Brexit Briefing No.17

It has been a tumultuous few days in the world of Brexit. On Monday morning it seemed as if a deal on sufficient progress in the divorce proceedings was very likely, meaning that the UK and EU could move onto discussing the key issues of the future transition and trade deal.

Indeed as Theresa May sat down for lunch Jean Claude Juncker in Brussels a deal seemed highly probable, especially after the budgetary concessions made by the UK last week.

However, by the end of that lunch things were very different and at the time of writing, all options, including a complete breakdown in negotiations, remain on the table.

eire

So how did we get here?

At the start of the week the main remaining obstacle was the issue of the Irish border and how to convince the Irish government that there was sufficient commitment from the UK side to avoid a hard border.

Negotiators therefore agreed that Northern Ireland would commit to “regulatory alignment” with the EU in areas affected by the Good Friday agreement post-Brexit.

It had taken some time to get to that point as originally the term was “no regulatory divergence”. Yet it seemed that the wording of “regulatory alignment” was ambiguous enough that each side could take what they needed from it.

However in a case study of how things can go wrong in these sort of negotiations, the European Commission and sources within the Irish government rather hastily briefed out that the agreement was that there would be “no regulatory divergence” which effectively meant Northern Ireland would be hived off from the rest of the UK into a separate regulatory sphere.

It is safe to say that this was not what the UK had agreed to.

However, as there was no immediate rebuttal from the British government, this led to mass reporting that Northern Ireland was staying in the customs union and single market, apart from the rest of the UK.

Both Nicola Sturgeon and Sadiq Khan then also dived in demanding Scotland and London be allowed to stay in the single market and customs union as well and Unionists in Northern Ireland were clearly troubled by the reports and lack of immediate rebuttal from London.

The DUP leader Arlene Foster then announced that they would not support the deal and the Prime Minister therefore left the very long lunch with Jean Claude Junker without a deal at all.

Most of the focus has been on this issue but less widely known is that there was another area of disagreement on citizens’ rights. The EU had initially demanded a permanent role for the ECJ over the rights of EU citizens in the UK. They then reduced this to fifteen years but it was still a long way from the UK’s reported offer of a five-year period of transition. In the end a compromise there seems possible.

The financial settlement, for a long time the hardest part of the agreement, was the least controversial on Monday, with people familiar with the text saying it merely states the broad formula for calculating the UK obligations, without a figure or a percentage, and with no upfront payment required. Further negotiations on that would be needed during the stage two transition talks, whenever they actually begin.

Importantly the fifteen page written agreement also includes a provision that states that nothing is agreed until everything is agreed which helps the UK as if no transitional or trade deal is agreed the UK could, in theory, withdraw its entire offer, including the financial settlement.

deal or no deal

So what happens next?

It is not yet clear if a deal can be reached before the European Council summit next week, which has widely been seen as the deadline for moving to the future trade talks. However there have been some encouraging signs in the last 24 hours.

Ireland remains the most challenging issue on the table to resolve, but the government is likely to offer new text to present to Brussels and Dublin and the Irish Taoiseach Leo Varadkar has indicated he is willing to look at text that also underlines the territorial integrity of the United Kingdom, which was the cause of the DUP veto this week and which is also of serious concern to many Conservative MPs. Whilst Northern Ireland by geography and through devolution will have a slightly different relationship with the Republic of Ireland than the rest of the UK (there is an all-Ireland electricity market in place already for example), the principle that the UK as a whole leaves the EU on the same terms has been reiterated this week as government policy. So in the coming days expectations are that a deal on sufficient progress will probably be done, but if agreement cannot be reached on the text around Ireland things could still fall apart.

However if things do fall apart it is not the end of the process. A no deal in December is likely to become a deal in January, particularly considering that both sides are really not too far apart. Transition talks which start in February will still allow substantial time to address the issues surrounding transition.

Things may feel extremely fraught at the moment, but this is merely the first stage, the really important discussions are to come, on the future trade relationship, as well as a host of over areas of cooperation going forward.

Meanwhile in Germany on Thursday the leader of the Social Democrats, the main opposition party, called for a United States of Europe with a federal constitution by 2025, a good reminder that Brexit is not the only issue or challenge on Europe’s mind and that the EU remains a fluid institution which is not standing still, even whilst the Brexit talks continue.