Why The Brexit Deal Has Become Such A Tangled Mess

Why The Brexit Deal Has Become Such A Tangled Mess

May's government might be realizing that working out the real-world Brexit compromise means unforeseen political and economic suicide.
Christopher Jacobs
By

On Tuesday, President Trump said the withdrawal agreement between the United Kingdom and the European Union designed to codify Brexit “sounds like a great deal for the EU.” This reflected the majority of political thought across Great Britain over the last fortnight, which has panned the agreement Prime Minister Theresa May obtained:

At some point, negotiations with the EU always seemed destined to hit a reality check. The gap between what many British leaders want and what May could deliver has placed the United Kingdom in the midst of high-stakes political drama with a far-from-certain outcome.

Why May—And Britain—Have Little Leverage

From the outset of the treaty process, the EU held most of the negotiating cards, for two big reasons. First, British business fears the prospect of a “no-deal” Brexit. Under this scenario, the U.K. would exit the European Union next March 29—the date currently scheduled for Britain’s withdrawal—with no agreement in place governing future relations between the two entities. Overnight, border and customs checks would go into place, and tariffs would be re-imposed on British goods entering the EU and vice versa.

A no-deal Brexit has terrified the business community, ranging from the banking sector, where London’s reputation as a financial capital relies in large part on its EU ties, to concerns about supply chain interruptions. To give but one example of the uncertainty plaguing industry, the head of Britain’s Food and Drink Federation testified before a parliamentary committee on Tuesday that “warehouses around the U.K. for frozen and chilled food are ‘for all practical purposes booked out at the moment’”—businesses are stockpiling supplies to try and avoid disruptions next spring.

A no-deal Brexit also would create political uncertainties in Northern Ireland. Without an agreement governing customs between Northern Ireland (a part of the United Kingdom exiting the EU) and the Republic of Ireland (a sovereign state that will remain in the EU), a no-deal Brexit could lead to the re-imposition of a “hard border” between the two nations.

From the outset, May has called a hard border in Ireland a non-starter, for three reasons.

First, it would undermine the peace objectives of the 1998 Good Friday Agreement, intended to promote cooperation among Protestants and Catholics in Northern Ireland. Second, May’s party—officially called the Conservative and Unionist Party—would object to anything that might undermine the united nature of the United Kingdom, including provisions targeting Northern Ireland.

Third, after disastrous results in the snap election she called last year, May must rely upon the votes of Northern Ireland’s Democratic Unionist Party (DUP) to maintain her majority—and the DUP will not countenance a hard border with the Irish Republic. For all these reasons, May needs to avoid a no-deal Brexit worse than the European Union does. Everyone (including the EU negotiators) knows that fact, which limited her ability to drive a hard bargain.

Prime Objections to the Deal

The Brexit agreement officially reached over last weekend (you can read all 599 pages of it here, or a summary here) does not define Britain’s future relationship with the European Union. Similar to a couple waiting until they officially separate to negotiate a divorce settlement, the EU will not officially negotiate a trading agreement until after Britain has left the Union. The UK and EU have negotiated a political agreement about what that future trading status should look like, but that document omits major details and does not legally bind either side.

The agreement allows for a transition period of 21 months, from the end of March 2019 through the end of calendar year 2020, during which the EU and UK would hopefully negotiate a long-term trading arrangement. The parties can also extend this arrangement by up to two years (i.e., to the end of 2022). However, the UK cannot negotiate trade deals with other countries, like the United States, during the transition period, a fact that likely led to Trump’s Tuesday declaration that Britain “may not be able to trade with us.”

Many Conservative objections to the agreement arise from the transition period. During that time, the UK must follow EU rules and pay a contribution to the European Union, but will not have any say in how those rules are made or applied. Moreover, the UK will make continued contributions to the EU without any guarantee of what its future trading relationship with the European Union will look like.

Could the Agreement Become Britain’s ‘Hotel California?’

Conservatives also object to the so-called “backstop” arrangement designed to avoid a hard border between Northern Ireland and the Irish Republic. If the UK and EU cannot reach agreement by the end of 2020 on the border issue, then “a single customs territory between the [European] Union and the United Kingdom” will come into place.

This backstop agreement pleased virtually no one. Rather than applying the backstop only to Northern Ireland—which would have left Northern Ireland and Great Britain (i.e., England, Scotland, and Wales) subject to different regimes—the agreement applies it to all of the United Kingdom. As a result, if the backstop gets triggered, all of the UK will remain subject to EU customs regulations.

Moreover, if the backstop gets triggered, both parties will need to agree to end the arrangement. Essentially, the UK will have traded a unilateral process, whereby any European Union country can exit the EU unilaterally under Article 50 of the EU’s Lisbon Treaty, for one that gives the EU a veto over a British exit.

Conservatives have argued that the backstop represents a “Hotel California” arrangement, whereby the United Kingdom will remain in permanent limbo—subject to EU rules, but without any say over those rules. Alternatively, the EU could attempt to tie an exit from the backstop to other unrelated issues like access to fisheries, effectively extorting the UK if it ever wants to leave the arrangement.

A Doomed Document?

Suffice it to say the withdrawal agreement has not gone over well with members of any political party: A former Conservative defense minister, once deemed “Mr. Reliable” for his loyalty to May’s government, on Tuesday called the agreement the “worst of all worlds” and “doomed.”

Meanwhile, Northern Ireland’s Democratic Unionist Party, whose cooperation May needs to maintain her majority in Parliament, has begun abstaining from votes in protest against the backstop arrangement, a move that could ultimately trigger the collapse of May’s government. One Labour backbench MP said in Parliament that he felt sorry for May, “because we have given her an impossible task.” Not to mention, one recent whip count showed 412 members of Parliament—including 94 members of May’s own party—voting against the deal, with only 226 supporting it, or unconfirmed in their position.

Despite the obstacles, May seems determined to keep soldiering on. Her strategy relies upon playing the sole card available to her. There is no alternative. Essentially saying that she could not get more concessions from the EU, she hopes that the prospect of a chaotic no-deal Brexit will force politicians on all sides to accept the agreement she has negotiated, on the grounds that no one could do better in getting an agreement, and the country could do worse by not getting one.

With a vote in the House of Commons now scheduled for December 11, May has two weeks to twist arms and change minds. It looks like an increasingly uphill struggle to do so.

Mr. Jacobs is founder and CEO of Juniper Research Group, a policy consulting firm based in Washington. He is on Twitter: @chrisjacobsHC.

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