Early Thursday afternoon, Theresa May’s cabinet ministers received a document outlining the proposals on the shape of Brexit they will discuss at Chequers on Friday. Leaked within minutes to the Spectator’s James Forsyth and to the pro-Brexit website Guido Fawkes, the blueprint sent Brexiteers into a frenzy of outrage.
“If this is correct this is not Brexit,” said Jacob Rees-Mogg.
The paper proposes that “the UK should maintain a common rulebook for all goods including agri-food” and make “an upfront choice to commit by treaty to ongoing harmonisation with EU rules on goods”. It acknowledges that such regulatory alignment with the EU would “not allow the UK to accommodate a likely ask from the US in a future trade deal” because Britain would not be able to recognise all US standards.
The paper makes clear that the plan for full regulatory alignment would not apply to services, which account for 80 per cent of the British economy.
“We would strike a different arrangement for services, where it is in our interests to have regulatory flexibility, recognising this will result in reduced market access,” it says.
The cabinet meeting at Chequers, which will start about 10am and includes a dinner, will also consider the prime minister’s new customs proposal, a “facilitated customs arrangement”. Under the plan, Britain would leave the EU’s common external tariff but all goods entering the UK would be tracked and charged the EU tariff if they are destined for Europe.
Denounce proposals
Brexiteer backbenchers lined up on Thursday to denounce the proposals but at Chequers, May must only persuade her cabinet, where most ministers favour a soft Brexit. Friends of Boris Johnson and David Davis have played down suggestions that they could resign rather than sign off on a common position which would be published in a White Paper next week.
Hardcore Brexiteers have the numbers to trigger a challenge to May’s leadership, which requires the support of 48 MPs but they don’t have enough support to topple her. And many Brexiteers fear that a change of leader could introduce the kind of instability that would change the Westminster arithmetic at Brexit to their disadvantage.
As the prime minister’s position has evolved towards an ever-softer Brexit from her Lancaster House speech last year through her speeches in Florence and at the Mansion House, the Brexiteers have grumbled and threatened but swallowed each compromise rather than risk delaying or even derailing Britain’s departure from the EU.
Negotiating dancefloor
When she is finished negotiating with her cabinet and her party, May must present her proposals to Britain’s negotiating partners in the EU. Brussels has already ruled out cherry-picking the single market or disentangling the four freedoms of goods, services, capital and people.
But May’s proposals don’t have to be welcomed as the basis for an agreement – they need only to be enough to get her on to the edge of the negotiating dancefloor. Once there, Michel Barnier can waltz her into the centre of the floor and beyond, necessitating further compromises from her cabinet and her backbenchers.
The EU will not offer Britain membership of the single market for goods, although that is precisely what it has offered Northern Ireland in its Border backstop proposal. Part of the problem is that it is increasingly difficult to distinguish between goods and services, as cars increasingly run as much on data as on fuel and often come with financial services, such as loans and insurance, attached.
For the EU, the only “common rulebook” for goods is the EU’s rulebook, which is adjudicated and enforced by the European Court of Justice. And Brussels will insist on strict “level playing field” conditions on competition policy, state aid, tax breaks and environment policy.
From the beginning, May has called for a “deep and special partnership” with the EU, deeper than Canada’s trade deal and more special than Norway’s automatic rule-taking as a member of the European Economic Area. For the EU, Britain’s choice is a binary one: between the Norway model and a free trade deal.
Norway option
In fact, the Norway option is not viewed as sustainable either in London or Brussels, because Britain is simply too big and powerful a country to be a permanent rule-taker on such a scale.
Britain’s negotiating partners dislike talk of the Swiss model, not least because the EU is negotiating with Switzerland to fix what it sees as major problems with that model. But there could be a Swiss route to a Brexit deal, involving a free-trade deal with extra bilateral agreements, possibly including a customs union, to maintain regulatory alignment and diminish friction at borders and costs to businesses.
None of the proposals leaked on Thursday addresses the Border backstop and Brussels and Dublin are both determined that the Irish issue should not be isolated and deferred to the end of the negotiations. The EU is ready to make changes to its backstop proposal and to take other steps to address British concerns, such as “de-dramatising” any checks that might be needed between Northern Ireland and the rest of the UK.
Backstop
Brussels will not countenance extending the backstop to the whole of the UK and persuading the DUP to accept a Northern Ireland-only version will require great skill and diplomacy from May. It might be helped by a shift in tone from Dublin, away from the robust language that has helped to telegraph Ireland’s resolve on the Border and towards a less confrontational and more subtle response.