BC BREXIT
Saved by @CodyyyGardner

How to make sense of the increasing number of UK-EU trade disruption stories?

In short - outside of a single market product checks and people working restrictions are inevitable. And outside a customs union you will have tariffs and / or rules of origin.

Detail ---> 1/

 The UK decided to leave a Customs Union. Within that Customs Union, no tariffs, just a common external tariff or preferential rates for bilateral deals or developing countries. Hence, distribution hubs in one country for all make a lot of sense. 2/
Outside a Customs Union our choice was tariffs under WTO rules or remove them subject to rules of origin with a deal. We chose the latter, but it means we can't just import from China, rebadge, and get zero tariffs from the EU. As we could until December 31. 3/
Net result of being outside of the Customs Union - it no longer makes sense for the UK to be a distribution hub for the whole of Europe. Particularly when so many neighbouring countries remain in it. No trade deal changes that. 4/
Now, product checks, of the sort causing problems for food exporters (see Scottish seafood). In the single market, we shared regulations, so a safe product in the UK was safe in France. No inspections. We chose to leave that system, as we want to change some regulations. 5/
All developed countries have extensive safety regulations, particularly on food and drink products. They have stringent entry checks. Outside of a single market, you face the full weight of those checks. They take time. 6/ https://t.co/3NY7zgXRet
Countries outside a single market can negotiate with each other to reduce the number of product checks. Agreements usually involve commitments on both sides to build trust, such as not changing regulatory standards. The UK chose not to pursue this on food. 7/
You could be forgiven for wondering why if I knew all of this, the UK government, MPs, and businesses did not. But you recall there was a campaign for the purest possible Brexit. You may recall Brexit central. Not everything written there was true... 8/ https://t.co/PuppVdIHWZ
Individuals who said leaving the single market and customs union meant product checks and rules of origin were told we were biased. We weren't invited to advise government. Business was not encouraged to say this. EU-shills. Code for inconvenient. Anyway, enough Trumpism... 9/
There is a whole category of restrictions we are hardly seeing yet, on services. We aren't travelling to the EU for work right now, because of covid. After covid it will be because of work permit restrictions. Financial services changes are coming. 10/ https://t.co/ankZwPqeUp
For services like goods, it no longer makes sense for London to be the hub serving the EU, when there will be barriers in terms of trade, people, perhaps data. The UK's European HQs are threatened. Hard to know how exactly this might unfold, but there will be change to come/ 11/
But the UK government is not powerless to prevent the erection or maintenance of EU trade barriers. It was a choice not to prioritise easing of regulatory checks. We chose a quick deal, with little regulatory alignment. We could choose differently. 12/
The UK government can choose to prioritise easing checks on food exports to the EU. But it will probably mean less regulatory divergence. We can choose to prioritise a data equivalence agreement, but that might require certain commitments. 13/
The government could argue that global Britain means pursuing deals and regulatory freedom elsewhere. Thus for example a US trade deal to change our food standards. That again is a choice. Can Scottish seafood be sold to the US? Such are the choices. 14/
But this is where we are now. A government supposed committed to free trade has chosen high barriers to £670 billion (approx 50%) of our trade. It can try to reduce them, or accept the consequences. It can try to replace EU trade with further away countries. Tricky. 15/
All of this was known last year and before. What is happening now the inevitable consequence of the decisions taken. But we also need to talk about the future choices. Alignment and reduced checks, divergence and higher barriers. No getting out of it, whatever partisans say. 16/
Goods regulatory checks and to a lesser extent rules of origin also apply to Northern Ireland - Great Britain trade. As widely stated when the Withdrawal Agreement was signed in 2019 but denied by the Prime Minister. 17/
Finally, element of "told you so"? Sure, not denying it. It isn't always easy being told that facts = bias, doors in government being closed because easier to listen to those who are factually wrong but politically right. But more a hope we start dealing in reality. 18/ end
PS a telling little detail. A modern trading relationship is made up of numerous such decisions, and on them will trade and investment depend. https://t.co/1Mt8xjslnf

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Going to have to disagree with my learned friend here. If anyone moved on level playing field it was the UK, on the principle of a ratchet, or tariffs for divergence which was still being denied midweek. Changing the way in this might be achieved (many options) is insignificant.


It is the same "I move in principle you move in detail" shift we saw with the Northern Ireland protocol last year, when no PM could accept a border between GB and NI suddenly did, just as recently no PM would accept tariffs for divergence and seems to have done.

So, are we at deal yet? No, and it remains far from certain, but better than the gloom of Saturday. I still think the PM wants his ideal where everyone is happy, still hopes if only he can speak to Macron and Merkel he could get it, still to decide.


And even if there is a deal it is now too late for either business to adjust to it, or the EU to ratify it according to normal procedure. In both cases you'd think we'd need an extension, but there is a big shrug on this whole question. Nobody knows.

And so, yet again on Brexit, we wait. In particular, those who actually do the trade, the businesses we rely on, are forced to wait for a formal outcome while preparing as best they can. Let's see what happens.
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Plenty of talk this morning about how UK sovereignty is what is stopping an EU deal, that the EU want to impinge on this.

Sorry, the argument is totally bogus. It is a combination of EU hatred and cakeism dressed up in respectable clothing. 1/ n

How do we define sovereignty in trade deals? Complex question, so let's just look at this government. It believes in trade deals and membership of the WTO. These contain binding rules. Therefore for this government sovereignty and binding rules are compatible. 2/

Therefore sovereignty in terms of trade rules for this government is a relative concept either in content or partner terms. So when they say the EU proposals go too far is that because of what is proposed, or who it is proposed with? 3/

We haven't been told the detail. But with regard to the level playing field it is suggested that no country could sign up to a situation where not following the rules leads to tariffs being imposed. However we agree to this in the WTO and FTAs. So that is untrue. 4/

Fish is a slightly different matter, and it is being said that the EU proposal would deny the UK control of our waters. But definitionally that can't be true. We're showing our control through the discussion. We don't have to do a deal. 5/
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As promised, a little story. Of how the EU ask of the UK on the level playing field is indeed new, how that came about, and why we should have been able to deal with this a lot better. And how, indirectly, David Frost is one of the reasons. Beware, contains analysis... 1/

Let us go back 5 years to the height of Transatlantic Trade and Investment Partnership (TTIP) discussions. As you may recall, by 2015 TTIP was about as popular in the EU as allegedly the EU is these days in the red wall. What, thought the EU and Member States, could be done? 2/

TTIP will be more popular, declared more than one insider, if we show there are tough labour and environment protections against undercutting by the nefarious and probably untrustworthy US. That, optimistically they said, will get NGOs on side. 3/

But there was a problem with EU level playing field provisions in 2015. The unit of DG Trade responsible absolutely did not believe anything should be enforceable. Pages of loose commitments, fine. Add more! But apparently enforcement was best done through a good chat. 4/

Now such soft-touch EU enforcement of level playing fields was probably designed particularly for developing countries, where sanctions were seen as unfairly penalising struggling business and individuals for the actions of a terrible government. Not the US. 5/
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David Henig
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Today's UK-EU trade deal reflection - what is rarely stated in discussions about the deal's shortcomings is that they reflect UK government policy choices - in particular that control of immigration and a US trade deal are a higher priority than an EU deal.

Thus, why was it not a UK government priority to secure for UK musicians the rights to tour the EU? Because that would probably have required a reciprocal right to be given to those in the EU, which we didn't want to give. Choice.

Meanwhile why did the UK government not seek or secure a reduction in food inspections for GB products going to the EU? Because that would probably have required fixing food regulations in a way that might have been an obstacle to a US trade deal.

Works the other way as well. Why did the EU refuse UK requests on mutual recognition of industrial testing? In part at least because of UK lack of commitment on maintaining the previous EU system of standards and conformity assessment which might be a problem in a US deal.

One of the strangest opinions in the London politics bubble is that the UK government isn't that bothered about a US trade deal, as it so obviously goes against the evidence. There might be domestic opposition, but this was to be Brexit Dividend Number 1.
BREXIT
David Henig
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Small business in particular struggling with new Brexit red tape. Entirely predictable, and a function of a world trade system distorted against smaller traders. Stay with me a short while as Brexit threadmeister and story author @pmdfoster may say... 1/

The nub of the issue is the extra costs for most exports, whether this is paperwork or meeting different regulatory requirements. A fixed cost per exported load inevitably adds a higher percentage cost to small than larger business... and they may lack expertise. 2/


You'll note that in the EU, with virtually no paperwork or differing regulations, the costs of exports are similar for smaller and large companies - though even there there is a big company bias, because who can afford to lobby for friendly regulations? 3/

The same unfortunately typically applies to trade deals. If you are Nissan and threaten to leave the country without the right deal you have more clout than a small cheesemaker. As we see. But is it just the EU that is over-bureaucratic? Sadly not... 4/


One of the best UK business groups on trade policy @BritAmBusiness (and yes you can quote me @EmanueAdam) has a new report out on a UK-US trade deal and SMEs. It shows opportunities. But unfortunately problems unlikely to be solved. 5/
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"The tangible benefits of #Brexit." A thread.

For the EU, the tangible benefits of Brexit have been immense. Not just in the way it has galvanised support for the EU across the bloc, but in the way that the UK has made itself...

/1

...the least competitive advanced economy in the world. Don't forget -- we're no longer a trading partner of the EU, but its main trading rival, and considering both their population and economy is 7x bigger than ours, we don't stand a chance.

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(Remember Boris Johnson's famous mutterings about business...? Something that could only have been said by a man born into fabulous wealth and privilege...)

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$1.6 trillion as of October this year.

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Amid all the announcements today, it's easy to overlook that the OBR has updated its scenario on a no-deal Brexit. It exposes an undeniably hard reality for the Govt that claims that the UK would "prosper mightily" under no-deal next year.

(Short thread)

1. Key chart: a no-deal/WTO/Australia-style Brexit would delay the point at which econ output regains its pre-virus peak by "almost a year to the third quarter of 2023."

In the upside scenario, this cross-over point could be at the start of 2022; in the downside, in 2025. Grim.


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3. While there's some short-term border disruption, most of the costs come in the medium term: from lost employment; productivity losses; lower business investment.

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All trade intensive sectors that have been spared the same drop in output as the non-tradables this year.
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It's OUT! My latest #Brexit Briefing for @FinancialTimes - examining @BorisJohnson
"buy now, pay later" Northern Ireland Protocol, why the EU-UK trust deficit is killing it, how that can be restored - because it needs to work. /1

@BorisJohnson The danger here is that lingering animus over the opportunistic nature Johnson's Faustian bargain - dividing his Kingdom in order to 'get #Brexit done' and win an 80-seat majority - is clouding judgement on both sides of the Channel /2

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Thirdly, both the EU and the UK agreed to this unsatisfactory arrangement jointly. /4

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1/ Lots of good analysis out there on why the EU-China CAI is a bad decision in the context of Xinjiang, transatlantic partnerships, etc. But I also think that even the trade/econ benefits of the CAI look quite limited. Thread:

2/ It highlights, as a win, that China’s preservation of existing liberalizations. That’s positive, but not really a big problem; the bigger issue is stagnation, where reform pledges have failed to materialize after years/decades of promises. Great example is in the FDI openings,


3/ which are highlighted to include cloud, auto, fin services etc—all areas of EU/MNC interest. Thing is, these openings aren’t new. China has begun opening auto/finance since 2018/19, while the 50% cap on cloud services has remained unchanged since 2015 (or before if we consider


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