Iain Dale: The EU has no interest in Northern Ireland’s future prosperity. It just sees it as a mechanism to exert its power.

5 Mar

Iain Dale presents the evening show on LBC Radio and the For the Many podcast with Jacqui Smith.

Most budgets are curate’s eggs. Good in parts. This one was no different.

Politically, it was a triumph for Brand Rishi. It was well delivered. His post-Budget press conference was slick and smooth. He comes across as a transparently nice and competent individual. That’s because he is.

But was it a budget with a narrative? Was it a “reset” budget? Was it a transformational budget? No, it was not.

It is possible to argue that it couldn’t be anything else than be a budget for the short term, given we have no idea where we will be this time next year, but even if you accept that argument, it disappointed on a number of levels.

The super-deduction measure was innovative and will have a massive event on investment over the next two years. And then it ends. It’s too short term, and should have surely been tapered.

Did corporation tax really need to be increased in one go by six per cent in two years’ time? Wouldn’t a gradual approach have been better, even if you accept it needed to rise. Which I do not.

It’s a tax rise which will inevitably make this country less likely to attract the levels of foreign inward investment in the long term. You can’t argue one day that lowering business taxes is a good thing and makes us more competitive, and then argue that by putting up corporation tax by a quarter still means that we are just as competitive.

Leaving the EU certainly gave some companies pause for thought about locating here, or increasing their presence here. We are lucky that most decided to go ahead anyway, but we do not need to give any company an excuse not to do so.

We may still have the fifth lowest rate of corporation tax among G20 countries, and yes, as Sunak argues, our rate will still be lower than in American, Canada, France, Germany and Italy.

But I’m afraid that argument cuts little ice in a world where the last thing the British government needs to do is do anything to put off businesses considering building a presence here.

Having said all that, two snap opinion polls show that the public approve the Budget with only 11 or 12 per cent disapproving. So from a political point of view, it was job done for the Chancellor. But I still wonder whether a bit more long term, “reset” thinking was needed and that both Sunak and the Government might come to regret that it was largely absent.

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If the pandemic hadn’t happened, surely this Budget would have been all about the post Brexit economy. Brexit wasn’t mentioned directly once in the Chancellor’s speech, although towards the end we heard a few oblique references.

What we needed was a pathway to the future, not just over the next couple of years, but over the next couple of decades. We needed a vision.

Businesspeople needed to be reassured about the future of our trading patterns, not just with the rest of the world, but with the EU. Too many businesses seem to be finding that the so-called “free trade agreement” with the EU is nothing of the sort. The inevitable bureaucratic teething problems in trading with EU countries are still there, two months on.

OK, there are no queues at Dover, but the attitude of (particularly, but not exclusively) of French customs officials leaves something to be desired. I hear time and time again reports that countries deal perfectly happily and efficiently with the US, China or even Russia, yet find it that deliveries to European customers are being returned to them by couriers with no explanation and on multiple occasions. They feel powerless to do anything about it.

And don’t get me started on the Northern Ireland protocol, whose only effect so far as I can see has been to effectively annexe Northern Ireland to the EU. Just as Martin Selmayr threatened.

The EU has no interest in Northern Ireland’s future prosperity. It just sees it as a mechanism to exert its power. It is a constitutional outrage that British companies are not free to trade without restriction to all parts of the sovereign United Kingdom. The checks that are now being demanded by the EU are so disproportionate as to be totally unreasonable. The British government bent over backwards to make a compromise to meet EU concerns that the Single Market could be compromised, but its goodwill has been exploited at every turn.

At some point this has to stop, and the unilateral extension of the grace period is the inevitable consequence of EU inflexibility. It is not, as the Irish government unhelpfully says, a breach of international law. What it is, is a sign that Britain’s patience with the EU on this issue is about to expire.

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I’ve been watching a new documentary on how Donald Trump won the 2016 presidential election called The Accidental President.

It’s made by the British film maker James Fletcher, who is now based in New York. Fletcher will be familiar to many for his work filming David Cameron for the WebCameron project back in the day.

It’s a fascinating account of Trump’s rise to the presidency. There was no narration, no voiceover, just 90 minutes of original campaign footage together with lots of testimony from political commentators, eye witnesses and vox pops.

The most powerful moment was when commentators were asked to name Trump’s campaign slogan. They all trotted out “Make America Great Again”. They were then asked for Hillary Clinton’s campaign slogan. None of them could recall it, bar one, who recalled it was “Stronger Together”. He then followed it up with “whatever that means”.

If proof were needed that political slogans can be all powerful, then we now have it.

Henry Hill: Frost’s appointment shows the Government is not resigned to the Northern Ireland Protocol

4 Mar

Throughout the Brexit negotiations, the European Union always insisted that its approach to Northern Ireland was governed by the pre-eminent importance it placed on the Belfast (‘Good Friday’) Agreement. Events may be about to test this thesis.

Today the Loyalist Communities Council, “an umbrella group that represents the views of the UVF, UDA and Red Hand Commando” in the Guardian’s words, wrote to Boris Johnson to announce that the major paramilitary groups were withdrawing their support for the Agreement.

Whilst they insist for now that unionist opposition to the Northern Ireland Protocol remain ‘peaceful and democratic’, the move has been made against a background of mounting concern about a resurgence of loyalist violence, most likely targeting the infrastructure and personnel enforcing the new Irish Sea border between Ulster and the mainland.

All this is important context to the announcement that Lord Frost, the new Brexit Minister, is going to unilaterally extend the grace periods exempting supermarkets from checks on goods being shipped from Great Britain to Northern Ireland, as well as a moratorium on customs declarations for parcels being sent to the Province. The move has sparked outrage from Brussels, which has accused the Government of engaging in a second UKIM-style breach of international law.

But according to sources familiar with the thinking behind the move, this is quite another sort of manoeuvre. The threat of “specific and limited” breaches to international law deployed during the debate on the UK Internal Market Bill were a short-term negotiating tactic – and one which worked, in as much as it helped Michael Gove to secure concessions from the EU on the Protocol.

However, the Chancellor of the Duchy of Lancaster was at best negotiating with one hand tied behind his back. Whilst the Prime Minister and his team had apparently come to office fully aware of the danger posed by the Backstop – see this letter from Johnson to Tusk from August 2019 – the passage of the ‘Benn Act’ severely restricted their ability to push back against Brussels’ demands before the Withdrawal Agreement had to be concluded.

Thinking within government has since divided into two camps. The first, represented by Gove, is essentially facilitative. They don’t like the Protocol, but they recognise the extreme difficulty of resiling from it. This would certainly be in keeping with his more conciliatory approach to the parallel row over devolution.

Frost apparently takes a different view. His camp believes that with the best will in the world, the Protocol is simply not sustainable. Even if its first few weeks had not already witnessed several emergency summits, the triggering of Article 16, and the above loyalist declaration, there are deeper structural problems that mean it cannot be a stable foundation for a lasting settlement.  Specifically, the fact that the whole thing is rooted in EU law means that it is a ‘living document’, whose implications and scope will continually expand in line with EU regulation and rulings from the European Court of Justice. Its operation will therefore drag Northern Ireland farther and farther away from the economic orbit of Great Britain by default.

If you take this view, then it follows that the Protocol needs to be replaced, and sooner rather than later – just as the UKIM Act partially redressed Theresa May’s capitulation to the devocrats over post-Brexit powers. This is where Frost’s unilateral extension of the grace periods comes in.

Those privy to the thinking behind the move believe that it is much more defensible internationally than the UKIM gambit was. Especially in light of the dangerous situation with the loyalists and the role of empty shelves as a focus for unionist anger, the Government can defend a temporary measure intended to buy more time to find lasting solutions.

But as we saw when we looked at Gove’s negotiations, such solutions may not exist in the current framework. He notably refused to reassure Democratic Unionist MPs that the original grace periods were intended to buy time to make GB-NI supply lines work, rather than give Northern Irish businesses time to find new, EU suppliers. Which on the face of it makes another round of temporary fixes just another tactical get-out-of-jail (for now) card.

Unless, that is, the ambition is to have secured material changes to the Protocol by the time those extra six months are up.

This won’t be easy. Contra the somewhat complacent assumptions of some ERG members, it would be very difficult for the UK to simply resile from the Protocol. A short, sharp, UKIM-style threat is one thing. Standing indefinitely in the bad graces of the international law community quite another.

So there are two possible paths forwards. The first, assuming that Brussels absolutely refuses to play ball, is that Britain manages to argue that the EU is operating in bad faith and uses that to justify walking away from the agreement. The second is more attritional, and involves persuading the EU that reworking the Protocol is in the interests of both sides.

This might seem optimistic. But in the event of an actual return to violence, not to mention an endless succession of crisis talks, Brussels will be forced to choose between its hard-nosed defence of the Single Market and its homilies about the peace. British strategists apparently think that the EU places such a high value on its being seen as a moral (indeed, the most moral) actor that it is unlikely to stick to its current purist position in such conditions.

In the event of fresh negotiations, London would be aiming for a new arrangement which overturned two axions which May unwisely signed up to: that there be no change whatsoever to the border between the United Kingdom and the Republic of Ireland (which is often dressed up as a Belfast Agreement obligation, but isn’t); and that the EU should not have to adapt its legislative arrangements. Greater cooperation in other areas – maybe defence? – could be offered in exchange.

This is a bold strategy. To have any chance of working it will take months of sustained diplomatic and governmental effort. If the Prime Minister really has elevated Frost with such a mandate, it is vital that he be left in post long enough and be sufficiently empowered to pursue it. To let one half of your Union strategy collapse into chaos might be regarded as carelessness; to let both looks like negligence.

Shanker Singham: Breaking the Gordian knot of agricultural trade negotiations. How the TAC has risen to the challenge.

2 Mar

Shanker Singham is CEO of Competere. He is a former adviser to Liam Fox when he was Secretary of State for International Trade, and to the Office of the United States Trade Representative.

Agricultural trade is one of the most difficult areas to negotiate, and has long been the bugbear of international trade negotiations. The lack of liberalisation in developed country markets has done significant damage to developing countries and is a profound source of friction between developed and developing worlds.

In its report for the Secretary of State for International Trade, the UK’s Trade and Agriculture Commission might have just come up with a way of breaking the Gordian knot of agricultural trade negotiations.

I was privileged to be a TAC commissioner, and while, as commissioners we came to the subjects with very different perspectives, we have, I believe managed to resolve the tensions in a way that makes a major contribution to trade policy. We have done so on a unanimous basis – a credit to my fellow commissioners and our chairman.

The heart of the TAC report’s import policy contains an innovative proposal that attempts to simultaneously promote a trade liberalising agenda in agriculture, while at the same time protecting the UK’s high standards in food production and ensuring the UK fully complies with WTO rules on animal and plant health, as well as technical regulations that apply to food trade.

This proposal includes a mechanism to deal with some of the most difficult issues in agricultural trade which relate to animal welfare, environment and labour rules. The heart of this mechanism is the potential for the application of a tariff in cases where an aggrieved party can show that a trading partner is violating agreed standards in an FTA.

The result of the mechanism is a tariff based on the scale of the distortion which operates like a trade remedy. The mechanism can also be used offensively where a country is preventing market access by the UK as a result of the market distortion, or defensively where a distortion in a foreign market leads to excess exports from that market.

Unlike the UK-EU TCA rebalancing mechanism with which it has some similarities, the tariff would be calibrated to the scale of the distortion and would apply only to the product category in which the distortion is occurring. The advantage of this over a more conventional trade remedy is that it is based on cost as opposed to price and is designed to remove the effects of the distorting activity. It would not be applied on a retaliatory basis in other unrelated sectors.

In exchange for this mechanism, the UK commits to trade liberalisation and, within a reasonable timeframe, zero tariffs and zero quotas. This in turn will make the UK’s advocacy of higher standards in international organisations much more credible, another core TAC proposal.

The TAC report also notes that behind the border barriers and anti-competitive market distortions (“ACMDs”) have the capacity to damage UK exports and therefore suggests a similar mechanism or set of disciplines could be used offensively. Certainly, where the ACMD is being used to protect a particular domestic industry, using the ACMD mechanism to apply a tariff for the exports of that industry would help, but this may not apply where the purpose is protective, and the industry does not export much.

I would argue that in this case, it would be important to ensure that UK FTAs include disciplines on these ACMDs which if breached could lead to dispute settlement and the potential for retaliatory tariffs for sectors in the UK’s FTA partner that do export. This is certainly normal WTO-sanctioned practice, and could be used here to encourage compliance. It is clear from the experience in dealing with countries that engage in ACMDs for trade or competition advantage that unless there are robust disciplines, mere hortatory language would accomplish little or nothing.

But this sort of mechanism with its concomitant commitment to freer trade has much wider potential application than just UK agricultural trade policy. It could also be used to solve a number of long standing trade disputes such as the US-China dispute, and indeed the most vexed questions in trade involving environment and climate change in ways that do not undermine the international trading system itself.

This is because the mechanism is based on an ex post tariff as opposed to an ex ante one which contains within it the potential for protectionism, and is prone to abuse. Because the tariff is actually calibrated to the cost advantage which is secured as a result of the violation of agreed international standards, it is much more likely that it will be simply limited to removing this cost advantage as opposed to becoming a punitive measure that curbs ordinary trade flows.

It is precisely this type of problem solving and innovative thinking that the international trading system needs as it faces a range of challenges that threaten liberalisation itself and the hard-won gains of the post war GATT/WTO system itself. The TAC report represents UK leadership that has been sought after since the decision to leave the EU. It has much to commend it.

Anand Menon: What does Global Britain mean in practice, and when will the Government deliver it?

1 Mar

Anand Menon is Director of the UK in a Changing Europe.

“In leaving the European Union we restored sovereign control over vital levers of foreign policy,” declared Boris Johnson in his speech to the Munich Security Conference. To be frank, that is debatable. The EU’s competence over foreign policy is limited – so membership provided little in the way of constraint on national autonomy.

What is less open to question is the assertion, as the Prime Minister clearly laid out in what was an important speech, that this is a moment of opportunity for British foreign policy. Seizing it, however, will pose several challenges.

Brexit has already allowed the UK to take some actions it would not otherwise have been able to. By 1 January, continuity trade agreements had been signed with 58 countries. The UK moved to impose sanctions on Belarus, while the EU dithered and delayed.

There are costs as well as benefits, though. The new trade deals largely replicate what we had as a member state, and their impact is paltry compared to the negative impact of new barriers to trade with our nearest and largest trading partner. Equally, sanctions are more effective when applied by several states, and autonomy from the EU comes at the price of a decline in influence over what the EU does.

Indeed, it might yet be that the most important foreign policy impact of Brexit turns out to be indirect. ‘Global Britain’ was dreamt up as a way of underlining that Brexit did not mean insularity. And the desire to ensure that Brexit is seen to succeed provides a powerful incentive to make Global Britain real.

Consequently, at Munich, the Prime Minister sketched out an ambitious agenda. He clearly intends to use his convening power to push his agenda. He has used the UK’s chairmanship of the G7 to issue invitations to Australia, India and South Korea to attend the summit in Cornwall in June. This may mark the inauguration of a formalized D10 intended to present a united front against China.

On climate change, the 26th United Nations ‘Conference of the Parties’ (COP) on climate change will be the first such event to be held in the UK, presenting a golden opportunity to establish the UK as a continuing big player in global climate diplomacy in its own right.

Yet turning ambitions into reality will require several things.

First, a clarity of vision and ability to make difficult choices. When it comes to the D10, Mr Johnson needs to consider whether it really makes sense to create a grouping of democracies without engaging closely with the EU, whether some of those he is inviting really merit the label ‘democracy,’ and, indeed, what balance he wishes to strike between sanctioning and engaging with China.

It is hard to believe now, but the Prime Minister repeatedly called for a free trade agreement with China. Domestic pressures are going to make that impossible to deliver. And yet an overlooked implication of Brexit is that Beijing can retaliate against UK measures in response to perceived human rights abuses without the need to get embroiled in a wider fight with the EU as a whole.

Dealing with China and – more so – addressing the climate crisis are the work of decades. Success is not a question of quick political ‘wins’, but requires sticking power. For partly understandable reasons related to the pandemic, this is not a Government that has, as yet, shown an aptitude for thinking beyond the short term. If it is genuine about its environmental aspirations, however, it must.

This will involve not only confronting those among the Prime Minister’s own supporters who do not share his liberal international vision, but also building a consensus that can outlive his time in office.

None of which will be altogether straightforward. According to recent polling by the British Foreign Policy Group, while 34 per cent of Britons think ‘Global Britain’ implies the UK being a ‘champion of free trade and globalisation,’ more than a fifth (21 per cent) – including 35 per cent of Conservative leave supporting voters – take it to mean the UK is a nation with strong and secure borders focused on issues at home.

And when it comes to climate, while 68 per cent support the UK taking a global leadership role, Conservative voters appear less supportive and the least willing amongst voters to take individual action to address climate change.

This matters, because tackling the climate crisis involves a combination of diplomacy with action at home. Just as claims to be a champion of a rules-based international order were undermined by a stated intention to contravene international law so, too, the UK’s international climate leadership will hinge in part on it setting an example at home. The Government’s Ten Point Plan of November last year marked a good start, but more will need to be done to meet the ambitious targets set, and a failure to do so will hardly burnish our international climate leadership credentials.

And all this is without mentioning the domestic bases of international influence. It perhaps goes without saying – yet nevertheless I will mention it here – that the UK’s ability to make Global Britain a success will hinge every bit as much on the pace of its economic recovery from both the pandemic and from Brexit, and its ability to retain its unity in the face of separatist challenges.

The year ahead holds real promise in terms of the UK’s ability to finally put some flesh on the bones of its claims about Global Britain. Brexit adds a degree of political urgency to the quest to show the UK continues to wield influence. And the Government has laid out a pretty impressive agenda committing itself to the defence of the liberal, rules based international order. But declarations are merely a start. To deliver on its rhetoric, the Government will need to make hard choices and to show evidence of a clarity and long-term vision that, to date, have been rather notable by their absence. The long-awaited Integrated Review of security, defence, foreign policy and international development will represent an important signal as to whether it is willing to do so.

ConservativeHome and UK in a Changing Europe will be discussing Global Britain – navigating the post-Brexit world this evening with: Liz Truss MP, Secretary of State for International Trade; Katy Balls, Deputy (Chairman). Paul Goodman, Editor of ConservativeHome, will chair the event. Please register via this link.

Hussein Kassim: Britain faces limited opportunites to diverge from the EU after Brexit

26 Feb

Hussein Kassim is senior fellow at UK in a Changing Europe, and Professor of Politics, School of Politics, Philosophy, Language and Communication Studies at The University of East Anglia.

Although 31 December 2020 had long been set as the end of the transition period, the UK was not ready for the transfer of responsibility from the EU. Moreover, further change is likely.

The Trade and Cooperation Agreement may have enabled the two sides to avoid the disruption of no deal, but it also leaves substantial unfinished business.

Looking further ahead, it is unclear that the UK will have much latitude to use the regulatory autonomy that it secured through its pursuit of sovereignty to diverge from existing policy. It faces constraints imposed by the deal itself, but also others that derive from international conventions, international law, and other sources.

These are the conclusions of the report, UK Regulation after Brexit, released today by a team of policy specialists and produced by ‘The UK in a Changing Europe’, the Centre for Competition Policy, and Brexit & Environment.

Is the UK ready?

On 1 January 2021, following the expiry of the transition period, the UK assumed responsibility for regulation from the EU. Rule-making and regulatory tasks that had been performed by EU bodies on behalf of the member states across the full range and breadth of public policy returned to the UK.

In addition, the Trade and Cooperation Agreement imposed its own regulatory requirements relating to the border with the EU that the UK’s withdrawal has created. In some cases, such as aviation, competition policy, and consumer protection, the Government decided to enlarge the responsibilities of existing agencies. In other areas, including the environment, it established completely new bodies.

A cross-sectoral overview reveals important gaps in the governance of key areas. In environment, for example, as a result of the delay in passing legislation, the new Office for Environmental Protection is not yet in place. Indeed, it may not be fully operational before the end of the year. Other elements including policy instruments and infrastructure are also missing. Although the UK has left the EU Emissions Trading System, the UK version remains in development. Elsewhere, the Goods Vehicle Movement System (GVMS), which will allow operators to file paperwork to secure advance approval to cross the EU border, is still under development.

In a number of policy areas, stakeholders have expressed reservations about the design of British regulators and whether they are suitable equipped. As well as staffing and budget, concern has been raised as to whether UK bodies have the appropriate powers, especially in enforcement. Because EU agencies are backed by EU law and the European Commission and Court of Justice of the European Union, they are able to ensure effective compliance, including on the part of governments. It remains unclear in some areas whether UK regulators will have the same clout or enjoy the same independence.

They are also worries about how, or indeed whether, British bodies will be able to compensate for the effects of losing access to EU resources. This applies to EU agencies, such as the European Environment Authority, which is an invaluable source of information for policy making, from which the UK has withdrawn, as well as networks, such as the European Competition Network, which shares data and expertise that the UK Competition and Markets Authority used to pursue antitrust issues with a transnational element.

Similarly, it is unclear how policy instruments, such as the European Arrest Warrant, used by the UK to find, arrest and extradite11,300 people in the ten years up to 2019, or the European Criminal Records Information System, which is an important tool for cooperation on crime, can be replaced. The fact that the Schengen Information System (SIS II), used by UK police forces more than 500 million times each year, and Europol databases are no longer available to British authorities, is a particular concern.

Duplication is a further issue. In aviation, the UK Civil Aviation Authority will perform many of the same licensing, certification and approval functions that are carried out by the European Air Safety Agency. Costs will not only be borne by the UK taxpayer. Pilots and flight crew, airline companies, manufacturers, training organisations and others wanting to operate in both the UK and the EU will need to submit to the same accreditation processes in both jurisdictions.

In chemicals, companies will have to register with both UK and EU authorities at an estimated cost to the industry of £1 billion. Duplication is not only expensive, it creates uncertainty and over time may lead firms to choose to make a decision to be active in one market rather than both.

Unfinished business following the deal

The process of regulatory adjustment is also patchy and incomplete for reasons related to the scope and provisions of the Trade and Cooperation Agreement. Defence and foreign policy, for example, are not included in the deal, but it seems likely that the two sides will want to cooperate in the future.

In some sectors, such as equivalence in financial services, a decision on the EU’s part is pending, leading to some anxiety and uncertainty over the fate of the City of London. In others – for example, consumer protection – agreement still needs to be reached between the EU and the UK.

In others still, transitional arrangements introduced to smooth the transfer from EU to UK regulation will require action the part of the Government or stakeholders when they expire. British exporters to the EU, for example, are currently permitted to self-certify their compliance with rules of origin, but this possibility has only been extended by the EU for a fixed period. Importantly, the Agreement links a review on energy cooperation to fishing. More broadly, the entire deal will be reviewed every five years.

Moreover, there is unfinished business on the UK side. Key policy decisions have yet to be taken in a number of areas. Quota allocation across the UK fishing fleet, for example, has yet to be decided, and is like to raise tensions between the four home nations. Decisions are also awaited on how SafeSeaNet, CleanSeaNet and THETIS, instruments for the sharing maritime safety, security and environmental information, are to be replaced.

What prospects for divergence in the long term?

The UK has ceased to be an EU member state, but there is a question mark about whether policy divergence is a real possibility in the longer term.

Despite the new impediments to trade, the EU remains the UK’s largest trading partner. There is a clear asymmetry in the size of the respective economies, and the EU is aware of its bargaining strength in international trade agreements. Both the asymmetry and the EU’s experience are reflected in the Trade and Cooperation Agreement, where the single market is strongly safeguarded, and non-regression clauses, the possibility of cross-retaliation, and the single governance framework limit the possibilities for British divergence.

But the Agreement is not the only constraint on the UK. In many sectors, obligations are imposed by international treaties and international law. Pragmatic considerations also need to be taken into account. In areas where the EU is a global standard setter, for example, departure from EU norms would place UK producers at a competitive disadvantage.

Moreover, business itself may be wary of too much change. As David Bailey notes in the report: ‘While the UK government highlights possible regulatory divergence as a benefit of Brexit, at the moment industry sees it solely as a cost given that it has invested heavily in complying with the current framework’.

Looking forward

The report shows that, despite the changes in British regulation, the UK was not prepared to assume responsibilities from the EU, and that there are important gaps in governance. The difficulties that have been experienced so far are not teething problems, but reflect a structure change. Moreover, the process of adjustment is far from complete.

Yet, in many sectors, the prospects for policy divergence, which was central to the UK government’s pursuit of sovereignty, are limited, and not only due to the terms of the Trade and Cooperation Agreement.

Ben Roback: China. Under Trump, a threat. Under Biden, a competitor. The President’s speech at the Munich Security Conference.

24 Feb

Ben Roback is Head of Trade and International Policy at Cicero Group.

Joe Biden’s speech for this year’s Munich Security Conference (MSC) was probably an easy one to write.

“Don’t be like the previous guy” will have been the simple steer given in advance. And in just his third paragraph, the president delivered that message: “Two years ago, as you pointed out, when I last spoke at Munich, I was a private citizen; I was a professor, not an elected official. But I said at that time, “We will be back.” And I’m a man of my word. America is back.”

Turning the page on Donald Trump’s ‘America First’ philosophy in rhetorical terms was hardly a surprise. Joe Biden has been an internationalist and a multilateralist throughout his political career, and so the recent brief chapter in which the White House was sympathetic to autocratic strongmen was slammed shut.

An immediate return to the Paris Climate accord and a U-turn on the US approach to the European Union – once again a key strategic ally – mark further divergence, although it is reasonable to expect Biden to retain the pressure applied by Trump on European countries to spend more on defence.

Biden also marks a difference on Iran. He retains a hawkish view, like his predecessor – although in this speech he reinforced his “willingness to re-engage in negotiations with the P5+1 on Iran’s nuclear program” while addressin “destabilising activities across the Middle East”. Concurrently at the MSC, Boris Johnson referred to Iran as one of “the most pressing security issues”.

“I know the past few years have strained and tested our transatlantic relationship”

The MSC is hardly a lynchpin in the political calendar in the same way as the presidential inauguration or a State of the Union address. On that basis, with domestic America hardly tuned it, the President spoke to European allies to whom he felt the Trump administration had given the cold shoulder.

There was a reminder of a recent order to halt the withdrawal of American troops from Germany, and a lifting of the cap imposed by the previous administration on the number of U.S. forces that can be based there.

For the United Kingdom, there was perhaps a curious absence. Biden quickly cantered through a reference about the importance of democracy and the need to “fight for it, strengthen it, renew it”, but did not mention the Government’s proposal to create a “D-10”.

In Boris Johnson’s speech, the Prime Minister confirmed he has invited South Korea, and Australia and India to attend the next G7 summit as guests. This chimes perfectly with Biden’s proposal to host a ‘Summit of Democracy’, which is likely to include the three nations mentioned above.

Making the case for democracies around the world is expected to be a core pillar of US-UK foreign policy, alongside a shared approach to China and increased military spending. As proof of the latter, UK carriers will be deployed to the Indo-Pacific and will be fully integrated with the US Marines.

A pivot away from the pivot to Asia?

Whilst Biden is a known internationalist, the world has changed around him. Trump left the Oval Office with Sino-scepticism seemingly a part of the White House furniture. And yet, the 46th president struck a softer tone that would have been unconscionable for the 45th, referring in his speech to building democratic allegiances in order to “prepare together for a long-term strategic competition with China”.

As well as seeking to lower the political temperature at home, this was a speech by Joe Biden that perhaps looked to do the same in the Asia Pacific area. Biden spoke about the need to “push back against the Chinese government’s economic abuses and coercion that undercut the foundations of the international economic system.” The politics of economics, not conflict.

Barack Obama initiated the ‘Pivot to Asia’ – a political and diplomatic shift towards the Asia Pacific.  Biden’s first foreign policy foray may have indicated a pivot back – three mentions of China, compared to seven of Russia. Time will tell whether that was accidental or by design. Perhaps it was a mere reminder to the world that America would revert to a much firmer stance on Russia than we had become used to with Trump in the White House.

The tonality was stark. Whilst China was a mere “competitor”, Russia was described as a “threat”. Here, no punches were pulled. “The Kremlin attacks our democracies and weaponises corruption to try to undermine our system of governance…Putin seeks to weaken European — the European project and our NATO Alliance.” Even more words that it was impossible to think Trump would ever have deployed.

Republicans have tried to label Biden as a “radical” in every respect – immigration policy, climate change, Cabinet nominees, the pricey Covid relief package. But on foreign policy, Biden’s first major intervention appeared anything but radical. Russia was painted a familiar threat, but Johnson went much further in explicitly calling out the attempted murder of Alexei Navalny. China was reframed from a direct threat (Trump) to a mere strategic competitor (Biden). President Biden’s MSC speech was far from radical. If anything risked being disappointingly tame.

Guy Mansfield: Now we must work with the EU to make Britain more safe and secure

19 Feb

Lord Sandhurst is a member of the Conservative European Forum (CEF) Justice and Home Affairs policy group. He is a past Chairman of the Bar of England and Wales (as Guy Mansfield QC), and current Chair of Research of the Society of Conservative Lawyers.

As Conservatives, it is our duty to ensure that the UK is neither less safe nor less secure outside of the EU. Both parties must think again and strengthen cooperation.

Understandably, political and media attention has been focused on the trade elements of the deal agreed between the UK and the EU on Christmas Eve. Now that we have left the European Union, it is time to review carefully all aspects of the Trade and Cooperation Agreement (TCA) to ensure it satisfies all of UK’s needs, beyond simply trade, tariffs and quotas.

My paper published by Conservative European Forum’s Justice and Home Affairs policy group – The Trade and Cooperation Agreement: The Justice and Security challenges ahead – examines, in detail, part three of the TCA, which covers UK-EU security cooperation.

Regardless of one’s view on Brexit, we can all agree, especially as Conservatives, that we do not wish to see the UK less safe or less secure as result of our changed relationship with the EU.

The paper raises a number of concerns. The statement released by the Home Office immediately following the agreement was optimistic. In fact, since 31st December 2020, the UK has been at a disadvantage. We have lost tools ‘to tackle serious crime going forwards’ and to ‘bring criminals to justice.’ The new extradition system will be less efficient.

First, the UK no longer has direct, real time access to two important centralised databases – SIS II, which holds records of stolen identity documents and wanted people, and VIS, which stores fingerprints and digital photographs of those applying for a Schengen visa. In 2019, UK police checked SIS II no fewer than 603 million times. These databases have been vital for UK police forces, notably enabling them to check if anyone is wanted or missing across the EU.

Secondly, we have lost our membership of Europol. As a consequence, the UK’s police forces have lost real time access to its databases. In fighting crime, speed is crucial. Crime and criminals are constantly evolving to evade detection. The UK will no longer be a member of Europol’s management board; it will not be able to exert the same influence over its future focus or prioritise areas of threat. As a non-Member State, the UK has lost the right to initiate operations such as Joint Investigation Teams.

Thirdly, the UK has left the European Arrest Warrant (EAW). This will result in slower and more complex extradition processes. Henceforth UK and EU member states can, if they choose, refuse to execute an arrest warrant for a number of reasons:

  • In non-terrorist cases, on political grounds (the ‘political’ exception);
  • On grounds that the requested person is a national of that executing state (the ‘own national’ exception).
  • On the ground that the crime for which the UK seeks extradition is not a crime in the state from which extradition is sought (‘double criminality’). For such countries to agree to extradite, the crime must be an offence in that jurisdiction.

The political exception may well be an improvement. Not every member state is scrupulous in ensuring that decisions to prosecute are free from political interference.

But the reintroduction of the own national exception is bad news. Germany, Austria and Slovenia have already indicated that they will not extradite their own nationals. There are potentially a further 13 Member States which may likewise refuse to surrender their nationals. The UK will, in such instances, have to provide its evidence to such Member State, which (alone) will then decide whether to prosecute. Any trial will be conducted, if at all, in the Member State.

The double criminality requirement will slow down and even stop extraditions to the UK where the issue is raised. That too is bad.

It is not all bad news. The UK will continue to receive Passenger Name Record (PNR) data in advance of all arrivals by air. We shall continue to enjoy access to the Prüm system (which makes accessible to EU Member States and the UK all national databases which store DNA profiles, fingerprints and vehicle registration data) and the European Criminal Records Information System (ECRIS), which permits access to criminal records of individuals on national databases across the EU. These are not gains; they simply maintain the status quo.

It is important to emphasise that the losses in security cooperation disadvantage the EU too. This is not a one-way street. The UK’s diminished role in Europol will create reciprocal dis-benefits to the EU. The UK’s loss of access to the EU systems means the EU loses access to the UK’s systems.

Our conclusions are intended to be constructive. However, it is plain that we have lost important tools for tackling crime. Looking to the future, the UK and EU member states must address further the security needs of our populations to go about daily lives free from avoidable harm. I urge both sides to continue to work together to strengthen security cooperation. The price of failure is too high, not just for the UK, but for the EU as well. This is not a debate about sovereignty, trade or tariffs. It’s about security. As Conservatives, the security of the UK and its citizens must always come first.

Henry Hill: Gove’s challenge – what if the Protocol ends up threatening the peace in Northern Ireland?

11 Feb

The Government’s war of words with the European Union over the Northern Ireland Protocol shows no sign of abating. Indeed, if anything it looks set to get more serious.

According to the FT, the bloc has fired a ‘warning shot’ over ‘shortcomings’ in the UK’s enforcement of the new border regime. It has also apparently rejected demands for ‘flexibility’ in enforcing some of the provisions, which has seen diggers refused entry to the Province with British soil on their tracks.

As Michael Gove prepares to meet his Brussels counterpart, Maros Sefcovic, today to discuss the problem, the Guardian reports that the latter’s stance is that London must enforce the Protocol in full before any requests for leniency will be considered.

This comes as unionist and loyalist anger at the new arrangements continues to mount. Although checks at Ulster’s ports have resumed following threats of violence, political pressure on the major unionist parties continues to mount after a surge in support for the Traditional Unionist Voice (TUV), a hardline party led by Jim Allister, a former Democratic Unionist MLA.

Meanwhile a petition against the Protocol set up by the DUP has passed the 100,000 signatures needed to trigger consideration in Parliament, and the Orange Order has called for it to be scrapped.

But opposition isn’t confined to the traditional hardliners. David Trimble, the ex-Ulster Unionist leader and former First Minister who won the Nobel Prize as co-architect of the Belfast Agreement, has said that “the astonishing and disturbing fact is that the Withdrawal Agreement and, in particular, the Protocol clearly rips the Good Friday Agreement apart.” He fleshes out his case thus:

“Since, under the protocol, the laws governing 60 per cent of economic activity in Northern Ireland would no longer be made at Westminster or by the devolved Assembly, but by an outside law-making body, the EU, and those laws would be subject to interpretation by a non-UK court, clearly the constitutional position of Northern Ireland would be changed without the consent of the people of Northern Ireland as required by the Good Friday Agreement.”

This touches on a concern that both Lee Reynolds and myself have previously raised on this site, namely the unequal treatment of unionist versus nationalist entitlements under the Agreement. The latter are interpreted very broadly as an entitlement to the pre-Brexit status quo, whilst the former’s safeguards on Ulster’s constitutional status are defined as tightly as possible around top-level sovereignty.

Perhaps the breadth of this criticism explains the increasing stridency of the DUP response. Have initially seemed prepared to try and make the Protocol work, the party is now coming under heavy fire for refusing to take part in a meeting of the Joint Committee on the Implementation of the Good Friday Agreement, according to the News Letter.

Such a strategy of non-engagement could have serious consequences, as the devolved institutions in Northern Ireland require the active participation of both sides to function. That’s why Sinn Fein was able to collapse Stormont the last time – and there is nothing to bar the DUP from doing the same.

Predictably, anger is focused on the of the issues raised by Unionist MPs when they tried to quiz Michael Gove on the arrangements in Parliament. At the time, we highlighted his evasive answer to the question of whether or not the ‘grace period’ for food products was meant to buy time to negotiate a deal to protect mainland supply lines to Northern Irish businesses, or to give those businesses time to find new EU suppliers. It seems to have been the latter.

All this puts the Government in a difficult position. Unionist anger at the Protocol – both its outcomes and its underlying assumptions – is justified, and has been building for years. But ultimately Boris Johnson did sign up to it, shamelessly abandoning his promises to Ulster in the process. Despite its self-inflicted wound over Article 16 (which does make it easier for London to activate it, although Gove seems disinclined to do so), the EU gets what it wants by doing nothing and has little incentive to compromise.

But peace in Northern Ireland – which the bloc has always claimed was its top priority – is a dance with two partners. Not only are mainstream unionists incensed, but loyalist paramilitaries have just spent several years watching people pray in aid of the threat of republican violence to justify ruling out checks on the land border. It would be very bad if London and Brussels allowed the impression to form that the prizes will go to those who make life the most difficult – or dangerous.

John Macdonald: Are the Tories becoming the party of high taxes and picking industrial winners?

10 Feb

John Macdonald is the Head of Government Affairs at the Adam Smith Institute.

The idea that British state should pursue an “industrial strategy” was a key feature of the Mayite years. But it has received a substantial boost as a result of the pandemic. Last week, Business Minister Kwasi Kwarteng announced that, now free from EU state aid rules, Britain would design a more expansive homegrown subsidy scheme to support British industry. On this site last week George Freeman set out his stall and personal record in picking winners as a guide to his expected future success as head of the new Taskforce for Innovation and Growth through Regulatory Reform (TIGRR).

The latest ambitions for government involvement in industry claim that Britain needs to be both more self-sufficient and can achieve success by focusing on certain industries, like vaccines but also environmental technologies, agriculture, and digital. If only they’d realise businesses mostly want to be a bit more free from government in all areas.

Some of the focus has been on reducing red tape — like unscientific restrictions on genetically modified foods. This is extremely welcome: now Britain is out of the European Union the Government should be doing everything it can to make the UK a more welcoming place for innovation and entrepreneurship. Reducing both homegrown and EU-derived red tape is key to that mission.

On the other hand, the focus on allowing greater use of domestic subsidies to back certain industries is retrograde. There are no doubt a number of fields with huge potential, but it is folly to presume that politicians and bureaucrats have the necessary skills and knowledge to assess which technologies and specific companies have the most potential. If they did have those skills they would perhaps be in the private sector, making lots of money. Inevitably state subsidies will be given out more for political reasons than good economic reasons.

The recent case study of vaccines — in which the Government provided advance order purchases and subsidised manufacturing — is now being trotted out as a counter example of how the state can do good.

The Government has good reason to feel chipper about the vaccine. Kate Bingham’s prepayment for vaccines will ensure the country access to seven vaccines: the three mRNA vaccines (Pfizer, Moderna and Curevac), the Novavax vaccine that has been shown effective against the South African variant, the Astrazeneca vaccine, the Valneva vaccine and the single-shot Johnson & Johnson. We’ll have an oversupply of doses that will enable a shot of vaccine diplomacy to deliver immunity to friends and allies of our choosing.

But we should be extremely cautious about applying the lessons from a once-in-a-century pandemic to every day policymaking. Vaccine Taskforce chair Bingham was successful because she, rightly, had a very clear short term goal and a practically unlimited budget to purchase lots of different vaccines.

There is a clear and obvious difference between buying a product from a company, and extrapolating this one win in a pandemic full of state-failures to think ministers or Whitehall have any grand oversight of the direction an economy of millions of people should go next as we reopen.

The pre-purchase of vaccines from companies with strong pharmaceutical track records, including the front-runner which took no public money to develop their product, is no reason to conclude that the Government should take equity stakes, engage in secured or unsecured lending, grant giving, or underwriting debt positions of whole industries just because someone has decided they’re sexy.

Even less so when they’re subsidy blackholes or nascent industries when the creative destruction of our market system and extensive financial industry’s risk taking is best placed to deliver.

The Government claims that the new state aid scheme is not “intend to return to the 1970s approach of the Government trying to run the economy or bailing out unsustainable companies”, in which taxpayer money used to protect certain businesses and industries, usually with little success.

But of course the intention is never to pick losers. That doesn’t make it so. Just last year the Chancellor launched Project Birch, a scheme intended to offer loans to (and in some cases a government-ownership stake in) companies deemed too big to fail. This was in addition to all the other state transfers and loans on offer to companies to make sure they could survive the Covid storm.

Just a quick glance at the industries Freeman listed as bets he’d like to see back has hydrogen, biofuels, and supposed “superfoods”. There is a qualitative difference between handing cash to companies in sectors you want to be seen with at a photo-op, and removing red tape from others you think might flourish without. Reviewing GDPR, expanding CRISPR research in agriculture and removing the precautionary principle might well be worth legislative change but need to be sold on their own merits, not as part of a package of subsidy for unrelated industries that have lobbied their way to prominence.

Even the UK’s existing programmes to support supposedly innovative companies are not achieving much success. A National Audit Office (NAO) report last year found most business support spending lacked measurable objectives, making it impossible to know if they provided value for money. In the one case that evaluation was available, Innovate UK’s flagship Smart Scheme, there was no statistically significant performance improvement between companies that did and did not receive grants — meaning they are not achieving very much.

A productive, high-potential enterprise can currently borrow at extremely low rates without the good graces of the Government (and without exposing itself to political risk). If the state begins offering a wide range of subsidies, it will inevitably chase those enterprises that are less efficient (in an attempt to, say, level up), wasting taxpayer money, crowding out private sector investment and potentially pushing up interest rates. There is also evidence to suggest it could lead to the growth of “subsidy entrepreneurship”, in which firms waste time seeking state aid instead of creating value.

This would be undesirable in normal circumstances, but here could seriously hamstring the post-pandemic recovery and return to growth.

Time and time again, we have been shown that the state fails to pick winners, wasting people’s money in trying to do so. Removing obstacles to growth, forgoing rumoured tax hikes that could choke it off, and giving the private sector new regulatory space to take advantage of innovations is the only way to truly “level up” — rather than through the artifice of taking from the taxpayer to give to the corporation.

It is time for the Tories to choose. This is not the time for policy experimentation or a new model of capitalism, like some have brazenly claimed. Excessively directing the economy, and pursuing policies that are either unproven or debunked, risks prolonging the downturn. They would do well to disabuse themselves of cronyism and reclaim their mantle as the party of low tax and free trade. Leave the case for subsidies and state intervention to Her Majesty’s opposition.