Upbeat mood in Westminster as Brexit talks move on to economics

When David Davis told a conference this week that Sinn Féin had "quite a strong influence" on the Taoiseach's tough negotiating style on Brexit, he was expressing a view widely shared at Westminster, especially among Conservatives. The truth, that Dublin's high bourgeoisie enjoys a spot of Brit-bashing as much as any of their country cousins with a pike in the thatch, is perhaps too cruel to contemplate.

Labour's shadow international trade secretary Barry Gardiner had to apologise for dismissing the Good Friday Agreement as a shibboleth, explaining that he was using the word in its archaic sense of a "pass word" or "test of membership". He was also criticised for suggesting that Ireland was "playing up" the issue of the Border in pursuit of its own economic interests.

Few at Westminster would use the word shibboleth, but many share Gardiner’s frustration and bewilderment at the way the issue of the Border has occupied centre stage in the Brexit negotiations. As one official put it to me, the British government has a responsibility to minimise the damage Brexit does to Ireland but it has other responsibilities too, such as protecting Britain’s economic interests.

Gardiner also dismissed one of Labour's six tests for the Brexit deal, that it should secure the same benefits as Britain enjoys as a member of the European Union.

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“It’s bollocks. Always has been bollocks and it remains it,” he said.

“We know very well that we cannot have the exact same benefits and actually, you know, it would have made sense, because it was the Tories that said they were going to secure the exact same benefits, and our position should have been precisely to say, ‘they have said that they will secure the exact same benefits and we’re going to hold them to that standard’. Not that we think we can secure the exact same benefits as well.”

Indisputably true

Gardiner was not obliged to apologise for that statement, which is indisputably true. Indeed, Theresa May herself no longer claims that Britain can enjoy the same benefits outside the EU as within it.

Still, the mood in Downing Street around Brexit this week is fairly upbeat, with a sense that the context of the negotiations has changed since last month's summit in Brussels. During the first phase of negotiations, the European Commission was clearly in the driving seat, with EU member states content to leave the details to Michel Barnier. Now that the talks are moving on to economic issues, London believes that other capitals are taking a closer interest and leaning on the commission to take their national interests into account.

The customs partnership could be made even more intellectually perfect if Britain agreed to apply the same tariffs on goods as the EU after Brexit

Downing Street is confident that it has won the argument about cherry-picking and that the EU now acknowledges that neither Norway nor Canada are appropriate models for a future relationship that will be in the British and European interests. London acknowledges, however, the conflict between its desire to take back control and its hope of retaining frictionless access to European markets. The related issues of the Border and Britain's future customs relationship with the EU are among the most difficult and politically sensitive.

May has ruled out membership of the EU customs union or even of a customs union with the EU. Instead, she has floated two possible approaches: a customs partnership or a customs arrangement. The former, which British officials describe as “intellectually perfect” but unprecedented in human history, would involve Britain applying tariffs on the EU’s behalf to goods that arrive in the UK destined for the EU market. Goods destined for the UK market could face a different tariff.

Frictionless

The customs arrangement would involve technical and administrative measures to keep the customs border as frictionless as possible. Special measures could apply along the Border, such as Davis’s idea that “very small” and “tiny” businesses could operate tax-free.

The customs partnership could be made even more intellectually perfect if Britain agreed to apply the same tariffs on goods as the EU after Brexit. This remains, for now, unacceptable at Downing Street, where anything which inhibits Britain’s freedom to set its own tariffs is regarded as a customs union.

A parliamentary amendment calling for Britain to stay in the customs union is expected to win some Conservative support in the next few weeks, but perhaps not enough to pass. MPs and peers will have a “meaningful vote” on the final Brexit deal later this year, but the government will have one further legislative hurdle, the passage of the Withdrawal Agreement and Implementation Bill. This will put into law the terms of the withdrawal deal and the framework of Britain’s future relationship with the EU.

As primary legislation, it will be subject to amendments in both houses. But what if an amendment is passed which changes the meaning of the withdrawal agreement?

“Then,” a senior Downing Street source said, “we have a problem.”