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Preppers should find that they will have a great business opportunity in the UK once the great unwashed citizenry realizes how utterly unprepared the UK is for a disorderly Brexit. That outcome that looks more likely with every passing day.
The latest proof comes via two papers released by the Government that describe how the UK plans to handle trade in the event that Brexit talks fail. They apparently have the joint aim of reassuring businesses and the public and strengthening the UK’s negotiating position with the EU.
To any discerning reader, these documents are a monster own goal. They demonstrate how the officialdom hasn’t even begun to grapple with the enormous operational challenges that Brexit presents. The papers are so threadbare in terms of their discussion of “rubber hits the road” issues like what will happen at borders generally and with the Irish border specifically that they fall short of even qualifying as plans to come up with a plan. Those would at least would define issues to be tackled with deadlines, allocation of work, staffing levels, and clear end products.
If I were a businessman in the UK whose business had any meaningful exposure to imports and exports, I’d be hitting the panic button.
And EU officials may be getting a form of double vision. On the one hand, the spectacle of the Brits unable to get past the analysis paralysis stage will only reconfirm that they have the upper hand and can hold firm to the positions they have already staked out. On the other hand, they have to be getting even more frustrated with dealing with the UK’s bizarre combination of arrogance and gross ineptitude.
Normally, a performance this pathetic would lead third parties to want to help such an incapable counterparty, or at least not rough them up too much. But UK has acted for years as if it didn’t need friends in the EU and has only doubled down on its high-handedness since the Brexit vote. Lack of preparation, bad faith, inability to settle on a strategy, and continued outright delusion are enormously trying to deal with. The EU was likely annoyed with the UK wanting to negotiate only one week out of a month because that was obviously far too little time to resolve the dense thicket of Brexit issues. They now are probably relieved, since they probably need that much recovery time to be able to keep their cool.
Normally, I’d make at an effort to give the two documents a careful reading, particularly since neither one is very long. But both are such obvious handwaves that they aren’t worth any more than a quick look.
It’s obvious even on a mere flip through that they natter on about principles or presen data that might have a place in a much longer treatise but isn’t on point for the task at hand, figuring out how to handle the movement of goods if the UK has no exit deal as of March 2019. In keeping, it sketches the types of things a Customs Bill ought to include, as opposed to making recommendations or offering alternatives.
For those who are brave enough to have a look, it’s not hard to see that the first paper, Preparing for our future UK trade policy, is hot air with a few charts to give it an air of substance. The Twitterati could barely be bothered to discuss it:
OK I didnt learn anything new in the Trade White Paper (but trade policy wonks probs not the target audience). Onto Customs Bill White Paper
— Allie Renison (@AllieRenison) October 9, 2017
— Vicki Hird (@vickihird) October 9, 2017
There admittedly are a few tidbits but not many. Section 3.2 might rile Scotland, since it reads like a plan to abrogate devolved powers:
As parts of these agreements will touch on devolved matters, legislation will create powers for devolved administrations to implement them. These powers will be held concurrently by the devolved administrations and the UK government.
…..but I was relieved to see I wasn’t the only one scratching my head about that section:
I am struggling to make sense of the Trade White Paper section that says "we will transition EU 3rd country trade agreements".
— Adam Jackson (@Adam_E_Jackson) October 10, 2017
The Customs paper at least occasionally skimmed the surface of border issues. But all you needed to do was encounter pablum like “government is committed to developing solutions” in the “no deal” scenario to know the officialdom has barely started to think things through.
And as we’ve pointed out repeatedly, trade isn’t managed with clerks and green ledger paper any more. IT systems are the core of customs operations. The UK would have had to have had detailed specs completed months ago to have a thin hope of being ready by March 2019. There is no evidence here that the Government has begun to think though what goods might go through what channels and how.
Anyone who has even a dim appreciation of the systems requirements can see that the grand idea presented below couldn’t possibly be in place for years, given large IT system lead times (and that’s before you get to their high failure rates):
5.16 One potential approach the UK intends to explore further with the EU would involve the UK acting in partnership with the EU to operate a regime for imports that aligns precisely with the EU’s external customs border, for goods that will be consumed in the EU market, even if they are part of a supply chain in the UK first. The UK would need to apply the same tariffs as the EU, and provide the same treatment for rules of origin for those goods arriving in the UK and destined for the EU.
5.17 By mirroring the EU’s customs approach at its external border, the UK could ensure that all goods entering the EU via the UK have paid the correct EU duties. This would remove the need for the UK and the EU to introduce customs processes between them, so that goods moving between the UK and the EU would be treated as they are now for customs purposes. The UK would also be able to apply its own tariffs and trade policy to UK exports and imports from other countries destined for the UK market, in line with the aspiration for an independent trade policy.
Folks, a mirror system is still a new system, and one that has to handle vastly more goods than now, since EU goods going into the UK and UK goods going to the rest of the EU aren’t subject to customs or tariffs. Now admittedly, this is only one of several ideas, but that actually makes matters worse. The fact that UK bureaucrats haven’t the foggiest idea what path they might wind up taking means that they can’t get going on any action plan. And the the fact that this “mirror system” scheme it tossed out as if it were easy-peasy should set off alarm bells.
And more generally, the handling of goods at the border can’t be finessed for a whole host of reasons. For starters, any imports that will be incorporated into products for export have to have their content documented properly. Lord only knows what sorts of contraband, defective or adulterated goods or illicit money-movement via invoicing games could take place with slipshod border controls.
The section on the Irish border illustrates how insanely unrealistic the Customs napkin-doodle is:
5.22 In line with these shared objectives, the UK has already published a Northern Ireland and Ireland Position Paper. The paper set out nine key principles on which to base a future customs solution. These include aiming to avoid any physical border infrastructure; preventing any new barriers to doing business within the UK, including between Northern Ireland and Great Britain; and agreeing at an early stage a time-limited interim implementation period. Based on these principles, and in recognition of the unique circumstances of the Northern Ireland-Ireland land border, the UK government proposes two creative solutions to explore with the EU, as outlined in the Future Partnership Paper. The Northern Ireland and Ireland Position Paper also sets out that the UK will seek to ensure that individuals travelling to the UK from the EU, and vice versa, can continue to travel with goods for personal use as freely and as smoothly as they do now.
5.23 Under the highly streamlined customs arrangement, the UK believes it would need to go still further to agree specific facilitations for the Northern Ireland-Ireland land border. A cross- border trade exemption acknowledges that many of the movements of goods across the land border are by smaller traders operating in a local economy, and they cannot be properly categorised or treated as economically significant international trade. The cross-border trade exemption would ensure that smaller traders could continue to move goods with no new requirements in relation to customs processes at the land border. In 2015, over 80% of north to south trade was carried out by micro, small and medium-sized businesses.
Did you get what happened in these two paragraphs? This is “assume a can opener.” The text breezily acts as if there will be a “highly streamlined customs arrangement” when no one has the foggiest idea how to have that happen in the face of a hard border between the two Irelands.
And the excuse? “Well, there isn’t that much trading happening across that border now, so this isn’t a big deal.” This completely ignores the issue that the EU finds unacceptable: a porous border between Northern Ireland and Ireland post-Brexit will become a gateway for all sorts of goods and foodstuffs that don’t comply with EU rules to get into the single market. The current trickle now is likely to become a flood.
And mind you, this is under the optimistic scenario, that the two sides work out some sort of transition period. The next section, on “Preparing for a contingency scenario” is just clueless. For instance:
5.35 In this scenario [roll on, roll off ports], the government would need to be able to confirm that businesses have complied with customs obligations. The government will work closely with industry on what would be required.
Yet another “assume a can opener”….
And on top of that, the UK has vastly more “trade” in the form of services than goods. Both papers are silent on this critical topic. Even worse, as any trade negotiator will tell you, trade deals are much easier to negotiate than services deals. So you can kiss the UK’s current account balance, and with it, the pound, goodbye.
Even with the thin details, the Government couldn’t hide the fact that life after Brexit, particulary a messy Brexit, would impose more costs on businesses…contrary to earlier promises of a Glorious Brexit. From the Guardian:
Crashing out of the EU without a deal will impose a raft of new regulations on business, according to the government’s first detailed contingency planning for Brexit…
Despite pre-referendum promises that Brexit would rid Britain of both excessive red tape and bureaucrats, Theresa May said the new proposals were necessary to “minimise disruption” in the event of talks collapsing.
Among the hardest hit in such a scenario would be exporters and importers who trade between the UK and EU but potentially face more complicated consequences than anticipated if new border tariffs are introduced.
The Guardian also pointed out, as did quite a few tweets, that the papers had typos and the Customs paper, a duplicate paragraph. You also had to get halfway into the piece to learn “Most of the methods of mitigating border chaos remain to be formulated however.”
Sadly, the Financial Times treated the two documents with far more respect than they deserved. For instance:
The customs paper sets out a contingency plan in which traders would need to present goods for inspection “as inland as possible” because of space constraints at the majority of ports.
It added that the UK could also manage a “no deal” scenario by introducing measures to replace border checks, such as businesses “pre-notifying” or “self-assessing” imports.
In other words, an honor system. Help me. But some snippets of reality sneaked through:
But British officials admit contingency planning is at an early stage and that the government has not started spending the large sums of money on staff, IT systems and real estate needed to build a new customs and regulatory system by March 2019…
Some rightwing Conservative Eurosceptics are sanguine about Britain leaving the EU without a deal, since it would mark a decisive break from the bloc’s regulatory system and force Britain to change its economic model to compete globally.
But it would require the creation of a new British bureaucracy to replace EU regulatory bodies and a vastly increased customs service and is seen in some European capitals as an empty threat.
“Far from having more for public services, Brexit Britain will have to spend tens of billions it doesn’t have on new quangos — brilliant,” tweeted James Chapman, former chief of staff to Brexit secretary David Davis.
British bureaucrats were once the envy of the world. To see what passes for leadership in the UK exposed as utterly unfit has to be a shocker even for hardened critics in Europe.
This is one of the costs of neoliberalism, particularly for early and enthusiastic adopters like the UK and US. Competent governments are valuable things to have around, particularly when you put yourself in the position of needing one badly.