Financial Times

Mission Impossible at Chequers

by James Blitz, FT

February 21, 2018 | 5:03 pm
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Theresa May will convene leading cabinet ministers at Chequers on Thursday for another “crunch” meeting on Brexit. And once again there is much speculation over whether soft and hard Brexiters round the cabinet table can possibly be reconciled.

David Davis, Brexit secretary, said this week that ministers will have to be “locked in a room all day” to get a decision on what the end-state of the UK-EU relationship should be. Boris Johnson is reported to have told German officials recently that the UK’s Brexit strategy is still “a mess”.

Despite the hype, we already know the Brexit solution that the prime minister is heading for. This is to have a trade relationship that goes under the name “managed divergence”.

Under this approach, economic activity between the UK and EU would be divided into three baskets: complete alignment, where the UK would follow EU rules; “managed mutual recognition”, where both would agree to common objectives but each would choose its own rules; and a third basket where the UK can abandon EU regulations and do whatever it wants.

The beauty of this approach is that it unites the cabinet. Soft Brexiters like chancellor Philip Hammond will point to all the areas (notably manufacturing) where the UK can be fully aligned with the EU and can protect the UK economy; hard Brexiters like Mr Johnson will point to the sectors (mainly in services) where Britain can choose its own rules.

Everyone will be happy.

There is just one problem. This plan is almost certain to be shot down by the EU27, which refuses to allow the UK to cherry-pick those bits of the single market that it wants to remain part of while walking away from the rest.

As Jill Rutter of the Institute for Government remarks in a blog post: “The danger is that, in the protracted battle to find something that will unite the cabinet, we have forgotten that the real negotiation is with the EU27.”

If that is the case, then why is the May team pursuing such a flawed approach? Answer: they think that, despite initial resistance from Michel Barnier and the commission, the UK can gradually win over EU capitals.

Charles Grant, head of the Centre for European Reform, highlights this thinking in a piece for Politico. He notes that the 27 are more divided on the future relationship than they were on the first phase of the Brexit talks.

He says that some governments are uncomfortable with the hard line taken by the Germans, the French and the commission and point out that the UK’s trade with the EU is eight times that of Canada’s and that Britain and the EU will want a much closer relationship in areas like security, foreign policy and research. “This camp includes Sweden, the Netherlands, Denmark, Ireland, Portugal, Italy, Croatia, Hungary, Poland and possibly Spain.”

Even so, winning over these EU states will be far from easy and Mrs May will have to make painful concessions in the next few months if “managed divergence” is to make any headway.

Mr Grant argues that Mrs May will have to swallow rigorous dispute resolution mechanisms; she will need to be flexible on her “red lines”, such as accepting ECJ authority in some areas; she will have to propose an immigration system that gives Europeans a smoother entry to the UK than non-EU nationals; and she would have to offer money for particular EU projects.

That is a big list. It is hard to see how Mrs May can make those concessions without provoking a backlash from hard Brexiters in her own party. Indeed, the letter to the prime minister signed by more than 60 hard Brexit Tory MPs (and leaked on the eve of the Chequers summit) drives home the demand that Britain must retain “full regulatory autonomy” after Brexit.

Mrs May is about to declare what the end-state should be. Twenty months after the referendum, we will finally have a tangible plan to look at. But it takes a considerable leap of faith to believe that “managed divergence” will divert Brexit Britain from its natural destiny, which is to be the EU’s Canada.
Critics of the UK’s vision of a “smart border” between the Irish Republic and Northern Ireland include the Irish tax office, which said in a paper that it is not clear that a number-plate recognition system could be installed in time and that a “physical customs presence would still be required to engage with legitimate traders and to meet a range of EU obligations”. According to the Irish revenue service, almost 40,000 vehicles a day crossed the border into Ireland in 2016 on 12 national roads.

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by James Blitz, FT

February 21, 2018 | 5:03 pm
12893  |   93   |   0  |   Start Conversation

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