Tories sleepwalk towards soft Brexit

Theresa May has completed a last-minute ‘divorce settlement’ on the EU’s Brexit priority issues – the exit bill, citizens’ rights, and the status of Northern Ireland.

The story of the deal is essentially a long series of British capitulations that began in June. Having predicted that the sequencing of talks (whether the future relationship could be discussed in parallel with or only after the resolution of the divorce issues) would be the ‘fight of the summer’, David Davis accepted the EU’s two-stage sequencing on the opening day of negotiations.

Other issues have taken longer to resolve, but the story has been more or less the same. Having initially said that the EU could ‘go whistle’ if it expected the UK to continue making payments to the bloc after Brexit, Boris Johnson today welcomed a deal that will see Britain continue paying into the EU budget “as if it had remained” in the bloc to the end of 2021. This commitment will involve the UK making payments to the EU well into the 2030s.

The final UK concession – on the status of Northern Ireland – came this week. The Conservative party’s idea of a ‘global Britain’ prospering outside the EU was always predicated on the UK’s ability to diverge from EU regulations after Brexit. This would, in theory, enable Britain to sign trade deals and attract investment that the EU, because of its high tax and regulation standards, could not.

But any change in the UK’s regulatory environment would require customs checks between Northern Ireland and the Republic of Ireland in order to prevent the smuggling of unauthorised goods into the EU. And the return of a hard border would not only threaten the economies on both sides but also the island’s still-fragile peace that depends in part on the lack of a conspicuous border.

Brexiters’ initial delusions – firstly that this problem could be overcome through ‘creativity and flexibility’, and secondly that there was no need for a border and that if the EU and Ireland insisted on one it was their responsibility – finally gave way to reason last week. On Monday Theresa May was ready to sign a deal proposing that Northern Ireland, unlike the rest of the UK, would maintain ‘regulatory alignment’ with the Republic, so as to avert the need for border checks.

But apparently no-one thought to check this with the DUP, Northern Ireland’s staunchly unionist party that props up May’s government in Westminster. When news of the deal’s proposal broke, May was humiliatingly recalled from Brussels by the DUP leader Arlene Foster, who threatened to bring down the government if Northern Ireland was in any way differentiated from the rest of the Union.

And so the UK has been forced into the final phase one climb-down. The key paragraph in the agreement signed today is as follows:

The United Kingdom remains committed to protecting North-South cooperation and to its guarantee of avoiding a hard border. Any future arrangements must be compatible with these overarching requirements. The United Kingdom’s intention is to achieve these objectives through the overall EU-UK relationship. Should this not be possible, the United Kingdom will propose specific solutions to address the unique circumstances of the island of Ireland. In the absence of agreed solutions, the United Kingdom will maintain full alignment with those rules of the Internal Market and the Customs Union which, now or in the future, support North-South cooperation, the all-island economy and the protection of the 1998 Agreement.

This means that it is not just Northern Ireland that will maintain ‘full alignment’ with relevant EU regulations; so will the rest of the UK. This seems to undermine any hopes of the UK becoming a ‘Singapore on Thames’ and, indeed, any of the potential benefits of Brexit at all.

The UK is making a vague promise which it expects it can wriggle out of in important respects, and which will probably not be required anyway. But the story of the negotiations so far tells us that it is likely wrong on both counts.

The question now is how Theresa May managed to convince her Eurosceptic colleagues to accept this. While the prime minister’s only goal in these negotiations appears to be her personal survival, many of her colleagues have strong views on Brexit and it is hard to understand how they have been won over.

Some of the more hardcore backbenchers, like Ian Duncan Smith and Jacob Rees Mogg, are unlikely to fall into this camp, and some degree of trouble no doubt lies ahead for the prime minister on this front. Other remain-leaning Tories like Amber Rudd and Ken Clarke will be delighted to see the UK edge closer to a ‘softer’ Brexit position that opens the door to Britain eventually remaining in the customs union or single market.

But the key group of stakeholders for May are the powerful cabinet member Brexiters like Michael Gove and Boris Johnson, who have both loudly trumpeted the Global Britain approach, but also both come out in support of this agreement. Their endorsement is crucial to understanding how this deal is viewed by the government and hence to what lies ahead for phase two negotiations and the future relationship.

For most observers, the key phrase in the paragraph quoted above is ‘full alignment’. But for the May government, the operative words are on either side of it. The deal promises to maintain full alignment only on those rules which support North-South cooperation, and can be expected to attempt to loosen some EU regulations by making the argument that they are not critical to that purpose.

Secondly, it promises to maintain such alignment only ‘in the absence of agreed solutions’, by which is meant the deep and comprehensive trade agreement that Brexiters expect to strike with the EU before the end of the transition period in March 2021.

In other words, the May government is making a vague promise which it expects it can wriggle out of in important respects, and which will probably not be required anyway. But the story of the negotiations so far tells us that it is likely wrong on both counts.

It has taken almost nine months to agree the most basic exit settlement. The EU-Canada FTA took seven years to negotiate – and was far more limited than the one sought by the UK. With all the complex issues ahead, the idea that the future relationship can be settled before March 2021 is fanciful.

So the provisions regarding alignment in today’s deal will be required. And as that point nears the EU will seek greater specificity on their implementation. Everything about how the EU has behaved up to this point tells us that it will not accept the British interpretation. It will insist that, if the UK wants any future trade deal, it must honour the commitments made in the exit deal – and on the EU’s terms. This will mean accepting continued UK alignment with the vast majority of EU regulations.

So today’s deal effectively means the ‘Singapore’ option is off the table. The UK will not become a low regulation, low tax economy on the edge of Europe. Its commitment to avoiding a border either on the island of Ireland or in the Irish Sea effectively guarantees that.

It also sets up an almighty row later in the negotiations when the clash of interpretations between the EU and UK comes to the surface. This will create a heated inflection point at which the UK could refuse the EU’s demands and walk away with no deal.

But everything about how the UK has behaved up to now tells us that that is unlikely. More likely is that it will accept this reality as it has all the others thus far – belatedly, begrudgingly, but accepting all the same.

If so, this increases the possibility of the UK remaining in the Customs Union or Single Market: there is little point in being outside these bodies if you cannot remodel your economy to attract new business.

There is a long way to go, and much could happen to change this calculus. But there is a real sense that, instead of sleepwalking towards hard Brexit, today’s deal means that the Tory party may now be sleepwalking away from it. Delusion, it would seem, is the one constant in this government’s handling of Brexit.

​This article was originally published by Euractiv on December 8.