October 12, 2018
A deal so close, and yet so far
The FT reports this morning that the EU and the UK were close to a Brexit deal. We reserve judgement on this specific issue, but note the more important point that the parliamentary math is - as of yet - not conducive to approval, and indeed has become less so over the last few days. It is interesting that the Times has no Brexit news at all among its lead stories this morning, while the Guardian reports on a Kent motorway being turned into a car park as part of the no-deal preparations. And this despite the fact that Theresa May has invited her inner war cabinet to a meeting yesterday to update them on the state of the talks. The Telegraph notes that there is unhappiness among eurosceptic ministers about the lack of an end-date for what we call the second of three stages of Brexit.
The already-agreed 21-month transitional period is to be followed by a further phase during which the whole of the UK remains in a customs union with the EU. The UK is to stay there until a free-trade agreement is negotiated, including an agreement for its provisional application prior to full ratification. The end date is an important issue for the eurosceptics, but what many in the UK fail to realise is that it is also an important issue for Michel Barnier. There is no appetite in the European Commission, or in France, to keep the UK locked in a provisional customs union that becomes permanent over time. The row over the end date is a red herring: the EU side will want to move to a permanent arrangement just as much as the eurosceptics do. Businesses prefer planning clarity, and so will politicians in this case.
The FT noted that two eurosceptic ministers, Andrea Leadsom and Esther McVey, were last night on the verge of quitting. The paper says that May agrees to the European Commission’s principal ideas for the Northern Irish backstop. This would involve minimal checks on goods travelling across the Irish Sea once the FTA takes effect, while Barnier is happy to include the whole of the UK in the customs union until it does. This means there will be no controls in Ireland during that period, followed by minimal controls in the Irish channel afterwards.
The current wording of the drafts that are circulating means that there would be no firm end date to the second period, but what the FT quotes amounts to a clear pathway towards an FTA. We believe that the nature of this transition is the key political issue in the UK, and it is possible that May could seek ways to firm up the path towards an FTA even if it does not include a specific date.
Polly Toynbee, the political commentator of the Guardian, writes that it is not always easy to separate signal and noise when it comes to Northern Irish politics. But her sources are suggesting that this time the DUP is not bluffing. They already started boycotting the government this week, by supporting an opposition amendment on the agriculture bill. She writes that the absence of a border between Northern Ireland and the UK constitutes the fundamental rationale for the DUP's existence.
"That’s who its MPs are, what they eat and fire-breathe, their only purpose on Earth. Do they care what happens on the Irish border? Not as much as the holy UK bond across the Irish Sea."
She also noted a poll among Tory party members showing a majority supporting the idea that a breakdown in the peace process was a price worth paying for Brexit. She further reports that the Labour leadership is very confident that the vast majority of Labour MPs will follow Jeremy Corbyn in his rejection of Theresa May’s deal - whatever it will be. She herself concludes that it is hard to see more than a trickle of Labour MPs responding to any appeals to patriotism in support of May’s deal. So this would beg the question: where should parliamentary support for the deal come from? An open-ended customs union may satisfy the Tory Remainers, who themselves plotted to convene a caucus to vote down the deal. But it will energise the European Research Group of Tory eurosceptics. Toynbee suggests, probably correctly, that the opposition from the hard Brexiteers might be smaller than initial estimates suggested. But if the Labour Party sticks with Corbyn and the DUP votes no, the game is up under any scenario.
There is one caveat. The Labour Party’s opposition to the deal is based on the illusion that there are still alternatives. The British debate has not yet entered the world of deal versus cliff-edge. A no vote would throw up a whole number of alternatives, including a second ratification vote closer to the Brexit deadline, new elections, or a second referendum though not necessarily with a Remain option. The fact that May appears to be seeking an early deal suggests that she might already be working on a plan B, in case of a failure to assemble a parliamentary majority for her deal. She seems to have decided against the other strategic option - to procrastinate and strike a deal at the last minute, so as to avoid any uncertainty about the dire consequences of a failure to ratify.