On 6 July 2018, Theresa May summoned her cabinet to the Prime Minister’s country residence at Chequers to agree on White Paper proposals on the UK’s negotiation position on a future relationship. Famously, she threatened that those who resigned would immediately lose their ministerial cars and would have to walk home or take a taxi.
The UK cabinet approved a proposal for an economic partnership which would include a free-trade area without friction at the borders. It recognised that the single market was built on a balance of rights and obligations and that the UK could not have all the benefits of membership without obligations. It proposed, therefore, a new framework with a fair but different balance.
There would be a common rulebook under the proposal whereby the UK would enact EU regulations in respect of goods necessary to maintain frictionless trade. The proposed new arrangements on services and investment had greater regulatory flexibility and reduced access to each other’s markets. It proposed a new framework for control of borders ending the free movement of people.
The August 2017 proposals for a customs partnership were revived proposing that the UK would enforce EU tariffs on imports destined for the EU while maintaining its own tariffs on goods destined for the UK. The facilitated customs arrangement was intended to remove the need for customs checks and controls between the UK and the EU as if it was a combined customs territory. It proposed the elimination of tariffs quotas and routine requirements for rules of origin checks on goods moving.
The backstop was widely criticised by those opposing Theresa May within her party and beyond. The proposal for voluntary alignment of regulation was a bridge too far for them. By agreeing to the principle, brexiteers including the former Foreign Secretary Boris Johnson who had been prominent in the Leave campaign argued that the UK be left into the EU orbit indefinitely.
Within days, David Davis, the Brexit Secretary resigned, and Boris Johnson, the Foreign Secretary, followed shortly afterward. Boris Johnson’s resignation letter said that the proposal accepted that the UK would not make its own laws and that the Brexit dream was dying.
Brexiteers amended legislation going through the UK Parliament prohibiting the UK from unilaterally collecting another territory’ customs tariff unless the other territory reciprocated by collecting UK tariffs. This undermined the UK proposal unilaterally to collect EU tariffs. Another amendment excluded the UK being part of the EU VAT area while, yet another prohibited the division of Northern Ireland into a separate customs area.
Although aspects of the proposals were welcomed by the EU, many of the criticisms made in respect of the August 2017 proposal were repeated. The tracking of goods would be enormously complex, burdensome and complicated and could encourage fraud. There was no mechanism to collect VAT on imports. The EU objected that it would undermine its ability to police its trade policy and guarantee the safety of goods within the single market.
In the run-up to the October 2018 EU council meeting, the UK government insisted its Chequers plan was the only option available and that in its absence, there would be no deal with a hard Brexit crash out at the end of March 2019. At a difficult and fraught meeting of EU leaders in Salzburg September 2018, the UK Prime Minister appeared to be isolated and ambushed as EU leaders reportedly rubbished the Chequers plan a week before the Conservative conference.
It was widely reported that she was humiliated after EU leaders unexpectedly declared that the proposals would not work. The Prime Minister accused EU leaders of engaging in negotiation tactics to throw her off course. French President Macron accused brexiteers of lying about how easy it would be to negotiate an exit from the EU. Both sides spoke openly of their readiness for a no-deal exit.
The Chequers proposals were ruled out, and EU and UK negotiators worked on a new proposal for the Northern Ireland backstop which would see Northern Ireland in the EU customs union and effectively the single market for goods, Great Britain in a customs union with the EU but not in a regulatory union so that it was free to set its own rules. Checks would be needed on goods entering Northern Ireland to confirm that they complied with EU standards. There would be no tariffs customs procedures or origin requirements as the whole of the UK would be in a customs union with the EU.
The next EU council meeting was scheduled for mid-October 2018. By early October 2018, a draft withdrawal text was being worked on intensively, although there are still significant differences. Days before the EU Council meeting, the Brexit secretary travelled to Brussels to notify the EU Commission that the existing draft was unacceptable.
Negotiations resumed. The EU dropped its opposition to a UK wide customs union. What might have been the future trading relationship was now contained in the Withdrawal Agreement as the backstop in the event that no other solution to an open border on the island of Ireland could be achieved. It involved Northern Ireland as part of the EU customs area and single market in goods together with a customs union between Great Britain and the EU but without regulatory alignment. The EU required a guarantee of a level playing field in areas of regulation which was embodied in the draft Withdrawal Agreement.
A 585-page Withdrawal Agreement was published on 14 November 2018. It was accompanied by a Political Declaration in relation to the future relationship which contemplated a more distant free-trade agreement. However, the Withdrawal Agreement backstop, including the UK wide customs agreement was to become effective in the event that no future relationship agreement was negotiated by the end of the transitional period.
The Withdrawal Agreement was quickly approved by the UK Cabinet, although some junior ministers resigned. In accordance with UK legislation and constitutional requirements, the consent of Parliament was required to ratify the patrol agreement. It was approved by the EU Council summit on 25th November. 2018 The consent of the EU Parliament would also be required.
The Withdrawal Agreement contained provisions on citizens’ rights, financial obligations, a transitional period and the Northern Ireland backstop. It was much longer than the March 2018 draft, principally because of the additional provisions in relation to the backstop.
The EU rules in relation to goods which were to continue to apply to Northern Ireland were set out and listed. There were detailed provisions on level playing field rules that would apply in relation to Great Britain under the backstop. They provide that the UK would not reduce the existing level of environmental labour and social rights applicable at the end of the transition period. There are limits on UK state aid for private industry
The EU and UK were to use best endeavours to agree on a future relationship by 31 December 2020 which would supersede the Northern Ireland backstop provisions while avoiding a hard border on the island of Ireland. It was contemplated that the Northern Ireland backstop could be superseded in whole or in part so that it could be a Northern Ireland only backstop.
If a longer period was required to negotiate the future relationship agreement, then a decision could be made by the UK and EU to extend the transition period by 1 July 2020. If there was no future relationship meeting the requirements of the backstop by the end of the transitional period, the backstop with the Northern Ireland and GB provisions mentioned above would come into effect unless and until superseded by a new future relationship agreement. The backstop was to be temporary in that sense.
It was provided that fishery products were to be excluded from the customs union unless there was an agreement on mutual access to fishing waters.
The political declaration, which is not binding, declared the intention that there would be an ambitious, broad, deep and flexible partnership. The UK’s objectives to end free movement of persons and to pursue its own trade policy was recorded. The declaration left open a range of future relationship possibilities. The UK’s aspiration for a looser relationship, contrasted with the backstop provisions which provided for a much closer relationship pending resolution of the issue of a hard border on the island of Ireland.
The Withdrawal Agreement could be superseded in whole or in part which implied that it could refer to a Northern Ireland only arrangement at a future date. Alternatively, the existing customs partnership might be built upon, into a relationship involving membership of the customs union or a customs partnership with varying degrees of regulatory integration.
The DUP strongly objected on the basis that the backstop arrangements provided different trading arrangements for Northern Ireland and Great Britain. The UK government pointed to the advantages for Northern Ireland in that regulatory checks would apply only on GB to Northern Ireland trade but not Northern Ireland to GB trade.
Hard-line supporters of Brexit in the Conservative Party pointed to the prospect of the whole of the United Kingdom remaining stuck in the backstop indefinitely at the behest of the EU. The arrangement this was said to be worse than EU membership as there was no unilateral exit. In effect, the EU would judge if and when the backstop requirement was satisfied. The trade agreement would require the consent of each EU state, including Ireland. The Brexit Secretary Dominic Rob resigned from the UK government, quickly followed by several other senior and junior ministers. The DUP made it known that they would not support the agreement.