18 March 2019

Britain still hasn’t faced up to its Brexit predicament


At the heart of the Brexit debacle has been a consistent failure by the UK political establishment to assess its predicament with sufficient clarity. Until that changes, there will be no way out of the quagmire.

Primarily this means understanding that the existing withdrawal package already indicates a closely integrated future trading relationship, and digesting the implications of how and why the EU presented that option to the UK.

It has become increasingly apparent over the last year that EU policy is for Northern Ireland to stay in a customs union with the EU and its Single Market for goods. This means there would be no need for compliance checks related to the Irish land border, as all  Northern Ireland’s tariffs, customs rules, and regulations related to the freedom of movement of goods will remain harmonised with the EU’s.

The EU justifies this approach with an argument that border-related administrative processes stemming from Northern Ireland leaving its customs and regulatory areas would be incompatible with the objectives of the Good Friday Agreement. This thinking was there in the critical December 2017 Joint Report, which stipulated that after Brexit there must be the “avoidance of a hard border, including any physical infrastructure or related checks and controls” on the island of Ireland.

In March, the EU translated that report’s terms into the first draft of the ‘backstop’, which is the contingency plan to keep Northern Ireland economically integrated with the EU “unless and until” another solution is found. In the month prior to the Joint Report, Michel Barnier’s Brexit Taskforce had pushed that policy, and Deputy Prime Minister Simon Coveney explained the position at Ireland’s parliament.

“Our position of Britain being part of the same customs union, whether that is a redesigned customs union or an extended Single Market, would solve a lot of these problems. In the absence of Britain, as a whole, doing this, we need some assurance on the island of Ireland that Northern Ireland will be the subject of unique and flexible solutions,” he said on November 16, 2017.

The Tánaiste was not referring to exceptional methods of maintaining the Irish land border status quo in the event of Northern Ireland exiting the Single Market for goods and a customs union. He was referring to Northern Ireland remaining within those systems via special arrangements: the backstop.

The thrust of the overall policy was not new. Irish Prime Minister Leo Varadkar had said five months earlier: “We do not think it’s in the interests of Northern Ireland or the United Kingdom that there should be an economic border between our two countries or on our island.” That has also been the goal of the Irish Farming Association since at least March 2017, as it worries greatly about the impact on €5.2 billion worth of exports if the UK leaves the EU trade bloc and lowers food standards.

EU and UK work last year on Irish “North-South cooperation”, which covers 156 areas and has to be protected under future arrangements, further buttressed the EU and Irish policy. It confirmed cooperation relied to a “significant extent on common Union legal and policy framework” and that phrase is in the backstop.

According to the final version of the backstop, the UK would remain in a customs union with the EU, as it refused the idea of a customs border between Northern Ireland and Great Britain. Northern Ireland would keep applying the Union Customs Code, as well as legislation on goods, sanitary rules for veterinary controls, rules on agricultural production and marketing, VAT and excise in respect of goods, and state aid laws, while the island’s Single Electricity Market would be maintained.

The UK, at least officially, has appeared to continue to believe that non-customs union, and maybe non-Single Market, “alternative arrangements” could preclude or replace the backstop. They would involve tracking goods remotely and conducting compliance checks away from the border.

While the EU is legally committed to exploring such options in good faith, officials have repeatedly described them as “magical thinking” and “unicorns”, Deputy Negotiator Sabine Weyand says they do not exist, and there is no obligation for Brussels to accept any future UK proposals.

In addition to its expressed concerns over the Good Friday Agreement, the EU is not willing to tolerate any additional threat to the integrity of its Single Market and Customs Union that results from the UK leaving. It says this would occur from increased smuggling if there were a porous EU external trade border across Ireland.

Instead, it appears that the EU considers the only acceptable alternative to a special status for Northern Ireland is what is often referred to as the British government dropping its “red lines”. This means the UK agreeing to continued membership of the Single Market, including the freedom of movement of persons, in addition to staying in a customs union, which means applying EU tariffs.

The reality of the UK’s overall Brexit predicament is reflected in the Political Declaration on the future partnership that is part of the twice-rejected withdrawal package. It says that new customs arrangements will “build and improve on the single customs territory provided for in the Withdrawal Agreement which obviates the need for checks on rules of origin.”

This “single customs territory” is the part of the backstop that puts the UK in a new customs union with the EU, and so an intention to “build and improve” on it strongly indicates the UK will keep applying EU tariffs. Again, there appears to be no alternative that the EU will accept, at least as long as the UK government refuses an internal customs border.

Although the exit plan therefore aligns with Labour’s signature policy to maintain a customs union with the EU, only three out of 245 Labour MPs backed the deal last week. It is hard to identify reasons that are not overtly political for the party’s stance.

The exit package does not signal that there would be a “UK say” in EU trade deals, which is a Labour objective. But it is one that would be hard to achieve in practice, as external trade is an exclusive competence of EU institutions, and there is no precedent for such a privilege being granted to a non-EU state. Instead, the UK would have an independent trade policy, but it could not offer negotiating partners tariffs that are lower than the EU’s.

The Prime Minister’s essential problem is that the Withdrawal Agreement is being rejected on one side by her MPs, primarily because Northern Ireland or the UK will have to remain permanently economically integrated with the EU, and opposed on the other by Labour because it is not its deal.

Some MPs would probably also be convinced to back the Withdrawal Agreement if the government pledged to remain a member of the Single Market. But, if the agreement is ratified, the UK will anyway need to make a choice on the Single Market during trade negotiations: does Northern Ireland keep partial membership, or does the UK retain full membership?

Although the Political Declaration indicates that the freedom of movement of people will end, which means the UK exiting the Single Market, it also says the future partnership “might evolve over time” to become more ambitious and “may encompass areas of cooperation beyond those described in this political declaration.”

If the UK stays in the Single Market, the EU may well impose stringent compliance mechanisms in order to guard against UK foot-dragging in adopting new rules. This is because Brussels will not countenance the possibility of a very large economy like the UK’s temporarily undermining the integrity of its Single Market, especially given waning trust and concerns over UK intentions.

For example, the existing cross-party Common Market 2.0 proposal promoted by Nick Boles and Stephen Kinnock appears unrealistic, as it says the UK would have the “right to reject new rules.” That breaches the EU red line that third country relationships have to balance rights and obligations.

If there is a third Meaningful Vote, the Prime Minister could perhaps win over some more European Research Group MPs and the 10 from the Democratic Unionist Party through further legal assurances on the backstop and due to the increasing possibility of Brexit not occurring. Theresa May needs 75 more votes to ratify the deal, and 85 members of her party and the allied Northern Irish party rejected it last week. A small chunk of those 85 oppose the deal as they either want to stop Brexit, or at least want the UK to stay in the Single Market.

If the deal is again rejected, a “Brexit election” could possibly be held during an extended Article 50 period to try and break the impasse. The new Parliament could then once more try to ratify the existing withdrawal package.

If it chose not to, it might then vote in turn on leaving the EU but staying in a customs union and the Single Market, leaving with no deal, holding a second referendum, or revoking Article 50. A failure to gain a majority for any would mean the default option of a no deal exit.

Should another referendum be approved, the electorate could choose between staying in the EU or leaving without a deal. That people’s vote would undoubtedly be a vicious affair, and there is no way of definitively resolving the question of the UK’s role in the EU given the societal divisions, but at least this time around there should be more clarity about the situation.

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William Davison is a journalist focusing mostly on Ethiopia and Brexit, and a former Bloomberg correspondent in Addis Ababa.