Tony Connelly: The Chequers die is cast
The Chequers die is cast. Theresa May faced down the hardliners during a day of drama, but the anticipated purge of recalcitrant hardliners did not come to pass.
The three page agreement, as such, does its best keep both sides on board.
Brexiteers are still outraged: the UK will be a rule-taker, overshadowed by the EU’s single market body of law on how goods are produced, the ECJ will hold sway, and the end to free movement is qualified.
The so-called customs partnership idea, dismissed by Boris Johnson as "crazy" is back in play, with the UK maintaining the EU’s common external tariff where appropriate, and acting as customs collecting authority for the EU where the UK’s tariffs are lower.
The EU will not like it. The statement says the UK will go its own way on services, thus splitting the four freedoms. The customs partnership idea will be anathema to European Commission customs officials who believe you are either in or out of the Customs Union, because it only works if everyone follows the same rules, and there is automaticity of sanction.
There is a also convoluted section about joint procedures should disputes arise on the so-called common rulebook, with ECJ case law being a priority, yet with the ECJ somehow not being able to have the final word.
Listen: Brexit Republic podcast
Each time the UK has to adapts to new or updated EU rules on the single market, which will happen very frequently, parliament will have to give its approval. If it does not, the paper says there will be "consequences" but it does not say what those consequences are.
The Chequers paper commits the UK to agreeing an Irish backstop in the Withdrawal Agreement, but states with confidence that it will never be needed, since the vision for the future relationship - as envisaged in the document - will be so comprehensive that no controls will be needed along the Irish border.
At last week’s European Council, the EU27 leaders demanded "workable and realistic" proposals from the UK.
Has the Chequers document delivered "workable and realistic" solutions?
It does not look like it. But so much of this process is governed by hints, nuances, fig leaves, and apparent contradictions. As I’ll try to argue here, what matters is how perceptions are managed, and how this plays out over a much longer period than simply the deadline for the Withdrawal Agreement in October.
The preamble to Chequers was marked by deepening pessimism on the EU side, given the domestic turmoil in the Tory Party. "There is quite some doubt whether they are capable of coming forward with clear, credible and realistic proposals," said one senior EU official ahead of the meeting. "That’s what’s at stake [at Chequers]. Where will she be able domestically to put the cursor?"
At the EU summit they spent just one hour discussing Brexit, since the UK had not put anything workable on the table. Only five out of 27 leaders intervened. Leo Varadkar simply elaborated on what Michel Barnier, the EU’s chief negotiator, had already told leaders: Serious differences remained over the Irish backstop, time was running out, and Britain had to come forward with workable solutions.
The council conclusions carried four paragraphs worth of reprimand which said "no substantial progress" had been made, that the UK had to stick to the commitments it made in December and March, and that the transition period – which hangs on the Withdrawal Agreement’s successful conclusion – was essentially at risk.
The 27 leaders adopted the conclusions in one minute.
"There was nothing to say," says one EU diplomat. "The Brits haven’t come up with anything since March, except for that dreadful customs paper [from June 7, which spoke of a UK-wide backstop]. Five leaders intervened, nobody had anything to say except [to express] a sense of bewilderment."
But the discussion left its mark.
"The realism on the European side about where things are at was sobering," says a senior EU official.
That said, the realism on the British side appeared to be deepening. Theresa May’s options are all the time being narrowed. Irish officials felt that Chequers might take place in a more "honest" context.
With one British model after another tumbling in the face of EU opposition, the UK’s options for its future relationship with the EU are being boiled down.
For EU leaders the cursor will ultimately have to be placed (with a margin of error here or there) on either a free trade agreement, such as EU-Canada (CETA) deal, with the backstop attached (because a CETA-style FTA would not restore an invisible border), or a Norway-style deal, with a customs union attached (which would).
Senior EU figures know that Theresa May could not simply plump for Norway plus at Chequers. "Nobody is expecting they will shift suddenly to a Norway plus customs union model," says a senior EU figure. "Nobody thinks that is on the cards. It would mean, however, that you solve the backstop, because you would have a perfect match to avoid all the checks."
Those with a keen knowledge of the dynamics within both Downing Street and the Department for Exiting the European Union (DexEU) describe a process of Theresa May tortuously, yet deliberately, inching her government along the spectrum, away from Canada and towards Norway.
Her hope appears to be that she will get as close to Norway as humanly possible, so that the EU will be graciously flexible when we all get there, perhaps not before October, but sometime during the two year transition period.
On the eve of Chequers, leaked extracts of the text suggested a significant step in that direction. They spoke of Britain accepting "European harmonised standards" on manufactured goods, and promising not to diverge from those standards in the future by putting forward its own "competing national standards".
Throughout the day, however, some of that language appears to have been rubbed out.
Sources suggested that Theresa May’s long term strategy changed in December. Although she still consults Nick Timothy, her former hardline chief of staff, she has been more tightly connected to a small group of advisers including her EU sherpa Olly Robbins, cabinet secretary Jeremy Heywood (although he is now on sick leave), and figures from the Treasury, including the Chancellor Philip Hammond.
In public she has persevered with slogans on Brexit meaning leaving this or that. But she has been persuaded in private that a much softer Brexit is in the national interest.
The three page Chequers statement is classic Theresa May. There are enough fig leaves to give the impression that she is sticking to her red lines: Britain is still taking control of its borders, ending free movement, and will still strike free trade deals around the world (but for services only, is the implication of the text).
She has made tactical use of Business Secretary Greg Clark. He is not an out and out Remainer, so does not raise the hackles of Brexiteers. But at both yesterday’s Chequers gathering, and the previous one in February, he presented slides that were dry, but hard-hitting, on the impact of leaving the single market and customs union.
It’s understood that Philip Hammond, vilified by hardliners and the Brexit-supporting press, was to present more facts and figures on the fiscal and macroeconomic implications of a hard Brexit. His message was expected to be more political – targeting pivotal figures like Sajid Javid, the Home Secretary, who is a widely tipped frontrunner to succeed Theresa May.
If the Conservatives wanted to win the next election with the promise of more public spending, he was expected to say, then a softer Brexit was unavoidable.
EU officials have been careful not to pre-empt the Chequers meeting with a rejection of what had been leaked.
While the ministerial cars were cooling in Chequers, the EU’s chief negotiator Michel Barnier, told an audience of IIEA members in Ireland’s Permanent Representation to the EU would not comment on what was happening at Chequers until he and his team had examined the upcoming white paper in detail.
But he said he had "real respect for Theresa May and I know her daily work is not easy."
EU Task Force officials decided to withhold a series of slides on the state of play on the Irish backstop and the interplay between goods and services at a meeting of the Working Party of EU27 officials in on Thursday on the eve of the Cheques meeting. Those slides will be presented next week instead.
However, Mr Barnier’s speech was still uncompromising.
He had two key messages: The EU was not going to start unraveling its single market just to suit the UK. And, there would be a bigger push to dedramatise the backstop, ie make it palatable to unionists and the UK government, because it was not going away.
"Let me be clear," he told the audience. "We are not asking for any border between Northern Ireland and any other part of the UK. We must dedramatise the backstop. We’ll need to clarify how and where these controls [on goods coming in from Great Britain] need to be done. These are only technical controls on goods, no more, no less."
Michel Barnier is insisting that such practical controls are needed to maintain a limited version what is there already, in order to be faithful to what both governments and the EU have already promised: no checks on the Irish border.
But his message on the single market was unmistakable. It was at the heart of the EU project. The UK had helped forge it, but would not be allowed to wreck it on its way out. "The Single Market is our main economic public good," he told the audience. "We will not damage it. We will not reverse what we achieved with the UK. We must find solutions that respect the integrity of the Single Market. We are ready to adapt our proposal, should the UK’s redlines change. Our objective has always been to find a solution that works for us and the UK, not against the UK."
The notion of Britain staying in the single market for goods but not services, which is a centrepiece to the Chequers statement, has been worrying the Commission for some time.
It would allow London to strike free trade deals on services around the world. Britain would then seek to access the EU single market for financial services in exchange for some freedom of movement for EU citizens
According to senior sources, the European Commission could see the traction the idea was getting and quickly moved to scupper it. When they travelled to Dublin on June 21, both the Commission President Jean-Claude Juncker, and Michel Barnier told the Irish government that it was not a runner.
"The Commission saw suddenly this [idea] becoming the talk of the town and they felt it necessary to clarify why it wouldn’t work," says a senior EU source. "It’s not so much hardening their position but rather clarifying the problems with. Because if Chequers was going to be successful [from a British cabinet point of view], then you would expect it to contain the model of a customs union and single market for goods [and not services].
"What the Commission actually wanted to make clear was that a single market for goods [only] has quite a few problems."
Some senior Commission officials have sympathy for the idea. The EU has a surplus on manufactured goods so it would make economic sense. But Brussels is clearly not ready to take such a leap in the current time-frame.
"I don’t see any appetite within the EU to start messing around with the single market," says one EU diplomat. "I just don’t. Maybe in five years, maybe in ten years. But not now. The EU will not rush itself into making a bad decision."
The single market has taken years to evolve, and it is still far from complete (especially in services and digital). The EU would want years of inching forward in order to insert safeguarding measures, restrictions, and possible sectoral carve-outs in any revamped single market.
"But you can’t do it between now and October," says the diplomat. "That’s just not going to work."
On the backstop, the Chequers statement simply says that, although the UK will agree to having a backstop, it won’t be needed. The agreement would ensure "that the operational legal text the UK will nonetheless agree on the ‘backstop’ solution as part of the Withdrawal Agreement would not need to be brought into effect."
The UK’s concerns over the backstop, as articulated in the draft Withdrawal Agreement of February 25, are acknowledged in Brussels. Officials accept that the phraseology is problematic for unionists, to say the least.
There are indications the EU may be prepared to change the language, but not the fundamentals. "It’s not that we absolutely want a sticker on it saying, this is the Commission original," says the source. "If we can find a different presentation on the backstop fine. But the ingredients are there to solve the issue of border crossings and checks."
Another EU diplomat says: "I think people are conscious that the language [from the draft Irish Protocol in the Withdrawal Agreement] is difficult for unionism. If there’s any alternative language, let’s go with it."
But that must be seen in the context of Michel Barnier’s new buzzword of "dedramatisation."
There will be a push in the coming weeks to examine how those checks can be stripped of their political toxicity, even through the use of maximum facilitation, or max fac, which puts the emphasis on technology.
Brexiteers have wanted to use max fac for the Irish border; the Commission will explore it for the Irish Sea, on the basis that it is easier to have checks on ferries and at ports, rather than along a 500km land border with over 200 crossing points.
But from a British point of view, dedramatisation works both ways.
If the EU were to agree to the UK as a whole staying in a customs union, then that also takes the drama out of the backstop.
That would allow the UK to give itself cover by agreeing to the backstop, with modified language, by October.
The cover would be that there is an implicit acknowledgement on all sides that everyone wants the same outcome: no border on the island or along the Irish Sea.
Much of this can only work if there is an accepted margin of incompatible presentation: the UK effectively swallowing the EU’s legal order on customs, but saying they’re not. The UK claiming to be a third country, but effectively not being a third country.
Again, all of this would be managed and massaged well into the transition period. And it will depend on the EU not slamming the door shut immediately, notwithstanding the Task Force’s abhorrence of what has been proposed so far.
"It won’t be a deal now," says one source with close ties to both Downing Street and DexEU. "But that’s what we’re working towards. It’s the only way the UK can dedramatise things. Anything new and ambitious, but not off-the-shelf, will play out well into the transition. The question is how you get there. We need light at the end of the tunnel, but we don’t have a tunnel yet."
The source adds: "There are two options. Put pressure on Dublin, by saying, look, we’re moving towards this - we don’t need a backstop. Or the second option is, ok we’ll sign up to a version of the backstop - but it needs to be there to provide reassurance that we’re all moving towards a world where customs checks aren’t needed anywhere."
If we read the Chequers statement according to that logic, then Theresa May herself is working towards that end, and trying, by dint of pressure, fig leaves and prestidigitation, to drag her government with her.
But is a high risk strategy. The transition extends to December 2020. That is a long time in politics.