Brexit backstopped

UK headed for more turmoil and uncertainty

The draft Brexit deal that the British cabinet rubber-stamped on Wednesday has served to underline like never before that leaving the European Union (EU) would be a more challenging proposition for the United Kingdom (UK) than Brexiteers bargained for. With Prime Minister Theresa May facing challenges within her party and the deal clearly unlikely to pass Parliament, the UK appears to be headed for more political turmoil and uncertainty. Corporations would be wise to strengthen their contingency plans and explore alternative supply chain networks. The fundamental weakness of the current draft agreement was best exemplified by the exits, among the serial resignations today, of the minister for Northern Ireland, Shailesh Vara, and within hours Brexit secretary Dominic Raab, the second incumbent to resign from that post. The principal sticking points in the draft agreement are “backstop” arrangements that supposedly seek solutions to the “hard border” issue between the Republic of Ireland and Northern Ireland. 

Under the agreement, there will be no hard border because the UK and the EU will be in a customs union until such time as a final agreement is in place. The reason both government and opposition MPs are uncomfortable with these “backstop” arrangements is that they are open-ended in terms of a timeline, impose on the country EU laws and regulations and will require a significant pay-out by the UK. These latter requirements contradict the raison d’être of the Brexiteers that exiting Europe was essential to “take back control” of their laws, international treaties and budgets. For the Remainers, the misgivings centre on the fact that the arrangement leaves the UK in a weaker position since, as an exiter, it will not be in a position to negotiate those laws and regulations under the backstop. In a spirited three-hour defence of the draft withdrawal agreement and subsequent press conference, Ms May candidly explained that the backstop arrangements were the starting point required by the EU negotiators. The arrangement, which she described an “insurance policy”, could end once a final partnership is in place (for which the deadline is 2020), she said, and there was a mechanism for opting out of the backstop by mutual consent. Given the hard bargain that the EU can be expected to drive in the months ahead, most MPs are understandably sceptical of its temporary and supposedly benign nature. 

Their reservations were best expressed in the resignation letter Mr Raab sent to Ms May on Thursday morning, “The terms of the backstop amount to a hybrid of the EU customs union and single market obligations. No democratic nation has ever signed up to be bound by such an extensive regime, imposed externally without any democratic control over the laws to be applied, nor the ability to decide to exit the arrangement.” 

In Brussels, which is readying for a November 25 emergency session to finalise the terms of withdrawal, it is no coincidence that most EU member-countries have expressed approval of this draft. In the days ahead, much depends on how far Ms May can convince her own party, Parliament and the British people that this is not a perfect deal but the best deal to be had in the circumstances, balancing the UK’s interests with the EU’s demands. Back in September, she had said: “No deal is better than a bad deal.” Judging from the reactions in Parliament and with the March 29, 2019 deadline rapidly approaching, the UK appears to be facing a Hobson’s choice.