October 05, 2018
What to make of the Anglo-Irish approximation on the backstop?
There is a fundamental trade-off in the debate over the Irish backstop. The greater the concession Theresa May is willing to make, the greater the backlash in her own ranks, and by the DUP. But it appears that May is pressing doggedly ahead with the compromise that has been flagged for some time - a quasi-customs-union deal that keeps the inner-Irish border open and allows for some regulatory controls in the Irish Sea, or at UK mainland sea ports.
The Irish Times writes that the Irish government has received word that an official British proposal is expected in the next few days. It quotes four senior sources in Dublin who say they have been encouraged to believe that May would be offering a significant proposal on the backstop. Leo Varadkar is expected to hold talks with Michel Barnier this week, ahead of the next EU summit in two weeks' time.
The FT writes that one of the proposals May is working on is for the whole of the UK to participate in the customs union. We are not sure whether this entails full compliance with EU regulations during that period, or whether this is still the Chequers version of the customs union. We will need to see the details of this proposal to see how far this goes. It could be a time-limited customs union followed by a process of divergence after a certain period of time, contingent on technical developments.
One potential obstacle for Dublin, according to the Irish Times, is May’s insistence that any future regulatory divergence between the UK mainland and Northern Ireland would have to be approved by the Stormont Assembly. We noted in an earlier report that May had mentioned this in her last bilateral with Varadkar, and we also believe that she gave assurances to Arlene Foster in this respect. This could be a real problem because it would give the DUP an effective veto over the process.
And, even if Dublin were to accept the UK’s proposal on this basis, it is not clear that the EU would accept it. As misunderstood by many observers, this is not a customs union agreement but still the hybrid Chequers version that extricates the UK services from the single market. We believe that May will have to move further, but we have not seen much movement yet. If the promise of regulatory checks in the Irish Channel were counter-balanced by giving Stormont the final say on future divergence, we are not sure that this will interpreted as a big move. And we do not detect movement on the EU side either.
We noted a tweet by Michael Savage, polical editor of the Observer, who writes that already 34 MPs have signed up to the #StandUp4Brexit campaign, which lines up behind Boris Johnson’s slogan to chuck Chequers. He notes:
“If there is a further pivot towards a compromise with the EU, that will grow. There is no dance that can win these MPs over.”
This is the fundamental tradeoff. And it also is possible that the EU rejects even a modified version of the proposal. Donald Tusk reiterated the EU’s version of a Canada-plus type deal, a comment immediately seized on by Boris Johnson and Jacob Rees-Mogg, who have also called for this type of agreement. The big difference, however, is that the EU wants a Canada deal with a full Irish backstop in place - which would keep Northern Ireland in the customs union and the single market. This is why Canada is non-starter. There is already talk in the UK about EU annexation of Northern Ireland. The only scheme capable of being agreed and ratified would a time-limited customs union, full-Monty-style, followed by some tech-contingent future divergence. But the risk of a no-deal Brexit remain significant.