Business

If the EU didn’t like the December Phase 1 deal, it shouldn’t have agreed to it

BY Andrew Lilico   /  27 February 2018

It is reported today that EU negotiators will, on Wednesday, insist that “Northern Ireland must sign up to Brussels rules and regulations if Britain wishes to leave the customs union and single market. France and Germany are understood to have blocked British plans to continue “fudging” the [Ireland-Northern Ireland border] issue and are now insisting on a legal agreement”.

There have been so many previous “exclusives” and “leaks” regarding what the EU was going to insist upon or what the UK had agreed to that have subsequently proven false that one should be sceptical of such claims, which are probably leaks intended to create rows and divisions within the UK as much as anything else.

However, let us proceed for the moment on the basis that this is correct. Some will say “Well, the December Phase 1 agreement was a fudge that didn’t really resolve matters and the EU is merely attempting to spell out in practical terms what it means.” That, however, misses the fundamental point: what the British wanted from Phase 1 was for the EU to agree we should not resolve these matters in advance of the final future partnership agreement. By agreeing to the fudges of the Phase 1 deal, what the EU agreed to was to not resolve these matters in advance of the final future partnership agreement. That it was a fudge was not some unfortunate compromise that neither side wanted. Rather, it was precisely what the British required and got, and the Phase 1 deal would not have passed in the UK otherwise.

For the EU to now attempt to have these matters resolved in advance of the future partnership agreement would be for it to renege, in the most blatant of manners, upon the Phase 1 deal. There were an increasing number of people in Britain who, at the time of the Phase 1 deal, had come very close to favouring the UK walking away from the talks, on the basis that the EU appeared to have no appetite for a deal and was just stringing us along. If the EU now reneges on the Phase 1 deal, a large block of such people will switch decisively into the “walk away” camp.

The EU reneging on the Phase 1 deal would certainly mean the considerable majority of the UK’s “divorce bill” would never be paid. After all, one of the other key features that the UK had wanted, and got, from the Phase 1 deal was that the deal accepted that the UK’s “divorce bill” payments were contingent upon our agreeing a satisfactory future partnership deal. We did not accept that we “owed” these monies and would pay them whatever subsequently happened. Rather, we accepted we would pay these monies if there was an overall deal. If the EU reneges on the Phase 1 deal, we shall have to think again.

The EU reneging on the Phase 1 deal might or might not mean there would be no transitional arrangements. Even if we eventually part without a future partnership deal, both sides might find it mutually advantageous to agree some bridging phase where we transition from the current arrangements to the new no-partnership world. But the British do not “need” transitional arrangements any more than the EU does, and if the EU had made itself a deal-breaker on Phase 1, we would need to approach any bridging partnership arrangements quite sceptically.

If we exit the talks and declare our assumption that we will be exiting the EU at the end of March 2019 with no new deal in place, pending the EU making credible proposals for one that we could accept, we will doubtless need to put in place preparations for a no-deal scenario. There would be a year to do that, so a great deal could be achieved in the time if we committed to doing so. Some claim that some matters would inevitably over-run. If they’re right, there would be all the more reason for starting preparations sooner rather than later so that the period of hiatus were kept to a minimum. What we should absolutely not do is to accept claims that leaving with no deal is impossible so we must accept a deal on any terms the EU fancies. That will not do at all.

I am sceptical of these reports that the EU is about to insist upon immediately resolving matters that Phase 1 fudged. But less us be crystal clear: for the EU to do so would be for it to renege upon the Phase 1 deal, an integral and ineliminable part of which was that those matters not be resolved until the final future partnership is agreed. If the EU now reneges upon the Phase 1 deal, there will be little choice for the UK but to walk away from the talks. That won’t be fun for either side, but that is the way it will have to be.