What’s the next step on Brexit?
As Cabinet meets to decide on deal it will seek with the EU, we answer the crucial questions
SENIOR Cabinet Ministers will meet this week to thrash out our Brexit policy.
At the heart of the debate are two intertwined decisions: what sort of trading relationship do we want and will we remain in a customs union?
The UK is hoping countries with the most to lose economically from our exit, like Holland and Belgium, will persuade France and Germany to offer a positive deal.
But time is against us. Although we are leaving at the end of March 2019, any deal has to be agreed by October this year to be approved by the European Parliament.
What does the Government want?
That is the £350million-a-week question. The Cabinet hasn’t decided. Theresa May has ruled out us staying in a customs union but is talking of a customs arrangement in which we mirror EU rules.
Philip Hammond wants only a “modest” divergence from EU regulations but the Brexiteers want a clean break with Brussels.
The EU has said we have two choices: the Norway model or the Canadian model.
Theresa May has all but ruled out the Norway option as it would mean paying to access the single market and accepting EU rules, including free movement.
The Canadian-EU agreement allows for free trade between the two but does not include services – which is our largest sector.
It could also lead to UK farmers paying tariffs on exports to the EU.
And, as we would be outside the customs union, UK exports would still face checks at EU borders and non-tariff barriers.
The customs union allows tarifffree trade within the EU and sets agreed tariffs for goods imported from outside the EU.
Non-tariff barriers include licences for exports and quotas on components made outside the EU.
So what will Theresa May do?
The Prime Minister claims she will get a bespoke deal for Britain. This will be a free trade arrangement with frictionless borders and include financial services.
In other words, we want all the benefits of being in the club but without paying a membership fee.
The EU has said Britain cannot have the same advantages it enjoys now and has specifically warned there will be no cherry picking.
In other words, it will not allow the UK to have one trade agreement for financial services and another for agriculture. Brussels also says its hands are bound by “most favoured nation” rules which means if it offers the UK a deal better than one enjoyed by Canada or Japan, it must rewrite its deals with them so they get the same benefits.
Could we get a deal by October?
The EU says trade talks may not progress until outstanding issues have been resolved. This includes the divorce bill, citizens’ rights and Northern Ireland. In December, Brussels said sufficient progress had been made on these issues but they still need to be finalised. It stands by its line that nothing is agreed until everything is agreed. Northern Ireland is especially tricky. Paragraph 49 of the December deal agreed between the EU and UK says the UK is committed to avoiding a hard border. And Paragraph 50 says the UK “will ensure no new regulatory barriers develop between Northern Ireland and the rest of the UK”. We have yet to say how these commitments can be kept outside the customs union.
What other issues are there?
The UK wants a transition period of around two years from when we leave in March 2019. This will give us time to prepare for life outside the EU, doing things like setting up new customs systems and agencies.
The EU has said during this period the UK will have to continue to accept EU rules, including freedom of movement, and European Court of Justice jurisdiction.
Tory Brexiteers have already signalled they are opposed to these conditions, with Jacob ReesMogg saying it would make us a “vassal” state. To appease the right, Mrs May has said she wants to impose restrictions on EU nationals during transition.
But this has already been ruled out by Michel Barnier, setting the scene for another bust up with Brussels. The Government also faces trouble in the House of Lords, which is debating the EU Withdrawal Bill.
When the amended Bill returns from the Lords to the Commons, Remainers may try use the opportunity to force a vote to show there is no majority for leaving the customs union.
Anything else?
A lot. The negotiations are not just about trade. The UK and the EU have to discuss data sharing and data protection, regulatory alignment and procurement rules. Decisions have to be taken on whether we remain in some EU agencies, like Europol, European Medicines Agency and the European Aviation Safety Agency. Then we have to agree police and intelligence co-operation on issues like the European Arrest Warrant, criminal records sharing and freezing criminal assets.
Is that all?
No. At the moment the UK has more than 40 trade arrangements signed as a member of the EU with non-EU countries.
Britain would like to roll over these trade deals during the transition period – indeed, we have no choice because under EU law we cannot sign new trade deals until after transition.
The problem is that this is not in our gift.
While some of these countries have signalled they are willing to roll over the trade agreements, others – like South Korea and Chile – are more reluctant. They have sensed there is an opportunity to exert some leverage.
They will agree to continue the trade arrangements but only on condition they get favourable terms when it comes to striking a new deal once we finally leave.
When will it come to a head?
The moment of maximum danger for the PM will be in October. This is when MPs will have the opportunity to vote on any deal. Nothing is certain. It could be that the EU and the UK have been unable to reach a deal and will ask for more time. This would require the Article 50 deadline of March 2019 to be extended – something which would require the agreement of all 27 EU countries. It is also unclear if MPs will have the opportunity to send Mrs May back to the negotiating table if they dislike the deal or if they will be presented with a take-it-orleave it deal. If it is the take-it-or-leave-it option and the Prime Minister were to lose the vote, then we would crash out without a deal. It could also force the resignation of the PM or, possibly, oblige her to call a second referendum.