A Bad Brexit Deal – and Then?

Kirsty Hughes | 17 October 2019

© 2017 SCER

So we have another Brexit deal – almost a year after Theresa May concluded the first one. Boris Johnson’s deal is, of course, an amended version of May’s. But the key amendment of creating a Northern Ireland only backstop (no longer meant to be called a backstop) means the UK as a whole won’t stay indefinitely in the EU’s customs union. As a result, there will not only be a regulatory border in the Irish Sea (with no commitment to voluntary alignment on the British side) but also a customs border. There will be major economic costs as a result.

Will it Pass?

Will the deal pass in the Commons on Saturday? No one knows. If it does, it seems Johnson – and the EU – will see if they can rush through scrutiny by both the European Parliament and the Commons, and, on the UK side, the implementation bill in days instead of weeks (if they can’t do this, a short extension may be needed). If it doesn’t pass, then Johnson, under the Benn Act, must ask for a 3 month extension. The EU is much more likely to given an extension than allow a no deal crashing out by the UK. But the EU – and indeed the UK with its failing politics – would need to know what the extension was for: an election fought over Johnson’s deal or a referendum, and the length of any extension would be up to the EU to offer.

So far, the cross-party opposition in the Commons has proved incapable of coalescing behind one route ahead – not on a referendum, nor on a temporary unity government, nor (so far) on an election once an extension is secured. It is this weakness of the opposition that is, in part, pushing the EU –the European Council, Commission and Parliament – to hail the deal as a good one. And for the EU it is (if Brexit has to happen) – it protects peace on the island of Ireland, and protects the EU’s single market and customs union while still causing some significant economic and political harm to the EU.

A Bad Deal

For the UK, or rather for Britain, this is far from a good deal. There are no good Brexits. Johnson’s deal ensures the UK is out of both the customs union and the single market – much more damaging than a ‘soft’ Brexit but allowing Britain not to be a rule-taker without even a vote or seat at the table any more, so avoiding the direct and major democratic deficit that would go with a ‘soft’ Brexit. So this fits with the ERG Brexiters’ narrative of a major break from the EU (even though all exporters to the EU will still have to meet EU regulations). Rather than staying in a customs union with the EU indefinitely, as in May’s deal, this allows the narrative of a buccaneering UK agreeing new trade deals round the world (think chlorinated chicken and powerful US trade negotiators) to continue.

Johnson’s ultimate aim, beyond winning the upcoming election, is a free trade agreement with the EU by the end of 2020. This is ambitious and unlikely timing though a very basic deal need not take as long as a Canada one – and an extension of transition to the end of 2022 will still be possible. This Brexit deal will hit trade with the EU very hard in both goods and services with knock-on effects on growth and investment, including foreign investment. A free trade deal will be somewhat better than a WTO outcome but not that much better – and services will be especially hard hit. The era of just-in-time supply chains and of a UK surplus in services exports to the EU will be over.

Northern Ireland

Northern Ireland will in theory remain in the UK’s customs territory and in practice be part of the EU’s customs union and its single market for goods (with provisions too, as before, for tariff free trade for fisheries and acquaculture products) for UK vessels registered in Northern Ireland. There will be a customs and regulatory border down the Irish Sea, with some exemptions. But essentially, as clause 12 of the new protocol makes clear, EU rules will still apply and EU ‘representatives’ will have the right to be present to check, in some form, the application of Union rules. And if the UK does not apply new, relevant single market rules to Northern Ireland there’s a process that could lead to the EU taking ‘remedial measures’. An integrated UK internal market, free from EU laws and court, this is not.

Northern Ireland will benefit from keeping its open border with the Republic of Ireland – both in terms of maintaining the peace process and economically – but there will be frictions and costs given the Irish Sea border. And like the rest of the UK, Northern Ireland will suffer from no longer being part of the single market for services. If it is seen as at all likely that, through the consent mechanism, Northern Ireland could withdraw from this deal, that too could inhibit investment. And while the term ‘backstop’ has now been dropped, and some suggest this is a permanent arrangement, the new protocol in the Withdrawal Agreement (clause 13.8) in fact allows for the future UK-EU relationship to potentially mean the protocol no longer applies “in whole or in part” – unicorns are still allowed for.

Scotland

Under this Brexit deal, if it goes through, Scotland will be part of any UK – effectively British – future trade deal with the EU. There will be a hard customs and regulatory border with the EU. Even if a future free trade deal removes most tariffs ( and it may well not be all tariffs especially on agriculture and fisheries products), there will be rules of origin, regulatory and other checks. These checks will have costs – such barriers to trade will reduce trade compared to what it would otherwise have been and inhibit foreign direct investment. The ending of free movement will also hit Scotland hard.

The political impact, if Brexit goes ahead, will surely only grow. Recent opinion polls have shown an increase in support for independence to around 50% – mainly driven by remain voters switching to support for ‘yes’. Nicola Sturgeon has said she will ask for a section 30 order for another independence referendum before the end of the year. She’s also suggested Scotland is uniquely ignored in this unfolding of Brexit – something that doesn’t really recognise that Northern Ireland also voted remain and that even in England, since early 2018, there’s been a majority in polls for remain.

The demand for another independence referendum in the face of a hard, damaging Brexit that Scotland did not vote for will be one that Johnson, if he remains in power, will surely reject at least in the short term. But the political case that Brexit is both so damaging and systemic that Scotland should be allowed to vote again on independence is a powerful one. How far this case will be reinforced by the SNP’s performance in the general election, whenever it happens, and by opinion polls that could move further towards independence if Brexit is a fait accompli is an open but crucial question. But if Johnson’s deal goes through and the UK leaves the EU in the coming weeks, the Scottish independence debate will surely take off strongly. One tricky issue, just as in the Brexit debate, will be the question of borders – a hard Britain-EU border means a hard Scotland-England border (contrary to some who imagine the Northern Ireland-Ireland border is somehow a template for an independent Scotland – it isn’t, the correct comparison will be the Britain-Republic of Ireland border).

Brexit, Election, Referendum

By Saturday, we will know if Johnson’s deal is likely to go through – whether it comes to the Commons as an indicative or more formal vote. If it does pass, and the majority (which may be very small) can hold through the withdrawal agreement implementation bill, then Brexit will go ahead soon. If it doesn’t, we will be in extension/election or referendum territory – and there are multiple scenarios as to where that could take us.

If the Johnson deal does go through, the UK will leave the EU heading for a hard, damaging Brexit, with a fractured UK, and with many years ahead of UK-EU talks and uncertainty (including the uncertainty of what happens if there’s a change of government during those talks). The UK’s failing politics has been fully exposed in the three plus years since the referendum – there will be no rapid cure for the deep divisions Brexit has created and reflected. And no steady or predictable path ahead.

 

Kirsty HughesKirsty Hughes | Twitter

Scottish Centre on European Relations

Dr Kirsty Hughes is Director of the Scottish Centre on European Relations. She is a researcher, writer and commentator on European politics and policy, and she previously worked for a number of leading European think tanks.