Stephen Booth is Acting Director at Open Europe.
Day by day, we appear to be inching closer to the finale of the first phase of our Brexit drama. We do not know how it ends but the fact that the Liberal Democrats and the SNP now both explicitly back an election is likely to be significant. It remains unclear if the Government can pass its Withdrawal Agreement Bill under this parliament, and ultimately an election, at some point in the next three months, may be required to settle the issue at hand: will the UK leave the EU (with the Prime Minister’s deal), or face another referendum and potentially not leave at all?
But what might lie beyond an election if Boris Johnson is returned to Downing Street to implement his deal? The most important substantive difference between Theresa May’s Withdrawal Agreement and Boris Johnson’s is that the new deal leaves open many more questions to be negotiated in the transition or implementation period, namely the future UK-EU relationship. This provides both greater room for manoeuvre and greater uncertainty. This means that the next parliament, and party management, could yet have a significant role over the process.
The ‘Northern Irish backstop’ negotiated under the previous government actually provided a UK-EU customs union as a default trading relationship, potentially superseded by a further agreement. This would have limited UK aspirations for an independent trade policy, but many in Brussels felt the backstop granted the UK the prize of zero-tariff access to EU markets with too much leeway on so-called ‘level playing field’ provisions on social and environmental rights.
In contrast, the new agreement ensures the UK is able to leave the Customs Union and conduct an independent trade policy, but we do not know what the future trading arrangement will be. The non-binding Political Declaration points towards the Government’s preferred destination of a comprehensive free trade agreement. But one of the reasons previously hardline Brexiteers are able to support the new deal is that it could yet result in a WTO-terms outcome following the transition period, if talks fail. The Northern Ireland-specific provisions would apply but these can be ended unilaterally by a majority in Stormont.
In fact, given that it is unlikely that a UK-EU trade agreement can be finalised in six or seven months, one of the first things the UK and EU will have to do is to decide by 1st July 2020 whether to take the option of extending the transition period. The failure to leave on either 29th March or 31st October has eaten into the length of the transition, which wasn’t revised in the new text. It is currently scheduled to finish on 31st December 2020, but can be extended to the end of 2022.
If UK-EU negotiations are undertaken in good faith an extension ought to be relatively straightforward, but it is likely to involve politically sensitive issues. These include settling on additional payments, as the previously agreed £39 billion only covered the period to December 2020, and with the clock ticking, the EU might be tempted to throw in agreement on fishing quotas as a condition to extending the transition. Therefore, a Johnson government is likely to need to convince some of its own backbenchers to make further compromises in the pursuit of a free trade agreement and continue planning for a potential WTO Brexit at the same time.
The new sequencing and potential 2020 or 2022 ‘cliff edges’ could work both ways. Unless the UK remains prepared for the prospect of a WTO terms Brexit, the EU will be tempted to use the pressure of the clock against UK negotiators. On the other hand, we have also seen in recent days how determined the EU is to avoid No Deal and, with the genuine ability to walk away, the UK would have more flexibility than under Theresa May’s deal. Ultimately, the most important questions remain the fundamental trade-offs UK and EU negotiators will need to assess.
For the UK, the economic trade-off is between alignment with the EU and access to its markets. Many Labour MPs have made much of the fact the level playing field commitments of Theresa May’s deal have been removed from the legally binding Withdrawal Agreement and moved to the non-binding Political Declaration. This merely reflects the fact that the UK-EU customs union is gone and that this will be a negotiating point in the free trade agreement talks.
The level playing field issue doesn’t necessarily need to be immensely difficult but it is vital that the Government and the Conservative Party is clear about its bottom line – and parliamentary arithmetic could yet play a role. Michel Barnier famously outlined the options available to the UK with a staircase graphic: Norwegian-style access to the Single Market comes with Norwegian-style alignment on regulation and level playing field issues, whereas a looser Canada-style deal comes with fewer obligations. To be clear, there is also a major economic incentive for the EU to conclude a deal but, as May found with her Chequers proposals, the more complicated the UK ask, the more strings the EU will attach.
The broader issue facing the EU is a geopolitical one. It was perhaps telling that Angela Merkel recently chose to describe the UK as a potential “competitor” rather than a “partner”. May’s deal was probably preferable for the EU since it was likely to limit UK divergence from the EU over the medium term. It therefore would have allowed the EU to ignore the question of how to respond to a truly independent UK for a little longer. If Boris Johnson secures a new mandate as Prime Minister, a more assertive UK might insist that a genuinely balanced relationship would weigh the UK’s contribution to European security alongside the mutual economic benefits of free trade. The European Commission doesn’t have a graphic to answer that question and EU leaders have been much more comfortable relegating Brexit to the orbit of technocrats and process.
In summary, the first phase of Brexit might be the most fraught, but there will still be much to do in the next. May lost all momentum following her 2017 Brexit election; Johnson cannot afford to do the same whenever it comes.