It is sometimes tempting to imagine that the Brexit negotiations will follow the course of a Sunday night TV drama: weeks of suspense, then everything is miraculously resolved with five minutes to go.
Last December’s agreement was a case in point. Theresa May turned up to see Jean-Claude Juncker, the Commission President, expecting to do a deal; then the Irish border hit and the whole process seemed in danger. But the Prime Minister made a pre-dawn dash to Brussels just four days later and a deal was done. This has all added to Westminster’s sense that, ultimately, everything will be alright on the night.
This means Westminster is underestimating the danger of the negotiations failing. In December, problems could be postponed. But what is agreed from now on will go into the legal text of the withdrawal agreement, making it harder to fudge things. A senior figure in the Department for Exiting the European Union calculates that there is a one-in-five chance of the talks collapsing, and Britain leaving the EU without a deal.
The issue most likely to halt the negotiations is Ireland. Both sides want to use the Irish border issue to advance their own broader agendas.
The UK government wants to use the Irish border to promote its hybrid customs model. The idea is to keep trade flowing freely by having the UK collect tariffs on the EU’s behalf. The problem with this proposal is it is not seen as credible even within the UK government. One cabinet minister tells me: ‘Sounds mad and unworkable? Yes it is.’
Another government insider says that only the Prime Minister and Olly Robbins, her chief Europe adviser, think the idea is a goer. The European Commission, which is busy claiming it can’t even trust Britain with sensitive information after Brexit, is hardly going to allow this country to collect tariffs for it. On top of this, the technology behind the scheme would take years to get up and running and no one is quite sure if the World Trade Organisation would regard it as legal.
The EU, for its part, sees the Irish border as a way to keep Britain in the customs union and closely aligned with European rules on goods and agriculture. This would be quite a result for Michel Barnier, the EU’s chief negotiator. He would have succeeded in delivering the Brexit that works best for the EU. Britain would be unable to chart its own course and no threat to the European economic model. ‘Permanent vassal state’ is how one government insider describes it.
Mrs May has repeatedly been clear that she wants Britain to leave the customs union. But Brexiteers remain extremely worried that Britain will end up in a de facto customs union with the EU long after December 2020. They fear that many of those around the Prime Minister would be quite happy if this were to happen. They fear that a lost parliamentary vote on the issue, which is by no means impossible, will be used as the pretext for doing this: that it will be sold as a necessary compromise. If Mrs May is to win meaningful parliamentary votes on the customs union, she’ll have to be prepared to make it clear that she’ll quit if the Commons goes against her. Only that message will make enough of the Tory rebels back down.
Mrs May, who isn’t yet willing to make this threat, would be well advised to do so for both policy and political reasons. Leaving the EU but staying in the customs union would be bizarre. Britain would be jettisoning one of the main opportunities of Brexit, the ability to make comprehensive free trade deals with other countries. Britain’s impotence on trade would undermine its role on the world stage. It would also mean several of Brexit’s consumer benefits couldn’t be delivered. Voters won’t be offered cheaper food, clothes or wine if Britain can’t cut tariffs on these goods.
The political problem is that for many Tory Brexiteers the customs union is a total red line issue. Traditionally, the EU’s Common Commercial Policy has been a far bigger driver of Tory Euroscepticism than free movement or any other issue. If the Prime Minister backed away from leaving it, these MPs would feel betrayed. One well-connected Tory predicts that ‘any backtracking from the commitment to leave the customs union will bring forth the 48 letters’.
Those who favour a customs union dismiss such bloodcurdling warnings. They argue that even if the Eurosceptic wing of the party delivered 48 letters necessary for a confidence vote, Mrs May would still win. But if such a vote was called, it is hard to predict how things would play out. How many Tory MPs in these circumstances would conclude that the damage had already been done and that she was too wounded to continue?
The EU’s trump card in these negotiations, though, is that Britain can’t walk away because the May government has failed to make the necessary preparations. As a result, her negotiating position is significantly weaker than it ought to be. Even now, the Treasury is reluctant to spend serious money on ‘no deal’ preparations. The bottom line is that Mrs May has to sign.
There is one obvious way of fudging this situation. Britain stays in the customs union, but only until the new systems needed to keep trade as frictionless as possible are in place. Mrs May could argue that this second transition period was needed to deliver a smooth exit and that it wasn’t just a case of Britain needing to be set for its post–Brexit future, but Europe too. She could point out that there was little point in, say, Dover being ready on day one if Calais were not.
This might just work. But there is little doubt that Brexiteer opinion is hardening. They were prepared to put up with a standstill transition because they thought this was part of the price of getting the final deal they wanted. But if they thought that Britain was going to end one transition only to head into another, they would be far less relaxed. They would fear that the truth of that old diplomatic saying, ‘C’est le provisoire qui dure’ — it is the provisional that endures — was about to be proved again.
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