Johnson’s big deal

Johnson

Most of the Johnson deal is cut and pasted from Theresa May’s Withdrawal Agreement.

However much many in the ERG may have huffed and puffed over the financial settlement not being linked to a future relationship, or giving the ECJ jurisdiction in the transition period (and beyond on citizens’ rights), the whole renegotiation focused on solving the Irish border issue – and the Varadkar-Johnson talks last week seem to have opened the pathway to a deal.

The Boris Johnson-dubbed ‘undemocratic’ backstop negotiated by Theresa May has gone.

The proposed new arrangements look not a million miles away from the Northern Ireland-only backstop that was roundly denounced in parliament early in 2018, when the EU dared propose what was portrayed as annexation.

But while the last prime minister saw her backstop as something only to be used in the event that the long-term relationship risked a border, the new government has entered into a semi-permanent fix in Northern Ireland in order to allow the rest of GB to have a loose relationship with the EU.

The EU has built on the proposed all-island zone for regulation

The big move looks in retrospect to have come when Johnson persuaded the DUP to sign up to an all-island regulatory zone, which removed the need for land border checks on goods travelling between the North and South, and substituted it for East-West checks.

But when he proposed this, in his letter to Jean-Claude Juncker, which launched this phase of talks, that was to be subject to a possible DUP veto through the complicated processes of the Good Friday Agreement.

The EU banked the offer on regulation, but then pointed to the need to deal with customs as well, and change the consent provisions.

Both of these meant significant concessions from the UK.

Whose customs territory is it anyway?

Mr Johnson originally made it clear that Northern Ireland would stay in the UK’s customs territory.

The EU pointed out that this failed to avoid a customs border in the island of Ireland.

The new solution seems to be an agreement that, for tariff purposes, Northern Ireland stays aligned with the rest of Great Britain, but for administrative purposes it stays part of the EU.

This would avoid the need for a new customs border in the island of Ireland. In fact, the solution isn’t new.

It’s a scaled down version of an earlier proposal from Mrs May for a ‘new customs partnership’, allowing the UK to administer part of the EU’s border on its behalf.

Goods that might find their way into the EU have to be charged the EU tariff, but if they are staying in Northern Ireland they can benefit from the lower UK tariff (if there is one).

Making that work isn’t easy.

But confining it to Northern Ireland is a less of a stretch for the EU than an arrangement which put part of the EU border round a whole third country United Kingdom.

Whether Northern Irish beef farmers will thank the UK for exposing them to competition in this way is far from clear.

Stumbling over VAT

The third border issue that needed solving, and one that was reported to be causing last minute headaches, was how to deal with VAT.

The EU is a single VAT area and trade between suppliers in different countries is accounted for in the same way as domestic VAT.

The UK is proposing to leave the EU VAT area—and that means VAT should be paid on imports at the border—and people crossing the border should be liable for refunds.

An arrangement seems to have been found whereby NI stays in the EU VAT area, but the UK still collects VAT.

How this works in practice is still to be filled in.

The UK got a unilateral exit mechanism

Northern Ireland does not get a say about whether these provisions start to apply.

The initial idea of agreement to that has gone and with it the ‘DUP veto’.

But in a major victory for the UK negotiators Northern Ireland will be given periodic opportunities to decide whether it wants to stay in the arrangements.

The way that decision process works is set out in a unilateral declaration by the UK government.

But a decision to abandon the arrangements—and thus precipitate a hard border on Ireland, unless the UK has a very different future trade relationship with the EU than the one currently envisaged—will happen two years after a simple majority of members of the NI Assembly votes to leave (and they get to vote even if the assembly is not sitting).

So there is a unilateral exit mechanism: the 27 and in particular the Irish government are taking a bet that they never do.

On the current assembly arithmetic, if all unionists voted to leave they would have only 40 of 90 assembly seats, leaving a likely majority in favour of staying in the arrangements.

The long-term relationship is still up for grabs – but more distant than envisaged by May

The new protocol is accompanied by a revised political declaration.

That now sets a very different end point for the new relationship, an ‘ambitious’ trade agreement, but loses the May aspiration to build on the Withdrawal Agreement as a bridge to the future.

The Johnson end-point is a much looser relationship with the EU than she envisaged on goods.

Neither May nor Johnson showed much aspiration on services, and both committed to end free movement. In those respects, nothing has changed.

The political declaration is also where commitments to some sort of appropriate level playing field provisions have moved—May had signed up to some of these as part of the GB’s customs arrangement.

The emphasis here is on the balance of rights and obligations.

That sets the frame for the next stage of negotiations.

But it also sets up a potential battle ground for the next election and the next parliament.

As the EU has always made clear, the UK changing its red lines or asks means the EU can change its offer.

If the UK ratifies the deal quickly, the EU said it is ready to get talking from November.

Even so, to have a full-scale trade agreement up and ratified by December next year—the end of the transition period—is a huge stretch.

At the moment, no one is talking about an extension to the transition period, but with so much of the negotiating time already eaten up, and the need to get all the new arrangements for the NI border with GB in place, it may prove unavoidable.

Both sides moved, but Johnson made the decisive one

Enthusiasts for the deal are pointing out that Mr Johnson got the EU to crack and reopen the Withdrawal Agreement.

But he did that by resurrecting many elements of the deal they offered Theresa May in February 2018—a Northern Ireland-only backstop—and making them semi-permanent.

But he has secured Northern Ireland’s right to benefit from UK trade policy (though at the cost of considerable bureaucracy) and has introduced a democratic element with a right to exit.

He has opened the way to a different sort of Brexit, but probably for GB only.

A problem for Mr Johnson is that, while it is unwelcome to the DUP, the SNP and the Welsh government may think they should have been offered Northern Ireland’s deal too.

By Jill Rutter, senior research fellow at the UK in a Changing Europe. 

Disclaimer:
The views expressed in this analysis post are those of the authors and not necessarily those of the UK in a Changing Europe initiative.

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