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The Withdrawal Agreement – It Is Not Over Yet

  • United Kingdom
  • Brexit
  • Competition, EU and Trade

14-11-2018

Today, the Cabinet met to consider the deal concluded between the Commission negotiators and the UK negotiators agreed on 13 November 2018.

The first question is whether Cabinet approval will be given and, at the time of writing, it appears likely that the meeting will continue into the evening.

What do we know about the deal?

95 per cent of the content of the Withdrawal Agreement is already known. The rights of EU citizens presently living and working in the UK will be protected and similarly those rights of UK citizens living and working in the EU. The financial settlement of approximately £39 billion is also known. The terms of the proposed transitional arrangement to the 31 December 2020 means that there will be almost no change in the UK’s relationship with the EU until that date. The UK will remain in the Single Market and the EU Customs Union, and there will continue to be free movement of people between the UK and the EU. All existing EU regulatory, budgetary, supervisory, judiciary and enforcement instruments and structures will continue to apply in the UK. The Court of Justice of the EU (“CJEU”) will, until 31 December 2020, still be the ultimate arbitrator on all EU laws including all new EU laws which will come into force in the UK before 31 December 2020. The key change is that in the course of making those new EU laws, the UK will no longer be represented. There will be no Commissioner appointed by the UK, no UK membership of the European Council, no UK MEPs and no UK judges on the CJEU.

What about the border between Northern Ireland and the Republic of Ireland?

The key objective has been to avoid any physical infrastructure on that border and section 55 of the Taxation (Cross-border Trade) Act 2018 includes a legally binding requirement that there can be no hard border. The key challenge has been how to implement this obligation without separating Northern Ireland in terms of its treatment post-Brexit from the rest of the UK and whilst ensuring the continuation of frictionless trade even after the end of the transitional period.

The DUP upon whose votes the Government depends under the Confidence and Supply Agreement has been adamantly opposed to:

1) any different treatment of Northern Ireland vis à vis the rest of the UK; and

2) any solution to the hard border which could potentially drive Northern Ireland into the arms of the Republic of Ireland without a democratic vote with Northern Ireland.

The key stumbling block has been the “backstop”. This is the arrangement that could come into operation in the event that, by the end of the transitional period, no alternative arrangement to avoid a frictionless border has been achieved. Reports say that the solution found is to leave the whole of the UK in the Customs Union.

Allowing the UK to remain in the Customs Union clearly poses risks to the Single Market as far as the EU is concerned. It also crosses one of the Government’s red lines in the negotiations which was to leave the Customs Union. The function of the border is not just for the imposition of tariffs, it is also to ensure regulatory uniformity across the Single Market and to ensure that adequate sanitary and security checks are in place as goods cross borders between the EU and non-EU countries. A backstop which involves the UK remaining in the Customs Union will inevitably entail regulatory alignment. The question we cannot answer until we can see the full text of the draft Withdrawal Agreement is what the Government has had to agree to in the shape of that regulatory alignment and whether more has had to be conceded in relation to regulatory alignment in Northern Ireland over and above that which will be required in the rest of the UK.

Our last observation is in relation to timing. If the draft deal is endorsed by Cabinet, the next hurdle is to obtain a simple majority of MPs to pass a resolution endorsing it. From the Prime Minister’s response to questions in the House today, it would appear that MPs will be able to make amendments to the resolution, raising the possibility of a conditional approval for the deal subject to the renegotiation with the EU of certain issues.

The continued presence of the UK in the Customs Union beyond the end of the transitional period is unacceptable to Brexiteers. The DUP at the time of writing have made it clear that they are unhappy with what appears to be “different treatment” for Northern Ireland than for the rest of the UK in certain respects. The timetable is already very tight, with the last possible date for an agreement being almost certainly the final European Council meeting this year on 13-14 December allowing very little time for any further negotiation. The transitional period will only come into effect if the Withdrawal Agreement is approved by both sides. The alternative will be a hard Brexit with no transitional period from 30 March 2019 onwards.

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