Brexit Briefing 57: The Irish backstop still looms large

PmMay

Another week goes by and as they say in Strasbourg: "plus ça change". The UK’s departure date grows ever nearer and the withdrawal, or 'divorce', agreement remains elusive

Ninety percent of the deal is finalised, but that has been the case for months. The outstanding ten percent relates to the Irish border and this week brought us no closer to a final resolution. In reality, a breakthrough was not expected this week. After last week’s missed deadline, both sides spent the week taking stock of where they are and trying to work out their next moves.

Brussels effectively appears to be waiting for the UK to come up with a new proposal. There have been few practical attempts from the continent to move the negotiations forward, despite the fact that if no deal is agreed and the UK crashes out without a deal (still a very unlikely scenario), then there will be no provision to avoid a hard border in Ireland. Exactly the outcome the EU has spent the last two years trying to avoid. This is the sole reason why a deal has not yet been agreed. 

However, the ball is in the UK’s government’s court. The increasingly fraught debate in London is partly because it is becoming increasingly clear that the only way to get any deal at all is for the UK to agree to one of two unpalatable options as part of the backstop element of the withdrawal agreement.

The backstop will only come into force if a trade agreement is not in place at the end of the proposed transition period after the UK has left the EU. This set for the end of 2020 but could be extended further. The reality is that once the backstop is agreed, it will almost certainly be invoked because a trade deal cannot be negotiated and ratified by all EU national and regional parliaments in time. Once in place there will be less pressure on the EU to agree a future trade deal, especially if it puts the backstop and the Northern Irish border in jeopardy.

A backstop needs to be treated as if it will be permanent. That is why the UK is trying to get an end date to the backstop. That does not solve the EU’s problem. It wants an inviolable and permanent commitment to policies to avoid the hard border in Northern Ireland before they will move on to anything else. However, that just means that another backstop - a backstop to the backstop - has to be agreed which takes the negotiations back to square one.

This still leaves two unpalatable options for the UK. The first, which is the EU’s favoured option, is that Northern Ireland alone stays in the single market and customs union; a border would be placed in the Irish Sea between Great Britain and Northern Ireland, in practice splitting the province from the rest of the UK. This would also mean that most economic laws in Northern Ireland would emanate from the European Union. In such a situation, the only representation Northern Ireland would have would be from Sinn Fein MEPs elected from the Republic of Ireland who claim to also represent Northern Ireland. To get any EU law changed Northern Irish businesses would have to rely on the Irish government to negotiate on their demand. There would be no unionist presence at all. It would therefore create a political United Ireland in all but name. 

Border

This is the reason Unionist parties in Northern Ireland cannot support the proposal and also why many Conservative and Labour MPs will also oppose it. The only other option is for the whole UK to stay in the single market and customs union as part of the backstop. That would solve both the Northern Irish border problem and the Irish Sea border problem between the UK & NI. However, as the backstop is likely to be a permanent (or at least a very long-term option) it would leave the UK bound by all EU rules without any say in how those rules are created. Some critics have dubbed this the “vassal state” option as a result.

Under this option, the EU would have little incentive to negotiate a trade deal as they already have the outcome they want, and any trade deal would potentially undermine the Irish border, bringing the first backstop option back into play. In addition, for the UK a semi-permanent outcome like this would be worse than EU membership and would likely spark genuine debate about whether the UK would be better off staying in the EU after all.

The EU, of course, knows all this. These two backstop options are the only ones on the table and a future trade deal along the lines of the Canada deal can only be done for Great Britain, not for Northern Ireland. The only possible escape route is to threaten no deal. As in political terms, the EU then loses control of the Irish border situation and faces a hard border being imposed in Ireland. The nightmare scenario for the EU is that they are forced to choose between forcing the Irish government to impose a border against their will or imposing their own border between Ireland and the rest of the EU, effectively cutting Ireland out from the customs union. 

Port

This is why the rhetoric about no deal has been cranked up in recent weeks. However, it is very much a game of chicken because a no deal situation is potentially existential for both sides, but probably on balance, worse for the UK. The short-term economic impact could be ruinous for the U.K., given the fact that the effects would be concentrated whereas the effects on the EU would be spread around different parts of the continent and therefore easier to mitigate.  The effect on the integrity of the UK, especially concerning Northern Ireland and Scotland, also cannot be discounted. The psychological effects of potential job losses of manufacturing supply chains; or people not easily being able to travel to Europe for holidays next summer; or families potentially being split up because they are on the wrong side of visa rules on the continent, are hard to gauge.  Even if in the medium to long run, the economy would almost certainly prosper as the UK has many competitive advantages, no government can be in complete control of the sudden short-term effects, especially if it does not have the political support of its parliament to follow that course of action, which it almost certainly will not have. 

That is why the no deal threat from both sides is mostly empty rhetoric. Neither side wants it, the political fallout would be uncontrollable and although it is easy to threaten it now, if it started becoming a potential reality early next year both sides would find a way to avoid it, most probably by extending the deadline for negotiations. 

It is against this backdrop that the political theatre in London is being played out. But whatever the outcome in the UK, any British leader will be faced with the same dilemma. 

There are some suggestions that the UK government is preparing to accept some form of the second backstop option as a stepping stone to leaving the single market and customs union fully if they can in a few years time. Originally, it was a UK proposal for the whole UK to stay in the areas that affect the Good Friday agreement. These are fairly limited in scope and mainly affect agriculture. However, the EU has always been uneasy about this as it claims that this would be cherry picking the single market. I.e. the UK would only stay in a part of the single market. Whether this position can hold up is debateable as the EU is demanding that only a part of the UK (i.e. Northern Ireland) stays in the single market that also appears to be cherry picking. 

The only other option that appears viable, being put forward by some from the Leave side in the referendum, is for the UK to “park” itself in EFTA and the EEA for a defined period of time. Thus staying in the single market (but not for agriculture or fisheries) and benefiting from the institutional clout of those institutions in the UK’s dealings with the EU. Then the UK would seek to move to a Canada style trade deal from there once the heat has been taken out of the issue. The problem with this is that it still doesn’t solve the Northern Ireland border issue and would also need customs union membership. It then starts to look very similar to the second backstop proposal. 

So little has moved forward this week and as we head into the last two months of the year it is clear that room for manoeuvre is very limited. The only options on offer are, in the short term at least, very similar to EU membership, but without representation. That is unpalatable for many in the UK given the result of the referendum and the heat of the issue now in British domestic politics and may well not garner a majority in parliament. 

Quite how it can be solved is anyone’s guess, but these are the parameters that now define the negotiations. With two months to go until a deal really has to be done if the March 2019 Brexit deadline is to be met, things will now move quickly and pressure points will begin to give, possibly in unpredictable ways. We certainly live in interesting times!