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In Britain, Hopes for a ‘Half-In’ Brexit Deal Linger

Posted by hkarner - 7. April 2017

 Is that worth a Brexit? (hfk)

Date: 06-04-2017
Source: The Wall Street Journal By SIMON NIXON

Theresa May shows signs of willing to compromise for a ‘deep’ partnership

Nine months after the referendum and a week after the triggering of Article 50, it is starting to become clear what Theresa May meant when she said “Brexit means Brexit.”

In her Lancaster House speech in January, the Prime Minister ruled out “partial membership of the European Union, associate membership of the European Union, or anything that leaves us half-in, half-out. We do not seek to adopt a model already enjoyed by other countries.”

Yet senior pro-EU conservatives are increasingly optimistic that what may yet emerge from the negotiations is what one describes as “associate membership in all but name.”

Indeed, Mrs. May’s goal of a “deep and special partnership” covering everything from trade to security sounds a lot like an Association Agreement of the sort that the EU already has in place with many neighboring countries.

Ukraine, for example, negotiated an Association Agreement with the EU that covers security and foreign policy as well as a deep and comprehensive trade agreement. This deal allows Ukraine tariff-free access to much of the EU single market for goods in return for compliance with EU rules, overseen by a bilateral commission, and without joining the customs union, allowing it to strike its own trade deals. Ukraine and the U.K. may not have much in common but the Ukraine deal provides a template of sorts, which has the advantage of being provided for under the EU treaties.Of course, reaching such a deal won’t be easy but Mrs. May has demonstrated over the past week a willingness to compromise. She appears to have dropped her demand for parallel negotiations, accepting the EU Commission’s insistence that “significant progress” is made on the divorce settlement before any trade talks begin; she has made clear that the Great Repeal Bill won’t in fact repeal a single EU rule—and that U.K. judges will continue to take European Court of Justice rulings into account when interpreting EU-derived laws.

She also has agreed that the U.K. will continue to respect EU freedom of movement rules right up until it leaves the EU in 2019; and she has accepted that the U.K.’s new trade deal with the EU may not be within two years and signaled that the U.K. will continue to abide by its EU obligations during what may turn out to be a lengthy transition.

What this means in practice is that very little may change for either businesses or citizens over the next five years—and may not much even after that. The EU has made clear in its draft negotiating guidelines that it will seek commitments from the U.K. over fiscal, employment and environmental legislation to safeguard against what it calls “social dumping.” For her part, Mrs. May has conceded that U.K. companies will be bound by rules over which the U.K. has no control, at least when trading with the EU, and that she won’t do anything to weaken employment rules.

In reality, any new partnership between the U.K. and EU is bound to have at its core a mechanism to ensure the U.K. remains dynamically compliant with evolving EU rules overseen by a body to resolve disputes. In other words, much of the British economy may end up continuing to abide by EU rules.

Of course, such a deal is bound to run into opposition from some Brexiters, particularly those who were hoping for an immediate bonfire of EU regulations, a shutting of the borders and a return to imperial measures. The government hopes they can be persuaded to fall into line because the U.K. will have formally left the EU, allowing them to claim it is once again a “sovereign self-governing nation” that has “taken back control.”

Ministers also believe conservative Brexiters will ultimately back a deal that allows the U.K. to pursue it own independent trade deals, allowing them to claim that quitting the EU has paved the way for a more “global Britain.” For the government, this has become the big prize for Brexit, while cutting immigration—the priority for many Leave voters—has been quietly downgraded to a vague commitment to ensure democratic control.

At the same time, many erstwhile Remainers will be frustrated by a Brexit that results in a slightly worse version of what the U.K. had before in terms of access to EU markets—the U.K. would be sacrificing influence for the illusion of sovereignty, says one cabinet minister. Many will be skeptical that the U.K. on its own will be able to secure more advantageous trade deals offering only access to its national market than the cumbersome EU is able to negotiate by offering access to its far larger market.

There is an irony too in a Brexit whose primary gain is the ability to strike independent free trade deals. Until recently, Brexiters used to say the EU’s customs union was the one bit of the EU they wanted to retain. The frequent complaint was that “we thought we were only joining a common market.”

Yet the direction in which Mrs. May now appears to be heading points to a better outcome than had seemed likely a few weeks ago, when she was setting out seemingly unachievable red lines and talking of “no deal being better than a bad deal.” For most businesses, the alternative of crashing out of the EU without a trade deal would be the worst possible outcome.

What remains to be seen is whether she can deliver, given the obstacles on both sides of the Channel—or whether her apparent conversion to half-in, half-out model enjoyed by other countries can settle the debate over the U.K.’s relationship with Europe.

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