Richard North, 10/10/2017  

The Brexit negotiations currently are in crisis, stalled over what are called the "phase one" issues, where the Commission is insisting on seeing "sufficient progress" before it will recommend to the European Council that the talks can move on to phase two. Only then can there be discussions on a trade deal and what Mrs May calls an "implementation period".

To break the logjam, the Commission needs to see the UK team in Brussels this week come up with "concrete proposals" on expat civil rights, the financial settlement and on the Irish border question. Only then will Michel Barnier be able to attend of European Council sitting as 27, on 20 October, and advise them that it is safe to progress to the second phase.

In response to this clearly and repeatedly expressed scenario, Theresa May has decided, in the most dismissive of ways, simply to ignore it. Instead, via a statement to the House of Commons yesterday, with her chief negotiator by her side, she appealed over the head of Barnier, speaking to the 27 in the hope that they will decide to authorise phase two talks, regardless of the lack of progress.

Mr Speaker, she said, "a new, deep and special partnership between a sovereign United Kingdom and a strong and successful European Union is our ambition and our offer to our European friends". And the wording here is absolutely crucial. The "colleagues" are expecting an offer – but on phase one issues but they are actually getting an "offer" to engage on phase two matters – her "deep and special partnership".

Then, to make it plain what she expects from the 27, she declares: "Achieving that partnership will require leadership and flexibility, not just from us but from our friends, the 27 nations of the EU". And, to that, she adds: "as we look forward to the next stage, the ball is in their court. But I am optimistic it will receive a positive response".

The sub-text is unmistakable. Despite the 27 convening on the 20th to assess whether or not sufficient progress has been made with phase one, she is demanding that they abandon their plans and move to phase two regardless. And, from the new talks, she expects "a positive response".

The reason she thinks the "colleagues" should do this is because she believes that, "what we are seeking is not just the best possible deal for us", but also "that will also be the best possible deal for our European friends too".

But we then find, by way of a peroration, that she is also setting up her alibi to explain away failure. "By approaching these negotiations in a constructive way – in a spirit of friendship and co-operation and with our sights firmly set on the future", Mrs May says, "I believe we can prove the doomsayers wrong".

By staking this claim. if the phase two talks fail – thereby proving the doomsayers right – it will be the fault of the "colleagues". The Prime Minister has made a "generous" offer, so the failure is down to the other side not approaching the negotiations in a constructive way – "in a spirit of friendship and co-operation and with our sights firmly set on the future".

Having thus set out her stall, Mrs May then declares that, while she believes "it is profoundly in all our interests for the negotiations to succeed", it is "also our responsibility as a government to prepare for every eventuality. So that is exactly what we are doing".

This is the veiled threat, seized upon by the media that the government is preparing for a "no deal". The message to the 27 is clear: give us our "new, deep and special partnership" or we walk. May has delivered a "velvet" or, as I called it, the "passive aggression" ultimatum.

In exactly the opposite style of Mafia, who famously make offers that people cannot refuse, the Prime Minister has made the "colleagues" an offer they cannot possibly accept. But, by refusing it - which they must - they will be cast as the villains.

As for that "new, deep and special partnership" to which the "colleagues" are then supposed to agree, we see the first instalment of this in a Treasury White Paper published late yesterday, after Mrs May had finished speaking.

Headed "Customs Bill: legislating for the UK's customs, VAT and excise regime", this "sets out the government's approach to legislating for a future customs regime, and to creating a framework that supports intra-European trade".

What emerges from this is that the government has fully understood the implications of leaving the EU and the Single Market on cross-border trade with the EU, and the potential for disruption. To avoid this disruption, it wants to embed within the "new, deep and special partnership", a "new customs partnership", which it hopes to negotiate with the EU.

To suggest that the authors might be deluded, though, is being far too generous. Having been lectured mercilessly by the "colleagues" for attempting to have their cake and eat it, the proposal here seeks to do precisely that, offering "innovative approaches that could support UK-EU trade outside of a customs union arrangement, while still removing the need for customs processes at the border".

Without stating as much, the government, in deciding to leave the Single Market – the major benefit of which is "frictionless trade" with no customs processes at the borders" – has come up with a regime that replicates exactly the major benefit of the Single Market, without assuming the responsibilities of participation.

To achieve this miracle, the UK would apply the same tariffs as the EU, and provide the same treatment for rules of origin for those goods arriving in the UK and destined for the EU. Then, by mirroring the EU's customs approach at its external border, the UK could ensure that all goods entering the EU via the UK have paid the correct EU duties.

This, the White Paper authors assert, "would remove the need for the UK and the EU to introduce customs processes between them, so that goods moving between the UK and the EU would be treated as they are now for customs purposes".

If one reads carefully into the text, though, one sees that the authors are not thinking in terms of the Single Market. They are seeking to replicate the conditions of the Customs Union, wrongly assuming that, with the harmonisation of tariffs and rules of origin, the border checks disappear.

Bizarrely, the Government does recognise that "there are additional border activities undertaken as part of official controls which, while vital to the UK's trade, safety and security, are not directly related to the collection of customs duty".

These, we are told, include the regulation of cross-border movements of large sums of cash, tackling counterfeit goods, detecting firearms, explosives and narcotics, disclosure of information to other government departments for non-tax purposes and certain non-tax import and export controls, such as animal, public and plant health checks.

In fact, under the latest version of the Union Customs Code, these (and the all-important conformity checks on imported manufactured goods, about which it says nothing) – less the animal, etc., checks which remain separate - constitute the unified "release for free circulation" procedure. They are an integral part of the customs system.

These supposedly additional issues are the non-tariff barriers which become the main basis for border checks, and will be the main sources of delay and disruption. Yet they are not to be covered in the Customs Bill. 

Yet all we get is that the government "will set out proposals in relation to these other areas in due course". Once again, we're back in the "apart from that, how did you enjoy the play, Mrs Lincoln", territory. In publishing a White Paper that seeks to avoid disruption and delay at the borders, the Government omits those very aspects which will be primarily responsible for the disruption and delay.

What is more, the Government admits that the scheme proposed constitutes "an innovative and untested approach" which "would need to be discussed further with the EU and businesses". Thus, the Customs Bill "cannot be drafted specifically to provide for the implementation of this outcome".

With that, one gets an incredible feeling of disconnect. This is only one part of the "new, deep and special partnership". Of the rest we have no detail, apart from an incoherent treatise on trade, also published yesterday. Yet it is quite evident that Mrs May believes we can conclude her "new, deep and special partnership" by the time we leave the EU.

Thus, if the "new customs partnership" is delusional, the pursuit of a final agreement has to be considered doubly so – except that it will never come to pass. Hours before Mrs May delivered her statement, Commission spokesman Margaritis Schinas told a regular briefing that there was "a clear sequencing" to the talks and "there has been so far no solution found on step one, which is the divorce proceedings". The ball was "entirely in the UK court".

With David Davis sitting alongside Mrs May during her Commons statement, when he should have been in Brussels talking to Barnier, one can only conclude that the UK is not taking the fifth round of talks seriously. In similar manner, it seems very unlikely that the European Council next week will take Mrs May's "offer" very seriously.

Slowly, inexorably, we are drifting to the end game where a "no deal" seems inevitable. The 20th October is set to be a historic turning point and has the potential to be marked down in the history books as the day Brexit fell apart.

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