Don’t worry, compromise is coming on Brexit

Clashes in the negotiating process are to be expected, but both Britain and the EU know they need a deal

Ignore the sound and the fury as the House of Commons debates Brexit today, and it is possible to see a road map towards a potential agreement between Britain and the European Union. The strategy announced at Lancaster House in January by Theresa May continues.

A second speech by the Prime Minister – due before the end of the month – is pencilled into the Government grid, but that will certainly build on, rather than contradict, the Lancaster House approach. Despite briefings that suggest otherwise, there is agreement in government about the Brexit strategy. After a summer of manoeuvring, Philip Hammond’s joint article with Liam Fox last month confirmed that the Chancellor supports leaving the customs union as well as the single market.

Impatience among business and others who worry about Britain’s departure from the EU is understandable: they want to know what the final deal will look like. But they can be assured that compromise is coming. It is just that in negotiations, compromises are made throughout and towards the end of the process, not at the beginning. It is in the interests of both sides – and governments and multinational companies around the world – that a deal is agreed. The incentive to do so for the British is obvious, but the incentive for the Europeans is stronger than many sceptics believe.

Departure without a deal would hurt Britain, but it would hit important sectors of the European economy disproportionately, from Dutch ports to French fishing. It would weaken Europe’s defence against organised crime, terrorism and a revanchist Russia. And it would damage the Irish economy in particular. This is why the Taoiseach’s recent speech in Belfast was interesting not for his criticism of Brexit but for his tentative support – the first from another member state – for a unique customs relationship between the UK and the EU.

So compromise will suit both sides. But to understand where compromise will come, one must first understand the negotiating process. In public as in private, there remains a clash between the European position that the new partnership can be discussed only after the terms of departure are agreed and the British position that they should be negotiated together. In truth, these are exaggerated negotiating positions. EU leaders know that Britain cannot agree a departure payment without agreement on future trade. And Britain understands that we will have to settle our bills – within reason – if we want a trade deal. That is why the Conservative manifesto said: “We will determine a fair settlement of the UK’S rights and obligations… in accordance with the law and in the spirit of the UK’S continuing partnership with the EU.”

The next thing to consider is the mindbogglingly complex list of issues – from aviation agreements to customs rules – that will need to be agreed. But while the negotiators need to go through those issues line by line, they can speed up the process by agreeing key principles.

First, dispute resolution. Britain has said it wants to end the jurisdiction of the European Court of Justice in this country. This is not unreasonable: no other country allows a court from an organisation of which it is not a member to overrule its own courts’ judgments. But disputes will need to be resolved, and a legal panel consisting of British and European judges would surely be acceptable to both sides.

Second, regulatory divergence.

As an existing member state, Britain already adheres to EU rules, which should make an agreement easier to reach. But what happens after Brexit when British and European rules change? British firms will have to comply with EU regulations when they do business inside the European Union. And we will be free to change our own rules to improve our competitiveness. But to ensure neither side moves too far from a reasonable position on, say, financial services regulation, the negotiators might agree processes for the two sides to manage their way through divergence.

Third, free movement. Since Britain does not seek single market membership, free movement rules will not apply. As the Home Office document that was leaked yesterday said, Britain will control European immigration, and will probably use work permits to do so. But one can imagine an agreement that gives EU nationals preferential treatment in the British immigration system, and does the same for British nationals who want to live and work in the remaining EU member states.

It is possible that the negotiations will fail. Hardliners in Brussels, Paris and Berlin might prevail, for example, in their pursuit of a punishment deal that Britain cannot accept. The challenge of agreeing a new customs relationship might prove too much.

For these reasons, Britain must be prepared for a “no deal” scenario. But there are good reasons for both sides to want to reach an agreement, and an ambitious agreement at that.

Compromise is coming, but, under this Prime Minister, Brexit will still mean Brexit.