LONDON CORRESPONDENT: Having spent the summer suggesting the British government’s Brexit proposal is a non-starter, the European Union now says a deal could be reached in six to eight weeks. What on earth has changed?
Rewind a moment. In July, in the so-called Chequers plan, the British suggested the UK could continue to follow the EU’s rules for goods and agricultural products after leaving the EU – effectively remaining in the single market for these items. Britain would avoid trade disruption; Europe would retain a protected market.
The EU’s unhappiness with this reflected a philosophical principle – that you can’t pick and choose from the EU’s four freedoms (free movement of goods, capital, services and people).
To be fair to the EU, this has been a clear position since the beginning of the negotiations. But to be fair to the UK, the principle has already been compromised. Look at the case of Switzerland.
The Swiss people will not vote to join the EU anytime soon – a fact grumpily accepted by the EU. The Swiss and EU have therefore spun an elaborate web of treaties to replicate many aspects of EU membership in line with the four freedoms.
Switzerland makes payments to the EU, accepts EU product and other regulations, and permits free movement of labour. The relationship is one of interminable bargaining, with the EU threatening loss of access if Switzerland does not conform to new rules and the Swiss carefully weighing the economic and political costs and benefits of changes.
It is clear the EU has zero interest in replicating the Swiss approach, but it does let you consider what compromises the EU might accept. You could conclude that the EU believes borderless access to its goods market is worth a great deal; that it won’t compromise without clear concessions, particularly on free movement of labour; that it might believe – and with justice – that the UK will have to adopt EU rules in heavily regulated industries where these are effectively the market standard.
The EU may feel that it is being generous if it offers a wide-ranging zero-tariff free trade agreement for a swag of what the British might see as non-reciprocal concessions. Think of access to UK fisheries, compromising UK sovereignty on the Irish border, European legal jurisdiction over the rights of EU citizens living in the UK, avoiding regulatory competition, “voluntary” contributions to EU projects – you get the picture.
Perhaps the EU’s stance has changed because its bluff has been called. But the Swiss example suggests it’s not really a bluff. It’s more likely the EU is trying to keep the negotiations on track to support the British Government, which has been challenged by Conservative party rebels.
The rebels also reject the Chequers plan but for very different reasons. They cheerfully accept the EU’s reasoning that following EU rules is the price of privileged access – because they do not value access on those terms. They think Chequers would be worse for the UK than a free-trade agreement because it locks the UK into an uncompetitive and over-protected EU market.
Indeed, they believe a free trade agreement is only a little better than trading on WTO terms.
So, the EU dislikes Chequers because it thinks the British are trying to get something of value without paying the required price; the rebels despise it because they think its toxic. This understandably makes for a complex battlefield and leaves British Prime Minister Theresa May fighting on two fronts.
On the Westminster front, the party rebels are trying to mobilise forces inside and outside Parliament to make the Government drop the Chequers plan and negotiate for a bare trade deal with a minimum of non-reciprocal concessions. This plays out over September, during the Conservative party conference at the end of the month, and throughout the negotiations. If they get the numbers in the party caucus, they could force a vote on the party leadership.
This could backfire, however, because the formal process is drawn out and that in turn could derail the EU negotiations. If they fail to change the Government’s position, they will have set themselves up to attack the final deal as a historic error and a sell-out.
On the Brussels front, May will be trying to finalise leaving terms (which include sensitive areas like the Irish border and the financial settlement) and the heads of agreement for a trade deal. The EU now confidently says this can be done by end-October, thus giving time for ratification – but perhaps not on terms Mrs May (and certainly not her rebels) could live with.
Paradoxically, the pressure from the rebels might help her wring more concessions from the EU.
Given this intensity, it would not be surprising if negotiations stretch into next year, While uncomfortably close to the March 29 leaving date, this can be extended if the parties agree. Nor would it be surprising if there was some ambiguity in the future trade relationship left to be worked out (despite the risks, particularly to the UK, of leaving this unclear).
This only comes into force after the anticipated transition period. It would be surprising, however, if the UK dropped out on March 29 2019 without any sort of withdrawal agreement.
No-one (including the Tory rebels) wants to take the rap for this. Not because all the earlier scare stories have been confirmed. The planning suggests there are often workarounds, albeit laborious (for example, Spain is working to make sure British residents and tourists would not be affected by suddenly non-compliant paperwork).
Dropping out is unlikely because it would unnecessarily inconvenience most of Europe’s registered voters and would look dreadfully incompetent.
An agreement is not the end of the story. It must also be ratified by both sides. The EU seems confident it can whip its troops into line but Britain’s parliament looks more febrile.
In theory, the agreement could be rejected by an alliance between the Labour opposition and Conservative party ultras. In practice, British party allegiances have been so frayed by Brexit that it might be carried through on the back of splits in both the major parties. It could even generate a more profound realignment in the parliamentary factions and a general election should not be ruled out.
Only then might Britain enter the relative tranquility of the transition period – during which, of course, it will abide by EU rules.