The UK Negotiating Cards are on the Table: Deal or No Deal?

October 2, 2019

British Prime Minister Boris Johnson has been clear: the United Kingdom will leave the European Union on October 31. However, he would prefer a deal to avoid the massive costs and disruption of a no-deal Brexit. Can he get such a deal before the end of October? The UK government has just formally submitted a seven-page document with a new plan for the European Union to consider. 
 
European Union goals have also always been clear: to protect the integrity of both the European Single Market and the Good Friday Agreement, which remains the basis for peace in Northern Ireland.
 
As we have described previously, the biggest challenge in Brexit negotiations remains the border between the Republic of Ireland and Northern Ireland after the United Kingdom leaves the European Union, and the insurance plan (backstop) to ensure a frictionless border, which underpins the Good Friday Agreement. 
 
The UK government’s offer (referred to as “two borders for four years”) seeks to:

• Separate customs (external tariffs on imports) from regulations (the common standards for goods and services that are the basis for the European Single Market).
  • For customs, Northern Ireland would leave the European customs zone along with the rest of the United Kingdom in 2021—assuming a two-year transition period. A future EU-UK free trade agreement could remove customs checks on the island of Ireland. 
  • For regulations, Northern Ireland would remain aligned to EU standards only on agricultural and manufactured goods and incorporate any future changes to those standards. Northern Ireland would also remain outside EU arrangements on value added tax (VAT, the common sales tax arrangement in place throughout the European Union). 

• Avoid building infrastructure on the border between Northern Ireland and Ireland by placing this infrastructure several miles away from the border until at least 2025, and possibly beyond then, depending on the decision of the Northern Ireland executive and assembly.
  • In 2025, Northern Ireland would vote on whether to stay within EU rules or switch to Britain’s standards, thus making the backstop ‘democratic’ in Johnson’s view. It is important to note that there has been no functioning executive in Northern Ireland for two and a half years. 
  • The deal creates in effect a land border in Ireland and a border in the Irish Sea for goods between the United Kingdom and the European Union, which would have to be approved by Northern Ireland.

Will EU leaders agree to the United Kingdom’s new deal? It is highly unlikely, for several reasons.
 
First, the UK offer establishes check posts near the Irish border, which contravenes both the letter and spirit of the Good Friday Agreement (and obliges Ireland to set up its own check points). The UK demand that Northern Ireland remain outside the European Union’s VAT undermines the single market, which will impact other EU members. 
 
Second, it would set a new precedent for the EU by dramatically altering the bloc’s single market to accommodate a member that wished to depart and pressuring Ireland to accept a border arrangement it does not want. Would other EU members be subject to similar treatment as Ireland? Although a no-deal Brexit would also mean the European Union was required to establish border checks, they would be doing so involuntarily, and blame for breaching the Good Friday Agreement would fall squarely on Britain.
 
Third, even in the remote chance that the European Union agreed to this new formulation, it is unlikely that this deal would receive a majority of votes in the UK House of Commons. The parliamentary math is just not there. After the painstaking two-year negotiation that led to Theresa May’s Withdrawal Agreement only to see it rejected by the largest majority ever recorded against a government motion in the United Kingdom, European leaders will not make important concessions again, only to have their effort wasted and precedents broken.
 
Fourth, the two-year time schedule foreseen in the UK plan is extremely optimistic to complete a UK-EU free trade agreement—the EU-Canada or CETA deal took seven. The UK deal points to technology that has not yet been developed or deployed to make borders frictionless and checkpoint-free. 
 
The European Union, however, will not wish to carry the blame for a no-deal Brexit. European Commission President Jean-Claude Junker has signaled that there are “positive aspects” to the UK proposal. Irish Taoiseach Leo Varadkar has noted that the United Kingdom’s proposals “do not fully meet the agreed objectives of the backstop” but that they will be “further studied.” Over the next few days, the European Union will detail the many ways in which the plan falls short in the most diplomatic way possible. The UK government will then have to decide whether the negotiations with the European Union will formally end or whether they will put forward another version of their plan. But the clock will eventually run out on this back-and-forth (in what little time is left already) with the likely outcome being that there will be no agreed deal by October 31, leaving only two options: (1) a UK request to seek yet another extension for negotiations to January 2020 (issued by Johnson, a caretaker prime minister, or a Scottish Court); or (2) a Halloween no-deal crash out. Both alternatives will lead to early elections.