Article 50, Backstop, Brexit, Customs Union, Single Market, Theresa May

Two weeks to go (to Brexit) and we still do not know…

This blogpost was written on Friday March 15th 

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It is hard to know what to say about what happened in the UK House of Commons (HOC) this week. In two weeks, two weeks from today Friday, March 29th at midnight Brussels time, the UK is due to leave the European Union.

As I write this briefing we still do not know on what terms the UK will leave, if there is to be a deal or if the UK leaves with no-deal. Even though the HOC voted on Wednesday night to take a no-deal Brexit off the table that does not actually mean anything, as we explain below.

The week began with UK Prime Minister, Theresa May, flying to Strasburg on Monday evening to finalise “clarifications of clarifications” with EU Commission president, Jean-Claude Juncker. These “clarifications” came down to trying to define in what circumstances, if any, the UK could leave the “Irish backstop”, the provisions of the Withdrawal Agreement designed to ensure that there would be no return of border infrastructure on the island of Ireland.

The need for the backstop arises out of Theresa May’s insistence that Brexit must mean that the UK is outside the EU’s Customs Union, Single Market and the jurisdiction of the European Court of Justice. There is no example, anywhere in the world, of two countries having different customs regimes which do not have a border between them to ensure regulatory compliance.

The “Strasburg Clarifications” amounted to little more than a restatement of what the EU has said previously that the UK must remain in the backstop “unless and until” alternative arrangements that worked could be put in place to ensure no border between Northern Ireland and Ireland. References were made in the documents to the right of the UK to go to arbitration in certain circumstances to ask the arbitrators to free it from the backstop.

May hoped that the clarifications were such that her Attorney General, Geoffrey Cox, could write a legal opinion to the effect that the UK now had a clear and unambiguous route out of the backstop. This, she hoped, would bring on board the hard Brexiteers and the Northern Ireland Democratic Unionist Party (DUP).

In a three-page letter to Mrs May published on Tuesday, Mr Cox did say that the new Brexit assurances “reduce the risk that the United Kingdom could be indefinitely and involuntarily detained” in the Irish backstop because of bad faith on the EU’s part.

However, he concluded that “the legal risk remains unchanged” that, if there were “intractable differences” between the UK and the EU, rather than just bad faith by the bloc, Britain would have “no internationally lawful means of exiting” the backstop without the EU’s agreement.

In other words, it is very difficult to prove before any court that the other party is acting in “bad faith” or are not using their “best endeavours”. Further, if the difference between the parties is simply down to the fact that they cannot conclude an agreement because of “intractable differences” there is nothing any court can do. if you want to sell your house for €300K and I am only prepared to offer you €200K there is no court that can order us to split the difference.

The “Strasburg Clarifications” failed to work and the Commons voted down the Withdrawal Agreement on Tuesday night by 391 to 242 votes. Then, on Wednesday night, the HOC voted to take a “no-deal Brexit” off the table and on Thursday voted to seek an extension of the March 29 deadline, if necessary.

However, the UK cannot unilaterally rule out a “no-deal” Brexit or extend the March 29th deadline. As matters stand, the UK will leave the EU in two weeks’ time unless either the UK votes to revoke the Article 50 notice it gave the EU two years ago, meaning it would not now be leaving the EU, or the EU agrees to extend the timeline.

To extend the deadline the EU would want a reason to do so, such as a planned general election in the UK or the holding of a second referendum. A request for more time “just to kick the can around a bit more” could well be unacceptable.

As I write on Friday morning, it now seems that Mrs May plans to bring the Withdrawal Agreement back to the HOC for a third vote next Tuesday. The Attorney General, Cox, has circulated a further legal note saying that, in accordance with Article 62 on the Vienna Declaration on the Law of Treaties, the backstop could be revoked if it had a ‘socially destabilising effect on NI’. “It is in my view clear and undoubted in those exceptional circumstances that international law provides the [UK] with the right to terminate the Withdrawal Agreement”, he writes.

Legal commentators have been quick to point out that the International Court had found that the fall of USSR and break up of Czechoslovakia didn’t warrant exit from a treaty as they weren’t regarded as radical changes. So, social unrest in Northern Ireland isn’t going to cut it. The chances of the Withdrawal Agreement being accepted by the HOC at the third time of asking would appear to be slim. It is very difficult to overturn a 150 majority against you when the question being asked has not changed.

It has always seemed to me that there are two strands of opposition to the Withdrawal Agreement and the accompanying Political Declaration in the HOC. The Withdrawal Agreement covers the settling of the UK’s financial obligations, the rights of citizens and the Irish backstop. The Political Declaration sets out the framework for discussions on the UK’s future relationship with the EU after Brexit.

The ultra Brexiteers object to the Withdrawal Agreement because of the backstop which, they believe, would keep the UK trapped in a customs union with the EU, so preventing the UK from cutting its own, independent trade deals with countries such as the US.

The fact that all mainstream economic analysis shows that, by any metric, what the UK could gain from such trade deals would be minimal compared to what will be lost from putting new barriers between the EU and the UK. Brexiteers also assume that trade deals could be quickly negotiated on favourable terms for the UK. Trade experts point out that even relatively minor deals can take years to finalise and the stronger party, such as the US or China will dictate terms. The UK is just not as big as Brexiters think it is.

The DUP opposed the backstop because it worries that it could see Northern Ireland separated from the UK mainland. The problem for the DUP is that majority opinion in Northern Ireland favours the backstop, seeing it as giving the province the best of both worlds, able to trade freely with both the EU and the UK. The backstop could actually make Northern Ireland a sort of “special economic zone”, a magnet for inward investment.

The second strand of opposition comes for those who are probable reasonably happy with the Withdrawal Agreement per se but whose real problem is with the Political Declaration and its vagueness. Their concern can best be summed up as: “You are asking us to sell the house and leave without any idea of where we are going. This is madness”.

Indeed, it is madness. But that is not the EU’s fault. It is entirely down to Mrs. May. The Political Declaration is as vague as it is because of Mrs. May’s “redlines” that we mentioned earlier: no Customs Union membership, no Single Market membership, and an ending to the jurisdiction of the European Court.

It was Mrs. May herself, along with her advisors, who decided back in 2016 that this is what Brexit meant. There was little or no consultation within her Conservative Party about this, still less across the aisle with Labour and the other opposition parties.

Mrs. May’s approach to Brexit has grown out of her obsession with cutting immigration to the UK, which meant ending EU freedom of movement (FOM). She has put this front and centre of her Brexit strategy since day one. It blinds her to all other possibilities.

The EU has repeatedly said that while the Withdrawal Agreement is locked and will not be reopened, the Political Declaration on future relations can be redrawn at any time. But for it to be redrawn requires the UK to walk away from May’s redlines.

If the HOC does not want a “no-deal” Brexit and if it finds the current Political Declaration unacceptable then it needs another way forward. Fast.

I have never made any secret of the fact that I believe that the UK leaving the EU is in nobody’s interest, except perhaps the Russian president, Vladimir Putin, who would happily see the EU damaged. Brexit is a negative-sum process, which will see both parties worse off afterwards, though it will be the UK that takes the brunt of the hit. The UK remaining in the EU is the best option by far.

But I just don’t see that happening at this time. Why? Because of the position of the Labour leadership. Corbyn is a lifelong Eurosceptic. In his long presence in the HOC he never once voted for any EU supporting measure. He is as committed to Brexit as is May.

So, if Brexit is going to happen what is the least damaging Brexit there could be?

I believe that there could be a majority in the HOC for the following:

  1. UK and EU now agree that the transition period will run to the end of 2022. This gives all parties time to work things through properly.
  2. During the transition period the EU and the UK to discuss the possibility of the UK remaining in both the customs unions and the single market.
  3. At the end of the transition period, or when an agreement is reached, whichever is the sooner, the results of the negotiations be put to the UK electorate by way of a referendum.

All of this is doable. But, I would go further.

I would ask the EU to be generous to the UK. I would propose that the EU say to the UK now, that at the end of the transition, when the next referendum is held, then the choice would be between the new terms on offer or re-joining the EU on current terms.

It may be argued that if the EU were to make such an offer to the UK would other countries not want to go down the same road? Why would they? What rational country would want to opt-out of EU decision making for up to five years, while still having to meet all the obligations of membership during those five years, and at the end of the five years the best it could hope for would be to resume membership on current terms? Brexit to date has been a salutary lesson that, of course, you can leave the EU, but there will be a heavy price to be paid and it will not be easy.

I have just finished reading the distinguished economics journalist William Keegan’s book, Nine Crises. It is a memoir which recounts his insider view of nine crises that hit the UK, starting with the devaluation of the pound in the 1960s and finishing with Brexit. I’m old enough to remember them all.

John Maynard Keynes once commented:

“Practical men who believe themselves to be quite exempt from any intellectual influence, are usually the slaves of some defunct economist. Madmen in authority, who hear voices in the air, are distilling their frenzy from some academic scribbler of a few years back”

Keegan’s book reminds us of just how often otherwise sensible and sane UK politicians have been in thrall to “voices in the air” or to the work of some “academic scribbler” or other. Think of Harold Wilson’s obsession with “saving the pound” or Geoffroy Howe’s dogmatically pushing policies based on the monetarist theories of Milton Friedman. A few years later, when the fever has passed, folk scratch their heads and ask: “What was that all about?”.

I suspect the same will happen with Brexit. If the UK can find a sensible accommodation with the EU along the lines sketched out above, most people will just breathe a sigh of relief and get on with their lives. Sure, some Brexiteer ultras will be apoplectic with rage, but there will be no rioting in the streets. Talk of buccaneering trade deals and a low-tax “Singapore-on-Thames” will soon disappear from public discourse.

And folks will say: “What was that all about?”.

3 thoughts on “Two weeks to go (to Brexit) and we still do not know…

  1. Cogent analysis of a complicated phenomenon. I’m a Yank, so I’m even more perplexed. I have a limited understanding, but it seems to me that hardline Brexiteers are shrinking fast. If it’s so troubling, why not have a second referendum? Was this voted down due to the stubborn ideologies of Corbyn and May? Go back to the UK people and see if they still want it!

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  2. I don’t know if the UK has the same type of late-night talk shows that we have in the US. If so, they have had more material to work with over the past 2-3 years than they could possibly handle. I guess every country goes through a period that, to outsiders, appears to be national insanity. Query: While I know that the UK is predominately a two-party system, there is the Liberal party: could they improve their degree of national relevance by coming out in favor of a second referendum?

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  3. Sorry upfront for my English, as I am not a native speaker or writer.

    I think it is fair to say that in general the EU is not very happy with UK leaving the EU, and that counts for me as a person as well. Now the complexity is that with the EU we have created a scrambled egg with 28 countries, and we need to get the UK egg out, that was once put into the EU. Now this is complex for both UK and EU, hence the transition period of 2 years.
    The situation regarding leaving, has been an UK political dance, I where nobody seems to want to dance towards mutually agreed conditions. It is for this moment in time impossible to get all details 100% clear, due to this scrambled egg . The political game has been very frustrated for all remaining EU members. I believe that the EU has been very corporative and patient with the UK. The political scene in the UK should get its act together by staring to working together and forget about the politics, just for a brief moment, for the benefit of the UK itself.
    As long as there is no mutual agreement between political parties upfront, there is no point for the EU to delay the 29th exit any further. As EU, we need to move forward as well, and therefore should avoid losing any more time with this endless political game. Also, I believe that with or without any agreement of leaving, the UK will survive, as it has its own strong economy and businesses will find a way out. Takes time with both an agreement and no agreement.

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