Tag: Withdrawal

Brexit: More Tumult and Uncertainty

Brexit Options

To say the least, it has been a tumultuous month for Theresa May.  Despite reaching an accord on the Withdrawal Agreement and a Political Declaration on the Future Relationship with the EU in November, the Prime Minister’s plan has been faltering in recent weeks and culminated an eleventh-hour postponement of the meaningful vote on the proposed deal in Parliament on the 11th December.  Since then, she has overcome a confidence vote by Conservative MPs, but her position has weakened as a result. Following last week’s rebuttal at the European Council when the PM sought to obtain legal guarantees that the Irish backstop would only be temporary, there are serious doubts as to whether her proposed deal will be ratified by Parliament, even if the vote is delayed until mid-January.  In the House of Commons, there are now several schools of thought as to the end-point that the Government should seek in its relations with the EU.  These are summarised briefly below;

  1. No Deal –  the UK-EU relationship would be based on WTO Most-Favoured Nation (MFN) conditions.  As highlighted previously, this would mean tariffs on UK exports to the EU and would cause significant damage to agri-food trade both as a result of new trade barriers and the potential for the UK to unilaterally reduce tariffs on imports.  Some MPs are advocating a variant of this called a ‘managed No Deal’ where limited agreements with the EU are reached in areas concerning aviation for example.  This option is likely to lead to a significant economic shock both for agri-food and the economy generally.  It would also lead to a hard border in Ireland which would add a volatile political element to the economic uncertainty that would ensue.  Whilst a motion put forward by Dominic Grieve last month and approved by Parliament limits the chances of a No Deal, with time running out and current legislation still putting the UK on the course for No Deal as a default, the prospect of crashing out on WTO terms cannot be completely ruled out. 
  2. Canada ‘plus, plus, plus’ – leading advocates of this option include David Davis and Boris Johnson.  Whilst it would permit tariff-free trade in goods, non-tariff barriers would be a major issue particularly on the island of Ireland.  Therefore, without a backstop in place, the EU-27 will simply not agree to this.  Proponents of this arrangement have devoted scant attention to addressing Irish border concerns and the proposals they have put forward recently, which are closely linked with technology, have not addressed issues such as sanitary and phytosanitary measures which EU official controls law states requires controls at the border.
  3. The Withdrawal Agreement (with modifications) – this is what Downing Street is still aiming for but as alluded to above, the EU is lukewarm towards any modifications.  Whilst the EU-27 will countenance some ‘clarifications’ to the Political Declaration and backstop-related provisions of the Withdrawal Agreement (WA) in a separate document, it will not agree to re-opening the WA legal text itself.  Whilst this option would mean that the UK would lose its influence (vote) on EU regulations and as a result become a rule-taker, it would permit an open-border on the island of Ireland and would permit tariff-free goods trade between the UK and the rest of the EU.  As reported last month, it would involve some regulatory checks on GB-to-continental EU trade and would permit the UK to end free-movement, one of the key driving forces behind the Leave vote.  However, it is clear that the ‘indefinite’ nature of the Irish backstop is the major hurdle which many MPs object to.  That said, for the EU side, the backstop is seen as a vital insurance mechanism to apply ‘unless and until’ a better solution can be found to maintain frictionless trade on the island of Ireland.
  4. Labour Renegotiation – Labour has mentioned its ‘six-tests’ on numerous occasions which it would use to assess the Government’s deal, but these look to have been set-up from the start to reject any proposed deal that the PM put forward.  Labour appear to be proposing a Customs Union-type arrangement with the UK with a high degree of regulatory alignment (around Single Market matters) which it would see as obviating the need for a hard border on the island of Ireland.  However, Labour would seek a say on future trade deals that would be struck under this UK-EU Customs Union and it is also keen to curb free movement.  Once again, the EU is likely to have serious misgivings about these requests, particularly the latter as it would contravene its red line on the ‘indivisibility of the four freedoms’ (of the Single Market).  It is also likely that it would still insist on a backstop as an insurance arrangement.  Of course, for the UK itself, being locked into a (goods) Customs Union with the EU will limit its ability to strike free-trade agreements elsewhere as trade deals in Services tend to be very limited in scope.
  5. Norway ‘plus’ – as reported last month, this option has gained traction amongst some MPs and it is thought that some in Cabinet (e.g. Amber Rudd) would be in favour of it if Theresa May’s deal were to fail.  This arrangement would entail Norway’s EEA/EFTA model.  The ‘plus’ would involve agri-food and potentially a Customs Union (or ‘Single Customs Territory’) with the EU until alternative customs arrangements could be found to ensure that no hard border emerges in Ireland.  Of course, the big drawback with this option is that free movement would have to be accepted.  So, without some form of emergency brake being applied in the UK for a period of years, it will remain a challenge to get a majority in the House of Commons for this option.
  6. Remain in the EU – advocates of this option are calling for a second Referendum (‘People’s Vote’) and would involve withdrawing the Article 50 letter and remaining in the EU, subject to the Referendum ratifying that approach.  However, this option also has challenges.  Not least is what some perceive as the democratic deficit which would ensue if the 2016 result is overturned. Furthermore, there are also issues around what the question should be on the ballot paper.  Will it consist of some form of preference vote on three options (Deal, No Deal and Remain) as suggested by its lead advocate Justine Greening?  It would also likely lead to Brexiteers calling for a ‘best of three’ if Remain were to win. Of course, if a Leave option were to win, it would close the issue for a generation and society could at least move on and address other issues which badly require attention (housing, NHS, social care etc. etc.). 

It is clear that whatever course of action eventually gets chosen, difficult challenges will have to be overcome.  For more than two years, our Brexit articles have argued that judgement needed to be suspended until it was clear what a deal would entail, both in terms of Withdrawal but also in respect of the Future Relationship.  Whilst the current deal partially answers this question, insofar as it is clear what the backstop would involve, it is neither the UK’s nor the EU’s preferred option.  Parliament urgently needs to get its act together and work in the national interest to firstly coalesce on which option it would approve.  This will involve a deal of some description as there is simply not the will within Parliament for a No Deal. Options 2-5 above involve compromises and all arguably go against the ‘will of the people’ as expressed in 2016 in some form (e.g. continued acceptance of free movement, rule-taker, splitting the UK into two customs territories etc.).  However, with the result as close as it was in 2016, some form of compromise was always going to be needed.

Brexit – Key Dates in Coming Months

With all of the uncertainty at present, the following dates are worth bearing in mind as the Brexit drama unfolds;

  • Week commencing 14th January – the Government will bring the Withdrawal Agreement and Political Declaration before Parliament for a ‘meaningful vote’.
  • 21st January – deadline for the UK Government to have made a decision on whether to proceed with the PM’s deal.  If the Government has not presented the deal before then, powers for MP’s to influence Ministers’ next steps will kick-in.  Alternatively, if the Government is defeated on its meaningful vote deal, it would have 21 days to report back on what it believes the next steps should be based on the provisions of the 2018 EU Withdrawal Act.  If the Commons passes the deal, then the Government would put forward the EU (Withdrawal Agreement) Bill.
  • 11th March – according to some, this is the latest available date for the European Parliament’s vote on the Brexit deal, which is required before formal EU ratification.  The potential for an alternative special plenary session to vote on the Withdrawal Agreement cannot be ruled out either.
  • 21st – 22nd March – next European Council meeting and set to be the UK’s final Summit as a Member State.  It is at this point that a ratified UK-EU Withdrawal Agreement would be rubber-stamped.  Failing that, this would be the juncture that the UK could request a suspension, extension to, or revocation of, the Article 50 process.  The UK could also choose to delay its Article 50 notification at any time before 29th March.
  • Before 29th March – UK Parliament will have to pass the European Union (Withdrawal Agreement) Bill by this point, assuming that Parliament has approved it beforehand.
  • 29th March (‘Brexit Day’) – UK formally exits the European Union based on the current Article 50 timeline (at 11pm).  If a deal has not been ratified (by both UK and the EU) by this point, a No Deal would be the default as things stand.
  • After 30th March – assuming that the UK has an agreed Withdrawal Deal from the EU, fully-fledged talks on the UK’s Future Relationship with the EU could begin.  Until the UK has withdrawn, such formal talks are not permitted under EU law.
  • 18th April – last session of outgoing European Parliament.
  • 23rd – 26th May – European Parliament elections to take place across EU Member States.  If the UK decided to suspend/extend Article 50 in March, there are questions around what would happen to its representation at the European Parliament.
  • 2nd July – inaugural plenary session of the new European Parliament.  If Article 50 was delayed, and the European Parliament still had to vote on the Withdrawal Agreement, it would be after this point that a new vote could take place.

Thereafter, the next key dates to note are July 2020, by which point it is expected that a decision will be taken on whether the Irish backstop would apply, if the current Withdrawal Agreement were to be ratified. Alternatively, a decision could also be taken at this point to extend the Transition (Implementation) period which is due to end in December 2020.  For those who think that talk of Brexit would end on the 29th of March, there will be some disappointment as the process is set to continue on for many more years to come.