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Theresa May's Brexit deal has a fatal defect


LAST week Theresa May unveiled her draft agreement with the European Union on the terms of Britain's exit. The reaction was exactly as expected. Remainers despaired because the deal is so much worse than staying in the union - which is true, of course. Leavers despaired because the deal is Brexit in name only - which is also true. But that was bound to happen, right? Whatever variant of the earlier much-derided Chequers plan May had brought the EU to accept, the response from both sides would have been exactly the same.

Yes it would - yet this kneejerk reaction obscures a vital point. This deal, despite its resemblance to the Chequers plan, fundamentally subverts that earlier approach. This is no longer a flawed but defensible compromise. It's a capitulation.

Remember that serious negotiations on the UK's longer-term economic relationship with Europe haven't actually started. Despite its inordinate length, the draft agreement is almost exclusively concerned with the terms of Britain's departure: what it owes, what arrangements will apply during a 21-month transition period before Brexit comes into effect, the rights of EU citizens living in Britain and vice versa, and what steps will be taken during the transition and beyond to ensure that no hard border will be needed between Northern Ireland and the Irish Republic. A short section will be appended on the shape of the future economic partnership, but unlike the rest of the deal this will be non-binding and amount to little more than a statement of intent.

The so-called backstop arrangement for Northern Ireland has played a pivotal role throughout. One of Britain's biggest mistakes from the beginning - that's a high bar, heaven knows - was to let this issue assume such importance. By its nature, the backstop had to extend beyond the transition and connect the exit terms to the yet-to-be-determined future relationship. But the question was, how far would it shape and constrain that eventual outcome?

The new feature is that the backstop not only envisages an arrangement much to the UK's disadvantage, but also in effect commits the UK to endure it indefinitely, until the EU decides otherwise.

In this new text, there's no time limit on the backstop, and no exit clause. The terms are that, unless the EU says different, Britain would remain in a relationship that suits the EU pretty well - as part of a stripped-down customs union (preventing the UK from cutting its own trade deals), bound by various "level playing-field" restrictions (making it impossible for Britain to make its own policy on an array of economic questions), with a border of sorts between Northern Ireland and the rest of the UK, and subject to rulings of the European Court of Justice across an expansive range of issues.

No voice on policy, no option to quit

Britain would be a disenfranchised EU rule-taker, with no voice on policy, and no option to quit.  Once Britain has acceded to this, what reason is there for the EU to agree to any other kind of deal? Why look for other solutions to the Northern Ireland issue - for instance, to a comprehensive free-trade agreement plus technological solutions to keep the border open? Europe will be empowered to prolong any such discussion indefinitely, and will probably choose to do just that. Why agree to a long-term trade partnership more to Britain's liking and less to Europe's, once Britain has allowed itself to be chained to this in perpetuity?

At this stage of the negotiations, both sides should have merely declared that they would avoid the reimposition of a hard border on the island of Ireland, and leave it at that. How tough a problem the border question proves to be is uncertain until the terms of the long-term relationship are clear. There was no reason to suspect the UK of resiling from that commitment, because its interest in avoiding a hard border and any inflaming of sectarian anger in the North is greater than Ireland's and vastly greater than the EU's.

If it was necessary to say more than that, the backstop needed a time limit and/or an exit clause, and it needed to be equally objectionable to both sides as a permanent dispensation - an outcome both would see as a last resort and strive to avoid.

The text provides for none of this. As a result, under the terms May has accepted, the backstop isn't a backstop at all - it's the whole deal, the best long-term arrangement Britain can now expect, as good as settled before negotiations on that future economic relationship have even started.

All parties in this epic of incompetence have failed. That's a given in Britain's case, of course. But Ireland's government and the EU's puffed-up negotiators have failed, too. Either the UK parliament rejects this deal or May somehow succeeds in shackling her country to it. Neither result would stabilise the EU-UK relationship in a way that advances Europe's interests.

Serious collateral damage

If Britain's parliament rejects the deal, as seems likely and as it certainly should, the EU will suffer serious collateral damage from the pain inflicted on Britain. For one thing, it will find itself telling Ireland to install a new border with the North, making a mockery of its insistence that no compromise on that question could be contemplated. If, on the other hand, Europe wins and the deal goes through, its victory will turn to ashes in short order. The EU will have converted a potential friend and partner (the world's fifth biggest economy and a valuable military and intelligence-gathering ally) into a humiliated subordinate, primed for vengeance. That situation is certain to end badly - for both sides. BLOOMBERG

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