We are dealing with two possible outcomes to the Brexit talks. Either the UK concedes to pretty much all the demands from the EU side or the talks collapse in chaos. This is the way it was from the start, and nothing much has changed.
In either case the UK will be worse off than it would have been if it stayed. The irony is that the more it concedes, the better off its future economic position will be – membership of the EU Single Market and Customs Union, for example, would allow free trade to continue and avoid massive disruption. But it would also mean giving up or compromising on some of the key political aims of Brexit.
Britain’s Brexit retreat has already started. The UK signed up to the EU’s proposal for sequencing the talks. Then London accepted that during a transition period after it leaves the EU it would abide by EU rules. This week there was by far the biggest concession yet – the Conservative government agreeing to pretty much sign up to the exit bill set down by the EU.
The next big test is whether the UK will relent in relation to the Irish Border. The problem here is politically even trickier, however, and goes to the heart of the whole Brexit process.
The only clean solution is for the UK to remain in the EU Customs Union and Single Market. But that is to deny the vision of Brexit put forward by the Conservatives, meaning it must remain subject to pesky rules set in Brussels and the oversight of the EU courts, can’t do its own trade deals with other countries, and may have to compromise on controlling migration.
Retreating from this now to solve the Irish Border question – whatever about doing so as the extraordinary cost and disruption of leaving becomes ever clearer in the months ahead – looks impossible.
Apoplexy
So the route now under examination is for London to indicate the North would operate a regulatory and customs regime post-Brexit aligned to the Republic and thus, as things now stand, different to the rest of the UK. This is causing apoplexy in the DUP, and has also been so far ruled out by London.
Even though livestock, food and medicines are already subject to checks in the Irish Sea between Britain and the North, the idea of checks on manufacturing goods is a step too far for the DUP. And in London they will worry about the impact on the Union and on Scotland in particular, not to mention the DUP threats.
This has left both sides looking for some agreed language on the Border sufficient to allow the talks to progress, with the possibility that the full extent of the 171,476 words available in the English language may not provide the answer.
This one is really hard to fudge. Ireland has sought commitments on the alignment of customs and trading rules and regulations tantamount to the North remaining in the EU trading bloc. Comments by European Council president Donald Tusk in Dublin on Friday show that Ireland has full EU backing on this and will get to decide on whatever the UK offers. This seems to remove the political risk to Ireland of coming under pressure to back down for the sake of a deal, but it seriously ups the political ante as well and puts us right in the front line.
Is Theresa May willing to face down the DUP? Or can the DUP be persuaded that it might be to its advantage to relent a bit at this stage and see what emerges later? Either looks unlikely. And what are the political consequences in the UK if the talks do not progress in December?
This is where we are now at, with no signs so far of any willingness to accept a fudge from Dublin. The diplomatic challenge for us is complicated by our desire to see the talks move on to the second stage given our need for a new trade deal and a good transition arrangement. But if you thought the talks so far were difficult, messy and contentious, it is only a warm up to what is in prospect if we get to stage two.
Complicated
And it is not going to get any easier for London. The EU side simply won’t allow Britain to pick and choose as it wishes as the talks turn towards new trade arrangements.
And if they are out of the EU trading bloc, then they are out.There are examples of half-way houses – Norway is in the Single Market and Turkey in the Customs Union. But they are all complicated and messy.
And the more the the stones are turned over, the uglier it looks. For example, the EU has around 60 trade deals which set the rules for trading with other countries. When Britain leaves the EU it has to get agreement from each individual country that it can continue to trade on these terms.
Then the complications of putting together a new trade deal between the EU and UK are enormous. Once Britain steps outside the EU trading bloc it is opening the Pandora’s Box to years of negotiation, to end up in a worse place – economically – than it was before.
Maybe a new half-way house involving a new EU/UK customs union might emerge in time. Or maybe these talks are just doomed to fail. Maybe you just can’t unscamble an egg.
Divorce bill
The really interesting thing that has happened this week is that May agreed to pay the divorce bill without the pro-Brexit lobby going mad. Even Boris Johnson shrugged his shoulders, and said it was time to move on.
Do the Brexit lobby in cabinet realise that the game is up in terms of their hard exit strategy? Or are they just trying to avoid a general election, with the likelihood of Jeremy Corbyn coming into 10 Downing Street? May has hung in so far, but for how much longer can she hold her fractured party together?
This is the key dynamic now. Either May can engineer an ongoing retreat and further concessions to the EU demands or the talks will get stuck again or possibly collapse. The next test is on the Irish Border.
For Britain it is Brussels’ way or the highway.