Learning by erring in the Brexit plans

The UK government has kept us all on tenterhooks by delaying the publication of its proposal (and therefore this issue of Free Lunch) for the “Northern Ireland backstop” for the withdrawal agreement with the EU. But not really. Much like with the debate about the future permanent customs arrangements, British indecision on the backstop has been between options of which none will be realised. The significance of this proposal, and of the bust-up between Prime Minister Theresa May and Brexit secretary David Davis, is whether the government is able to take the next step towards formulating a position from which it can negotiate in any serious way.

To recall what the backstop is about: the UK government has committed to having no physical infrastructure on the Ireland-UK land border. While it hopes to negotiate a future trade and customs relationship that makes this possible, or find technology that makes border infrastructure unnecessary, it has accepted that the withdrawal agreement must include a default legal specification that avoids the necessity to introduce a physical border. 

The EU proposed its version, which would have Northern Ireland remain part of the EU customs territory and single market until other border solutions were agreed, but the UK rejected it. So everything has been hanging on Britain’s alternative proposal — which was most lately held up by the May-Davis disagreement. That was reportedly over whether the proposed backstop solution should be explicitly time-limited.

We now have the answer, since the paper has just been published. The government says the backstop will be time-limited, but does not call for an explicit end date — rather an “expectation” that the permanent trade relationship will be in place by end-2021, and a reference to a “range of options for how a time limit could be delivered” to be discussed with the EU. 

The fact is that a backstop solution cannot be time-limited, or it would not be a backstop. Its function is to fill any void, to provide the legal framework whenever other solutions are not available. So the only question is how long it will take the UK government to accept an indefinite backstop. It has taken half a step there today; getting all the way there will just take a little longer. (The solution may involve a verbal expectation of limited duration combined with indefinite legal validity.) 

But once the UK brings itself to that acceptance, other problems arise. The very fact that the backstop must be indefinite limits what can go into it substantively. As had been expected, the UK proposes that the whole country remain in the same customs territory as the EU until the backstop is superseded. But — since the backstop must be indefinite — that amounts to asking for the EU to be hobbled in its trade negotiations with the third parties by the indefinite uncertainty about the exact reach of its customs territory. There is a delicious irony in this: it would mean the UK frustrating the EU’s efforts at liberalising trade with the rest of the world. 

So the next step for the UK will be, if not to savour the irony (at its own expense), then to accept that this is not going to happen. There are other reasons for this. By sidestepping the problem of regulatory controls, the proposal does not even solve the border problem. Moreover, the UK wants to both benefit from the EU’s current and future free trade agreements while the backstop applies (and its interest to be taken into account in its trade talks with others), and to be able to strike its own trade deals, just suspending the parts that affect the backstop until it expires. Either one of these is preposterous enough on its own; together they are laughable.

So, again, the question is simply how long the UK government will take to recognise that its backstop will not be accepted. Then, and only then, will the time pressure really be on. Because if the eventual backstop does not, as the government wants, keep the whole UK inside the customs union, then there will be no way to fudge the prospect of UK trade with the rest of Europe becoming dramatically costlier at midnight, December 31 2020, when the standstill transition period will end. This is not a “no deal” scenario; it is a description of any deal in which Great Britain (even if not Northern Ireland) has left the customs union and/or the single market.

Chris Giles’s latest column looks at what this means concretely, in a hypothetical case of moving a pallet loaded with a British toy and Chinese plastic cutlery from Dover to Calais. But do not take his word for what a logistical nightmare it would be. Simply look at reports of how businesses in the rest of Europe are preparing, on the advice of their governments and Brussels, to find alternatives to their current UK suppliers. As this prospect looms ever larger, it will intensify the pressure to accept a permanent trading relationship with the EU that can prevent it.

It seems the prime minister senses what that relationship has to be: all signs are that her landing zone is for the UK to stay permanently within the customs union and something like the single market for goods. There are also hints in the backstop paper that the government is edging towards accepting some European Court of Justice jurisdiction and the rules of the EU’s system for value added tax.

None of this means the EU will accept such a model even for the permanent relationship (although it should). But the publication of the backstop is still a sign of progress — specifying what it wants is a necessary step for the UK government towards realising that it cannot have it. And gradually along the way, it incrementally absorbs the requirements it will realistically have to accept.

Other readables

  • The Delors Institute has published an extremely useful “decryption” of Angela Merkel’s important recent interview about the future of Europe.

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Learning by erring in the Brexit plans

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