Brexit breakdown: how Britain and the EU ended up on the brink
Coronavirus would not halt the Brexit negotiations. Rather than being postponed, they would be conducted virtually. As Boris Johnson recovered in Chequers from intensive care treatment, and a month after Michel Barnier had himself contracted coronavirus, the EU’s chief negotiator gave an update in April on the latest round of trade talks. “Ladies and gentlemen, the UK has affirmed its wish to make substantial progress between now and June,” he said. “We’re on the same wavelength on this, and we respect the same timetable.”
That turned out to be hopelessly optimistic. The following months were dominated by posturing from both sides. Britain demanded as much sovereignty as possible, while the EU insisted on retaining legal and regulatory influence in return for a trade deal. They were deadlocked from the start.
In June, the British government upped the stakes. There had been prior rumours of an extension of the transition period to give both sides capacity to tackle the coronavirus. But Michael Gove was insistent: “We don’t believe that extending the transition period is the right thing to do… That’s it. We are leaving the transition period on December 31.” Negotiators now had just four months to secure a comprehensive agreement.
When Barnier and Frost reconvened in July, there was a rare glimpse of progress. On dispute resolution, the EU backed down on its demands for European Court of Justice jurisdiction, and in return the UK agreed to some level of joint governance of any future trade deal. But both sides remained bitterly divided over the so-called level playing field – with the EU demanding robust guarantees, including on state aid – fisheries, and a dispute settlement mechanism. “We will continue to insist on parallel progress on all areas,” said Barnier. “The EU expects, in turn, its positions to be better understood and respected in order to reach an agreement. We need an equivalent engagement by the United Kingdom.”
Downing Street believes that a concession on fisheries would imperil the Union. Johnson and his team are convinced that a significant proportion of Scottish Conservative support would be eroded if the government fails to fulfil its election promises of regaining control over Scottish waters. It would also provide the SNP, already flying high in the wake of coronavirus, with another effective attack line.
On state aid, Johnson’s team, particularly Dominic Cummings, are adamant that Britain should have full sovereignty over the matter; to be able to make subsidy decisions without consulting or notifying the EU. While the UK currently spends much less on state aid than Germany and France, Cummings’ vision for post-Brexit Britain foresees comprehensive state intervention to create and boost key industries. He has already highlighted technology as a space where large subsidies can have a multiplier effect. He says he is looking for ways to build a £1trillion British technology company.
Negotiations on these two points of contention – considered fundamental by both sides – remained stagnant over the summer, with the press being treated to increasingly pessimistic press briefings from European Union officials. Gone was the hope for “substantial progress” in April, replaced by “an agreement… seems unlikely… we are wasting valuable time.” Even David Frost, now Lord Frost, the UK’s chief negotiator who is usually highly optimistic, became doubtful. “There has been little progress,” he said.
“The EU is still insisting not only that we must accept continuity with EU state aid and fisheries policy, but also that this must be agreed before any further substantive work can be done in any other area of the negotiation, including on legal texts,” Frost added.
Brussels believes it has already made considerable concessions on state aid. Barnier’s original position, that the UK should continue with the EU’s state aid regime, has evolved into an acceptance that the British government could diverge in some areas so long as Brussels is consulted. European officials feel aggrieved that the British side failed to return the favour by revealing precisely what the UK’s post-Brexit regime will be. This week the Department for Business confirmed it will follow World Trade Organisation subsidy rules, but provided no further information.
Until this week, the EU had considerable leverage on this point. According to the Withdrawal Agreement, in the event of a no-deal Brexit, Northern Ireland’s unique access to the customs union would require Westminster to notify the EU of any state aid decisions made with regards to Northern Ireland companies. The rule also applies to decisions regarding British companies which could potentially affect Northern Ireland. In Downing Street, this is considered a backdoor for the EU to enforce state aid rules on the UK for the foreseeable future.
“The PM feels we have to have a walk-away option and that they have us over a barrel on Northern Ireland,” one source familiar with Downing Street’s thinking told The Spectator’s James Forsyth.
That walk-away option translated this week into clauses in the United Kingdom Internal Market Bill which give British ministers the power to unilaterally circumvent the Withdrawal Agreement, sparking a constitutional and diplomatic storm when it was leaked earlier this week. If the Bill is passed, notifying Brussels of state aid decisions will become a political choice to be made by a Secretary of State, rather than a treaty obligation.
By the government’s own admission, this Bill breaks international law. Potentially, the Bill also removes crucial leverage from the EU’s coffers. In the days prior to the leak of the Bill, the EU not only believed it could tacitly control British state-aid post-Brexit, but – say British officials – even threatened to block British agricultural goods from crossing into Northern Ireland by refusing to grant the UK third country statues, according to The Sun.
Thus, the EU’s control over Northern Irish trade has also been watered down by the Bill, which states that a minister of the Crown “may by regulations make provision about the application of exit procedures to goods, and a description of goods”.
For all that the focus in the UK is on the parliamentary problems the Prime Minister faces in passing the Bill, the ball is currently in the EU’s court. On Thursday, Brussels convened an emergency meeting of the UK-EU Joint Committee, which deals with Northern Ireland issues. After months of consensual committee meetings, this encounter was starkly negative. Michael Gove “was not the usual gentleman” and didn’t use diplomatic language when addressing diplomats in the meeting, one source told the BBC’s Laura Keunssberg. What followed was a blunt exchange of statements, with the EU threatening legal action if the government fails to change the legislation by the end of the month, and Gove responding: “I made it perfectly clear… that we would not be withdrawing this legislation.”
The Joint Committee has solved numerous technical difficulties in recent months – more, in fact, than anyone expected – but it has neither the clout nor legal powers to resolve the fundamental issue of state aid regimes.
Given that Downing Street remains committed to enacting the new legislation, the present situation will have one of two outcomes, assuming it becomes law. First and most damagingly, the EU could act on its threat of legal action, suspending trade talks in the meantime, resulting in Britain leaving the transition period at the end of December without a deal. This would have significant ramifications not just for UK-EU trade, but for Britain’s relationship with the United States. US Speaker Nancy Pelosi came out strongly against Downing Street yesterday, saying: “What were they thinking? Whatever it is, I hope they’re not thinking of a UK-US bilateral trade agreement to make up for what they might lose.”
The second outcome, which appears to remain Downing Street’s hope, is that the Bill nudges the EU back to the negotiating table, where a more sensible agreement can be hashed out on both state aid and Northern Irish trade. It worked last year – the prorogation of parliament forced diplomats to look over the precipice, and both sides came together in the end out of fear for the consequences of no deal. This time, however, it may have the opposite effect.
The Northern Ireland Protocol is considered of fundamental importance in Brussels. The EU will not allow Northern Ireland to become a backdoor into its single market and customs union. It may well decide that a chaotic Brexit is worth teaching the UK government a lesson, and showing that it is serious about standing by Ireland, a member state.
Negotiations will continue until the EU’s end-of-the-month ultimatum comes to pass. It now seems unlikely that a breakthrough will occur.
Domestically, the government is facing severe pressure from Conservative backbenchers. Even the Prime Minister’s most loyal supporters have found it hard to defend a policy which the Northern Ireland Secretary said this week – reading from a script in the House of Commons – would “break international law, in a very specific and limited way.”
There is an active effort to block the bill by Sir Bob Neill MP, who tabled an amendment alongside former First Secretary of State Damian Green which would give the Commons a veto on the government’s plan to override the Withdrawal Agreement, effectively scuppering Downing Street’s plans to use it as a negotiating tactic. While it is difficult to imagine the amendment overcoming the government’s 80-seat majority, a narrow victory for the government would nonetheless erode Johnson’s ability to herd his backbenchers. Indeed, there has been sufficient concern in Downing Street that Johnson will today address backbench Conservative MPs via Zoom.
Even if the Bill passes the Commons next week, its biggest danger will come in the Lords. The interventions against the legislation from Lord Howard and Lord Lamont, two very senior Conservative Brexiteers, have given peers cover to oppose the Bill without appearing to be disgruntled Remainers. The Salisbury Convention, which protects legislation promised in the government’s manifesto from meddling by peers, will be ditched on the basis that the 2019 Conservative manifesto said the Withdrawal Agreement was “a great deal” that would be “signed, sealed and delivered”, and it is unlikely that Speaker Hoyle will agree to categorising the legislation as a finance bill.
Without the votes of peers like Lamont and Howard, it will be a challenge to get the Bill through the House of Lords in a timely fashion. Downing Street expects that, in the worst case scenario, there would be three rounds of ping-pong between the two Houses before peers give in to the democratic will of the Commons. Given the strength of feeling in the upper chamber, however, that is far from certain.
Such a situation threatens to trigger an almighty constitutional battle, but because it is regarded as a matter of such significance, both domestic and international, peers are willing to stake their chamber’s reputation to fight it. As Lord Howard said in the Lords: “How can re reproach Russia, or China, or Iran when their conduct falls below internationally accepted standards, when we are showing such scant regard for our treaty obligations?”
Many Conservative backbenchers, dismayed by the government’s tactics, remain hopeful that a last minute deal will nullify the most controversial parts of the Bill. If there is a comprehensive agreement on state aid, they say, the disputed clauses won’t have to come into effect. David Davis, the former Brexit Secretary, has said the EU always bangs heads and comes to an agreement “in the final three weeks of a negotiation”. With less than a month to go until the mid-October deadline, however, time is short.
On the other side of the Commons, the Labour Party has remained remarkably quiet. Even as Johnson’s actions provoked international horror this week, Keir Starmer failed to raise the matter at Prime Minister’s Questions, instead opting to focus on coronavirus testing. “[Starmer’s] going to keep away from Brexit until December,” a senior labour staffer told Reaction. “Because the whole thing is going down the drain. Cummings is going to f**k it up, and then Labour can say: ‘Who do you trust to run the government?’ Sort of flipping the Corbyn script. Chaos under Johnson.”
Starmer’s silence has clearly worried Downing Street. It was Johnson who raised the Internal Market Bill at Prime Minister’s Questions, accusing Starmer of having “an Ox once again stood on his tongue”, adding: “He has nothing at all to say about that subject today because he doesn’t want to offend the huge number of his backbenchers who want to overturn the verdict of the people and take us back into the EU, which is of course what he wants to do himself.”
This attempt to project onto Starmer the confused Brexit position of his predecessor sounded unconvincing and a bit desperate. It was a sign of Johnson’s worries about owning the consequences of Brexit in December, whereas in the past he was able to deflect attention onto Jeremy Corbyn.
The Prime Minister won the 2020 election with a promise to Get Brexit Done. More than anything, the public was worn out by months of disorder in Westminster. Proroguing parliament helped Johnson because it was seen to show his commitment to ending the ordeal of Brexit. Engaging in high-risk legal battles over Northern Ireland, with Britain’s global reputation as a partner and signatory to international treaties at stake, may help create the chaotic conditions for a different electoral outcome next time.