The Irish Taoiseach’s Fireworks

Further to my last blog on ‘Much ado about nothing’ what are we to make of the Irish Taoiseach’s comment on the sale of fireworks?  He is reported as saying that the rules do not have to be all the same by giving the example of fireworks.   It is illegal to sell fireworks in the Republic of Ireland but they are sold legally in Northern Ireland.  He thus makes my point for me.  It is entirely up to the Irish authorities to root out any activity which is illegal including the sale of goods that are not authorised in the EU.  Brexit will make no difference to this principle.  If Ireland can control the sale of fireworks it can control the sale of chlorinated chickens if the UK decides these are fit for sale.

On the day after Brexit (if it is ever to come) all the regulations will be in full alignment.  What happens after that date is what is matters.  If the UK changes its regulations – relaxing some rules on animal health for example then the Republic of Ireland will have to take steps to ensure that non compliant animals are not offered for sale in their territory.  They already seem to be able to do this with respect to fireworks so why not everything else?

The UK has repeatedly stated that it is not going to impose a hard border between Northern Ireland and the Republic.  If nasty things from the EU turn up in Northern Ireland its authorities will pursue and punish those who have imported them.  Same for the Republic.  That principle is the way the EU works anyway.   All the laws and rules of the EU are enforced within each separate member state.  Some of them are good at this, some are not.  The debate thus far seems to indicate that the Irish Republic wants a hard border unless all regulations are for ever the same.  If Ireland feels that its administrative structure is too weak to cope with the new arrangements for trade then it clearly needs to strengthen its capacity to prove its fidelity to EU norms.   If it does not it will be pursued in the European Court of Justice for infringements of EU rules.

In some exceptional circumstances a ‘hard’ border may have to be introduced around a particular area – foot and mouth disease is an example.  But that border may not be contiguous with the border between the Irish Republic and Northern Ireland.  And, perhaps no one has noticed that several EU member states have erected razor wire fences to stop migrants getting in and out of their countries.

The whole border issue can easily be solved.  It does, however, require politicians to learn how trade actually works within the EU and between the EU and third countries.  Mr Varadkar’s fireworks are the first sign of connection with the reality of economic life.

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The Irish/UK border – much ado about nothing

Sitting here in Wales, looking out of my office to England across the river Severn, I am totally puzzled by the Irish/UK border dispute.  A list of 142 cross border activities that might be negatively impacted by Brexit has been drawn up, according to a report in The Guardian.  The list includes medical services and access to education.  Well, from my vantage point in Wales the extent of cross border cooperation between the Irish Republic and the UK seems entirely laudable.  If only we could have similar cooperation here in Wales.  You still have to pay to get into Wales via the Severn Bridges.  Even in 2018 the toll will merely reduce but not disappear entirely.  How easy is it for someone in Monmouthshire to elect to be treated in an English hospital?  How easy is it for a student to enrol in an English school?  Welsh students pay less in fees for their University education than do English students. If a Welsh student goes to an English University they have to pay the English fee.  If a Welsh student goes to a Scottish University they are treated as though they were from another planet – no free tuition for them.  Yet all these differences are tolerated without the imposition of a ‘hard border’.  They are merely reflections of different priorities set by different administrations.

Far, far too much is being made about this ‘fake’ problem.  Take agriculture and the issue of standards for food.  There are EU rules but all EU rules are implemented and policed entirely within the borders of each member state.  If, post Brexit, the UK decided to import chlorine-washed chickens that does not mean that the Irish would be obliged either to import or to eat them.  They would remain prohibited under EU law and it is entirely up to the Irish authorities to ensure that they are not on sale in Eire.  If one was smuggled across one of the many crossing points that would be an illegal act.  The Irish authorities would have, within their territory, to take steps to catch and punish offenders.

The entire EU legal edifice is constructed on the principle of common rules implemented and enforced within each separate member state.  Of course, if a member state fails in its duty to enforce the law it can be brought before the European Court of Justice.  The member state itself must rectify its faults.  Enforcement of EU law takes place at the level of the member state, that is at the point of DESTINATION of goods and services.  Why is destination in capitals?   Because it is such an important principle.  It has not been easy for the EU to apply this principle to all activities.  It took more than four decades for the Commission to realise that Value Added Tax should be collected at the point of destination rather than at the point of origin of goods and services.  Collection of VAT at destination is now to be the ‘definitive’ i.e. the permanent method of collecting VAT for cross border transactions.  This decision means that there are still borders in the EU’s single market but that these borders are rendered invisible by control in the country of destination.  This fundamental principle of how the EU works requires each member state to have an efficient and corruption free administration and police force.  And, that is not something that the Irish Republic seems to have just now as the present row over whistleblowing reveals.

Good research topic – pity about the research method

A Conservative MP, who happens to be a Whip and thus on the government payroll, is in hot water for having written, on House of Commons notepaper, a letter to University Vice-Chancellors requesting information about courses on the European Union.  What was his motive?  To collect information for a ‘book’ apparently.  If that book was to have any credibility as a sound reflection of the state of politics teaching in British Universities this was a strange way to go about ‘research’.

Why write to Vice-Chancellors who are largely highly paid business operatives distant from the academics who toil in their lecture rooms?  Better to ask them about the University’s profit and loss account and the success of its fundraising efforts.  The first port of call would surely be the departmental websites.  These give details of staff, courses, research grants, publications and often much more.  Some are very informative others less so.  This is where the research begins.  Many websites give email address of staff so why not go to the horse’s mouth?

This Conservative MP was, sadly, all too typical of the way in which ‘research’ into politics is undertaken in University politics departments themselves.  Its all too easy to get huge sums of money to do ‘surveys’.  But there is a great void between those who teach  and ‘research’ ‘politics’ and those who practice the art.  Would you really want to go through an entire degree in chemistry without once encountering a lecturer who had ever set foot in a chemistry lab?  Would you want to study in a department of music where none of the staff had ever played an instrument or could read music?  Would you want to study architecture without ever hearing from a practising architect?   There is certainly a place for theory but today’s students want and need more than the curriculum of the Platonic academy.  Few of those teaching ‘politics’ have themselves been active players in the field.  And, there is, as with economics, much more professional status in overseeing a vast expensive survey or model than there is in padding around the House of Commons or the corridors of Whitehall taking the pulse of political life.  Its even worse with the European Union where a key question to ask of Universities is ‘how many of those teaching courses in the EU have ever worked in its corridors?’

I taught the politics of the European Union (it was the EEC then the EC when I started) from the early 1970s to the end of the 1980s when I escaped from the theoretical world of the academy to practise real politics as a business lobbyist.  When I started the EEC did so little that the course had to be padded out with a run round the political systems of the member states.  When I stopped at the end of the 1980s the landscape had entirely changed.  And, so had I.  Why?  Because in the mid 1980s I became a practitioner.  I was made a member of the EU’s Economic and Social Committee.  It was a shock to discover that this was in effect another European Parliament.  During the next seven years I was from time to time a Rapporteur responsible for delivering the ‘Opinions’ required before Commission proposals can become law.  I chaired the Industry Section.  I had easy interaction with Commissioners.  I was besieged by lobbyists.  I found out that the EU was, even by that time, a deeply dysfunctional organisation where opposition was not acceptable.  Not at all.  Any whiff of scepticism about a Commission proposal was met by severe ill-treatment.

I can only hope that someone with a better grasp of suitable methods of research will tackle the question of how politics is taught in Universities.  The challenge is already on in the field of Economics.  Time to look at the rest of the ‘social sciences’.  The MP asked an interesting question but spoilt his chances of finding out much of value by his clumsy research methods.

 

 

Brexit talks – A glimmer of common sense from Donald Tusk

Reports are circulating of a draft document said to be the ‘Conclusions’ of yet to be held talks at the forthcoming European Summit of Heads of State to be held in Brussels at the end of October.  This document appears to have been obtained by Alex Barker of the Financial Times.

Although it seems peculiar to leak the conclusions of a meeting that had not yet taken place, the document appears to be designed to calm nerves after the reported ‘Deadlock’ of the last round of talks between M Barnier for the EU and the UK.  It is the first, very belated, sign of common sense.

There will be no progress until the member states themselves begin to take an active part in a process which directly affects their citizens.  Leaving the talks entirely in the hands of the European Commission has elevated the pursuit of the purist line of ‘ever closer union of the peoples of Europe’ above the real interests of those peoples.  Their elected representatives form the basis of their governments and it is those governments which must ensure that their citizens are not disadvantaged in the pursuit of a rigid ideological objective.  Are those representatives of the peoples really prepared to see their cars stopped at Dover, their airplanes grounded, and their cheese undeliverable to the UK just for the sake of the ideological purity of the European project?  Their voters will not thank them if they cause mayhem.

If the document is to be believed (it can be found on the euronews website) no preparations for the future have been made so far…and these are the people who complain that the UK is not prepared.  The text says ‘The European Council invites the Council (Art 50) together with the Union negotiator to start internal preparatory discussions’.  Have they really not had any discussions during the past 18 months?  As I said in my last post, the European Union is extremely slow at making decisions, but is it really so stupid that it cannot prepare for what might be an extremely disturbing event for European citizens.

These ‘internal preparatory discussions’ are necessary so that it can be ready to start talks on ‘the future relationship and on possible transitional arrangements’.  The transitional arrangements may well have to last a lifetime considering the total incapacity of the European Union, its Commission and the ever shifting parades at meetings of Heads of State to make decisions.  We know from past history that major decisions are only made by the European Union at times of extreme political pressure.  Closed customs posts and airports might just be such an occasion.

Here we go again – a ‘Definitive’ EU VAT system by 2022? Some chance.

On 4 October 2017 the European Commission published a Communication (COM (2017) 586 final on the subject of the future shape of the European Union Value Added Tax regime.  It is entitled ‘Towards a single EU VAT area – time to act’ but the action will take a long time.

The EU has been debating what its ‘definitive’ system of VAT should be for the past sixty years – yes, sixty years.  The EU is not noted as a swift decision maker and it has so far made a dogs breakfast of the VAT rules.  The current structure is complex, costly to firms, and prone to large scale fraud.  It is a mess.  So, one cheer for trying to sort it out.

The Commissioner, announcing the current plans,  which are a very simple twelve page outline said ‘Member States should consider cross-border VAT transactions as domestic operations in our internal market by 2022’.  The details, such as they are, point in a different direction.

The proposals do not envisage a single EU VAT collector and distributor, nor do they require uniform VAT rates.  They are based on the notion of 27 member state collectors of VAT.  The idea of a single set of rates can be abandoned.  Traders will also be able to prepare invoices according to the rules of the member state in which they operate.

It is when one looks at the details – available only in outline – that the plan begins to unravel.  When goods pass from one member state to another VAT will be charged by the supplier at the rate prevailing in the member state of the customer.  That will appear on the invoice but it is not clear how the actual tax arrives in the coffers of the member state where the customer is situated.  How can the local tax collector find out what is available for collection and how can he ensure collection?  This proposal, designed to combat widespread VAT fraud on cross border transactions could simply open the door to a new type of fraud.

Business Europe, in its response to the announcement, supported the move to a destination principle as the definitive system for EU VAT, but wonders about ‘the proposed collection method’.  We have been here before.  This is all too reminiscent of the response of business and member states to COM 320, the Commission’s proposal for the single market programme for 1992.  This introduced the concept of a ‘clearing house’ to reallocate taxes collected.  Both business representatives and the fiscal authorities of member states are likely to spot the weak spot in the 2017 proposal.  And, to succeed in the Council of Ministers, it must be agreed by all member states.  Tax proposals are still subject to the rule of unanimity.  The completion date of 2022 looks excessively optimistic.

Getting it right about the European Court of Justice after Brexit

Once the UK leaves the European Union it will no longer be party to the Treaties (the latest version being The Lisbon Treaties).  If it signs a new trade agreement with the EU post Brexit it will be party to a new Treaty specifically between the UK and the EU.

For internal purposes, within the terms of the Lisbon Treaty, the European Court of Justice deals with disputes between the EU and its member states (for example on enactment or not of EU law into national law) and it can provide ‘preliminary rulings’ on matters referred to it by national courts.  Once the UK leaves the EU it will no longer be party to the existing Treaties and thus the role of the ECJ will end.

If a new Treaty on trade is agreed then it will almost certainly require machinery for arbitration of disputes between the EU and the UK under the new Treaty.  This is a well known feature of international law.  This arbitration panel will need to be impartial – that is not beholden to either party.  Thus the use of the ECJ as the arbitrator is ruled out by the conventions of international law.

Where things become murky is the question of how far an arbitration panel will need to refer to either party’s legal system in the event of a dispute.  Recognition of a conflict of laws between the parties will be part of the basis of any process of judgement.  The way in which judges make their decisions is complex – the subject of the philosophy of law is full of different theories.  It is essential to distinguish the legal framework of the parties from the attitudes and experience of those making judgements.

Just as leaving the EU means leaving its customs union and its single market (in terms of law) so leaving the EU also means leaving the jurisdiction of the ECJ.  It means finding a new route to reconciliation of disputes – a route through international law.   Those arguing that the UK’s recent position on this issue is a ‘climb down’ do not know anything at all, it appears, about the nature of international law.

What did Mrs Merkel really mean when she said that Europe would have to rely on itself for defence?

Some commentators on Mrs Merkel’s speech to a recent party rally on the subject of defence seem to conclude that she was condemning the USA and the UK for deserting Europe.  I think she meant something rather different.  She may well have been rattled by the continued reminders from Donald Trump that the European nations have sheltered under the umbrella of US defence spending for far too long.

A couple of years ago NATO met in Wales and agreed that all members should spend 2.0% of their GDP on defence.  They agreed to that and then went away and did nothing to keep their promises.  Germany is a particular outlier being such a rich country.  Surely 2.0% of GDP is a mere fleabite to a country with huge trade surpluses and a budget in credit?  Somehow Germany’s history seems to have made it difficult for Mrs Merkel to keep to what she agreed in Newport.  Let us look at the statistics, courtesy of Eurostat, the European Union’s official statistical data base.

Of the current 28 member states of the European Union only Greece and the UK spend more than 2.0% of GDP.  Greece tops the list at 2.7% but as its GDP is one third below what it was in 2008 and still shrinking this is not a big contribution to the total.  The UK comes next at 2.1%.  Estonia spends 1.9% but its economy is pretty small. The only other large contributor to the common European defence effort is France at 1.8%.  Germany lags behind at a miserable 1.0%.

Worse still, Eurostat estimates that more than half of European defence spending is on employment costs.  Spending on equipment and particularly on Research and Development is pretty small.  Only the UK and France are substantial spenders in the R and D sector.

When the UK leaves the EU it will leave a big hole.  With 14.8% of the EU total economy it represents 25% of its total defence spending and a whopping 40% of EU spending on defence R and D.

The European nations have been hiding under the US and UK (France excepted) defence umbrella for far too long.  It is time for them to get real.  They say they are going to create a Europe army. First they will have to find the funds to pay not only for some fighters but also for guns, helicopters, ships, tanks and all the other equipment necessary to ensure they can take action if required.  That, it seems to me, is Mrs Merkel’s real message –  Germany has been the target of Donald Trump’s pointed barbs and she is rising to the bait.  If, as seems likely, she is reelected as Chancellor of Germany we should expect a bigger German defence budget.