Thursday 13 December 2018

Colm McCarthy: Fudge and waffle now off the menu as May stumbles into crisis

The EU looks to have had its fill of Brexit can-kicking after reality bit for the UK at the Salzburg summit, writes Colm McCarthy

British Prime Minister Theresa May arrives to make a statement on Brexit negotiations with the European Union at Number 10 Downing Street on September 21, 2018 in London. Photo: Getty Images
British Prime Minister Theresa May arrives to make a statement on Brexit negotiations with the European Union at Number 10 Downing Street on September 21, 2018 in London. Photo: Getty Images
Colm McCarthy

Colm McCarthy

In the lead-up to the 2016 Brexit referendum, Michael Gove, then a principal voice of the Leave campaign and now a senior UK cabinet minister, stated: "The day after we vote to leave, we hold all the cards and we can choose the path we want."

In its campaign leaflet, Vote Leave assured voters: "We will carry on being part of the free trade zone that stretches from Iceland to the Russian border." Also prior to the vote, the Brexiteer MP Douglas Carswell opined: "I think we could very easily get a better trade deal than we have at the moment."

There was more reassurance in the days after the Leave campaign's referendum victory. Liam Fox, the current trade secretary, predicted: "The free trade agreement that we will do with the EU should be one of the easiest in human history." His then cabinet colleague David Davis in October of 2016 was equally ebullient: "There will be no downside to Brexit, only a considerable upside." Early in 2017 the Brexiteer MEP Gerard Batten added a homely note: "Trade relations with the EU could be sorted out in an afternoon over a cup of tea."

The British government has proceeded to nurture, for more than two years, the illusion that frictionless trade with Europe, and freedom from its rules and institutions, can be combined with lucrative new trade deals around the world, if only the European Union would 'compromise'. The reality was explained by the EU negotiator Michel Barnier in July 2017: "By choosing to leave the Union, you move to the other side of the external border that delineates not only the customs union but also the area in which the rules of the internal market are adopted and implemented. Only the combination of the internal market and the customs union guarantees the free movement of goods."

The UK government's unwillingness to listen was fully exposed last Thursday in Salzburg. Theresa May's Chequers deal, an attempt to spin out the pretence that Brexit comes without consequences, was finally despatched and the responsibility for Britain's humiliation allocated with Gallic precision by French President Emmanuel Macron: "Brexit shows us one thing: it's not that easy to exit the European Union, it's not without cost, it's not without consequences." The Leave victory was, he said, "pushed by those who predicted easy solutions. Those people are liars."

Back in the real world, this is the state of play. When the European Council meets on October 18, less than four weeks away, the intention had been to announce agreement on two documents. The first is the withdrawal agreement required under Article 50 of the Lisbon treaty, for which an 118-page draft prepared by the EU team was first considered by the Council last March. This would be a binding treaty in international law. The second is an accompanying 'political declaration' on the UK's long-term relationship with the EU, including its trade deal with its largest partner. In this case, the most visible draft is the UK government's Chequers plan finally published in July. The political declaration would be a non-binding statement of intent.

The October deadline has not been relaxed according to Council president Donald Tusk, speaking after last Thursday's informal council in Salzburg, although there could be an extra European Council on November 17 and 18. Failure to agree soon will leave time too short to allow for ratification by Brexit Day, March 29, next year. The deal must be approved by a simple majority in the European Parliament, a qualified majority of the EU-27 and by the UK parliament. If all goes smoothly there will be a 21-month transition period post-Brexit, no crash-out and existing trading arrangements left in place until the end of 2020.

What happens from 2021 onwards depends on negotiations which cannot commence until the UK has become an ex-member, a third country in the jargon. There is scepticism among the experts that 21 months will be adequate to negotiate what would be the largest trade deal ever attempted. A further binding treaty would then be needed. If this treaty encompassed matters beyond the collective competence of the EU it would require the consent of all 27 states, each of which would have a veto.

The UK has expressed its hostility to a key aspect of the EU's proposed withdrawal agreement, the backstop designed to avoid a hard border in Ireland, while the EU will not accept any political declaration built around the Chequers plan. The UK is seen as seeking concessions which would undermine the EU's internal market, demanding privileges of membership without accompanying obligations. Tusk last Thursday declared simply "it will not work". The Taoiseach remarked in Salzburg last Wednesday that no progress had been made over the last six months.

The Irish border problem would be easy to fix if the UK's long-term deal with the EU, which will not be included in the withdrawal agreement, included continuing membership in the single market and external attachment to the customs union. This is the link between the (binding) withdrawal agreement and the 'political declaration' which opens the path to a fudge. The UK could accept uncongenial wording on the Irish backstop and the EU could accept aspirational waffle in the political declaration, kicking two important cans down the road into the post-Brexit negotiations. In addition to the Irish problem, there is no consensus in the UK, not even in the cabinet, about the preferred long-term relationship with the EU. Deferring awkward decisions through an incomplete withdrawal agreement and a vague political declaration avoids a no-deal crash-out at the end of March and furnishes the Conservative party with further time to conclude negotiations with itself. For the EU, the fudge avoids the immediate dislocation of no-deal. Last Sunday Michael Gove, one of the Brexiteer ministers who stayed in the cabinet after the unveiling of the Chequers plan, revealed his interpretation of the fudge possibilities to the BBC. Whatever understandings about the future relationship were contained in the political declaration would not bind a future UK government according to Gove, which rather lets the cat out of the bag. For the Irish government, Gove's intervention raises the stakes: a vague declaration devoid of serious political intent means that the backstop might not be rendered nugatory through a subsequent long-term trade arrangement. It is not clear how it could be activated if the UK opts for a Canada-style third-country trading deal, rather than a closer affiliation to the single market and customs union.

But it also raises the stakes for the EU-27, since it would ensure a fractious basis for the negotiations that must ensue once Brexit has been accomplished. Would you be confident entering negotiations with a counterparty publicly indifferent to the fulfilment of its commitments?

The lesson of Salzburg is that the super-fudge is not after all acceptable to the EU-27. The political declaration will have to go well beyond waffle about frictionless trade, and there will be no withdrawal agreement, hence no transition period, without something concrete on the Irish backstop.

The EU has apparently decided to have an early UK political crisis rather than another can-kicking competition with the Conservative party.

Sunday Independent