As expected, a core part of the proposal is for Britain to stay in a goods-only single market but, significantly I think, it is not described in that way but as a UK-EU “free trade area for goods”. This wording is either a sop to the Brexiters or represents the continuation of what has long been one of their core misunderstandings, namely that a single market is the same a free trade area. This confusion, discussed in detail in my blog post of 20 February 2017 is, as I wrote there, evidenced by an interesting insider account of the referendum campaign, written by Daniel Korski, formerly Deputy Director of David Cameron’s Policy Unit. He records the frustration during the pre-referendum re-negotiation with the EU:
“Nor would our counterparts in Europe acknowledge that the EU’s four freedoms are very much divisible. A country can reduce tariffs and remove trade barriers and still maintain restrictions on which foreigners are allowed to enter the country. This is what the United States has done since World War II, with NAFTA being the best example.”
Later in that post, I suggested that the government’s approach to Brexit at that time was to try to shoehorn together the two fundamentally different models of international trade, a single market and a free trade area. On the basis of the wording of the Chequers statement that is still the approach or, at least, Brexiters are being allowed to believe that it is. It also panders to the ‘country cousin’ of the single market/ free trade area confusion, namely the habitual canard that ‘when we joined, we were told it was just a trade area’.
However, in other respects, the Brexiters are being asked to swallow something which looks more like ‘Ukraine plus’ or ‘Switzerland plus’ i.e. a goods but not services single market; some kind of UK-EU institutional arrangement which might look rather similar to the EFTA Court, or to the kind of ECJ-backstopped arbitration system associated with the Ukraine DCFTA; and an as yet unspecified ‘mobility framework’ that would be more or less close to free movement of people as per Switzerland. In addition to all of this, and very much in addition to Swiss or Ukraine models, there is the proposal for a new ‘facilitated customs arrangement’.
Will the EU-27 agree to this? Ultimately, no, for the reasons set out in my previous post. But they will almost certainly take it seriously and negotiate seriously about it, if only because, as noted above, it is the first time Britain has produced a basis for such a serious negotiation. In the course of it, I would expect the court arrangement to land up pretty close to the EFTA court and the mobility framework to get pretty close to freedom of movement.
As for the customs arrangement proposal – this remains a mess and it is very hard to see how it can generate something workable and, if so, not any time soon. So that implies a much longer transition period than is presently envisaged. Perhaps more likely it morphs into a straightforward replication of the existing customs union. What is most significant here is that by committing to a single market for goods and a customs arrangement, the statement also commits to agreeing to the existing Northern Ireland backstop agreement from phase 1, if only by dint of the assumption that it will never be used. That, at least, removes what has been the biggest obstacle to progress since the publication of the draft Withdrawal Agreement text.
Clearly if this does become the direction of travel, and it is hard to see how May can not expect it to be, it may fracture the very fragile unity of the cabinet and might provoke rebellions within the Tory Party. The question is whether what happened yesterday was that the Brexiters crossed the Rubicon and will now swallow pretty much anything that comes, or not. One irony, which I noted as a possibility in my post on the recent Withdrawal Bill votes is that the Brexiters have engineered a situation whereby a ‘meaningful vote’ on Brexit terms will not happen. They may live to rue that.
If things develop in the way just outlined, it will become increasingly difficult to see what the case is for not remaining in the single market for services, of course. It certainly makes no sense in terms of British economic interests for reasons set out by Charlotte Moore in a recent incisive article on the politics.co.uk site. By implication, the government still expect mutual recognition agreements to do far more heavy lifting than can be asked of them. And there is very little mileage in having an independent trade policy for services given that free trade agreements rarely liberalise service trade to any depth (the implication to the contrary in the Chequers statement is wholly fanciful and, presumably, just a sop to Brexiters along with the reference to potentially joining TPP; for that matter, it’s hard to see how the Chequers proposals give much scope for free trade agreements in goods).
So perhaps the model then shifts towards ‘Norway plus’ (i.e. Norway plus customs arrangement). If so, another irony emerges: since most Brexiters have, since the Referendum, insisted that this would not be Brexit at all they would really have no convincing argument against simply abandoning Brexit altogether although (as always) the route and timing to that outcome remains unclear. In any case, to the extent that Chequers makes a soft Brexit more likely it may also reduce pressure to abandon Brexit in the face of a possible ‘no deal’ crash exit which, by contrast, is now less likely.
We’re not, of course, at anything like the point of knowing anything for sure yet. It is still perfectly possible that the Tory Party will implode into civil war over the Chequers position, or that for fear of that the government refuse to make the accommodations which might, conceivably, make something like this position fly in the negotiations with the EU.
The whole situation remains absurd, needless to say. None of this is remotely worth doing, and if it was worth doing it would have been better to have arrived at this proposal before embarking on Article 50. Still, yesterday was, by Brexit standards, slightly less absurd than usual.