#Brexit – The Fast Fading Fantasies

#Brexit – The Fast Fading Fantasies

   November 12, 2018  
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#Brexit – The Fast Fading Fantasies

Just when you think there cannot be any more twists and turns in the Brexit saga, along comes the resignation of Jo Johnson (Photo): Transport Minister in May’s government and Boris Johnson’s younger brother. Jo Johnson is not, and never was, an attention seeker. Instead, he was a sober, industrious member of the government who voted Remain in the 2016 referendum.

His devastating resignation statement frames the choice May intends to present to parliament as one between “vassalage”, obeying EU rules with no say in their adoption, or “chaos”, leaving the EU with no agreed terms. Rather than have parliament vote on these two unpalatable options he wants them, along with the option to remain in the EU, put to the people in another referendum.

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If a centrist such as Jo Johnson is taking this position, then there must be many other centrist MPs who see things similarly. Will they break cover in the coming days? If we add the dozen or so already declared centrists who want another referendum to 20 or 30 Hard-Brexiteers and the 10 DUP votes, it becomes increasingly difficult to see May getting the Commons to vote for any deal she manages to bring back from Brussels.

That is, if she manages to bring back a deal.

From multiple press reports it would seem that there are now not one but two potential deal breakers.

Re-emergence of a hard border

The first, of course, continues to be the Irish backstop. Second, related to the Backstop, but somewhat separate, are the terms and conditions under which the EU would allow the whole of the UK to opt into a temporary customs union.

90% plus of the terms of the UK’s Withdrawal Agreement (WA) from the EU have been settled between the parties, including the rights of citizens and the UK’s financial obligations. The issue still in play remains the need to avoid the re-emergence of a hard border between the two separate political entities on the island of Ireland. The UK committed to this last November/December in Article 49 of the Joint Report from the two negotiating teams to the heads of government.

Article 49 stated that whatever else happened, Northern Ireland would stay in the EU’s customs union and would also stay aligned with single market regulations “unless and until” either an EU-UK economic relationship was finalised, or technology was developed, which would obviate the need for a border on the island.

But, as we have previously written, it became clear, very quickly, that the UK did not fully realise that what is had signed up to last December could mean a border between the UK mainland and Northern Ireland. Given that the May government is dependent on the ten votes of the Democratic Unionist Party (DUP) from Northern Ireland to stay in power, Article 49 put the government in a political bind.

The story of the Brexit negotiations in 2018 is little more than repeated attempts by the UK government to extract itself from this political bind: how to avoid a border between the UK and NI?

The latest UK proposal is that, in order to avoid such a border, the whole of the UK would temporarily stay in the EU’s customs zone after the end of the transition period in December 2020. This would come into force if, in the meantime, the EU and the UK had not yet reached a comprehensive agreement on the future relationship between the UK and the bloc that made a border unnecessary.

Given the complexities involved in negotiating such an agreement, trade and economic specialists are practically unanimous in saying that the transition period from March 2019 to December 2020 is simply not long enough. Anywhere between five and ten years is required. As for a technological solution, forget it.

So, after December 2020 the whole of the UK would stay in the EU’s custom zone to avoid an internal UK border of any sort between the UK and NI.

As noted above, this raises two significant questions.

First, on what terms would the EU agree to the whole of the UK staying in the customs union?

Membership of the customs union would give the UK quota-free and tariff-free access to the EU’s internal market. The EU is not going to offer that without, what has become known in the jargon as an LPF, a level playing field. LPF implies that, while in the customs union, the UK would follow all EU regulations that impact on competitiveness such as labour, product, social and environmental standards.

British fishermen

The EU would not want to see its businesses undercut by a UK that slashed and burned its own regulations. This would include adherence to future EU rules in these areas but the UK would have no say in their development. A rule taker rather than a rule maker. Hence, Johnson’s reference to “vassalage”.

Second, also complicating the question of UK customs union membership, as we noted in last week’s Briefing, is the issue of fish. As things stand, EU fishing fleets have access to UK waters under the Common Fisheries Policy (CFP).

This policy was in place before the UK joined the old Common Market back in 1973 and has always been regarded as unfair by British fishermen. One of the planks of the Brexit campaign was to “take back control” of British waters and to leave the CFP. Even though fishing represents less and 0.5%of British GDP is has become a totemic issue.

To further complicate matters, over 70% of the fish caught by British fishermen is exported to the EU. Most of the fish eaten in the UK is imported. Whatever about the chips, the fish are all foreign!

Big EU fishing powers, such as France, Spain, Belgium the Netherlands and Denmark are concerned that membership of the customs union would allow the UK free rein to export fish to the EU while quitting the CFP would let the UK shut their boats out of UK waters. They are demanding that customs union membership comes at the price of continued access for their boats to UK waters. To coin a phrase, a very tough demand for the UK to swallow.

As an alternative, it would appear that what the UK is suggesting is that during the 2019 -2020 transition, it would be prepared to negotiate access for EU fleets to UK waters in “good faith”. But given the way the UK has conducted Brexit negotiations to date and also given some of the language coming out of London around “just getting out of the EU in March 2019 and then sorting things afterwards” good faith is in very short supply, if not non-existent. Would you buy a second-hand fish from these people?

Ironically, Theresa May always wanted to negotiate with EU political leaders over Brexit rather than with Michael Barnier’s EU Commission team because she thought they would be more accommodating. Over fish she might just get her wish and regret it.

Be careful what you fish for.

If the issues of the CFP and the LPF as regards UK membership of the customs union can be resolved, and that is a very big if, it still leaves the question of how and when this “temporary” arrangement can be ended and by whom?

Remember, the purpose of the UK accepting a customs arrangement is to avoid the Irish backstop and that backstop can only be ended when the EU and the UK arrive at an agreement that means no border is required in Ireland. The Irish backstop stays in place “unless and until” alternative arrangements are negotiated and agreed.

Politically unpalatable

The fears on the part of the UK’s Brexiteers, and others, is that the UK could be locked in this “temporary” arrangement for many years to come. They, therefore, want the unilateral right to be able to walk away from it at a time of their choosing. But, a unilateral right to walk away means that the backstop is not a backstop.

The EU is insisting that if this is what the UK wants then there has to be a backstop to the backstop meaning that if the UK quits the customs union then NI stays in it and stays aligned with EU single market regulations. May finds this politically unpalatable.

To try and get around this it would seem that the UK is now proposing that that the issue of ending the UK-wide and NI-specific backstops be put to arbitration. A panel of UK and EU judges, chaired by an independent person, would decide if a point had been reached that would justify ending the backstops.

I, for one, do not see the EU accepting this. The decision as to whether or not the backstops are no longer needed is a political decision, not a judicial one.

The Brexit negotiations are a conflict-of-interest negotiation and in the real world the outcome of such negotiations is decided by power and negotiating leverage, not by judges. The inappropriateness of independent arbitration is properly highlighted in this article by the ‘ lawyer of choice’, Martin Howe. (A Sunday Times report says Brussels has already rejected May’s arbitration proposal).

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