Flexcit is dead

At the start of a new year, it is common to reflect on the events of the last year and look ahead to the coming year. So I thought I'd reflect on my own experience of the 2016 EU Referendum and how my views have developed over the last year.

In January 2016, I was a relatively new supporter of Flexcit, the self-styled “definitive” Brexit plan, which proposed a phased exit from the EU via EFTA EEA, on the basis that (i) Article 50's 2 years timescale is not enough time to reach a comprehensive exit settlement (ii) remaining in the Single Market for an interim period removed economic risk from exit.

Leave.EU

At the start of 2016, Leave.EU briefly flirted with Flexcit. The response was overwhelmingly negative from the primarily UKIP supporting Leave.EU membership. "No to EU Freedom of Movement, EU Laws & EU contributions" was the common refrain. This was a bruising encounter, but ultimately one I found instructive. The issues of Freedom of Movement, EU laws, EU contributions were totemic because they represent to many people the most obvious ways in which the power to govern ourselves has been diminished.

Leave.EU also hired polling experts from America, who advised that Labour voters would be key to a Leave victory. I suspect this also contributed to Leave.EU's change of heart on Flexcit. But I have to say that the Referendum results from Labour heartlands and the accuracy of Leave.EU's final poll prediction (52-48 for Leave) suggests Leave.EU's pollsters were on the money.

Vote Leave

Vote Leave won the designation for Leave and campaigned under the theme of "take back control" – a simple phrase to cover self-government, sovereignty and democratic control. The issues raised by Leave.EU's membership also appeared during the campaign:

Freedom of Movement. Whatever your views on immigration, it is unarguable that the UK government has ceded power regarding EU immigration. The majority of UK public opinion favours "controlled" immigration, with no discrimination against non-EU citizens and no automatic right to benefits - impossible as an EU member state.

EU Laws. Tabloid tales of barmy Brussels regulations are legend but in truth are usually gross misrepresentation - as was the case with Boris and the Banana regulations (which actually come from UNECE and apply to exporter, not retailers). However, this issue touched a deeper nerve with greater public awareness that we no longer controlled the making of UK law:

- Many trade and technical standards are now international in source. But while countries around the world (USA, Japan, Canada, Australia etc.) implement these standards into their national regulations, the UK has ceded regulatory control to the EU Commission.

- The legal tradition of this country based on common law, habeas corpus, magna carta and "permissive law" (all is permitted unless explicitly prohibited) is being overtaken by EU law based on an inquisitorial, "prohibitive" (all is prohibited unless explicitly allowed) continental legal system.

EU payments. The "£350m per week" claim generated much controversy amid claims of lies and deception. In fact the £350m per week figure is the correct GROSS figure. The NET figure is reduced by the UK rebate and CAP / regional funding, as was frequently pointed out amid huge media attention (which of course was the whole point of the exercise!). Although £10bn per year NET payments is a tiny amount of Government spending, it is still a huge sum of money to most voters - and how that money is spent is not in our control.

Remain Campaign

As expected, the Government / Remain campaign focused on economic risk and the single market. Little attempt was made to make a virtue of membership of a European Political Union. Despite lauding the single market, the Remain campaign dismissed the EFTA EEA option as terrible - “still pay and no say”. Many Remain campaigners claimed that it would simply not be an option - exiting EU would mean exiting EEA as well.

Crucially, in mid-April, Michael Gove said in a speech for Vote Leave that the UK would leave the Single Market. As confirmed by Ameet Gill (David Cameron's director of strategy), Remain seized on this and “spent the next three months trying to hang that round Leave’s neck” - exemplified by statements from David Cameron and George Osborne.

Referendum Result

The Remain campaign have complained that Vote Leave's campaign was based on instinct over intellect and “lies” citing the £350m figure (as discussed above). Yet the Remain campaign was based on an appeal to “fear” and ludicrous statistics (£10 back for every £1 we put in?). Dominic Cummings has written a long but exteremely interesting blog on the Referendum Campaign in the context of our dysfunctional politics and political media and he also explores how political debate might be improved. Put simply, Vote Leave's direct appeal for self-government, to “take back control” was necessary and effective.

Despite some media attention for the interim EFTA EEA option in the last few weeks of the campaign, I find it difficult to argue or believe we had any impact on the Referendum result. It seems to me that those who valued the Single Market and economic certainty over sovereignty and self-government voted Remain – including some who were attracted to the idea of an EFTA EEA option. Conversely those who prioritised self-government and sovereignty voted Leave – including some who favoured the interim EFTA EAA option and understood there was no guarantee of this route being taken.

Nor do I believe that a Leave campaign based solely on Flexcit would have won. Many Leave voters would simply not have been motivated to vote for “Brexit-lite” - especially Labour supporters and the significant numbers of Leave voters who never normally vote. Reluctant Remain voters cowed by Project Fear would probably conclude “Brexit-lite” did not offer sufficient gains to make the risk worthwhile.

Ultimately, the main Leave and Remain campaigns boiled the Referendum choice down to “take back control” versus “don't take the risk”. Although the margin of victory for Leave was narrow, it was significant in triumphing against the status quo and much of the establishment. First and foremost the Referendum provides a mandate for the UK to become a sovereign, self-governing nation. Secondary to that will be pursuit of the best trading terms.

Remain campaigners claim there is no mandate for a “hard” Brexit. But it seems to me that in the context of the campaign there is no mandate to stay in the Single Market, certainly not at the cost of sovereignty. The EU are implacably opposed to reforming the Single Market to accommodate Britain's desire for full self-government, so the inevitable conclusion is that Britain must leave the Single Market.

Beyond the Referendum

So having campaigned for an EFTA EEA interim option, was I disappointed by the Referendum campaign? Am I now worried about the prospect of a "hard" Brexit? In short, am I now a candidate for "Bregret" ? My answer is: No – absolutely not ! Like most, if not all "Liberal Brexiteers", I voted Leave because my priority was self-government and sovereignty.

While I had developed some queries over elements of Flexcit approaching the Referendum (I thought the conformity assessment issue had been overplayed),  I still thought the EFTA EEA interim provided the most likely and safest Brexit scenario. Having continued, to read, question and investigate, I find I have lots more issues and queries regarding Flexcit. I will go into more details in subsequent blog posts, but here is an overview :

- Political and legal considerations. Public support for the EEA option is unlikely, nor can it be guaranteed that EFTA / EU consent will be forthcoming or can be circumvented.

- Single Market Regulations. The UK will remain subject to the EEA acquis (~26% of all EU laws, ~70% of EU Directives). The claims that these regulations are simply handed down from international organisations do not stand up to detailed scrutiny.

- ECJ rulings. The EFTA EEA states fall under the jurisdiction of the EFTA Court, but the key EEA principle of homogeneity also applies to the courts and ECJ rulings also apply via the EFTA Court.

- Interim becomes permanent. Once the UK is safely parked in the EEA, there will be no incentive for the EU to negotiate. The UK will have lost all leverage available on exit and will also have signalled an unwillingness to contemplate leaving the Single Market. Longer term, there is a high risk that the EU will impose an “Associate Membership” on EFTA EEA states.

- Flexcit is not an interim EEA option. Since the referendum, Dr North has clarified Flexcit as meaning the UK stays in the EEA for 20+ years and argues the case for Single Market reform. The argument appears to amount to: “We must leave the EU, it won't reform. We must stay in the Single Market for 20+ years and persuade the EU to reform”.

- Customs Union issues. The EEA option does not provide an “off the shelf” solution. There are many trading issues associated with leaving the EU that EEA will not address, including customs operations and agriculture / fisheries. Consequently, the EEA option may not meet the 2 year Article 50 deadline.

- WTO & Conformity Assessment. The problems associated with conformity assessment and the risk of an “operation stack” scenario have been exaggerated. Negotiating an MRA (Mutual Recognition Agreement) should be straightforward. The WTO option is sub-optimal (for both EU and UK) but does not mean “all trade will literally grind to a halt” (to quote Anna Soubry).

Perhaps the final nail in the coffin is the intransigence of Remainers who now see the Single Market / EFTA EEA as a platform for staying in or rejoining the EU. They reinforce this strategy with Project Fear Mk II, but, we should be sceptical of the hype regarding the Single Market:

- As Andrew Lilico notes, in 2012 the EU Commission estimated that since its inception, the Single Market had added just 2% to GDP averaged across EU member states (with the UK's gains probably less).

- The All Party Parliamentary Group (APPG) in 2013 concluded there still is no "single market in services".

- Numerous commentators suggest anxiety over the Financial Services Passport is overdone, with one even stating "The City needs the EU like a fish needs a bicycle".

Polling by YouGov suggests 68% support for getting on with Brexit, with a Canadian style Free Trade agreement the most popular choice.  There is no good reason why the UK and the EU cannot agree a mutually beneficial trading arrangement outside the Customs Union and Single Market. Alternatives to EEA have been highlighted to provide transitional trade arrangements pending a final deal. The facts and the politics are moving away from Remainers and Flexcit - both of whom want to stay in the Single Market indefinitely. Flexcit (short for flexible response and continuous development) has shown itself inflexible in responding to changed circumstances.

Conclusions

What a year 2016 was. I've certainly learnt a lot and my thinking has evolved considerably from a year ago. Far from suffering "Bregret", I am very confident about our future outside the EU. To sum up my current views in a simple phrase: "Flexcit is dead. Long-live Brexit!"

The Last Straw

This is not an easy blog post to write – but it has been coming for a while.

First, a bit of background. If you've read my blogs, you'll know I have advocated the EFTA EEA option as an interim step for Brexit - based on the the ideas in Flexcit / The Market Solution, written by Dr Richard North, whose EU Referendum blog is frequently referenced in my own posts.

I was something of a latecomer to the EU debate. I first started searching for information beyond mainstream media in early 2015. Following the General election of 2015 and the prospect of an EU referendum, I accelerated my search. I went through as much pro and anti EU info as I could find : think-tanks ; books; various blogs etc – I tried to make sense of the competing arguments and visions.

After many months, I came back to EU Referendum blog and Flexcit and the penny dropped on what they were saying. I'd also read “The Great Deception” by Richard North & Christopher Booker (an excellently researched history of the EU up to rejection of the EU Constitutional treaty in 2005). I had reached a clear conviction that we needed to leave the EU, but that it would be complex and would need to be phased – especially to avoid trade and economic fall-out.

I actually went as far as setting up a monthly donation to EU Referendum – nothing spectacular, but I wanted to support what I saw as research far ahead of the crowd. I also responded to the call for bloggers issued by Pete North (Dr. North's son & working associate) and started blogging in the autumn of 2015. Later that year, a private message group was set up on Twitter for EU Referendum and associated bloggers, which I was invited to join.

A tale of two bloggers

I happily concede I was very much a newby and a junior figure in the group. I privately wondered if I was only invited because of my donation. Certainly there were 2 members of the group who stood out for their efforts and impact:

Roland Smith. Involved in the EU debate for decades – widely known as “White Wednesday” on social media. In March 2016, Roland voluntarily gave up work in the run-up to the Referendum in order to campaign full-time and promote Flexcit / interim EEA ideas in Westminster via his ASI institute connection - with notable success.

Ben Kelly has been an active blogger for many years (via “The Sceptic Isle” and Conservatives For Liberty) and was especially prolific during the Referendum campaign. He brought a significant social media profile to the group and also edited the Leave Alliance web site (Leave HQ) during the referendum.

But dont just take my word for it. Pete North marked Roland and Ben out for special praise on the eve of the Referendum vote here.

Yet within a matter of weeks of the Referendum victory, Dr North had attacked the reputations and integrity of Roland and Ben and accused them both of “plagiarism” and “intellectual theft”.

Roland had promoted interim EEA ideas via the ASI but shorn of their Flexcit label and Dr North's name in order to attract new audiences. This was undertaken with the full knowledge of Dr North and was a notable success - as confirmed by Dr. North himself. Furthermore, on 2nd June, the ASI had invited Dr North to write a blog post explaining Flexcit and how the ASI articles had drawn upon his ideas. The flashpoint for Dr North's change of attitude seemed to be an apparently innocuous blogpost written by Roland on June 10th referencing some comments by Daniel Hannan that were reported in the Evening Standard. Dr North has a longstanding antipathy to Hannan – who Dr North also accuses of intellectual theft. A subsequent ASI post co-authored by Roland Smith (after the Referendum) on the advantages of an interim EEA option prompted Dr North to launch a full-on attack on Roland. By this time, various voices had come out in support of the interim EEA option with no apparent connection to Roland or ASI. The ideas were in the public domain and out of anyone's control. Dr North never did take up the invitation to write his own post for the ASI.

During the Referendum campaign, Ben had written a number of guest articles for newspapers and web sites – again interim EEA ideas were floated without explicit reference to Flexcit or Dr North in order to gain a wider audience. Ben's crime was to write a similar article after the Referendum for the IEA. Dr North reserves particular venom for the IEA - in his eyes they “rigged” their 2014 IEA Brexit competition and “snubbed” his Flexcit submission. A full-on attack ensued, including a particularly low blow by Pete North regarding some payments made to Ben. As far as I am aware, the majority of funds collected via EU Referendum and Leave HQ web sites were directed to supporting Pete in his full-time blogging activities. As someone who donated to these funds, I am extremely glad that some of the money made its way to Ben. His efforts in the referendum campaign were unstinting – he deserves every penny.

A question of ownership and loyalty

So what exactly is the “intellectual property” that has allegedly been stolen ? Dr North describes the essence of Flexcit as

(i) The EEA option as an interim step. I can confirm that Dr North and Flexcit was how I came across this concept. But there have been suggestions of the EEA option as a way to leave the EU pre-dating Flexcit and I have also seen other suggestions that  EEA could be used as a transition ahead of a longer term deal that are not associated with Dr North. I do not see how Dr North can claim sole ownership over this idea.

(ii) EFTA/EEA members have independent voice/veto in international organisations (unlike the UK) where international regulations and standards are framed. It is quite possible that Dr North was responsible for revealing the role of international organisations in framing regulations and standards, in particular the discovery of the“ diqule ” (dual international quasi-legislation). Whether revealing the way international governance works is copy-rightable is another matter.

It is clear that Dr North sees these concepts as his own personal intellectual property. But what is he expecting as a result ? Royalties ? The right to stop other publications by injunction ? He has stated he simply wanted acknowledgement that articles are based on his ideas. But ask yourself why license was given during the Referendum campaign to re-use material without Dr North's name or the Flexcit brand – and why such a strategy was so successful in gaining traction.

The answer is self-evident – Dr North is toxic to the cause he espouses. He has a long-standing reputation as a hostile, angry person and a history of bitter fall-outs. He alluded to this history on his blog in July when he launched an attack on Roland Smith . In reality, he actually has a much longer list of people and events that he views as “betrayals”. Having seen the appalling treatment of Roland and Ben, I have plenty of reason to doubt Dr North's version of past events.

A classic example is provided by the Leave Alliance launch of Wednesday 16th March. Two conservative MPs attended but walked out after Dr North had insulted Vote Leave, its leaders and Conservative MPs. The events are described on Dr. North's blog and Pete North's blog – judge the tone for yourself. Pete North states “the consensus is that Dad arriving late and in a foul mood spoiled the presentation a bit …. we had yet more calls to moderate behavior and language” before dismissing such calls outright. In other words Dr North's own supporters were uneasy over events but got short shrift. This was the last straw for one particular member who subsequently left the group.

The case for Dr North's intellectual property is thin at best and the charges of plagiarism against Roland & Ben are baseless. Will anyone who has followed Roland and Ben not be aware of their association with Flexcit and Dr North ? Does anyone seriously believe Roland & Ben wrote the articles for personal gain ? Their crime appears to be that their loyalty was to securing Britain's independence, not to the promotion of Dr North and the denigration of his enemies.

The Last Straw

Dr North spent much of the rest of the campaign attacking Vote Leave and the Leave campaign. He assumed defeat was inevitable and seemed to be relishing the prospect of revenge on those he would blame. Nor did the Referendum victory mellow him at all. He continues to attack all and sundry while complaining that “the bubble” ignores him.

So what happens when someone in “the bubble” approaches Dr North, as John Mills (head of Labour Leave) did recently ? Dr North published their exchange of letters in his "The Mills File" blog post of 27th August. Mills is clearly trying to understand what can be achieved as a minimum within the 2 years Article 50 time-frame. Dr North's responses had a familiar "passive aggressive" edge.

Granted, Mills has weaknesses in this area of debate (like many public figures in Westminster), but he at least accepted the need for additional protocols/agreements over and above the WTO framework and was aware of the financial services passporting versus equivalence debate. But Dr North's focus seemed to be on attacking his "enemies" for proposing options that are impossible, specifically because of the 2-year Article 50 timescale. Notably:

North describes negotiating an MRA as a hugely complex and time-consuming task, although previous posts by him and Pete North paint a different picture.

North highlights issues associated with customs code and drafting new customs law. He neglects to mention that the Flexcit / EEA option will also suffer from the same drawback.

Finally, in the last response, North states “Even the Efta/EEA agreement could be very tight, in two years. We could even find ourselves having to seek an extension of time.”

The admission that EFTA/EEA may require an extension of the 2 years deadline is critical. In fact, Dr North has admitted this several times since the Referendum:

24/6/16: “Even with the best will in the worlds - adopting the EEA core acquis unchanged - concluding the settlement within two years is going to take Herculean effort.”

29/6/16: “We could, for instance, apply for a three-year extension, making five years in all – thus taking the time-limit off the agenda. We could even make the total ten years.”

12/7/16: “leveraging an early notification against an agreement by the EU to extend the negotiation period – say to five years”

2/8/16: “Even with a fair wind, though, with every possible stratagem adopted, no realistic assessment will suggest that there is any reason for optimism. The chances of completing negotiations within two years have to be considered slight.”

Note also what Dr North states regarding the bi-lateral option in his  Monograph 4:

"On this basis, it is highly improbable that a de novo (bespoke) bilateral agreement under the aegis of Article 50 could be concluded in two years - something which is being increasingly recognised. Five years is probably more realistic. Whatever their attractions in theory, the bilateral options seem hardly viable, purely on the grounds of the time needed to negotiate them."

If an extension is contemplated for the EEA option, it can be contemplated for other bi-lateral options. The core Flexcit argument is that the constraints of Article 50 dictate the EEA option as the only option - that no longer stands.  

This is a highly significant change, but not an isolated one. A series of posts over recent months have changed the nature of Flexcit considerably. Co-incidentally, the first of these posts appeared within days of Dr North accusing Roland of thievery. It is as if North feels that the “old” Flexcit has had its day, and new ideas are required to create a “new” Flexcit, distinct from the one that in his own mind has been “stolen” by imagined "enemies". 

Flexcit is essentially the container for Dr North's research, but it also seems to be the vehicle for his own private wars.  For me it has become an unreliable source.

Ultimately, the Mills File post was the last straw for me. Dr North complains of “the bubble” ignoring him - in reality he does not want to share his ideas with “the bubble” - as evidenced by his treatment of Roland and Ben, who were singularly successful in promoting these ideas. It seems to me that Dr North is actually inside his own bubble – one where only he is right and everyone outside his bubble is to be attacked as “morons”, “children” or "behind the curve".

I will happily acknowledge I have learnt a lot from the Norths and will acknowledge their work in my posts. They do provide unique and interesting research around trade and regulations and I would recommend reading their blogs – just try and ignore the angry rant stuff. I have wondered for a while whether I should just drift away from the group quietly (as others have done). In airing my views on this blog I have probably set myself up for some brick-bats and vitriol, although I may escape that if I am considered to be too small-fry to bother with, e.g. “why give him the publicity”. In the end I have decided to be honest about my views – I hope it is the right decision.

A profound choice

This referendum is the most momentous decision we will take in our lifetimes. The Referendum should be hinging on big questions like our national identity, who governs us and how do we see our place in the world for the next 40 years. There should also be a clear understanding of what the EU's purpose and aims are and whether we share those aims. Perhaps the most succinct statement on this was provided by Francois Hollande, in an exchange with Nigel Farage last Autumn "Do you really want to participate in a common state?"

The EU's aim is a single European State

There should be no doubt that the purpose of the EU is to create a single European state, governed from Brussels, absorbing formerly independent and autonomous nation states. But don't just take my word for it. Here's some quotes from European politicians over the years:

"We have sown a seed... Instead of a half-formed Europe, we have a Europe with a legal entity, with a single currency, common justice, a Europe which is about to have its own defence. " — Valery Giscard d'Estaing, President of the EU Convention, presenting the final draft of the EU Constitution, 13th June 2003

"The proposals in the original constitutional treaty are practically unchanged. They have simply been dispersed through old treaties in the form of amendments. Why this subtle change? Above all, to head off any threat of referenda by avoiding any form of constitutional vocabulary!" — Valéry Giscard d'Estaing, 2007, referring to the the Lisbon Treaty achieving the aims of the rejected EU constitution

"The Constitution is the capstone of a European Federal State." — Guy Verhofstadt, then Belgian Prime Minister, now an MEP.

"The European Union is a state under construction." — Elmar Brok, Chairman of the European Parliament’s Committee on Foreign Affairs

"Of course the European Commission will one day become a government, the EU council a second chamber and the European Parliament will have more powers." — German Chancellor Angela Merkel addressing MEPs,  November 2012.

"We need a true political union ... we need to build a United States of Europe with the Commission as government and two chambers - the European Parliament and a "Senate" of Member States ... European Parliament elections are more important than national elections ... This will be our best weapon against the Eurosceptics." — Viviane Reding, Vice-President of the European Commission, January 2014

“For my children’s future I dream, think and work for the United States of Europe” — Matteo Renzi, Italian Prime Minister, May 2014

Also, we have our very own Kenneth Clarke, in a rare moment of honesty from a British pro-EU politician:

 "I look forward to the day when the Westminster Parliament is just a council chamber in Europe." — Kenneth Clarke, Conservative Chancellor in International Currency Review Vol 23 No 4 1996 

This is reinforced by the proposals for the next EU treaty, The Fundamental Law of the European Union, published by the federalist Spinelli Group of MEPs, through the Bertelsmann  house in late 2013. The pre-amble contains a a telling paragraph:

"This proposal for a Fundamental Law of the European Union is a comprehensive revision of the Treaty of Lisbon (2007). Replacing the existing treaties, it takes a major step towards a federal union. It turns the European Commission into a democratic constitutional government, keeping to the method built by Jean Monnet in which the Commission drafts laws which are then enacted jointly by the Council,representing the states, and the European Parliament, representing the citizens. All the reforms proposed are aimed at strengthening the capacity of the EU to act."

Nor should anyone believe that this is a recent development. The EU was always conceived as a vehicle for supra-national federal union, dating right back to its founding organisation, the European Coal & Steel Community (ECSC) established in 1951:

"Through the consolidation of basic production and the institution of a new High Authority, whose decisions will bind France, Germany and the other countries that join, this proposal represents the first concrete step towards a European federation .."  — The Schuman declaration May 1950

"By the signature of this Treaty, the participating Parties give proof of their determination to create the first supranational institution and that thus they are laying the true foundation of an organised Europe.” — Europe Declaration made on 18 April 1951, at the signing of the Treaty of Paris establishing the ECSC

Supra-national EU erodes national sovereignty

Perhaps the biggest mis-conception in the public mind  is to confuse the EU with other international organisations.  Nothing could be further from the truth.

Organisations such as the UN, NATO, WTO, the Commonwealth and the myriad of organisations making international regulations / standards (e.g. UNECE, Codex Alimentarius, ILO) are inter-governmental. They are based on bi-lateral or multi-lateral agreements between sovereign governments as equals or partners. These agreements will include specific and limited obligations and commitments entered into freely for mutual benefit between the partners (e.g. Nato's mutual defence clause, trade agreements that open markets etc).   Nations are free to co-operate, form alliances and partnerships on an issue by issue basis. Decision making is based on consensus, voluntary opt-in and allows for opt-out or right of reservation. For example, NATO does not have majority voting: each nation makes its own decision regarding military action and is free to leave inside one year under a recognised process - as France did in the 1960's .

The EU is uniquely a supra-national union. The EU treaties create over-arching legislative, executive, and judicial authorities.  Powers or competencies are passed from the member states to the union, and the union then exercises power in these competencies in a sovereign manner. Hence the obligations and commitments made by member states are essentially open-ended. The relationship is hierarchical rather than multi-lateral, as member states are subordinate to the union.  The member states are fixed in a permanent alliance with each other and the Union will tend to represent the member states in international forums. Decision making is by majority rather than allowing voluntary opt-in or right of reservation. If the pro-EU camp are to be believed, leaving the EU is so complicated and fraught as to be practically impossible - although they would wish us to believe that so as to deny us a Leave option.

The argument is often made that there is no such thing as absolute sovereignty. It is certainly true that (i) national decisions are constrained by considerations for neighbours, allies and  other inter-national factors (ii)  joining & co-operating with allies is often necessary.  This of course has always been the case. Sovereignty is not unfettered power, it is the ability to choose our path/allies/commitments and accept the consequences.  But it is clear that membership of the supra-national EU means that we increasingly pass decision making to the EU and are unable to choose our allies from around the globe - that is real loss of sovereignty.

EU institutions & democratic deficit

As indicated by Angela Merkel, Vivian Reding and many others, the EU's political institutions mirror that of a state. There are 2 revising chambers: the EU Parliament representing the peoples of Europe and the and EU council representing the members states.  The EU commission is referred to as a "supreme government" by European federalists but as "just a civil service" by UK Remain campaigners trying to downplay their significance. In fact the EU commission is both civil service AND government.  It has sole power to initiate and propose new or amended legislation (as supreme government) and also undertakes the drafting of all legislation (like a civil service). Commissioners are appointed by national governments and swear an oath of loyalty to the EU.

The European Court of Justice acts as a supreme court for ruling on the EU treaties and EU law. The Lisbon treaty also includes the Charter of Fundamental Rights & Human Rights legislation as general principles of EU law (Article 6). Asylum Law is also included in EU law via Article 18 of the Charter of Fundamental Rights. Recent UK government proposals to amend the European Communities Act 1972 and assert Parliament as sovereign were abandoned. The supremacy of European Union Law was established as long ago as 1963, in the "van Gend en Loos" case and subsequent ECJ case history increases the scope of EU judicial supremacy.

This institutional structure is essentially the one proposed by Arthur Salter in his 1931 publication "The United States of Europe", based on the League of Nations (which had a Secretariat, Council of Ministers, Assembly & Court). Crucially, Salter proposed a Secretariat as a permanent body of international civil servants, loyal to the new organisation (not to the member countries) and with supreme authority over national ministers. Salter also suggested splitting up member states into regions to further erode nationalism - all in the name of peace and avoiding further Franco-German conflict. Salter's close friend and former colleague at the League of Nations, Jean Monnet, adopted this blueprint for the EU's fore-runner (the ECSC).

The EU suffers from democratic deficit, not just because of these institutions but also due to the lack of a European identity, or "demos". The EU commission recognised this issue in its white paper on European governance in 2001. Citizens of the member states see democracy in terms of national issues and vote accordingly. There is a continuing decline in turnout for EU parliamentary elections. But what emerges from the white paper is not a proposal to empower the people, or return powers to member states, but an approach to undermine existing national institutions and "europeanise" them. You can read a well-researched  critique of this white paper here  (ghost-written by Dr R North for a younger Nigel Farage before he became pre-occupied with immigration).

It seems clear that there is simply no room for national democratic self-government in the EU. The EU is built upon a plan dating from 1931, when many intellectuals preferred rule by technocrats and had little confidence in democracy. Its anti-democratic nature is hard-wired.

EU's growing competencies erode national governance

The EU's competences, or powers, are defined in Articles 2-6 of the The Treaty of the Functioning of the European Union (TFEU) and represents a large range of powers already transferred from the UK:

• The UK  has no power to act in exclusive competences such as commercial/trade policy, tariffs, competition rules etc. 
• The UK can only act in shared competences where the EU has not (yet) legislated. The UK's scope is increasingly restricted as the EU increases its activities. For example, an Energy Union is currently being planned. The UK has a general opt-out of Security & Justice, with 31 specific opt-ins for measures such as the European Arrest Warrant.
• The UK's economic, employment and social policy must fall within EU guidelines and co-ordinate with other member states policies. Despite the € opt-out, the UK is still subject to the EU's competence on economic policy which aims to achieve convergence for monetary union. 
• Even in areas where the UK is not prevented from acting, it is not free from EU actions in the same field to implement programs, conduct common policy or supplement the UK's actions. 

The EU also has competence for external affairs, specifically to "define and implement a common foreign and security policy, including the progressive framing of a common defence policy." This policy is defined and implemented by the European Council (Heads of State) and the Foreign Affairs Council (consisting of Foreign, Defence & overseas aid ministers) acting unanimously. So the UK retains a veto (with some exceptions as defined in Article 31). However, the direction of travel is clear:

• The Lisbon treaty established: (i) the "High Representative of Foreign Affairs", essentially the EU's foreign minister; (ii) the European External Action Service (EEAS), essentially the EU's foreign ministry and diplomatic corps. 
• Lord Owen, the former foreign secretary, in a recent speech noted "the range and the activity of the EEAS are inexorably increasing  and so is its cost ... At every stage this creep is resisted by the British government initially and then absorbed. Meanwhile we have seen substantive cuts in the budget of the Foreign Office". 
• There have been many european voices (including President Juncker) calling for an EU army, an EU Defence Union and so on. A highly-informed and balanced analysis on Defence and Brexit can be found at ThinkDefence blog. While he sees little change in the short to medium term, he concludes "the question we should be dealing with, do we want a single EU state with a single EU Navy, Army and Air Force? ... The long term points to ever closer political, and that means military, union."

The EU usurps national representation in international organisations

But perhaps the most dramatic and least understood loss of national power is the way the EU increasingly usurps the role of national governments on the international stage.  The UK is increasingly bound by common policies and the requirements of Article 34, which as a recent blog by LostLeonardo explains, means the loss of influence, vote and right of reservation in international organisations.

With legal identity secured by the Lisbon Treaty, the EU is  keen to upgrade its "limited status" in "organisations and fora where important decisions are taken" (see Vice-President Ashton's Strategy communication to the Commission, dated 20.12.2012). The implication is that member states will be reduced to passive observers and in the fullness of time lose representation entirely. The EU has already assumed competence in the International Maritime Organisation, with predictably negative results (See Pete North Politics blog). Britain is the world's No.2 in services provision, but we have no national representation at the  Trade in Services Agreement (TiSA) negotiations, unlike EFTA states Norway & Switzerland, unlike Commonwealth allies Canada, Australia & New Zealand.

The direction of travel is clear. The UK will end up with as much influence on the international stage as Texas or California.

Conclusion - The honest Referendum choice

Voting to Remain is not a simple "stay as you are option". As Allister Heath states in the Telegraph: "Comfortable, middle-class voters who are considering sticking with the devil they believe they know need to think again. Voting to remain is a far greater leap into the unknown than voting to leave. It’s self-evidently normal to be independent and prosperous: just look at America, Australia, Canada or Singapore. But there are no known examples of a previously independent democracy being subsumed into a dysfunctional, economically troubled technocracy and doing well as a result. As mad gambles go, it is hard to think of anything worse."

We need to recognise the EU for what it is - a political project to create a single state, governed by bureaucracy/technocracy instead of by democracy (the consent of the people). The Referendum can be boiled down to one very simple choice : Should Britain be a self-governing nation, trading and co-operating with nations in Europe and around the world ? Or should Britain be subsumed into an undemocratic United States of Europe ?

Single Market - UK trade with EU

In a series of posts, I'm aiming to discuss the "Single Market", one of the major topics of  the EU Referendum.  In this post, I will be looking at UK trade with the EU.

UK Exports as a proportion of UK economy

The Office for National Statistics (ONS) has analysed the importance of the UK's trade relationship with the EU , which shows for the year 2014:
- UK exports to EU = £227 billion (44.65% of total exports)
- UK exports to non-EU = £281 billion (55.35% of total exports)

However, the ONS figures overstate the real level of UK exports to the rest of the EU, due to 2 separate distortions:
- "Rotterdam-Antwerp Effect" where exports destined for non-EU countries are routed via the ports of Rotterdam or Antwerp and so are recorded as exports to Netherlands or Belgium,
- "Netherlands Distortion", where investments and subsequent income are channeled through  "brass-plate" holding companies for tax purposes by investors domiciled in other countries.

The ONS have not attempted to estimate these effects, but have made reference to these distortions in recent bulletins.  The think tank Global Britain have analysed the effect of these distortions and estimated that over 11% of the trade recorded as exports to the EU was in fact exports to the Rest of the World, which would suggest that the share of UK exports is more likely to be:
- UK exports to EU ~40%
- UK exports to non-EU ~60%

The ONS "Composition of Demand" statistics for 2013 show that UK exports contribute 23% to the UK economy.  Based on this, we can estimate that the contribution to the UK economy from UK exports to EU as 40% x 23% = 9.2%.

UK Trade Deficit with EU

The ONS figures for 2014 show a UK trade deficit with the EU of £61 billion, i.e. we bought more goods/services from EU states than EU states buy from us.  In fact, a trade deficit has been an enduring feature since the UK joined the then common market in 1973 (despite having been in trade surplus with Europe during the 1950's and 60's). The table below is based on ONS statistics and has been extracted from Business for Britains "Change or Go" document. 

This deficit has widened appreciably in recent years, due in part to the on-going Euro crisis, which is depressing demand from most Eurozone states and providing an artificial boost to German export competitiveness.

Although the UK has historically recorded a trade in goods deficit with the EU, its trade in services balance with the EU is much more favorable, running a surplus in each year since 2005, which reached £15.4 billion in 2014.  While the Single Market was theoretically implemented in 1992, there is unfortunately still no effective single market in services and little progress is being made to remove trade barriers in services - which is a particular disadvantage to the UK (ranked number 2 in services globally after the USA).

UK Trade with Rest of the World

By contrast, the UK's trade with the Rest of the World is typically in balance or surplus, as per the ONS seasonally adjusted chart for 2015 Q2 in the diagram at the top of this page.  UK exports have been re-orienting away from the EU and towards the Rest of the World since before the millennium, reflecting the fact that the EU is a declining market place in the world, down to 17% of Global GDP and forecast to fall further.  Global markets provide the best prospects for UK trade growth and trade balance.

Insider Advantage ?

It is an oft-repeated claim that membership of the EU gives the UK an essential trade advantage. However, a detailed analysis of UK export figures 1960 - 2012  (undertaken by Michael Burrage for the cross-party think tank Civitas) shows no positive impact on UK trade with other members. Britain's trade with other EU nations accounts for no more of its trade with all leading economies than it did on joining the European Economic Community in 1973; UK exports to non-EU nations Iceland, Norway and Switzerland have increased enormously over the same period.

".. evidence presented above contradicts again and again those who wish to claim that the UK has enjoyed an insider advantages in the Single Market. The growth of UK exports to other founder members was low when compared with UK exports prior to its launch, low when compared with the exports of goods of 27 non-members to the other founder members of the Single Market, and low when compared with the exports of services of 21 non-members to the other founder members. It was also low when compared with UK exports of goods and services to non-member countries. There was therefore no prima facie evidence that the UK enjoyed any insider advantage, and therefore no obvious place to look for it."

"It is similarly hard to accept the idea that there are disadvantages to non-membership, since the exports of goods and services to the EU of so many ‘voiceless’ and ‘powerless’ nations, both developed and less developed, who had never been ‘at the table’ or even ‘in the overflow room’, have grown faster than those of the UK."

Conclusions

It would be wrong to suggest that the UK's trade deficit is entirely due to membership of the EU. The UK has historically suffered from lower productivity, skills levels and investment compared with the likes of France, Germany, Netherlands etc. UK governments have shown themselves quite capable of pursuing damaging policies without assistance from Brussels.

Nor is trade with the EU the fount of all prosperity that it is often portrayed as.  UK exports to the EU contribute less than one tenth to UK GDP - as per calculations above and in line with a 1999 report from the National Institute of Economic and Social Research (NIESR) which looked at how many jobs were linked to trade with the EU.

The myth of "one-in-ten / 3 million jobs at risk" derives from the 1999 NIESR report.  As reported in the Telegraph, Britain in Europe (campaigners for UK to join the Euro) used this report in 2000 to claim that these jobs "depend on the EU".  Dr Martin Weale, the director of the NIESR, was so outraged by this misuse of his study that he called it “pure Goebbels”, and said “In many years of academic research I cannot recall such a wilful distortion of the facts.”  His report had in fact concluded that almost all of these jobs would exist whether Britain were a member of the EU or not.

The political reality is that it will be in everyone's interest to ensure continuity of trade.  If 3m jobs are at risk in the UK, then 5m jobs are at risk in the EU (given the UK's trade deficit with the EU). Furthermore, trade is now incredibly inter-dependent.  For example, the UK manufactures and exports car engines which are often incorporated into German cars subsequently imported to the UK. Complex international supply chains are at the heart of modern commerce.  An abrupt halt to trade between EU and UK would risk a "cardiac arrest" for international trade.

The key question is does trade with the EU have to entail integration in the political structures of the EU ? There are many trade blocks around the world (e.g. NAFTA, ASEAN etc), but only the EU requires political union of its members and removes the right of veto.  Fortunately, membership of the European Union and participation in the Single Market are not one and the same, as we will explore in a subsequent post.

Foundation of the EU - Supra-national not Inter-national

In this post,  I will try to briefly highlight the foundation of the EU and in particular the tension between the "Supra- national" EU and British preference for "Inter-national" co-operation (i.e. an "Intergovernmental" approach).  Once again, I have gleaned this primarily from “The Great Deception” written by Christopher Booker and Dr Richard North –  available to download as a PDF here.

An "intergovernmental" organisation is based on self-governing nation states co-operating willingly - the participating nations states remain independent and autonomous.   By contrast, a "supranational" organisation sits above nation-states - powers and decision making are transferred from participating state to the "supranational" organisation.

Post-war International Co-operation

In the aftermath of World War Two, Britain was at the forefront of international co-operation that led to the founding of many "inter-governmental" institutions, including: 

• United Nations - the successor to the League of Nations, but this time with participation of the USA;
• World Bank & International Monetary Fund (IMF) - to avoid another financial crash that led to the Depression; 
• General Agreement on Tariffs and Trade (GATT) - to lower tariffs world-wide and avoid the protectionism that prolonged the Depression and also to promote free trade.  GATT was superseded in 1995 by the World Trade Organisation (WTO), another "intergovernmental" organisation to promote free trade around the globe. 

Britain's Intergovernmental Approach to Europe

Contrary to views commonly held today, Britain also played a leading role in the European arena in the post-war world, pursuing an “Intergovernmental” co-operation and “Free Trade” agenda:

• The “Council of Europe”, an intergovernmental organisation proposed by Churchill (1946) and brought into existence by the 1949 Treaty of London.  This organisation was by-passed by Monnet in setting-up the European Coal and Steel Community in 1951.  Nevertheless, Britain signed an agreement of ‘association’ with the European Coal and Steel Community in 1954, with a commitment to friendly co-operation.
• Britain led the creation of the Western European Union (WEU) an "Intergovernmental" organisation and military alliance to provide mutual defence.
• The Organisation of European Economic Co-operation (OEEC) was formed in 1948 to administer the distribution of Marshall Aid.  At the insistence of Britain, Sweden and Switzerland  this was a strictly ‘Intergovernmental’ organisation, controlled by a ‘Council of Ministers’ making decisions on the basis of unanimity. 
• Britain & Ludwig Erhard (German Minister of Economics and "Father of the German economic miracle") proposed using the OEEC as the infrastructure for a Free Trade Area Common Market 
• When this proposal for a Free Trade Area Common Market was rejected, Britain led the creation of the "Intergovernmental" European Free Trade Area (EFTA) – established by the Stockholm Convention in Jan 1960 it comprised 7 countries: Britain, Norway, Sweden, Denmark, Switzerland, Austria & Portugal.
• Britain promoted intergovernmental co-operation in a wide range of fields.  For example, in civil aviation (where it was a world leader) : Eurocontrol was agreed in 1960 and provided a Europe-wide system of air navigation safety; the Supersonic Transport Aircraft Committee was established which eventually led to the building of Concorde.

Monnet's Supranational Europe

Britain's "Intergovernmental" approach to Europe was an anathema to Monnet, characterised by his verdict on the OEEC "the OEEC’s nothing: it’s only a watered-down British approach to Europe – talk, consultation, action only by unanimity".  At the end of the 1940’s Jean Monnet renewed efforts to establish a “Supranational” United States of Europe based on the model described by Salter - in diametric opposition to Britain's approach.

A hallmark of Monnet's approach was to use a "beneficial crisis" and then advance his ideas via a public advocate.  In spring 1950, French demands regarding West Germany's coal & steel industries were the "beneficial crisis" and Robert Schuman, the French Minister of Foreign Affairs was his advocate.  On 9 May 1950, Schuman made a declaration (prepared by Jean Monnet) proposing integration of the French and German coal and steel industries: 

"Through the consolidation of basic production and the institution of a new High Authority, whose decisions will bind France, Germany and the other countries that join, this proposal represents the first concrete step towards a European federation ...."

The European Coal & Steel Community (ECSC) was founded by the Treaty of Paris in 1951 when The Six members states (France, West Germany, Italy and the 3 Benelux states) handed over control of their steel and coal industries to this new “supranational” organisation.   “Qualified Majority Voting” was used in the Council of Ministers.  Jean Monnet became the first President of the “High Authority”.

Monnet then proposed a ‘Supranational’ European Defence Community (EDC), with a European Army run by a European minister of Defence and Council of Ministers, a common budget and common arms procurement policy.  Rene Pleven (French Prime Minister) was the public advocate, but the initiative met with sustained opposition and eventually failed.  Consequently, Britain led in the creation of the "Intergovernmental" WEU to provide mutual defence.  It is worth noting that from 2000, the WEU’s capabilities were transferred to the EU and the WEU was wound up in 2011 - there have since been fresh moves within the EU to create a Single European Army.

In response to the rejection of the EDC, there was a change of tactics: the language was changed with phrases such as “European Government” and “Federal” being avoided; as exemplified by the Francois Duchene quote at the start of this blog.  Political integration was to now proceed under the guise of economic integration.

Monnet resigned as President of the High Authority and began work on "economic" integration. Paul-Henri Spaak (Belgian Foreign Minister) composed The “Benelux Memorandum” (based on a draft by Monnet) which called for a Common Market including integration of transport, energy, nuclear energy and social legislation.  Tellingly, the phrase “United States of Europe” in the original draft was removed to give more emphasis to the idea of an “economic community”.

Spaak rejected Britain & Ludwig Erhard's suggestion of a Free Trade Area using the existing OEEC governance, as it  ‘offered no prospect of a European political union’.  Instead, the Common Market was implemented as a Customs Union with a common external tariff wall erected against non-members – i.e. focussing on integration within the European Economic Community rather than an expansion of free trade. 

The Common Market treaty was signed in 1957 in Rome.  Although commonly believed to be a purely economic agreement, the Treaty pre-amble includes the declaration to ‘lay the foundations of an ever-closer union among the peoples of Europe’. 

Subsequent treaties have continued the transfer of powers from the member states to the “Supranational” EU.  Executive power is held by the European Commission, the equivalent to Salter’s “Secretariat”, a body of civil servants who owe loyalty to the EU, not member states.  Most decisions are via Qualified Majority Voting, i.e. national vetoes have been mostly eliminated.   Just as Salter & Monnet envisaged. 

Conclusion

There is a historic difference between the "Supra-national" nature of the EU and Britain's preference for "Inter-national" co-operation, which helps explain why the UK has never felt comfortable inside the EU and why the UK is often seen as the “awkward” member. 

It should also be understood that the EU is something of an anomaly as the only recognised Supranational Union in the world.  By contrast,  the "intergovernmental" organisations created after WW2 are still the dominant global institutions, i.e. UN, NATO (which has been the cornerstone of Europe's defence & security for almost 70 years), IMF & World Bank (which still underpin the world's financial systems) and GATT / WTO, which has been the major force enabling Global trade.  Crucially, the WTO along with a plethora of other "intergovernmental" institutions (e.g. UNECE, ILO, Codex Alimentarus etc) is driving the emerging Global Single Market which has effectively made the EU redundant as a law-maker for the Single Market.

Fundamentally, the choice for Britain in the Referendum is the same as it has been for the last 65 years: 

• Should Britain "Trade and Co-operate" with nations across the Globe  as a self-governing nation-state ? (i.e. an "Inter-governmental" approach)
• Should Britain commit to a "Supra-national" EU, where the EU sits above the member states (as a form of Government of Europe) and where the EU represents the member states around the world ?