Let’s thank the Irish PM for showing us how absurd Project Fear has become

There are international agreements allowing overflights. Irish planes will still fly over the UK once we have left, and UK planes will still fly over Ireland. BA is of course part of IAG, an Anglo Spanish  company with a headquarters in Madrid,  so does the Irish PM anyway not see that as an EU company that will carry on flying?

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Improving delivery times

I am delighted so many people have suddenly become interested in the issue of speedy delivery of raw materials, components and finished goods. Some are so interested they think it is the topic which should determine our approach to Brexit.  I want to ask the question what actions could we take to cut down delivery times more if people think this is such an issue.

Lets take a complex supply chain. The company concerned needs imported components from India and from Slovakia to meet an automated manufacturing   system. The typical delivery time from Slovakia by road transport is four days. The typical delivery time by sea transport from Mumbai is 20 days. Immediately when we look at this issue we see that the short time it takes to get through the port of Dover from Slovakia or through the port of Southampton or London Gateway from India  is tiny compared to the lengthy time it takes by sea or road.  The sea journey is probably a bit more predictable than the road journey, as it is less open to congestion and delays. The sea journey does also need two road transport journeys to get to and from the ports involved, whilst the road journey from the continent needs a short sea crossing to tackle the English Channel.

The investment needed to cut journey times and unreliability includes investment in the road networks involved. I do not know all the details of the road congestion from Slovakia on the continent, but can vouch for the delays and unreliability the shortage of capacity from Dover or from Southampton to a factory in say Birmingham can  cause. This would seem to be a more sensible worry than the idea that after Brexit lorries will face unacceptable delays at our ports.

We need to remember that the bulk of our trade with the EU is imports, not exports. That means the crucial port movements occur in UK controlled ports. It is the UK authorities  who will have the task of checking standards and tax liabilities, as they do today whilst we are still in the EU. We have no reason to set up a complex system at the port which will cause more delay or so called friction. We can continue to use Authorised Economic Operators. electronic manifests and on line assessment, tax collection and clearance of most cargoes. Trade within the EU today requires complex calculations of VAT, other transaction taxes, quality and safety checking and other compliance. Most of this occurs away from the port. We have no need to make it too difficult when we are  out of the EU.

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The EU offers some helpful guidance

Whilst the EU carried on with colourful and misleading language about parts of Brexit, its document issued today also showed it is beginning to want to look after the business interest on the continent and help with sensible business continuity. In particular it confirmed that  current contracts which span the exit date will of course remain valid with parties fulfilling them. It thinks the UK should   be part of the Common Transit Convention to speed transport crossing borders. It gets close to saying the UK out of the EU will of course have high standards of data handling so there will still  be close arrangements for data transfer.

One of the welcome features of the short document was the repeated statements that much of what needs to be done to keep trade flowing is down to individual companies and member states, who are likely to want it to work well. The EU comes close to suggesting member states roll over certain permissions where the UK  will still meet the same acceptable standards after exit.

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The WTO global trading model and Mr Barnier – time for the media to mend its language

There is a lot of bad and misleading language used about Brexit. Apparently Mr Barnier is about to embark on his own version of Project Fear, claiming the so called “No Deal” option will be difficult. The UK government will  make sure all is ready to depart without a Withdrawal Agreement if necessary. Why would the UK want to sign such a one sided Withdrawal Agreement anyway? What is Mr Barnier offering to make it worth our while?

Let me attempt to adjust the language to be more  balanced and descriptive.

“No Deal” is the WTO global trading option. Far from being without trading rules and without a working system for importing and exporting, the UK would rely on the WTO system for its EU trade just as it relies on that system for the bulk of its trade today which is conducted with non EU states.

“Crash out” are the words often used by Remain to describe leaving without paying the EU £39bn for the privilege of leaving. As we do not owe them any money, most people would call that just leaving, not crashing out. We will not crash, and will have lots more cash.

“Fall off the cliff edge” is another fatuous phrase they use. There is no cliff edge. Planes will fly and lorries will move through ports the day after we leave just as they did the day before. We will carry on trading and travelling, investing and being tourists in each other’s countries, as we do today in numerous non EU countries.

 

The EU talks about a “disorderly Brexit” if we leave without a Withdrawal Agreement. That means we leave without paying which annoys them but is good for us. The EU will find that people, companies and global rules will work just fine. The continental exporters to the UK will make sure they can still sell to us as they sell to other countries not in the EU. There is nothing disorderly about the way EU states trade with non EU states.

The use of this pejorative language is silly and misleading. The proponents of the EU say they wish to defend the international rules based system. Presumably their beloved EU does just that. In which case, as a law abiding member of the World Trade Organisation, the EU will not be able to discriminate against the UK after we have left and will not be able to impose new additional tariff or non tariff barriers. The EU has to treat us as it treats all other most favoured nations under WTO rules.

As the bulk of the UK’s trade with the EU is imports, I assume even Mr Barnier will understand they need continued decent access to the UK market. The good news for them is we are offering that, as long as it is reciprocal and within WTO rules.

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Trade is mainly about companies and individuals, not governments

The good news is governments  need to promote and tolerate trade as well as unfortunately doing their best to harm it. Governments like to tax trade, with excise duties, VAT, other sales taxes and customs dues. This both harms it, but also gives them a rationale to want to promote more of it at the same time.  They like to regulate it for a variety of good and bad reasons. They rightly want to stop people selling dangerous items that could be misused and want to supervise the safety of everything from planes to drugs, but they also often want to control the style, performance and method of manufacture of things where variety might not be harmful.  The EU both poses as an advocate of more trade within its zone, and acts as an impediment to more trade outside the zone by imposing a barrage of controls and taxes on items coming in from non EU sources. The US objects to VAT on its sales into the EU, as well as to the higher tariffs like the ones on food products.

In the never ending UK Parliamentary debates on trade the advocates of us staying in or rejoining the EU customs union, or inventing a customs union with them similar to one we are leaving, never give up and never find any new and convincing arguments. Three times Parliament voted down staying in the customs union by a large majority. Last night Parliament voted it down yet again by a small  majority. As someone who likes Parliamentary democracy and thinks things should be settled here by lively debates and votes, I am also allowed to ask how many more times do we have to make the same decision? I want this Parliament to tackle issues like housing, economic growth, real wages and the other things that matter to voters, but its ability to do so is constrained by so many MPs wanting to go over the same old topic day after day.

I am an MP who wants business to succeed and wants to see more prosperity and more better paid jobs in the UK. So why don’t I want a customs union? Let me have one more go at replying to the tired old statements of the Remain campaign that we hear daily in Parliament on this subject.

1  Remain claims that industrial business operating Just in Time supply chains with imported components will not be able to work efficiently  from outside the Customs Union!

a) Many businesses today in the UK operate Just in time systems with components coming in from the USA, Japan, China and other sources that are outside the EU. Some JIT systems operate well with seaborn deliveries from outside the EU. They know how to get their products through the docks in London or Southampton just fine. The products have been many days at sea and the short time taken at the port is minor compared with total travel time.

b) Both EU and non EU components come in under a system of Authorised Economic Operators. They file electronic manifests of the consignment, and the calculation of any  VAT, customs dues ,excise and other taxes occurs as the goods transit. The lorry driver at the port does not have to wait whilst they work out the payments and pay them by cash or card in a queue of trucks. There has been a long standing system of TIR trucks, with sealed cargo sections that have permission to cross borders because the authorities know what is in them.

c) Both the EU and the UK are members of the WTO. Its Facilitation of Trade Agreement covers the main issues requiring member states to minimise friction at borders.

2. Remain claims that any non EU system of imports will be too expensive and administratively difficult, especially given rules of origin which require specified proportions of local content.

a) The current EU system also requires substantial electronic paperwork and complexity. The EU levies VAT which requires great detail about process and where value was added, with issues over transfer prices. It also needs to police rules of origin. Importing from outside the EU need not be more onerous, and once out of the UK we will design our own system which can be friendly to business.

b) The information the authorities need to police and tax is very similar to the information the company needs to supply to its customers and counter parties. If you are supplying a component for a complex machine like a plane or vehicle you need to send great detail about how and where the components was made, what the tests results were, and  what its price is. Modern manufacturers require individual component traceability in case something goes wrong . It means the information the authorities need is already known to the company  and in its computer, so a simple computer programme can extract and present the relevant information for transit papers.

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The Customs and Trade bills

I welcome the fact that the government is pressing on with taking the necessary legal powers to run our own customs and trade policies.  They tell us the bills will allow them to set tariffs, impose trade penalties and do what it takes to be a full voting member of the WTO. So far so good. I support that.

Buried in the detail of the legislation are some areas where I and others sought reassurance or amendment. The government has agreed to make improvements. The government should not  have the power to put us back into a customs union or similar arrangement without needing primary legislation. Parliament has agreed to leave the EU Customs Union – voting decisively three times on this matter  after extensive debate. Any wish to reverse this decision should also need substantial debate and a formal legislative process. I agree with Dominic Grieve’s line on the need for primary legislation in such circumstances, as he required us to do for the Article 50 letter and all aspects of leaving the EU in the Withdrawal Act.

We also want to see the UK outside the EU VAT system. On March 29 2019 VAT must become a UK tax which we can change as we see fit. The government agrees.

The government supports an amendment that rules out a customs or tax border between the island of Ireland and the UK. All parties to the negotiations tell us they do  not  want such a border, so we might as well make that clear in legislation. The amendment proposed makes clear Northern Ireland will  be part of the same customs and tax arrangements as the rest of the UK. I have always thought the Irish border issue was much exaggerated by the EU for their own purposes. It already is a Vat, Excise and currency border, but these matters are settled away from the border itself. The UK government does not  want to put in big barriers and seek to calculate customs or VAT at the border point, nor does it need to. What we have today can handle customs as well if that becomes necessary as it already does for non EU trade.

The government has also agreed to accept an amendment which says that the UK would not collect EU customs duties  for the EU unless the EU collected UK customs for the UK.

Yesterday’s debate was dominated by people who have never run complex supply chains who were unwilling to accept they work fine with  non EU as well as with EU parts. We needed to explain all over again how TIR, Authorised Economic Operators, the WTO Facilitation Agreement, electronic manifests and calculations and checking loads away from the border currently operate to speed goods across borders. The electronic paperwork is detailed and sometime complicated, but it is also needed by the customer and required for product audit purposes. If you supply a part into the supply chain for a complex and safety crucial product like a plane or truck, you do need to supply the customer with very detailed information about  where it came from, when and how it was made, and how it has been tested. Your computer can share the parts of this information that is needed with the Customs, Vat, Excise and other authorities electronically.

 

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A 3 option referendum would not work

The latest call for a referendum between leave, the White Paper terms and Remain is a non starter. We made our decision in the original referendum and need to get on with implementing it.

The EU will not accept the government’s opening bid in the White Paper so it is not a real  option.

It is by no means clear we could get back into the EU on current terms once we have left in March 2019 were people and Parliament to change their minds. The EU would  probably want us to sacrifice our veto on the Euro and Schengen, and lose the contributions rebate for starters. It would need to be negotiated, with uncertain outcome, so that too is not a fixed and available option.

There is no point in voting on two options the EU does not accept. The real referendum was about two straightforward options – stay in on current terms, or leave. The EU agreed to both under their Treaty. We voted to leave. We were told  by Parliament and government voters were making the decision.

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Getting the Russian relationship right

This week Mr Trump meets Mr Putin. I want the President to be realistic about Russian behaviour and how we need to respond. It would be good if  relations improve rather than a further deterioration with threats on both sides, without compromising important principles. Mr Trump may well wish to announce  new practical working approaches despite the differences.

The current UK government has been at the tough end of western attitudes towards Russia, in part owing to the poisonings in Salisbury. Of course killing people with nerve agents must be condemned strongly and my heart goes out to the families affected. Our relationship with Russia is, however, a complex one. The government and NATO  work in  close contact with the Russian authorities when acting militarily against Isis.  That makes sense, but reminds us how there are few absolutes in relations between important countries.  Germany, part of NATO, has made herself very dependent on Russian gas, as Mr Trump pointed out. Events and circumstances can change, and diplomacy needs to respond. A country has a range of interests. These can require agreements with countries that have very different values and behaviours and may need to reshape old alliances. We do have friendly working relations with a number of countries with whom we have profound disagreements on human rights and government behaviours.

Russia is a dominant power in the Middle East. President Obama’s decision to limit US force in the region and to stay out of much of the Syrian war has ensured growing Russian influence. President Trump has not changed this policy, though he has taken specific action over chemical weapons use. Given this development the USA, UK and other NATO allies co-operate closely with the Russian military where Russia does hold sway. and need to do so to avoid inadvertent clashes.

Russia upset the EU through its actions in Crimea. This led to sanctions and tough words. The western allies however are not going to try to prize Crimea apart from Russia by force, so at some stage there needs to be discussions about how to proceed despite  this dispute. Russia would say the bulk of the people of Crimea want to be Russian, so under the doctrine of self determination it makes sense. The West says there was no internationally approved referendum to test opinion and make this decision. The EU needs to watch to see what if anything the President says on this matter, as we need to avoid a major split on the subject between the USA and the European NATO members.

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Ministers decide, civil servants advise

David Davis’s letter raised important issues about the process of government. We learned from the background to it  that the Secretary of State for Brexit who should be the principal adviser of the PM on these matters, and the main negotiator under the PM, was often sidelined by the official civil service. Of course this could only happen if No 10 let it happen, whether by design or by misunderstanding. It nonetheless raises crucial issues about how democratic government is functioning at an important time for our country.

There appears to have been a tough approach taken towards much of the Cabinet over the production of the White Paper. Apparently many Ministers saw the draft late, and were given little time to respond. On a major policy document like this, published two years after the first demand for it, you would expect all relevant Ministers to be fully engaged through correspondence, sharing drafts, and through Cabinet committees where necessary. At its best UK government is very good at this, with several drafts refining views as Ministers seek improvement, attend to detail, or find compromises.

There needs to be trust between all Ministers and senior officials. They need to share their work in private with each other. Officials are welcome to their  views and to put in suggestions, but in the end Ministers have to decide, to approve the lines and sign off the final text. Clearly this did  not happen with the Chequers Statement and White Paper, which is why it triggered several resignations of Cabinet Ministers, junior Ministers,  and Parliamentary Private secretaries. It also led to the resignation of   two Vice Chairmen of the Conservative party who would of course be outside the formation of a collective view on this or any other government matter, but need to sell the policy. Their refusal to do so reflects the fact that the more politically minded members of the Cabinet did not have enough chance or enough support to get the strategy amended to one which could gain more popularity.

The lack of trust  by some Ministers is part of a much wider distrust between public and officials on the mighty topic of the EU. Viewed from the outside to many members of the public  it looks as if a large  number of officials voted remain, think the voters were wrong to vote Leave, and are doing their best to re run Project Fear in various guises. I of course appreciate there are many good officials who do not let their personal political views influence their work, and some officials who did vote Leave who therefore support the government policy of leaving willingly. What is undeniable is the civil service as a whole have taken to the task of trying to find as many  difficulties as possible that they think might delay or impede Brexit, and have been very shy about finding and tackling all the opportunities that a clean Brexit brings.

Of course where something needs fixing by March 2019 to make sure things work as planned, the civil service are right to flag that up. They should also flag up the remedies as well as the problems. They also need to help Ministers knock back the self serving and factually incorrect fears that some Remain oriented groups and businesses are putting forward.

I trust  now Cabinet has reaffirmed its wish to get on with the WTO Global UK option there will  be strong co-operation to do so. I would also like to see good news policies covering a new migration policy, a new farming policy, ways of spending the money we will free if we simply leave in March 2019, and what we should do with all the customs revenue if we end up on WTO terms. The civil service at its best is balanced in its judgement of risks and opportunities, and keen to implement the government’s policy. The government’s policy as specified in 2017 was to leave the EU. The civil service have helped talk the remaining Ministers into a policy which does not amount to leaving the EU. The  Ministers who relied on this bad advice have now placed themselves in a difficult position, where they need to change their policy as soon as possible so we can conduct good and strong negotiations for the UK.

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We published a plan to get us out of the EU in January 2017

I keep hearing  the falsehood that the Brexiteers have no alternative plan to the government’s White Paper. I point out we have proposed a comprehensive free trade deal, or the WTO Global UK options.

Then I am told wrongly  we have no worked out White Paper to match the government’s. We published a 108 page document entitled “The Road to Brexit” based on the all day experts seminars we held on October 16 2016 and 27 January 2017. This document set out how to send the Article 50 letter and how to handle the UK legal issues in a single Bill which became the EU Withdrawal Bill. It went on to discuss how to negotiate a free trade agreement, and how to put in place winning policies on fishing, farming, the budget, taxation, migration, borders and much else where there are gains to be had from leaving.

Some of this was summarised on this site in the form of the Minutes of the first seminar on October 3 2016.  The document is still good advice today.

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  • About John Redwood


    John Redwood won a free place at Kent College, Canterbury, He graduated from Magdalen College Oxford, has a DPhil and is a fellow of All Souls College. A businessman by background, he has been a director of NM Rothschild merchant bank and chairman of a quoted industrial PLC.

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