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21 SEP 2018

TO BE OR NOT TO BE...

Julian Francis on what the Prime Minister's "humiliation" at Salzburg really means

T

he room was all set, all the guest had arrived, and the press had been primed for a breakthrough of solidarity and statesmanship but the European summit at Salzburg turned out to be a nightmare for the PM. The hoped-for polite reception turned into a firm, embarrassing rebuff. But it's more politically charged then that because the expected platitudes that tend to flow from a European summit were meant to be an insurance policy for the Prime Minister to protect her from increasingly vitriolic attacks at home and set her up for her Party Conference in Birmingham.

Instead Theresa May is facing her Party next week with her Chequers plan looking increasing thread bare. The EU regards the proposal to use a customs arrangement to avoid a hard border in Ireland as complex and unworkable. It believes that allowing Britain to stay in the single market for goods but not services would undermine the market’s integrity. Its mantra is that Britain can have a Canada-style free-trade deal or full membership of the single market with full obligations like Norway—but nothing in between much to the joy of the Brexiteers in her Party. Its hope is that, with time running out, its bullheadedness will push Mrs May into making more concessions, even to the extent of accepting free movement of people.

There is some validity in this point of view. For Theresa May the backstop is a slowly closing trap, crushing her hopes of a Brexit deal between hard Brexiter opposition to staying in a customs union and DUP resistance to a special deal for Northern Ireland. Her survival strategy will involve pressuring Varadkar to drop the idea of a comprehensive, “all-weather” border backstop as the price of a Brexit deal, briefing sympathetic journalists, and ramping up the diplomatic pressure. What many UK politicians don’t understand is that Varadkar, like May, is politically boxed in. He has everything to lose by accepting less than Britain’s December commitments to no hard border, which he described as “bulletproof”.

Those who think that May will escape the trap by facing down the DUP need to look at her strategy. She has gone out of her way – most recently in New York this week– to condemn the EU’s backstop solution for Northern Ireland as an attack on the constitutional integrity of the UK. She is using this “threat to the union” argument to drag her party towards an “unpalatable, but at worst temporary” form of customs union.

We are reaching the limits of compromise, however. This is all the more frustrating because London and Dublin no longer seriously disputes the “how” or “what” of a border solution; the UK white paper recognises that the answer will be a version of the EU’s protocol that keeps Northern Ireland in the customs union and much of the single market rules. But May now has to ask Varadkar to take the political risk on where and when a backstop applies. If the trade bill becomes law, she can only offer a Northern Ireland regulatory backstop, covering the rules that account for around 70% of cross-border checks. The remaining 30% of essential checks could only be removed, legally, through a customs deal for the UK as a whole.

The realities of the political impossibility of treating Northern Ireland as a separate entry to the UK combined with the Salzburg rebuff has led to the Prime Minister adopting a more defiant, confrontational tone accusing the EU of not showing the UK the respect it deserves. This has the double advantage of shoring up her support in her party and the country while also sending a message to the EU that she has reached the limits of what is possible for her to deliver.

Individual EU leaders are beginning to recognise the danger that Europe face from pushing the UK towards a ‘no-deal’ scenario. Dutch Prime Minister Mark Rutte sees Brexit as one of the biggest threats to the economic prosperity of the Netherlands, Algemeen Dagblad says. "Brexit will have consequences for the Netherlands no matter what" and "everything must be done" to prevent a no-deal Brexit, it quotes him as saying.

“Brexit is threatening our exports, our jobs, and our wallets," De Telegraaf quotes Dutch Finance Minister Wopke Hoekstra as saying. Mr Hoekstra lists Brexit as one of the risks to Dutch economic growth, alongside geopolitical instability and trade conflicts, the daily notes.

Belgium's De Standaard quotes Economy Minister Kris Peeters as saying that a no-deal hard Brexit "remains a very realistic option for now". The paper notes that much is at stake for Belgium since 10% of its exports go to the UK, accounting for 40,000 dependent jobs.

While in Slovakia, Foreign Ministry Undersecretary Frantisek Ruzicka says a hard Brexit would have a "direct impact on Slovak citizens living in the UK, trade, and services", Teraz.sk website reports.

Chequers is certainly not a perfect document nor does it satisfy all sides but it does have the potential to establish a new relationship that both sides could build on. Mrs May’s plan represents a big shift by the government towards accepting the EU’s principal demand—that a post-Brexit Britain should abide by most single-market rules, including, in effect, the jurisdiction of the European Court of Justice. It offers a way to avert a border between Northern Ireland and the Irish republic that a Canada-type agreement on its own does not. And the promise to maintain a level playing-field for competition answers one of Brussels’s biggest fears, of a race to the bottom in standards.

Though including services would be beneficial, membership of the single market for goods alone is hardly heresy. Most free-trade deals cover goods, not services. Moreover, Switzerland and the Channel Islands are in effect members of the EU’s single market for goods alone. Brussels may hate these precedents, but it cannot deny their existence.

As for free movement of people, there is no economic logic arguing that this is needed for a single market. In practice several countries restrict it. The Swiss offer jobs to their nationals first. The Belgians deports migrants who cannot find work. Liechtenstein has quotas for how many EU nationals it admits. There should be scope for compromise, the more so since the numbers coming to Britain from the EU have fallen sharply.

The danger for both the UK and EU lies in the fact that both have an overriding incentive to try to find a deal and both believe that a consensus can be found. But what Salzburg has laid bare is the delusion that lies at the heart of these talks. Both sides are talking but failing to understand the other side’s position as they are trapped in a strait jacket of their own ideology. Sadly, talks where no-one is really listening are the beginnings of all the great political tragedies.  

Read ACE's member-only Brexit Briefings.

Julian Francis

Julian Francis

Director of Policy and External Affairs

Julian leads the creation of policy and government engagement strategy at ACE.

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