There are very strong reasons why the EU ought to accept the Malthouse Compromise

The recent vote in Parliament attempting to prevent a no-deal outcome on Brexit was counter-productive and non-binding. Any attempt to hobble the Government’s negotiating hand would have been a self-inflicted wound. It was also irrelevant, since virtually no-one in the UK is advocating no deal. The preference of the European Research Group (ERG) of Conservative […]

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The recent vote in Parliament attempting to prevent a no-deal outcome on Brexit was counter-productive and non-binding. Any attempt to hobble the Government’s negotiating hand would have been a self-inflicted wound. It was also irrelevant, since virtually no-one in the UK is advocating no deal.

The preference of the European Research Group (ERG) of Conservative eurosceptic MPs has always been for what is usually called a ‘Canada-plus’ free trade agreement. Everyone also supports sensible side deals on such issues as aircraft landing rights, air and vehicle safety certification, and truckers’ licences. It may not be the Withdrawal Agreement signed off by Theresa May, but it is a perfectly coherent UK offer, especially if accompanied by undertakings on the Irish border.

It is entirely logical for Brussels to play hardball at this stage of the talks. The EU still see some prospect of Parliament reversing its rejection of the Withdrawal Agreement and are, of course, fully aware of the non-binding vote on no deal. However, the EU’s current refusal to re-open the Withdrawal Agreement is unlikely to be a guide to the endgame in March.

It would nevertheless be logical for the EU to offer Parliament a sweetener in the form of a codicil attached to the Withdrawal Agreement. This codicil could suggest that the EU will try hard to ensure that the backstop is either never used or will be used for only a short period.

However, this is unlikely to work since prominent ERG MPs have said that they will reject any formulation that does not replace the current wording of the Withdrawal Agreement with a clear get-out clause from the backstop. The likelihood is, thus, that the deal will once again be rejected if it returns to Parliament.

The Prime Minister’s first preference is clearly still to get an amended Withdrawal Agreement through Parliament. Her strategy all along has been to give Leave supporters a formal exit from the EU and control over EU migration, but to give companies an outcome very close to the customs union and single market. The recent Nissan decision not to build the new X-Trail model in the UK will have strengthened this resolve.

The voting strength of the ERG, however, means that a fall-back position is now under consideration – the ‘Malthouse Compromise’. This is close to the ERG’s long-standing preferred option, with the involvement of prominent Remainers giving the plan a far higher profile than we might otherwise have expected. These MPs find the Withdrawal Agreement unacceptable. They also share a survival instinct and wish to prevent their party from fracturing and losing the next election.

If and when the Withdrawal Agreement fails again to pass in Parliament, the plan is to have a compromise which the Malthouse group hope will command sufficient Tory and DUP support (together with up to forty Labour MPs from Leave-voting constituencies) to provide majority backing in Parliament. This can then be presented to the EU who will need to choose between this and no deal.

The Malthouse Compromise is based on a free-trade agreement with no tariffs or quotas. A commitment to avoid new infrastructure on the Irish border is supported by proposals for advanced customs and trade facilitation measures of the sort already in use on, for instance, the Swiss border. Regulatory equivalence of the type that currently exists for meat imports from New Zealand are proposed to remove the need for sanitary and phytosanitary checks for food and animal imports. Non-regression clauses of the sort common in modern free trade agreements are proposed to address EU concerns over unfair competition. Provisions on citizens’ rights and payments to the EU would be carried forward from the Withdrawal Agreement.

The Malthouse plan could involve an extended transition period agreed under Article 50 to allow time to negotiate a free trade agreement (which should not be difficult between two entities which already have free trade). Additional payments would accompany an extended period.

Alternatively, the free trade negotiation could be conducted without a formal transition period through making use of the provisions of GATT Article 24 as long as the EU agreed that formal FTA talks could begin soon after 29th March. Article 24 allows countries engaged in formal free trade negotiations to suspend the most favoured nation rule of the WTO and to continue with the existing tariff-free trade arrangements. In either case, the period would finish by December 2021 at the latest.

The EU is likely to resist consideration of this alternative for several weeks, but once the Withdrawal Agreement has sunk without trace, and both sides face no deal, there are three strong reasons why it might accept the Malthouse Compromise.

First, an agreement secures the £39 billion (or more) promised in the Withdrawal Agreement. Secondly, an agreement avoids potentially high tariffs for EU exporters into the EU. The EU currently sells £55 billion of products in high-tariff food and vehicle sectors into the UK. Exports from the UK into the EU in these sectors are lower at £21 billion.

But the most pressing reason is to secure a frictionless border in Ireland. The UK has guaranteed no new border infrastructure, deal or no deal, but without a deal there will be a problem on the Irish side to maintain the integrity of the EU Single Market.

It is obviously better for Ireland and the EU to accept some deal on the Irish border rather than no deal at all, even if that deal were inferior to the backstop in their eyes. The UK will also prefer to avoid no deal but can live with tariffs and side deals.

This is an extract from Brexit and Backstop: everything you need to know, published today by The UK in a Changing Europe.

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Why seeking an extension to Article 50 would be a terrible idea

From various quarters, whispers or even open calls are growing for an extension to the UK’s Article 50 period which finishes, unless extended, on 29th March 2019. Most of those talking about an Article 50 extension seem to assume that the UK only has to ask for such an extension, and it will be granted […]

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From various quarters, whispers or even open calls are growing for an extension to the UK’s Article 50 period which finishes, unless extended, on 29th March 2019. Most of those talking about an Article 50 extension seem to assume that the UK only has to ask for such an extension, and it will be granted unto us.

However, the European Union is not the beneficent Lord mentioned in the gospel according to St Matthew Chapter 7, Verse 7 (the Sermon on the Mount), and confidence that the EU will just grant any extension that the UK asks of them is likely to prove very misplaced.

The so-called “Cooper-Boles amendment”, which was defeated in the House of Commons on 29th January by 321 to 298 votes, seems to be based on such an assumption. This sought to pave the way for a Bill which would impose a legal duty on the Prime Minister to “seek an extension of the period of two years specified in Article 50(3) of the Treaty on European Union to a period ending on 31 December 2019”, or to such other date as the House of Commons might decide on a future motion.

The legalities of an Article 50 extension

But let us look at the legalities both of how an Article 50 extension can be granted, and the legal effects of such an extension. It is important to understand both in order to assess the likely reaction of the European Union and its Member States to an Article 50 extension request from the UK.

The governing provision is the closing words of Article 50(3) of the Treaty on European Union:

“3. The Treaties shall cease to apply to the State in question from the date of entry into force of the withdrawal agreement or, failing that, two years after the notification referred to in paragraph 2 [i.e. 29 March 2019], unless the European Council, in agreement with the Member State concerned, unanimously decides to extend this period.”

The effect of an extension, if granted, is to postpone the UK’s date of exit from the European Union, so that the whole panoply of rights and obligations of EU membership would continue to apply to the UK as a Member State during the extended period. So the UK’s obligation to pay into the EU budget would automatically be extended. But most importantly in view of its political repercussions, both the right of the UK to be represented by MEPs in the European Parliament and its obligation to choose them by direct elections would continue to apply to the UK.

On the face of it, this means that if an extension takes us past May, the UK must then hold a fresh round of European Parliament elections. There is a little bit of wriggle room, in that if the extension period terminates before the new European Parliament assembles on 2nd July 2019, such elections could be avoided as pointless. But if the extension is beyond that date, it is very difficult so see how the elections could be avoided.

That would mean that Nigel Farage would be re-elected to the European Parliament, probably in present circumstances as part of an increased phalanx of members of his new Brexit Party. And the EU’s internal legal advice is apparently that once elected, the UK MEPs would be entitled to remain members of the European Parliament for the rest of their five-year terms, regardless of when the UK leaves the EU. This would completely up-end the political agreements which have been reached for the sharing out of the seats which (it had been assumed) would be vacated by the UK in the European Parliament.

This is a huge spanner in the works for any Article 50 extension longer than three months. No doubt the ‘creative law-bending’ departments of the EU would be hard at work to think of ways round this problem, but at the moment it looks like a formidable difficulty.

But another problem arises if an extension is for three months or less – say to 29th June. It is not possible to treat such an extension as a “more of the same” extended negotiating period. This is because the current European Parliament term will end on 18th April 2019 prior to the European Parliament elections. Article 50(2) requires that the European Parliament must consent to any Withdrawal Agreement before the EU can conclude it.

So, at most, an extension to the Article 50 period which stops short of 2nd July would allow merely an extra three weeks for an agreement to be finalised and concluded.

As to how an Article 50 extension is granted, it should be noted that this requires the unanimous consent of each EU27 Member State within the European Council. This is actually a more stringent rule than for an Article 50 agreement to be concluded, which can be done by Qualified Majority Vote (QMV).

The effect of this requirement is to place enormous power in the hands of each individual Member State which may have demands it wants to make. If the UK comes crawling along, begging for an Article 50 extension, what better time to dig in and extract some useful concessions?

What terms will be imposed on an Article 50 extension?

Let us then turn to the question of whether, and on what terms, an Article 50 extension might be agreed if the UK asks for it. As is evident from Article 50(3) quoted above, such an extension is not simply a matter of choice for the UK, but requires the unanimous consent of all EU27 Member States.

First, the EU collectively is unlikely to agree to any Article 50 extension unless there is a clear purpose to it, other than just buying time for yet more turmoil and negotiation. Secondly, as mentioned already, the EU will be very reluctant indeed to agree any extension beyond 2nd July 2019 because of the consequences for the European Parliament elections.

But, thirdly, quite apart from what the EU as a whole may have concerns about, each individual Member State may have demands of its own.

As reported in the Financial Times on 1st February: “The Spanish are gearing up for a Gibraltar fight when there is an extension request,” said one senior EU diplomat. “It could be dangerous.”

And Germany also could have its demands. When my colleague Dr Gunnar Beck and I gave evidence in Berlin to the European Union Committee of the Bundestag, the subject of a possible Article 50 extension was raised by a number of the German legal experts giving evidence to the Committee. First, it was the general view that there would be great difficulties in extending it by more than a couple of months, because that would mean that the May 2019 European Parliament elections would need to be held in the UK. None of the German legal experts could think of a convincing way round this problem, since the election of MEPs in each Member State is mandated by the European treaties.

However, one of the German experts made an important point. He pointed out that the UK Government is using the fact that there is no mechanism to make the UK pay the ‘divorce bill’ unless a Withdrawal Agreement is ratified as a negotiating lever. He advised the Committee that Germany should require, as a precondition of agreeing to any Article 50 extension, that the UK should agree unconditionally to abide by the obligations to pay money into the EU budget which are set out in Part Five of the Withdrawal Agreement, and to submitting to the jurisdiction of the ECJ to set the amount of these payments, regardless of whether or not a Withdrawal Agreement was subsequently ratified.

One does not know whether the German Government will take up this suggestion, but it would be quite logical for it to do so. Germany will end up paying the lion’s share of the shortfall in the EU budget caused by the UK’s departure. Under the draft Withdrawal Agreement, the UK would have to pay a sum which has been widely estimated at £39 billion, but in fact is likely to end up considerably higher, particularly since Theresa May caved in to the EU’s demand that the ECJ should be given jurisdiction to decide the amount instead of a neutral international tribunal.

Under international law, the UK would have some legal obligations, but they would be very much lower (for background on this, see what I and Charlie Elphicke MP wrote here on the EU’s financial claims).

So taking advantage of the UK’s moment of weakness when it supplicates for an Article 50 extension, and taking the chance to lock in the EU’s legal entitlement to this enhanced sum come what may, would be quite the logical thing for Germany to insist on.

This illustrates a wider point about any application to extend Article 50.

By asking for a favour when up against the clock, the UK would once again put itself in a very weak negotiating position, where it would be subject to being blackmailed for further concessions.

It would also let the EU off the hook and remove the negotiation pressure on the EU to revise the terms of the Withdrawal Agreement.

Asking for an Article 50 extension would be a terrible, terrible idea.

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Deal or no deal, Martin Selmayr told the Brexit Select Committee our divorce bill is £39 billion

The Brexit Select Committee had its first meeting with Martin Selmayr, Secretary General of the European Commission today (4th February). Pleasantries were effusive, but we found just one word of agreement between ourselves. That came in the description of the UK’s departure from the EU without a formal deal – described as ‘suboptimal’. We received […]

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The Brexit Select Committee had its first meeting with Martin Selmayr, Secretary General of the European Commission today (4th February). Pleasantries were effusive, but we found just one word of agreement between ourselves. That came in the description of the UK’s departure from the EU without a formal deal – described as ‘suboptimal’.

We received some castigation for not meekly agreeing, as a country, to the draft Withdrawal Agreement brought back by the Prime Minister. This ignores the significant horse-trading, treaty change and new protocols post-Heads of Government agreement that took place in the Republic of Ireland following the refusal to ratify at the first Treaty of Lisbon referendum in 2008; or in France following its refusal to ratify the European Constitution at a referendum in 2005; or the Danish public’s refusal to approve the Maastricht Treaty in 1992. Going back for change is not new, but then some members are ‘good’ and others are just ‘bad’.

The messages we received from Martin Selmayr were clear. There has been no notification, to date, from the UK Government requesting a re-opening of the Withdrawal Agreement and, in any event, that matter is closed. The EU negotiating team under Monsieur Barnier have finished their work, the EU27 have approved it and that is that.

When it was pointed out that there is the small matter of a 230 majority in the House of Commons against the current deal, the greatest defeat for a UK government in history, this was brushed aside as a mere irritant. When pressed that there is the potential for a deal under terms of the Malthouse Compromise that follows from the Brady Amendment passed on 29th January, but that it must include the ditching of the backstop, the suggestion fell on deaf ears. There can be no change to the Withdrawal Agreement text, but letters of assurance on the backstop: codicils, even a letter signed by all of the EU27 might be provided.

The backstop is advanced as an ‘insurance’, we are told, and it will be unlikely ever to be used. If this not-ever-to-be-used text, unwanted by the Commission and EU27 to have anything beyond a short life, unwanted by the UK Parliament (following Brady), and so it must now be construed unwanted by the Government, and most certainly unwanted by the public – why won’t this dead parrot admit that life has indeed left it?

And then came the kicker. In the event of no deal, which must now have increased in likelihood by several points, the EU will still demand the £39 billion divorce fee, else future relations would be forever soured.

Let’s get this right:

  • No deal – £39 billion
  • Appalling deal with no guarantee of an acceptable future relationship – £39 billion
  • A deal we might swallow (minus the backstop) – £39 billion
  • A good deal and a great future relationship – £39 billion

No wonder the sequencing of the negotiations were insisted upon at the outset. What was the question? The answer is £39 billion.

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The Brady Amendment and Withdrawal Agreement aren’t as incompatible as they may appear

Following the passing of the Brady Amendment demanding “alternative arrangements” to the Irish backstop on Tuesday, the Prime Minister is grappling with the issue of finding “alternative arrangements” which are compatible with the existing Withdrawal Agreement. At first sight, the odds of success are poor. The EU and its institutions have firmly entrenched themselves in […]

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Following the passing of the Brady Amendment demanding “alternative arrangements” to the Irish backstop on Tuesday, the Prime Minister is grappling with the issue of finding “alternative arrangements” which are compatible with the existing Withdrawal Agreement.

At first sight, the odds of success are poor. The EU and its institutions have firmly entrenched themselves in the current backstop framework, ostensibly to support Ireland and the maintenance of the Good Friday Agreement (a highly dubious claim), but practically as a mechanism to ensure that it has the upper hand in future trade negotiations with the UK.

As such, Parliament has rightly sent the Prime Minister back to Brussels to re-negotiate to improve our hand. She will likely follow the plan suggested by Kit Malthouse, which relies on an alternative border protocol included in A Better Deal. Realistically, while this ruse succeeded in uniting the Conservatives, I believe it stands no chance of being accepted by the EU.

However, it should not be forgotten that the Withdrawal Agreement itself does allow for the backstop to be avoided until December 2022 via an alternative arrangement, namely via an extension of the transition period to act as “front-stop”, thereby eliminating the backstop requirement.

As such, a scenario is described in the Withdrawal Agreement text, giving Theresa May a clear chance of saving her deal and improving our future negotiating position, while also respecting the deal as drafted. What is missing is an incentive for both sides to make this work.

As such, my proposal to the Prime Minister is as follows:

  1. The UK should agree a paid extension to the transition period to 2021 or 2022 as allowed under the Withdrawal Agreement. This will give ample time for border technologies and processes to be deployed and tested by both parties and of course additional time to prepare for our exit.
  2. Beyond this date, should the EU (read Ireland) declare that they are unhappy with the deployed border arrangements then the transition would continue while they are enhanced, but on the basis that no charge was levied on the UK for continuing transitional benefits. Furthermore, freedom of movement would cease. This would serve to give the UK substantial ongoing economic benefits (at the EU’s expense), should the EU seek to exploit the Irish situation for political purposes.

The resulting deal would remove the contentious backstop, guarantee no hard border in Ireland, maintain the unity of the United Kingdom and ensure fair play from both sides during the “future relationship” negotiations.

For the Irish, it grants them what they superficially seek – namely an ongoing device to solve the border issue – but one that ensures that it will not be deployed for a prolonged period, unlike the current backstop. Both President Macron and the European Parliament have slipped up by revealing that they see the backstop as the device to cement their negotiating hand. Added to this, while the trajectory of our future relationship with the EU remains uncertain, both a Canada Plus trade deal and a bespoke customs union for goods seem the most likely outcomes, and both would require unanimity from the 27 member states.

Without a financial disincentive as described above, Spain and Ireland may be tempted to blackmail the UK in the final stages of negotiation just as we saw from the Walloons and the ratification of the Canadian trade deal. The device above effectively isolates them within the EU and forces the club to act in good faith in its negotiations with the UK, hopefully avoiding a repeat of the negotiating issues we have seen in the last two years.

So where would this revised deal leave both parties?

For the EU, this proposal puts them in a difficult public position. It is “reasonable” as it provides extra cash and maintains the Withdrawal Agreement framework. It also retains a device – albeit a costly one – to ensure a trade deal is not signed until the border issue is signed off. They would receive an additional £10-20 billion from the UK depending on the length of the formal extension agreed, which would be welcomed by the Germans who are already nervous about the funding demands on them in the next budget period. Moreover, if they are seen to squeal about the arrangements post-2022, they will reveal their hand and show the world that they do not believe they can conclude a trade deal with the UK in the next four years; a message they will be reluctant to send member states and international parties.

From the British perspective, we will have secured a smooth transition and avoided the limbo of the backstop. This outcome would be well received by international investors who would likely be deterred by the curious legal arrangements described in the current backstop and which effectively put the UK in the sin-bin. Secondly, by committing money, technology and urgency to the Irish border debate now, we are sending the EU the strong message that this issue is a priority that we want to solve straight away.

To the Prime Minister’s credit, the concept of an extended transition was raised in mid-October but dismissed by Brexiteers when “no-deal” was the assumed default. Good ideas often get lost in lengthy negotiations and this is a prime example. She now needs to return with a fresh team in negotiations to bring about change. This framework allows her to do so within the construct of the Withdrawal Agreement, therefore ensuring the EU is forced to sit up and listen to her proposal.

I conclude with one final suggestion: the extended transition period payment should only be made when the trade deal is ratified. We have failed to exploit the value of the existing £39 billion bill; the same mistake must not be repeated.

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‘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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Backstop or no backstop, Theresa May’s Withdrawal Agreement remains a bad deal

Backstop or not, our MPs must unequivocally maintain their opposition to Theresa May’s Withdrawal Agreement. It is worrying that some MPs are starting to think that a concession from the EU on the Irish border issue may make them vote the Agreement through. The Irish backstop has had the effect of a dense fog descending […]

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Backstop or not, our MPs must unequivocally maintain their opposition to Theresa May’s Withdrawal Agreement. It is worrying that some MPs are starting to think that a concession from the EU on the Irish border issue may make them vote the Agreement through.

The Irish backstop has had the effect of a dense fog descending on Westminster. It has obscured the obvious truth that should be there for all to see: that the Withdrawal Agreement is a bad deal and a betrayal of the Brexit that the people of this country voted for.

Many of our MPs’ memories – nor to mention their judgements – may have become clouded by this fog as they face another momentous week.

Even with a time-limited backstop, a backstop with a guaranteed escape clause or even one with pink and purple spots, the Withdrawal Agreement still leaves us under EU control and out in name only.

Its hundreds of  pages include provision for a transition period from our ‘departure’ on 29th March until 31st December 2020, which could in fact be extended to the end of 2022 – meaning we could be locked in as a vassal state for nearly four years! Some say best to accept this as it still means we leave and that we will be able to regain control in the years (probably decades, if ever) to come. This is not Brexit.

We will have to abide by all EU rules but will have lost membership of all of its institutions along with any say about damaging new rules and directives which we will have to follow to the letter under the jurisdiction of the European Court of Justice. Rules which have done our country’s economy and SMEs so much harm in the past. How is this ‘taking back control’?

Oh, and we will need to hand over £39 billion, at least, for the privilege; with no cast iron guarantee about our future trading relationship.

Anything other than a clean Brexit will leave us unable to decide upon regulations and there will be no chance of us seeing British Standards revitalised and brought back, which our exporters will need to develop their trade on the international stage.

Succumbing to Theresa’s May Withdrawal Agreement, even without the awful backstop, will mean stumbling around for at least another couple of years as we try to pin down the EU on trade and our future relationship having already gifted away all of our bargaining power.

That means more uncertainty, more cost, more time wasted, more disastrous directives from Brussels and more division.

We’ve already suffered more than two years of dithering at the highest level, culminating in the ill-conceived Chequers Plan and the historic vote against Mrs May’s disastrous first Withdrawal Agreement.

Absolutely no-one wants to see a permanent hard border in Ireland or a return to the Troubles of the past; on that we all agree and ways can be found to avoid this.

The whole issue has been disgracefully weaponised by those behind Project Fear as leverage to sabotage Brexit in the most disingenuous way.

It is time for our MPs to quit scrambling around in the fog and start to see sense: it’s time to leave, and leave properly.

They ought to unite behind a default departure on WTO terms on 29th March as an independent nation with its destiny under its own control.

Planes won’t fall out of the sky, medicines will still be prescribed and goods will still cross the Channel.

Only with a clean Brexit can we seize the great prize that is there to be won and start striking our own free trade deals around the world – and talk to the EU about our future trading relationship from a position of strength, rather than prolonging the agony for many more years.

No Deal means a WTO deal on trade and hundreds of other deals to ensure cooperation in the interests of all. It will also be the basis for a good trade deal too.

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Labour MPs should start embracing a no-deal Brexit

The below is an extract from Economists for Free Trade’s recent report, No Deal is the Best Deal for Britain The Brexit negotiations have brought an interesting paradox to light: politicians who have opposed the UK leaving the EU without ‘a deal’ have almost certainly made it more likely that we will end up with No […]

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The below is an extract from Economists for Free Trade’s recent report, No Deal is the Best Deal for Britain

The Brexit negotiations have brought an interesting paradox to light: politicians who have opposed the UK leaving the EU without ‘a deal’ have almost certainly made it more likely that we will end up with No Deal.

The EU took Theresa May’s refusal to prepare for no deal as a signal that the option was being ruled out. As a result, the EU was able to offer the UK a choice between a Withdrawal Agreement entirely in the EU’s interests and abandoning Brexit completely. However, if the EU has miscalculated and Brexit will happen come what may, then No Deal is now more likely than had we made serious preparations for it from the start.

For Labour MPs who want to stop Brexit completely, taking No Deal off the table is entirely rational. Things are different though for Jeremy Corbyn. He understands that going back on the Referendum result would not only be disastrous for democracy but would lose the Labour Party trust and credibility with a range of voters, and not just those in northern, leave-leaning seats. Corbyn now needs to grasp that taking No Deal off the table completely is simply incompatible with respecting the referendum result.

In fact, taking the No Deal option seriously is the best route to a better deal for the UK. Even if it is too late to renegotiate a formal revised withdrawal agreement, a more limited deal to continue tariff-free trade might still be possible before 29th March. But if that does not happen in time, once we have left, the economic arguments for tariff-free trade will continue to be strong and no longer inhibited by distractions such as the fictitious Irish hard-border problem or the lure of a second referendum.

The shameful lack of preparation for No Deal by the Tories means that short run disruption will be greater than it could have been. But Labour MPs must not be seduced by exaggerated horror stories of Project Fear Mark II. The vast majority of customs and other border checks already take place electronically, well away from borders. Indeed, Labour donor and businessman John Mills has explained how his company trades with a range of non-EU countries with extremely low border costs, whilst manufacturers such as JCB also see no major threat from leaving without a deal.

Whisper it, but there is also an economic upside to a No-Deal Brexit. In the first place, there is no justification in international law for the UK to hand over anything like £39 billion to the EU as a ‘divorce payment’. Without the Withdrawal Agreement, some of that amount can be used to ease transition costs for business affected by new customs procedures and tariffs, whilst also freeing up money to invest in key public services. Just as welcome for businesses will be the rapid end to uncertainty which a clean break with the EU on 29th March will bring.

The heart of the matter, though, is that a clean break from the EU will allow UK politicians (and by extension the electorate) to decide in what direction the UK goes. For example, the Labour front bench seems determined to stay in the EU Customs Union. It is an eccentric policy given that, by imposing high tariffs on many non-EU goods, the main purpose of the customs union is to protect businesses from overseas competition, thereby keeping prices of food and clothing high for hard-pressed consumers. However, if this is really thought to be a price worth paying to maintain existing protection for international companies, then a future Labour government can simply choose to have tariffs on non-EU goods at the same level as the EU. It certainly does not need the Tory Government to commit to this in a legally-binding treaty.

It is understandable that Labour MPs are worried by the prospect of Tory free-marketeers taking advantage of a No-Deal Brexit. But the other side of the coin is the restrictions to Corbyn’s economic agenda, which are inevitable under any other outcome. The EU is at heart a system aimed at making life easier for big multi-national companies and any formal withdrawal agreement will limit Labour’s options over nationalisation, industrial state aid, to say nothing of VAT reforms such as abolishing the Tampon Tax. The solution of course is to persuade voters to back the Labour vision of our economic future. Indeed, a key advantage of a clean break from the EU should be the reinvigoration of national and local democracy.

Jeremy Corbyn needs to keep the option of No Deal on the table on democratic grounds alone. But, properly managed, no deal makes political and economic sense both for the country and the Labour Party.

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The Government must force the EU back to the negotiating table while preparing for a WTO Brexit

Last night’s votes in the House of Commons sent a clear message to the Government that it must get on with delivering Brexit. Preparing for Brexit by getting the country ready for a departure on WTO terms also presents an opportunity to force the EU back to the negotiating table to get a better deal […]

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Last night’s votes in the House of Commons sent a clear message to the Government that it must get on with delivering Brexit. Preparing for Brexit by getting the country ready for a departure on WTO terms also presents an opportunity to force the EU back to the negotiating table to get a better deal for Britain.

This means that as the dust settles the Government needs to swiftly dismiss those who want to use the defeat as an excuse to stop Brexit and keep the UK under the thumb of Brussels. For too long they have been permitted to carry influence on the Brexit process and decision-making.

Many of those now trying to unpick Brexit voted for the referendum, stood on a manifesto to deliver Brexit, voted in favour of Article 50 and agreed to our departure from the EU on 29th March 2019. The Government must therefore move forward with new purpose and get Britain ready for our freedom from the EU on 29th March.

There are many advantages to leaving the EU on 29th March under WTO terms and with careful preparation there is nothing to fear.

First, doing so gives business and the country certainty to plan for the future as it gets rid of the years of uncertainty caused by the Withdrawal Agreement.

Second, as there will be no financial settlement, the Government will have £39 billion available to invest in the economy to address concerns about volatility and to support economic growth.

Third, we can immediately work on agreeing new trade deals with the rest of the world.

Fourth, we will have taken back control and delivered the outcome of the referendum and kept our promises to the people.

As well as leaving on these terms, we can also extend the hand of friendship to the EU to continue to cooperate in areas of mutual interest and to pursue an advanced free trade deal.

But while it is imperative the Government should fully prepare for departure under WTO terms, it is still preferable that we leave with a deal, so ministers should press for the Withdrawal Agreement to be amended. The Government should put new legal text on the table which changes the worst aspects of the Agreement to make it more acceptable.

This must include replacing the backstop with a better alternative that does not threaten the integrity of the United Kingdom and removing those elements that bind the UK into a single customs territory. With £39 billion at stake, there’s every prospect that the EU will return to the table for what should be seen as modest but important revisions.

Looking to negotiate a better deal while being fully prepared to leave on 29th March is the sensible and right course of action to take with either outcome being orderly and better than the deal that has been rejected.

The Government now has a chance to ensure we leave the EU and deliver on the promises made to the British people.

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Juncker and Tusk’s letter to Theresa May changes nothing: we must vote down the draft Withdrawal Agreement

The letter sent from Jean-Claude Juncker and Donald Tusk to Theresa May in the last 24 hours shows more clearly than anything else possibly could why the draft Withdrawal Agreement is fundamentally flawed: not only the lack of substance in the letter, which adds nothing new to the sum of human knowledge, but also the […]

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The letter sent from Jean-Claude Juncker and Donald Tusk to Theresa May in the last 24 hours shows more clearly than anything else possibly could why the draft Withdrawal Agreement is fundamentally flawed: not only the lack of substance in the letter, which adds nothing new to the sum of human knowledge, but also the lack of any form of collegiate kindness or helpfulness to the Prime Minister.

When the Prime Minister addressed the 1922 Committee on 12th December, she assured colleagues that she would secure legally-binding wording to address concerns over the Northern Ireland backstop. Now we learn there will be no end date to the backstop or unilateral exit mechanism for the UK. So, yet again, the EU have let the Prime Minister down.

The lesson is clear: we need to vote down the Withdrawal Agreement by as large a majority as possible. Only then can we move on and either negotiate a new agreement (as David Davis argued at the weekend) or Leave without a deal on World Trade Organisation terms with a view to later negotiating a new relationship.

The Government and the Conservative Party must remain committed to delivering the result of the referendum, as repeated in our 2017 manifesto, which pledged to leave the Customs Union and the Single Market, accompanied by the declaration that No Deal was better than a Bad Deal. Otherwise, the credibility of our democracy will be thrown into chaos.

The draft Withdrawal Agreement does not respect the result of the referendum. The Government should be seeking to unlock the negotiations by returning to the Canada-style option offered by President Tusk, using the tried and trusted techniques and procedures so that rules of origin and customs checks are conducted away from the Northern Ireland border, to make unnecessary the hard border that everyone agrees must be avoided.

The backstop means we will be trapped under the thumb of the EU with no date to escape – and unable to strike trade deals. It means we would be trapped indefinitely as a satellite of the EU, obeying its laws without a say, unless the EU and its Member States gave permission for us to leave. The UK will be paying £39 billion – equivalent to £1,443 per household, or £60 million per constituency – and getting nothing in return. We will not take back control of our money, laws and trade. Remaining in the Customs Union is a breach of the 2017 Conservative Manifesto on which I and all my colleagues stood.

The backstop drives a regulatory barrier down the Irish Sea, severely damaging the Union and moving Great Britain and Northern Ireland further apart. This deal keeps the supremacy of the European Court over our own law and sells out the UK fishing industry, excluding them from any trade deal, and envisaging a deal where the Prime Minister trades away our fish in return for market access.

We remain effectively in the EU for an extendable ‘transition’ period, paying and accepting new laws over which we will have had no say. Unrestricted immigration of EU nationals will still be continuing for years after we leave. This commitment comes with no guarantee of a future trade agreement. Worryingly, this deal will deny the UK an independent trade policy while potentially keeping us out of existing EU trade policy. We would be cut off from the world with our trade and economy regulated from Brussels without any say.

So, let us be honest: the Withdrawal Agreement is a terrible deal – worse than Chequers, less popular than the Poll Tax and only one in five voters think it honours the referendum result. The only way to get a better deal for the UK is for Parliament to reject it and force the Government to renegotiate with the EU.

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Don’t be fooled: this Brexit deal creates a triple lock to shackle the UK to Brussels forever

Just as we thought the orchestrated fog of confusion around the Withdrawal Agreement was about to lift, there were reports that Theresa May might even postpone the meaningful vote again while she seeks “reassurance” from the EU about the Northern Ireland backstop. Whatever fudge is cooked up in Brussels to try to bolster support for […]

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Just as we thought the orchestrated fog of confusion around the Withdrawal Agreement was about to lift, there were reports that Theresa May might even postpone the meaningful vote again while she seeks “reassurance” from the EU about the Northern Ireland backstop.

Whatever fudge is cooked up in Brussels to try to bolster support for her “deal”, it is very unlikely that the EU will delete the backstop. Why? Because it is a crucial element of the Withdrawal Agreement’s “triple lock” structure designed to stop Brexit. “Withdrawal Agreement” is an Orwellian misnomer, of course. This agreement keeps Britain in chains.

Voters may believe we need it in order to leave the EU. We do not. They could be fooled by the Prime Minister’s repeated claims that there might be “no Brexit” unless it is passed – when of course Brexit will happen by default without it under the terms of the European Union (Withdrawal) Act. Voters might also be forgiven for believing that the Withdrawal Agreement settles our future trade relationship with the EU. Not in the slightest. Future trade talks remain just that – in the future – while May’s “deal” keeps the UK legally shackled to a moribund EU economy which it must attempt to revive with vast sums of British taxpayers’ money for an indeterminate number of years.

Project Fear has been in overdrive since the Withdrawal Agreement was published, with spin, misrepresentation and blatant untruths deployed to sell it to a rightly suspicious nation. But once people open the Withdrawal Agreement tin, they seem more inclined to spit out its contents than swallow them whole. It’s rather like buying a can labelled “tomato soup” and finding it contains a concoction of deadly nightshade.

But credit where it’s due: EU officials (ably abetted by their British allies) have produced a devilishly clever draft treaty which, if passed, would end Brexit and get Britain ready to board the express train to a United States of Europe. The political takeover of the UK represented by the Withdrawal Agreement is an audacious attempt to reverse a damning popular vote of discontent with the European Project and provide fresh impetus for the federal superstate that is the EU’s raison d’être.

The EU’s triple lock guarantee is so constructed that never again will Brussels be troubled by an explosion of democracy in the United Kingdom. Parliament has one last chance to escape total eclipse – and it is now, by rejecting the Withdrawal Agreement in its entirety.

The first lock: the transition period
The first lock is the transition period, which lasts until at least 2021. We must hand over an estimated £39 billion for nothing, be bound by EU law and take orders from an unelected Joint Committee operating under the jurisdiction of the European Court of Justice. Will the EU27 agree an equitable free trade agreement before the end of 2020? Unlikely, since all the goodies they want in the “future partnership” are set out in the Northern Ireland backstop, which kicks in automatically on 1st January 2021 unless superseded by a “partnership” agreement. Full ratification by all Member States is required before any such agreement can come into force. Achieving this in time to avoid entering the backstop would be nothing short of miraculous, even if the EU agrees to extend the transition period for one or two years. So it is more pay with no say and a likely doubling of the Brexit bill to £80 billion, to be paid with no reference to British MPs.

The second lock: the backstop
The backstop is intended to be inescapable. It prepares Britain for the final destination set out in the political declaration, as a permanent satellite state of the EU. By which time, of course, it is doubtless hoped that we will be so fed up with our vassalage that we decide to rejoin the EU as a full member – with greatly increased budget contributions and a whole swathe of new EU law to obey. The United States of Europe will have taken shape during our “wilderness years” using our money (“Britgeld” seems to be an appropriate term), but without our political input. No taxation without representation? What a joke.

Not only does the backstop carve out Northern Ireland as an EU province and set a border in the Irish Sea, it creates a partial “customs union” that requires us to implement EU trade tariffs and policy with no decision-making powers. Under highly restrictive “non-regression clauses”, the UK also agrees to implement all EU environmental, competition, state aid and tax harmonisation laws, with the unelected Joint Committee and the ECJ once again able to punish us for any perceived backsliding. British farmers will be locked into a subsidy regime well below support received by EU27 farmers, who nevertheless retain tariff-free access to the UK. British agriculture would be decimated. It means we could not support British businesses, give ourselves a competitive edge in new technologies where we excel, strike independent trade deals or diverge in key policy areas such as goods regulations and tax. Free EU access to UK fisheries is set down as a marker for negotiation in the future “deal”.

The third lock: the “future partnership”
Anyone expecting the EU27 to give up the immense advantages they gain under the backstop is delusional. Retaining tariff-free access to the UK market and effective control of UK trade and competition policy must be nirvana for them. To ensure they reap the full benefit, there is the third and final lock in the Withdrawal Agreement. Unless we agree to a “future partnership” as set out in the political declaration, the backstop will endure in perpetuity.

The Political Declaration replicates all the onerous “non-regression” clauses of the backstop and requires even more surrender of sovereignty via participation in and funding of the EU’s aerospace and defence programmes, free access to UK waters for EU fishermen, a full customs union and common trade policy, free movement by the backdoor under “mobility” clauses, EU control of UK agriculture via the state aid rules and in general full adherence to the acquis communautaire in all policy areas.

Thank you for your triple lock guarantee, M. Barnier. The Withdrawal Agreement cage conforms to the highest EU safety standards.

But could I have my Sovereign Tomato Soup now, please?

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