- Created: Thursday, 05 April 2018 10:02
- Written by David Yaffe
Prime Minister Theresa May’s hubris at every stage of Brexit negotiations has been progressively deflated. Britain has been forced to give way on each significant, contested point.1 The Brexit transitional deal agreed on 19 March 2018 between Michel Barnier, European Union (EU) chief negotiator, and David Davis, UK Brexit Secretary, is no exception. Britain has provisionally secured a Brexit transition lasting until 31 December 2020 by offering concessions on UK sovereignty in order to avoid a cliff-edge exit from the EU at the end of March 2019. This allows businesses and citizens a further 21 months to prepare for Brexit-related changes. Markets welcomed the news, with the pound climbing above $1.40 against the dollar, reaching its highest level for three weeks. More concessions will be necessary in a third phase of negotiations during which Ireland, governance issues and future trade relations will be further discussed in parallel. David Yaffe reports.
The published transitional deal, 75% of which is agreed, will allow the UK to leave the EU but retain the benefits of the single market and customs union for 21 months – the British wanted 24 months – with the flow of goods, capital, services and people continuing to be governed by EU law. During this period the UK will lose its political role in EU decision-making institutions – a situation that Jacob Rees-Mogg, a leading pro-Brexit Tory MP, had compared to being ‘a vassal state’. Britain, however, immediately after Brexit will be allowed to enter trade negotiations and sign new trade deals that would only come into force in 2021, after the transition period has ended. The transition period itself depends on a full withdrawal treaty being agreed and ratified before Brexit day by the UK and EU parliaments, possibly in the autumn. This will require remaining disagreements to be resolved, the most important of which concerns the Irish border. At the EU summit on Friday 23 March the leaders of the other 27 EU member states recognised that progress had been made in transition talks and they adopted new guidelines for Barnier in future negotiations.
British government concedes
In order to attain the transitional deal the UK government was forced to concede defeat on a series of demands.
The Prime Minister had very publicly demanded that Britain should treat EU citizens arriving in the country during the transition period differently to those already in the UK. She insisted that the rights offered must be different for those ‘coming to the UK they know will be outside the EU’. She was briskly rebuffed by Barnier at a joint press conference on the latest draft of the transitional deal when he said that ‘British citizens and European citizens of the [EU] 27 countries who arrive during the transition period will receive the same rights and guarantees as those who arrived before the day of Brexit’. There are 1.2 million British citizens living in other EU countries. Concern about the deal was raised by Jane Golding, the chair of the Berlin-based British in Europe, the organisation which represents them. She said that the draft excluded any reference to British citizens’ continued right to freedom of movement to move and work across the EU, either as people falling under the transitional deal or as third country nationals. She concluded that for many ‘as things stand, after Brexit English cheddar will have more free movement rights than [British citizens] will’. This is one of the many issues still to be ironed out.
Britain was forced to abandon the demand by the Environment Secretary, Michael Gove, for a renegotiation of the fishing quotas for the last year of transition. Nicola Sturgeon, Scotland’s first minister, denounced the ‘massive sell-out of the Scottish fishing industry’ as did many Tory MPs in Scotland. In a farcical stage-managed protest, Nigel Farage and other Brexiteers threw two crates of dead haddock into the water as they passed Parliament in a fishing boat on the Thames. Rees-Mogg and other Tory MPs were unable to join the fishing boat at Embankment Pier as planned, as the vessel had not obtained the necessary licence to land the boat from Transport for London. Davis only made matters worse by celebrating the agreement that ‘the United Kingdom’s share of the total catch cannot be changed’ – precisely the outcome that the UK fishing industry had wanted to remove. A letter from 13 Tory MPs and one Democratic Unionist Party (DUP) MP said the agreement was completely unacceptable. It warned that it would be rejected by the House of Commons.
The north of Ireland border
The most important threat to the transitional deal is the unresolved disagreement between Britain and the EU on the Irish border. Barnier pointed out that the UK had agreed in December 2017 that the withdrawal agreement would retain a default ‘backstop’ solution to avoid a hard border between the north of Ireland and the Irish Republic, under which the north of Ireland would maintain full alignment with the EU single market and customs union rules.2 However, after the full publication in February of the previous draft agreement, May said that no British Prime Minister could possibly agree to this ‘backstop’ proposal of the EU, which ‘could threaten the constitutional integrity of the UK by creating a customs and regulatory border down the Irish Sea’. She was well aware that such a proposal is anathema to the DUP in the north of Ireland, the party which provides a working majority for her government in Westminster. However, with this issue threatening the transitional agreement, the UK has gone back to the position it accepted in December; the ‘backstop’ is acceptable, with the proviso that both sides work towards technological and legal alternatives that will avoid the necessity for full regulatory alignment between the north of Ireland and the EU. Since the EU regards the technological and legal alternatives that the UK has so far proposed as implausible, a showdown with the DUP has simply been postponed, and with it the future of the Tory government.
On 20 March the agreement was cast into doubt when Spain refused to endorse the deal without further concessions over Gibraltar. Spain, which lays claim to Gibraltar, wants the legal text in the agreement to make clear that it has a veto on Gibraltar staying in the single market and customs union. This came about after Davis had insisted the day before that Gibraltar would enjoy the same benefit as the rest of the UK in the transition period. The issue was alleviated for the present time after President of the European Council, Donald Tusk, promised Spain that its veto over Gibraltar’s inclusion in the agreement will be emphasised at the EU summit later in the week.
Britain pressed for a longer transition period than the 21 months in the agreement and secured support for this from about nine member states. For tactical reasons the EU avoided an extension clause in this draft. Later talks may return to this issue, not least because most EU member states believe that 21 months is too short a time to sort out post-Brexit relations.3
On the road to a ‘soft’ Brexit
According to a leaked government paper, EU Exit Analysis – Cross Whitehall Briefing, dated January 2018, obtained by Buzzfeed, Britain will be left worse off under all economic scenarios after Brexit. A ‘no deal’ scenario, a ‘hard’ Brexit, with Britain under World Trade Organisation rules, would reduce UK economic growth by 8 percentage points over the next 15 years compared with current forecasts. Under a free trade agreement with the EU, growth would be 5 percentage points lower and a ‘soft’ Brexit option of Norway-style access to the EU single market through membership of the European Economic Area – presently ruled out by May – would see growth lowered by 2 percentage points.4
Every move by the Tory government on Brexit is designed to contain the deep splits in the Tory Party, hold together a deeply divided cabinet, and maintain a working majority in parliament through its deal with the reactionary, pro-Brexit DUP. And it has attempted to do this while gradually moving away from a Brexit that would seriously damage the British economy, dominated as it is by financial services and the activities of the City of London. That is why May’s major contributions on Brexit from the Conservative annual conference in October 2016, the Lancaster House speech in January 2017 to her Florence speech in September 2017 and Mansion House speech in early March 2018 have necessarily moved from a ‘hard’ to a ‘softer’ Brexit standpoint.
In her Mansion House speech to EU ambassadors and business figures, Theresa May confronted the Eurosceptics in her party with some ‘hard facts’ on Brexit. Leaving the single market, she said, would mean the UK and EU would have less access to each other’s markets than at present. In her speech she offered a series of compromises intended to secure an ‘ambitious’ trade deal with the EU. She said that Britain was prepared to match high European standards and state-aid rules and accepted that European Court rulings would ‘continue to affect us’. Being unmoveable with regard to Britain’s ‘red lines’ on ending free movement and being able to strike trade deals with third countries, she offered two possible alternatives: a ‘customs partnership’ in which Britain would mirror EU requirements on imports at its borders and a ‘highly streamlined customs arrangement’ using technology to minimise friction at the border. On services, including finance, there would be a similar approach in which the UK and EU would agree regulatory objectives allowing Britain to be free to set its own rules to meet such targets. In sectors such as chemicals, medicines and aerospace Britain would go further and apply for associate membership of EU agencies, abiding by their rules and paying towards them.
Brussels was not impressed by all this and she was accused of having ‘vague aspirations’ and an unacceptable ‘pick and mix’ approach to the single market. Labour leader, Jeremy Corbyn, said her speech only piled confusion on top of complication.5
May’s ‘vague aspirations’ will not alleviate the pressure on the Tory government. A major challenge is building up as a result of Corbyn’s decision at the end of February to shift the Labour Party’s position on Brexit and call for ‘a new comprehensive UK-EU customs union’ after Brexit. The Confederation of British Industry and the Institute of Directors, as well as former Conservative Chancellor George Osborne welcomed this change. Osborne said the Tories had offered Labour an ‘open goal’ by making no customs union a red line and Corbyn had ‘just kicked the ball into the back of it’. It is a move that threatens May’s working majority in parliament. It puts her on a collision course with a number of ‘remain’ Tory MPs, whose amendment to the trade bill calling for the government to pursue a customs union will now have the backing of the Labour Party. Corbyn has even won the support of several pro-Brexit Labour MPs, who had previously been against this position. This means that the vote of as few as 12 Tory MPs could lead to a government defeat. Unsurprisingly the government has moved to delay the vote, which was expected in March, until after the local elections in May, because it believes it cannot win.
Many key issues around the transitional deal still need to be resolved, especially that of the Irish border. This, together with the possibility of a government defeat on its position to leave the customs union, makes the next nine months decisive for the future of the Tory government and with it the Tory party.
1 See David Yaffe ‘Brexit chaos and Tory rifts as the City prepares’ FRFI 262 February/March 2018 at https://tinyurl.com/y89y2dpt and ‘Brexit, imperialist rivalry and the split in the working class’ FRFI 260 October/ November 2017 at https://tinyurl.com/yckzdp9m for a discussion of these developments.