Brexit Briefing 70: A Brexit breakthrough...or Groundhog Day?

Brady

 

This week appeared to be a breakthrough week in the ongoing Brexit saga. For the first time, MPs rallied around a position that commanded a majority in the House of Commons. On Tuesday, the prominent Conservative backbench MP Graham Brady (pictured above) tabled an amendment that passed by 317 votes to 301. The amendment, which had almost certainly been placed by the government, called for the Prime Minister to renegotiate the backstop, the key part of the withdrawal agreement that produced the previous impasse, and replace it with “alternative arrangements” based on technological solutions. It did not spell out those alternative arrangements, but it gives the Prime Minister a new mandate, backed by a parliamentary majority, to push for more concessions from European capitals. 

In the same evening the Parliament also voted on several other amendments. MPs voted for a non binding amendment that rules out a no-deal Brexit. However they rejected amendments calling for an extension to article 50 and for a second referendum. 

The end result of all these votes is that finally there is a path to a potential majority for a Brexit deal comprising of the government, the rebel Brexiteer faction of Conservative MPs in the European Research Group (ERG), the Northern Irish Democratic Unionist Party (DUP), and some Labour Brexiteers. The problem is that the deal which can command this majority is just not on offer from the European Union. It needs either the removal of the backstop, a time limit on it or the ability for the UK to exit it unilaterally. Reaction from around the EU was swift. All the major players ruled out the changes immediately, leaving us back in the same backstop impasse which threatened to derail the talks last year. 

The EU position may still move, especially as we get closer to the Brexit day deadline, but at the moment it seems unlikely that the EU will agree to any deal which could meet the demands of the Brady amendment. 

In addition the parliament voted against a no-deal Brexit, but also against the only ways to avoid a no deal by rejecting both an extension of article 50 and a second referendum. As a result this week’s votes have done little more than just formalise the impasse that everyone suspected. All potential parliamentary paths forward still look blocked. 

However, the vote does provide some breathing space for the PM. It allows her to go back to Brussels and try a last ditch attempt to get some more concessions. However it is also providing oxygen to a developing narrative in the UK that blames Brussels intransigence if no deal emerges at the end of this. Surprisingly similar criticism is also emerging in Brussels with some voices now suggesting that the European Commission got their whole approach to Article 50 wrong by prioritising the backstop over the future relationship. 

It, therefore, remains to be seen whether the EU will move. They could still move, especially as the UK begins to flesh out more details on their alternatives to the backstop. 

In a sign that the pressure is biting on all fronts, Labour leader Jeremy Corbyn also agreed to meet Theresa May to discuss the new proposals. This hints that the Labour leadership could be prepared to back a Brexit deal if one closer to their line emerges. As Jeremy Corbyn has also been vocal against the backstop, the main problem in the negotiations remains. However, Labour could push the government to a softer Brexit which includes a closer single market relationship. That may be enough to convince the EU that enough trust exists to ditch the backstop. However to do this, which would deliver a soft Brexit with Labour votes, against the wishes of many Conservative MPs, would probably prove too controversial for the government to consider. 

So in reality the PM has two paths to a Brexit deal. Either persuade the EU to move on the backstop or to pursue a softer Brexit with Labour support. If she fails to deliver either, she is constrained because the Parliament has voted against leaving without a deal.

Commons

However this vote was not legally binding and so the government could, in theory, ignore it. But in reality they would find it very difficult to ignore, especially as the number of MPs opposing no deal will undoubtedly grow as we get closer to the 29th March. 

To counter this, and recognising that no deal would not be a desirable place for the UK to be, Leave-supporting MPs have been trying to pitch the “managed no deal” alternative. This suggests that the UK & the EU could use Article 24 of the GATT agreement (the precursor to the WTO) to keep existing trade relationships for up to ten years.

This is an intriguing proposal because on the surface it has some merit. Article 24 allows two countries to keep existing trade relations if they are moving towards a customs union or a comprehensive trade deal. So theoretically neither the EU or UK would need to impose tariffs on each other in order to comply with the WTO Most favoured nation (MFN) rules. 

However, there are two problems with this approach. Firstly the EU would need to agree to it. This is highly unlikely given that it would allow the UK to keep the benefits of the EU single market without the perceived costs (budget contributions, EU regulation, freedom of movement). The EU has always been clear that trade is just one aspect of the EU-UK relationship that they want to negotiate; for the UK, trade is the most important point. It is therefore difficult to see how the EU would agree to giving the UK such an unprecedented deal on the one area the UK is most interested in, whilst not getting anything in return in the areas that are a priority for them. 

Secondly, the WTO would also have to agree and given the fact that Article 24 is designed for countries that are moving to a much closer trade relationship (i.e. a customs union), it is difficult to see how it could be used for two countries who want to move further apart towards a relationship where they impose new trade barriers on each other (which will be the case even with the most ambitious free trade agreement between the EU & the U.K.)

So it is difficult to see how this option could be viable. However, it does show the flexibility that is now being applied by all sides in this debate. Many Leave supporters recognise that many people are worried about no deal and the advancement of Article 24 appears to be an attempt to ease those worries whilst also recognising that there are severe challenges with no deal.

Corbyn

However, despite everything that has happened this week, no deal is still a very unlikely outcome. If a deal is not voted through parliament and ratified by the EU before the 29th March, and if no other action is taken, then the UK will leave on that date. 

In the UK, all sides are beginning to move. The PM moved from her deal, which was the only deal on the table not so long ago, to supporting the removal of the backstop. The Labour Party leadership met with the Prime Minister, something which they previously ruled out. Some Leavers offered a proposal to mitigate the effects of no deal, something which they had previously suggested was not needed. 

In addition, British Foreign Secretary Jeremy Hunt hinted that there might need to be a technical extension to article 50 in order to ensure that all the relevant Brexit legislation could get through the British Parliament before the UK left. This was despite the government whipping against an amendment proposing an extension of Article 50 this week. There is a huge difference between a technical extension for legal reasons -- which is what Mr Hunt was hinting at -- and an extension designed to drag out the leaving date in the hope that the UK may not leave at all (which appeared to be the motivation behind the amendment in parliament), however it was still a significant change for the government to hint that March 29 may not be Brexit day after all. 

On the British side all the forces are moving yet it is not clear yet whether a similar process will happen on the EU side. For any deal to be done (including a managed no-deal Brexit), there has to be some softening of the line from Brussels. There are already voices arguing for this and so there is every chance that something may change. Within which parameters? That is still not clear to see. If the EU moves at all, it will have to still be able to ensure that its commitments to Ireland and the Irish border are retained. That already significantly constrains their room for manoeuvre. 

However, we are both close to a viable deal and still a million miles away. These negotiations were always destined to go down to the last moment and we are fast approaching that point. I’m afraid that predictions are useless at this point, except to say that we can expect a few months of high drama before this saga is finally over.