19 July 2018
Brexit Chaos
Where now?
By John Watson
If the Devil is in the detail he is certainly welcome to it. The 104 pages of government white paper on the Brexit negotiations become steadily more confusing as one gets away from broad principles into how the solutions proposed are to be implemented. The much-canvassed proposals relating to trade are a good example of this with the complexity growing steadily as they move from principle into practicality. They are designed to reconcile two things. First there is the need for components to circulate within the EU without Customs barriers, a requirement of modern supply chains even before one gets to the politics of the Irish border. Second there is the need for Britain to be free to set its own tariffs with third countries, a freedom which lies at the heart of Brexit.
Both of these objectives are simple enough in themselves. It is when you look at how to achieve them that it gets difficult. Goods imported from third parties for consumption in the UK should bear UK level tariffs. Goods which are going to be passed on to other EU countries should bear EU tariffs. So far so good, but they all come in through the same entry points so how do you make sure that the right amounts are collected?
According to the white paper itself, the answer to that depends on whether the goods enter the EU/UK free trade area through Britain or through a continental port. If Britain, enquiry can be made at the point of entry and the correct amount charged. Where the ultimate place of consumption cannot be identified satisfactorily, the higher rate of duty is paid subject to a rebate where the destination is subsequently proved. If continental, the EU tariff rate is applied at entry with subsequent adjustment.
This system, under which we would have to apply the EU’s rates, has upset the Brexiteers who have amended the legislation so that the system can only be used if the EU has to apply British duties to goods destined for the UK. Surprisingly the Government has accepted that, although the condition will clearly not be satisfied. Estonian Customs enforcing British tariffs, surely not!
Even with goodwill that would be too complicated. Well, drop a further level into the detail and it gets harder yet. What happens when the goods are combined with other goods? How will the adjustment process work? In the end the only viable dual tariff system would be a substitution of UK for EU tariffs where goods were brought into the UK for consumption here. Otherwise EU tariffs would apply Will that be enough for the Brexiteers? Quite possibly not.
This isn’t the only place where complexity and politics overlap. Take the famous common rule book under which our standards will have to at least match those of the EU if our goods are to be sold into their market. Standards have to be overseen and one would expect a single authority to oversee everyone. Supervised by a single court of course. Ah! And who sets the rules? Ah, again!
None of it really looks like working at the moment and yet those who call for new referenda and staying in the market are in trouble too. The public is expecting free trade and limits on movement of people and will not be happy if it doesn’t get it. Rerunning the referendum would probably produce the same result as before. In any case, as we have already discovered, a referendum is too blunt an instrument for this sort of decision. Long before the polls closed we would be wishing that the questions had been slightly different.
“Cometh the hour, cometh the man,” runs the rather optimistic proverb. Well, maybe a man or woman will be able to catch the public’s imagination and drive Brexit in accordance with his or her vision. It isn’t obvious who they will be, however, and in their absence matters will have to swing away from over-complex attempts to please everyone into a solution. Will we end up in the customs union, Brexit a mere formality, which changes little, or will we go for a hard Brexit disrupting our trade? Labour plus Remainer Tories have the votes to push through the first but that might not go down well with the public. The political class offered them a choice and they made it. Having surrendered the decision to the man in the street it is unwise to ignore his wishes.
So it looks as if we will not get our free trade area after all, or at least that it will only operate in particular sectors. No wonder that those manufacturers who are dependent on complex chains for the supply of their components are looking at the possibility of moving their operations elsewhere.
