The UK-EU27 deal on EU citizens’ rights, the divorce bill and Northern Ireland’s border will unlock the second stage of Brexit talks at next week’s European Council summit in Brussels. The summit is expected to issue guidelines on a transition period while the crucial trade guidelines will come later perhaps in February or March.
Overall, the UK largely conceded to the EU27’s demands all round: EU citizens’ rights are largely protected, the divorce bill meets almost all the EU’s demands, and the commitments to keep the Northern Ireland/Ireland border open are exactly what the Irish government was looking for.
Tough trade talks ahead
The deal, by unlocking the next stage of talks, has brought Brexit substantially closer. Some have suggested the deal and commitments on keeping the Northern Ireland border, both with Ireland and with the rest of the UK, open will push the UK towards a ‘soft’ Brexit. But the outlook is, rather, for very tough talks on a free trade deal. Such a deal – with Canada as the template – would be enormously damaging to UK trade.
And once they do start trade talks, the EU27 and UK will find it immensely difficult to square the circle on keeping Northern Ireland’s borders, both with Ireland and with the rest of the UK, open and frictionless, as the deal promises. The EU27 has made it repeatedly clear that if the UK does not want a Norway-style deal, then the EU-Canada deal represents the most ambitious EU trade deal to date. The 15 page deal agreed in the early hours of Friday repeat the UK’s position that the UK, as a whole, will leave the EU’s single market and customs union. So, for the EU, Canada is the template.
A Canada-style deal would certainly mean harder borders between the EU27 and the UK. With a separate trade policy, different regulations and no free movement, there will be non-tariff barriers aplenty, even if there will mostly be tariff free trade. Services trade with the EU could fall by as much as 60%. And just-in-time production and rapid customs clearance will be a thing of the past.
It is certainly very hard to see how a Canada-style deal can be squared with the backstop commitment, in the deal, that if no special solution is found, then the UK will ensure ‘full alignment’ with those EU single market and customs union rules which ‘support North-South’ cooperation and the Good Friday Agreement. This has been taken by many commentators as meaning alignment with all single market and customs union criteria, but that is not what the text says. And once trade talks do start, the UK government’s interpretation of these crucial phrases will become clearer.
A difficult stand-off is likely to face the two sides in the talks once the UK starts arguing for full alignment in some sectors, similar rules in others and different rules in yet others. This sounds like cherry-picking – already ruled out by the EU – not like fulfilment of the 15 page UK-EU initial divorce deal.
And whatever their interpretation, even if ‘full alignment’ is only in some sectors, this commitment is likely to get in the way of, and complicate, many of the UK’s future desired trade deals with other third countries.
Overall, on Northern Ireland, in many ways the can has been kicked down the road. A soft Brexit could meet the commitments made by Theresa May in the UK-EU27 deal but a Brexit deal as outlined in her Florence speech will not (from the EU27’s point of view). But with the cabinet, shockingly, having yet to have a full, in-depth discussion of what the government wants from a UK-EU27 trade deal, the chances they would agree on a soft Brexit approach are pretty non-existent.
Labour’s Brexit shadow minister, Keir Starmer, was reduced to tweeting, on the deal, that it was ‘good’ that talks are moving on, but that May should stop creating chaos in talks. Labour has not signed up to a soft Brexit either. So where the UK-EU27 deal should give Labour a great opportunity to point out that only a soft Brexit can really fulfil what has been agreed, Labour look like continuing to give the Tories a rather soft ride.
Scotland alert to special deals
In Scotland, Nicola Sturgeon was quick to contrast the language of the deal, and its assurances that Northern Ireland will face no border either with Ireland or with the rest of the UK, with the heavy unionist language on the hard border Scotland would face with England if it went independent. But the independence movement has not just been given a free pass on open borders in the future.
If there are hard borders between the UK and EU27, with a Canada-style deal, then an independent Scotland in the EU would also face a hard border with England. And while Northern Ireland might get some ‘specific solutions’ for its border with Ireland, England can’t opt-out of its own trade deal with the EU to facilitate more open borders with an independent Scotland (or Scotland in the single market).
But, on the other hand, the deal also states that Northern Ireland’s assembly and executive could in fact agree that they want ‘distinct arrangements’ on regulation, ones that might introduce regulatory barriers between Northern Ireland and the rest of the UK. This commitment is something the Scottish government and parliament will surely pore over with great interest.
The UK government dismissed with scorn the Scottish government’s proposal last December to keep Scotland in the single market and in the UK (a proposal supported by Scottish Labour MSPs as well as Green and SNP MSPs). The language on Northern Ireland in the May-Juncker document is of a notably different type to that used in rejecting the Scottish government’s proposal – it is a positive and constructive language, open to all sorts of possible, facilitative arrangements.
Transition as a key step?
A transition arrangement, probably for two years, looks likely to be agreed quite fast. It also means that the sequence of talks has changed from what the EU27 initially anticipated, as transition talks will precede not follow trade talks. But this also gives the lie to Theresa May’s claim that transition is an ‘implementation’ phase. Transition is, in effect, an extension of negotiating time, though agreeing a Canada-style trade deal in 3 years will challenge even the EU’s top trade negotiators (though some in Brussels think it could be done).
Business in the UK has been pushing for an early transition deal. But it may prove of less use than they hoped. If by February or March it is clear that a Canada-style trade deal is the goal, then many businesses will surely trigger contingency plans to avoid the many non-tariff barriers to their business that will be looming a bit further down the track.
But the biggest block in the negotiations is likely to come as the two sides square off over regulation and the route to keeping the Northern Ireland/Ireland border starts to become difficult indeed. The Brexit talks took a big step forward on Friday, but steps back may well be on the agenda too.