What we should be concerned about in the proposed Withdrawal Agreement

What we should be concerned about in the proposed Withdrawal Agreement

Over the weekend, the Brexit Secretary, Dominic Raab, gave great heart to Brexit-supporters by linking the payments the UK is agreeing to make in the Withdrawal Agreement with the EU/UK negotiations on trade. “Article 50 requires, as we negotiate the Withdrawal Agreement, that there’s a future framework for our new relationship going forward, so the two are linked,” he said, in terms designed to show to Brussels that the Government was standing up for itself.

But he said nothing new. He certainly did not make the inflammatory statement that, if we did not agree a trade deal, we would not pay any money. The absence of any angry reaction from Brussels to this ‘new’ stance is proof of that and shows that the statement was entirely for domestic consumption. Yet many Brexit-supporters found encouragement in the statement, including some MPs. Do they, and we, actually understand what negotiations we are engaged in and how their timing and sequencing are crucial to their outcome?

The Commission is focusing all its attention on getting the UK to sign the Withdrawal Agreement. It will be cast in the form of a bilateral treaty binding in international law. The negotiations are set to continue throughout the summer parliamentary recess with a view to agreement at a European Council meeting in October. The Government is just as keen to make progress: the No 10 EU negotiating team has been supplemented by the secondment of fifty civil servants from DExEU. All leave has been cancelled – except for MPs, who are welcome to stay away as long as they like.

But contrary to widespread belief, the Withdrawal Agreement will not settle the future trading relations between the UK and the EU. These will be negotiated in the “transition” or “implementation” period. (Although the period between March 2019 and December 2020 is described as an “implementation” or “transition” period, it is really a time for negotiation of our future trading relationship. Unless these negotiations are completed with unusual speed, there will be little opportunity for “implementation” or “transition” until close to December 2020). Signing the Withdrawal Agreement is the EU’s political price for opening those negotiations. In exchange for signing up, we will get, as the Secretary of State says, merely a “framework” that will set the direction for those talks and put some flesh on the bones of the future trading relationship. That “framework”, which the Chequers plan is an attempt to influence, will be non-binding and outside the Withdrawal Agreement treaty.

It is easy to understand why the EU is so keen to get the Withdrawal Agreement signed before we finalise trading relations. Signing it will close down several options that many Brexit-supporters would want left open.

According to last December’s European Council declaration, the Withdrawal Agreement has three elements:

  • it obliges the UK to make net payments estimated at £39 billion over a number of years
  • it deals with “citizens’ rights”
  • as contemplated, it will bind the UK in international law not to take steps that create a “hard border” on the island of Ireland; it will do this by establishing a binding commitment to a “backstop” that will be implemented by both sides unless they agree alternative arrangements for an invisible border, though in doing so it will remove any incentive for the EU to agree such an alternative.

The Withdrawal Agreement will also create a “transition” or “implementation” period during which the UK will effectively remain within the EU but without being a member-state or having any decision-making rights. This will run until December 2020.

The key issue that should concern Brexit-supporters is the “Ireland clause”. The provisions on citizens’ rights should be unobjectionable, provided they are reciprocal and don’t involve a continuing jurisdiction of the European Court of Justice (ECJ) within the UK.

But the money is also a huge problem, and not just because it is a huge amount of money. On this side of the Channel it is seen as a payment for a trade agreement of some sort. Mr Raab’s statement has been interpreted as confirming that. But this is not at all what is on offer. For the EU, it is an exit fee, a “settling of accounts”, not a down-payment for a future relationship. In fact no country, even Norway, despite common report, pays for access to the Single Market, though Norway does indeed make voluntary payments to several EU programmes.

Moreover, while the Withdrawal Agreement (and the associated non-binding “framework” on trade) need to be approved by the European Council using Qualified Majority Voting, the final trade agreement, some time later, will need unanimity. Having agreed irrevocably to pay the £39bn (give or take), we may find ourselves held hostage by a single state with an agenda. Spain and Gibraltar come to mind, but Ireland too becomes even more pivotal than now.

There is therefore no guarantee, however much the UK pays, that any deal will be signed or that it will be satisfactory to those keen to see Brexit delivered. The payment obligation will, however, increase pressure on British negotiators to secure some deal or other and not to “walk away”, since it will be very hard, especially after Mr Raab’s remarks, for a Government to say to the British people that they have paid a non-refundable “deposit” of £39 billion net and have even so secured no deal.

But if that is a political constraint on British negotiators’ room for manoeuvre, the “Ireland clause” imposes a serious legal constraint. This needs to be seen through the eyes of EU counterparts.

The Commission has repeatedly made clear that they can contemplate two structured models of continuing trading relations between the UK and the EU after Brexit (apart from “WTO terms”). One is a “third country” Free Trade Agreement (FTA) similar to that secured by Canada. Indeed, Donald Tusk indicated on 7th March 2018 that it could be even better than Canada’s, with 100% tariff-free and quota-free access and with services included as well. This, if agreed, would be the most comprehensive FTA ever signed by the EU.

The other option acceptable to the Commission is for the UK to remain in the Single Market, approximately like Norway, accepting all four “freedoms” and the jurisdiction of the ECJ (the EFTA Court is really just a glove-puppet of the ECJ).

Either of these options would easily be conformable to the European Union considered as a legal construct. The Chequers White Paper is an offer based on the Norway model, with some cherry-picking and fancy language. There is universal agreement that it will not be acceptable to the EU unless amended to be much closer to the existing Norway model.

Brexit-supporters would probably prefer the very different model of a “third country” FTA. But Tusk’s offer of a generous FTA comes with a condition: it can only apply to Great Britain – Northern Ireland would remain effectively a part of the EU Single Market and Customs Union, insofar as that was required to avoid a “hard border” on the island of Ireland. The Single Market would be “defended” by an economic border in the Irish Sea.

No Brexit supporters (and few Remain supporters) are willing to accept this economic dismemberment of the Union. Indeed it may be said that the recent amendment to the Trade Bill promoted by the European Research Group would make it illegal. But that amendment does not prevent the Government signing the “Ireland clause” in the Withdrawal Agreement. It merely removes the option of an FTA between Great Britain and the EU, making a Norway-style Association Agreement the only option on offer from the EU that Mrs May can legally accept. (Indeed, the “Ireland clause”, if signed, would also remove the possibility of an FTA between the UK and any other country, at least without the prior approval of the EU that an acceptable method of “defending” the Single Market had been found that allowed Northern Ireland to be economically part of the UK. With the “Ireland clause” in place, the Government could only offer other countries an FTA with Great Britain. It is also argued by some that the “Ireland clause” would be a potential barrier to the UK’s resuming its seat at the World Trade Organisation, since the UK, though a state, would not be a trading unit – only Great Britain would be that). The “Ireland clause” also means that, once the Withdrawal Agreement is ratified, we could not legally revert to “WTO terms” as a United Kingdom, since we would still be bound by the “backstop”.

And closing down the possibility of a “third country” FTA seems the Government’s intention as well. In her speech in Belfast on 20th July, Theresa May went out of her way to pour cold water on the feasibility of any “technological” solution to the Irish question, making her drive for regulatory alignment the only option open to her. This was reckless and unnecessary. Her Brexit really is now “my way or the highway”.

This is why it is vital that those who support a vision of future trading relations based on an FTA between the EU and the UK as a whole (and indeed those who would be happy with “WTO terms”) work to ensure that the Government does not sign a Withdrawal Agreement that includes the “Ireland clause” as currently contemplated: it would make both an FTA and “WTO terms” legally impossible for the UK as a whole. It is also of course why the EU is so thoroughly focused on getting it signed. The trap only closes when it is.

Some Brexit supporters make the honourable argument that the way ahead is to achieve legal exit from the EU (which we shall do, unless prevented by upsets, on 29th March 2019) and then to “fix” everything that needs fixing later. This argument can only be robust if we do not sign the binding Withdrawal Agreement before we leave, as long as it contains the contemplated “Ireland clause”. They cannot mean that they would simply renege on a treaty binding in international law, so they need to explain how their approach would work given the sequencing agreed for the various stages of the negotiations.

The Withdrawal Agreement and its accompanying “framework” on trade negotiations cannot be ratified by the Government without approval by both Houses of Parliament. That is the “meaningful vote” passed into law by Remainers against the wishes of the Government. It will now be very useful to Brexit supporters, but if the arguments are not made now, it may be politically too late to stop an unacceptable deal by the time it comes to Parliament.

For Brexit supporters, a better route would be to seek to accept the generous FTA offered by Mr Tusk, while insisting that it cover the whole UK and asking that the resolution of the Irish border issues be removed from the Withdrawal Agreement (except in terms of a declaration of shared intent) and remitted to a separate strand of the talks, perhaps involving bilateral discussions between the United Kingdom and the Republic of Ireland and their technical experts. There is a border on the island of Ireland today and it is collaboratively policed to prevent the smuggling of various goods, such as diesel and illicit drugs. Given the very small volume (by value) of goods that cross the border compared to total EU trade, it should be possible to build on existing co-operation and electronic reporting to resolve all issues in a way that defends the EU Single Market while allowing the land border to remain invisible.

Resiling from the “Ireland clause” as currently contemplated would look like the Government was going back on last December’s agreement (although it was not binding: “nothing is agreed until everything is agreed” remains the mantra, though it applies only to the Withdrawal Agreement, not to the trade talks that will follow). It would of course be a huge ask for the EU to swallow. But it need not be like that. If the commitment were amended to “best endeavours” and the EU were persuaded to look again at a technological solution that achieved the shared objective of an “invisible” border that nonetheless sufficiently protected their Single Market interests, that could be presented as a considerable negotiation success for both parties keen to step back from a “disorderly” Brexit. It would allow the option of a “third country” FTA for the whole UK to be back on the table and it would keep open the option of trading on “WTO terms” if the trade talks failed.

If we sign the Withdrawal Agreement as planned, our options in the ensuing trade talks will have reduced to permanent regulatory alignment or abandoning Northern Ireland to the Single Market. The eagerness of EU negotiators to get the Withdrawal Agreement signed is very plain to understand. It needs to be stopped. Either the Government needs to back up and take a new approach or Parliament will have no choice but to use its “meaningful vote” to reject the Withdrawal Agreement. It will be a hot summer and Brexit-supporting MPs who take a break may find things look very different on their return.