After losing Home Secretary Amber Rudd, the British prime minister is now facing a split in a cabinet whose balance between Remain and Leave campaigners has been tilted.
On Wednesday morning the UK woke up to a rather expected “ultimatum” by Leave advocates, who want a clean break from the EU and do not want a Customs Union of any kind. Apparently, 60 MPs led by Jacob Rees-Mogg have sent a 30-page report to Theresa May of their own proposed course of action, making clear that any Customs Union with the EU is unacceptable.
Ireland or “no deal”
Those who want to put the issue of a Customs Union with the EU to sleep have yet to produce a convincing answer to the challenge of what will happen with Ireland. Hardline backbenchers led by Jacob Rees-Mogg have made clear that they don’t consider avoiding a hard border in Ireland the responsibility of the UK.
Rees-Mogg has admitted that the idea of a technological solution to the problem at hand is “cretinous”; his conclusion is that the UK should be preparing for a “no deal” scenario.
Mrs May has long suggested that it is possible to rely on technology to minimise border checks by ignoring customs for small and medium businesses and introducing a “trusted trader” scheme and various tracking technologies for sizable transfers of goods. In this maxfac (Maximum Facilitation) scenario, the UK would collect tariffs on the EU’s behalf for goods making their way to the Single Market via the UK.
With more polite terms than those chosen by Mr Rees-Mogg, Brussels dismisses this idea as “unworkable” or “magical thinking.”
That is why the majority of Theresa May’s cabinet are now discussing the possibility of a “clean break” with the EU, with the “no deal” scenario centre-stage. The international trade secretary, Dr Fox, the foreign secretary Boris Johnson and the environment secretary Michael Gove have vehemently opposed the idea of any sort of Customs Union. There have been threats of resignations.
Hammond champions compromise
As a precondition to initiating trade talks in December 2017, the UK signed onto a “backstop” solution for Ireland, in which the North of the island remains part of the Customs Union while the rest of the UK leaves. That solution has never been acceptable to the Democratic Unionist Party (DUP) and will never be approved by the House of Commons without the support of the opposition. In any event, it would signal the loss of confidence in Theresa May’s government.
There is little question that without a convincing answer to the issue of Ireland, the UK cannot take for granted the offer of a two-year transition period. The UK stands to lose almost immediately the market that absorbs 50% of its exports in goods and one-third of its market in services.
Chancellor Philip Hammond is said to be leading the Conservatives making the case for a customs partnership, in which the UK mirrors EU customs rules with some scope for differentiation. Normative deviation in this solution remains a sovereign prerogative, but the UK will know that it could see the immediate disruption of trade and a hard border in Northern Ireland. That solution will have the support of Labour and perhaps the rest of the opposition.
Hammond can also count on the support of business secretary Greg Clark and at least 12 Conservative MPs in the House of Commons. For Brexit hardliners, this is a backdoor to retaining the status quo.
The intention is for the UK to remain part of pan-European value chains in manufacturing and services. Overall, it is expected that there will be a cross-party majority in favour of a solution that will not entail a border, safeguarding the Good Friday Agreement. The question is whether this parliamentary majority can be expressed by the current government.