Brexit Update 9th November 2018

By November 20, 2018 Brexit Updates

Top 3 developments  

    • Breakthrough on all-UK backstop, despite remaining challenges
    • DUP sees May’s assurances as ‘broken promises’
    • UK likely to lose rebate and other opt-outs if it seeks to rejoin EU

UK Update

We live in hope

You would be forgiven this week for thinking that the UK and EU were seconds away from revealing the conclusion of talks, and a move to a formal agreement in the coming weeks. Such is media speculation, backed up by exchanges with various EU officials and cabinet soundings. However, despite talks of a ‘major step’ forward on the backstop, which has been the EU agreeing to an all-UK customs union arrangement, cold water has been poured by both sides on the chances of an imminent deal. Issues still very much remain, with continued disagreement over the mechanism for the UK pulling out of the backstop agreement if it doesn’t like the direction of travel, talk of added obligations on the UK if it does implement the backstop, and soundings from all sides on what exactly is in the future framework declaration.

Talk has moved towards possible final agreement on a UK-EU deal at the December EU council meeting, which would just about leave enough time for the Government to jostle for MPs support before fixing a date for a vote. At the same time, the Government is reportedly planning on stepping up its public information campaign on its no-deal preparations in the coming two weeks, whilst setting into motion a series of votes in Parliament when it returns from recess to prepare the UK in any scenario.

Backstop legal implications

Talk this week has turned to how the Government’s as yet unpublished solution to the Northern Ireland border would work, with varying levels of demands over releasing the legal basis in which it will operate. Environment Secretary Michael Gove has asked to see the full legal advice, not just the summary, whilst DUP MP Jeffrey Donaldson calling for its public release. The comments come after an apparent government document set out future plans to pressure sceptical MPs to back the final deal that is agreed. Whilst No.10 denied the document was theirs, it did reiterate the challenges May faces through the crucial last stages to gain enough support to pass the deal through Parliament. The government has said it is not usual practice to publish legal advice, making its release to the public unlikely.

Davis calls on MPs to ‘force a better deal’

Brexiteers and those seeking a second referendum are setting themselves up for a confusing joint campaign to get MPs to vote against the deal the Prime Minister may eventually bring to the voting lobbies in Parliament. Whilst the objective is clear for those seeking a second referendum, Brexiteers are hoping that it will lead to a better deal eventually being achieved between the UK and EU as they are ‘forced to get a better deal’ to avoid a no-deal Brexit. The government stands by its commitment that a vote against the deal is a vote for no deal, but very few MPs agree.

Single Market by the Backdoor

Cabinet ministers are seeking clarification of the Prime Minister’s backstop plans, warning her that she should not commit to a last-minute concession that would see the UK remain in the Single Market ‘through the back door’. The EU wants to ensure a ‘level playing field’ if the backstop comes into place, asking the UK to commit to upholding EU rules on state aid, the environment and workers’ rights. Ireland, Germany and other states are worried that the EU’s decision to allow an all-UK customs union backstop will give the UK an unfair advantage when trading into the bloc and beyond.

Whilst the UK would be bound by the Common External Tariff on its imported goods from third countries under EU customs union rules, it could still use its position outside the single market to bring down costs and obligations on businesses and exporters, making its businesses more competitive, increased further by a devalued pound. May will therefore need to placate both the EU and her own party on this ahead of any agreement or risk taking negotiations on the backstop into the implementation period.

Raab-le on

Brexit Secretary Dominic Raab addressed a TeckUK/Technation event, telling the audience that he hadn’t fully understood the reliance of the UK’s trade into Europe and beyond on the Dover-Calais crossing. His comments were later ridiculed, attracting similar disbelief to Northern Ireland Secretary Karen Bradley after she said she hadn’t realised Northern Ireland political parties only campaign for votes amongst either the unionist or nationalist communities. During the talk he also hinted at future cooperation with the EU across multiple areas as part of the future relationship framework and indicated arrangements in the future immigration bill could possibly include provisions for people under 30 from certain countries to travel to the UK for a two year period to find a job.

Broken Border Promises

DUP MP Sammy Wilson has accused the Prime Minister of breaking her promise to the his party and ‘to the people of the UK’, after she sent the DUP a letter setting out that alignment on EU single market regulations may be needed “in some scenarios” after Brexit to avoid a hard border. The letter went on to say that the Northern Ireland backstop is “an insurance policy that no-one in the UK or EU wants or expects to use”, and that she could not accept it “coming into force”.

The DUP has interpreted this as an admission that the Prime Minister is about to sign up to a legal commitment within the treaty text, which could trigger the no-deal Brexit plans for the border. This would be avoided if the UK and EU find another agreement before the end of the implementation period, or the Government rescinds on the agreement at this time, however, this is highly unlikely given the UK’s commitment to international agreements.

Given the intricacies of trade negotiations, especially with the EU with its 27-Member States separate interests in various facets of the UK economy, a deal within the 18-month implementation period appears unlikely. The backstop therefore continues to appear as the de facto reality after the implementation period initially, making any hint of concession away from a time limited period, or a separate regime for Northern Ireland anathema to the DUP and Brexiteers.

EU Update

Opt-outs out the window

Michel Barnier has stated that if the UK changes its mind after Brexit it can reapply to join the EU ‘like a third country’. In practice that means the majority of opt-outs the UK currently enjoys, as a product of being in the room when the decisions on things like the introduction of the euro were made, will now be off the table. The EU’s budget chief, Guenther Oettinger, has also said that EU rebates, including that negotiated by Margaret Thatcher, would come to an end in any case. Barnier went on to say however, that the EU would ‘adapt immediately’ if the UK decided to remain in the EU before the March 29th Brexit date. If the UK did decide to re-join in the future, it would need to complete certain ‘chapters’, as well as gain the unanimous support of all EU states for accession in a vote. Whilst many are currently campaigning for a second EU referendum to keep the UK in the EU before we leave, the argument is likely to become infinitely harder when the reality of re-joining comes to fruition.

Mer-go!

Key Angela Merkel ally and protégé Annegret Kramp-Karrenbauer has launched her bid to take the helm of the Christian Democratic Union (CDU) following Merkel’s decision last month to break away from the party chairmanship / chancellor dual role to focus primarily on being Chancellor. Kramp-Karrenbauer faces the challenge of going up against Friedrich Merz and Jens Spahn, both of whom are party adversaries to Angela Merkel. If either gain the chairmanship of the CDU, Merkel may find that her time as Chancellor may be brought to an earlier end as each seek to jostle for full control of the already fractured party.

Merz is the North Rhine-Westphalia state commissioner for Brexit and trans-Atlantic relations, taking the unenviable position of preparing the region for ‘Brexit turbulence’ according to the German paper Spiegel. Spahn on the other hand has talked about the EU budget needing to shrink after Brexit, putting him on par with Merkel’s position, but against the position of France which has been more supportive of the need to increase the EU’s budget in the next spending period.

Upcoming Key Dates

    • 13th December: EU Council Summit
    • 29th March 2019: UK planned exit from the European Union
    • 30th March 2019: UK planned transition period.
    • 31st December 2020: UK planned exit from the transition agreement.