There’s another option beyond no deal or May’s deal – and Boris knows it

27 July 2019

9:00 AM

27 July 2019

9:00 AM

With Boris Johnson finally in No. 10 we now have a prime minister who says he is committed to Britain leaving the EU on 31 October, deal or no deal. According to popular wisdom, the only way of avoiding the latter is for the government to negotiate a modified version of Theresa May’s deal, perhaps with the removal of the hated Irish backstop, or at least with a more easily digestible version. But these are not the only two options. As Boris hinted during his leadership campaign, only to be unfairly cut down, there is a third way.

May’s deal is based on a withdrawal agreement (WA) negotiated under Article 50 of the Treaty on European Union. It is improbable that a tweaked version of this could form a viable basis for leaving the EU — and not just because the WA has already been rejected in the Commons three times. A WA based on Article 50 could not be ratified by the UK until a full Act of Parliament had been passed, implementing it into our domestic law. It is quite impossible in the time available to negotiate changes to the WA and then pass the complex and controversial implementation bill through all stages in both Houses in time for us to leave the EU on 31 October.

The outgoing May administration has prepared a draft implementation bill which has been kept under wraps. In theory, that ought to save time. However, this bill is known to contain at least 175 clauses, many of which will be very contentious. The bill will entrench the so-called ‘direct effect’ of the WA — and make it supreme over UK laws, including over future Acts of Parliament. It will make future ECJ judgments binding on UK courts across the board during the roughly two-year transition period, and for an indefinite time in some areas, such as EU citizens’ rights, and within Northern Ireland under the backstop protocol.

Even if you make the heroic assumption that the EU could be induced to cut the backstop protocol out of the WA, there is little or nothing of value to the UK in the remainder of the text and much that is extremely damaging. That includes an obligation to make post-exit payments to the EU far in excess of the UK’s international law obligations, with the amount to be decided by the ECJ instead of by a neutral international tribunal.

Can anyone really imagine Jacob Rees-Mogg accepting any of this? Moreover, opposition parties and Tory Remainers will have every incentive to oppose and obstruct the bill, in order to delay or defeat Brexit. Or they could succeed in amending it, for example to add a clause requiring a second referendum (probably with a loaded question) before the WA can be ratified. That would then make the bill unacceptable to the government.

Disregarding opposition on this side of the Channel, the EU has repeatedly and emphatically stated that it will not countenance any changes to its text. So to achieve meaningful changes to the WA would require the EU to be willing to accept a massive loss of face. This seems unlikely to say the least.

So the only viable route to leaving the EU with a deal is to leave May’s WA unratified in its box and bypass Article 50 altogether. This can be achieved via a free trade agreement (FTA) similar to Canada’s but with enhanced mutual recognition of services, as well as security and criminal justice cooperation.

Since it would take time to negotiate and conclude such a deal, we would need short-term bridging arrangements to keep trade flowing freely in both directions while the details of the long-term FTA were being hammered out. The UK and the EU would continue to recognise goods and services as conforming with their standards, unless and until relevant laws are changed. Most of these bridging arrangements could be implemented (at least in the short term) through the UK and the EU using unilateral powers under the umbrella of a political agreement, as opposed to needing a formal legal agreement.

Zero tariffs would continue on all goods made in the UK or EU and traded between them under a temporary basic free trade agreement. Contrary to the claims made against Boris in the leadership campaign, this basic agreement would be a fully compliant FTA under Article XXIV paragraph (5)(b) of GATT, and would not be an ‘interim’ agreement to which certain additional requirements under paragraph (5)(c) would be relevant. Boris was repeatedly challenged on GATT in his BBC interview and ridiculed when, having named the former paragraph, he was apparently unable to answer Andrew Neil’s question as to what was in the latter. Yet Boris is right: GATT does provide a viable exit route from the EU, providing the EU agrees to using it.

The EU has every incentive to agree a basic FTA thanks to its huge goods trade surplus with the UK. Not only that, the EU’s exports to the UK are concentrated in high-tariff sectors such as cars and agricultural produce. The tariffs which the EU could avoid through a basic FTA with the UK would be more than double the tariffs that the UK would avoid.

These bridging arrangements could be implemented on our side without needing primary legislation before 31 October. This is because the default position under the 2018 EU Withdrawal Act is for UK law to continue to recognise EU goods and services as lawfully importable into and sellable in the UK, unless and until regulations are made to the contrary. Some of the regulations already made in preparation for the abortive no deal exit on 29 March may need tweaking. But unlike a bill, parliamentary votes on secondary legislation are simple yes/no votes which cannot be hijacked to add amendments which could delay Brexit or require a second referendum.

The EU would still want to pursue some of the objectives which it negotiated to be incorporated in the WA, such as the rights of EU citizens in the UK — something Boris has already agreed to recognise. These, and the corresponding rights of UK citizens in the EU, could be safeguarded as a first step by each side making unilateral — but in practice mutual — measures. These could later be cemented into a formal agreement. As for the EU’s money claims, the UK could offer to submit them to a binding international arbitration, provided of course that the UK’s counterclaims would also be taken into account — such as claims to a share of EU property and the assets of the European Investment Bank.

That leaves the issue of the backstop. It always was nonsense to discuss customs arrangements on this border in advance of and divorced from the long-term trade relationship between the UK and the EU where such discussions naturally belong. We should offer to build on the work done by the Alternative Arrangements Commission under Greg Hands MP and Nicky Morgan MP — which would put in place away-from-the-border measures for enforcing tariff and non-tariff customs rules, as part of the long-term UK/EU trade relationship.

A critical feature of these bridging arrangements is that unlike the ‘transition’ period under May’s WA, the UK would be able to negotiate and put into effect trade agreements with non-EU countries in parallel with its negotiations with the EU on the long-term FTA. This would give Europe an incentive to conclude the long-term FTA with reasonable speed.

Would the EU go for this deal? It would be a very fair offer, assuring them continued zero-tariff and regulatory barrier-free entry into the UK market for their huge goods trade surplus, now running at £93 billion per year. It’s certainly more beneficial to the EU than a so-called no deal where trade would revert to WTO rules. And it’s a politically easier route for them to take than going back on their long-held refusal to make changes to the WA.

In the end it will depend upon whether reasonable economic self-interest comes out on top or whether politics drives the EU to try to punish the UK for its temerity in deciding to leave its sacred project. We can only find out by doing something May never did during her long course of being bullied by Brussels — that is to put it to the test, with a determined prime minister both saying and meaning: ‘It is this deal, or no deal.’

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