The Chequers Agreement - What does it mean?

The Prime Minister received the full backing of the Cabinet on Friday on the contents of the UK Government's White Paper, summarised ahead of its Monday publication by a three pager, 'The Chequers Agreement', released at the end of the summit. This is a seismic moment in the Brexit process, the day long summit at the PM's official country retreat of Chequers which saw Ministers deprived of their mobile phones and cut off from outside communication for the duration saw the government finally settle on its vision for future UK-EU relations. 

This should now see the negotiations enter a new phase. For two years now the Europeans have claimed they need to know what the UK wants to be able to negotiate on the future relationship. Despite a series of set speeches by Theresa May and various UK government papers the EU could still credibly know they did not know what the UK wanted in detail. After Monday that will no longer be possible and the EU will have to engage with the substance of the UK proposals. A series of EU27 meetings are expected in the next few weeks, as well as another UK-EU round of talks on the 16th July and it will be fascinating to see how the EU reacts and if the European Council adjusts its negotiating guidelines to Chief Negotiator Michel Barnier. 

We will have to wait on the White Paper for all the details, but what does the Chequers Agreement indicate? 

This is neither a hard nor a soft Brexit, those binary choices never aligned with UK economic and political realities, it instead seeks to keep the UK close to the EU in some areas whilst allowing for divergence in others. 

The biggest headline from the summit is the decision to commit the UK to a common rule book with the EU on goods and agricultural products. This, combined with the UK's commitment to collect EU tariffs for the bloc at external borders, negates the need for a hard border in Ireland or any kind of barriers to trade in the Irish Sea. This commitment would see the UK signing up to implementing EU rules in this area, with parliament having the sovereign decision-making power to diverge, but accepting the consequences of such a divergence for trade flows. Alignment in many goods and food areas for reasons of economic interest had already been agreed by the Cabinet in principle at the Chequers away day in the spring. 

rule book

This common rule book agreement would limit the ability of the UK to strike free trade deals with for instance the US on agricultural products, but the political reality was that there was no chance of the UK signing a deal with America that saw the UK market flooded with US food products. In both goods and agriculture high standards fit with UK public policy aims and standards are also increasingly globalised. So whilst the common rule book will place limits on possible UK free trade agreements in goods, it does not impact services, the main part of the UK economy, and it makes it simpler for the UK to replicate future EU deals with other countries. 

There is no desire to remain in the single market in services, in part because the UK recognises such a request would see the EU demand continued unhindered free movement in current terms, but also because the UK may wish to diverge on EU services regulation to gain competitive advantage in a global economy increasingly dominated by services. 

There is no doubt the plan on customs is complex, it will see the UK collect EU tariffs on goods arriving in the UK destined for the EU and if the good is destined for the UK and tariffs differ a different tariff being collected. This becomes a significant logistical challenge if UK and EU tariffs diverge, but in an era where outside of Trumpian America there is a desire for lower tariffs that may not be the case. So the UK government's red line on an independent trade policy appears to have been met, even if it does not have a totally free hand in negotiations, but it never would have. 

Another UK red line still intact is on ECJ jurisdiction, which the Chequers Agreement makes clear comes to an end, but with a common market in goods, nor will the UK be totally disregarding the ECJ's views.

On free movement, whilst this formally comes to an end, the UK is proposing a highly flexible labour mobility agreement that sounds quite similar to the EU situation before Maastricht, people with a job offer can move freely between the UK and the EU. Many Brexiteers may see this as a pinking of a red line, although it also reflects the reality of UK economic interests and a key demand from almost every sector of business, as well being one of the most important issues for so many young people who voted remain. 

Those are the key areas of the agreement, the big question of course, is will this position have majority support in parliament and will it be accepted by the EU. 

Achieving cabinet unity was undoubtedly an important political victory for the Prime Minister and the return to collective responsibility will make it much harder for minsters to disagree with the government line and will make rebel Conservative MPs hesitant as well. That said, the parliamentary arithmetic is difficult for the government, even as Labour are yet to adopt a position on the Chequers Agreement, and whilst the DUP will be happy to see no divergence between Northern Ireland and the rest of the UK their support cannot be taken for granted either. 

The EU's response may take some weeks to become clear but if they reject the UK approach then it is far from sure what happens next. Equally, the arrangements for this deal are very complex and cannot possibly be completed before October so how much of it is set in stone by both sides in the annex to the withdrawal agreement will be critical. 

So there is much to watch for in the coming weeks, but to quote Churchill, this is not the end, it is not even the beginning of the end, but it is, perhaps the end of the beginning. The Prime Minister will hope Churchill's follow-up quote on the turning point of WWII can also be prophetic: "before [El Alamein] we never had a victory. After [El Alamein], we never had a defeat".