Who will cut through the Gordian knot of Brexit negotiations?
Wednesday’s meeting was supposed to be the EU summit where leaders crossed the t’s and dotted the i’s of the UK’s withdrawal agreement. The final document was then to go to the UK, the EU and the other 27 member parliaments for ratification. That would have enabled an orderly Brexit.
“Would” is the operative word here. The negotiations between UK chief negotiator Dominic Raab and his EU counterpart Michel Barnier hit a deadlock over the question of the Irish border and the backstop on Sunday. These negotiations had been touted as the event where Raab and Barnier would pull the rabbit out of the hat and things could be finalized in time for Wednesday, or at a special Brexit summit in November. It was not to be.
The stumbling block was once more Northern Ireland, where the respective red lines of the EU and the UK seem mutually exclusive.
Both sides want to ensure that there are no border controls between Ulster and the Republic, which will be difficult when the UK leaves both the single market and especially the customs union. However, keeping the border open is important to maintain the peace and stability that was achieved in the Good Friday Agreement in 1998. That agreement ended decades of sectarian strife.
The UK proposed to remain in the customs union for goods, but not for services, which is not acceptable to the EU because, as Barnier has pointed out again and again, the EU will not allow for cherry-picking. The EU’s counterproposal was for Northern Ireland to stay in the customs union while the rest of the UK left. That would result in a hard border in the Irish Sea. It will never be acceptable to any British government to have a hard border between one of the four nations and the mainland — especially not as the votes from the hard-line Democratic Ulster Unionists (DUP) prop up Prime Minister Theresa May’s minority government in the House of Commons. Hence irresistible force meets immovable object.
This situation also puts the Irish in a very difficult situation. The economies of the North and the Republic have become highly integrated. In 2017, 34 percent of Irish exports were destined for the UK, most of them crossing the land border to the North. Ireland never voted for Brexit, yet the country’s economy may be even more heavily impacted by the UK leaving the EU than the UK itself.
European Council President Donald Tusk referred to the Ireland situation as a Gordian knot and continued to say that, unfortunately, he could not see a modern-day version of Alexander the Great to cut through it.
While an extension to the transition period would be a wise move, it is clearly unpalatable to the Brexiteers in May’s Tory party.
This left May in limbo when she attended dinner with the EU-27 on Wednesday night. May insisted that a solution could be found, one just needed to work on it. Barnier echoed her sentiment, which was quite surprising because he had quipped that he needed proposals from the UK, if everything on offer from the EU was unacceptable to their side.
The situation is tricky and European leaders are quite exasperated. We are roughly five months away from March 29, when the UK will officially exit the EU. Lithuanian President Dalia Grybauskaite articulated EU leaders’ frustration eloquently, when she said that it seemed May was at the behest of many forces in Parliament and therefore had no clear mandate. She added that it was difficult to negotiate with people who did not know what they wanted.
Sadly, Grybauskaite has a point: Whatever proposal May brings home, she will upset somebody and she may not achieve the numbers needed to pass the EU withdrawal bill through Parliament. The EU proposal on Northern Ireland will enrage Arlene Foster’s DUP. A deal along the lines of the Chequers agreement (a compromise hammered out within the Cabinet at the prime ministerial country retreat) will enrage the Brexiteers of her party. Chequers did, after all, result in the resignation of then-Foreign Secretary Boris Johnson and then-Brexit Secretary David Davis. Labour could be her savior, but the opposition party demands that any Brexit deal should leave Britain with the same benefits as though it was staying in the single market and customs union, which is blatantly unrealistic. Labour stands ready for the prime minister to fail in order to call a general election, where it feels it would stand a good chance of winning.
It did not help the prime minister either when Raab suggested that any EU withdrawal bill would be a take-it-or-leave-it proposition when it came before Parliament. This had both Brexiteers and Remainers up in arms, as they demanded a “meaningful vote.” As former Attorney General Dominic Grieve pointed out, the “sovereignty of Parliament” would be put at risk if MPs were prevented from amending the bill.
This leaves us with the fallout from Wednesday’s bust-up. May and the EU agreed that they would be willing to extend the transition period (the time between leaving the EU and negotiating an agreement over the shape of a future relationship) for another year. This would mean that things could go on as is until March 29, 2021. It would also mean that Britain would still agree to the rules and regulations of the EU until 2021 without the opportunity to influence them. Most importantly, the EU would enter into a new budget cycle during the last year of the extension, which would have fiscal ramifications for the UK. So much for taking back control over the UK’s borders, laws and money. While the extension would be a wise move, giving both sides more time to come to an agreement, it is clearly unpalatable to the Brexiteers in May’s Tory party.
So stuck is the situation that EU leaders did not even offer a special Brexit summit in November. A senior EU ambassador in Britain said only a few days earlier that failing to offer a November summit would be outright discourteous toward the UK.
In the meantime, business still needs clarity; inward investment into the land of hope and glory is still dwindling. As Sarah Gordon pointed out in the Financial Times, the companies most affected are the six million or so small businesses who do not have the means to employ huge swaths of lawyers and consultants to help them navigate through a potential no-deal Brexit. Let us hope, for the sake of the economy and the people of the UK, that someone will be able to cut through that Gordian knot at the 11th hour. In the meantime, the risk of a no-deal Brexit increases every day.
- Cornelia Meyer is a business consultant, macro-economist and energy expert. Twitter: @MeyerResources