Richard North, 08/03/2018  

Now that the European Council has got its draft guidelines, I think we can safely assume that Mrs May's policy proposals, as expressed in her Mansion House speech, are now dead in the water.

Her brave new proposals, based as they were on completely unrealistic ideas of mutual recognition, were never going to fly. And yesterday, nemesis arrived in the form of European Council president Donald Tusk and his smiling henchman, Xavier Bettel, prime minister of Luxembourg.

Two hours before addressing the press corps, he told us, he had sent the EU27 Member States his draft guidelines for our relations with the UK after Brexit, and he was in Luxembourg to consult with Bettel on those guidelines that he hoped would be adopted at the European Council in March.

"My proposal shows that we don't want to build a wall between the EU and Britain", said Tusk. "On the contrary, the UK will be our closest neighbour and we want to remain friends and partners also after Brexit. Partners that are as close as possible, just like we have said from the very first day after the referendum".

With that, it was not long before he was putting the boot in, ignoring Mrs May's ideas for semi-detached membership of the Single Market. He proposed merely "a trade agreement covering all sectors and with zero tariffs on goods". Like other free trade agreements, he said, it should address services.

And in what most likely will cause a lot of grief, especially amongst the "ultras" he linked this to fisheries. Reciprocal access to fishing waters and resources, he said, should be maintained. The message there was very clear – all your fish are belong to us.

The generality is confirmed in the draft guidelines themselves. The European Council is ready to "initiate work towards a free trade agreement (FTA), to be finalised and concluded once the UK is no longer a Member State". But just so that there can be no misunderstanding, the guidelines go on to say: "Such an agreement cannot offer the same benefits as Membership and cannot amount to participation in the Single Market or parts thereof".

With the irony bursting from his script, Tusk in his statement called this a "positive approach". The simple fact was, he added, "that because of Brexit we will be drifting apart". This will be the first FTA in history that loosens economic ties, instead of strengthening them. 

In terms of slogans that go on the sides of red busses, his next sentences didn't quite make the cut. "Our agreement", he said, "will not make trade between the UK and the EU frictionless or smoother. It will make it more complicated and costly than today, for all of us. This is the essence of Brexit". Perhaps they would fit on the roof, to be relayed to us via helicopter onto our TV screens.

Nevertheless, these guidelines are very much a draft. They have not even been formally published. But, as M. Barnier and M. Juncker have both observed at various times, a speech does not constitute a negotiating position. As with Florence, for them to have any actionable status, they needed to be translated into a formal proposal.

Therefore, unless there have been communications of which we are unaware (which is quite possible), we have a situation where the Tusk is reacting to a non-proposal from the UK government, in the form of a speech from Mrs May. He has responded with draft guidelines which cannot even formally exist until they have been approved by the European Council – meeting as the 27. And this is not set until 23 March.

In strictly legal terms, therefore, yesterday's statement was a non-event. In theory, nothing has actually changed. Of course, though, everything has changed. Mrs May is holed below the waterline. The policy on which she so delicately crafted an agreement with her Cabinet has crashed and burned, shot down in flames by the EU before it could even take on the status of a formal proposal.

Yet, in the absence of the very formality which gives these things tangible effect, the May government can carry on as normal for a while, as if nothing had happened.

Some time ago, I drew the comparison with the worker who has taken a lethal dose of radiation. For a short time, before the symptoms kick in, he can pretend nothing has happened. But he's still dead – it's just a matter of time. The Mansion House speech is dying – even now its organs are shutting down. Soon it will be dead.

The lethal dose came towards the end of Mr Tusk's short statement, by way of his summary. We will enter the negotiations of the future relations with the UK with an open, positive and constructive mind, he said. But also with realism.

Instead of Mrs May's five tests, he offered us a mere two. The first was the test of balance of rights and obligations. For example, he stated, the EU cannot agree to grant the UK the rights of Norway with the obligations of Canada.

Next, there was the test of integrity of the Single Market. No Member State is free to pick only those sectors of the Single Market it likes, nor to accept the role of the ECJ only when it suits their interest. By the same token, a pick-and-mix approach for a non-member state is out of the question. We are not going to sacrifice these principles. It's simply not in our interest.

That's the epitaph that goes on the tombstone of the Mansion House speech: "It's simply not in our interest". That's why it died.

By coincidence, or not, at roughly the same time, Chancellor Philip Hammond was giving a speech. On Friday, he said, the prime minister set out the UK's vision for its future economic partnership with the European Union, in a speech which answered the call to set out "what we want". 

It was "clear" said Hammond, "that we understand this is a negotiation, where both sides will need to give and take". Our task, together with our European partners, he added, "is to deliver a Brexit that works for the UK and for the EU".

Well, what works for the UK clearly doesn't work for the EU. It's simply not in its interest. Thus, the EU is going to pursue its own version of give and take: we give, it takes. It will do so because it can, and because Mrs May has boxed us into a corner so firmly that the UK has run out of option. We take what we are given, or we go away with nothing.

By the end of his speech, though, Hammond hadn't got the message. For financial services, he still thinks we can go "far beyond what is available in ordinary third-country relationships", establishing "the most comprehensive supervisory cooperation arrangements anywhere in the world".

But, as the draft guidelines bluntly tell us, when it comes to trade in services, the UK will become a third country. Thus, the Union and the UK "will no longer share a common regulatory, supervisory, enforcement and judiciary framework".

This is not just a matter of common regulation. There are four elements to the framework, of which regulation is only one. We will, therefore, be lucky to get "regulatory equivalence", granted on a grudging, case-by-case basis, that will take years for each firm to put in place.

Hammond needs to hear the words: the agreement "cannot offer the same benefits as Membership and cannot amount to participation in the Single Market or parts thereof". Mrs May has made our bed – and we will have to lie on it.

The only false note of the day thus came from Tusk when he declared that "we don't want to build a wall between the EU and Britain". But that wall doesn't have to be built. It already exists around the Single Market, like the wall round a medieval city.

Mrs May has decided to place us on the outside and, like the song goes: baby, it's cold outside. We just got the first icy blast of that reality.

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