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Grayling's Brexit Bulletin - 11 May 2018

11th May 2018


The BREXIT Bulletin: Customs hold-up continues in Westminster

With the European institutions enjoying a mid-May five day weekend, the same cannot be said of the situation in London where the Cabinet divisions over the UK’s post-Brexit customs future continues to dominate the headlines.
 
The Lords have also continued to pile on the pressure, voting through an amendment to the EU Withdrawal Bill this week that seeks to keep the UK in the European Economic Area - the so called ‘Norway Model’.
 
Having already unloaded a broadside against the Government’s relatively flimsier red line on the Customs Union, the Upper House have now unleashed a second wave on the red line that rules out membership of the Single Market.
 
Whilst the Government will face a hard time when the Bill returns to the Commons on the Customs Union, the audacity of the Lords in raising the membership of the Single Market from the dead is revealing.
 
The rhetoric from the ranks of Remainers is becoming increasingly aggressive, assertive and ambitious. In the wake of the vote Anna Soubry - the darling of the soft Brexiteers – tweeted that Parliament is finally taking back control of Brexit and that there is a cross-party consensus for both the Customs Union and the Single Market.
 
In this excitement spare a thought for those currently out of the office in Brussels. Indications that the UK will give ground on the Customs Union are welcome. However, any shift in London is not happening quickly enough for comfort.
 
The EU continues to wait for the UK’s position on customs so that it can declare progress in June on Phase 1 – in respect to Northern Ireland. Similarly, many of the EU-27 are increasingly eager to discuss the future relationship in detail.
 
The European Commission may have agreed to a list of four thematic pillars for discussion on the future relationship on 4 May - which under ‘economic partnership’ features the skeleton headings for an EU/UK FTA – but it has decided against publishing technical position papers before June.
 
There have been hints that these may be published over the summer, but this will almost certainly require progress on Northern Ireland in June.
 
The longer the wait for concrete positions on the framework declaration on the future relationship, the weaker the declaration is likely to be.
 
Proactive publication by the European Commission of technical position papers has to a large extent maintained the momentum in the negotiations.
 
Now that these will not be forthcoming, London really must come forward. To date it has on the security relationship. However, security is relatively uncontroversial. On the meaty issues, i.e. trade, we remain none the wiser.
 



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This week's contents:

The highlights from the UK

The highlights from Brussels

The highlights from the UK

Crunch time approaches
Cabinet divisions over the UK’s customs proposals have reached fever-pitch this week, with Ministers not only briefing against one another, but taking to the airwaves to make their sentiments known. Theresa May allegedly fired the starting gun on this week’s briefing wars by sending Greg Clark onto the Andrew Marr sofa to warn of the threat to the UK car industry in the absence of a customs arrangement, a move that many saw as an attempt to browbeat members of the Brexit Cabinet sub-committee who had threatened to torpedo May’s proposed ‘New Customs Partnership’ (NCP).
 
Boris Johnson made no secret of his view, adding his two cents on a trip to Washington DC, where he labelled the NCP proposal “crazy” and totally unacceptable to Cabinet Brexiteers. Jeremy Corbyn scored a rare, uncontested victory at Wednesday’s Prime Minister’s Questions exchange, where time and again, the Prime Minister was unable to answer the question of whether she agreed with her Foreign Secretary’s comments. Instead, May was able only to offer the same, repeated commitment to leaving the Customs Union and the Single Market.
 
The House of Lords wound up its Committee Stage of the Withdrawal Bill this week, inflicting its thirteenth defeat on the Government. Both Labour and Conservative Peers defied their whips to back Lord Alli’s amendment to mandate the Government to seek membership of the European Economic Area, effectively retaining Single Market membership. After the Bill has its Third Reading this Wednesday, the Government must decide when it is willing to let MPs consider the Lords' amendments, with the Chief Whip reportedly having informed the Prime Minister that she does not have the votes on the issue of customs. Parliamentary time has been tentatively allotted for Monday 21st May, but it remains to be seen whether Party managers will decide to delay the vote, as has happened on the Customs and Trade Bills, where the Government is attempting to hold off defeat.
 
The Grayling View
After months of uncertainty and speculation, the final likely shape of the UK’s exit from the EU appears to be emerging. The longer the Government continues to fight amongst itself while insisting that the UK will be leaving both the Single Market and the Customs Union, the more remote the prospect that the Cabinet will actually be able to bring forward a customs proposal likely to attract majority support in the Commons. If Ministers persuade May to abandon the Customs partnership idea while insisting on the “Max Fac” model that has already been dismissed outright by EU negotiators, then MPs will naturally conclude that they must choose between effective membership of a customs union with the EU, and crashing out of Europe without the guarantees on customs that businesses have asked for, with the attendant risks to jobs and the economy.
 
For its part, Labour finally appears to be making headway on Brexit after months of criticism for appearing to equivocate on customs and the Single Market. Now that the Opposition has firmly pledged its support to a customs union, they have grown more confident in holding the Government to account and are succeeding in embarrassing the Prime Minister, as Jeremy Corbyn demonstrated to great effect this week at the despatch box. This will only add to the pressure on the Government in the coming days and weeks. 

 

The highlights from Brussels

EU-27 looks forward to a post-Brexit EU
It’s been a quiet week in Brussels.  9th May was Europe Day, when the EU Institutions are closed (everyone else is working though), 10 May was a public holiday, and 11 May, whilst being a working day, was very quiet as many in Brussels took advantage of “the bridge” and took this day off too.
 
Europe Day, in the context of Brexit, always risks from now on being a damp squib, but Brussels doesn’t do “damp squibs” – so it came as little surprise when the European Commission launched on Europe Day a 12 question online public consultation addressed to all Europeans, asking them what they want the EU to do in the future. The Consultation was put together by a so-called “Citizens’ Panel” made up of 96 people from the EU-27. The Consultation runs for one year until 9 May 2019, the day of a major EU Summit in the Romanian town of Sibiu which will discuss the report emanating from the Consultation.
 
This Summit is already being trailed as a major gathering, taking place just over one month after Brexit and a few weeks before the EU elections, to plot the course for a post-Brexit EU. 
 
The Grayling view
Often these major set piece events either go unnoticed or get overtaken by other major global events. The timing of the Summit in Sibiu is highly symbolic and is meant to project to EU citizens and the rest of the world that the EU remains very much open for business, and indeed more strongly united even after Brexit. So is this is just a PR exercise, or will the Summit actually be a genuine marker in the sand?

It is impossible to say right now, as much depends on whether Brexit goes well – meaning the Withdrawal Agreement is ratified and the transition period is in place. If it does, it could be an opportunity to recalibrate the EU to present day realities, reflecting the genuine concerns of citizens and businesses, and positioning it coherently on the world stage. 

If Brexit goes badly, the Summit may indeed be overtaken by events, albeit one closer to home – namely a chaotic and disruptive Brexit.

 

The UK: One state, Two Systems?
According to Politico, EU diplomats have come up with a new, possibly off-the-wall solution to the Irish question; Northern Ireland could become the new Hong Kong. The unnamed source claims that the suggestion was brought up during informal EU withdrawal agreement discussions between the EU and UK.

In order to avoid a hard border in Ireland, the EU has suggested that Northern Ireland should exist in a separate customs area to the UK, similar to the situation in Hong Kong. Under the ‘one state, two systems’ principle which governed the transfer of sovereignty of Hong Kong from the UK to China in 1997, China’s President is the Head of State in Hong Kong, however Hong Kong enjoys political and economic independence. The EU diplomats argued this principle would allow Northern Ireland to remain part of the United Kingdom, but enjoy membership of a different customs union.

However, UK officials responded saying it was not a viable solution as it would mean ceding British sovereignty.
 
The Grayling View 
The reported suggestions from EU officials, provocative in nature, are perhaps seeking to push the UK to engage with the EU’s preferred solution to the Irish border question, namely keeping Northern Ireland in the Customs Union. This has so far been ruled out by Theresa May’s government as threatening the UK’s constitutional integrity, whilst it is also unacceptable to the Democratic Unionist Party, who keep May’s minority government in power. Nevertheless, the EU is adamant on avoiding a hard border in Ireland.

Generally, we are seeing increased pressure on the UK to put forward solutions to the Irish question, so that negotiations can progress and deadlines met - though the Hong Kong scenario may seem far-fetched, it further ramps up the pressure on the UK to provide a solution which can satisfy both its own constitutional integrity whilst preventing a hard border on the island of Ireland. 

 


Dates for your diary

28-29 June 2018 - EU Summit, and informal deadline for agreement on Irish border
1 July 2018 - Austrian Presidency of the Council
18-19 October 2018 - EU Summit and deadline for negotiations on Withdrawal Agreement 
1 January 2019 - Romanian Presidency of the Council
29 March 2019 - UK expected to leave EU
31 December 2020 - Expected end of transition

 

Grayling Brexit Unit

Our Grayling Brexit Unit brings together the very best consultants from across the Grayling network and includes those who have direct experience of working alongside the leading political figures charged with negotiating Brexit in London and Brussels.

The Grayling Brexit Unit is here to support, guide and inform the success of your business and identify how the political dynamics will change as a result of Brexit in both London and Brussels. We are your Brexit experts.

Please contact Robert Francis Tel +32 2739 47 34 (robert.francis@grayling.com) in our Brussels team or Jonathan Curtis (Jonathan.Curtis@grayling.com) in London for more information, and check out our brochure.


 #Brexit Papers 


Brexit Negotiating Documents
The 'Great Repeal Bill'
Brits working in the EU institutions
Article 50

Sir Julian King - The Last UK Commissioner
David Davis – UK Brexit Secretary.
Sir Keir Starmer – Shadow Brexit Secretary.
Sir Tim Barrow – UK Permanent Representative.
Michel Barnier – EU Chief Negotiator.
Sabine Weyand – Barnier’s Deputy.
Guy Verhofstadt – EP Brexit Lead
No-deal – Concrete impact

Grayling Team

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