Are there any expressions other than ‘the elephant in the room’ to connote the ignoring of big, obvious things? If so, it would be useful to know them as that poor old elephant is now the most clichéd of clichés to describe the government’s attitude to Brexit. In their speeches to this week’s Labour Party conference, Rachel Reeves mentioned it only briefly and in passing, and Keir Starmer not at all. It’s absurd, especially as the guiding theme of both speeches, as of the government’s entire incoming communications message, is that of the dire inheritance bequeathed by its Tory predecessors. Brexit can hardly be excluded from that reckoning.
It's tedious to go on and on making that observation, and it’s certainly not made with any surprise on my part that Nellie is still ignored in the corner, but it remains a necessary one, for two reasons. One is because, mentioned or not, Brexit continues week-in and week-out to exert its damaging effects. Ignoring them doesn’t make them go away. The other is that, in the continued absence of discernible post-Brexit strategy, this means that the government’s approach is one of ‘accommodating’ Brexit. That is perhaps slightly different to ignoring Brexit, as it is a kind of acknowledgement of Jumbo’s existence alongside a dogged determination to live with it.
The ongoing damage of Brexit
As for the first of these, the latest news on the economic damage of Brexit comes with a new study by Professor Jun Du and others of Aston University. Apart from providing new evidence of the already well-attested “profound and ongoing” dampening effect of post-Brexit trade barriers on UK-EU goods trade, it identifies two, more specific, things. One is the particular effect of reducing the varieties of goods traded, sharply and continuously in the case of UK exports to the EU; declining, sharply recovering, then slowly declining again in the case of UK imports from the EU.
My reading, although it isn’t stated quite in these terms in the report, is that what has happened is that small product lines (and especially those of smaller firms) have simply been dropped as not being worth the extra costs. That has happened continuously as regard UK exports because the EU introduced full import controls immediately. In the other direction, it was discontinuous presumably because the initial impact of customs and VAT charges had an immediate effect, which was then adjusted to, but more recently the gradual introduction of UK import controls has produced a new decline.
Whatever the process, the result is that specialist products are now less likely to be traded. That has an economic impact on the firms affected, of course, but it also reduces consumer choice, with effects which are not just economic but adversely affect quality of life. Delicatessens are a good example, as trade in small batches of artisanal food products is exactly the kind of thing which has suffered. It’s easy for Brexiters to sneer that, like post-Brexit travel barriers to fancy foreign holidays, such things are the complaint of the effete metropolitan elite. But, whatever purveyors of this new politics of envy may imply, it is hardly the case that everyone other than middle-class Londoners holidays, if at all, in Bridlington, and subsists solely on bread and dripping apart from an orange at Christmas. (An orange, you say? You had it lucky!)
The other noteworthy finding of the Aston study is that Brexit has “heavily disrupted and weakened” UK-EU supply chains. This isn’t surprising, and confirms earlier research by, for example, the Resolution Foundation, but, apart from providing valuable new empirical evidence, it is worth highlighting because it strikes at the heart of one of the Brexiters’ many stupidities. Because they thought of the single market as being a kind of trade agreement, potentially replicable by a new trade agreement, they entirely failed to understand its role in integrating supply chains. Obtaining, as the UK did, a (largely) ‘tariff-free’ trade agreement with the EU did little to address this, and now we are living with the consequences.
It’s worth stressing again that, as with the consequences for trade, these are ongoing. As I pointed out when the transition period ended: “what is underway is a fundamental shift in the ‘tectonic plates’ of the UK trading economy and its supply chains, happening in real time and under our noses, but with little comment on the aggregate picture. And it is going to get worse when all the new rules are stringently applied on the EU side and applied at all on the UK side. It is reaching, or will reach, into every niche of economic life …”
What has changed now, of course, is that it is becoming possible to see the aggregate picture, with the Aston study being the latest instalment.
Mutual recognition - again
Press reports of the government’s reaction (£) to the Aston study just repeated the standard mantras about “improving” trade terms with the EU by “tearing down unnecessary barriers”, which doesn’t begin to address the problems. The study’s policy proposals for doing so include regulatory alignment, which seems likely to be consistent with government policy, but rightly recognize that to significantly reduce trade frictions such alignment would need to be accompanied by ‘mutual recognition’ of regulations as between the UK and the EU.
To a degree, that too is consistent with government policy, at least as regards its stated intention to seek mutual recognition of professional qualifications. However, there are significant obstacles even to that, and far more to the extensive use of Mutual Recognition Agreements (MRAs). The EU does enter into some MRAs with third countries, but it was a persistent folly of some of the more ‘sophisticated’ Brexiters to believe that the single market could be extensively replicated by a patchwork of such MRAs, a folly embraced by Theresa May in her March 2018 Mansion House speech when she called for “a comprehensive system of mutual recognition”. However, there was simply no possibility of the EU agreeing to this, as it would effectively end the single market, for reasons set out elegantly and in detail by Professor Stephen Weatherill of Oxford University at the time of May’s speech. That analysis still holds.
It’s true that the Aston proposals are nothing like as unrealistic as Theresa May’s were, in that they refer to a small number of “key sectors”, but, although MRAs in such sectors can’t entirely be ruled out, there is unlikely to be much appetite within the EU to entertain them. Not only would doing so begin to make the EU’s relationship with the UK look rather like that which it regards as complex and cumbersome with Switzerland, it would do so without the UK accepting, as the Swiss do, freedom of movement of people. We’ve been all round these loops before, both before the UK left the EU and afterwards, most recently in November 2022. As the reference to May’s 2018 speech also illustrates, in many ways the UK is still stuck on what in the past I’ve called the Mobius Strip of trying to square the circle of Brexit, by endlessly revisiting solutions to the impossible conundrum of how to be ‘out’ and yet be ‘in’.
The one area where that circle might be squared is that of what seems to be Labour’s ‘flagship’ post-Brexit policy of seeking a Sanitary and Phytosanitary (SPS) regulation deal with the EU. I’ve written about this numerous times but, even there, if the government intends to seek, as at one time the Tories did, an SPS deal based on ‘regulatory equivalence’ then it will not be agreed by the EU. And this is because such a deal would (in effect, even if not in formal terms) be a form of MRA, with both the UK and the EU mutually recognizing each other’s regulations as ‘equivalent’.
If the EU agrees any SPS deal, it will be based on ‘dynamic alignment’ with ECJ jurisdiction and, in that de-limited sense is often described as a ‘Swiss-style’ agreement. It could also be described as, within the SPS domain, the UK being ‘in’ whilst in all other respects being ‘out’. But this would be an exceptional deal, conceivable because it has in the past been offered by the EU (and rejected by Johnson’s government as violating UK sovereignty), and not a template for other sectoral carve-outs.
Regulatory alignment of product standards
An SPS deal may be one of the main ways that the government will seek to accommodate Brexit, but some of the issues wrapped up in those of regulatory alignment and mutual recognition surface in other policy developments.
A key example is the Product Regulation and Metrology Bill (PRMB). I’ve mentioned this Bill a couple of times since it was unveiled in the King’s Speech, referring to it in terms of providing the legal basis for the UK to continue to follow EU safety regulations and, as such, being an important indication of the government’s commitment to regulatory alignment. What I failed to spot, but was alerted to by Nigel Haigh of the Institute of Environmental Policy UK, is that whereas in the King’s Speech the Bill was indeed entitled the Product Safety and Metrology Bill, in its published form the word ‘safety’ was replaced with ‘regulation’, and that betokens a much wider ambit. Just how much wider remains to be seen, but one important clause in the Bill refers to potentially tracking EU regulations relating to the environmental impact of products.
No matter how wide its ambit turns out to be, this doesn’t amount to ‘dynamic alignment’ with EU product regulations, in that, whilst creating an easy mechanism for the UK to follow such regulations as they change in the future, it does not create any commitment automatically to do so. In this sense, despite Brexiters’ horrified reactions to the Bill, it does not actually violate sovereignty, even in their highly restricted meaning of the term. However, it does at least imply a commitment to ongoing regulatory alignment as the norm rather than the exception.
To the extent that this implication is realized in practice it will have the effect, amongst other things, of somewhat mitigating the costs of Brexit, since it means that businesses only need to produce to a single standard whether selling in the UK or the EU. To a degree, that may not make much difference. We’ve already seen, most famously with ‘tethered plastic bottle tops’, that firms sometimes choose to follow EU product standards even without any corresponding change in UK law, so as to avoid the costs of dual production lines. However, the PRMB should mean that businesses, when selling to the EU, are relieved of much of the burden of having to establish for themselves what EU regulations they need to conform to, since this would be done by the government. It also prevents firms, whether in the UK or overseas, from ‘dumping’ what might be considered sub-standard products on the UK market. It should also serve to ‘thin’ the Irish Sea Border, to the extent that it reduces the possibility of passive divergence between product standards in Great Britain and Northern Ireland.
Nevertheless, it can’t be emphasized often enough that simply having the same regulatory standards as the EU, to the extent that the PRMB will deliver that within some regulatory domains, whilst reducing some of the costs and inconveniences of having left the single market, in no way provides the benefits of single market membership. Alignment is not access (£): the PRMB still means that we are ‘out’ and not ‘in’. To put it another way, there is no ‘mutual recognition’ in any of this, which is the flipside of it being something that the UK can do unilaterally, without the need for any agreement with the EU. The fact that the UK may choose to align with EU regulations does not make those regulations ‘recognized’ by the EU. What it does show is that the UK recognizes (in a different sense of the word) the pragmatic benefits of having regulations which are aligned with those of the EU.
So whilst the PRMB does not in fact violate the Brexiters’ idea of sovereignty – the UK is making its own laws – it does show just how facile that idea is. For what it really demonstrates is that the practical realities of the UK’s economic proximity to the EU mean that regulatory alignment is still its best option, despite Brexit, whilst massively reducing its benefits, because of Brexit. The UK may, in the Brexiters’ terms, have regained sovereignty, and paid the price for doing so, but it can’t afford to use it. The PRMB is simply a (limited) acknowledgment of this reality, and an attempt to accommodate to it by ‘making the best of a bad job’*.
‘Not for EU’ labels
Some of these issues appear in a different way in one of the most abstruse of Brexit topics, that of ‘Not for EU” (NFEU) labelling. As I discussed in a detailed post last October, NFEU labels are, in part, a particular illustration of the difference between alignment and access. They don’t necessarily mean, as many mistakenly believe, that the product they are attached to does not conform to EU standards, but rather that, whether or not they do so, they are not certified for sale in the EU single market.
Without re-hashing that long and complicated post, the labels arise as part of the Windsor Framework as a requirement for certain goods produced in Great Britain (GB) but sold in Northern Ireland (NI), preventing them being legally sold in (the Republic of) Ireland (or, of course, anywhere in the EU, but it is primarily aimed at the possibility of them entering Ireland). The decision to extend their use to GB was an entirely unilateral one taken by the UK government, largely as a sop to NI unionists as it assuaged their concerns about NI being treated differently to the rest of the UK. In a way, this could be regarded as yet another way of acting as if Brexit hadn’t really happened, in the particular sense of trying to act as if the Irish Sea Border Brexit has given rise to didn’t really exist.
NFEU labels were due to become a legal requirement in GB at the beginning of October for meat and dairy products (fish, fruit and vegetables were set to follow next July), although many firms began to introduce them in advance of the deadline. However, at almost the last minute, the new government announced this month that the requirement has been indefinitely postponed, with a review to be undertaken. To avoid any misunderstanding: this does not mean the end of NFEU labels in NI, where they have been required since last October and will continue to be used, because doing so is part of the Windsor Framework agreed with the EU. Rather, it is the UK’s unilateral decision to extend to their use in GB which has been reversed.
But not for GB
At one level, it’s yet another example of the mess and chaos which Brexit has brought in its train, and especially of the consequences not just of the UK leaving the EU single market but of the way that Brexit has fractured the UK single market. It is also, of course, an eruption of the consequences of the insoluble ‘Northern Ireland Trilemma’. But it is particularly fascinating because the business economics of NFEU labels point in contradictory directions.
For some firms, in some respects, it is quite desirable for NFEU to apply in GB, given that it applies in the NI. If they are selling in both territories then it reduces costs, as it avoids having to have different labels, and increases flexibility, as it allows stock to be distributed to wherever in the UK it is needed. This would be the case for those supermarket chains which extend across the UK, for example, and, indeed, there was some business lobbying of government to introduce the GB policy. It also explains why some chains began to implement the policy before it was legally required.
Against that, however, is the fact that mistaken as it is, the impression that the goods marked NFEU are sub-standard may deter some consumers from purchasing them. I suppose they might be offset by fanatically pro-Brexit consumers, who read the label as denoting some special Brexity product, denied to envious continentals, but it is surely hard to imagine them to be very numerous. Meanwhile, for firms which only sell in GB, including chains which have no presence in NI, there is no upside to NFEU, only downside. Hence there has also been business lobbying to abandon the GB policy.
It's probably sensible to have postponed, and very likely to have halted, NFEU labels for GB, but doing so will inevitably provoke unionist grievance in NI. And, as with the postponement of UKCA marking, it is another case where those firms which incurred costs to comply in advance of the now abandoned deadlines have wasted money. That may not amount to much in the overall scheme of Brexit costs, but it’s yet another example of how those costs just keep mounting, and how even modest attempts to reduce them are not, themselves, cost-free.
The bigger picture
One of the difficulties of analysing Brexit is that it is hard (and, for any one individual, I would say it is impossible), to grasp it in its totality. That is mainly because of its scale and the technical complexity of each of its elements, but also because of the ways in which those elements interact and interlink with each other.
For example, in relation to this post, the need for NFEU labeling would disappear if there were to be an SPS agreement, and I assume that this is what the government hopes will ultimately be its fate. By extension, this is one reason why the EU is likely to be amenable to an SPS agreement. For the original offer of one was made in the context of the then ongoing row about the Northern Ireland Protocol and it arose because the EU has a strategic and principled interest in ameliorating the problem Brexit created for Ireland, as was demonstrated from the very first days after the referendum result. It is unclear that this interest exists in relation to any other regulatory area.
There is also a potential interrelationship with the PRMB, because although we don’t yet know its full ambit, we do know the areas it will exclude, as they are listed in a schedule at the end of the Bill. For the most part, they are things like food, plants, and products or by-products of animal origin: in short, the kinds of products that SPS regulations relate to, and, moreover, listed with reference to their definitions in EU law. No reason is given for their exclusion so this is pure, very possibly stupid, speculation on my part, but I wonder if it is because the government anticipates an SPS deal with the EU which would entail standards for these products being dynamically aligned with the EUs and, as such, treated separately from all other product standards?
Whether or not that is the case, the wider point is that with which I began, and which I’ve written about in the last couple of posts: the government’s lack of a post-Brexit strategy. For the implication of the interlinked nature of Brexit issues is that they are not really amenable to piece-by-piece attempts to accommodate to being out of the EU. Whilst that strategic absence persists, there will still be plenty of Brexit news to discuss but it won’t add up to a coherent picture and, in the absence of that, many of the old debates will continue.
This is the first post of the ninth year I have been writing this blog. There’s still little sign Britain has accommodated itself to Brexit, or even has any idea of how to do so.
*A more extensive acknowledgement of this reality could lead, even within Labour’s red lines, to a new post-Brexit settlement along the lines of the Ukraine model. If it is objected (let’s go round the loop again) that this would make the UK a rule-taker, then it would show a failure to recognize that, as things stand, the UK is already a de facto rule-taker, but with few of the benefits.
Friday, 27 September 2024
Monday, 9 September 2024
Reset means Reset
Regular readers will realise that this isn’t posted on a Friday morning, as normal. For various reasons I’ve had to post early this time. In line with the new fortnightly pattern, the next planned post is still Friday 27 September.
In my previous post I wrote about the new government’s lack of a post-Brexit strategy, at least in public. Politics, like nature, abhors a vacuum, so an inevitable consequence of this absence is speculation and criticism. What, beyond a ‘reset’ is the plan, and what does a reset mean? Recent examples include The Observer’s Andrew Rawnsley, suggesting that Starmer’s agenda risks antagonizing both pro- and anti-Brexit voters, whilst achieving little of value. Meanwhile, Luke McGee of the I identifies divisions within the Cabinet over how to proceed.
But it’s not just a matter of commentators trying to make sense of things. Political actors are also seeking to shape events. For example, the former leader of Labour MEPs, Richard Corbett, has outlined some of the steps the government could take within its ‘red lines’ whilst warning that these impose a caution which is at odds with the scale of what is needed. TUC leader Paul Nowak gave backing for Starmer’s re-set, but in doing so pushed for more extensive agreements on, especially, youth mobility than the government is publicly willing to entertain. And Labour MPs, along with those of some opposition parties, are pressing the government for clarity and action.
Talk about negotiations
There are some parallels with the period in 2016 when Theresa May kept insisting that ‘Brexit means Brexit’ prior to announcing that it meant hard Brexit. Now ‘reset means reset’. In both cases, in the background intense lobbying was going on within the UK. Meanwhile, in the EU, a steady process of consensus-building was developing about what Brexit would mean, and there are signs that something similar is happening now. A report of a leaked EU internal briefing document (£) suggested that Labour’s plan for a travelling artists’ mobility agreement would not be accepted, and its other publicly stated asks would not be straightforward.
Of course there are also important differences between these periods. Dealing with Brexit was the defining task for the UK government under May, and a major task for the EU. Neither of those things are true now. Moreover, then, there was the prospect (once Article 50 was triggered) of a defined negotiating process. Now, there is no equivalent. This makes a recent article in the Telegraph by Daniel Hannan, entitled “the UK has the whip hand in negotiations with the EU”, even sillier than his usual offerings. For, apart from the fact that it shows that the ‘they need us more than we need them’ fantasy still persists, in this case there are no negotiations with the EU over Brexit. Even holding them will be a UK request that may or may not be granted. In other words, Britain is a demandeur not simply within the negotiations but in seeking them.
Hannan and his ilk have less direct influence now, of course, but the continued existence of this kind of discourse can only feed suspicions in the EU that the UK polity as a whole has yet to purge itself of Brexitism. It’s tempting to add ‘despite the new government’, except that the fear that drives Labour’s timidity is itself a sign of the hold Brexitism still has.
At all events, there is little reason to expect any immediate clarity in what the reset is going to consist of, or achieve. That’s partly because even the first steps to that, of developing and improving relations, are still only just being taken, Starmer’s trip to Dublin last weekend to – yes, of course – ‘reset’ those with Ireland being a recent important example. Relatedly, it is because nothing much of substance is going to happen until the new EU Commission is in place, effectively at the beginning of next year. For that reason, it’s also probably sensible not to read too much into reports, such as that of the leaked briefing document, of what may or may not be agreed.
Familiar farces
During this ‘reset means reset’ period, many of the now familiar features of the post-Brexit (or should we call it pre-reset?) landscape continue. These include reports that the new government will yet again postpone the full introduction of import controls, with what was supposed to have been the October phase now put off until next July. It’s the latest iteration of a farcical saga which I’ve discussed in detail at the time of previous postponements.
This time there is the added feature that whereas, apparently, the new government thinks the need for controls will disappear if and when, following the ‘re-set’, there is an SPS agreement, the EU seem likely to be unwilling to agree to any re-set until the provisions of the original deal have been fully implemented. This includes the provisions for goods coming from Ireland to Great Britain, also much delayed, with construction work beginning only last week on the necessary facilities at Holyhead port. These facilities are due to be completed “sometime in 2025”. We will see.
Even more farcical, although, paradoxically, at the same time eminently sensible, is the latest retreat from the utter absurdity of the UKCA mark. Here too there has been a long history in delays to the date by which CE quality marks would cease to be valid, and UKCA would become mandatory. I discussed this issue in detail in August 2023, when the plan was “indefinitely postponed”. However, as I noted then, some products were not included in that, one case being construction products, where CE marks were still due to be phased out by the end of June 2025.
Last week, the government announced that this date would not apply and gave no other in replacement, suggesting that, for these products too, postponement is now indefinite. So far as I know, no such announcement has been made as regards medical devices, the other main area not covered by the 2023 indefinite postponement, with CE marking for these products due to be phased out by 2028 in some cases and 2030 in others. But I think it is all but inevitable that these will also be dropped.
UKCA was a particularly ludicrous piece of Brexit hubris, which has unravelled because in practice no one wanted it, and the country couldn’t afford it. In that sense, it is a metaphor for Brexit itself, albeit that, unlike Brexit, it proved easy to unravel by simply not doing it. Every time we see the Conformité Européenne mark on a product will serve as a reminder of that.
Evidently neither the latest postponement of import controls nor that of conformity assessment marking show any departure from the pattern of the previous government (from which derived the welcome news of the first Horizon funding for post-Brexit projects). In fact, in terms of things the government can do unilaterally (as opposed to through negotiation with the EU), the sole new departure so far has been the promised legislation to (mainly) track EU product safety, and weights and measures, provisions. Pretty much everything else remains unclear, and will most likely emerge in piecemeal decisions which only in time (if at all) will come to form a pattern of its own. In that sense, the ‘reset means reset’ period is likely to be a long one.
Latest false claims about Freeports
However, whatever the Labour government’s post-Brexit policy intentions may be, one thing which is pretty much irrelevant to them is Freeports. I’m not sure that this is even worth discussing, but there is a new myth gaining traction on social media that because the government apparently has no plans to close what are almost invariably referred to as ‘Sunak’s 86 SEZs and Freeports’ this means that it is precluding the UK from rejoining the EU or even the single market. In a more conspiratorial version, the reason the government doesn’t want to rejoin is in order to continue with ‘SEZs and Freeports’.
This is the latest iteration of something which has been doing the rounds for a few years. It started with the claim that Freeports are, or could become, ‘Charter Cities’, where companies are granted ‘charters’ to set and run legal systems. This would supposedly mean that all regulations, including employment and environmental laws, along with all public healthcare and education, would disappear within these zones. I wrote a detailed debunk of this in 2022, calling it a conspiracy theory because having already claimed that creating Charter Cities was ‘the real agenda’ behind Brexit, the subsequent announcement of Freeports was retro-fitted to ’prove’ this [1].
Subsequently, the same idea re-emerged, not always referring to Charter Cities explicitly, but making a similar false claim that ‘SEZs and Freeports’ were ‘States within a State’, again setting their own corporate legal and regulatory regimes. I wrote another debunk of this, earlier this year. It included reference to the then only emerging claim that ‘SEZs and Freeports’ are somehow a barrier to ever rejoining the EU and the very first references to Labour’s complicity in this.
Since the election, this latter claim, along with repetitions of the previous ones, has become quite widespread on social media. I won’t link to examples because, as a matter of general policy, I don’t make critical comments about social media posts by private individuals, as this can lead to bullying ‘pile-ons’ [2]. However, a quick key word search of X-Twitter, and to an extent BlueSky, will provide examples.
Freeports and the prospects of rejoining
I have put ‘SEZs and Freeports’ in scare quotes because this near-ubiquitous formulation is often the first clue that something misleading is about to follow. SEZ – meaning Special Economic Zone – is a generic term, encompassing many different institutional forms, of which Freeports are one (though they, themselves, are not all the same). So to say ‘SEZs and Freeports’ is a misnomer, and this is not a pedantic matter of jargon: it is a misnomer which carries some highly misleading implications.
It implies that all 86 UK SEZs (exact numbers vary) are part of this supposed explanation for Brexit or this supposed barrier to re-joining the EU. Describing them as ‘Sunak’s 86 SEZs and Freeports’ makes that implication even stronger, since it suggests that they were his invention. In fact, the majority of these were created before Brexit and before Sunak, and so, self-evidently, neither explain Brexit nor preclude EU membership. Nor, by the way, have any of them ‘turned into’ anything remotely resembling Charter Cities or ‘States within a State’ which, if that was the ‘secret plan’ for them, there would surely be signs of by now.
So what about UK Freeports, specifically, which do, in their present form, post-date Brexit? It’s certainly true that Sunak and others proclaimed them as a post-Brexit ‘freedom’. Oddly enough, I recall correcting some of the initial criticisms of Sunak which were based on the fact that Freeports had existed, though had been closed, when the UK was in the EU. I pointed out that, post-Brexit, UK Freeports would indeed be different as they would not be bound by EU rules, highlighting in particular EU state aid rules. The problem with those initial critiques was that they were a knee-jerk reaction, ignoring key details.
I wrote that in February 2020, so it is somewhat ironic that now, over four years later, some are latching on to the differences between UK and EU Freeports, most especially as regards state aid, but again ignoring key details. (There’s also a certain irony in the way that they are simultaneously presenting Freeports as neo-liberal hellholes in the making and yet also fulminating about state aid, which they pearl-clutchingly tell us is really taxpayers’ money, for all the world like the most doctrinaire of neo-liberals.)
As to the details, there are two questions. One is whether, as a matter of fact, the tax breaks provided to Freeports would not be allowed under EU state aid rules. This is by no means an easy question to answer, as recently highlighted by George Peretz KC, a leading expert in this area, in response to the claim that this is so. It doesn’t just depend on what those tax breaks are, it also depends on the (hypothetical) question of how the EU Commission would interpret them. Moreover, it is simplistic to discuss the state aid issue in terms of EU rules, ignoring those of the UK (which exist: again, it’s not a neo-liberal free for all), the Level Playing Field provisions in the UK-EU Trade and Cooperation Agreement, the provisions of the Northern Ireland Protocol, WTO rules, and OECD protocols. In other words, the issue here isn’t reducible to EU rules versus no rules.
The second question is whether, even assuming that UK Freeports do violate EU state aid rules (or any other EU rules), this precludes the UK joining, or applying to join, the EU or the single market. The answer to that is certainly ‘no’ (this also applies to the parallel claim that they would preclude an independent Scotland joining the EU). Many other EU accession countries have had SEZs which, at the time of application, did not comply with EU rules. As part of the accession process, these SEZs either changed their rules or were phased out, in some cases over long periods, hence the idea that UK Freeport contract lengths might delay, even if not prevent, rejoining is also bogus [3].
There’s absolutely no reason to think the same would not be true for any accession process for the UK and, anyway, it would be part of a much wider issue than that of Freeports. If the UK ever rejoins the EU or the single market, any and all divergences from its rules that may have occurred since Brexit will have to be ended. Freeports are different in detail, but no different in principle, to any other such case. The sole reason they are being presented as some kind of special obstacle to rejoining is because of the weird preoccupation with Freeports which has grown up.
It shouldn’t have to be spelt out, but I will do so to avoid misunderstanding. None of this means that Freeports, specifically, or SEZs, generally, are a ‘good thing’. On the contrary, there are serious questions about issues including corruption, various forms of criminality, value for money, and lack of accountability. That is especially clear from questions which have been raised in the case of the Teesside Freeport. Similar questions would arise with or without Brexit (because EU Freeports are by no means immune from criticism). But Freeports don’t ‘explain’ Brexit, they aren’t a vehicle for post-Brexit ‘States within a State’, and, to speak to the latest claims, they are irrelevant to the prospects of rejoining.
That being so, it would make no sense for Labour to continue with Freeports in order to subvert rejoining. Nor do we need to look to Freeports for some secret reason to explain Labour’s hostility to rejoining. The reasons for that may be poor or at least debatable, but they are well-known (freedom of movement, fear of Labour leave voters, fear of it dominating the entirety of the administration etc., etc.). The UK may or may not end up joining the EU again, or the single market, under a Labour government, but Freeports won’t play any part in deciding that.
Ruthless remainers?
Although I don’t think the distraction of these Freeport claims is very widespread amongst serious political actors, they do point to a wider issue for ‘remainers’ or ‘rejoiners’ (or whatever the best term would be: just ‘joiners’, perhaps?) So also, and more importantly, does the present vacuum of this ‘reset means reset’ period which, as I noted above, creates a space for such political actors to influence government policy. That wider issue is the politics of the ‘join’ or ‘rejoin’ movement.
The Bagehot (aka Duncan Robinson) column in the latest issue of the Economist (£) posed some sharp questions for what it called this “strangely ineffective” movement, exhorting “remainers” to become “more organized and more ruthless”, aping the determination of Farage and what became the Brexit movement. It provoked a lot of interesting discussion on social media, and although I don’t have space to discuss it in this post, I will probably return to it in the future.
For now, one observation is that, whilst part of the ‘ruthlessness’ of Brexiters was a quite cavalier disregard for factual accuracy, I do not think that will serve ‘remainers’ well. Ruthlessness needn’t mean truthlessness. That’s not a matter of squeamishness, or even of scruples, it’s more that, with so many excellent arguments against Brexit it’s hardly necessary to make false ones.
Notes
[1] I’m not going to re-hash all the tortuous arguments about this, but those who have followed them may be interested in a recently published academic paper by Patrick Holden and Nichola Harmer of Plymouth University, who note that: “The outcome [of the UK’s introduction of post-Brexit Freeports] is a Freeport policy that, whatever its merits, is not forging a neoliberal dynamic in the UK’s political economy.” This is actually a specific instance of a point I’ve made many times on this blog. There were certainly some Brexiters who saw it as vehicle to pursue a massive agenda of neo-liberal deregulation. This was ‘a’ reason for Brexit, but it wasn’t ‘the’ reason for Brexit, and when Brexit happened they found that there were many other constraints on the pursuit of their agenda apart from EU membership. It’s yet another instance of Brexiters simply being wrong about what EU membership meant and what Brexit would mean.
[2] By private individuals, I mean any account where it is not clear that they are posting in a professional capacity as politicians, journalists, or experts within the domain that is the subject of their post, or on behalf of some organization, or might reasonably be considered a ‘public figure’ in some other way.
[3] A related claim is that investors in Freeports would make use of Investor-State Dispute Settlement (ISDS) systems to sue the UK government if it adapted or closed Freeports in order to re-join the EU. However, that would be irrelevant if the contracts were simply wound down as part of any accession process. That aside, the ISDS claim is a bit like some of the Brexiters' 'technical' sounding claims which are difficult to disentangle as they involve a simplistic take on a deeply complex area, but it certainly isn’t true, as such claims imply, that ISDS would simply be available to foreign investors in such circumstances, as if it were some kind of international court open to all comers. It might (but wouldn’t automatically) apply if the investor was from a country with which the UK had an ISDS agreement as part of an investment or free trade agreement, which, post-CPTPP accession might apply if that country was a CPTPP member (though not if it was Australia or New Zealand). However, typically, ISDS (of which there are very many legitimate criticisms) comes into play in countries which do not have well-developed domestic legal systems to which investors can bring claims. For this reason, those ISDS agreements the UK has entered into have almost entirely been used by UK firms against foreign governments, not by foreign firms against the UK government (the UNTD database records only one such case, from an Indian investor in 2006, though some sources suggest there have been two; either way, no case has succeeded). Anyway, even if the UK sought to re-join, and if an investor in a Freeport had a right to bring an ISDS action, and if it did so, it would not follow that it would win, and even if it did win, whilst that might cost the government some money, it wouldn’t derail rejoining. In short, it is a red herring.
In my previous post I wrote about the new government’s lack of a post-Brexit strategy, at least in public. Politics, like nature, abhors a vacuum, so an inevitable consequence of this absence is speculation and criticism. What, beyond a ‘reset’ is the plan, and what does a reset mean? Recent examples include The Observer’s Andrew Rawnsley, suggesting that Starmer’s agenda risks antagonizing both pro- and anti-Brexit voters, whilst achieving little of value. Meanwhile, Luke McGee of the I identifies divisions within the Cabinet over how to proceed.
But it’s not just a matter of commentators trying to make sense of things. Political actors are also seeking to shape events. For example, the former leader of Labour MEPs, Richard Corbett, has outlined some of the steps the government could take within its ‘red lines’ whilst warning that these impose a caution which is at odds with the scale of what is needed. TUC leader Paul Nowak gave backing for Starmer’s re-set, but in doing so pushed for more extensive agreements on, especially, youth mobility than the government is publicly willing to entertain. And Labour MPs, along with those of some opposition parties, are pressing the government for clarity and action.
Talk about negotiations
There are some parallels with the period in 2016 when Theresa May kept insisting that ‘Brexit means Brexit’ prior to announcing that it meant hard Brexit. Now ‘reset means reset’. In both cases, in the background intense lobbying was going on within the UK. Meanwhile, in the EU, a steady process of consensus-building was developing about what Brexit would mean, and there are signs that something similar is happening now. A report of a leaked EU internal briefing document (£) suggested that Labour’s plan for a travelling artists’ mobility agreement would not be accepted, and its other publicly stated asks would not be straightforward.
Of course there are also important differences between these periods. Dealing with Brexit was the defining task for the UK government under May, and a major task for the EU. Neither of those things are true now. Moreover, then, there was the prospect (once Article 50 was triggered) of a defined negotiating process. Now, there is no equivalent. This makes a recent article in the Telegraph by Daniel Hannan, entitled “the UK has the whip hand in negotiations with the EU”, even sillier than his usual offerings. For, apart from the fact that it shows that the ‘they need us more than we need them’ fantasy still persists, in this case there are no negotiations with the EU over Brexit. Even holding them will be a UK request that may or may not be granted. In other words, Britain is a demandeur not simply within the negotiations but in seeking them.
Hannan and his ilk have less direct influence now, of course, but the continued existence of this kind of discourse can only feed suspicions in the EU that the UK polity as a whole has yet to purge itself of Brexitism. It’s tempting to add ‘despite the new government’, except that the fear that drives Labour’s timidity is itself a sign of the hold Brexitism still has.
At all events, there is little reason to expect any immediate clarity in what the reset is going to consist of, or achieve. That’s partly because even the first steps to that, of developing and improving relations, are still only just being taken, Starmer’s trip to Dublin last weekend to – yes, of course – ‘reset’ those with Ireland being a recent important example. Relatedly, it is because nothing much of substance is going to happen until the new EU Commission is in place, effectively at the beginning of next year. For that reason, it’s also probably sensible not to read too much into reports, such as that of the leaked briefing document, of what may or may not be agreed.
Familiar farces
During this ‘reset means reset’ period, many of the now familiar features of the post-Brexit (or should we call it pre-reset?) landscape continue. These include reports that the new government will yet again postpone the full introduction of import controls, with what was supposed to have been the October phase now put off until next July. It’s the latest iteration of a farcical saga which I’ve discussed in detail at the time of previous postponements.
This time there is the added feature that whereas, apparently, the new government thinks the need for controls will disappear if and when, following the ‘re-set’, there is an SPS agreement, the EU seem likely to be unwilling to agree to any re-set until the provisions of the original deal have been fully implemented. This includes the provisions for goods coming from Ireland to Great Britain, also much delayed, with construction work beginning only last week on the necessary facilities at Holyhead port. These facilities are due to be completed “sometime in 2025”. We will see.
Even more farcical, although, paradoxically, at the same time eminently sensible, is the latest retreat from the utter absurdity of the UKCA mark. Here too there has been a long history in delays to the date by which CE quality marks would cease to be valid, and UKCA would become mandatory. I discussed this issue in detail in August 2023, when the plan was “indefinitely postponed”. However, as I noted then, some products were not included in that, one case being construction products, where CE marks were still due to be phased out by the end of June 2025.
Last week, the government announced that this date would not apply and gave no other in replacement, suggesting that, for these products too, postponement is now indefinite. So far as I know, no such announcement has been made as regards medical devices, the other main area not covered by the 2023 indefinite postponement, with CE marking for these products due to be phased out by 2028 in some cases and 2030 in others. But I think it is all but inevitable that these will also be dropped.
UKCA was a particularly ludicrous piece of Brexit hubris, which has unravelled because in practice no one wanted it, and the country couldn’t afford it. In that sense, it is a metaphor for Brexit itself, albeit that, unlike Brexit, it proved easy to unravel by simply not doing it. Every time we see the Conformité Européenne mark on a product will serve as a reminder of that.
Evidently neither the latest postponement of import controls nor that of conformity assessment marking show any departure from the pattern of the previous government (from which derived the welcome news of the first Horizon funding for post-Brexit projects). In fact, in terms of things the government can do unilaterally (as opposed to through negotiation with the EU), the sole new departure so far has been the promised legislation to (mainly) track EU product safety, and weights and measures, provisions. Pretty much everything else remains unclear, and will most likely emerge in piecemeal decisions which only in time (if at all) will come to form a pattern of its own. In that sense, the ‘reset means reset’ period is likely to be a long one.
Latest false claims about Freeports
However, whatever the Labour government’s post-Brexit policy intentions may be, one thing which is pretty much irrelevant to them is Freeports. I’m not sure that this is even worth discussing, but there is a new myth gaining traction on social media that because the government apparently has no plans to close what are almost invariably referred to as ‘Sunak’s 86 SEZs and Freeports’ this means that it is precluding the UK from rejoining the EU or even the single market. In a more conspiratorial version, the reason the government doesn’t want to rejoin is in order to continue with ‘SEZs and Freeports’.
This is the latest iteration of something which has been doing the rounds for a few years. It started with the claim that Freeports are, or could become, ‘Charter Cities’, where companies are granted ‘charters’ to set and run legal systems. This would supposedly mean that all regulations, including employment and environmental laws, along with all public healthcare and education, would disappear within these zones. I wrote a detailed debunk of this in 2022, calling it a conspiracy theory because having already claimed that creating Charter Cities was ‘the real agenda’ behind Brexit, the subsequent announcement of Freeports was retro-fitted to ’prove’ this [1].
Subsequently, the same idea re-emerged, not always referring to Charter Cities explicitly, but making a similar false claim that ‘SEZs and Freeports’ were ‘States within a State’, again setting their own corporate legal and regulatory regimes. I wrote another debunk of this, earlier this year. It included reference to the then only emerging claim that ‘SEZs and Freeports’ are somehow a barrier to ever rejoining the EU and the very first references to Labour’s complicity in this.
Since the election, this latter claim, along with repetitions of the previous ones, has become quite widespread on social media. I won’t link to examples because, as a matter of general policy, I don’t make critical comments about social media posts by private individuals, as this can lead to bullying ‘pile-ons’ [2]. However, a quick key word search of X-Twitter, and to an extent BlueSky, will provide examples.
Freeports and the prospects of rejoining
I have put ‘SEZs and Freeports’ in scare quotes because this near-ubiquitous formulation is often the first clue that something misleading is about to follow. SEZ – meaning Special Economic Zone – is a generic term, encompassing many different institutional forms, of which Freeports are one (though they, themselves, are not all the same). So to say ‘SEZs and Freeports’ is a misnomer, and this is not a pedantic matter of jargon: it is a misnomer which carries some highly misleading implications.
It implies that all 86 UK SEZs (exact numbers vary) are part of this supposed explanation for Brexit or this supposed barrier to re-joining the EU. Describing them as ‘Sunak’s 86 SEZs and Freeports’ makes that implication even stronger, since it suggests that they were his invention. In fact, the majority of these were created before Brexit and before Sunak, and so, self-evidently, neither explain Brexit nor preclude EU membership. Nor, by the way, have any of them ‘turned into’ anything remotely resembling Charter Cities or ‘States within a State’ which, if that was the ‘secret plan’ for them, there would surely be signs of by now.
So what about UK Freeports, specifically, which do, in their present form, post-date Brexit? It’s certainly true that Sunak and others proclaimed them as a post-Brexit ‘freedom’. Oddly enough, I recall correcting some of the initial criticisms of Sunak which were based on the fact that Freeports had existed, though had been closed, when the UK was in the EU. I pointed out that, post-Brexit, UK Freeports would indeed be different as they would not be bound by EU rules, highlighting in particular EU state aid rules. The problem with those initial critiques was that they were a knee-jerk reaction, ignoring key details.
I wrote that in February 2020, so it is somewhat ironic that now, over four years later, some are latching on to the differences between UK and EU Freeports, most especially as regards state aid, but again ignoring key details. (There’s also a certain irony in the way that they are simultaneously presenting Freeports as neo-liberal hellholes in the making and yet also fulminating about state aid, which they pearl-clutchingly tell us is really taxpayers’ money, for all the world like the most doctrinaire of neo-liberals.)
As to the details, there are two questions. One is whether, as a matter of fact, the tax breaks provided to Freeports would not be allowed under EU state aid rules. This is by no means an easy question to answer, as recently highlighted by George Peretz KC, a leading expert in this area, in response to the claim that this is so. It doesn’t just depend on what those tax breaks are, it also depends on the (hypothetical) question of how the EU Commission would interpret them. Moreover, it is simplistic to discuss the state aid issue in terms of EU rules, ignoring those of the UK (which exist: again, it’s not a neo-liberal free for all), the Level Playing Field provisions in the UK-EU Trade and Cooperation Agreement, the provisions of the Northern Ireland Protocol, WTO rules, and OECD protocols. In other words, the issue here isn’t reducible to EU rules versus no rules.
The second question is whether, even assuming that UK Freeports do violate EU state aid rules (or any other EU rules), this precludes the UK joining, or applying to join, the EU or the single market. The answer to that is certainly ‘no’ (this also applies to the parallel claim that they would preclude an independent Scotland joining the EU). Many other EU accession countries have had SEZs which, at the time of application, did not comply with EU rules. As part of the accession process, these SEZs either changed their rules or were phased out, in some cases over long periods, hence the idea that UK Freeport contract lengths might delay, even if not prevent, rejoining is also bogus [3].
There’s absolutely no reason to think the same would not be true for any accession process for the UK and, anyway, it would be part of a much wider issue than that of Freeports. If the UK ever rejoins the EU or the single market, any and all divergences from its rules that may have occurred since Brexit will have to be ended. Freeports are different in detail, but no different in principle, to any other such case. The sole reason they are being presented as some kind of special obstacle to rejoining is because of the weird preoccupation with Freeports which has grown up.
It shouldn’t have to be spelt out, but I will do so to avoid misunderstanding. None of this means that Freeports, specifically, or SEZs, generally, are a ‘good thing’. On the contrary, there are serious questions about issues including corruption, various forms of criminality, value for money, and lack of accountability. That is especially clear from questions which have been raised in the case of the Teesside Freeport. Similar questions would arise with or without Brexit (because EU Freeports are by no means immune from criticism). But Freeports don’t ‘explain’ Brexit, they aren’t a vehicle for post-Brexit ‘States within a State’, and, to speak to the latest claims, they are irrelevant to the prospects of rejoining.
That being so, it would make no sense for Labour to continue with Freeports in order to subvert rejoining. Nor do we need to look to Freeports for some secret reason to explain Labour’s hostility to rejoining. The reasons for that may be poor or at least debatable, but they are well-known (freedom of movement, fear of Labour leave voters, fear of it dominating the entirety of the administration etc., etc.). The UK may or may not end up joining the EU again, or the single market, under a Labour government, but Freeports won’t play any part in deciding that.
Ruthless remainers?
Although I don’t think the distraction of these Freeport claims is very widespread amongst serious political actors, they do point to a wider issue for ‘remainers’ or ‘rejoiners’ (or whatever the best term would be: just ‘joiners’, perhaps?) So also, and more importantly, does the present vacuum of this ‘reset means reset’ period which, as I noted above, creates a space for such political actors to influence government policy. That wider issue is the politics of the ‘join’ or ‘rejoin’ movement.
The Bagehot (aka Duncan Robinson) column in the latest issue of the Economist (£) posed some sharp questions for what it called this “strangely ineffective” movement, exhorting “remainers” to become “more organized and more ruthless”, aping the determination of Farage and what became the Brexit movement. It provoked a lot of interesting discussion on social media, and although I don’t have space to discuss it in this post, I will probably return to it in the future.
For now, one observation is that, whilst part of the ‘ruthlessness’ of Brexiters was a quite cavalier disregard for factual accuracy, I do not think that will serve ‘remainers’ well. Ruthlessness needn’t mean truthlessness. That’s not a matter of squeamishness, or even of scruples, it’s more that, with so many excellent arguments against Brexit it’s hardly necessary to make false ones.
Notes
[1] I’m not going to re-hash all the tortuous arguments about this, but those who have followed them may be interested in a recently published academic paper by Patrick Holden and Nichola Harmer of Plymouth University, who note that: “The outcome [of the UK’s introduction of post-Brexit Freeports] is a Freeport policy that, whatever its merits, is not forging a neoliberal dynamic in the UK’s political economy.” This is actually a specific instance of a point I’ve made many times on this blog. There were certainly some Brexiters who saw it as vehicle to pursue a massive agenda of neo-liberal deregulation. This was ‘a’ reason for Brexit, but it wasn’t ‘the’ reason for Brexit, and when Brexit happened they found that there were many other constraints on the pursuit of their agenda apart from EU membership. It’s yet another instance of Brexiters simply being wrong about what EU membership meant and what Brexit would mean.
[2] By private individuals, I mean any account where it is not clear that they are posting in a professional capacity as politicians, journalists, or experts within the domain that is the subject of their post, or on behalf of some organization, or might reasonably be considered a ‘public figure’ in some other way.
[3] A related claim is that investors in Freeports would make use of Investor-State Dispute Settlement (ISDS) systems to sue the UK government if it adapted or closed Freeports in order to re-join the EU. However, that would be irrelevant if the contracts were simply wound down as part of any accession process. That aside, the ISDS claim is a bit like some of the Brexiters' 'technical' sounding claims which are difficult to disentangle as they involve a simplistic take on a deeply complex area, but it certainly isn’t true, as such claims imply, that ISDS would simply be available to foreign investors in such circumstances, as if it were some kind of international court open to all comers. It might (but wouldn’t automatically) apply if the investor was from a country with which the UK had an ISDS agreement as part of an investment or free trade agreement, which, post-CPTPP accession might apply if that country was a CPTPP member (though not if it was Australia or New Zealand). However, typically, ISDS (of which there are very many legitimate criticisms) comes into play in countries which do not have well-developed domestic legal systems to which investors can bring claims. For this reason, those ISDS agreements the UK has entered into have almost entirely been used by UK firms against foreign governments, not by foreign firms against the UK government (the UNTD database records only one such case, from an Indian investor in 2006, though some sources suggest there have been two; either way, no case has succeeded). Anyway, even if the UK sought to re-join, and if an investor in a Freeport had a right to bring an ISDS action, and if it did so, it would not follow that it would win, and even if it did win, whilst that might cost the government some money, it wouldn’t derail rejoining. In short, it is a red herring.
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