‘Malthouse Compromise’ wins DUP backing and support from trade experts

Late last night it emerged that MPs representing a broad cross-section of Tory opinion on Brexit had been working together on a new plan behind which Leavers and Remainers could unite. The so-called Malthouse Compromise – named after Brexit-backing minister Kit Malthouse who helped broker the discussions that brought the parties together – would provide […]

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Late last night it emerged that MPs representing a broad cross-section of Tory opinion on Brexit had been working together on a new plan behind which Leavers and Remainers could unite.

The so-called Malthouse Compromise – named after Brexit-backing minister Kit Malthouse who helped broker the discussions that brought the parties together – would provide for “exit from the EU on time with a new backstop, which would be acceptable indefinitely, but which incentivises us all to reach a new future relationship”.

Also reportedly involved in the talks that brought about the proposals were European Research Group stalwarts Jacob Rees-Mogg and Steve Baker, Remain-backing ministers Stephen Hammond and Robert Buckland, as well as Treasury Committee Chair and former Cabinet Minister Nicky Morgan.

The plan would extend the transition period by a year to December 2021, which would “allow both parties to prepare properly for WTO terms, but also provide a period in which the parties could obviate this outcome by negotiating a mutually beneficial future relationship”.

A summary of the proposals is circulating, which explains it as follows: 

Plan A – Revise negotiated Withdrawal Agreement and Framework

Outline:

  • Immediately table legal text to amend the Withdrawal Agreement to replace the backstop with an acceptable indefinite solution set
    out in A Better Deal, 12 Dec 2019
  • Maintain our offer on the rights of EU citizens in the UK, the agreed financial settlement, and the proposed Implementation Period
    (IP) until no later than Dec 2021, or sooner on conclusion of the Future Relationship (FR)
  • Require that, at the end of the IP or sooner, the UK shall negotiate fisheries access as an independent coastal state, under UNCLOS

Advantages

  • Rescues the Withdrawal Agreement
  • Maximises leverage plus secure a transition period
  • No backstop dangers: the new protocol is permanent, a “frontstop” and should be objectively acceptable to all.

Disadvantages

  • Uncertainty continues until the FR is ratified
  • Difficulty of persuading Eurosceptics to swallow:
  • – £39bn payment
  • – Saving the effect of the ECA during the IP
  • – Additional EU citizens’ rights
  •  – Other WA problems (DSC, CCP vs WTO)

Plan B – Basic transition agreement=====================

Outline:

  • Continue to offer legal text for Plan A and bilateral cooperation in areas of mutual interest, including security, in a spirit of goodwill
    and cooperation
  • Unilaterally guarantee EU citizens’ rights
  • Uphold current standards, pending a comprehensive FR
  • Offer to pay our net contribution (c.£10bn pa) in exchange for the Implementation Period as negotiated, until no later than Dec 2021
  • Require that, at the end of the IP or sooner, the UK shall negotiate fisheries access as an independent coastal state, under UNCLOS
  • Work to agree an interim GATT XXIV compliant trading arrangement, pending a comprehensive FR
  • Revise our financial offer to the minimum compatible with our public law international obligations and submit to arbitration

Advantages

  • Offers a standstill to 2021 to enable negotiations
  • Preserves optionality
  • Secures time
  • Secures exit

Disadvantages

  • Risks EU conditions, legislation, extension
  • No Withdrawal Agreement
  • Eurosceptic concern about:
  • – Structure of standstill, esp saving ECA effect
  • – Money

The DUP have been swift to endorse the Malthouse proposals, with party leader Arlene Foster issuing a statement to formally endorse the plan:

“We believe it can unify a number of strands in the Brexit debate including the views of remainers and leavers. It also gives a feasible alternative to the backstop proposed by the European Union which would split the United Kingdom or keep the entire United Kingdom in the Customs Union and Single Market. Importantly, this proposal would also offer a route towards negotiating a future trade relationship between the United Kingdom and the European Union.

“If the Prime Minister is seeking to find a united front, both between elements in her own party and the DUP, in the negotiations which she will enter with the European Union, then this is a proposition which she should not turn her back on. There is no better time to advance this alternative given the confusion and disarray which is now manifesting itself in Brussels. This has been displayed both by the contradictory EU statements and the panic stricken behaviour of the Irish government.”

Steve Baker has also released a letter in support of the Better Deal plan from a range of international trade experts, which reads as follows:

Dear Steve,

You have asked for our views as trade policy experts as to the proposal of a Better Deal as an acceptable Withdrawal Agreement that would allow the UK to proceed to the next stage of negotiations, and that would not, in our view take an independent trade and regulatory policy off the table, and would allow, if the UK so chose a clear and negotiable pathway to a comprehensive and advanced free trade agreement such as proposed in Plan A Plus.

We can confirm that in our view the UK would be best served by putting an offer like a Better Deal on the table, and allow the process of pressure and compression at the back end of the negotiations to start to take effect. We would anticipate that the UK will see datapoints emerge from the EU in the course of the next month, such as EU member state agricultural producers express concern about the possibility of no deal, especially Irish beef farmers, Bavarian dairy farmers, and French farmers. We would anticipate member states start to weaken in their unity vis-à-vis each other and the Commission. We have already seen signs of this from Germany, Poland, and from French farmers and fishermen. It is imperative that the UK keeps the pressure on (seeking an extension of Article 50 at the end of February per the Cooper-Boles amendment would be a fatal mistake as it would take the pressure off the EU just as it would otherwise be building). In addition, there is value to putting this facilitated approach on the table as if there is to be an FTA in the future, it will require discussion and evaluation now. It is better to get the EU used to UK ideas on this point, and to put some specifics behind Michel Barnier’s recent pronouncement that, in the event of no deal, alternative arrangements would have to be found for the Irish border. Furthermore, during this period, it would be important for the UK to line up its allies, especially those who run global supply chains through the UK and EU-27 such as the US, Japan, and Korea to name three in support of its reasonable proposals, thus increasing the pressure and compression on the EU.

In our view the current deal gives all the negotiating leverage to the EU during the negotiating phase and makes the path to an advanced FTA such as we have proposed in Plan A Plus extremely difficult. If comfort could be given that such an un-occluded path exists, then support might be brought to bear on all sides for an agreement allowing the transition period to be retained.

Yours sincerely,

Peter Allgeier, Former Deputy USTR and Former US Ambassador to the WTO
Eduardo Perez-Motta, Former Mexican Ambassador to the WTO and Former Chairman of the Mexican Competition Commission
Alan Oxley, former Chairman of GATT Council, Former Australian Ambassador to the WTO, founder of the Cairns Group
Lockwood Smith, former Trade Minister of New Zealand
Shanker Singham, former cleared advisor to US government, Mitt Romney Presidential Campaigns of 2008 and 2012, and formerhead of Squire Patton Boggs Market Access/WTO practice
Hans Maessen, Customs specialist, SGS Corporation, and representative of CLECAT, European Association of Customs Professionals
U. Srinivasa Rangan, Professor of International Business, Babson College, US

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