The Brexit crossroads: What does the Deal really contain? (1/2)

What is clear from recent political developments is that the UK is at a crossroads. According to Kirsty Hughes, whether a deal passes or not in the House of Commons in December depends now not least on whether enough Tory Brexiter MPs will vote against Theresa May’s Brexit deal, an irony considering this could lead to Brexit not happening at all. As time is running out, this first post explains the deal itself and its dilemmas while the second one discusses whether the deal can pass. 

Deal contained in the very long withdrawal agreement and the short (but to be lengthened) political declaration is a messy one. It covers – as the March draft did – the rights of citizens, the UK’s financial payments, transition – and now with clear governance proposals and a new variant of the backstop to ensure an open border in Ireland.

The transition period, when the UK stays in the EU’s single market and customs union – a powerless rule-taker – still ends in December 2020 but can be extended if the UK asks for it to be by July 2020. When it may end is left open for now in the draft text – “20xx”.

The Irish backstop sets out a basic customs union for the UK alongside a deeper customs union and, effectively, participation in the EU’s single market for goods for Northern Ireland. While the text is drafted in a way to lean over backwards to assuage UK political concerns, in fact the separate deal for Northern Ireland is quite striking (as it was in its similar but more blatant February version published by the European Commission). So, for instance, in Article 7 of the protocol to the withdrawal agreement, headed ‘protection of the UK internal market’, the protection is one way. It provides ‘unfettered market access’ for goods moving from Northern Ireland to the rest of the UK but not the other way round.

Essentially, the backstop deal aims for frictionless trade across the Irish border but not between the rest of the UK and Northern Ireland nor the rest of the UK and the EU. Moreover, the basic customs union for the rest of the UK does not contain other agreements which will be necessary, such as road transport agreements, meaning it is not entirely fit for purpose.

Nor does the short political declaration have any references to frictionless borders, without which cross-border supply chains and just-in-time production face severe or impossible challenges. Unless the UK is fully in the EU’s single market too, frictionless borders will not result from either the backstop or any future trade deal – the EU’s rejection of May’s Chequers ‘goods only’ single market approach stands. So once the UK leaves transition, the economic damage of Brexit will intensify – not least for the services sector not covered anyway by a customs union in goods.

The political declaration and the protocol on Ireland/Northern Ireland both state that the aim of the future relationship will be to agree “ambitious customs arrangements that build on the single customs territory provided for in this Protocol/Withdrawal Agreement”. So, on the one hand, the EU and UK insist they don’t want the protocol to come into force but, on the other hand, they aim at a future relationship building on the ‘single customs territory’ approach of the protocol (which is a customs union approach). Where an independent UK trade policy would fit into a future relationship based on being a single customs territory (composed of the UK and EU customs territories) is quite unclear.

And, of course, the dilemma that meant an Irish/Northern Irish protocol was necessary has not gone away: unless the UK is in both the EU’s single market and in a customs union with it, the UK will not have frictionless borders with the EU. So moving out of the protocol or never triggering it would require an approach to the future relationship – a ‘soft’ Brexit with a huge democratic deficit – that neither Theresa May nor other Brexiters are ready to contemplate. And, indeed, the partial compromise May has made – a UK-wide basic customs union but a much deeper one for Northern Ireland, and regulatory alignment in goods for Northern Ireland – drives much of the Brexiter anger at the deal.

Moreover, amidst the emotional debate that characterises UK Brexit politics, the major challenge of the UK becoming a rule-taker with regard to EU policy, with a still substantial role for the European Court of Justice in various aspects of the deal, has ironically served to demonstrate the influence, voice and vote the UK has as an EU member state. The democratic deficit of being a ‘rule-taker’ is now clear to all.

With the draft withdrawal agreement, the UK will have no say on EU trade rules while it’s in a backstop customs union nor in many ways on level-playing field issues (notably on state aids and competition which will be in dynamic alignment but also on environment, labour, tax – in terms of non-regression from standards reached by the end of transition). So while Labour’s Jeremy Corbyn still argues for a permanent customs union and the SNP’s Nicola Sturgeon wants both that and staying in the EU single market, the nature of the democratic deficit either choice entails is now well understood amidst the on-going Brexit turmoil. There’s nothing ‘soft’ democratically about being a rule-taker.

Access to fishing waters and trade in fishery products is a major bone of contention between the UK and EU dealt with, for now, by stating that fisheries will not be within the customs union, and that the aim is to agree on access to fishing waters by the end of transition. Slipped into the Northern Ireland protocol (Article 6.2) is the fact that the joint committee to be established by the EU and UK will decide how to exempt certain fisheries products from tariffs by vessels with a UK flag registered in Northern Ireland – in other words, for Northern Ireland fisheries products will come within the customs union. This is logical in terms of the Irish border, neuralgic though it is in Scotland in particular.

There’s much else besides in the deal and in the short political declaration. The range of issues in the latter, from security to energy to transport to trade in goods and services, illustrating, despite its brevity, the herculean task of leaving the EU only to have to replace all the existing range of arrangements within the EU with new or substitute agreements, which almost by definition will not be as good.

There are few alternatives to this inchoate deal. A ‘soft’ Brexit would be absurd when there is the option of staying in the EU. And it is only the extreme Brexiters who consider that a hard Irish border is unimportant so the UK could and should simply go for a basic free trade deal or even trade on WTO terms (neither of these simple at all in fact – and both highly damaging to the economy as well as to the Good Friday Agreement). The folly of Brexit has been apparent for a long time – but the options the UK faces now underline that.

  • Dr Kirsty Hughes is Director of the Scottish Centre on European Relations. She is a researcher, writer and commentator on European politics and policy, and she previously worked for a number of leading European think tanks.

This post was originally published as a single article in the Brexit Deal Series of the Scottish Centre for European Relations.

Note: The views expressed in this post are those of the author, and not of the UCL European Institute, nor of UCL.

Photo by Number 10 on Flickr.

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