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Westlake Legal Group > Posts tagged "Canada"

Roderick Crawford: We have interests in the rest of Europe, but must be free to run our own foreign policy

Roderick Crawford works on conflict resolution in countries such as Yemen, South Sudan and Iraq, and on Brexit-related matters. He is a former editor of Parliamentary Brief.

One could be forgiven a sense of déjà vu as we enter the second round of accelerated talks, this time in London. The high hopes of breakthrough at the start of last week’s talks were dashed as they broke up on Thursday last. The same sticking points remain: the legal structure of the agreement, level playing field commitments, including state aid, and of course fisheries. Specific details have not been released, so it is hard to comment on why the progress on getting agreement on underlying principles has failed to materialise.

Though working through the underlying principles of the agreement should help identify where the barriers to agreement lie, a look at the overarching principles of the negotiating positions of the two parties may throw better light on the lack of progress.

Last month, Der Spiegel ran an interview with the Anglophile former German Ambassador in London, Peter Wittig; he provided a revealing glimpse into the EU’s perspective on the negotiations. Asked whether, in effect, the EU should accept a hard Brexit and let the UK go, he says, no:

‘We should continue to endeavour to tie Britain as closely as possible to the European Union. Europe can only survive in the competition between the USA and China if it is strong and united. I always thought it was good that the Federal Government was the voice of pragmatic reason in all these difficult negotiation phases. I advise everyone not to think about the short-term effect, but to keep a strategic eye on where Europe should be in five, ten or 15 years.’

The quote is interesting because it is part of an intra-German conversation from a friend of the UK expressing pragmatic views on the big picture in which Brexit sits. While the UK has been caught up in its own arguments and political storms – and of course running ourselves down – we have lost sight of the impact of Brexit on the EU: it has been considerable.

The EU has lost its only global city, its only global finance centre, its most dynamic services economy, 12 per cent of its consumers – more when weighted for income – and its only universities ranked in the world’s top ten. It has lost a major pillar of good governance (the UK was a consistent upholder of the EU’s rules-based system) and a source of sound counsel.

As the EU looks to develop its common foreign policy and defence co-operation, it does so now from a far weaker base. The UK was one of two EU permanent members of the UN Security Council, one of two nuclear powers.

It had the only blue-water navy capable of working with the US; China has just achieved a two aircraft carrier capability – the UK will soon be there, too. It has a battle-tested professional army and air force. The UK alone had the capability of power projection across the world – albeit with limitations – and the will to do so. The Foreign Office, despite its shortcomings, is still world class and the UK’s influence is, arguably, stronger across the world than any single EU member state.

The EU is diminished, while the fault lines on which it sits become more unstable. To its east, Russia is reviving in confidence as its actions in Ukraine, Syria, and its challenges to the West demonstrate. Turkey has become a regional player, outside of the NATO fold, and looks to a future untied to the EU. The Middle East and North Africa are unstable, and a source of potential and probable mass migration to the EU driven by demographics, economic and political failures and climate change.

The UK looks out across the North Sea to Norway, Denmark and the Netherlands, and across the Channel to Belgium and France; to our west lie the USA and Canada. It is an envious position to be in, though not one deserving of complacency: we still want a secure and stable EU. We are committed to the peace and security of Europe through NATO; in these respects, our interests and obligation in NATO, we are tied in.

One of the problems in the current negotiations is that the EU has re-written history to build up its own role in keeping the peace of the last half century. One of its foundational myths is that it has been the EU that has kept the peace in Europe. It even claims responsibility for the Belfast Agreement.

But its claims to success are absent of evidence. It is the transatlantic partnership that has kept the peace in Europe; it was the Northern Irish, London and Dublin – with US support – who brought about the Belfast Agreement. The EU forgets its role in the break up of Yugoslavia, and the subsequent wars and civil wars ended only with US engagement. Its diplomatic bungle over Kosovo, when it resurrected the July 1914 ultimatum to Serbia, ended likewise – and at great cost in civilian lives. The EU has not kept the peace in Europe.

The EU’s ambitious partnership proposal is overly ambitious, based as it is on inflated ideas of its own story and present capability; the ideas of uniquely shared values and interests ignore that they are shared with the English-speaking world and beyond. When the myth is removed, and the reality of the EU’s position is seen — its risk levels, its lack of investment in NATO and its own level of defence preparedness, and its poor relations with its neighbours — it is hardly an attractive partner; more of a liability.

The EU, quite understandably, wants the UK as closely tied in as possible to its defence and foreign policy (and economy). The UK, quite understandably, does not. Present commitments through NATO provide sufficient security to the EU’s members and help balance much, though not all, of their security concerns. The UK will do more, through co-operation bilaterally with members and freely alongside the EU too.

The EU and UK can co-operate to secure shared interests, but ultimately, though the UK wants a stable and secure EU and stability and security for its member states, there are differences in interests. The UK must be free to run its own foreign policy, champion alliances that may take precedence over that with the EU and policies that the EU will oppose — even the freedom to support member state interests against those of the EU institutions. It cannot be tied-in to a punitive governance structure to prevent it exercising such choices.

The overarching principles of the EU and the UK as regards governance of the future relationship are in conflict — we can’t be tied-in and free simultaneously; papering over the differences would breed confusion and likely lead to fresh upsets in the future. The UK cannot afford to accept a single overarching governance structure or claims upon it in the field of the EU’s common foreign policy and defence.

Real Estate, and Personal Injury Lawyers. Contact us at: https://westlakelegal.com 

Alan Mak: Britain should champion a new Five Eyes critical minerals reserve system

Alan Mak is MP for Havant and Founder of the APPG on the Fourth Industrial Revolution.

The on-going trade dispute between the US and China has put the spotlight on so-called “critical minerals”. We in Britain cannot afford to be passive observers. Instead, we should take an active interest in this key strategic and economic issue, and play a leading role in safeguarding access to critical minerals, both for ourselves and our Five Eyes allies. Ensuring our scientists, manufacturers and technology businesses have a secure and reliable supply of critical minerals is vital for Britain’s leadership of the Fourth Industrial Revolution.

Critical minerals consist of the 17 Rare Earth Elements (REE) recognised by the International Union of Pure and Applied Chemistry, with names such as promethium and scandium, plus other economically valuable but relatively rare minerals such as lithium and cobalt (used in batteries), tungsten (used in defence products including missiles), bauxite (the source of aluminium) and graphite (key to battery production).

The REEs have unique magnetic, heat-resistant, and phosphorescent properties that no other elements have, which means they are often non-substitutable. Whilst used only in small quantities, they are key components in a wide range of consumer products from mobile phones, laptops and TVs, and have widespread defence applications in jet engines, satellites, lasers and missiles.

Although they are more abundant than their name implies, REEs and critical minerals are difficult and costly to mine and process. Converting critical minerals embedded in rocks from under the Earth’s crust to separated elements is a complex and costly process which often involves the use of highly concentrated acids and radiation.

China hosts most of the world’s processing capacity and supplied 80 percentemploy of the REEs imported by the US from 2014 to 2017. On average, China has accounted for more than 90 pe cent of the global production and supply of rare earths during the past decade, according to the US Geological Survey.

By contrast, the US has only one rare earth mining facility, and currently ships its mined tonnage to China for processing. Lynas Corporation, based in Australia, is the world’s only significant rare earths producer outside China. Other critical minerals are similarly concentrated in a small number of producer nations. For example, the Democratic Republic of the Congo was responsible for around 90 per cent of the world’s cobalt production in 2018, whilst Guinea dominates bauxite, with around 35 per cent of the world’s reserves.

As globalisation and industrialisation accelerate around the world, critical minerals have become a highly sought-after resource for the high-technology, low-carbon and defence industries. They will play a vital role in Britain’s future plans for economic growth, innovation and green industrialisation, especially as we renew and expand our manufacturing base in the wake of Coronavirus.

Given the national strategic and economic importance of critical minerals, the UK needs to act now and lead efforts to protect our national supply for the future. Neither we nor our Five Eyes allies can remain reliant on one producer for anything, including critical minerals. Here are four steps we should take:

Establish a New Five Eyes critical minerals reserve stockpile

The Five Eyes intelligence sharing partnership between Australia, Canada, New Zealand, the USA and the UK has been in existence since 1941 and provides the perfect foundation on which we should develop a new critical minerals reserve that would end our collective vulnerability of supply.

The reserve would consist of inter-connected physical national stockpiles of critical minerals, and then extend to become a processing chain that all partners could draw on. The US already maintains stockpiles, and creating others including in Britain would lead to new jobs. The UK is never going to become resource independent, but through international co-operation we can diversify supply and refine, through innovation, the processing of these elements.

Use our international aid budget to secure critical minerals supplies

As the Foreign Office and DFID merge, the UK can align its development goals alongside diplomatic priorities. We should deploy our international aid to unleash the untapped supply of critical minerals in developing countries, effectively funding the start-up of new critical mineral mines and processing plants. This would enhance our supply of these elements and create jobs, transforming communities around the globe through trade, not just aid. China has already implemented a similar strategy in Africa, for example providing Guinea with a $20 billion loan to develop the country’s mining sector.

Create a new National Critical Minerals Council

The Government should establish a new National Council composed of metallurgists, scientists and foreign policy experts to monitor global trends in critical minerals, and advise the Government on rare earths and its strategic stockpile. Given the national security and defence procurement implications, the National Council’s establishment would help to keep this issue at the forefront of future policymaking.

Become the world’s greenest stockpiler by incentivising private sector involvement in critical minerals processing

The Government should provide funding for greater research into how we can improve the processing chain of critical minerals with a focus on how we can tighten environmental controls in this sector internationally.

The UK should establish itself as the world’s “greenest stockpiler” of critical minerals by offering incentives that encourage private sector investment in recycling processes and reward companies that contribute to the UK stockpile. We need more facilities like the University of Birmingham’s Recycling Plant at Tyseley Energy Park, which is pioneering new techniques that are transforming the recycling of critical minerals such as neodymium, which is commonly found in hard disk drives.

The Coronavirus pandemic has taught us the importance of supply chain security, whether for PPE or critical minerals. With our reputation for scientific excellence, global alliances and diplomatic networks, we can help ourselves and our allies strengthen our access to the key minerals that will power our economic growth and innovation potential for decades to come.

This is the first in a three-part series on how to boost our economy after Coronavirus.

Real Estate, and Personal Injury Lawyers. Contact us at: https://westlakelegal.com 

Jonathan Djanogly: Parliament should be able to scrutinise new trade deals properly. But the current arrangements are unfit for purpose.

Jonathan Djanogly is a former Minister, and is MP for Huntingdon.

Did we come through the Brexit process only for the UK Parliament to have less scrutiny over new free trade agreements than we had during our membership of the European Union?

This is the question that Parliament is going to have to address through the Trade Bill, currently making its way to report stage in the House of Commons.

In fact, it seems to be surprising most people that, seemingly contrary to what was proposed in the Queen’s Speech, the Trade Bill does not actually address future trade agreements at all.

Rather, it provides a low scrutiny mechanism, using Statutory Instruments (SIs), for existing EU free trade agreements (FTAs) to be ‘rolled over’ to the U.K. However, given that we have left the EU, it can be questioned as to whether any EU deals with such third countries should now be dealt with as new trade agreements.

For instance, the U.K /Japan proposed FTA is now being treated as a new agreement, and will not replicate the FTA that the EU agreed with it. Likewise, countries such as Canada seem to be waiting to see what the EU agrees with the UK, before agreeing their own new deals with the UK.

In effect, it is arguable that the Bill, which was perfectly rational when its second reading was initially heard in January 2018, may now simply have missed the boat, in terms of the future relevancy of EU trade deals that we have thus far failed to adopt.

It is also somewhat annoying, to those of us that have been following the generation of this bill for the last three or more years, that most of the sensible amendments offered by the then Secretary of State, Liam Fox, have not been re-incorporated into the current bill now before the House.

Agreement that the SI regime should only last for three years rather than five, and that the Government should have to produce reports for Parliament to explain their proposals at least 10 days before the SIs are heard, are surely not contentious. Accordingly, I have re-tabled the last Government’s own amendments for debate.

There then arises the question as to how we are going to deal with future FTAs with countries and organisations, such as the US, China and the EU. On this the Bill is quiet, despite Fox agreeing to consult on a new scrutiny process in 2018.

For the last 40 odd years, the EU has been negotiating our trade deals. As part of the EU scrutiny process, a vote needs to be taken by the EU Parliament on the draft FTA prior to its signature.

Most other countries have similar approval arrangements. In fact, some go further and allow the legislators to get involved in the provisions of the deal. So, for instance, the U.S. Senate can amend draft trade agreements.

In practice, a parliament holding the threat of a veto means that it is very rarely used. This is because the executive will have good reason to look for consensus on its negotiating mandate, as well as carrying legislators along during negotiations through regular disclosure and discussion.

A wise executive would naturally wish to avoid an unnecessary parliamentary bust up just before signing an FTA. Of course, this is where it all went wrong with the TTIP negotiations between the US – EU. Here, both the US Congress and the EU Parliament were disclosing information to their respective elected representatives, that was not being provided to UK parliamentarians.

As a result, and with the inevitable leaks, the whole debate surrounding thousands of lines of deal negotiations got reduced to accusations of selling the NHS and Brits being forced to eat American chlorinated chicken. One might have thought that the UK government had learnt its lesson from the TTIP experience.

The point to be addressed in the Trade Bill is not whether individual issues, such as food standards, environmental regulations, public services or digital services provision or consultation with the devolved authorities are good or bad things in themselves.

Rather, it is the need for the Bill to provide a statutory framework that requires government to take early stage consultation and ongoing soundings through the course of FTA negotiations. This is in order that business and citizens feel they are being listened to with similar rights to their counterparts in the country with whom we are negotiating. Then, before signing, MPs should get to vote on the deal, as will be the case with the counter-party.

In effect, I would argue that current UK practice on scrutinising trade deals is neither democratic nor practically fit for purpose. Moreover, I would go further to point out that our poor scrutiny process is going to be undermined, in any event, by other countries’ more modern scrutiny practices.

The Government suggest that the Constitutional Reform and Governance Act (CRAG) process, allowing a short delay mechanism before ratification (ie after the signing) of FTAs, is adequate. This is the same CRAG process that was implemented by Labour in 2010 at a time when the U.K. benefited from the EU Parliament veto. By the way it’s also the same process that was described in 2019 by the Lords Constitution Committee as ‘anachronistic and inadequate’.

Secondly, the Government suggests that the Trade Select Committee could be utilised to provide scrutiny for proposed new FTAs. Let us here, firstly, assume that the Trade department and therefore its committee is going to survive a rumoured merger with the Foreign Office. Even so, and despite negotiations with the US and now Japan having already started, no such arrangements with the trade committee have yet been agreed. We know this from an on the record June letter sent from the chair of the committee to Truss.

Of course, the Trade Committee will not have jurisdiction to look at the proposed EU FTA and, following the post- Brexit demise of Bill Cash’s European Standing Committee B, it has not yet been made clear who or how any proposed EU deal will be scrutinised.

I am not suggesting that MPs should be able to impede Government negotiations on FTA’s, and nor am I saying that MPs should be able to amend draft FTAs. However, we need legislation that provides for Parliament to approve FTAs, on a yes or no basis, before they are signed. I have tabled an amendment to the Trade Bill to that effect, and I look forward to the debate.

Real Estate, and Personal Injury Lawyers. Contact us at: https://westlakelegal.com 

Six months on from last year’s general election, it’s only the LibDems who bang on about Europe

Britain has left the European Union.  Boris Johnson and Dominic Cummings turned round a Conservative poll rating of barely 20 per cent, a hostile Supreme Court judgement over prorogation, Commons defeats, stalemate and resignations to deliver first a Commons majority of 80 and then Brexit itself – less than six months after the Conservatives were reduced to only a bare four MEPs under Theresa May.

Even if he achieves nothing else as Prime Minister, Johnson will be remembered for this nation-changing achievement, more monumental even than Margaret Thatcher’s economic reforms.  Tories should always honour him for it, and for seeing off Jeremy Corbyn.

So what’s at stake in the current trade negotiation with the EU is the form of Brexit, not the fact of it.  Will we be, at one of the scale, more like (say) Norway, circling within the orbit of the EU’s Single Market rules and social market consensus; or, at the other end, Australia (for example), having no trade deal at all, and trading on minimum WTO terms?

Perhaps, at some point in the future, some other Government will lean in a Norway-type direction.  But that is neither what Johnson’s Brexit deal pointed towards, nor what his election manifesto expressly promised.

On Johnson’s deal, the revised Withdrawal Agreement and Political Declaration was worse for Northern Ireland than Theresa May’s version, since it expressly separated it further from the settlement which will apply to Great Britain…

…But better for Great Britain than May’s deal, since that settlement gives it greater potential to shape its own economic destiny as an independent state.

On the Conservative Manifesto, that document expressly committed the Prime Minister to a future relationship “based on free trade and friendly cooperation, not on the EU’s treaties or EU law”…

…And to “not extending the implementation period beyond December 2020”.  Given those commitments, we’re surprised that anyone was surprised that the Government made it clear this week that it keep that pledge.

The thrust of the public objection to doing so came from the now reduced Remainer residue – the diehard remnants of the campaigners that sought a second referendum less than a year ago.

It was that the start of 2021 would be a bad time for more friction in trade between the UK and the EU, because of the effects of the Coronavirus.

But the heart of the economic case for Brexit was always what this site called short-term pain for medium-term gain – in other words, trading off more friction with the EU for greater spending, regulatory and tax freedoms overall.

There is no guarantee that the end of transition will be any more or less disruptive in two years than it will be in December.

In any event, the real objection of those former Remainers to not extending wasn’t the public one.  Rather, it was that ending the implementation period will make it easier for Britain to begin leaving that EU orbit.

In other words, the campaign to extend transition was essentially part of the push to keep Britain within it – and make it more like Norway and less like Canada or Switzerland – or Australia, if there’s no trade deal at all.

However, the sum of the matter is that this ship is already sailing.  The economic arguments for and against Brexit were tested in the 2016 referendum.  Leave won.

Johnson then refined them further, proposing “a new relationship based on free trade and friendly cooperation, not on the EU’s treaties or EU law” in that manifesto last year.  He won.

The question that therefore remains is whether a trade deal will or won’t be agreed before the end of the year – which, given the legal and political exigencies, will mean that the parties need to get a negotiating move on.

And as our columnist Stephen Booth keeps pointing out, the dynamics of this negotiation are rather different from those of May’s.

It wouldn’t be true to claim that the UK wants nothing from a trade deal other than a barebones settlement.  It would like greater access for financial services, for example, and less trading friction than other third parties.

But in the last resort, Johnson seems prepared to walk away from the talks rather than concede “a role” to the European Court of Justice, to quote from the manifesto again.

Furthermore, he has a majority of 80, specifically returned on the basis of his Brexit vision and pledges, whereas May had none at all.

Additionally, the second most intractable problem in the two-stage negotiation has been resolved: the matter of where regulatory and trade barriers will run between Great Britain, Ireland and Northern Ireland.

Which leaves the hardest one of all – the role of the Court.  If the EU is willing to recognise that Johnson won’t budge, which seems to be the case, the elements are in place for a solution.

The EU wants fishing and migrant access, plus no tariffs, given its manufacturing surplus; the UK wants services and trade access, with minimum friction on rules of origin and other regulatory checks. The Prime Minister will have to be very careful on fishing, particularly given the Scottish dimension – and will want a U.S trade deal as a sign that the UK is truly entering a new era.

Michel Barnier seems to recognise that the EU will have to give up some ground on fishing, but although a trade deal looks possible on paper it also looks daunting in practice.  This negotiation is more in the hands of the member states and less in that of the Commission than its predecessor, and so vulnerable to spanners in the works.

Whatever happens, Britain has moved on from May’s Government and Brexit stalemate.  The CBI now says that it “supports the Government’s timetable”.  Keir Starmer is a dog that hasn’t barked on implementation extension.  EU alignment is becoming a niche cause.

David Cameron once suggested that the Eurosceptic Conservative Party was irritating the electorate by “banging on about Europe”.  That fate is currently reserved for the pro-EU Liberal Democrats, currently languishing on some seven per cent in the polls.

Real Estate, and Personal Injury Lawyers. Contact us at: https://westlakelegal.com 

Roderick Crawford: Brexit and trade. Here’s a grand bargain to open the way to a final agreement.

Roderick Crawford works on conflict resolution in countries such as Yemen, South Sudan and Iraq, and on Brexit-related matters. He is a former editor of Parliamentary Brief.

Today’s virtual meeting between Boris Johnson, Michael Gove and David Frost and Ursula von der Leyen, Charles Michel and David Sassoli is the first of what is likely to be a number of political engagements to break the impasse and help lay the ground for a final agreement acceptable for the UK, the EU and its 27 member states.

A key issue – probably the key one – that must be resolved is the establishment of a robust level playing field to ensure the fair and free competition that is needed to underpin a free trade agreement (FTA). This is a hard EU red line, but the proposed implementation of it has come up against UK red lines and, in places, crossed them. Without a resolution of this issue, there can be no FTA.

In the Political Declaration, the UK agreed to ‘uphold the common high standards applicable in the Union and in the United Kingdom at the end of the transition period in the areas of state aid, competition, social and employment standards, environment, climate change, and relevant tax matters’.

The EU 27 will not agree to sincere assurances from the UK in this area; the final UK-EU FTA will need to have much more robust level playing field standards than the Canada-EU FTA if it is to be acceptable to the Commission and to the 27.

One answer would be for the UK and the EU to agree ‘common high standards’ drawn from those currently in force in the EU and UK — standards that are directly and not peripherally concerned with trade and competitiveness. These standards would have standing only within the free trade agreement, and, not being ‘common standards’ within the EU and therefore EU rules, would have no role for the European Court of Justice (ECJ) in interpreting them.

They would be common to the EU and UK only in the limited context of this agreement, securing level playing field on the terms set out in the Political Declaration. Normal FTA dispute resolution, as in Canada-EU, ought to be sufficient to ensure that these are upheld, and that there is no regression: if these need to be a little more robust,  that should not present an insurmountable problem, so long as the mechanisms are entirely within the framework of the FTA.

This does not mean a return to the common rulebook, as proposed by Theresa May; that required the continued application of EU rules and a significant role for the ECJ. Rather, ‘common high standards’ would have a legal basis solely within the FTA, and without a role for the court in interpreting them — they would not be EU rules, and their origins, as such, would be severed. The UK would be a rules upholder, not a rules taker.

Amongst these level playing field issues, state aid offers incredibly complex challenges, not least in the post-Covid-19 world of massive state interventions in all our economies. As the EU proposals on state aid are not endorsed by the Political Declaration, the UK and EU will need to find answers outside of EU rules and institutions.

Using common high standards, as proposed above, combined with close regulatory co-operation and robust FTA dispute resolution mechanisms will be necessary, and should provide effective and efficient security against abuses by both parties.

In the trade talks, the elephant in the room is the UK’s substantial trade deficit with the EU. In 2018, the UK had a trade deficit of £66 billion with the EU: a surplus of £28 billion in services against a deficit of £94 billion in goods.

In any usual trade negotiation – and this clearly isn’t one – that would never be far from the minds of the negotiators. Maintaining access to the Single Market for UK services, including finance, adds value to the EU economy as well as helping the UK pay for its import of EU goods.

We have been pretty relaxed about this – other member states would not be – but if our trade carried an equivalent surplus it would have been a major issue for the EU. A healthy free trade agreement needs to be comprehensive and balanced: at its core is not only a proper level playing field, but healthy balanced trade too.

A second impasse is on the overarching governance of the future relationship; the UK is clear that it does not want this, whilst the EU clearly wants a comprehensive agreement covering all aspects of the future relationship.

However, while access to the Single Market should be dependent on open and fair competition, it should not be dependent on security, justice, foreign policy or defence matters. The UK is ambitious in its foreign policy; though it will want to co-ordinate and co-operate with the EU, it also wants to take its own initiatives and forge wider alliances; it will want to champion interests that the EU might not support — or which the EU might oppose.

Freedom to act is essential for the UK — and there can be no retaliation on trade, because the EU considers the UK is in breach on other areas, such as foreign or defence policy. With a review of the UK’s integrated foreign policy and defence review lying ahead, potentially more significant even than that carried out after the end of the Cold War, this is no time to be tying the UK into EU frameworks. Arrangements with the EU should follow, not precede, that review.

There is flexibility in the Political Declaration on the governance of the agreement. Its precise legal form is not set out: specific governance arrangements can be established in individual areas, and the parties to the agreement may decide that an agreement should sit outside of the overarching institutional framework. This is the text that the Government should use to argue that its red lines on governance are compatible with the Political Declaration.

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Nick King: The business bailout scheme should avoid moral hazard, protect taxpayers – and not throw good money after bad.

Nick King is Head of Business Policy at the Centre for Policy Studies. He is a former Chief of Staff to Sajid Javid.

The news recently broke that the Government was drawing up plans for investment into ‘strategically important companies’ as part of its response to the Covid-19 pandemic. The proposed bailout plan, given the working title ‘Project Birch’ within Government, is reported as being considered for investments worth billions of pounds into companies within aviation, automotive, aerospace and steel, amongst other sectors.

To say this would be a novel approach for the Treasury would be an understatement. But this would hardly be the first break with orthodox Treasury thinking that we’ve seen in recent months – the millions of people currently being paid by the state via the furlough scheme provides an all too obvious example of that.

But the furlough scheme, and other Government interventions like the Future Fund, Bounce-Back Loans and Coronavirus Business Interruption Loans, all show the value of Government planning before such schemes get launched.

CBILs, for example, were necessarily launched quickly, but not designed on terms which were attractive enough for most small businesses and which failed to overcome the banks’ bureaucracy or reluctance to lend.

The other schemes mentioned – the Future Fund, the furlough scheme, and Bounce-Bank Loans, have been wildly popular – but one could argue that their popularity is testament to their generous terms. If one puts oneself in employers’ shoes then why would they not apply for loans on interest free terms or put their staff on furlough whilst they wait to see how long the lockdown continues?

The Treasury might respond, of course, that such moral hazard is a price worth paying to keep most businesses afloat and to keep staff retained, albeit furloughed. Only time will tell as to whether or not that is an accurate judgment, but there is surely an all too real risk that some of these companies and employees are simply in a holding pattern. It feels inevitable that many companies will fold and large numbers of employees will lose their jobs as we move out of lockdown.

That brings us back to Project Birch. In shaping this bailout fund, the Government must do everything possible to avoid moral hazard, to protect taxpayers and to ensure it’s not throwing good money after bad. Here then are some principles it would do well to abide by.

Firstly, it should only lend money once all other avenues have been exhausted. Companies including British Airways, Jaguar Land Rover and British Steel are thought to be candidates for funding from Project Birch and their owners are reported to be in discussions with Treasury about cash injections. Each of these companies has shareholders and existing lenders – these should be the first port of call for necessary investment with the Government only stepping as a last resort.

Secondly, where Government is convinced there is no prospect of any such support, it should only provide funding where it is confident of the long-term financial sustainability of the company or the sector, perhaps underpinned by transformation plans.

Steel, for example, has been written off by some as an outdated industry in the UK. But if Government can guarantee a pipeline of future sales activity, put against the increased infrastructure investment recently promised for example, the UK steel industry would be on a more secure footing.

If plans to promote and progress ecological ‘green steel’ are supported, the UK can even forge a competitive advantage for its domestic steel industry. So support through Project Birch should be contingent upon there being a line of sight to future financial sustainability.

Thirdly, as a logical extension of that, the Government should be prepared to let some companies go into liquidation, either where there is no confidence in its future viability or where they are publicly owned. If a listed company cannot raise funds in the equity markets, then it is likely it is better off going into liquidation. Any valuable assets would readily be secured by another organisation and economic recovery is likely to be all the quicker as a result.

Fourthly, where the Government is willing to step in, and whether it is providing debt or taking equity, it should only offer funding which prioritises the taxpayers’ investment. In the case of debt, it should insist its debt is senior to other creditors, insuring the taxpayer against future defaults, and where it takes equity is should insist on taking preferential shares.

A potential model to be followed exists in the form of debtor-in-possession financing, already used in the USA and Canada. Current investors and creditors won’t like this, but they have the option of injecting cash if they wish to. If they want to access taxpayers’ money, this should be the price they are willing to pay.

Finally, where Government does take equity stakes, which might be necessary in some cases given the likely working capital requirements, these must be run at arm’s-length from Government. Investment, divestment and operational decisions would need to be taken by investment professionals, even if they’re answerable to politicians. The day to day running must be entirely free of political interference.

There has been a relatively strong case for the UK to develop its own Sovereign Wealth Fund for some time, and it would be an irony of the current crisis if Project Birch finally led to its creation. But necessity is the mother of invention, as the phrase goes, and it feels like this bailout might be deemed necessary sooner rather than later.

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Trudeau’s 21-Second Pause Becomes the Story in Canada

Westlake Legal Group 03unrest-canada-facebookJumbo Trudeau’s 21-Second Pause Becomes the Story in Canada Trump, Donald J Trudeau, Justin George Floyd Protests (2020) Canada Black Lives Matter Movement

TORONTO — When asked what he thought of President Trump’s call for military action against American protesters and the tear gassing of peaceful demonstrators to make way for a photo-op, Prime Minister Justin Trudeau paused at his podium for 21 uncomfortable, televised seconds. He opened his mouth, then shut it — twice. He softly groaned.

Finally, in a scene on Tuesday that has now spread wildly around the internet, Mr. Trudeau said: “We all watch in horror and consternation what’s going on in the United States.”

From their perch above the United States, Canadians have been watching in shock as the country they’ve long considered their closest friend and protector now seems like a crazed, erratic and dangerous stranger.

Most of the country’s horror has been focused on President Trump. Even the country’s conservative newspapers were filled with columns like one by Gary Mason stating, “There couldn’t be a scarier person inhabiting the White House at this very moment.”

“It’s deliberate what he’s doing. He’s deliberately stoking anger so he can run a law-and-order platform,” concurred Janice Stein, the founding director of the University of Toronto’s Munk School of Global Affairs. “It’s horrifying.”

Most Canadians soured on President Trump two years ago when he placed tariffs on their country’s steel and aluminum exports, threatened to cut Canada out of the continental free trade deal and insulted Mr. Trudeau as “very dishonest and weak” moments after leaving the Group of 7 summit, which Mr. Trudeau had hosted.

But, during the pandemic, public opinion of President Trump has sunk to even lower levels among Canadians.

While politicians here have set aside their partisan differences to work together to protect Canadians from the coronavirus, Mr. Trump is viewed as politicizing the pandemic for his re-election effort.

“My view is one of profound sadness — sadness at watching communities we respect being so torn apart, and sadness at watching the loss of life in the pandemic,” said Frank McKenna, a former premier of New Brunswick and a former Canadian ambassador to the United States. “The United States is so polarized, the question of wearing a mask or not is fraught with political overtones. It’s excruciating to watch.”

Prime Minister Trudeau, however, dared not openly criticize President Trump in his response on Tuesday. Instead, like many other Canadian leaders, he chose to ruminate on racism against black Canadians and other minorities.

Protests in support of George Floyd, the black man killed by a white Minneapolis police officer, occurred across the country last weekend and in Toronto were connected to the death of Regis Korchinski-Paquet — a 29-year-old black woman who plunged from her family’s high-rise apartment shortly after the police arrived, answering a distress call. The incident is being investigated by a police oversight unit.

“It is a time for us as Canadians to recognize that we too have our challenges,” said Prime Minister Trudeau, whose own record on race was badly tarnished after old photos of him wearing blackface and brownface at parties surfaced during the 2019 re-election campaign.

“There is systemic racism in Canada,” Mr. Trudeau said.

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On the 14-day quarantine, the Government has got it right

Since it was first announced, there has been huge backlash over the Government’s plan to introduce a 14-day quarantine period for people arriving in Britain after June 8. Many feel that it has been implemented too late in the day; that it’s unenforceable, and worst of all, economically destructive.

Huw Merriman, Conservative Chair of the Transport Select Committee, described it as the “wrong policy” that “disproportionately impacts the economy”, and 217 tourism and travel businesses put forward similar concerns in a letter to Priti Patel.

Today the Home Secretary is due to outline details of the quarantine in the House of Commons, but it remains to be seen what happens next. Because it is a statutory instrument, it does not automatically need to be voted on.

However, Sir Lindsay Hoyle, Speaker of the House of Commons will be able to decide if the scale of opposition warrants a debate. Given that this week over 20 Tory MPs demanded that the Government rethinks its strategy, with the support of around 50 MPs, it may very well be the case that their side gets a hearing.

MPs and travel leaders are right to be concerned; travel accounts for more than £5 billion sales and four million jobs, so quarantine is going to have a big economic toll. That’s before we get to the impact it could have on national morale, particularly with the advent of summer.

Research by the International Air Transport Association showed that Brits willingness to travel again soon was above that of the United States, Japan, Germany, Canada and Australia – so by all indications these sort of barriers will be received badly.

It could even be said to be socio-economically unjust; people who can work-from-home will find it much easier to isolate after holidays than those in frontline jobs, such as nurses, carers and delivery staff.

Even so, the Government has said its priority is to keep the R number below one; it is doing everything it can to minimise more infections of this virus, especially as Britain comes down from the peak. With that in mind, it makes sense that it is being extremely careful about travel, even if spite of the economic consequences.

Ultimately the Government’s critics can’t be entirely surprised it’s so cautious after numerous accusations that it did not impose lockdown soon enough. Now that the figures are under control, it is seizing the moment to knock the virus on the head. Yes the measures may be excessive in retrospect, but given that Britain’s airports are some of the busiest in the world, it is simply not worth taking the risk – and causing more disruption in the long-run.

Furthermore, the measures are temporary and subject to a review on June 29, when the Government will have a much better understanding of how many cases there are in Britain, and should be in more of a position to relax the rules.

It has even been said that plans are being drawn up in Whitehall for “air bridges” between countries; an agreement which would allow the Brits to venture to various destinations. This idea was first proposed by Grant Shapps in May, and has become increasingly popular. It could open up travel to Spain, Germany, Italy and France.

One thing that’s worth remembering, for UK citizens who question the move, is that even if the Government scrapped the quarantine plan, there are countries that will not have Brits there. Spain’s tourism minister, for instance, said that the UK’s coronavirus figures had “to improve” before they allow visitors, and Greece has said no too. Other countries have strict guidelines about who can come; Austria and Iceland ask for medical certificates proving a negative Covid-19 result, and Cyprus is only allowing citizens from Germany, Greece and Malta in. 

So it is a fallacy to believe the quarantine itself is blocking movement back and forth from Britain; one of the main problems is that other countries are wary of our Covid-19 levels. Hence why the Government is being so vigilant about quarantine; we have to prove we can totally get our Coronavirus rate down.

So it is a question of the long-game. In the immediate, there are exemptions for health workers, scientists, lorry drivers and others – who can keep part of the economy going. But anything that would compromise the trajectory Brits are on – to get rid of the Coronavirus – will merely push holidays even further away.

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Shanker Singham: EU-style regulation on animal welfare would be the wrong step for Britain

Shanker Singham is CEO of Competere. He is a former trade advisor to Liam Fox, the UK Trade Secretary.

Animal welfare concerns seem to be dividing the free-trade wing of the Conservative party and the agricultural wing. But some of the solutions being proposed would row back on decades of WTO rules and practice, and make the UK a pariah state in the WTO community.

It is axiomatic in WTO law, and in the way that nations have dealt with each other in trade, that countries should not discriminate between products based on how they are produced. Laws should be technology and process neutral. This is true in all areas, including the complex rules that underpin the animal, human and plant health standards (SPS rules) that countries can impose on trade.

Article IV of the SPS Agreement (the agreement that deals with these rules) and its implementing decision are especially clear on how to deal with different approaches in the SPS area. As long as the ultimate objectives are the same, and they are objectively achieved by the regulatory system, differences in approach should not defeat equivalence, and there are quite detailed mechanisms for ensuring equivalence decisions can be reached, precisely because the risk of protectionism in this area is so high.

There is an assumption in the UK, largely because it has so far been shielded from the global opprobrium generated by the EU’s choices in the SPS area, that EU standards are the best in the world. They are not. The EU is an outlier in the SPS area and has managed to unite countries as diverse as Canada, Australia, New Zealand, the US, India and Latin America against its barriers.

Its direction of travel, far from changing course, is accelerating with new bans or cumbersome restrictions on new technologies such as gene editing, fungicides and insecticides every day. Soon it will be impossible to make an economic case to grow wheat or similar plants in the UK’s temperate climate with its wet summers (different from most EU member states, except Ireland).

For the UK to now require a foreign exporter to meet its animal welfare standards before it accepted any of its products would be a flagrant and obvious breach of WTO rules, and would ride roughshod over all the work of the SPS committee over almost thirty years.

To get round this, and to block even the most modest agricultural liberalisation, the latest argument appears to be that there are some products whose production methods mean that they are actually different products (and therefore by implication different tariffs can be applied).

An argument was recently made by Anthony Browne, MP, in ConservativeHome that there is a precedent for including animal welfare concerns into the UK’s tariff liberalisation plans, by arguing that so-called Hilton beef (non-hormone treated) has a quota into the EU while hormone-treated beef does not. He argues this is precedent for treating the same product differently for the purpose of tariffs or quotas if it has been produced in different ways.

Browne then seeks to build on this to introduce animal welfare as a way of differentiating between products. This approach is fundamentally misconceived. The Hilton-beef quota only exists because of the EU’s illegal ban on beef hormone-treated products – a case the EU lost in the WTO. The EU had to change its ban or face sanctions. As part of a resolution of that matter, and to avoid US trade sanctions (sanctions that would have hit such UK exports as scotch whiskey and other iconic products), the EU agreed to open up its market to non-hormone treated beef which also exists in the US. If the EU removed its WTO-illegal ban, the Hilton beef category would be unnecessary.

There is much misinformation about whether hormone treatment is dangerous to animals or humans. The reason that the WTO found the EU beef hormone-ban to violate SPS rules was that it was not based on sound science, and that levels of hormones as a result of the treatment were inconsequential. A three gram serving of hormone-inject beef produced 0.85 units of oestradiol, whereas the same serving of eggs produced 94 units.

Indeed, in 2005, a subgroup of the UK’s own Veterinary Products Committee examined the EC’s 2002 Opinion (the basis for the ban) and concluded that they were “unable to support the conclusion reached by the Sub-Committee on Veterinary Public Health (SCVPH) that risks associated with the consumption of meat from hormone-treated cattle may be greater than previously thought.” So much for sound science.

The notion that animal welfare should be part of trade agreements has already been considered and dismissed by the WTO since it would open the door to the very kind of protectionism that Browne suggests. Farmers would seek protection, claiming that animal welfare standards were being violated in the exporting country.

It would certainly be appropriate for the UK to push its animal welfare agenda in the OIE which is the appropriate venue for animal husbandry standards setting. Such a dialogue needs to be informed by science and not mumbo jumbo, as the PM said in his Greenwich speech. Before mounting such a campaign, the UK would need to make sure it is the animal welfare leader it thinks it is. A quick look at conditions in abattoirs and slaughterhouses in the UK would give one pause for thought.

It is also wrong to assert without question that US animal welfare standards are lower than the UK’s. Where is the evidence for this? Of course there are always rogue actors (these are also present in the UK), but US stocking densities for poultry range from 31Kg/square metre to 43 Kg/Sq metre depending on the weight of the bird, where the UK’s maximum is 39Kg/square metres. In many cases, UK farms have higher stocking densities than US farms.

When the UK is truly independent with control over its laws, operating like any other WTO member, the urgent question will be what it chooses to do with that freedom. There seem to be those that think that what it chooses for its own domestic regulatory framework does not matter. That it can have its cake and eat it, to borrow from a well-worn phrase.

But for the true prize of Brexit to be gained, to grow its economy and give people in Britain genuine hope that they can lift themselves and their families by dint of sheer hard work which will be rewarded and not punished, it must choose a domestic regulatory framework that promotes innovation and competition. By so doing, it opens up trade possibilities with the community of like-minded nations.

Locking in to EU-style regulation in areas where that regulation has been shown to be anti-competitive and anti-innovative (which is more true of agriculture than any area) would be a disastrous first step, and would damage the UK economy, its trade policy, its consumers and ultimately its farmers.

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Bob Seely: While we are distracted by the virus, China prepares to seize Hong Kong – and crush freedom

Bob Seely is the MP for the Isle of Wight.

This coming week, China’s National Peoples’ Congress will approve – rubber stamp is perhaps a better term – a resolution to change the security apparatus and laws in Hong Kong. In doing so, they will undermine Hong Kong’s freedoms; cause further, significant damage in our relationship with the Chinese Communist state, and confront the Home and Foreign offices here with a significant political and practical crisis.

Beijing’s planned laws, which threaten to strip Hong Kong of its autonomy, give China power to establish its own security agencies in the city-state, and to introduce concepts such as  ‘subversion’, ‘secession’, and ‘collusion with foreign political organisations’, which will ensure the  previously lawful activities of pro-democracy politicians as well as activists may now carry prison sentences. China has tried to get the Hong Kong administration to bring in these laws itself, but it has failed to do so, thanks to months of mass protest.

I was lucky enough to attend one of these last year on a rainy Saturday in September. Those people I spoke with could technically fall foul of these new laws by talking with me, UK diplomats or journalists under “collusion with foreign political organisations”. I have been to many demonstrations over the years, and I was deeply impressed by those I met. They reconfirmed my belief in the integrity of those universal values that free states – and those who care for freedom – share.

The assumption must be that these laws will enable the arrest of politicians and activists who support Hong Kong’s autonomy from China and its constitutional freedoms. This will signal the beginning of the end for Hong Kong as we know it, as China’s Communist Party seeks to end the ‘one country, two systems’ in exchange for ‘one country, one (authoritarian) system’.

Why does this matter?

First, it is regrettably clear that a new reckoning with China is coming. Our policy towards it has been woefully out of step with the reality of an aggressive Communist state with its ‘wolf warrior’ diplomacy. Whilst the UK needs to relearn the art of strategy in our foreign policy in general, we specifically need a new one for China which aligns us with an alliance of free nations. The decision to review Huawei’s involvement in the UK is part of that review, but it is only a start.

Second, there are immediate and significant issues for the Home and Foreign offices. Some Hong Kongese have British National (Overseas) – BNO – passports – a little over 100,000 people. Some of those will now be under fear of arrest and imprisonment. What does the UK Government intend to do whilst BNOs are arrested and imprisoned for what amount to political ‘thought-crimes’? The UK needs now to make clear that arrest or imprisonment of BNOs will come at a price, not only for UK/China relationship, but also internationally for China. The Foreign Secretary’s joint statement with Canada and Australia is a good start, but it is just that – a start.

Third, the Government needs to be prepared for an exodus of BNOs from Hong Kong, anything from the low hundreds to the tens of thousands. BNOs have the right to come to the UK, but they cannot work here, and it takes years to transfer BNO status to that of full citizens. Effectively, the BNO status treats the UK as a bolt-hole for Hong Kong citizens, but not more.

I believe we must now change the status of these passports to allow Hong Kong BNOs a quicker path to full UK citizenship, and potentially to offer the same to younger Hong Kong residents who may not have BNO status, but have been active members of the democracy movement. It would be a stain on our country’s reputation if other nations were to open their arms, metaphorically speaking, to Hong Kong BNO folk in their hour of need before the UK did so.

Like many people in this country, I am delighted that, under this Government and Home Secretary, we have an immigration policy that will allow stricter control of our borders. I agree that the open-door immigration policy of New Labour damaged and discredited the idea of balanced immigration.

However, we must not over-compensate. The possibility of a mass flight from Hong Kong may become one of those rare occasions where mass asylum in the UK is morally right, as it was with ethnic Indians in Uganda expelled by that country’s insane dictator, Idi Amin, and accepted by the UK and others in 1972.

I believe we should loosen the rules for BNOs, and work with the US, Australia, Canada and others, to ensure that Hong Kongese have long-lasting places of sanctuary. BNO passport holders have British passports. This is not an issue where we should be following others, but leading. One of those places of sanctuary must be our own nation, should the Chinese Communist Party now believe that freedom of thought and expression is incompatible with the state it is trying to build in Hong Kong.

We may be approaching a crisis point in Hong Kong. Thousands, potentially tens of thousands, of Hong Kong people may soon be in jeopardy. We cannot save that remarkable city-state from Beijing’s increasingly authoritarian one-party state, but we can open our arms to those remarkable men and woman who believe in a better future for themselves and loved ones, and who believe in human freedom. In the coming weeks, we must do the right thing.

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