From Amelia Hadfield (Professor in European and International Relations) and Christian Turner (CEFEUS Research Assistant)

It finally came. The day prior to her two-year anniversary as Prime Minister, Theresa May finally unveiled the 104-page document on Britain’s future relationship with the European Union. The White Paper, officially entitled ‘The Future Relationship between the United Kingdom and the European Union’[1] which has to date caused the resignation of two Secretaries of State, 3 junior Ministers and two Vice-Chairs of the Conservative Party, is threatening to split the Tories in a way not seen since the Maastricht Treaty did during the 1990s. This reflects the tough balancing act May has been forced to strike throughout her Premiership, between Tories old and new, left and right, and fundamentally, pro and anti-Brexit.

The Brexit spectrum has hardened in the past two years, both within Parliament, and in the country at large. For some, the rudimentary in/out polarity still determines their stance. For others, the spectrum consists of May’s speeches[2], and her red lines: extracting Britain from both the EU Single Market and the Customs Union, ending freedom of movement and the jurisdiction of EU courts, reducing net payments to the EU budget, and striking free trade agreements.

The White Paper’s Chequered Past

This brings us to the histrionics of the Chequers Cabinet summit on 6 July. Designed as the foundation for the subsequent White Paper, the Chequers agreement is made up of 12 key principles for future UK/EU negotiations. From May’s perspective, the Chequers deal had to be palatable for the full spectrum of the Conservative Party, clear enough to resonate with Parliament more broadly, and persuasive enough for Brussels to buy it. To do so, the deal also had to retain May’s infamous red lines, while minimising disruption to British jobs and British trade.

Substantively, the Chequers deal represents a last-ditch attempt to solve the fiendishly tricky customs and border issue. Those of us fascinated with the differences between the two models proposed initially last summer by the Department for Exiting the European Union will recall both New Customs Partnership (NCP), and the Maximum Facilitation Agreement (Max Fac). The former closely aligns Britain’s approach to the customs border with that of the EU, effectively removing the need for UK-EU customs border (cost: £3.4 billion with a five year set-up); the latter continues some of the existing arrangements, but relies more heavily upon technology and trusted trader status (cost: £20 billion, 3 years to implement).

Combining the two produces the current Facilitated Customs Agreement (FCA), an evolved Mansion House model[3] that retains the NCP’s goal of levying a UK import tax on finished imported goods entering or leaving the UK and collecting EU import taxes on behalf of the EU (refunding the difference to the EU). This model is combined with MaxFac’s technology-intensive tool to track the avalanche of incoming goods to the UK.

A Whiter Shade of Pale  

Procedurally, May’s balancing act relied upon the parliamentary arithmetic needed to get the bills[4] through. This was laid asunder a day or two before the White Paper even reached Parliament, with the resignation of Brexit Secretary David Davis and FCO Secretary Boris Johnson, both of whom resigned in protest at the nature of the Chequers deal, essentially viewing it as too closely aligned with the EU. When the White Paper itself arrived in Parliament under new Brexit Secretary Dominic Raab, the central talking point was the creation of a Customs Union of Goods and the overhauled Facilitated Customs Agreement. Supporters argued that the eventual goal of a combined customs territory would ultimately minimise friction and reduce the cost to business. Critics argued that the overall connection with the EU was still far too close, with a bureaucratically nightmarish twin-track approach. As we suggested recently in our evidence to Parliament, for Kent, a friction-free, ‘customs-lite’ deal is crucial to ensure the 4.2 million lorries that currently travel through the county continue to move freely without damaging delays[i].

Underlying the customs deal is the White Paper’s suggestion to create a common rule book establishing a free trade zone for industrial and agricultural goods that essentially follows the EU’s regulations for goods. Supporters here argue that EU rules and regulations on goods have over the past 40 years evolved and remained stable, and that British businesses have no desire to see them changed. Opponents argue that again, the relationship with the EU remains too cosy, and may alter the nature of prospective free trade deals with other countries and regions.

There is also the issue of the Court of Justice of the European Union (CJEU). The White Paper insists that overall EU jurisdiction would end. In reference to the Common Rule Book for instance, a Joint Committee would be formed by the EU and UK to handle disputes. However, should the Committee be unable to resolve an issue, the matter could be referred to the CJEU for ‘interpretations’. Brexiters fear that this could create a situation where the EU constantly refers matters to the CJEU, and in turn, essentially keeps the UK tied to the canon of EU law. However, it should be noted that it is difficult to see how else a deep free trade agreement with the EU, in particular with a bespoke Customs Union, could operate without a joint legal entity. Even the European Free Trade Association has its own court[5] to settle issues, and it may be that the UK way have to work within something similar.

Finally, the Government has outlined its views on immigration post-Brexit, once again insisting it will end Freedom of Movement for EU citizens. However, the White Paper does offer concessions. Firstly, it calls for visa-free travel for tourists and ‘temporary workers’. Also – importantly for those of us in academia – the White Paper also broadly supports student mobility, with a reference to UK and EU citizens being able to move reciprocally to study and work, presumably on the basis of a visa or waiver system. The White Paper also supports both the EU and UK being able to ‘move their talented people’. There is however an unappetising degree of UKIP-style rhetoric on immigration in the White Paper, with its focus on high-skilled Western Europeans rather than low-skilled multi-sectoral, multi-regional citizens, both west and east.

 

When is an Association Agreement not an Association Agreement?

Beyond key issues regarding the economy and communities, the White Paper makes clear references to avoiding a hard Irish border, devolving appropriate powers, and the removal of Britain from EU institutions. It also outlines Britain’s wish to continue standards convergence on goods (see above), its ongoing participation in EU agencies (chemical, aviation and medicines), is gloriously vague on the types of equivalence to facilitate trade in services (80% of the British economy), and makes further overtures about a UK-EU security partnership. Taken together, the template is one that many non-EU states currently have with the EU, called an association agreement with the EU.

Ironically, Association Agreements[6] are a long-standing tool that the EU has developed with neighbouring states (e.g. North Africa, the Middle East, Eastern Europe) to facilitate and deepen relations with the EU. Prime Minister May famously ruled out an EU-UK Association Agreement in her 2017 Lancaster Speech, but the July 2018 White Paper looks stunningly like one at present. Indeed, with the clear objective of establishing a relationship with the EU that is “broader in scope than any other that exists between the EU and a third country”[ii] (p.7), the White Paper seems to be suggesting an advanced Association Agreement.

Parliament Redux: The return of the ‘bastards’

As outlined in Part 1 of this blog, the White Paper, and the Chequers agreement before it, represents both the most detailed explanation to date of the UK’s future relationship with the EU, and the embodiment of the enormous domestic tensions that surround this issue. Nowhere is the atmosphere more febrile than Parliament itself. May’s various Brexit set pieces – speeches, red lines, D’EXEU papers, etc. – have done little to heal the rifts in the House or in the Conservative Party.

Euroscepticism remains a key component of the contemporary Conservative Party. It greatly hampered John Major’s Premiership in the 1990s, with Major himself labelling his rebellious colleagues ‘bastards’, believed to be referring to Michael Howard, Peter Lilley and Michael Portillo. In terms of transforming the White Paper into legislation, May too has her own bastards to contend with, the most convincing of which is the increasingly authoritative European Research Group (ERG), chaired by Jacob Rees-Mogg.

As the Taxation (Cross-Border Trade) Bill returned to the House of Commons on Monday 16^th July, the ERG sponsored three major amendments, with a fourth amendment led by Labour’s Kate Hoey on the Northern Irish border[iii].

The two most controversial amendments sought to prevent the UK remaining in the Customs Union overall unless the Government introduced primary legislation through Parliament, and secondly, EU-wide reciprocity in the collection of VAT and some tariffs. The former represented a clear signal that a large proportion of the Conservative Party will still not tolerate a ‘soft Brexit’ (by providing MPs an opportunity to vote it down). The latter undermined the White Paper’s customs union proposal by insisting that all 27 EU member states would have to collect the appropriate taxes on the behalf of the UK, as the UK itself was proposing to do for the EU (rendering the model increasingly impossible in practice).

The amendment argued for a British VAT regime independent of the EU, while the Hoey amendment rejected wholesale the concept of a border in the Irish Sea between the UK and Northern Ireland, and. The VAT issue opens the door for post-Brexit Britain raising or lowering VAT on certain products, which could cause border delays for certain goods.[7] The Irish Sea amendment meanwhile effectively scuppers the government’s approval of the Commission’s current proposal for a Brexit Backstop plan for Northern Ireland (i.e. allowing it to remain in the Customs Union and if possible, the Single Market).

Nil Desperandum Auspice.. Negotiations?

Desperate times call for desperate measures. Apparently. Sensing imminent defeat just hours before the votes, May (again) struck (another) deal and stated that the amendments (conveniently) matched ‘Government Policy’[iv]. However, Conservative Remainers, including Anna Soubry and Kenneth Clarke, in turn threatened to rebel, insisting that the amendments made the White Paper unworkable. The conclusion? A win of just three votes on the Customs Union and VAT amendments. Indeed, the vote was so tight that had certain events unfolded differently (e.g. Liberal Democrats Vince Cable and Tim Farron attending the votes, Conservative Chief Whip Julian Smith actually upholding the Parliamentary pairing agreement, Ian Paisley’s suspension), May could easily have lost on the veru amendments she had accepted at the last moment.

In the days that have followed, May saw off the Remainers on all tabled amendments, bar the European Medicines Agency[v], although happily the latte corresponds with Government policy (at least for now). In truth, this has been a bruising month for the Prime Minister. She has lost a profusion of ministers, while the 1922 Committee continues to keep alive the threat of a leadership. Labour remains riven on Brexit and ideological matters, and the Conservatives themselves remain polarised, amidst indications of a recent rise in UKIP support[vi].  To ensure that the White Paper and its legislation survives the summer, May and her ministers have undertaken a spate of diplomatic forays to Germany, France, Spain and Italy and beyond, to highlight its practicable aspects, despite chief EU negotiator Michel Barnier suggesting that much in it remains unworkable[vii].  The White Paper may have much to recommend it, not least its softer Brexit components. But with just nine months left to negotiate Britain’s departure, and time still needed to navigate the departure bill through the UK and EU Parliament, it is possible that the White Paper is simply too little, too late.

[1] ‘The Future Relationship between the United Kingdom and the European Union’, HM Government, https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/725288/The_future_relationship_between_the_United_Kingdom_and_the_European_Union.pdf

[2] Lancaster House, 17^th January 2017; Florence Speech, 22^nd September 2017; Munich Security Conference, 17^th February 2018, Mansion House speech, 2^nd March 2018

[3] https://www.spectator.co.uk/2018/07/can-brexiteers-stomach-mays-brexit-blueprint/

[4] European Union (Approvals) Act, 7^th December 2017; EU (Withdrawal Bill), 29^th June 2018; Haulage Permits and Trailer Registration Act 2017, 20^th July 2018

[5] http://www.eftacourt.int/

[6] http://eeas.europa.eu/archives/docs/association/docs/agreements_en.pdf

[7] Despite Switzerland having a Customs Union with the EU for instance, goods still require processing at the border to ensure that the necessary VAT is paid. Whilst Switzerland has a land border with four EU member states, the vast majority of goods currently travel by sea and rail via busy points such as Dover and Folkestone. Any delays could bring serious repercussions to the British economy.

[i] http://data.parliament.uk/writtenevidence/committeeevidence.svc/evidencedocument/transport-committee/freight-and-brexit/written/84401.pdf

[ii] https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/725288/The_future_relationship_between_the_United_Kingdom_and_the_European_Union.pdf

[iii] https://www.theguardian.com/politics/2018/jul/11/brexit-hardliners-demand-amendments-to-trade-bill

[iv] https://www.theguardian.com/politics/2018/jul/16/theresa-may-narrowly-avoids-defeat-after-caving-in-to-rees-mogg

[v] https://www.google.com/url?q=https://www.theguardian.com/politics/2018/jul/17/theresa-may-sees-off-rebellion-customs-union-amendment-defeated&sa=U&ved=0ahUKEwj76La-573cAhWHBZoKHTtuB3IQFggIMAE&client=internal-uds-cse&cx=007466294097402385199:m2ealvuxh1i&usg=AOvVaw0tySbN99Ko51Gw032kQuLn

[vi] https://britainelects.com/polling/westminster/

[vii] https://www.bbc.co.uk/news/44964521