Blaming Varadkar is just a diversion

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In the desperate attempts by Brexiteers to personalize the failure to come to an agreement over the UK’s departure from the EU, the Taoiseach is increasingly being demonised by politicians and pro-Brexit media alike.  It is, of course, easier to attack an individual than to get to grips with the underlying problem, but attempting to bully someone into bowing down before the might of the UK is no way to solve the issue.

People seem to have lost sight of the fact that the so-called ‘backstop’ isn’t really a ‘thing’ at all; it’s merely an agreement that, unless and until a way can be found to maintain frictionless trade across a border between two different regulatory regimes, the UK will ensure that its regulations will remain aligned to those of the EU.  The PM argues that the issue should be resolved during the trade negotiations – but that is, effectively, where it was always going to be resolved.  The ‘backstop’ is merely a statement of intent that whatever trade agreement is reached will honour the commitment to maintaining an open border.

So far, so amicable.  The problem, though, is that the Brexiteers have never had the slightest intention of negotiating any agreement which meets that precondition, not because they don’t want to but because there simply is no form of possible agreement which meets both their demands for regulatory divergence and the requirement for a completely open border.  They have no real objection to continued regulatory alignment during all – or at least part – of the period during which trade negotiations take place (although they’ll huff and puff about that) but maintaining it after the end of those negotiations is an absolute no-no for them.  In that sense, their fear that the agreed precondition will bind the UK in perpetuity is entirely justified and their desire to remove the precondition completely reasonable from their perspective.  It’s important to note, though, that the problem doesn’t stem from the mutual (EU and UK) desire for an open border (let alone from Irish intransigence) but from the determination on one side (the UK) to end regulatory alignment between the UK and the EU.  They talk about wanting an open border, but they know (they’re not stupid enough not to) that it is their desire to abolish and revise current regulations which makes some form of border control inevitable. 

For all their talk about wanting ‘free trade’, they know very well that free trade with regulatory divergence will always be less ‘free’ than free trade in a single market, and that their starting point is that, for the first time in human history, they are seeking to negotiate a free trade agreement which is more restrictive than the one which currently operates.  That is not a wholly unreasonable position to take; it’s certainly not unreasonable to believe that having total freedom to make all our own rules and regulations is worth the cost of imposing restrictions on trade and introducing border controls.  (I'd disagree, but I accept that the balance between the two is ultimately a matter of opinion.)  Their problem is that people might not have voted for that, so in order to persuade people to vote for Brexit, they claimed that there was no such trade-off and that the UK could indeed both have its cake and eat it.  And they were believed.  As PM, Johnson is now trying to say that the mess we are in is all the fault of the evil Europeans.  But it really is not – it’s the fault of those who told a lie in an attempt to sway votes never expecting that they would have to deliver, and who now prefer to double down on the lie rather than admit the truth.  The problem for the rest of us is that they might just be believed again.

The fudge won't last forever

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One of the things which guarantees that phase 2 of the Brexit talks will be even harder than phase 1 is the continuing failure of the Brexiteers to face up to the simple reality that their determination to scrap EU rules is what guarantees the imposition of a hard border somewhere, the only question being where.  This blog post sums up very simply the factors that lead to the requirement for a hard border, noting that:

There are essentially 3 reasons why customs borders exist:

1.    To impose tariffs and quotas;

2.    To confirm the imports’ countries of origin;

3.    To ensure compliance with regulations and standards.

A free trade agreement with the EU would only get us over the first of these. To avoid the second would require continued membership of the EU Customs Union (or the negotiation of something similar). To avoid the third we would need to stay in the European Economic Area and abide by the rules of the single market.

Whether because they don’t understand that very simple explanation, or because they’re being deliberately dishonest, the Brexiteers continue to insist that the EU27 will allow the free movement of goods and services across its boundaries from a country which no longer follows the same regulatory regime.  In their dreams, they fondly believe that they can scrap employees’ rights (such as the Working Time Directive), reduce environmental controls, scrap any EU rules that they don’t like, hand UK companies, as a result, a trading advantage in that they can produce goods and services with fewer constraints, and that the EU27 will simply allow a lower-regulation country to undercut their own companies on price.  Why?  Well, because they need us more than we need them, obviously.  And because the UK is very, very special.

Calling those who question the logic of all this traitors who are undermining the glorious charge into certain defeat may make them feel better, but it doesn’t alter the underlying logic, which is, at its simplest, that there is no way in which the EU27 are deliberately going to put their own businesses at a competitive disadvantage.  And that means, at its very simplest, that regulatory divergence mandates border controls.

The Brexit secretary talks blithely about Canada plus, plus, plus.  But Whilst the Canada agreement removes almost all tariffs and quotas, it does not do away with the need for customs controls for the other two reasons.  And as the EU’s website makes clear, “All imports from Canada have to meet EU rules and regulations on technical standards, consumer safety, environmental protection, animal or plant health and food safety (including rules on GMO's).”.  The goods sold by Canada to third parties (or in their own internal market) do not need to meet EU standards, but those sold to the EU do.  How many companies selling into the EU market from Canada will really decide to produce their products to two different regulatory regimes – that of the EU and that of Canada itself?  My guess is very few; most businesses will attempt to produce their products to a set of standards which meets the requirements of both regulatory regimes.  Exactly the same would be true for the UK.

It doesn’t matter how many pluses Davis adds to the word Canada, UK companies selling into the EU market will still need to meet all EU standards, as well as any different ones set by the UK government, and will therefore, in effect, see an increase, not a decrease, in regulatory requirements.  It is only those UK companies which either do not export at all, or which only export to less-regulated markets than the EU that will see any ‘benefit’ from regulatory divergence.  And that’s a rather smaller subset of the UK economy than the Brexiteers would have us believe.  And of course, as soon as the UK’s standards diverge, there would need to be border checks to ensure that only goods meeting EU standards and covered by the free trade agreement were crossing.  That in turn means that there is a basic, fundamental contradiction between the desire for regulatory divergence and the commitment to avoid a hard border across Ireland.

It’s a contradiction which they show no sign of even understanding let alone getting to grips with.  Some of them seem seriously to believe that the Irish Republic will shortly see the error of its ways, recognise the folly of independence, and beg to re-join Wales and Scotland under benign English dominance.  Others positively relish the thought of returning to what they see as the past glories of an island nation standing alone, based on a view of history which owes as little to fact as the case that they made for Brexit itself. 

(As an aside, every time they use the word ‘buccaneering spirit’ I find myself wondering if they really understand what the word means.  There may be a certain romanticism to murder, pillage and piracy – and licensed pirates are what buccaneers were – but trying to take whatever we want by force, deceit, and trickery doesn’t look like a particularly promising future for a middle-ranking European country in the 21^st century.)

I’ve argued before that the Brexiteers’ position makes little sense if Brexit is seen in isolation; it makes sense only as the first move in destroying the single market and the EU with it.  In that sense, their view of European diplomacy and the UK’s objectives in it have changed little over two centuries – sow division and make sure that no other country can achieve dominance.  The future is essentially unknowable, and they may even be proved right in time.  I have to say, though, that the evidence to date is not very supportive of that outcome.  So far they’ve managed to build more unity in the EU than we’ve ever seen before, and what they’ve sown in European minds to date looks more like bewilderment than division to me.

Scrapping EU red tape?

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One of the great claims made by those supporting Brexit was that it would enable the UK to get rid of all those regulations made by those dreaded unelected Eurocrats in Brussels, and free UK businesses from what is always described as ‘red tape’.  There are at least two obvious problems with this.  The first is that the regulations aren’t made by those unelected Eurocrats in isolation; they’re made with the agreement and input of the representatives of the elected governments of the 28 member states.  Not every state always gets exactly what it wants, but it’s democracy, not the lack of it, which ends up following the wishes of the majority – or perhaps more accurately, getting to a conclusion which a majority can support.

Leaving that aside, the second obvious problem is their apparent inability to point to many concrete examples of regulations which can in future be disregarded.  There were two stories last week which brought this to mind.

The first was a story about the possibility of giving priority to electric vehicles in a number of English cities.  This is, it seems, part of a response to a Supreme Court ruling, ordering the UK Government to comply with European limits on air pollution.  Would this, I wonder, be one of those horribly European bits of red tape which we should be tearing up post-Brexit in order to free up UK enterprises to make more money by paying less attention to environmental issues?  I mean, outside of Brussels, who really cares about having clean air to breathe?

The second was rather more local; it was about the decision to give protected status to Carmarthen Ham.  This ‘protected status’ is another of those horrid European regulations, and it’s clearly a barrier to other businesses who want to muscle in to this market and exercise their right to sell their product as they wish.  So is this one of the pieces of red tape doomed to be abolished, I wonder?

Perhaps these might look like silly examples, but that would also apply to almost any other example that I picked; and the second isn’t so far away from the one concrete example that the Prime Minister gave us in her speech to her party’s conference, when she talked about “how we label our food”.  This ‘plucky island nation’ (I should probably attribute the copyright of that phrase to someone or other) standing against the foreign foe for the right to put whatever labels we like on our food sounds like the sort of thing that might go down well in a Tory conference – but how sensible is it?

For any food producer wanting to sell its produce only in the UK, it might have some advantages, particularly if it means that they can get away with more (although I’m not sure why so many of those who will be consuming the products appear to think that’s such a good idea).  But any food producers wishing to sell into the single market (paying whatever tariffs are necessary for the privilege) will still have to comply with the rules of the EU.  But in this case, that would be in addition to complying with UK rules.  This is just one example of many where having separate UK rules will not necessarily mean less regulation and red tape – they could actually mean more.

And that’s the point about most of the EU regulations that people are raging against – they exist because having one set of rules to follow is better than having 28 with which exporting businesses need to comply.  It's actually a way of reducing the overall regulatory burden on companies trading within the market bloc.  This is far from being the first or the only example of what sounds like a good sound bite actually coming back to place a real bite on the posterior.  But then, as long as we have control of our borders…

Following the rules

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Last week it emerged that the new Home Secretary had been involved with offshore investment funds in the past.  The report was quick to reassure us that this was not an attempt to avoid paying tax in the UK; it was simply that the regulatory regime at the time did not allow this type of fund to be set up in the UK.  So she was not avoiding UK taxes, merely avoiding UK regulations.  That, apparently, makes everything OK.

Not as 'progressive' as it appears

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It isn’t just Cameron’s arguments in support of remaining in the EU which have disappointed me.  I’m also more than a little sceptical about the so-called ‘progressive’ case for the EU.  One of the most succinct expressions of that case was a statement by Plaid’s leader, Leanne Wood, when she said yesterday “Because of our membership of the EU, we have laws on equality, the environment, on workers’ and consumer rights, on farming and food quality, laws to tackle climate change and much more”. 

Now, I don’t dispute that we have laws on all those issues, or that the EU has been instrumental in ensuring that those laws are consistent across the whole of the EU, but is the fact that we have laws covering all those fields really “because of our membership of the EU”?  I believe not; I’m reasonably convinced that we’d still have laws on all those fields even outside the EU (which is why the claim by the Brexit camp that we would abolish all the EU regulations after leaving is pure baloney).  The question is whether they’d be the same laws, or whether they’d offer less – or more – protection than the laws as they currently exist. 

It’s no coincidence that many of those campaigning for Brexit would like to weaken the protection in all of those areas, but Brexit in itself doesn’t guarantee that they’d be in a position to do so.  By and large I accept the argument that the laws are probably better than they otherwise might be, but it’s hard to escape the conclusion that what we are really being told is that we should place more trust in EU politicians (or bureaucrats as everyone else seems to prefer to call them) than in UK politicians.  The ‘progressive’ argument seems to amount to saying that we need to be part of the EU so that someone else can over-rule the UK and set higher standards than the parties that we vote for here would ever do.  It’s not an argument which particularly inspires me, and it is, in essence, rather defeatist.

I’d certainly accept that there are advantages for trade across the EU from having a consistent set of rules and laws to which all have to work.  Consistency for trade purposes might be a more positive argument for the EU, but it’s one which the supporters of the EU seem to be very unwilling to make.  

Correcting the balance

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I liked Corbyn’s suggestion last week of a new law to prevent the payment of dividends by companies which are not paying at least a living wage to all their staff.  Any reasonable definition of a ‘viable business enterprise’ ought to exclude any business which can only turn a profit by underpaying its staff.  Underpaying staff whilst paying dividends to shareholders is just a simple and blatant way of transferring wealth from labour to capital.

The response of the CBI spokesperson was a little over the top – not to say out of touch with reality.  He said "The idea of politicians stepping into the relationship between a private company and its shareholders would be a significant intervention, and not one that we would support" as though the idea of legislative regulation of that relationship was an entirely new and novel suggestion.  I would have thought that anyone representing the CBI would at least be aware that the various Companies Acts are full of provisions which regulate that relationship.

And rightly so, too.  There are rules covering the way in which companies are managed, and rules governing the rights of shareholders and the responsibilities of companies and their directors.  Other legislation also affects the relationship – health and safety legislation and employment protection legislation, to name just two examples, both restrict the unfettered right of businesses to behave as they wish in the interests of shareholder profit.

I’m sure they’d argue that statute enshrines the duty of company directors to consider first and foremost the best interests of shareholders at all times, and that that’s what they’re doing in opposing this suggestion.  But as the previous paragraph illustrates, that duty has already been curtailed in a number of ways; it’s a duty which takes primacy only within the limits of any other legislation, and all Corbyn is proposing is another limitation on that duty – and quite a small one at that.

I can understand why the representatives of capital would want to maintain as far as they can the current presumption in favour of the interests of capital.  But I do wonder whether they have really thought this through.  It looks like a very short term and narrow view of the interests of capital to me.

A successful capitalist economy depends on there being a sufficient number of consumers in a position to buy the products and services which businesses produce.  From the perspective of any individual company, it might well appear advantageous to pay wages as low as possible in order to maximise its own profits; but from the point of view of the economy as a whole, underpaying employees is a huge problem in the long term.  Such narrow short termism is one of the fundamental problems of capitalism as an economic system, and it’s part of the reason for cyclical boom and bust.

Capitalists need external regulation and legislation for their own good; the fact that they don’t recognise that themselves merely reinforces the need.  So, on this one, I’m with Corbyn in principle.  Sadly, I think the chances that his own party would ever allow him to implement such a proposal are even less than the chances of him getting into power.

Following the rules

Tweet There was a story in the Western Mail a few weeks ago about the WW2 veterans who were being prevented from receiving medals from Russia by what seemed to be a rather arcane rule laid down by the UK Government.  It wasn’t until I read this follow-up story in Saturday’s paper that I realised that I had a ‘family interest’ in the matter, as it were.

The veteran who died on Remembrance Sunday was an uncle of mine.  Uncle Don was an officer in the Merchant Navy and spent much of the war on convoys running supplies through the Arctic to Russia.  With his death at the age of 92, it seems that there are now only a dozen convoy veterans left in South Wales – and it’s obviously one of those numbers which changes in only one direction.

Perhaps the Russians should simply decide to pop a few medals in the post to the remaining veterans.  I’m not sure who would be committing the offence if they did.  Would it be the Russians for sending them, or the aging veterans for receiving them?  Either way, the probability of anyone launching a prosecution seems rather slim to me – the publicity would make anyone who took such a decision look a complete idiot.  And I can’t believe that the UK Government would really want to provoke a diplomatic spat with Russia over such a trivial matter either.

What I really don’t understand is the rationale behind the rule.  Usually, I can see some sense or logic behind decisions made by those in authority, even if I disagree with them, but in this case, I just can’t.  It’s not that the UK Government is opposed to foreign governments giving awards to UK citizens; they’ve just decided that it must be within 5 years of the service of the individuals concerned.  Why 5?  Why not 4, or 6, or 10?  Why have a time limit at all, once the principle is recognised?

Trivial it may be to the governments concerned; but it matters to those involved.  I find it hard to believe that the UK Government can be so intransigent over such a wholly arbitrary time limit on a matter of such little import other than to those directly involved.