This blogpost was written on Sunday Nov 4th, 2018
It is Sunday and the weekend papers are awash with suggestions that the Brexit negotiators are close to a breakthrough. The Sunday Times reports, almost breathlessly, on “May’s Secret Brexit Deal”. RTE’s European editor, Tony Connelly reports it somewhat differently – and far more soberly.
As usual, the potential deal-breaker is the Irish backstop.
Apparently, what is now being discussed is that the while the whole of the UK would stay in a “bare bones”, temporary customs union with the EU, Northern Ireland (NI) would stay within the full EU customs code and the single market for goods. Regulatory checks would take place in factories and businesses away from the actual border. Instead of the border being down the middle of the Irish sea it might be somewhere in a factory in, say, Liverpool. But then Liverpool was always part of Ireland, really.
Were this deal to be finalised between the negotiators it is being suggested that it would allow UK Prime Minister, Theresa May, to argue that her redlines of no divisions within the UK have been respected and that the NI backstop would never have to be used in practice.
A proposed Future Economic Partnership (FEP) would leave open the door to a Canada-style trade agreement. Or Chequers.
Will it lead to a deal? We shall see. The devil is always in the detail, not the headlines.
As for the Sunday Times piece It is difficult to take seriously any article that finishes with the words “The small print is that Ireland is f*****”. British officials still cannot get it into their heads that while Ireland is inside the tent, the UK is outside. And you know what Lyndon Johnson said about the difference between being inside the tent and outside.
As the papers were reporting this seeming breakthrough, they were also reporting that Northern Ireland’s Democratic Unionist Party (DUP) had told Dominic Rabb, the UK Brexit Secretary, not to make any more concessions to the EU.
The anger among hard-line Unionist politicians at what is being proposed is well caught by the Belfast Newsletter journalist, Ben Lowry, when he writes:
What all this seems to confirm is that the UK will always be spineless in the face of anger from nationalist Ireland. London is (ultimately) determined to give greater assurance to a neighbouring jurisdiction (albeit of course a very close and important one that is physically adjacent to UK territory) than it is to its own territory, even under a party that prides itself as Conservative and Unionist. (here)
On top of Unionist concerns, it appears that a number of countries, including France, Germany, Belgium, the Netherland and Spain, are deeply disturbed that the proposed temporary customs union would give British fish exporters tariff-free and quota-free access to the EU market while locking EU boats out of British waters. These countries want access to the market to be traded for access to waters. Fish and ships.
Further, the hard-Brexit members of May’s cabinet will want to know for how long these temporary arrangements will run, how will they end and who will end them? The EU position appears to be that they should stay in place “unless and until” alternatives arrangements are negotiated and/or technology is developed which makes any sort of border infrastructure on the island of Ireland unnecessary.
Cabinet Brexiteers will want “temporary” to mean no later than sometime in 2021 and, in any event, well before the next scheduled UK general election in 2022. They will also want the UK to have the right to unilaterally walk away from these arrangements at a time of its choosing. This the EU will not accept because a backstop is not a backstop if one party can simply toss it aside. (See this from the influential website ConservativeHome here),
Even if all of this can get through the UK cabinet, can it get through the UK parliament?
There is no point in speculating right now. Let’s just wait and first see what the deal contains.
While we wait there are two observations I want to make, one related to the other.
The first is how far short all of the above is from where the Brexiteers said the UK would be today in its negotiations with the EU.
The second is that Brexit will not end on March 29th next. That date will be just the end of the beginning and not the beginning of the end. UK politics will not revert to any sort of pre-Brexit normal. Brexit will dominate and drain UK politics for years to come, including calling the continued existence of the Union of Great Britain and Northern Ireland into question.
Back in 2016, Brexit was going to be so simple. Remember the quotes:
There will be no downside to Brexit, only a considerable upside. David Davis brushes off Brexit retaliation fears (10 October 2016)
The day after we vote to leave we hold all the cards and we can choose the path we want. Michael Gove (9 April 2016)
There will continue to be free trade, and access to the single market. Boris Johnson (26 June 2016)
Getting out of the EU can be quick and easy – the UK holds most of the cards in any negotiation. John Redwood (17 July 2016)
To me, Brexit is easy. Nigel Farage (20 September 2016)
The free trade agreement that we will have to do with the European Union should be one of the easiest in human history. Liam Fox (20 July 2017)
However, by September, 2017, Davis, then Secretary of State for Brexit, was telling the House of Commons: “Nobody has ever pretended that this will be easy. I have always said that this negotiation will be tough, complex and, at times, confrontational”. Statement on the progress of EU exit negotiations made in the House of Commons.
As the song puts it:
Can it be that it was all so simple then
Or has time rewritten every line
Ah, the way we were!
Prior to the referendum Brexiteers confidentially predicted that, by now, the exit deal with the EU would have been concluded and a complete and comprehensive free trade agreement negotiated. As and from March 29, 2019 the UK would be free of all EU entanglements, life would go on as before, trade between the UK and the EU would be as frictionless as today. The UK would have all the benefits of membership with none of the costs. Exiting the EU would provide a dividend of £350m a week to invest in the health service. After all, the UK held all the cards.
Old friends such as Australia, New Zealand, Canada and, of course, the US would appear – as if by magic – bearing gifts of trade deals with the UK. The Brexit boys were busy putting the White Commonwealth band back together. Should never have broken up in the first place. When Ireland saw the wonders of Brexit to behold, it would dump the EU as well and resume its proper place as an appendage of the UK.
Instead of confidently exiting the EU on March 29th next, the UK has been forced to ask the EU for a transition arrangement, or “implementation period” as the Prime Minister keeps insisting on calling it, because there are no circumstances in which the UK would be ready to leave by that date.
Of course it would have been ready to leave if the EU had agreed to let the UK have all the benefits of existing arrangements without any of the cost. Strangely enough, the EU was not prepared to do that instead insisting that the benefits of membership were reserved for members and were not similarly available to non-members.
If May gets the Withdrawal Agreement she finalises with the EU through her cabinet and the Commons the UK will stay subject to all EU laws, including new laws, until at least December 31, 2021.
The question has to be asked, will it even be ready to leave on that date or will transition have to be rolled over? All the while the UK will have no say in EU decision making. A rule taker during transition, rather than having a voice in rule making as it has today.
Not to forget that all of this involves further on-going payments into EU funds, on top of the £40bn agreed as part of the Withdrawal Agreement to settle outstanding financial obligations. While the UK can talk trade with any country it wants, it can only implement any deals it might reach after it finally leaves the customs union, whenever that might be. Of course, other countries will be reluctant to talk with the UK until such time as they know what its final relationship with the EU is going to be.
Pulling it all together, four to five years after the June 23, 2016 referendum vote very little will have changed and it will still feel very much like the UK is still a member of the EU, though it will have de jure left.
Throughout, business confidence and investment will take a hit because no one will know where it all might end. Business will think to itself: “Yes, they got over the March 29th deadline with the Withdrawal Agreement and into transition. But that was just the continuation of the status quo and nothing much changed. But any deal the EU offers the UK will be worse than it has now. How much worse? If the UK continues to insist it will quit the Customs Union and the Single Market then it will be a lot worse and just-in-time supply chains will be hit.”
With such a level of uncertainty I suspect that businesses will use the transition period to build whatever capacity they need in the EU to offset capacity in the UK. When the crunch comes it will be capacity in the UK that will be shuttered.
None of which is to suggest that the UK is about to become an economic basket case. It won’t.
But it will be poorer than it otherwise would have been, and growth will be less than it could have been. As the Centre for European Reform notes this is already happening.
“The UK economy is 2.5% smaller than it would be if the UK had voted to remain in the European Union”, its latest comment on the economics of Brexit reports here.
Future lower growth will impact badly on government revenues at a time when there is already pressure on government to bring austerity policies to an end.
Which bring us to the second issue, politics. Since the referendum result In June 2016 UK politics has been convulsed by Brexit. Both major parties are split between “leave” and “remain” factions. These factions tend to overlap with wider ideological streams. For example, Tory Brexiteers are generally very much to the right of the party, believing in cutting taxes, slashing regulations, minimalist social safety nets and strongly aligning with Trump’s US.
At the opposite end of the spectrum, the far-left Labour leadership is also strongly pro-Brexit, but for very different reasons from the Tory right.
Jeremy Corbyn, the Labour party leader, has never voted in favour of the EU in all his years in the Commons, seeing it as a neo-liberal set of institutions. He particularly dislikes the way Single Market rules prevent governments subsidizing failing industries and he believes that insistence on open, government procurement policies would prevent a Labour government using public funds to boost British business. There is nothing Corbyn would like better than for Brexit to “be over” so he can get back to “real politics”.
But that is not going to happen. Brexit will never be over.
Because there will never come a day when the UK is able to say: “That’s it, we’re done with Europe. All ties cut. Free at last, free at last…”. What’s the UK going to do? Stop all and any businesses with the European Union? Walk away from over 50% of its export markets? Are British people going to stop going to Europe on holidays, so they won’t be concerned about driving licences, health insurance, the ability to buy a villa or an apartment in Spain?
Of course not. You only have to ask the question to realise that the UK will never escape the gravitational pull of Europe. It can’t. Geography dictates otherwise, while trade theory says that countries always do the most business with their near neighbours, however much Brexiteers wish it were otherwise. You generally don’t drive halfway across town to do your shopping when you have a first-class supermarket just down the road.
For years to come as questions of amending UK laws arise as Europe changes its existing laws or introduces a new regulation, UK politicians will continually be faced with the question: do we follow suit or risk losing markets if we diverge?
Or, when it comes to budgets and the funding of public services “remainers” will continually argue that so much more money would have been available had the UK stayed in the EU. What happens when millions, if not billions, have to be allocated to building the regulatory institutions and infrastructure to replace those that the UK currently shares with the EU? Money that could have gone elsewhere. We can anticipate howls of rage from leave supporters when they finally discover that all they were sold was a slogan on the side of a red bus.
Imagine the political battles when the US demands the opening of the NHS to US service providers as the price of a trade deal or Welsh sheep farmers are tossed under the bus so cheaper lamb can be imported from elsewhere.
If, despite DUP opposition, Northern Ireland ends up staying de facto in the EU and becomes a prime location for businesses, would it drift away from the rest of the UK towards Ireland if the UK begins to diverge from the EU? Would Scotland be far behind? How long will the UK hold together?
As all polling shows, younger voters in the UK overwhelmingly favour EU membership. What happens as these voters make up an ever-greater percentage of the total electorate, displacing older generations who pass on? There is now a vibrant, vocal pro-European movement in the UK where one never previously existed, as we noted here. Older Brexiteers cannot “hold back the river” forever.
The river may burst when it comes to the moment of truth at the end of the transition period and decisions have to be made on the UK’s future economic relationship with Europe. Who is going to step forward and say: “Let’s have a worse deal than we now have so we can curb immigration from the EU” which by then will not be the issue it is now because fewer and fewer Europeans will want to come to a cold and hostile country that has told them they are not welcome.
Pressure will grow to rejoin the EU, but that will require signing up to the euro and Schengen.
The former UK prime minister, David Cameron, called the Brexit referendum to “settle” the EU question in UK politics for a generation. Never was something so ill-conceived. As Denis McShane would put it: Brexit is from here to eternity.