There are few surprises in the EU-UK’s political declaration to accompany the much longer, legally binding withdrawal agreement. The combined effect of the EU and UK’s red lines are seen on the first page of the declaration where it’s admitted that the ‘ambitious, broad, deep and flexible partnership’ is still going to have to respect the integrity of the EU’s single market and customs union and the UK’s desire to develop an independent trade policy, retain its sovereignty and end free movement.
Of course, in this battle of red lines, Theresa May has blinked more than twice at various points. So while the EU’s main red lines have held firm, May has set up a customs union backstop in the withdrawal agreement that may go on indefinitely and that needs joint EU and UK agreement to exit from it. So a few pinches of salt can be taken with terms like ‘independent’ trade policy and the UK retaining its sovereignty.
The UK may in future stay indefinitely in a customs union or move on to a ‘deep and flexible’ future trade relationship – together with cooperation on foreign policy, security and justice and home affairs, and paying to access EU programmes on areas like science, culture, youth etc. Either way, there will be damage to the UK’s growth, trade and international influence as there will not be frictionless borders for trade in goods, nor free movement of people, nor anything like the access the UK has now in services as part of the EU’s single market. And, at the same time, the UK will, in a variety of ways, still follow some or most EU rules but without a vote or serious say i.e. losing sovereignty.
Canada Dry or Turkey Plus?
The big question and choice that arises from the political declaration is whether the UK, if it sticks to that framework in future talks, will end up with a ‘Canada Dry’ or a ‘Turkey Plus’ future trade relationship. Many have predicted that the UK will never emerge from the backstop customs union in the withdrawal agreement, agreed in order to keep the Irish border open and frictionless. But, in fact it is clear from the political declaration that the backstop could morph into a ‘Turkey Plus’ variant of the future trade relationship.
The withdrawal agreement is clear that the backstop could be replaced in whole or part by a future UK-EU permanent deal (Article 1.4): “The provisions of this Protocol shall apply unless and until they are superseded, in whole or in part, by a subsequent agreement”. Yet there is no suggestion in the political declaration that there is any expectation of ‘frictionless borders’ from the free trade area and ‘wider sectoral cooperation’ that the future economic relationship will aim for.
So how could the UK exit from the backstop? In article 23 of the declaration, the UK and EU explain they aim to build on the single customs territory of the withdrawal agreement including obviating “the need for checks on rules of origin”.
If they do build on the basic customs union that is the backstop, then the UK is heading to a Turkey Plus outcome (reportedly Michel Barnier’s deputy, Sabine Weyand, having told ambassadors that the basic customs union in the backstop is ‘Turkey minus’ as it has less regulatory facilitation).
A Turkey Plus/customs union outcome would give the UK little scope for its independent trade policy: it will be obliged to adopt the EU’s common external tariff and then will have to negotiate access to the markets of those 3rd countries the EU has deals with. The UK could still attempt to do separate services trade deals or deals with third countries that don’t have deals with the EU. But it won’t be much of a trade policy in range or power. And it won’t do much for sovereignty as the UK moves from having a say and vote to being an EU trade rule-taker.
And there would still be a catch. The backstop means Northern Ireland will effectively stay in the single market for goods, as well as adopting the EU’s customs code. And however much better a Turkey Plus deal might be than the basic customs union in the backstop, it still won’t allow a Chequers/single market for goods outcome for the UK. So however closely the UK aligns with EU regulations, Northern Ireland would still get a better deal ensuring a frictionless Irish border and the UK won’t get a frictionless border.
Nonetheless, if the Turkey Plus deal allows smoother UK-EU trade than the backstop and greater regulatory alignment by the UK (cooperating, as the political declaration says, with the European Medicines, Chemicals and Aviation Safety Agencies), this could ease regulatory barriers across the Irish Sea between Britain and Northern Ireland. So this could mean the future relationship might indeed supersede ‘in part’ the backstop.
Or possibly the future deal would write in the regulatory differentiation that Northern Ireland would still have (in terms of not needing the checks that British products will face). So the backstop would, in effect, merge into the future relationship – with whoever is then UK prime minister perhaps hailing it as an exit from the backstop even though it wouldn’t be.
If instead the UK goes down the path of negotiating a free trade agreement that is not a customs union, then the UK will face ‘Canada Dry’. While Brexiters talk about Canada +++, the reality is any pluses would be on security and other cooperation not in terms of trade. The political declaration sets out ‘ambitious’ aims for services too. But nice language cannot conceal the barriers that a whole range of services will face in operating in the EU (including equivalence provisions for financial services).
And however closely the UK chooses to align itself with a range of single market regulation and EU regulatory agencies, in a Canada Dry outcome, there would be customs checks on rules of origin as well as on regulatory conformity amongst other requirements.
So could the UK ever exit from the backstop if negotiators ended up producing a Canada Dry outcome? Brexiters can point to Article 27 of the political declaration – where “facilitative arrangements and technologies” will be considered as alternative ways to ensure the absence of a hard border on the island of Ireland. But if the UK left the basic customs union backstop for a free trade deal, there would be a customs border in the Irish Sea with Northern Ireland staying in the EU’s customs union and effectively in the single market for goods (though not for free movement of people or services).
Whether a future UK government would contemplate such a move is an open question. But it’s clear that it will be easier for the UK to say it has left the backstop if it’s a Turkey Plus deal (which might best be called a ‘backstop plus’ deal) rather than a Canada Dry deal where a hard customs border in the Irish Sea will be a highly visible symbol of the route the UK has chosen.
Fisheries, Level-Playing Field and More
There will be other issues a-plenty in the talks on a future relationship that will start next April, if Brexit goes ahead.
Fisheries and access to fishing waters have already proved highly sensitive. The withdrawal agreement deals with fisheries by putting it outside the backstop customs union – while allowing for Northern Ireland to, in fact, be inside the customs union for fisheries products once the withdrawal agreement and backstop kicks in (Article 6.2 of the Protocol on Ireland/Northern Ireland in the withdrawal agreement). In the political declaration, Article 75 links the future economic partnership to a future fisheries agreement on “inter alia, access to waters and quotas”.
Those in favour of May’s deal argue that this key paragraph means that the future economic deal and a future fisheries deal are separate while Brexiters, the Scottish National Party and others argue it’s a sell-out of Scotland and the UK’s fishermen. But it is clear (and has been for a long time) that the EU is not going to negotiate a future trade relationship without a decent agreement, from its point of view, on fisheries. The EU can not only, as in the withdrawal agreement, refuse tariff-free access for fisheries products, it can, if it wants to play hard ball, refuse a future trade deal entirely.
Other complex issues will also have to be covered in the talks – from all forms of transport (aviation, road, rail, maritime) to civil nuclear cooperation, space and more. Level-playing field provisions on state aid, competition, social and labour, environmental, climate change, tax and more will also build on the withdrawal agreement provisions. So these features of the backstop will also morph into and be developed in any future deal.
The chaotic Brexit process, and now the withdrawal agreement and political declaration, have made very clear quite how deep and broad the EU’s economic, regulatory, political and social structures are and how deeply embedded in them the UK is. If the UK and EU really want an “ambitious, broad, deep and flexible partnership”, there is nothing that fits that bill more than the UK’s existing EU membership. But for now, the EU and UK are set to agree a Brexit deal on the basis of the withdrawal agreement and political declaration.
Of course, Theresa May’s deal may not pass in the Commons. And she may, in that case, not survive as prime minister to push for a second vote on a tweaked deal in January. But if Brexit does go ahead as set out in the withdrawal agreement and political declaration, and if a Tory government remains in power, talks will start that will take the UK towards Turkey Plus (effectively ‘backstop plus) or Canada Dry. And the EU, and the rest of the world, will carry on looking aghast at the UK’s determination to enmesh itself in long and difficult talks that in any feasible outcome will be inferior to staying in the EU – politically, economically, socially, and – yes – in sovereignty terms too.