Brexit weekly: 5 things

You win some you lose some

Following the resignation of two Brexit backing Cabinet members last week over the Government’s alleged watering down of the Brexit plans Theresa May was this week accused by Remainers of caving in to the demands of the Brexit wing of her party. Conservative supporters of Leave tabled four amendments to the Customs Bill: to stop the UK from collecting tariffs for the EU unless the EU reciprocates; rule out a border in the Irish sea; pull the UK out of the EU’s VAT regime; and require new legislation if the Government wants to form a customs union with the EU.

After Downing Street accepted the amendments without hesitation, Remainer Tories rallied up their rebels and put forward their own amendment to keep the UK in the customs union if no frictionless trade deal is secured. Theresa May narrowly escaped defeat with the amendment being voted down by 307 to 301.

The strongly organised rebel groups on both sides of the Conservative Party will continue to give Theresa May a headache leading up to the vote on her final Brexit plans.

Dominic’s debut

New Brexit Secretary Dominic Raab went to Brussels this week to continue negotiations with EU negotiator Michel Barnier. He offered to meet Barnier throughout August to intensify the talks as they both agreed that the “clock is ticking.” The aim of the meeting was to discuss the UK’s Chequers White Paper, which was published last week but has not received a response from the European Commission yet.

The Guardian reported that a senior EU diplomat said the EU did not want to openly reject the UK’s proposals as it “would likely prove an existential threat” to the Prime Minister.  The source added that the White Paper won’t form “the basis of the negotiations” and that while some points have been well received by Brussels, such as a more practical approach to ECJ oversight, the plans are still seen as cherry-picking different parts of the single market. It is only a matter of time before the EU will have to make its views public and show how far negotiators are from an agreement.

Pairing is caring

Theresa May’s Chief Whip Julian Smith got himself into trouble this week as he was accused of asking a number of MPs to break their pairing deals for crucial votes on the Customs Bill. Conservative Chairman Brandon Lewis took on the Whip’s advice and voted with the Government despite having a pairing arrangement with Liberal Democrat MP, Jo Swinson – who had just given birth and was unable to attend the vote. The deal was that Lewis wouldn’t vote either to cancel out the absence.

Both Smith and Lewis claimed it was an honest mistake and that there was no intention of breaching the agreement.  Smith soon came under pressure to quit from both Brexiteers and Remainers. Theresa May, however, quickly insisted that she has full confidence in her Chief Whip. In usual circumstances the Prime Minister may well have sacked Smith, but with key votes ahead and only a narrow Parliamentary majority, May cannot afford any more government departures.

It’s all about the prep

The EU isn’t taking any chances and has published a briefing for Member States outlining measures that need to be taken to prepare for a UK exit without a deal. It encourages private companies and individuals to “take responsibility for their individual situation” as “considerable disruption” is expected. According to the Commission, this may include leaving UK and EU citizens in legal limbo, the creation of immediate border checks and the exclusion of UK entities to bid for EU contracts and funding. The EU executive also predicts disruption to air transport and restrictions on data transfers.

The briefing comes as the deadline approaches to conclude the withdrawal agreement, without which there will be no transitional period and the UK will abruptly leave the EU on 30th March 2019. While negotiators on both sides feel the pressure to avoid this scenario, the gap between the two positions on, for example, the Irish border remains significant. Decreasing that gap while maintaining self-set red lines will be extremely challenging for both sides.

There are no winners

Much talk has been around what the economic impact of Brexit will be on the UK economy, and the International Monetary Fund has now weighed into the debate. It highlights that EU Member States may suffer long-term damage equivalent to about 1.5% of annual economic output by 2030 if no free trade deal is reached between the two blocs.

Some of the biggest sufferers will likely be the Netherlands, Denmark and Belgium, who have strong trade links with the UK. Ireland, however, tops the list with a whopping loss of 4% of its GDP – putting it on an equal footing with the UK which is expected to suffer similar losses. The IMF suggests that if an EEA-deal (like Norway) is secured, the economic costs would be minimal. A free trade agreement for manufactured goods, meanwhile, will likely result in a loss of 0.8% of GDP.

Perhaps some food for thought for Brussels as the deadline to avoid the UK crashing out without a deal fast approaches.