Not-So-Super Saturday

David Long
October 22, 2019

To the surprise of many, Boris Johnson’s Government and the European Commission agreed a revised withdrawal agreement (WA) last week, founded largely on Teresa May’s prior WA, but with the so called Irish Backstop completely replaced with a new Irish Protocol, and a new political declaration on the future relationship pointing firmly towards a free trade agreement intended to enable the UK to enter into meaningful trade arrangements outside of EU regulatory control.

While most of the withdrawal agreement remains unaltered, this is without doubt a major achievement for Boris Johnson’s government. For months he has been ridiculed by almost all political adversaries and commentators, saying that a new deal was impossible. The EU had stated that not a single dot or comma in the withdrawal agreement would be changed – it was ‘the best and only deal’. The Irish Backstop was sacrosanct.

Not surprising then that the Prime Minister wore the hint of a smile when he stepped out before the cameras last week. The impossible had been achieved. The Backstop gone. The ‘Level Playing Field’ gone and the path to an FTA charted. These were major changes that fundamentally change the nature and balance of the agreement and left opponents stammering for words to belittle it. The notorious EU ratchet, where negotiations ratchet slowly but relentless in only one direction, was reset – a rare and remarkable achievement that other governments may well take note of.

There is, of course, a catch, being the need for customs and VAT procedures between Northern Ireland and the rest of the UK. Understandably, this has not been received well by the Democratic Unionist Party (DUP), who fear any differentiation between Northern Ireland and the rest of the UK opens to the door to the possibility of Irish reunification in the future.

The DUP have stated they are unable to support the deal; however, their fears may overstate the practical reality of what is being proposed. Legally Northern Ireland will remain part of the UK customs territory and the compliance with EU customs arrangements will need the consent of Stormont every four years. Moreover, these checks will apply only to goods. There will be no checks for people, and many of the checks on goods will take place in UK factories before they are dispatched.

Two further aspects are important. Firstly, any free trade agreement could and indeed should supersede these proposals (a key attraction of the original Backstop for the EU was that it gave them leverage over the UK in any subsequent trade negotiations). Secondly, the UK Government are developing technological solutions for tracking the movement of goods and hopes that these will be operable within the six-year window before a vote is needed, making customs checks redundant.

Economically this deal has the potential to put Northern Ireland in an extremely favourable position with direct access not just to the rest of the UK but to EU markets also. Not surprising then to see businesses in Northern Ireland strongly welcoming the deal today. They look set to enjoy a unique competitive advantage for many years.

But without the DUP onboard, the Prime Minister proved an enormous challenge to get his deal approved by the House of Commons in its first Saturday sitting since the Falkland’s war. To pass the deal this week requires 320 votes but the numbers look impossibly tight. The other big hurdle will be the ‘timetable motion’ (the government trying to accelerate the passage of the bill through parliament).

Even if the withdrawal bill passes, it is far from certain that this will lead to the UK’s exit on the 31st October. With days of legislation ahead and a remainer alliance determined to force a second referendum, things can turn on a sixpence. What is certain is that this will be an extraordinary period in British politics and history.

Disclaimer: The views thoughts and opinions expressed within this article are those of the author, and not those of any company within the Capital International Group (CIG) and as such are neither given nor endorsed by CIG. Information in this article does not constitute investment advice or an offer or an invitation by or on behalf of any company within the Capital International Group of companies to buy or sell any product or security.

Continue reading