8 Oct 2019
Brexit: PM Johnson Unveils New Proposals in Attempt to Secure Deal and Break Deadlock with EU
On 2 October 2019, Prime Minister Boris Johnson put forward new (in his words) “constructive and reasonable proposals which provide a compromise for both sides” in an attempt to break the long-running deadlock between the EU and the UK to secure a deal before the withdrawal of the UK on 31 October. The new proposals set out plans to solve the border issue of Northern Ireland which has proven to be the main obstacle in the negotiations for an orderly withdrawal to take place.
It will be of interest to Hong Kong traders to know that the Prime Minister went further than expected in his proposals on the contentious issue on the status of Northern Ireland post-Brexit. Johnson laid out the idea of an all-island regulatory zone as a way to solve the border issue between the British-ruled Northern Ireland and the EU Member State Republic of Ireland. The regulatory zone would cover all goods on the island of Ireland and would replace the previous arrangement, the so-called backstop, negotiated by Johnson’s predecessor Theresa May. The backstop was the insurance policy negotiated by Theresa May that would keep the UK in the same customs territory as the EU, thus keeping Northern Ireland closely tied to EU regulations until the UK and the EU could reach a trade deal. However, the backstop came at the cost of preventing the UK from pursuing its own independent trade policy or concluding trade deals with other third countries.
The new proposal, on the other hand, sets out that the UK, including Northern Ireland, would leave the customs union of the EU, but that Northern Ireland would remain in the EU single market for goods. This means that Northern Ireland would keep to the rules of the EU’s single market instead of UK rules.
The proposed all-island regulatory zone would remove the need for product standard and safety checks on goods at the border between the Republic of Ireland and Northern Ireland, but would not completely eliminate the need to have some customs controls in place. The UK says that customs declarations should be done electronically and that physical checks would only then be needed "on a very small proportion of movements". However, the EU has previously rejected a customs solution that relies on technology and, in January 2019, Sabine Weyand, the EU's director-general for trade, had even commented that "we looked at every border on this earth, every border the EU has with a third country - there's simply no way you can do away with checks and controls." The all-island regulatory zone would also create the need for customs checks between Northern Ireland and the rest of the UK. This means that all agricultural, food or animal products entering Northern Ireland from the rest of the UK would have to go through inspections and, equally, manufactured goods would need to be checked as well.
Interestingly, a key difference with the previous backstop arrangement is that Johnson’s plan now seemingly has the support of the Northern Irish political party in the British Parliament, the DUP. The DUP supports the UK’s Conservative party, but had refused to accept the previous backstop arrangement. It is hoped now that the approval by this Northern Irish party will help win over the support of British MPs who rejected the previous Withdrawal Agreement. “It is now for the EU to respond and also show they can be creative and flexible,” the UK’s Brexit Secretary Stephen Barclay said. “We don’t want an extension and we do believe there is enough time”. Despite this, however, Jeremy Corbyn, leader of the Labour party and the main opposition party in the UK Parliament, was dismissive of the Prime Minister’s plan stating that “it’s worse than May’s deal. I can’t see it getting the support that he thinks it will get.”
The initial reaction on the EU side was also critical. The EU's chief Brexit negotiator Michel Barnier warned that under the new plans “the EU would then be trapped with no backstop to preserve the single market after Brexit” while the Irish PM Leo Varadkar remarked that the new plans “do not fully meet the agreed objectives of the backstop”. In addition, the European Parliament issued a statement saying that “the UK proposals do not match even remotely what was agreed as a sufficient compromise in the backstop.”
While the latest proposals from the British government do include some concessions on the Irish border, a large gap remains between the two sides and many EU diplomats are convinced that the UK is heading towards either a delay or a no-deal exit. PM Johnson stated that he wants to conclude a deal at the high-level summit of EU leaders which will take place on 17-18 October and said that any further delay would be “pointless and expensive”. Under UK law, the withdrawal date of the UK from the EU is 31 October, however, legislation passed by the UK Parliament obliges the Prime Minister to seek an extension until 31 January 2020 unless a withdrawal agreement, or a no-deal Brexit, is approved by the UK Parliament by 19 October.
Nonetheless, EU sources say that the issues which remain to be resolved mean that there is little chance of a deal being concluded in time for the EU summit and, additionally, the European Commission has refused to enter into the secretive and intensive negotiations requested by the UK before the summit. Moreover, because of the increasing tensions and uncertainties in the last few weeks between the EU and the UK regarding the probability of a no-deal Brexit, many diplomats say that both sides are playing a blame-game in order to avoid taking responsibility for the disruption that would be caused by a no-deal departure.
In short, Hong Kong traders will want to note the high-level EU summit, on 17-18 October, and the deadline set by Parliament to seek an extension, on 19 October, as key dates which will, it is hoped, provide some clarity and certainty into the outcome of Brexit. In the lead up to the final stage of the negotiations it seems that all options, deal, no-deal or extension, are still currently on the table while both London and Brussels are attempting to position themselves to avoid taking the blame for a chaotic no-deal Brexit, should it occur.