Brexit Endgame: Uncertainty Mounts in Face of Deep Tory Divides

Kirsty Hughes | 10 May 2018

Elizabeth Tower, UK Parliament (Jessica Taylor), CC-BY-NC-2.0

With just 6 months to go to finalise the Brexit withdrawal agreement, the watchword most frequently heard around Whitehall and Westminster is ‘uncertainty’. The cabinet are at daggers drawn over the future customs relationship with the EU – a row that pays little attention to what the EU might agree to. And there is no visible progress on the backstop that would allow Northern Ireland to keep the border open whatever the future relationship.

The Scottish parliament, meanwhile, looks set to refuse consent for the EU withdrawal bill – although the Supreme Court won’t assess the legality of the parliament’s alternative ‘continuity’ bill until late July. Yet despite this multi-faceted Brexit endgame, the Scottish parliament’s Culture, Tourism, Europe and External Relations committee is bizarrely currently focusing on its culture brief rather than investigate the stumbling Brexit talks.

So there are Brexit challenges aplenty with the two ‘remain’-voting areas of the UK. But it is the potential failure to move forward on Northern Ireland that is leading some to predict a major, nasty row between the UK and EU at the late June summit – possibly one so bad that talks on the future relationship would be suspended. That would mean a hot summer and leave little hope of a deal by October, though perhaps, if a bad row provoked an eventual compromise solution, an emergency EU-UK summit in November could stitch it all together in time to ratify the withdrawal agreement ahead of 29 March 2019.

The deep Tory split over future customs arrangements also appears to exist between senior officials too. While some talk up the hope of a customs partnership that would be almost like being in a customs union, other officials (according to media reports) see a customs union as the worst possible outcome (a curious position given a free trade deal, on most estimates, would do much more harm to UK trade).

Kafkaesque customs options

Most of this is, in any event, quite Kafkaesque as observers attempt to read the runes of the Tory splits. Some argue that, even though Brussels is surely right to call Theresa May’s customs partnership ‘magical thinking’, it would mean that the UK would stay in the customs union while attempting (hopelessly) to sort the technology and procedures that would make such a partnership fly. It’s a customs union Brexit by stealth and delay and assumes the technology never actually works.

Even if the EU bought into this, which despite some very slightly encouraging words from Irish Taoiseach Leo Varadkar this week, currently looks unlikely, the EU would surely demand a veto on determining whether the technology was ever adequate rather than making a definite forward commitment. The EU determining whether the UK ever left the customs union would surely be unacceptable across the Conservative party – and for most of Labour too. And to get almost frictionless borders, the UK would still need to align fully with EU regulations. Even then, unless the UK were under EU regulatory and judicial structures, even goods (services don’t figure in any of this in UK analysis) would not flow freely – and just-in-time production would still be in deep trouble.

Amidst all the talk of customs arrangements, little is being said publically on the breadth of any customs union or partnership. For it to result in an open Irish border, it would need to cover agriculture too – but in her Mansion House speech, May distinguished agrifood and fisheries from goods. So it seems the customs partnership/stealth customs union is possibly meant to be for industrial goods for the whole UK with some differentiation on agriculture for Northern Ireland (which the DUP would have to swallow) in this version of events. And meanwhile services would take the full hit of leaving the single market, with estimates suggesting that could mean a 60% drop in EU-UK services trade – and that’s without considering how services and goods are often part of a combined package or product.

While a customs union would help, if not fully solve, the Irish border question – where the Johnson/Rees-Mogg ‘max fac’ (maximum facilitation approach) would not while also hitting trade hard – it doesn’t let the UK off the hook of agreeing a backstop for that too – as agreed in principle in the Joint Agreement last December. From Ireland’s point of view, the UK is putting forward ‘wheezes’ to get round this rather than respecting the commitment May made and putting forward serious proposals. So how to read Varadkar saying a different version of a customs partnership might perhaps work? Some see this as at least keeping the UK on a ‘close to the EU’ path, rather than a very hard Brexit that the Johnson/Rees Mogg Brexiters demand. But it may simply be an attempt to keep dialogue going ahead of the June summit.

With the cabinet now due to discuss customs again on Tuesday, there is talk amongst some Tory MPs of a longer transition period, even a short extension of Article 50 (though few think more than a few weeks is realistic – but that assumes chaos does not continue to reign). But if there is to be the possibility of extending transition, it will need to be in the Withdrawal Agreement and the UK has not yet asked for it to be included (Downing street this week again denying they want an extension).

Heading to a ratified deal, no deal or no Brexit?

Which way the cabinet, and MPs, will fall on the question of magical customs partnership versus unicorn ‘max fac’ is unclear – though ‘compromises’ of a longer transition in the customs union (but not in anything else) while ‘max fac’ is worked up have also been mooted in the last day or two. A partial extended transition may not appeal to Brussels at all either.

Indeed, what seems to get little attention in these swirling Tory divides is firstly what the EU will agree to and, secondly, what either of these unlikely outcomes (partnership or ‘max fac’) will do to the UK’s ability to negotiate future trade deals. If there was a deal to explore the customs partnership technology while meanwhile staying in the EU customs union, then at most the UK could attempt to negotiate services trade deals (perhaps with agriculture too).

But the idea the EU will accept a goods customs union with the UK, that doesn’t extend to agriculture or fisheries is unlikely – or not without a good deal on access to waters alongside. And while there is prolonged uncertainty over the future EU-UK relationship, including on whether the UK would ever leave the customs union (plus a complex/magical customs partnership to explain to potential trade deal partners from the US to Australia), then the prospect of serious and rapid new trade deals must be highly unlikely. Even dealing with ‘rolling over’ existing EU trade deals for the UK would look very tricky.

If there is a big row over Northern Ireland at the June summit and talks on the future relationship are suspended, while talks on the backstop continue, then there will be even less time to agree an outline framework of the future relationship. And while May is doing her best to delay bringing the trade and customs bills to the Commons – where it looks like a majority is to be had to keep the UK in the customs union – it cannot be put off forever.

But if the customs union/partnership/’max fac’ row is not resolved within the Tory party, then it’s also possible that the Withdrawal Agreement will not get a majority in parliament (should a UK-EU agreement be done). A rejection of the Withdrawal Agreement would lead to a huge political crisis, possible general election, possible extension of Article 50 plus new talks or a further referendum.

Uncertainty and a roller coaster few weeks and months beckons in this Brexit endgame. But uncertainty is not only over what sort of Brexit but also over whether it will, amidst this chaos, really happen. Looking on the bright side, chaos is, in fact, the best hope for those who still look for a route for the UK to stay in the EU after all.

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.