As every Brit knows, on March 29 2019, 109 days from now, the United Kingdom leaves the European Union. (Unless the remaining 27 member countries stop the clock, a well-used Brussels device). What happens if there is No Deal and the UK crashes out with no agreement in place with Brussels on anything? Inconvenience? A reduction in trade until new and better deals are made with say the USA?
Kent Council Council is responsible for the area leading to Dover docks and the Channel Tunnel. They are Tories but have studied the consequences.
A no-deal Brexit could cause major disruption across Kent, with gridlock on the roads around Dover, rubbish not being collected, children unable to take exams and rubbish piling up on streets [….] The registration service for weddings could also be affected and bodies could pile up in morgues because of traffic gridlock, Kent county council warned in an update on no-deal contingency planning.
So it’s more or less the zombie apocalypse, without weddings too. Their nightmare is that as the trucks (queuing for new customs checks at the ports) pile up on the two access highways, the M2 via Canterbury and the M20 via Maidstone, enterprising truck drivers will take to the side roads until these are jammed solid too. I suppose the council could buy electric bikes, so the plucky morgue staff can infiltrate past the stranded German trucks, in the 1940 spirit of Dad’s Army. That doesn’t help the garbage trucks, the hearses, or the wedding limousines though. Apocalypse it is.
What the council is trying to do with these horror stories is to get Whitehall to do some serious contingency planning for a truck rationing scheme that would cut in well before the vehicles reach Kent. What has Whitehall been doing these last two years? The excuse for general drift has been “we are too busy with Brexit”.
Why should the crash-out be so bad?
Brexiters like Jacob Rees-Mogg blithely claim that the disruption will be a matter of teething troubles, before shiny new and better trade agreements are signed with say the USA, allowing the arrival on British supermarket shelves of the chlorine-washed chicken that shoppers have been clamouring for (not).
A far less rosy picture emerges when you look more closely at Dover on March 30 with no deal. At present, 5,000 trucks cross the Channel to Calais every day in each direction, on Ro-Ro ferries from Dover and shuttle trains through the Channel Tunnel. They supply a good proportion of the food in British shops, the medicine in British pharmacies and hospitals, and parts for British factories. The UK is part of the European single market and there are no tariffs to collect or different product standards to enforce. Customs exist at Dover and Calais to combat the smuggling of illegal goods like ivory, slave prostitutes, or rabid animals, and to enforce phytosanitary checks on food and plants. I suppose they can conduct random checks if bored, but like all customs everywhere they mainly rely on well-rewarded tipoffs.
In a No Deal scenario, trade would default to WTO rules. These are based on the non-discriminatory “most favoured nation” principle, so both the UK and France would have to apply minimum tariffs on everything. These are low for manufactures, so shouldn’t be too disruptive, right?
To run trade on WTO or any other terms, you need trained customs officers and robust software to document the truck contents. The current customs officers at Dover and Calais know nothing about WTO rules. Draft them in from other ports, say Le Havre and Southampton, that do long-distance trade? There aren’t nearly enough of them. The issue is exacerbated by the fact that much trade (say in bananas) is conducted not by WTO rules but under separate EU trade agreements with Japan, Korea, Caribbean banana republics, and so on. Full list here. Experience with these is no help to a customs officer facing a WTO Brexit. However WTO rules apply to the USA, China, and Brazil.
Far more important is the software issue. Value-added taxes are collected and refunded at intra-European borders in a pretty seamless way; taxmen have offloaded the routine paperwork on to business, and both parties can live with this. In theory you can do the same for tariffs, WTO or bespoke. But the volume will be say five times what it needs to be now. A major government IT project is updating the customs software for the greater load. But “major British government IT project” is generally synonymous with “giant IT clusterf*** running years late”, and so it proves.
John Thompson, Permanent Secretary (chief civil servant) to the Customs department, giving evidence to a Parliamentary committee:
To get to an optimal system [in place] takes up to three years… we need to be clear a fully functional, optimal system will not be in place on 1 April 2019.
The plan is to release the new export software system just before March 29. I’m sure this will work well.
Philip Stephens at the FT joins the dots:
Whitehall officials estimate the inevitable post-Brexit imposition at Calais of EU checks and controls would cut traffic — imports to, as well as exports from, Britain — by more than four-fifths. The effect would be to choke off supplies to much of British business and leave stranded in France much of the produce destined for British supermarket shelves. … There will not be enough room for luxuries such as fresh fruit and vegetables.
Brits should be relieved that there are at least plans to bring in medicine by air.
Very fortunately, many Westminster MPs have realized that a “no deal” Brexit would be a historic disaster. The chattering classes expect May to lose the vote on her negotiated soft Brexit, originally scheduled for Tuesday but (stop press since breakfast today) now postponed in the face of impending defeat. The defeat would be at the hands of an opportunistic coalition of hardline Brexiters, hardline Remainers, and Labourites who just want to bring down the government. From now on, all bets are off. May can possibly hang on as a caretaker Prime Minister, but her claim to leadership has vanished.
That leaves two clear options on the table, as stated by Donald Tusk: no deal or no Brexit. There are however supporters of an even softer Brexit – BINO for “Brexit in name only”, based on the Norway model. This has no merits over staying in, except that it formally respects the result of the 2016 referendum. Brussels would have to be persuaded to stop the clock on Article 50 and reopen negotiations on a new basis, and I expect they would insist first on a clear political mandate in the UK for the reset. This dovetails with a growing movement for a second referendum, now that fantastic promises have been replaced by unappealing reality.
The one politician to gain from all this is the maverick Speaker of the House of Commons, the unbeloved but capable John Bercow. When you have three or four serious options that cut across normal party alignments, the choice of amendments to vote on and their sequencing can determine of at least tilt the outcome. Bercow is not a shrinking violet: he successfully blocked May’s plan to grant Donald Trump the exceptional privilege of addressing Parliament in the historic Westminster Hall.
There’s an interesting point of wonkery to finish up with. Paul Krugman – he got his Nobel for work on international trade, so he has real cred on this – disagrees with the dire assessments by the Bank of England on the economic costs of a chaotic Brexit. The Bank puts them at twice Krugman’s estimate.
I’m with the Bank here. Academic economists like Krugman model economic relations tacitly assuming a constant, or at least very slowly changing, institutional framework. Increase a tariff, as Trump has done on Chinese steel, and prices and quantities change in a predictable way – but nothing changes in the dockside procedures. A hard Brexit is a discontinuity, a massive and sudden disruption to a well-established system. It’s less like a standard policy shift than the outbreak of war – or if you like a zombie invasion that nobody knows how to deal with.
In this epistemologically extreme situation, well-founded anecdote is better than reasssuring models with invalid assumptions. The Bank’s chief economist, Andy Haldane, has revived Alfred Marshall’s practice of travelling round the country to talk to and above all listen to businessmen. They have I think been telling Haldane that a no-deal Brexit would be a train wreck, and he has heard them.