May unites Tory factions but faces uphill battle with EU

The British PM hopes to convince EU negotiators to compromise

Theresa May has managed to temporarily unite the Tory factions over Brexit, but the question is whether she can persuade the European Union to compromise.

Conservatives who support Brexit and those who prefer to remain in the EU’s customs union and single market, have so far backed the UK Premier’s “more detailed” and “practical” stance. Realisation has dawned on them that if they knife the premier, they could lose their seats in a looming election.

There will be a Parliamentary vote on the Brexit deal before the March 2019 deadline. But with only months to go, time has run out to organise a second referendum.

The basis of Mrs May’s speech is that post-Brexit Britain would follow EU standards and competition rules. It would seek a “pragmatic” bespoke tariff-free customs arrangement. The model, similar to a UK Institute of Directors proposal, is a partial customs union. It would cover all industrial goods and some processed agricultural products. It would remove the costly “rules of origin” tariffs – such as parts for the UK motor industry. The UK would then have the freedom to forge its own trade policy and seek free trade deals with other countries.

The EU’s draft Brexit negotiation guidelines,  however, only offer a free trade accord with zero tariffs. If UK is out of customs union and single market, friction is likely, the guidelines paper says, The EU must uphold the integrity of the single market.


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Good outcome for City crucial

A significant difference between negotiators on both sides is how the City of London, UK’s financial sector will operate in the EU after Brexit. Mrs May’s stance is that the City will have the same financial regulations as the EU, provided the UK has a say in rule changes.

The City “provides huge amounts of debt and equity funding for businesses across the EU 27, and the risk is born here in the UK”, she said. “It wouldn’t be right for us to take that risk on without us having a say (in the regulations).”

Currently the City operates under uniform EU rules. They allow Britain to export to the EU financial services worth more than £20 billion ($27 bn) or nearly 2 per cent of gross domestic product (GDP).

The question is whether the sharp Italian swing to the euro sceptical right will either encourage EU Brexit negotiators to compromise or continue to prove to be unbending.

“Theresa May needed to move beyond vague aspirations,” said Guy Verhofstadt, the European Parliament’s Brexit co-ordinator. “Our relationship must be close and comprehensive. This is only possible if the UK understands that the EU is a rules-based organisation. There is little appetite to re-negotiate the rules of the single market, simply to satisfy a divided Conservative party.”

He added that Mrs May’s reconfirmation of the December agreement on the Irish border “is reassuring but we need credible proposals detailing how the UK seeks to achieve this in practice”.

Tests for negotiating success

In last Friday’s speech, Mrs May said that there were several tests for Brexit negotiating success. These are implementing the referendum, creating an enduring goods and services trade deal, protecting security and maintaining a strong and durable friendly relationship with European nations. But Mrs May insisted that the deal will also require “cherry picking” as all trade deals require compromises. The EU guidelines indicate that the UK will not be able to pick and choose.

The PM admitted that “life is going to be different” after Brexit and that there were “hard choices” on both sides; that neither the UK or EU would get everything they want. Trade across the Irish border should be as “frictionless as possible”. Britain will adhere to EU regulations and is prepared to pay for access to European agencies covering medicine, chemicals and flights.

Significant figures on opposite sides of the Brexit spectrum are pessimistic about the UK’s Brexit team’s chances of success. John Major, former Conservative prime minister and Lord Heseltine, former deputy prime minister and minister of trade predicted that the EU “would never agree to” Mrs May’s proposals.

Nigel Farage, former leader of the United Kingdom Independence Party (UKIP) said that Mrs May has made a major mistake by not threatening to walk out of Brexit talks, if the EU won’t bend. Without this negotiating position Brussels “will treat us with contempt”, he claimed.

© copyright Neil Behrmann

This article was first published in The Business Times, Singapore

Neil Behrmann is London correspondent of The Business Times. Jack of Diamonds his thriller on global diamond mining and smuggling, will be published in coming weeks. It is the sequel to the thriller, Trader Jack, The Story of Jack Miner.

 

 

 

 

 

 

 

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