Thursday, March 07, 2019

Five reasons why Ireland should back a time-limited backstop

Published on CapX
The prospects of Theresa May’s Brexit deal have, for quite some time, depended on her government’s ability to amend or in some other way mitigate the so-called backstop set out in the Withdrawal Agreement. Yet, Ireland’s government may well hold firm. The arrangement, which is vociferously opposed by British Eurosceptics, involves the UK remaining under the EU’s customs regime until further notice to avoid customs checks at the Irish border.
Perhaps the UK Parliament will find it sufficient to make it more legally solid that the EU has a “best endeavours” obligation to negotiate an alternative to the backstop which reconciles the absence of a hard border in Ireland with an independent UK trade policy. It’s even possible that the UK government will ultimately sign up to a permanent customs union with the EU, though that would depend on Theresa May reaching out to Labour, which supports something along those lines.
It’s an issue which remains clouded in uncertainty, even at this late stage, and multiple hurdles remain. In Brussels, many realise Taoiseach Leo Varadkar has limited room to manoeuver on this domestically. Many in Ireland consider giving ground on the backstop as the gravest of Irish concessions.
However, there are at least five good reasons why it is in Ireland’s interest to agree to a time-limit to the backstop.
1. The UK effectively already has a “right to unilaterally recover trade powers”, so a time limit would not really be a concession  
The current draft Withdrawal Agreement requires the EU to act in good faith and not simply claim that any alternative to the backstop is insufficient to avoid a hard border in Ireland. Who, then, will decide whether this obligation has been violated? What people seem to forget, is that the UK will be a “third country” after Brexit, liberated from the legal regime of the European Union. The phrase “best endeavours” can be interpreted in many different ways. If relations between both sides have become so toxic that a trade deal replacing the backstop customs regime becomes impossible, it is highly unlikely the world’s fifth biggest economy would simply continue to outsource its trade policy to the EU. Britain could unilaterally declare it will start trading on WTO terms in 12 months’ time and ultimately there wouldn’t be much Ireland could do about it. So if Ireland now agrees to a time-limited backstop, it’s not really giving much away, as it hasn’t secured all that much in the first place.
2. Agreeing a time limit offers material gains to Ireland
Even if you do not accept that the UK could wriggle out of its Brexit commitments by simply referring to the “best endeavours” obligation – for example due to the importance of avoiding customs disruption – it remains the case that the benefits for Ireland of a Brexit deal being concluded now are much bigger.
The estimates of how a “no deal” would hit Ireland range from the IMF’s and Irish Central Bank’s four per cent of GDP to the whopping eight per cent forecast by Germany’s IFO institute, which estimates that the damage to Ireland’s economy would be three times as big as to the UK’s.
That’s before we come to the potential damage to the Northern Irish peace process. If Ireland and the UK decided to simply not enforce proper checks at the border, which is not all that unlikely, the EU would have to move the customs and single market checks to mainland Europe, creating “Irexit” in all but name.
But would Ireland agreeing to a time limit pave the way to a deal? The signs are promising that it would.
The DUP have declared that a time limit on the backstop “would be acceptable”, while Jacob Rees-Mogg, the head of the European Research Group of Tory Eurosceptics, has suggested something similar. With the probable abstention of Labour MPs disgruntled about their party’s commitment to a second referendum, the deal should pass the House of Commons. In summary: regardless of the vexed question of whether conceding to a time-limited backstop is a material Irish concession, avoiding a No Deal Brexit clearly has very significant benefits.

3. Setting a deadline forces the EU26 to make an effort to negotiate an alternative
Two kinds of checks need to happen at the Northern Irish border if the UK leaves without a deal: single market checks and customs checks. The Withdrawal Agreement includes a deadline of 1 January 2023, after which it will no longer be possible for the UK to remain in the single market as a non-EU member state. From that point on, single market checks become necessary at the border. There is no such deadline for customs checks. However, setting a time limit for the backstop would create such a deadline. It would be the fourth deadline, after 29 March 2019 and 1 July 2020, by which a decision is due on whether to extend the transition stage. If the current draft deal already has three deadlines, a fourth one surely can’t hurt all that much?
It’s important not to assume that the UK won’t demand its trade powers back at some point. The EU will be negotiating trade access to the UK, which won’t have any say. If the EU agrees a trade deal with, say, Russia, this means Russian companies would get access to the UK automatically, but the UK would need to ask Russia whether British companies can enjoy the same access to its market as EU companies. What’s more, EU trade negotiators would have difficulty telling potential trade partners the UK consumer market was on offer, while those trade partners would be able to hear British complaints about it, making them more hesitant to make concessions. So, the only realistic question is when the UK starts setting its own tariffs. A permanent EU-UK customs union falls firmly into the category of “unicorn”, as the ever-expanding Brexit lexicon would have it.
Ireland really holds the keys now. Were Varadkar to propose that the backstop be activated for a maximum of five years from 2023, it would mean the can being kicked all the way until 2028. This clearly reduces the chances that the UK would break out unilaterally — a scenario that would seriously damage Ireland’s economy. Agreeing such a time limit would also force the EU27 to focus on the deadline, something the Irish government would do well to bear in mind.
4. It’s in Ireland’s interest to keep good relations with the UK
It would be off if, in an effort to avoid a hard border and subsequent souring of Anglo-Irish relations, the Irish government refused a solution that simply kicks things into the long grass – itself a recognition of just how tricky a problem the border has become.
The backstop effectively gives Ireland a veto over when the UK can recover is trade powers. Is it so unreasonable for the UK to concede to being a “trade vassal” for a limited time, but request that it has control over how long that will be or that there is a firm deadline? From an Irish perspective, allowing a No Deal Brexit is like refusing to buy fire insurance, then leaving a cigar smouldering in the corner of the room.
Goodwill from both the UK but also from the EU26 will be needed to sort out the challenge of combining an independent UK trade policy with avoiding a hard border. The obvious compromise is for Northern Ireland to remain in the EU single market, but outside of the EU’s customs union, much like Norway. For this to be a realistic prospect, however, will probably mean waiting until the DUP is no longer propping up a Tory government, even if DUP founder Ian Paisley himself once said: “Our people may be British, but our cows are Irish.”
If the UK were to concede to regulatory checks in the Irish sea, it would mean that any good arriving in Northern Ireland from outside of the EU would have to comply with EU health and safety standards. If both Ireland and the UK decided not to implement overly strict customs checks, the risk would only be that some customs might not have been paid, something the UK could easily compensate the EU for. We’re talking about pocket change, given there is less trade between Northern Ireland and the Republic than with Great Britain. If Ireland refuses to give room on the backstop, it will be much harder to end with a similar fudge.
5. Ireland is not ready for no deal
The fact there is not yet a Brexit deal has already hit the Irish economy. Employment growth and SME investment have stalled. Varadkar himself has admitted the necessary extra customs staff won’t have been deployed by the end of March. There are major opposition questions surrounding preparation to upgrade port border inspection infrastructure and about the hiring of the necessary number of veterinary officials. Also Irish plans to request EU support to cope with No Deal have not gone anywhere yet. To remove any doubts about the level of Irish preparation, the country’s deputy prime minister Simon Coveney has stated: “I wouldn’t like to give the impression that we could easily manage a no-deal Brexit…It would put huge strain on the Irish economy.”
It would be a bit unfair to blame the Irish government for making only sketchy preparations for what was long considered a worst case scenario, rather than a likely one. One would hope that reason will prevail and the investments to prepare for No Deal turn out to be unnecessary. At the same time, all parties should do their utmost to avoid such an eventuality happening by accident.

Thursday, February 07, 2019

Flexibiliteit is nu meer dan ooit nodig om een harde Brexit te vermijden

Gepubliceerd op 

Het Britse Parlement gaf verleden week eindelijk meer duidelijkheid over welke aanpassingen het precies wil aan het Brexit-uittredingsakkoord dat de Britse Premier Theresa May met de andere Europese lidstaten afsloot in november.

Er is weinig controverse over het feit dat er een zogenaamde “transitieperiode” komt, vanaf 29 maart 2019 tot ten laatste einde 2022. Gedurende die tijd geniet het Verenigd Koninkrijk volledige toegang tot de Europese interne markt op voorwaarde dat het echter ook alle EU-regels overneemt zonder er over te kunnen stemmen. Nog belangrijker is dat de Britten dan ook dezelfde douanetarieven zullen blijven opleggen als de EU. Dat voorkomt dat douanecontroles nodig zijn in Noord-Ierland.

Tenzij er tegen 2023 iets alternatief is overeengekomen, voorziet het uittredingsverdrag dat er een zogenaamde “backstop” of terugvaloplossing in werking treedt. Die houdt in dat het VK vanaf dan vrij regels kan beginnen wijzigen, en ook markttoegang verliest, maar wel nog steeds het douaneregime van de EU volgt, wat betekent dat het ook geen eigen handelsbeleid kan voeren.

Een meerderheid in het Britse Parlement wil nu dat die “backstop” wordt vervangen door “alternatieve arrangementen”. Het is nog onduidelijk wat dat in de praktijk precies betekent, maar de doorn in het oog is in elk geval dat er geen einddatum is bepaald over hoe lang die backstop – status dan wel zal duren. Concreet betekent dit dat de Europese Unie geen veto mag hebben over wanneer het VK een eigen handelsbeleid kan gaan voeren. Ook Labour – leider Jeremy Corbyn heeft hier grote problemen mee. Hij zei daarover: “Het zou de eerste keer in de Britse geschiedenis zijn een Verdrag overeen te komen dat we niet zouden kunnen opzeggen”.

Zijn de Britten irrationeel om de EU ervan te verdenken hen in die “backstop”- status te willen houden? Verschillende EU leiders beweren dat het sowieso niet de bedoeling is dat dit een permanente status wordt, ook al omdat dit juridisch niet mogelijk is via het artikel 50 van het EU-verdrag. Dan kan niet gebruikt worden om een permanente handelsrelatie vorm te geven.

Het lijkt er op dat die vrees niet zo ongegrond is. De Ierse Minister van Buitenlandse Zaken, Simon Coveney, stelt dat “de backstop kan worden vervangen door alternatieve arrangementen, zolang die werken [om een harde grens in Noord-Ierland te vermijden]. Tegelijk stelde hij echter eveneens dat er “geen geloofwaardige alternatieve arrangementen bestaan” in die zin. Met andere woorden: Ierland – en met Ierland de rest van de Europese Unie – wil dat het Verenigd Koninkrijk, de vijfde grootste economie ter wereld, nooit meer een eigen handelsbeleid kan voeren. Het zal dan – net zoals Turkije op dit moment trouwens ook, grotendeels – geen eigen handelsbeleid kunnen voeren. Als de EU bijvoorbeeld een akkoord zou afsluiten met de V.S. of China betekent dit dat de vrijere toegang voor Amerikaanse of Chinese ondernemingen tot de EU ook zal gelden voor de Britse markt, maar dat de Britten niet automatisch de extra toegang zullen genieten die Europese bedrijven krijgen. Het VK zal formeel geen mogelijkheid hebben om zulke handelsgesprekken te blokkeren of te beïnvloeden.

Men kan veel willen, maar hoe realistisch is dit?

De Franse President Macron heeft er bovendien reeds mee gedreigd de Britten in die “backstop” te houden, tenzij er snel een akkoord komt over visserij.

Het uittredingsverdrag vermeldt echter dat de EU een verplichting heeft om ter goeder trouw te proberen om een alternatieve regeling overeen te komen. Als uitspraken zoals die van Macron dus gebeuren heeft het VK volgens het internationaal recht de mogelijkheid om eenzijdig het uittredingsverdrag op te zeggen.

Wat betekent dit? Het betekent enerzijds dat de Britten misschien niet moeten overdrijven over het risico dat ze voor eeuwig en altijd een vazalstaat van de EU op vlak van handel zouden worden. Maar het betekent anderzijds ook dat Ierland helemaal niet zo’n ijzersterke verzekering heeft dat het VK op een bepaald ogenblik geen handelstarieven die verschillend van de EU zijn zullen gaan toepassen.

De Poolse Minister van Buitenlandse Zaken zorgde voor onrust in EU-rangen door als eerste een taboe te doorbreken en te pleiten voor een beperking in de tijd van de backstop tot vijf jaar. Dat zou dus betekenen dat het VK onder het handelsregime van de EU blijft tot 1 januari 2028. Ook al zou de door Brexiteers gewenste eenzijdige afschaffing van douanetarieven niet mogelijk zijn, kan het VK dan ondertussen wel handelsakkoorden onderhandelen met de rest van de wereld, die ten vroegste in 2028 in voege zouden kunnen treden. Tot die datum zou er dan naar een oplossing kunnen worden gezocht voor industriële productieketens, die ook dreigen te worden verstoord door douanechecks, en vooral dus ook voor het vermijden van controles op de Ierse grens.

Als Ierland, maar ook de andere EU-lidstaten zich nu bijzonder inflexibel blijven opstellen over elke aanpassing aan die “backstop”, is er het gevaar op een “harde” Brexit, zonder akkoord, waarbij heel wat van de handel die met het VK verloopt eenvoudigweg illegaal wordt. Enkele maatregelen werden daarvoor reeds voorzien, maar zelfs op vlak van luchtvaart is er nog onvoldoende geregeld, met het risico op een annulering van maar liefst vijf miljoen vluchten. Bovendien zullen noch Nederland, België of Ierland voldoende extra douanepersoneel hebben aangeworven tegen einde maart om de dan vereiste controles uit te voeren. 80% van de Belgische ondernemingen zouden nog niet voorbereid zijn hierop. In Nederland of Groot-Brittannië is het overigens niet veel beter. Chaos verzekerd dus, tenzij men een akkoord sluit.
De strategie van de EU lijkt er tot dusver op elke toegeving aan de Britse conservatieven en hun Noord-Ierse coalitiepartner DUP te weigeren, in de hoop dat Theresa May dan maar met de oppositiepartij Labour een “softere” Brexit overeenkomt. Labour is er immers voorstander van dat het VK in een douane-unie met de EU blijft, al wil de partij tegelijk dat het VK dan wel degelijk invloed krijgt op het handelsbeleid. Het is onwaarschijnlijk dat de EU dit zou toestaan aan een niet-lidstaat – en waarom zou Turkije die mogelijkheid dan ook niet krijgen?- ook al is het een voorstel dat net werd gedaan door een groep Duitse academici. Bovendien is Corbyn dus ook tegen een niet in de tijd beperkte backstop.

Velen hebben betoogd dat het absoluut niet mogelijk is dat het VK van de EU afwijkende douanetarieven gaat heffen zonder dat dan ook douanecontroles in Noord-Ierland noodzakelijk worden. Nochtans verklaarde het hoofd van de douane van Zwitserland, dat zich eveneens buiten de douane-unie van de EU bevindt en een eigen handelsbeleid kan voeren, op een hoorzitting van het Brits Parlement dat wel degelijk mogelijk is om met technologie een ‘onzichtbare grens’ in Noord-Ierland te realiseren.

Op de grens met Zwitserland zijn het vooral kleinere ondernemingen die momenteel last hebben van de douanecontroles. Onder meer daarom heeft de Britse regering voorgesteld om kleinere ondernemingen dan maar vrij te stellen van zulke controles aan de Noord-Ierse grens. Zeker daar zou dit een pragmatische oplossing kunnen zijn, omdat er minder handel is met de Ierse republiek dan met het Britse vasteland. Niettemin weigerde de EU hierover te spreken, uit vrees voor een “gat” in de Europese douanegrens, ook al zijn de havens van Antwerpen en Rotterdam – de twee grote toegangspoorten tot de Europese douanegrens “zo lek als een vergiet” volgens de Antwerpse burgemeester. De vraag is waarom het Ierse vredesproces dan geen ‘gaatje’ in de douane-unie waard is.

Op 14 februari komt er een nieuw debat in het Brits Parlement en Theresa May probeert nu om tegen die datum toegevingen te verkrijgen van de EU.

De EU weigert echter elke flexibiliteit – tenzij in de richting dan van nog meer toegevingen door VK, een softere Brexit dus. Binnen de Europese instellingen is de controle over de Brexit – onderhandelingen door Martin Selmayr, de controversiële adjudant van Jean-Claude Juncker, bovendien aan het toenemen. Hij maakte alvast al openlijk duidelijk dat toegevingen nu niet aan de orde zijn. Het is maar de vraag waarom de Belgische regering en met hen de regeringen van andere lidstaten die zo veel bij een “no deal” te verliezen hebben, dit allemaal laten gebeuren.

De federale regering lijkt zich echter allesbehalve bewust van de dringendheid van de situatie. De Belgische Premier Charles Michel laat zich vooral opmerken door de hoop uit te spreken dat die Brexit gewoon ongedaan wordt gemaakt. Op zich een nobele hoop, al is het wel een beetje vreemd dat Michel al die jaren al de euro-federalistische lijn volgt, die net het VK voor de uitgang heeft doen kiezen. Binnen het Europees Parlement staan de Belgische vertegenwoordigers dan weer al klaar om een mogelijk compromis te torpederen. Een Belgisch Europarlementslid van Ecolo beweerde er zowaar dat een “no deal” het “minste van twee kwaden is”, in vergelijking met “een nederlaag over de backstop”, terwijl dit net onze economie een 2 procent kleiner zou kunnen maken, met een 42.000 jobverliezen tot gevolg, waarvan 28.000 in Vlaanderen. Het getuigt allemaal niet echt van veel verantwoordelijkheidszin. 

De Europese politici nemen beter een voorbeeld aan de fractieleider van de regeringspartij CSU in het Duits Parlement, die de weigering van de EU en ook van Angela Merkel om te heronderhandelen “bevreemdend” noemde, waarbij hij er aan toevoegde: “Het is van het uiterste belang dat er een flexibel antwoord komt, zonder dat daarom het volledige akkoord wordt heropend”. De politicus uit Beieren, de Duitse deelstaat die net zoals ons land ook intens handel met het VK drijft, waarschuwde: “Het is niet ‘Europees’ om koppig te zijn”.

Wednesday, January 30, 2019

Martin Selmayr is taking over the Brexit negotiations – and that’s bad news for both Britain and the EU

Published on The Spectator and also in German, for German opinion website Achgut

It’s no coincidence that the EU had already prepared a statement on Monday that ruled out any Brexit renegotiation, even before the 'Brady amendment', which requested the replacement of the backstop within the withdrawal agreement, had been voted on. One of the reasons why, is that a certain Martin Selmayr is now very much sitting in the EU’s driving seat.

A lot of media attention in the UK is often spent on whatever the EU Brexit negotiator Michel Barnier and his team are saying, but I am hearing in Brussels that when Theresa May’s top Brexit advisor Olly Robbins visits EU institutions, he now meets Martin Selmayr, the controversial Secretary-General of the European Commission.

Some member states are apparently uncomfortable about his growing influence, and they should be, because Selmayr has a reputation for behaving like a bull in a China shop. With the risk of no deal looming, one can only wonder why Ireland, the Benelux, Germany and France - who are risking a lot of damage, for which they are insufficiently prepared -  tolerate a hardliner in charge who's making this prospect more likely.

Until recently, Selmayr served as European Commission President Jean-Claude Juncker’s chief of staff. His recent appointment to the top levels of the European Commission, bypassing seasoned eurocrats, 'could be viewed as a coup-like action', according to the European Parliament, and did 'not follow EU law or the Commission's own rules' according to the European Ombudsman. The European Parliament has stopped short of questioning the appointment, perhaps fearing the troublesome ways its own top officials are appointed would be reassessed. More importantly, however, Jean-Claude Juncker had linked his own fate with that of Selmayr and quite aggressively forced his EU Commissioners to toe the line. Selmayr’s appointment raises serious questions as to how Jean-Claude Juncker’s rumoured condition may have opened the door for people like Selmayr to occupy positions of power that should never be reserved for mandarins like him.

When it comes to Brexit, Martin Selmayr has been regularly accused of complicating the negotiations unnecessarily. British officials have accused him of wanting to 'punish' the UK for leaving the EU, which he apparently considers to be a 'tragedy' that will, however, re-energise the European project as a case study in the essential value of the Union.

In other words: he buys into the narrative that Brexit will push anti-establishment populists in mainland Europe away from exiting themselves, despite the fact that populists in Italy, France - where about half of the French electorate voted for a Eurosceptic candidate in 2017 -  and Germany have actually been gaining ground since the Brexit vote. 

Selmayr’s idea of 're-energising' the European project seems to include preventing the UK from getting an easy ride out of the club. He has been accused of leaking details of a confidential Downing Street dinner to derail the Brexit negotiations. It's hard to know if this is accurate, but it's a fact that there are no similar rumours about the EU’s official Brexit negotiator, Michel Barnier, who's widely respected for having conducted the Brexit negotiations in a responsible manner.

EU Member states should really wonder whether Selmayr can be trusted to guide such a crucial issue as Brexit, given his history, which is anything but conciliatory. For example, he obstructed attempts to move non-eurozone member states more closely to the EU's core, suggesting they should either accept more EU-federalism or miss out on cooperation. He also pushed hard for a mandatory quota for EU countries to welcome asylum seekers, something which ended up increasing Euroscepticism in Central and Eastern Europe, hurting decades of efforts to bring them back into the West. In practice it also failed to relocate people within the passport-free Schengen area, but the Commission couldn’t resist using a crisis to try to expand EU powers.

In 2014, Selmayr helped to secure Juncker’s appointment, against all odds by pressuring German politicians like Angela Merkel to accept that the candidate that was nominated by the European Parliament’s biggest group – Juncker – had to be chosen by EU leaders as Commission President, even if he wasn’t even on the ballot in his native Luxembourg. This forced Merkel to break her promise to David Cameron not to appoint the 'EU federalist' Juncker, which contributed to the Brexit vote in 2016.

Selmayr was also one of the driving forces behind Juncker’s pledge in 2014 to turn the European Commission during his term into a 'political Commission'. With Brexit and a severe breakdown of relations with Central and Eastern Europe, it should be clear to everyone now that this was simply a bad idea.

Before that, Selmayr had worked in the cabinet of the ultra-EU-federalist Commissioner from Luxembourg, Viviane Reding, where he broke with EU single market orthodoxy to push through price regulation of mobile roaming fees, using it as a populist trick to promote the EU, even if it drove up prices for consumers that do not travel as much.

Fundamentally, regardless of his ideas, it's just not a good idea for a non-elected EU bureaucrat to play such an important political role.

It's obvious Selmayr is a would-be politician with very outspoken EU-federalist ideas, and opposes flexibility in the Brexit talks, which endangers the good ties almost all European politicians want to keep with the UK after Brexit. The Conservative MP Greg Hands has provided an insight into how Selmayr seems to see the Brexit negotiations as a 'zero-sum game', with winners and losers. In reality however, any restriction of trade access will of course hit both trading partners. Imagine if Angela Merkel were to claim that a few tens of thousand job losses in Germany were actually not all that bad, given the fact there is greater damage in Britain. Still, the idea that just because the damage of a no deal would be greater in Britain it is the EU that is holding all the cards holds sway within the EU institutions.

After all the controversy surrounding his appointment, which was unseen for any bureaucratic top job, you'd expect Selmayr to take a more cautious approach, but he didn't do that. On the contrary, the latest rumour is that he would now like to be the first EU ambassador to the UK.

Perhaps it’s an old fashioned thought, but diplomats should be diplomatic. It would be very irresponsible for the EU to appoint such a divisive figure to a position to shape the future relationship between the EU and the UK, which will be the EU’s biggest trading partner after Brexit. If Selmayr really likes politics so much, maybe he should simply stand for office.

Reportedly, while the EU’s institutions have offered an uncompromising position in public about renegotiating the withdrawal treaty, diplomats from some EU member states have already been discussing time limits on the 'backstop' as well as exit mechanisms. At a time when the UK is openly requesting renegotiation of the Brexit deal, the consequences of the European Commission inflicting a dose of inflexibility into the Brexit process could have huge consequences. If people like Selmayr believe that a no-deal Brexit and the chaos it would bring would benefit the EU project, then are badly mistaken. The European Commission tends to be blamed for all kinds of things it is innocent for. It can be sure to be blamed when it is guilty.

Monday, January 21, 2019

Renegotiation is the EU’s worst option except for all the others

Published on CapX 

Following Theresa May’s resounding failure to convince MPs of the merits of her Brexit deal, she has now opened up talks with other parties. It is yet to be seen whether Labour leader Jeremy Corbyn is willing to engage. As a precondition, he has requested that the option of no deal be taken off the table.

But, however loathed no deal may be by most MPs, taking it off the table is difficult without Theresa May surrendering her leverage in negotiations with the EU, especially now that France has put its “no deal” contingency plan in motion.
The bigger problem is that, if MPs can’t agree on any kind of Brexit, it is hard to stop no deal without stopping Brexit.
As Philip Hammond, Chancellor of the Exchequer, has explained, the proposed Commons “backstop” legislative bill to prevent a no-deal Brexit will “rescind the Article 50 notice” and “will meet the test that the European Court of Justice has laid down for unilateral recision of an Article 50 notice”.
EU officials have reportedly already discussed this as one of the options that could stop Brexit. Such a revocation of Article 50 cannot be temporary. The ECJ has stipulated that if the UK would unilaterally withdraw its request to leave, “the revocation . . . must be unequivocal and unconditional, that is to say that the purpose of that revocation is to confirm the EU membership of the member state.”
Political commentator Frances Coppola summed it up nicely when she wrote: “If [Corbyn] doesn’t accept this challenge, [May] implies, he is not acting in the national interest. But if he does accept it, his plans for electoral gain are in tatters”. She therefore thinks a “no deal” is the most likely outcome, due to the intransigence of both major parties in Westminster.
I don’t think a “no deal” at the end of March is likely at all. Perhaps it is possible in 2022, at the end of the – extended – transition, when the EU could refuse to engage with the UK to close a deal to safeguard trade. That would be a traumatic enough event, and the EU would be foolish to risk it, if only because of the importance of Britain as a security partner. But not this year. The immediate damage would be enormous, if only because of the uncertainty and the lack of preparation, both among governments and companies both in Britain and mainland Europe.
At Open Europe, we found that  the UK would cope relatively well with the loss of its current market access to the EU in the medium to long term, but as it would be imprecise, we didn’t calculate the immediate disruption, which is likely to be gigantic. Even those who disagree with me about the cost of the immediate disruption to supply chains, financial services and air travel, despite all the warnings from these industries, will surely agree that a deal whereby market access remains as open as today is to be preferred. In any case, a majority in the UK Parliament is against a “no deal”. It’s pretty much the only Brexit-related issue that a majority in Westminster can agree on.
As we have pointed out at Open Europe, Theresa May’s deal is full of flaws, but we’ve also highlighted how, despite those problems, it could be good stepping stone to a successful Brexit.
It may be the case that Theresa May’s plan is to ask MPs to vote on pretty much the same thing again and again, but we can’t be sure. It may also be the case that attempts to agree something much “softer” – but then also more unsustainable – with Labour succeed. Ultimately, however, there still is a chance of Theresa May – or another British Prime Minister — trying to renegotiate the deal with Brussels.
If that is the plan, what renegotiating options are available to the EU27?
The first is to make a – relatively safe  — bet that UK MPs will force the UK government to request an extension of EU membership, maybe for nine months, as suggested by Conservative MP Nick Boles.
The problem is that this would interfere with EU business. Some realise this. German liberal MP Konstantin Kuhle warned that an article 50 extension “may threaten to delegitimise the whole European Parliament and new Commission. The EU should not allow that chaos infects its own institutions”.
Indeed, imagine if the UK simply suggested to violate the EU Treaty and delegate MEPs from the Parliament in Westminster on 2 July, instead of holding a direct election to pick politicians to send to the European Parliament. Some MEPs elected in member states that have just secured an extra number of representatives would have to wait until Brexit before they’d be able to enter the Parliament.
Even if the “EP challenge” can be fudged, there is more. If it is still a member state, the UK would be able to exert influence over the selection of the successors of Jean-Claude Juncker and Council chairman Donald Tusk. At some point, the British would even gain a say on the EU’s long term budget. That’s a lot of leverage for the UK to use to shape the withdrawal agreement. Is this what the EU27 would want?
The EU27’s second option is to simply allow a “no deal” Brexit to unfold. But for all the talk of “no deal” preparation, we know that member states are not properly prepared for such an event, even if they may suffer less than the UK. Both in Belgium and the Netherlands, the government has been criticized for not managing to have enough customs staff ready to cope with a “no deal” Brexit at the end of March. The Irish government already admitted last Summer that it wasn’t going to manage to hire all the extra customs officials necessary for that. In Germany, political panic about the prospect for “no deal” is abound. Both German governing parties CDU and SPD, as well as the greens, have come out stating they’re open to extend UK membership.  The leader of German governing party SPD warned a “no deal” would cause “heavy turbulence for the whole EU and also for us in Germany” with also the farmers’ federation warning of the “chaos” it would cause.
Unsurprisingly, companies are not ready either. In Belgium, out of the 25,000 Belgian companies that are trading with the UK, four in five say they are not ready for “no deal”. German auto industry association VDA warned after the vote that “the consequences of a ‘no deal’ would be fatal” and “we strongly urge all relevant stakeholders to do everything possible in order to establish much needed certainty for our business and to maintain the truly frictionless trade on which our international production network is based.” I suppose this can be translated as the German car manufacturers urging also the EU-side to get their act together.
Given the shortcomings of the EU27’s first two options,the most preferable course of events for the EU is a renegotiation of the existing deal. It may even prove to be a lesson for it on in the need for major agreements to be acceptable to both sides. If it wants a sustainable deal that won’t be challenged, Brussels should stop wasting time hoping that Labour or some Tories agree to let tthe UK stay in the customs union or single market permanently. As strange as it would be for the world’s fifth biggest economy to permanently outsource its trade policy to the EU, it is also easy to predict that such a deal would come under fire from the moment the UK is asked to implement EU rules it dislikes without being able to vote on them.
And for fans of the EFTA-EEA option, “Norway” status means implementing legislation it isn’t able to vote on, simply because the so-called “right to reservation” that non-EU single market members have can be overruled.
In any case, there are signals coming from the EU that it is ready to consider renegotiation. Ahead of the vote, German Foreign Minister Heiko Maas said that “there could be further talks” in case of a rejection, not ruling out a renegotiation of the actual withdrawal agreement, instead saying he “doubts very much that the agreement can be fundamentally reopened”. That is a softening of language. His predecessor, Sigmar Gabriel, even wrote that “the EU should be ready to make more concessions to the UK and to allow more time for negotiations,” adding: “the British have withstood bigger crises and will overcome this economic crisis sooner or later. But it’s by no means assured that Europe will survive Britain’s departure.”
The Netherlands and other European countries are reportedly even willing to make further concessions on the “backstop”, however under the condition that Ireland supports them. This really makes clear that ultimately, given how the backstop is at the center of the concerns among those that Theresa May needs to convince, this is a negotiation between the UK and Ireland. And while it’s clear that the UK would be hit worse economically than the EU27 in case of no deal, that is by no means clear for Ireland.
The relationship between the Northern Irish DUP and Conservative Brexiteers is not dissimilar from that of Ireland to the EU: whatever the DUP agrees to on the backstop is likely to receive support from the European Research Group of Brexit-supporting Conservative backbenchers (with the exception of customs union membership).
Some in the DUP appear to be moving on the backstop. One of the party’s MPs, Jim Shannon, has said the party has “considered” supporting the Withdrawal Agreement if the backstop was time-limited, mentioning that “if the time-scale was one year, or perhaps even two, certainly within this term of government, I think we would certainly look at that as an option.”
As I have argued before, the EU27 could concede to meet the concerns of Brexiteers. Legally, according to the withdrawal agreement, the EU holds a veto over the UK leaving “backstop” status and recovering its trade powers, something French President Macron has reminded the UK about by threatening to use the right to keep it under the EU’s customs regime, as foreseen by the backstop, as ‘leverage’ to obtain concessions on fisheries.
In reality however, in a context where relations would have deteriorated so badly that it wouldn’t be possible to agree a trade arrangement, it is very unlikely that the UK would willingly continue to outsource its trade policy to the EU. In other words, the backstop is not the cast-iron insurance policy that it seems. An EU diplomat has also conceded this point.
Far from being fail-safe, the backstop even increases the risk of the damage it is designed to insure Ireland against. What could be a possible compromise then? “Kicking the can down the road” may also be the fudge needed here.
That could be done through an EU concession to make the backstop time-limited. This simply means that another cliff-edge will be agreed, adding to the existing cliff-edges of 29 March 2019, July 2020 (when it will be decided whether the UK will enter the extended stage of the transition) and January 2023 (when, short of an alternative deal, a lot of trade becomes illegal, as the UK enters backstop-status, thereby facing regulatory hurdles to the EU market while only being spared from customs hurdles).
Is one more cliff edge such a massive concession for the EU and Ireland? I would think not, especially as at any point during the “unlimited” backstop arrangement, the UK will have the ability to abandon the obligations of the withdrawal agreement, something it can always do with any international Treaty, by unilaterally pledging a date when it is willing to also give up the benefits of the arrangement, in case it would deem it impossible to safeguard a trade deal with the EU.
A time limit would not change the ultimate goal to replace the backstop with an alternative solution, which is likely to require concessions on all sides: from the UK – continued regulatory alignment between Northern Ireland and the Irish Republic, from Ireland – to tolerate certain loose customs checks on the border – and from the EU 26 – to tolerate the fact that just as elsewhere on the EU’s external customs border, there will be a trade-off between border protection and economic interests.
The only difference would be that fourth cliff edge, written in the agreement, possibly in 2026 or so. In any case it may take the UK until then before it has negotiated a whole range of international treaties with non-EU countries, so in terms of UK trade freedom this also isn’t the end of the world.
In terms of how realistic this is, it must be said that Ireland has been relatively flexible in recent months, supporting things like a “review clause”, and nothing indicates that Taoiseach Leo Vardakar, who has been standing up firmly against Irish hardliners, wouldn’t be aware of the importance of avoiding “no deal”.
In any case, even if a formal bilateral Treaty between Ireland and the UK, as some in the UK government seem to favour isn’t likely to happen, the renegotiation of the backstop is ultimately a negotiation between the UK and Ireland, which would face major damage in case of “no deal”.
To recap, the three options for the EU27 are now: extend UK membership, settle for no deal, or renegotiate.
By some margin, the most sensible option is some kind of renegotiation, perhaps with a clean extension until the beginning of July, just before the new European Parliament is installed. It is worth noting that, for all the EU’s reluctance to reopen negotiations, a no deal scenario involves talks to solve hundreds of issues in a very short period of time. So “no deal” will mean a lot more negotiation than renegotiation of the current deal
Renegotiation would basically entail the EU recognising that if indeed the EU and the UK fail to agree a trade deal, the UK ultimately has the right to abandon the obligations resulting from the withdrawal agreement, as with any other treaty.
That makes the backstop already implicitly time-limited under the current deal. If the Irish government allows this to be made explicit, we’re pretty certain to have a Brexit deal.