Turmoil and Technicalities – A Summary of the Brexit Process Thus Far

Bilal explains what is currently happening with Brexit, and includes commentary on Michel Barnier’s latest statements.

Turmoil and Technicalities – A Summary of the Brexit Process Thus Far

picture from BBC.

The European Union Customs Union is one of the key components of the EU, and has been at the centre of British politics recently as Prime Minister Theresa May and her cabinet struggled to develop a coherent strategy for exiting the European Union and pass two essential bills through the Commons amidst resignations and an onslaught of opposition and rebellions.

The EU Customs Union ensures there are no tariffs on trade between members of the union and requires a common external tariff to be imposed on all goods entering the union from nations that are not members of it. This means that if the EU, for example, imposes a 10% tariff on Japanese cars, the UK must do the same, and cannot negotiate its own trade agreement with Japan. In addition, the Customs Union means that all EU member states are represented by the European Commission in the World Trade Organisation.

This is different from the single market, which allows free movement of not just goods but also capital, services, and people, and involves standardising regulations to create a ‘level playing field’ for firms within the EU.
Given that about 43% of UK exports go to the EU, replacing the Customs Union with some sort of trade deal is a crucial element of Brexit.

Initially, the Prime Minister’s Chequers Plan proposed the UK exiting both the EU Customs Union and the Single Market, followed by the formation of a new ‘economic partnership’ between the EU and UK, which would include a ‘frictionless’ free trade area for goods, combined with a ‘common rulebook’ for regulations. A key proposal contained within it is that of a ‘Facilitated Customs Arrangement’ which would involve the UK charging EU Tariffs for goods intended for the EU, and UK tariffs for goods intended for the UK.

Despite the emphasis on ‘new arrangements’ and allowing UK to negotiate its own separate trade deals with non-EU nations, it appeared to preserve much of the status quo with Europe and was seen as a ‘soft Brexit’ by many Eurosceptic Tories.

It prompted the resignation of Secretary of State for Exiting the European Union David Davis, who stated that he could not support a plan he did not believe in.

Foreign Secretary Boris Johnson also resigned, stating in his resignation letter that this proposal was giving up too much and that the UK was “headed for the status of colony”. He ended with the claim that Europe is “a continent which we will never leave”, emphasizing the idea that the Chequers proposal represents a capitulation to Europe rather than an exit, as well as the fact that Boris Johnson doesn’t understand how Geography works.

Based on the Chequers plan, a 98-page white paper entitled “the future relationship between the United Kingdom and the European Union” was released by the government. The paper seemed to be more focused on being palatable to the EU, and echoed much of the language used by European officials. For example, it repeatedly mentions ‘a balance of rights and obligations’, and gives assurances on nearly every page that the UK will take its obligations with regards to the proposed economic partnership with the EU seriously. This suggests that the Prime Minister considers preventing a ‘no deal’ scenario to be a high priority.

In order for any such plan to be implemented, a Trade Bill and Customs Bill, officially known as the ‘Taxation (Cross-border Trade) Bill’, need to be passed by Parliament, which would lay the foundation for further changes.
The ‘hard Brexit’ wing of the Conservative party, the European Research Group (ERG) currently led by Jacob Rees-Mogg, pressurised the Government into accepting four amendments to the bill which state that:

– The UK cannot collect Tariffs on behalf of the EU unless there is a reciprocal arrangement;
– A customs border in the Irish sea would be illegal;
– The UK would require a separate VAT system from the EU;
– The Government would have to pass legislation through Parliament if it wanted to remain in a customs union with the EU.

The Government insists that these amendments do not contradict the Chequers plan, while the ERG apparently believe that the amendments will cause the EU to reject the Chequers proposal, leading to a hard, no-deal Brexit.
This was followed by backlash on part of the pro-EU wing of the Conservative party, culminating in an attempt to pass an amendment that would have meant that the UK would join a customs union (not the EU Customs Union, but one similar to Turkey’s arrangement with the EU) if a free trade area agreement hadn’t been reached by January 2019. It failed by 307 to 301 votes. However, the Government did face defeat as an amendment that states the UK must remain part of the European Medicines Agency passed.

Both bills have now passed through their third readings in the Commons, and their first readings in the Lords – the next stage will be their second readings in the Lords, which will take place in September.

Despite all the issues and objections that have been raised against the Government’s proposal, it at least deserves credit for being pragmatic in recognising the need for diplomatically addressing the EU’s arguments and concerns if a deal is to be reached. Indeed, the EU’s chief negotiator Michel Barnier said it opened “the way to a constructive discussion”, despite questioning and criticising elements of the plan.

The fact that Barnier did not reject the plan is significant, as it may indicate the ERG’s bid for a no-deal Brexit has failed. The extent to which he ‘dissected’ or ‘dismantled’ it has been exaggerated in recent media reports. However, the Government clearly still has a lot of work left to do, and it is unclear to what extent the ERG’s four amendments will undermine it in the future.

By Bilal Asghar