Michel Barnier hailed the Brexit deal agreed between Brussels and London as a “fair and reasonable result” after days of intensive negotiations.
Both the EU and the U.K. have moved in order to come up with the compromise deal, but in truth it is London that has had to make the more radical concessions. The final deal differs in many key respects from the “final offer” put forward by Prime Minister Boris Johnson at the Conservative Party conference. Those concessions may yet prove costly in terms of winning the backing of the Democratic Unionist Party and hard-line Brexiteers in his own party.
Here’s POLITICO’s rundown of the key elements of the deal with analysis of who moved and what could happen next:
Customs arrangements
On customs, both sides agreed to a remarkable balancing act: Northern Ireland will officially be part of the U.K.’s customs territory, meaning that it applies U.K. tariffs and can participate in future British trade deals, but at the same time the EU-U.K. customs border is placed in the Irish Sea, meaning that de facto Northern Ireland follows the EU’s customs rules.
Under this fudge, U.K. customs authorities will check goods at British ports before they enter Northern Ireland. Those goods can pass without paying tariffs as long as their final destination is Northern Ireland and they are consequently “not at risk of entering our single market,” Barnier told reporters Thursday. “However for goods at risk of entering the single market, U.K. authorities will apply the EU’s tariffs,” he added.
The criteria for defining such a risk will be worked out during the transition period by a Joint Committee — the body set up under the Withdrawal Agreement to police the deal — taking into account specifics such as the value of the good or the nature of movement. The Joint Committee will also define exemptions, such as for fishing vessels from Northern Ireland that operate under a British flag and that won’t need to pay tariffs when selling catch into the EU.
The main advantage of this solution is that there are no checks at the land border between Northern Ireland and the Republic of Ireland. Northern Irish companies and farmers will follow EU customs and regulatory rules, meaning that Northern Irish products from machinery to milk can go across the border without having to pass any controls.
However, there are still open questions: Bernd Lange, the chair of the European Parliament’s trade committee, raised concerns about whether the fix “adequately protects the [EU] internal market from dumping products coming from third countries.” The responsibility for customs checks “now lies solely with British authorities,” he added, questioning whether they would have “sufficient resources and will” to properly vet products.
Brussels has reason to be suspicious after British customs authorities were found guilty of tolerating a massive Chinese fraud network evading EU customs, which led to a hefty €2.7 billion fine by the EU’s fraud office last year. The EU will also need to trust U.K. veterinarians to properly check food products in order to avoid sick animals or unwanted products such as chlorine-washed chicken entering the EU market. A future EU-U.K. trade deal could, however, streamline much of the customs checks or make them completely unnecessary.
Barnier on Thursday defended the compromise as a “unique situation [that] must be dealt with using exceptional solutions.”
Who moved in the talks? Compared with the U.K.’s initial position, which foresaw customs checks on the Irish mainland (but away from the border), the U.K. has massively backtracked and now essentially accepted a proposal for “Northern Ireland-only backstop” that the EU proposed back in February 2018. This is a significant concession, because Johnson had previously categorically rejected any customs border in the Irish Sea. However, the fact that Northern Ireland is not fully kept in the EU’s customs territory but can participate in future U.K. trade deal is something that Johnson can sell as a win at home.
— Hans von der Burchard
Democratic consent
The new trading arrangements will take effect immediately after the Brexit transition period ends in December 2020 without any vote of consent in Northern Ireland. But after four years, Northern Ireland will have a say. Devising a mechanism of democratic consent underpins the deal and had been one of the major sticking points in negotiations.
Under the terms agreed, the Northern Irish Assembly will hold a vote within two months before that four-year period ends on whether to continue the arrangements or not. If it agrees by a simple majority, the trading rules will apply for a further four years. If the rules win “cross-community” support in the assembly, they will apply for a further eight years. Cross-community support would mean not only a simple majority across all members, but a majority among parties on each side of the republican-unionist divide, or the support of 60 percent of members, including 40 percent on each side.
However, if the vote on an extension fails even to win a simple majority, the new trading rules will only extend for two years. During that period the Joint Committee will have to work out a new system to keep the border open while protecting the single market. At a press conference introducing the deal Thursday, Barnier described that two years as a “cooling-off” period.
“This democratic support is a cornerstone of our newly agreed approach,” Barnier said. “Because this newly agreed proposal is no longer to be replaced by a subsequent agreement between the EU and the U.K., so it makes sense to ensure consent.” The new arrangements are envisaged as a permanent state, not a “backstop” that could be applied until an alternative were devised to replace it.
So what is new in the consent agreement? Nothing similar was formally proposed by Theresa May’s government. A detailed consent mechanism was first formulated under Johnson in the proposals he sent to European Commission President Jean-Claude Juncker at the beginning of October.
He suggested that the Northern Irish Assembly should get to vote on the trading arrangements before they even came into force, then hold subsequent votes every four years. If members rejected the plan from the beginning, it would never come into force, and if they rejected it at a later date, they would lapse after a year and revert to “existing rules.” It was never fully explained what existing rules really means.
Who moved in the talks? Johnson backed down from his original position that there should be an initial vote before the rules come into force. At the same time, the EU has managed to slip in stronger safeguards for the situation where the arrangements are rejected after each four-year block. The main losers, however, are the DUP, who were thought to be demanding an effective single-party veto on the plans. That veto has not materialized — another reason why the unionists are currently refusing to back the deal.
— Emilio Casalicchio
The future relationship
Despite all the noise in recent days and weeks about U.K. negotiators’ demands for a radically different and stripped down Political Declaration (the document setting out ambitions for the future relationship), what is remarkable is how little the document has changed. The new version has 141 clauses — just six fewer than the original agreed by Theresa May’s government back in November 2018. Some of those tweaks are there just to make it consistent with the new Withdrawal Agreement, such as cutting references to the Northern Ireland backstop. The new agreement even retains a typo from the original, which referred in section E on terrorism to “violent extremis [sic].”
EU27 diplomats were briefing, even as recently as Tuesday, that the Brits wanted the Political Declaration to be based solely on a free-trade agreement “and only this.” It hasn’t turned out that way. For example, the clauses on future cooperation with EU agencies for medicines, aviation and chemicals are identical. And a clause on the Court of Justice of the European Union being the ultimate arbiter in disputes involving EU law is still in. The section on security cooperation that London had wanted to change is also intact.
The biggest change is on so-called level playing field provisions — the extent to which the U.K. has the ability to undercut EU regulations on, say, labor rights or environmental regulations. In meetings with diplomats in recent weeks, Barnier has repeatedly raised the danger of the U.K. emerging as a robust competitor on Europe’s doorstep — a sentiment echoed by German Chancellor Angela Merkel.
The final text in fact includes a beefed up (and renumbered) clause 77 which retains the original commitment to “open and fair competition, encompassing robust commitments to ensure a level playing field.” But it goes even further: “Given the Union and the United Kingdom’s geographic proximity and economic interdependence, the future relationship must ensure open and fair competition, encompassing robust commitments to ensure a level playing field.” In scope are matters such as state aid, competition, social and employment standards, environment and climate change, and tax.
Then comes a line straight out of the Barnier playbook. “The precise nature of commitments should be commensurate with the scope and depth of the future relationship and the economic connectedness of the Parties.” In other words: the more the U.K. diverges, the less sweet a trade deal it will get.
One key change is that a reference to level-playing field commitments “building on” those set out in the Withdrawal Agreement (in the now scrapped version of the Northern Ireland Protocol) is gone. Brexiteer Conservatives will be pleased to see this but not all of their concerns will be addressed.
The Political Declaration is not legally binding. But assuming nothing else has changed in the legally-binding Withdrawal Agreement other than the Northern Ireland Protocol (as appears to be the case), then Article 184 of that text still commits both sides to “use their best endeavours, in good faith” to deliver the intentions of the Political Declaration. It’s a clause that has long been a bugbear of Brexiteer Tories, and if it remains in the Withdrawal Agreement, it will be very difficult for Johnson to ever wriggle out of these level-playing field commitments.
The U.K. government pushed back on the notion that the level playing field arrangements represent a concession by London, arguing they are “standard” in free-trade agreements around the world. “I would not say the level playing field commitments in it mark a step up or a step backwards from the ones before, but rather a step to the side because it’s going from a higher level relationship which the previous government was aiming for one more suited to a free-trade agreement.”
Who moved in the talks? London appears to have given up on its aim of stripping out level playing field provisions. That may not go down well with hard-line Brexiteers back home who want a clean break from EU rules.
— James Randerson and Charlie Cooper
Value-added tax
How value-added tax (VAT) will be applied in Northern Ireland after Brexit was one of the last outstanding issues in the negotiations for a deal. Under current EU law, each EU member state must have a VAT rate of at least 15 percent.
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In the U.K., the standard rate of VAT is 20 percent, with a reduced rate of 5 percent that applies to some goods, and complete exemptions for items such as children’s clothes, vegetables and fruit. In Ireland, however, the standard rate of VAT is 23 percent, with reduced rates of 13.5 percent and 9 percent for some items.
During the Brexit talks, the EU worried that the U.K. could apply VAT rates to goods in Northern Ireland that were lower than those of the Republic of Ireland, undermining the single market.
Under the Northern Ireland protocol, EU rules on VAT and excise duties will apply in Northern Ireland, with the U.K. responsible for their collection. However, revenues resulting from transactions taxable in Northern Ireland will be retained by the U.K. rather than being remitted to the EU.
The U.K. will also be able to apply VAT exemptions and reduced rates in Northern Ireland, as long as they apply in Ireland as well. Any concerns arising from VAT reductions and exemptions will be discussed at the Joint Committee which can review how the terms of this article are applied.
The EU and U.K. also agreed to exchange information to combat customs and VAT fraud.
Who moved in the talks? The deal agreed Thursday includes compromise on both sides. The Democratic Unionist Party had opposed Northern Ireland being treated any differently from the rest of the U.K. The terms of the Northern Ireland protocol allow the U.K. government to set VAT rates and exemptions in Northern Ireland that remain aligned with those of the rest of the U.K. as long as they are not lower than those in the Republic of Ireland.
— Cristina Gallardo
What happens next?
Ambassadors and Brexit specialists from EU27 national capitals have been examining the text of the deal since late Thursday morning. They will advise EU leaders who will discuss the deal and potentially endorse it at the European Council summit in Brussels Thursday afternoon. This is all vastly accelerated compared to the usual situation where leaders prefer to have more time for consideration. The political pressure to get on with it now that there is an agreed deal on the table will be immense.
In the U.K., Attorney General Geoffrey Cox’s legal opinion on the Brexit deal will be published later Thursdsy, a Downing Street spokesperson told journalists in London. There will then be a meaningful vote on the deal in the House of Commons on the deal on Saturday, after MPs approved a motion allowing parliament to sit that day.
House of Commons leader Jacob Rees-Mogg said MPs will be given the option of this deal or no deal; however, opposition parties could try to put forward other votes, for example making their support conditional on a second referendum.
If the deal is voted down in the U.K. parliament on Saturday, Johnson would likely have to seek another extension to negotiations under the terms of the Benn Act, a new law designed to prevent a no-deal Brexit. The EU could refuse to give the U.K. more time, which would leave MPs with the choice of backing Johnson’s deal or leaving without a deal.
If the deal is approved by both houses of parliament in the U.K. then the action switches back across the Channel to the European Parliament, which must ratify the text. But that could present a problem unless the legislative process in the U.K. proceeds extremely quickly.
There is a European Parliament plenary session next week in Brussels, but the U.K. ratification might not have been completed in time — even under the best-case scenario. “If the will is there and British parliamentarians make an effort, they could be ready in a week. But by then the plenary week of the European Parliament will be over,” said MEP Jens Geier, from the German Social Democrats. If MEPs miss that opportunity to vote on the Brexit deal, then the next opportunity is November’s plenary. But that would require the Halloween Article 50 deadline to be extended.
— Sanya Khetani-Shah and Florian Eder
What could go wrong?
This is not a done deal yet.
The DUP, whose support is key if Johnson is to get his deal through the U.K. parliament, was quick to announce that it does not back the agreement. “Following confirmation from the prime minister that he believes he has secured a ‘great new deal’ with the European Union the Democratic Unionist Party will be unable to support these proposals in parliament,” the party said in a statement. Without the DUP it looks very difficult for Johnson to push a deal through the House of Commons, in part because he lacks a majority and also because DUP support could lose him another key faction, Tory Brexiteers.
Labour Party leader Jeremy Corbyn criticized the deal as being worse than the one Theresa May agreed with Brussels. “This sell out deal won’t bring the country together and should be rejected. The best way to get Brexit sorted is to give the people the final say in a public vote,” he said.
Johnson is also yet to win over some of those Tory rebels he expelled from the Conservative Party for voting against a no-deal Brexit, the Guardian reported. He will likely need the backing of almost all of the 21 MPs who had the whip removed if he is to have a chance of passing any Brexit deal.
— Sanya Khetani-Shah
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