Brexit Briefing No.32 - An old war, the cold war, a trade war and a space war?

In a surprising twist the Brexit negotiations threatened to turn into a space war this week, meanwhile the UK alternative backstop idea for solving the Ireland question is finally being rolled out, and many European countries backed the UK government on its actions against Russia.

Last week the draft withdrawal and transition agreement was swiftly approved by EU leaders at the Council Summit in Brussels, in less than thirty seconds. That followed hours of tense talks with Spain over the status of Gibraltar and the last minute inclusion of a reference to the need for the UK and Spain to reach an agreement on the territory. Last week’s Brexit Briefing broke down the transition agreement (see here: https://www.danieldaltonmep.co.uk/news/brexit-briefing-no31-transition-agreed), which was a milestone in the talks, but still leaves a lot of open questions for the next 12 months.

Davis Barnier

The biggest of those is Ireland, and this week the UK has reportedly begun fleshing out its own backstop option for ensuring the conflicts of the past do not return to that island after Brexit. The EU proposal of Northern Ireland de-facto remaining in the Customs Union and Single Market, creating a new border in the Irish Sea, was left in the draft withdrawal agreement, but the government has made clear it cannot sign up to such a proposal. Now, further details are emerging about the government’s alternative, which it is believed may have been discussed in Brussels, and with Dublin, in the last few days.

Under the rumoured plan, the UK backstop proposal (in the event the future free trade relationship does not solve the issue) would see the UK as a whole agree to maintain full alignment with single market goods rules and a limited subset of services rules. On the customs issue, where the EU’s proposal that Northern Ireland is part of the EU’s customs territory is a non-starter, the UK will instead offer an alternative of a customs arrangement involving hybrid tariff collections. The hybrid proposal would see the UK continuing to manage its border as if it were the EU’s customs border, but then tracking imports to apply different tariffs depending on whether they are destined for the UK or EU market. This is a generous offer from the UK, essentially offering to do the EU’s customs collection job for it, and would mean that because Northern Ireland and the Republic of Ireland would still share an external EU customs border, as they do currently, there would be no need for checks on the land border between the two countries.

It is understood Dublin is cautiously supportive of this proposal, but the reaction of the Commission is yet to become clear, but reports indicate it may view this as the UK cherry-picking elements of single market access and membership. In terms of respecting the Good Friday agreement, this is a better proposal than the Commission’s, not creating any North-South or East-West divides, but the extent of UK compliance with single market rules would be a major point of contention between the two sides and between the government and Brexiteers, so this solution, whilst solving the peace conundrum, does have its fair share of problems. It is of course supposed to be the backstop option for the government, not its preferred technical model for the border.

Irish border

Whilst trying to salve the wounds of the past a new kind of war threatened to break out in the Earth’s atmosphere as the UK reacted angrily to the European Commission’s threat (via letter) to shut it out of the European space project Galileo. The satellite system, which has been plagued by delays, is supposed to be an independent rival to the US global GPS system. For the Commission, interpreting everything by the book and to the letter, it is obvious that as third country the UK can no longer have access or involvement in Galileo as it does currently. The problem is that UK companies have significant economic interests in the project and Galileo relies on equipment placed on a number of UK overseas territories to ensure global coverage. The UK has already threatened to shut down EU access to those sites if it is cut out of Galileo. There is some support for the UK remaining a full participant in Galileo from other EU member states, not least because as one of the two pre-eminent European security powers it would be needed to help act on any military intelligence gleaned from Galileo.

Unfortunately for the UK government economic interests also come into play, and French companies have a significant opportunity to gain leverage from the UK’s exclusion from the project. The bigger question raised by the Commission’s letter to the UK is what it means for the future EU-UK security alliance. The government has made plain it wishes to retain a deep security partnership, and this will form part of a separate treaty under an overarching association framework. The UK has a lot to offer in this area, with significant intelligence and security capabilities, in contrast to many EU countries aside from France and Italy, but the Commission approach to Galileo may symbolise a wider parting of the ways.

Satellite

This all comes under the shadow of a Russian threat to the continent from an increasingly hostile and risk-taking regime in Moscow. The UK secured a significant diplomatic coup last week as a result of concerted lobbying, with the EU agreeing with its interpretation of the Salisbury attack, that there was no other plausible explanation than that Russia or its agents were responsible. This was followed on Monday by 15 EU member states expelling Russian diplomats, and more followed in the coming days as well as the US’s expulsion of 60 diplomats, and a promise by Council President Donald Tusk that more action could be forthcoming. The fact that nine EU states did not expel diplomats was also a sign of the difficulty the EU has in forming a common foreign policy position on almost any issue. Security has been an overlooked part of the Brexit talks, partly because many competences remain at national level, but it is one of the most important strategic issues of the whole process.

Kremlin

Trade is obviously the biggest single part of the Brexit talks, and the UK and EU27 remained in lockstep on the issue of Donald Trump’s steel and aluminium tariffs at the Council summit last week. There remains a real risk of a trade war between the two sides, with the EU refusing to meet a 1st May deadline set by the President for proposals on steel oversupply to ensure his deferral of tariffs on European exports do not expire.

In the coming weeks, we can expect more details to emerge on Ireland, and a lot of speculation, but probably little progress on the exact nature of the future trade relationship in services. The Brexit Briefing will take a one week break over Easter, but will return in two weeks’ time.