answers”

[v] The Irish Times 19 December 2020 Fintan O’Toole “Let Britain think it’s great”

[vi] The Irish Times December 29 2020 Fintan O’Toole “Brexit was based on fantasies of triggering EU’s dinintegration”

[vii] New York Times 25 December 2020 Benjamin Mueller “Brexit Deal Done, Britain Now Scrambles to See How It Will Work”

[viii] The Times 26 December 2020 Oliver Wright “How Britain and Europe agreed to differ”

[ix] Observer 27 December 2020 “The deal is finally done – but many crucial issues still remain unresolved”

[x] https://michaelmcsorleyeconomy.blogspot.com/2016/07/brexit.html

[xi] https://michaelmcsorleyeconomy.blogspot.com/2017/02/global-populism.html

[xii] https://michaelmcsorleyeconomy.blogspot.com/2017/08/brexit-14-months-on.html

[xiii] https://michaelmcsorleyeconomy.blogspot.com/2018/08/our-precious-union.html

[xiv] https://michaelmcsorleyeconomy.blogspot.com/2018/12/arguments-for-and-against-brexit-as.html

[xv] https://michaelmcsorleyeconomy.blogspot.com/2019/03/brexit-briefings-to-dup-mp-jan-feb-2019.html

[xvi] https://michaelmcsorleyeconomy.blogspot.com/2019/04/brexit-lampooned.html

[xvii] https://michaelmcsorleyeconomy.blogspot.com/2019/07/how-can-uks-new-pm-resolve-brexit.html

[xviii] https://michaelmcsorleyeconomy.blogspot.com/2019/09/omnes-ad-unum-conservatives-and-dup.html

[xix] https://michaelmcsorleyeconomy.blogspot.com/2019/12/election-communication.html

[xx] https://michaelmcsorleyeconomy.blogspot.com/2020/01/brexit-leaving-britain-undone.html