Brexit - Onwards to Phase II
The political agreement which was achieved between the European Union and the United Kingdom last Friday was critically important in the context of moving the Brexit talks forward. Had a deal not been struck, we would have drifted into the New Year with no clarity whatsoever, and the discussions on a transitional deal postponed yet again. This would have been dire news for Ireland, more than any member state, since our businesses which export to the UK desperately need the discussions on trade to begin as soon as possible.
The agreement seemed in doubt last week, after Theresa May was forced to back out of a deal which had been negotiated by her own officials, because the Democratic Unionist Party threatened to withdraw support for her government. This was a monumental embarrassment for the Prime Minister and once again demonstrated just how weak she it. Her capacity to deliver any deal seemed in doubt.
Since then intensive engagement occurred with the DUP to assuage their concerns and find a wording which is acceptable to all sides. Like all political compromises, the wording in the agreement can be interpreted in several ways and allows all sides claim a victory. In Ireland we are rightly celebrating the fact that the agreement includes a commitment to avoid a hard border on the island and to retain ‘regulatory alignment’ north and south of the border. This basically means maintaining the same rules and regulations which would allow goods to flow in both directions without the need for customs checks.
The Brussels negotiators have also been selling this agreement on the border as a huge achievement and have indicated that this all means that that a ‘soft Brexit’ is now far more likely.
In London, however, the cause for celebration and indeed the binding nature of the entire agreement have been called into question in just a few days. In her speech to the House of Commons on Monday, the Prime Minister seemed to suggest that the greatest achievement so far has been sticking to her guns on her plan to leave the EU Single Market and Customs Union. Again and again she pointed to this, yet few MPs highlighted the very obvious contradiction of this position with the idea of ‘no hard border’. It seems this contradiction can be glossed over for now, but there is no doubt that this issue will raise its head again as the months go on.
As Theresa May herself keeps saying – “Nothing is agreed until everything is agreed”. This mantra is also being relied upon by the DUP, their clear understanding (and the deliberate impression they are being given by the PM and her Tory colleagues) being that this agreement is far from final and that the border issue may very well be re-opened should the UK end up failing to negotiate a smooth Brexit.
The Brexit Secretary, David Davis, has also suggested in recent days that the agreement between the EU and the UK is not legally binding. This is clearly true, as it is a political rather than a treaty agreement. However, the lack of subtlety and judgement displayed by the Brexit Secretary in opening up this can of worms is very worrying indeed. The capacity of the EU (and the Irish Government as part of that equation) to negotiate with the UK in good faith is seriously undermined by this type of rhetoric from the UK’s Chief Negotiator. It is a very worrying sign as we move towards the more sensitive part of the negotiations, the trade dimension.
Given the back peddling and all of the games being played in London, one might legitimately wonder whether the EU, or the Irish Government, should agree at all to move on to the next phase at Friday’s EU Summit. However, at this stage it would be madness to stall any longer. The Agreement on phase one was always going to be something of a fudge. From the Irish Government’s point of view, the text is as good as it can possibly be, and there is nothing that anyone can do to prevent collapse of the talks in the future. At present, the imperative is to get onto the next phase as soon as is possible.
The next phase is supposed to deal with the future trade relationship between the EU and the UK. These discussions are likely to determine whether entire industries in Ireland will be wiped out or not, so the stakes are very high indeed. However, the complexity and sensitivity of the negotiations means that they are likely to take many years to conclude. The legal position also demands that no formal trade talks can begin until the UK has left the EU on March 29th 2019 and officially becomes a ‘Third Country’.
So the negotiations from January to October are really going to focus on agreeing the terms and details of a ‘transition period’ after the UK leaves the EU, or an ‘implementation period’ as Theresa May insists on calling it. This is of vital importance to both the UK and to Ireland.
A transition period will most likely mean that once the UK leaves the institutions of the EU, it will continue for a period of time as a member of the Single Market and the Customs Union. This is crucial from a trade point of view, as it will enable business to continue between the UK and the EU in precisely the same way as it currently does, without tariffs or border checks.
The UK has asked for a transition of two years. In reality it will probably last much longer, while a new trade deal is being hammered out. The difficulty for the UK is that it will no longer be represented in the EU Institutions and so will have no say over decision making which may ultimately affect the UK. At some point politicians and the public will surely consider this to be a bizarre and very weak position to be in, but unfortunately that realisation is likely to dawn too late.
From Ireland’s point of view, the transition deal is essential, irrespective of what comes after it. That is why it is on our interests to wholeheartedly support an agreement at the EU Summit later this week. We are more exposed to Brexit than any other EU country. Jobs and economic growth in Ireland rely on a good outcome from the negotiations in the next number of months. We have no choice but to press on.