24 June 2019

How to drop the backstop and still leave with a deal

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Due to the Conservative Party leadership contest, the possibility of a No Deal Brexit is being discussed more than ever before. Boris Johnson has said the UK “must prepare” for a no deal outcome in case the EU refuse to renegotiate, although he has stressed he is not keen on a “disorderly” No Deal Brexit. Leading Eurosceptic MP Jacob Rees-Mogg explained the strategy as such: “To misquote Vegetius “If you seek a deal, prepare for no deal.”

Will this work?

Commentators have been quick to point to various EU sources denying that renegotiation is on the table, even if British EU correspondents– who are often very well informed, given their privileged access to both EU and UK policymakers – have pointed out that some in the EU27 are seriously considering a shift.

The Daily Telegraph’s Peter Foster, for example, thinks that “for all the continued assertions that the deal cannot be renegotiated, there is an acceptance that a new British prime minister will have to be given a fair hearing”. At the same time, “a demand to ‘bin the backstop’ will be rejected outright and [would] very quickly scupper any chance of a reset.”

Indeed, the backstop – an arrangement whereby the UK outsources its trade policy to Brussels until further notice from Brussels – is still very much at the heart of British opposition to Theresa May’s Withdrawal Agreement.

What we know is that so far there has only been a majority in Parliament for two things: to reject No Deal and to support the so-called ‘Brady amendment’, whereby MPs demanded the government negotiate “alternative arrangements” for the Irish border.

Johnson, whom most observers presume will succeed Theresa May, has referred to the backstop as “that prison, that Hobson’s choice”, given how it provides the EU with a veto over when the UK can recover trade powers, despite assurances in March that the EU would not be able to act in bad faith when alternatives to the backstop are being negotiated. Johnson has pointed to the Brady amendment as his preferred solution, explaining he favoured the “maximum facilitation” approach to the Northern Irish border, which would mean aiming to create a border that is as frictionless as possible.

The UK government has previously stated this approach includes technology-based solutions, waivers for entry and exit declarations and “trusted traders” schemes. Christian Bock, the head of Switzerland’s customs authority, has told MPs he thinks an “invisible border” on the island of Ireland could be “possible”. And he should know – after all, Switzerland is outside of the EU’s single market and customs union, just as the UK government intends to be.

The Irish response

The Irish government isn’t quite so convinced, to put it mildly.

“To me, no backstop is effectively the same as No Deal, because what the backstop represents is a legally operable guarantee that we will never see a hard border emerge again,” Taoiseach Leo Varadkar has stated.

He also rejected the idea of putting a time limit on the backstop. This contradicts diplomatic sources, who told  the Telegraph that such a time limit was “not beyond the realms of possibility if we’re talking five to seven years [and if there is a] clear baked-in Parliamentary majority as the price of a deal”.

Interestingly, Ireland’s leader did not exclude the possibility of a “technological solution” outright, but said the technology required to ensure no checks on the border had not yet been fully developed. “What people are saying is give up the backstop, which we know will work legally and operationally, in return for something that does not yet exist, but might in the future…I can’t do that to the border communities,” he said.

In any case, the onus is now very much on Ireland. A senior French official recently commented that “only Ireland can say the backstop is no longer necessary, but that’s not the case. We won’t have the backstop debate again”.

What would Boris do?

How to square that circle? Boris Johnson’s plan, which foresees a legal exit at the end of October, is to negotiate alternatives to the backstop after October, having them agreed during “the implementation period for discussion after we have left”.

In other words, Johnson wants the backstop to simply be scrapped. If the EU disagrees, his aim is to negotiate “a standstill in our current arrangements under GATT 24″, during which both sides could then work out how to avoid a hard border – something he committed to by pledging  that “nobody wants to see a return of any kind of infrastructure”.

Leaving aside that the EU would need to agree to such an arrangement– and the EU’s Trade Commissioner has ruled it out – Johnson’s preferred outcome would also not cover services.

Of course this is all possible in theory, but there are huge challenges involved.

Disruption due to No Deal could quickly lead to blame games that further diminish the good will needed to piece together some kind of solution.

Another alternative

Even if Ireland were to concede to a time-limited backstop, that would just delay discussions for a few years. Another solution could be to simply accept that both sides fail to agree on the backstop. Because both sides agree that the backstop should only be a temporary arrangement that needs to be replaced with alternative arrangements at some point, they could just agree to start negotiating those alternative arrangements right now. After all, why bother negotiating a time limit to the backstop if that ultimately only kicks the can down the road and does not solve the issue?

Why not test in reality whether Ireland is right to be so sceptical about alternative arrangements or whether the Swiss customs chief may be on to something when he claims an “invisible border” is perfectly possible?

Regardless of what the Good Friday Agreement actually says about a “hard border”, neither Ireland nor the UK have any intention to impose burdensome checks and both sides have a strong interest in good relations post-Brexit.

Concessions from all sides

This solution would entail flexibility from all sides. Ireland would need to sit down to talk about technology and all the other solutions its leaders have so far dismissed.

The UK would probably need to request yet another extension of its EU membership, given that these discussions are very unlikely to be sorted by the end of October. Perhaps the EU concession to talk trade could give Boris Johnson – or Jeremy Hunt, if he somehow defies the odds – the political capital to request an extension.

The EU would need to move as well. So far, it has claimed that it can legally only discuss a trade relationship with the UK from the moment that it has left the EU. This legal interpretation of the Treaty is highly debatable.

For one thing, in December, EU Commission President Jean-Claude Juncker said that “if the House of Commons backs the Withdrawal Agreement in mid-January, then we should begin preparations for the future relationship between the United Kingdom and the European Union the very next day and not wait until after the official withdrawal date of 29 March”.

When alternative arrangements have been agreed, the UK could leave the EU, in the certain knowledge that it would never have to enter the backstop

Complications

To be fair, many question marks would come up during such talks. One objection could be that setting up “invisible” border checks depends on the extent of market access the UK will enjoy and whether there will be customs checks.

Some elements of the future trade relationship are obvious and should be taken as read:

  • both sides are likely to agree that no tariffs will be levied by either the UK or the EU. That should be straightforward, especially as it is already part of the joint political declaration, which serves as the blueprint for the future relationship.
  • it’s pretty certain the UK will rule out the ‘Norway Option’ of full access to the EU’s single market in return for full rule-taking. It’s simply inconceivable that the UK would let the City of London be governed from Brussels, not least as the world’s greatest financial centre only does 25 per cent of its business with mainland Europe.

One option for ‘alternative arrangements’ could be for Northern Ireland to simply adopt Norway’s status: outside of the EU’s customs union, but still within the single market. Obviously, if Northern Ireland were to align with some or all of the EU’s rules, this would trigger extra internal market checks in the Irish Sea.  This may be a red line for the DUP, but it’s certainly not for everyone in the Conservative Party or elsewhere in British politics.

The Alternative Arrangements Commission set up by the cross-party group Prosperity UK, has not ruled out sanitary and phytosanitary checks in the Irish Sea, provided there is consent from the Northern Irish institutions. At the moment there are only checks on livestock coming from Great Britain to Northern Ireland. In theory, one could extend this to food or single market checks in general.

On the other hand, a red line for pretty much everyone in British politics is the idea of customs checks in the Irish Sea. For the UK to enter a permanent customs union and therefore to outsource post-Brexit trade policy to Brussels is clearly not politically sustainable

Though some in Brussels might see this as the ideal outcome of negotiations, it would be more responsible assume that at some point the UK will leave the  customs union and recover the power to conduct its own independent trade policy.

Flexibility

It’s clear that in the actual negotiations about ‘alternative arrangements’, considerable concessions will be required from all sides. As said, the UK side may well need to accept some extra regulatory checks in the Irish Sea. In case of No Deal, Ireland stands to lose out on several fronts – its economy will suffer, as will the peace process and its relationship not only with the UK but also the other EU member states, who are likely to request firm checks at the border.

Dublin may need to concede that Northern Ireland will not be within the EU’s customs union. The UK and the Irish Republic could however agree to not having customs checks on the border, something neither side is keen on in any case.

For the remaining 26 EU members, tolerating this arrangement would be a concession, but far from the end of the world. If Northern Ireland were to adopt ‘Norway’ status, goods crossing the border into the Republic would be compliant with single market standards anyway, so the only risk resulting from an absence of customs checks would be lack of tariff income, for which the UK and Ireland could compensate EU governments. There is more trade between British mainland and Northern Ireland than between the latter area and the Republic, so we’re not talking about a lot of money.

One should also keep in mind that the EU’s external customs border isn’t known for being strictly monitored (certainly not at mainland Europe’s great ports which provide access to it). In the past, the UK has suggested exempting SMEs from burdensome checks, a proposal the EU has dismissed out of hand. If it is genuinely concerned about peace in Northern Ireland, perhaps Brussels should be a bit more flexible here, considering how leaky its existing borders are anyway.

Conclusion

Many versions of “alternative arrangements” can be imagined, from the whole of the UK aligning with EU rules to shaky border checks with all kinds of transitional provisions, which is something the backstop currently already foresees. Which solution will prevail depends on the number of concessions made by Ireland, the UK and the EU26.

In any case, when it comes to protecting trade between the world’s fifth biggest economy and the world’s largest trade bloc, there is no alternative to perpetual negotiations and flexibility. Even when the EU-UK divorce and future relationship are sorted, negotiations will still be necessary.

If market access has been granted on the basis of regulatory alignment, any regulatory changes will once again trigger negotiations. That’s currently the case with the stormy relationship between Switzerland and the EU and it will not be any different with the EU’s relationship with the United Kingdom.

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Pieter Cleppe represents independent think tank Open Europe in Brussels.