Theresa May’s three pages long Chequers agreement on the UK’s Brexit position has been hailed as a shift to a ‘soft’ Brexit. But, in itself, it is only a ‘soft’ Brexit on goods and a ‘hard’ Brexit on services. And, crucially, the EU is not likely to accept the proposal in its current form at all. Equally important, though, for where Brexit talks go next, the EU looks likely to use the Chequers deal, and the longer White Paper next week, as a basis for more serious talks (not a big stretch for them given the chaotic and confused stance of the May government until now).
Cherry-picking Free Trade Area
What May’s Chequers deal does is accept the basic fact that businesses – in goods and agriculture and fisheries products – need frictionless borders with the EU and, for that, they need the same regulations as the EU. But there is plenty of cherry-picking going on here to keep the cabinet on board and to enable May to claim her red lines have not been crossed.
In the proposed free trade area for goods and agriculture, UK businesses will follow EU regulations – with a proviso that this in only as far as needed for frictionless trade at the UK EU border. The UK would also agree a common rule book on state aid. But, while there is a commitment to a level-playing field on “the environment, climate change, social and employment, and consumer protection”, this is interpreted as standards not falling below current levels. The EU is unlikely to buy that since the UK could then benefit from lower standards as the EU raised its own.
Even so, this looks quite like a Norway model on goods – but without free movement of people, and with “due regard” given to European Court of Justice rulings but not allowing dispute settlement to be overseen by the ECJ. The Chequers paper desperately tries to argue that parliamentary sovereignty would be preserved as parliament would pass all these EU rules – as would the “devolved administrations” – and Westminster could decide not to pass them while accepting there would be “consequences for market access, security cooperation or the frictionless border.”
There would certainly not be frictionless borders, of course, if parliament did not keep the stream of new EU laws and regulations up-to-date. So while the Chequers paper argues the UK could now agree an Irish backstop for the Northern Ireland border more easily, as it won’t ever be needed given the UK’s overarching proposals, in fact, as soon as any EU rules are rejected, the Irish border may not be fully open and the backstop would need to kick in. And whether Westminster operating as a Norwegian-style ‘fax democracy’ must be open to serious doubt – it doesn’t look like a sustainable (or sensible) political set-up not least given the alternative of staying in the EU.
And while there may be plenty of room to blur what the UK may decide its proposed UK-EU “mobility framework’ really looks like, there is a catch here since the Chequers notes suggest such a deal would be “similar to what the UK may offer other close trading partners in the future.” The UK is not going to offer free movement to India or Brazil for instance so this suggests a limit to how much the UK government would fudge the free movement issue – or alternatively this is a sentence to keep Brexiters on board for now.
There are also many gaps that the White Paper will have to fill in – including broadly on regulatory structures and not least on agriculture (a devolved competence of course). Here the Chequers paper suggests the UK will follow EU agriculture rules as part of its free trade area but at the same time it will design its own agriculture policy (leaving both the EU’s Common Agriculture Policy and its Common Fisheries Policy). The EU will have views on that. On regulatory structures, given the commitments to not lowering standards, it will be important to see whether and where the White Paper asks for the UK to stay in EU regulatory agencies.
Services cut loose
Then there’s services. The Chequers notes boldly explain that services won’t be in this free trade area (or we’d be at Norway minus free movement, minus an acceptable dispute settlement mechanism). The ‘plus’ for UK-based services – who stand to take a major hit in their trade with the EU (currently standing at 39% of UK-EU trade, and with a £14 billion surplus) – is meant to lie in “regulatory flexibility” and trading opportunities outside of the EU.
This will not be acceptable to the EU as it hints both at deregulation on services and it cherry-picks the single market – taking the goods and agriculture bit but not services. Nor does it face up to the extent that goods and services are intertwined in modern trade and production. Nor does it face up to the big challenges in doing free trade deals in services (whether alone or with a goods package too). And so, given this, many services will continue to move staff, offices and registration to the EU in the face of the Chequers outline.
Fantasy customs proposal
On the customs side, the Chequers paper reheats May’s customs partnership approach that was received with scorn in Brussels almost a year ago, now renamed the “facilitated customs arrangement”. Here, the UK would collect EU tariffs for goods destined for the EU and UK tariffs for goods staying in the UK – requiring some sort of tracking mechanism that the Chequers paper admits would need to become “operational in stages as both sides complete the necessary preparations” (if they ever did).
This is an attempt to keep all the benefits of being in the EU customs union while being able to say the UK would have its own trade policy and a seat at the WTO. The UK and EU would as a result act “as if [they are] a combined customs territory.” And on fishing waters, the UK would become an independent coastal state, “taking back control of its water”, but with the UK nonetheless also proposing frictionless access for fisheries products as part of its free trade area with the EU. It’s a bargaining stance that won’t survive much contact with Brussels.
“Cake and eat it” but perhaps a route to an autumn deal
Overall, this is still very much a ‘cake and eat it’ proposal. It won’t be accepted in its current form by the EU – though if it were, it would mean the UK would be a rule-taker across goods and agriculture in perpetuity. So this is not, whatever tortured explanations the Chequer note attempts, taking back control. It’s giving up control. And it’s giving up the current democratic say and vote on EU rules that the UK has through the European Council, Council of Ministers and European Parliament.
Importantly, the EU’s chief negotiator Michel Barnier responded on twitter to the Chequers discussion – welcoming them while saying the Commission would be assessing if they are workable and realistic. Certainly, the ground that Theresa May has conceded in the Chequers note is surely helpful for getting to a Withdrawal Agreement with the EU by the autumn. May is now sounding very conciliatory on an Irish backstop. So the EU can be more optimistic that a Withdrawal Agreement can be done – including a transition, a deal on money, on EU citizens’ rights and the Irish backstop. If so, a chaotic ‘no deal’ scenario retreats.
For the EU, that would be not a bad outcome – the UK leaves, the Irish peace process is protected, EU citizens have some protection, the UK pays its debts. And once the UK has left, the EU has more not less bargaining power on the future relationship – with most of the damage, if that future relationship veers back to a Canada-style deal, for the UK not EU.
But this crucially assumes that some outline framework of what the future UK-EU relationship looks like can be agreed too. The EU will be pushing the UK to shift towards something very similar to the Norway/European Economic Area deal and towards a simple customs union deal – rather than allow May’s Chequers cherry-picking. If this is too much, too fast for May, given Tory dynamics, then there may be some more partial deal.
But a partial deal that doesn’t cross EU red lines, not least on the integrity of its single market, won’t give full access to the single market, so frictionless borders will recede again. Even so, a deal on a semi-permanent customs union membership could be imagined – with suitable language over whether May’s facilitated customs partnership may ever become viable. Overall, Theresa May will have to shift a fair bit more by the autumn, if the EU is to agree a serious outline framework of the future relationship with the UK.
How Tory rebels respond will be crucial here too. Whether the pro-remain/soft Brexit rebels will still vote for the customs union amendment in 10 days time must now be open to some doubt. And the route the extreme Brexiter Tory MPs go down will also impact onto Westminster arithmetic.
But if the Brexiter Tory MPs rebel in the autumn – and if Labour comes out in opposition to any Withdrawal Agreement May comes up with – then there will still be a chance that Westminster would reject the deal. But otherwise, May has put the UK on a path to leaving the EU as planned next March. The challenge to the opposition parties – not least Labour and SNP alike – is whether they can move away from their versions of ‘soft’ Brexit (as May starts to occupy their territory) and make the simple case that staying in the EU gives the UK more sovereignty, more democracy, more security and the best possible economic outcome. For now that looks unlikely. And so the chances of Brexit have gone up; but tough talks ahead will show whether it’s at all likely to be ‘soft’. Certainly, in its current form May’s half-soft, half-hard, Brexit Chequers-style will not survive long.