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BREXIT: The Terrible Deal?

November 23, 2018

 

Introduction

After more than 18 months of dialogue and negotiations between the European Union and the United Kingdom, Prime Minister Theresa May has finally cleared the first hurdle as the cabinet backed the 585-page Brexit blueprint. The ‘Withdrawal Agreement’ provides a glimpse of what the future holds for the UK if the deal goes through. It attempts to solve key issues around the exit, ranging from citizens’ rights and external tariffs to the Northern Ireland border.

 

While May has defended the deal amidst a series of resignations of senior ministers, we will have a look at how the draft agreement fares in comparison to the promises made to the public by the Conservative Party to “take back control of our borders, laws, and money.”

 

Divorce Payments

The UK has agreed to a divorce settlement of approximately £39 billion to honor existing commitments along with £14 billion to cover outstanding loan payments. However, this bill only covers payments till the end of the transition period in December 2020. An extension of the transition period could lead to even further payments to the EU. A simple extension of the transition would require contributions of upto £13 billion a year.

 

External Tariffs

While a customs partnership which allows the UK to set its own tariffs was promised, the deal provides for a Single Customs Territory, with UK still bound to tariffs set by the Union. Sharing this tariff leaves the UK trade policy closely integrated and dependent on the EU. UK will continue to be covered by the EU’s defence strategies against external states dumping goods and harming domestic production. The Single Customs Territory will remain in place indefinitely if a new trade agreement is not reached before the end of the transition period.

 

Immigration

As both sides have indicated, the agreement to protect the rights of UK and EU citizens on both sides of the Channel will be implemented on a reciprocal basis. EU nationals who have lived in the UK continually for 5 years, and Brits who have lived in EU countries, will have the right to stay permanently in the UK, along with their family and will enjoy equal treatment with the nationals.

 

However, the host state will not be required to provide entitlement to social assistance in certain areas, and will not be required to grant student loans or other loans to people who do not have permanent residence. This deal means the end of free movement of labour.

 

Northern Ireland

May has agreed to a “backstop” clause which would allow for Northern Ireland to remain in the Customs Union, applying the EU single market rules for goods. UK will not follow the single market rules which may lead to friction as well as the need for customs infrastructure between Northern Ireland and Great Britain. While this backstop clause is only intended to apply in the absence of an alternative agreement, it is stated to remain in place unless and until it is superseded by a subsequent agreement. Thus, three options will exist by the end of the transition period- either prepare an alternative deal, extend the transition period (with further payments by the UK) or trigger the Irish backstop.

 

The agreement also states that the UK can only ‘notify’ the EU if it believes that the backstop is not necessary anymore, but cannot unilaterally pull out. The agreement has not just postponed the fate of the Irish border, but has also reduced Great Britain’s say in the entire arrangement.

 

European Court of Justice

Another promise made by the PM was to end the rule of the ECJ in the UK, with laws now being drawn up “not in Luxembourg but in courts across the country.” Instead, the deal presents an innovative legal model based on its Association Agreement with Ukraine. The model states that neither the UK’s Supreme Court nor the ECJ have the final say in legal disputes over interpretation of the agreement. All such disputes must be settled by an independent arbitration panel. However, disputes over EU law must be referred to the ECJ.

 

Fishing

While Brits were promised an independent coastal state after Brexit, with complete control over fisheries management and access to waters, May agreed to UK remaining in the Common Fisheries policy during the transition period.

 

During the transition period, UK cannot directly influence policy, but will be allowed to attend consultations and negotiations.

 

Party Responses

While the PM has been able to acquire the cabinet’s approval, there is still a long way to go before this bill can be passed by both the EU and the House of Commons. The bill has already been subject to a lot of opposition with concerns that it leaves too much power with Brussels and will create friction at the Irish border.

 

 

In addition to former Brexit minister Dominic Raab and former pensions minister Esther McVey, two junior ministers also quit. Pro-Brexit Conservative MPs have also warned that this deal will not win the approval of the parliament. Furthermore, May faces the threat of a no confidence vote, with anti-EU Conservatives submitting no-confidence letters against the Prime Minister. MPs from the Democratic Unionist Party (DUP), a Northern Irish party that props up May’s minority government has also expressed strong opposition over the proposed deal.

 

Amidst the slew of ministerial resignations and revolts within her own party, May has vowed to fight for the terms of her draft divorce deal, insisting that her agreement is the only way to avoid a no-deal Brexit. She has continued to reiterate that rejection of her Brexit deal would put the country on a path of deep and grave uncertainty.

 

  

No deal scenario

Majority of the support for May’s deal comes from the threat that a no-deal Brexit will be much worse for Great Britain’s future. The European Union is adamant that there is no such thing as a managed no-deal. If the divorce deal falls through, then either side will be forced to take its own unilateral contingency measures. The EU has already published a no-deal planning document which sets out unilateral measures to protect the Union from a complete fallout.

 

However, UK experts do not believe that a managed no-deal is completely off the table, with speculation about an extension to Article 50 to act as a parachute to place temporary measures. It is safe to assume that EU member states will strike bilateral side-deals with the UK to cushion the blow in case of a fallout.

 

While the reality of a no-deal Brexit would certainly be disruptive, it is unlikely that it will be catastrophic for either side. With both parties keen on minimizing disruption in the event the deal doesn’t fly and enforcing unilateral protection strategies to ensure minimal damage to trade, finance, as well as citizens’ rights, a managed no-deal could still emerge if the UK plays its cards right.

 

Uncertain Future

Brussels and London are ready to unite behind the draft Withdrawal Agreement, with their interests temporarily aligned in painting a no-deal scenario as the worst possible outcome. However, if a no-deal becomes unavoidable, the interests of both sides will continue to align in avoiding a catastrophic outcome by placing protectionist policies.

 

While London strives to gain majority approval for the divorce deal, the temporary measures put in place still leave the fundamental question unanswered, as to what future relationship Britain and the Union want, and how this can be squared to avoid a hard border in Northern Ireland.

 

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About the Author

 Abhay Gupta is currently pursuing his Bachelor's in Commerce from Hansraj College, Delhi University. He is an avid reader and is usually found in debate rooms over the weekend. Apart from debating, he has a keen interest in music and cinema. He is very passionate about animal rights and works with organisations to rescue indie dogs.

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