Brexit - Hard Brexit the Reality

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Is a no deal better than a bad deal?[edit]

It has often been said by Theresa May that no deal is better than a bad deal. As we stand now we'll be either accepting a bad deal or no deal whatsoever. A good deal is no longer on the table. The government, having spent the greatest part of the negotiation period arguing amongst themselves, are now at a point where they will have to accept the terms laid down by the EU. To negotiate one of the most complex processes in the history of the UK and not have a plan before starting the project is beyond irresponsible. It borders on the insane. Whether you are a remainer or a leaver there is no way that the handling of the process can please you. As laid out in the section Triggering Article 50 the starting point for even a medium sized project should be created in minute detail. If planning a medium sized project where the delivery time was, like Brexit, two years, you could not begin the project until the final deliverable had been agreed. Even then, many well planned projects fail due to external circumstances or simply because the delivery team lack capability. The timescale for delivering Brexit of 2 years was always ambitous (hence the transition period) and it was imperative that prior to submitting article 50 that we had all deliverables understood and lined up, with as much prior preparation carried out as possible as well as a plan for every minute detail of the 2 year leaving period once A50 had been submitted.

This section looks at what is on the table at the moment. As we stand we only have no-deal or bad deal left on the table This section outlines what the remaining two outcomes mean for the UK, as well as giving further insight into what it means when the government talks about "WTO Terms". Elsewhere we detail what a good Brexit could look like, although obviously many would argue that there is such thing as a good brexit


No deal Crashing out of the EU at 11pm on the 29th March 2019 with no
deal and no transition period. This would mean reverting to WTO terms for trade

WTO terms What is meant by WTO terms

Bad deal Compromise deal where we agree enough to take us into a transition
period with terms that will cause further divide in the UK. The Chequers deal
should be seen as a bad deal. The reasons why are discussed further on in this section

Good deal What is the best deal the UK could have hoped for had it planned
properly.

The sections have been prepared with the use of the videos "3 Blokes in the Pub - Talk NO DEAL Brexit"[1][2][3][4] Where the 3 blokes (in the pub) make a statement, it was cross checked with other sources to check accuracy. Their assertions are accurate.

No Deal[edit]

This is crashing out at 11pm 29 March 2019. This is where we will stand at that point:

Agreement Impact Comments
Border controls
  1. The UK does not have the customs control processes in place to check goods coming into or leaving the UK. These would need to be in place to meet EU regulations
  2. The UK has two main entry and exit points to mainland Europe - Dover and Folkstone, with a smaller amount of goods being shipped in and out through Felixstowe, Hull and Newcastle
  3. Prior to joining the EU the UK had agreements in place throughout the world to cover customs. These are now all agreements made by the EU. We have no bi-lateral agreements that cover customs
  4. The UK has 60 agreements outside the EU that allow for frictionless trade. On 29th March these will expire.
  • 4.2 million trucks pass through Calais and Folkstone each year (nearly 12,000 per day)
  • The figure excludes cars and vans
  • The government is in the process of increasing staff by 8000 in HMRC and customs
  • The government has put aside 500 million GBP to cover the cost of additional staff and systems
  • 500 million pounds equates at 32,500 pounds per person, per year. Including employment costs this leaves nothing for systems and is not enough to employ 8000 employees
  • 8000 staff need training. 500 million pounds will not allow for training except for on the job, which leaves no time for other tasks such as expanding systems, testing those systems and training
  • Goods transport will require paperwork completed to enter the EU. This is extremely compex paperwork (and expensive) where every item on the transport must be listed, valued and labelled. When the items are checked it can halt a transport for days. This will destroy UK just in time industry, which is integral to the process of a modern business
Driving Licences
  1. The UK driving licence will no longer be valid in Europe (commercial only)
  • The government has not taken steps to remedy this situation by March 2019. It is unlikely that it can be resolved in time at this stage
Vehicle Insurance (commercial only)
  1. Vehicle insurance to travel in Europe is covered by the Financial markets passport rights
  2. As soon as we leave the EU without a deal those rights expire
  3. These rights were covered by the green card system in the past. This system would need to be re-established
  4. The government has done nothing to establish a system where green cards can be re-introduced by 2019
  5. The financial passport rules mean that transport travelling to the EU could not purchase the insurance from a UK provider
  • The cost of vehicle insurance could quadruple
  • Foreign hauliers entering the UK would have to insure separately for driving in the UK
  • As trade is cross border with goods constantly coming in and out, the impact is likely to be that most small hauliers would be forced out of business
  • This would not be resolved by 29 March from where we are now
  • The EU has agreements with other European countries that mean that Vehicle insurance is valid (Turkey, Croatia, Switzerland). These agreements would no longer be valid.
  • Countries that would need separate insurance for both vehicle and travel is 60 outside the EU plus the 27 EU countries
Travel Insurance
  1. Like vehicle insurance, travel insurance is covered by the Financial markets passport rights
  2. UK citizens travelling to Europe would need to take out Insurance in their destination country
  3. Like vehicle insurance this would impact travel to countries outside the EU where bi-lateral insurance agreements are in place
  • You would need to buy local to country travel insurance to visit the USA, Canada, Russia and many more countries that have bi-lateral agreements with the EU
  • Countries that would need separate insurance for both vehicle and travel is 60 outside the EU plus the 27 EU countries
Trailer Permit
  1. Whether towing a trailer or caravan a special permit will be required for the EU
  • No actions have been taken at this time to put a permit process in place
WTO Terms
  1. WTO terms means that rather than have a trade agreement you trade based on a World Trade Organisation rule book
  2. The rule book is complex, applying different tariffs to each product type and within each product type varying tariffs are applied
  3. The EU withdrawal bill makes it illegal to apply WTO terms as section 10.2b states that no controls can be put in place on the NI border that did not exist prior to EU withdrawal
  • WTO terms can be demand very high tariffs
  • Tariff for cheese is 40% and grated cheese 48%
  • Tariffs on meat are very high with lamb commanding a tariff of 80%
  • WTO would not resolve the issue of vehicle or travel insurance
  • All goods have to be measured and recorded entering and leaving the country
  • Quotas apply to many products and this must be measured and reported on
  • The UK would have to leave the Ireland / Northern Ireland border open, which would mean no UK goods could enter Ireland as this would break EU rules
  • Each product grouping would require terms agreed with each country separately. This amounts to thousands of products from multiple countries.
  • Steel is imported in semi finished state from several countries and then finished in the UK. Each supply country would need to make a tariff agreement with the UK and we would need a reciprocal agreement to ship the finished goods from the UK.
Working just across the border
  1. Many UK citizens work just across a border with a EU state
    1. Gibraltor with Spain
    2. Northern Ireland with Ireland
  • Citizens of Gibraltor will no longer be able to work in Spain
  • Citizens of Northern Ireland will need a work permit to work in Ireland
  • Citizens of Ireland will need a work permit to work in Northern Ireland
  • EU is preparing for a border between Northern Ireland and Ireland
  • UK has not prepared for a border
  • It is illegal for the UK to put up a border, which goes against the mantra for Brexit of "control of our borders"
Energy Balancing
  1. The EU has an agreement that allows for electricity to be shared across borders
  2. This is used for energy production balancing, as countries have peak times when they need to draw extra eletricity from the EU grid and off-peak times when they supply energy to the grid
  3. A no deal brexit will end this agreement
  • Department for Business, Energy and Industrial Strategy (BEIS) have said that a no deal brexit would leave to more outages that last longer and are more widely spread
Trade Agreements
  1. Present trade agreements negotiated through the EU account for one third of world GDP
  • The UK would no longer be part of the EU trade agreements
  • It is unlikely we could agree better terms outside the EU as we don't have the same trading clout
  • Trade agreements have never stopped the UK doing business abroad. Having product to sell has always been the issue
  • Selling services abroad requires open borders, simple work visa provision and trade agreements. The service industry forms 80% of the UK economy
  • Our agreements with countries outside the EU have mostly been negotiated through the EU and expire on leaving the EU
  • Better trade agreements cannot be agreed with many countries as we have zero tariffs through EU agreements
  • There are 193 member countries of the UN. 35 are developed economies and a further 20 are regarded as emerging economies
  • Of the 35 developed economies, 27 of them are in Europe
  • Outside of Europe the remaining 8 countries are upto 18 hours away to transport goods by air
  • of the 8 developed countries outside Europe, they have a time difference of 5 to 8 hours
  • Because we are reliant on the Service industry the UK would need to work nights to trade successfully with these countries

Cost of transporting goods outside EU

  1. Container ships with any British made goods would need to travel great distances to deliver the goods
  • Great distances are a serious disinsentive for countries to do business with us. While China has container ships covering great distances, they are easily able to fill the container. Without a trade deal it would not serve the container ships to visit the UK, while previously they could unload in Antwerp and goods could then easily be transported on to the UK or unload in British ports and easily be transported on to the EU.
  • A 6000 container cargo ship will burn $28,500 worth of fuel per day. The UK does not have the industrial might to make it worth importing directly from the UK with no other EU products
  • A cargo ship exporting to Australia from the UK would take 40 days. Costs would be:
    • Fuel: 1.2 million dollars
    • Suez Canal: 200,000 dollars (approx)
    • Container ship hire costs: approx $600,000 for 40 days ($15,000 per day)
    • Tariffs: various depending on product
    • A single small container ship (in comparison with Chinese container ships that transport 16,000 containers) to Australia would cost at least 3 million dollars (with tariffs)
  • Australia has a population of 23 million
  • Australia is practically next door to China. It would not be cost effective for either the UK or Australia to trade with each other except for specialist products (minerals from Australia, whisky from the UK for example)
  • Our inability to connect with global transport systems would mean that new trade deals would not offer much in terms of actual business
Transportation logistics
  1. Goods transport leaving the UK will need to be checked to ensure the correct paperwork is in place
  2. Goods transport leaving the EU will need to be checked to ensure the correct paperwork is in place
  3. For goods leaving and goods entering both the UK and EU a percentage of transports will need to be physically checked to ensure the goods match the paperwork
  4. Goods arriving from non-EU countries will need to checked as reciprocal agreements will no longer be in place
  5. UK goods arriving in non EU countries will need to be checked as reciprocal agreements will no longer exist
  • Issues of goods entering non EU countries can be solved over time. However a no deal brexit would not allow time to put the systems in place
  • The 2 year transition period was intended to allow these processes to be put in place. A no deal brexit would remove the transition period
  • The need to slow down the import / export process would mean that great strain would be put on the logistics of ports
  • The space required to hold trucks leaving the main ports (Dover & Folkestone) would create serious logistical problems
  • The government has allowed for a backlog of transport by creating a lane on the M20 as a lorry park.
  • Container ports have little or no space to hold the number of containers for checking. Presently containers are unloaded and are transported on. This would no longer be the case with paperwork requiring to be checked and recorded
  • The UK cannot simply wave the containers through as this would break WTO rules.
  • Trucks travelling to Europe cannot be waved through as there would be issues when they reached Europe if they do not have the correct paperwork. Also multiple failures to meet EU paperwork requirements would lead to a refusal of all imports from the UK
Market
  1. The UK is looking to gain trade deals with commonwealth countries
  2. Excluding Canada, Singapore, Autralia & New Zealand the remaining 48 Commonwealth countries put together have a lower GDP than just the UK alone
  • Typically a car made in the UK would cost $30,000 in for example India
  • Average GDP income per person in India is $3500 per year
  • India (for example) has a strong home grown vehicle market to meet the income of Indians. There would be no need to import from the UK
  • The GDP of all of Africa (56 counntries) is half that of France.
Port sustainability
  1. The amount of traffic than can pass through both UK ports and continental ports will be greatly reduced, due to the number of checks that will be required
  2. In theory this will either cut funds to the ports and risk them closing or the ports will raise their prices to ensure they can continue to operate at a profit
  • This will lead to further costs to hauliers making trading with the EU even less viable
Food supply
  1. On 30th march all imports of food to the UK will stop dead
  2. Food that comes into the UK ports from the EU cannot come in as they have no custom controls at their ports
  3. Even if we are on WTO terms and wish to pay over the odds, there is nobody to pay
  • Their is a massive warehouse at Dunkirk where vegetables are then shipped to the UK. These imports will not be possible
  • Any food products that are imported through ports (Hook of Holland, Zeebruge, Dunkirk & Calais) will not be shipped
  • Even if the UK opens it borders, goods will not be allowed to leave the EU ports
UN ADR Rules
  1. UN ADR rules apply to the movement of dangerous chemicals
  2. We are signed up to the UN rules through the EU
  3. When we leave the EU we will no longer be signed up to these rules
  • Many ingredients that go into processed foods are highly inflamable.
  • If the UK is not signed up to ADR then importers will not be able to get liability insurance, so will not be able to export to the UK
The 70 white papers
  1. These white papers were produced by the government to detail a no deal brexit and the actions needed
  2. They were originally to be released one a week
  3. The news in the white papers was so bad that the government decided to release as a single paper and hope nobody noticed them
  4. The consolidated paper has still to be released
  • The white papers detail such things as:
    • Petrol rationing
    • Stocking up on processed food supplies (fresh food will is expected to run out by about mid April
    • Food rationing
  • We leave the EU at the end of March. No fresh food will be available from UK farms
  • Processed food will be stockpiled, but many of the ingredients for processed food is imported, so once the stockpile is exhausted the supply will reduce
  • Oil products (Petrol and Diesel) is in our top 10 imports. On 30th March 2019 we will have no trade agreements for their import
  • Only so much food can be stockpiled. We don't have warehouses to stockpile food for the long term
  • Just in time car parts cannot be stockpiled as there is no warehouse space. Presently parts are shipped in and go straight to the assembly line. This is why we trade with our closest neighbours and why we rely on easy movement throughout the EU countries.
  • This is why Turkey has a deal with the EU. It makes cars for the EU and needs a deal to be able to move parts and finished goods effectively. Even with a deal, Turkey cannot move goods in and out of the EU as easily as member states can move goods around
Medicines
  1. All our diabetes insulin is imported
  2. Inhalers imported for asthma treatment
  3. Isotopes imported for radiotherapy
  4. All goods that appear that are under UN ADR rules cannot be imported because the importer cannot get liability insurance if we are not signed up to ADR rules
  • Medicines cannot be stockpiled due to space constraints and how much and for how long should they be stored
  • Medicines often need special environments to stored. These do not exist for stockpile purposes
  • Radioactive materials required for x-rays degrade and are delivered to hospitals on a just in time basis
Police Effectivenes[5]
  1. Police leaders have stated No-deal Brexit poses serious risk to public safety,through the loss of cross border co-operation
  2. British police make regular use of 32 different law enforcement and national security measures that depend on EU membership
  3. These include the European arrest warrant – under which 1,735 arrests were made in the UK last year and more than 10,000 people were extradited since 2004 – and the Schengen information system (SIS), a vast database used by police to search for terrorist suspects, missing people and to check vehicle registrations and passport details.
  4. The SIS was checked 539m times by British officers in 2017
  5. The UK courts additionally depend on the European criminal records information system to establish the history of foreign offenders.
  • Police officers will instantly lose vital access to cross-border investigative powers and databases
  • Officers have stated they will suffer "a significant loss of operational capacity" should the UK crash out
  • The report was drafted by the Association of Police and Crime Commissioners (APCC) cross-party Brexit working group and was drafted after consultation with the National Crime Agency and the National Police Chiefs’ Council (NPCC).
  • The force has stated concern that "the government does not appear ready for such a crisis".
  • The European commission’s Brexit preparedness unit has already said it would “switch off the databases” if a deal was not struck in the coming months.
  • A small law enforcement team is in the process of producing contingency plans in the event that access to some or all of the European policing measures are lost. The contingency measures will be slower, less effective and ultimately will reduce the ability to identify risk and prevent harm on both sides of the channel.”
Social unrest
  1. Dexeu discussing cancelling police leave for two months in case of ‘no deal’ Brexit backlash
  2. Plans to ask police chiefs to cancel officers’ leave in the two months after Brexit have been discussed in Whitehall as the government readies itself for the worst case scenario of social unrest caused by a No Deal.
  3. A series of Freedom of Information requests this week also showed that many local authorities are preparing for civil unrest
  • The Home Office pointed out that the government had no authority to intervene in the staffing arrangements of local forces.
  • The government is preparing to issue two tranches of plans setting out proposals for no-deal planning over the next month.
  • The Police Federation, which represents rank and file officers, said it had not been made aware of the proposals.
Owning a company abroad
  1. Owning a company in the EU and countries that they have an agreement with is controlled by EU legislation
  2. UK citizens with businesses abroad will no longer come under those agreements
  3. Being a director of a foriegn based country may become illegal
  • This will very much depend on the rules of the country in question
  • It is still unclear what impact it will have on UK directors of EU based companies

Crashing into WTO terms[edit]

WTO Tariff Schedule[edit]

  • The World Trade Organisation (WTO) has 164[6] member countries
  • Tariff schedule[7] agreed between all members lays out what the tariffs will be for all goods traded between members of WTO
  • The tariff schedule has 4500 product groups
  • Within each product group their are many products. For example in the steel product grouping there are 3200 different types of steel plate
  • Each product within the product groups has its own schedule of tariffs to be charged under WTO terms
  • The UK as part of the EU is within the Commons Custom Tariff (CCT)[8]
  • The EU looks at all products made within its borders and sets the tariff under CCT to place high tariffs on goods it makes and low tariffs on goods it needs to import into the union
  • Items that we cannot make or grow within the UK, but are made or grown in the EU, as part of the EU we have tariff free trading. For example vegetables and fruit that we buy from Spain, which we can't grow in the necessary volumes in the UK.
  • The UK will need to go through all 4500 product groups (and products within those groups) and decide what tariffs to charge on what products
  • This is a highly complex process because the UK will need to balance off the issue that we need to import some products while we also produce the product domestically. Getting the balance right to ensure the domestic production survives and we can still import the additional product needed to meet our needs will take years of negotiation with supply countries.
  • The sheer number of products will mean not only will the negotiation period with other countries take years, creating the schedule will take years also
  • We cannot simply copy the CCT into our tariff regime as we no longer are part of the EU and so cannot measure in the tariff free supply we presently benefit from
  • This also means we will lose trade agreements with 60 other countries as well as the EU, as our trade is carried out with these countries under EU agreements. With no tariff schedule, no way of measuring or collecting tariffs this will mean that we will not be able to trade with 87 countries that we do 90% for our export business with
  • As the UK will have no trade agreements with countries and will have no Common Custom Tariff (CCT) agreement with the WTO we will be termed as having "third country status" with the WTO
  • Third country status means that tariffs will be charged at the highest rate until a trade agreement is in place
  • UK trade agreements will be put in place during the transition period. No deal means no transition period. Effectively upon leaving the EU, UK goods will cost 20 to 30 percent more to importing countries than they do today
  • This would be a no win situation for the UK as we would need to set our tariffs as low as possible to continue receiving goods, but we couldn't apply that to a just the EU. Under EU rules we would have to apply the same level tariff to all WTO member countries
  • We are protected from for example the EU using its internal zero tariff regime to damage the UK market by the CCT agreement. This would no longer be the case
  • Othe WTO member countries could not offer us zero percentage tariffs as this would mean they would have to offer it to all other WTO member countries, destroying their own internal markets
  • Pretty much all major trading partners have refused UK proposals to the WTO on trading quotas
  • Refusal of the terms means the UK has to re-work the whole proposal, get agreed by the EU and re-submit it to the WTO. This proposal may still be rejected by some countries meaning that the whole proposal will be refused
  • The UK presently exports 417 million GBP of manufactured goods per day. This will instantly stop. Even if these markets can be reopened at some point, the UK will have lost their market to foreign competitors.
  • The workforce associated with building 417 million pounds worth of goods per day is very large. These jobs will be lost. Likely many of the workers will emmigrate to work for companies that take up the slack rather than starve

Bad Deal Brexit[edit]

There is one thing that the UK and EU agree on and that is "no deal is better than a bad deal." However both parties in the process have completely different reasons for holding this view. In the case of the EU a bad deal (such as chequers) would mean that they would sign up to agreements that broke their own laws and would also put mean that their trading partners could take them to the WTO for breaking the terms of agreements they had made with them. In the case of the Conservative government it is a foolish bloody mindeness that means that they think they should be tough negotiators in order to secure a deal.

Chequers can be defined as a "bad deal" brexit. In reality it can be defined as a no-deal brexit. It cannot legally be passed by the EU and there appears to be little chance of any of it surviving negotiation with the EU. It does beg the question, if those so called members of the government that say they support a soft brexit are sincere, why did they vote for a white paper that is blatantly undeliverable? The only conclusions that can be arrived at is that they are making noise simply so that they can protect their own voter base when the UK crashes out of the EU.

The statement released from the Chequers meeting was heralded as a major breakthrough. The fact that it was released in July 2018, 15 months are article 50 was submitted should have raised major alarm bells. Generally however it was accepted as a step forward. The statement was in short a repeat of earlier demands placed on the EU that had already been rejected out of hand. It may be fair to state that the EU is rejecting these proposals out of hand because it wants to teach the UK a lesson or at least taking some pleasure in the fact that it can't grant UK wishes due to a legal framework. Whether that is the case or not, it is fair to say that the EU holds the whip hand and any proposals that the UK come up with will be rejected unless they meet that legal framework. This proposal did not

The white paper was approved in parliament in July 2018 with an amendment that undermined its credibility even further. The original white paper stated the following in 17b:

  • The UK and the EU should agree a mechanism for the remittance of relevant tariff revenue. On the basis that this is likely to be the most robust approach, the UK proposes a tariff revenue formula, taking account of goods destined for the UK entering via the EU and goods destined for the EU entering via the UK. However, the UK is not proposing that the EU applies the UK’s tariffs and trade policy at its border for goods intended for the UK. The UK and the EU will need to agree mechanisms, including institutional oversight, for ensuring that this process is resilient and verifiable.

The above paragraph may have been possible to gain agreement on with the EU, however this is not what formed the final approval in parliamment. However the European Research Group was able to add the following amendments to the paper:

  1. HM Revenue & Customs could not collect duties or VAT on goods on behalf of the European Union unless there was a reciprocal arrangement
  2. Make it illegal to have a customs border in the Irish sea
  3. The EU must offer reciprocal tariff collection for the UK
  4. The UK government would need further legislation to form a customs union with the EU

Amendment 1 ensures that the EU cannot enter into a customs union within the UK and amendment 2 ensures that the backstop for the Irish border cannot happen. As the EU cannot provide amendment 3 as it would be impossible for them to measure such things and would not be interest of member countries to add an extra layer of bureaucracy simply to meet the needs of a UK political decision. Amendment 4 cynically recognises the short timescales and kicks the process far enough down the road to be unachievable.

So this deal is a bad deal for the both the UK and the EU. This ensures that it could only be ratified by the other 27 EU countries if it was changed radically. It is difficult to see a situation where it could be changed radically while meeting the red lines that the Conservative government has put in place. The red line that there will be no Irish border in the Irish sea is written into law. It is also written into UK law that there will be no Northern Ireland / Ireland border.

In summary the EU now agrees fully with the UK government that a bad deal is worse than a no-deal for them.


References[edit]

  1. 3 Blokes in the Pub - Talk NO DEAL Brexit https://www.youtube.com/watch?v=Sx4AF-3Rd44&t=1164s
  2. 3 Blokes In The Pub... Talk THE BEST Brexit https://www.youtube.com/watch?v=sju9laLqeCo
  3. 3 Blokes In The Pub... Talk PROJECT FEAR https://www.youtube.com/watch?v=LH6O32Dqix0
  4. 3 Blokes In The Pub... Talk NO DEAL NOTICES https://www.youtube.com/watch?v=ohMnvXGjJWE
  5. No-deal Brexit poses serious risk to public safety, say police leaders - Guardian 6th August 2018 https://www.theguardian.com/politics/2018/aug/06/police-leaders-warn-home-secretary-public-safety-threat-from-no-deal-brexit
  6. Members of the World Trade Organisation https://www.wto.org/english/thewto_e/whatis_e/tif_e/org6_e.htm
  7. WTO Details of Tariffs https://www.wto.org/english/tratop_e/tariffs_e/tariff_data_e.htm
  8. EU Common Custom Tariff (CCT) https://ec.europa.eu/taxation_customs/business/calculation-customs-duties/what-is-common-customs-tariff_en



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