Posted by Rewan Tremethick on January 27th, 2017.
After months of speculation, voters, politicians and investors finally have some clarity over Brexit. Theresa May outlined her four key objectives and her twelve negotiating aims in a major speech in January, while the Supreme Court ruled Parliament should get a say in invoking Article 50.
The markets were happy and the opposition largely angry, but what about the people who voted for Brexit? Is the government pursuing the type of deal they wanted? And thanks to the Supreme Court judgement, will Theresa May be able to deliver on her aims?
In order to leave the EU, the UK must notify the EU of its intent to leave. This is specified in Article 50 of the Lisbon Treaty. Initially the government argued that it could use ‘Royal Prerogative’ to invoke Article 50 without Parliament giving it permission. The ‘Royal Prerogatives’ are a set of historic powers that used to belong to the monarch but have since essentially been transferred to government. The power to call elections is perhaps the most well-known example.
The relevant power in terms of the Supreme Court case is the making of foreign treaties. The government argued that, as Article 50 would trigger a series of exit negotiations leading to new treaties with the EU, ‘Royal Prerogative’ could be rightly used to start the process. But a legal challenge brought by investment banker Gina Miller argued that there was no precedent for ‘Royal Prerogative’ being used to remove domestic rights from UK citizens, which repealing the EU treaties currently applying to the UK would do.
Parliament, Miller’s lawyers argued, therefore had to vote on whether or not Article 50 could be triggered. The Supreme Court ruled that, from a legal standpoint, Parliament must get a say.
This means in order to invoke Article 50, the government must now put a bill to Parliament which, if approved by lawmakers, gives Theresa May the authority to notify the EU of the UK’s intent to leave. Like most bills put before Parliament, members can suggest and vote on amendments.
There is therefore potential for Theresa May’s Brexit plans to be greatly altered by changes to the Article 50 bill. Investors in particular are hoping for an amendment that would force Theresa May to try and keep the UK in the single market. Theresa May wants to leave the single market and have some form of access to the customs union.
So what’s the difference, what do Brexiters want and what are we likely to get?
In her speech on Brexit May claimed that, while the UK would leave the single market, it would attempt to remain (at least partially) a member of the customs union. She said;
‘Both sides in the referendum campaign made it clear that a vote to leave the EU would be a vote to leave the Single Market.
So we do not seek membership of the Single Market. Instead we seek the greatest possible access to it through a new, comprehensive, bold and ambitious Free Trade Agreement.
That Agreement may take in elements of current Single Market arrangements in certain areas – on the export of cars and lorries for example, or the freedom to provide financial services across national borders – as it makes no sense to start again from scratch when Britain and the remaining Member States have adhered to the same rules for so many years.’
But what exactly does that mean for the UK?
There are three types of trade agreement being discussed currently and it is very easy to get them mixed up.
Understanding a free trade agreement is the best place to start. A free trade agreement is one where two or more countries agree to forgo tariffs (taxes) and quotas on imported goods. The argument behind doing this is that it gives domestic consumers access to a broader range of goods and services, while improving the exports of domestic businesses by opening up new markets and lowering their costs.
Where a free trade agreement faces inward, a customs union is focussed outwardly. Countries in a customs union agree to charge a set level of tariffs on imports from countries outside the customs union. The idea is to promote trade between member countries, as this can be done tariff-free, while uniting to protect their domestic industries from outside threats.
A single market is different again. It goes further than a customs union by also removing what are called ‘non-tariff barriers’. Universal rules on things such as packaging and safety standards apply to single market members. In the case of the EU – the largest single market on the planet – this means UK manufacturers have to comply with safety standards; you may have heard talk about regulations governing the power of vacuum cleaners, toasters and kettles during the referendum.
Another feature of a single market is the freedom to move capital, people and services as well as goods. A free trade area only allows the later; members are free to control immigration, investment and regulate access for services as they wish. Under single market rules, all member states must allow these things to move freely across their borders.
It is not yet clear whether Theresa May will be forced by MPs to pursue single market access. Such a move could be politically dangerous for lawmakers whose constituencies voted overwhelmingly in favour of Brexit. Additionally, Tories voting in favour of this would be going against the wishes of their party; something considered by many to be a nail in the coffin for their careers.
But even if Theresa May is left free to withdraw from the single market, there’s no guarantee she will be able to secure a form of customs union membership. Several EU officials have already been sceptical of the idea, with the EU’s lead negotiator Guy Verhofstadt commenting;
‘I think it creates an illusion that you can go out of the single market and the customs union and you can cherry pick and still have a number of advantages.
I think this will not happen. We shall never accept a situation in which it is better to be outside the single market than be a member of the European Union. If you want the advantages of a single market and customs union, you have to take the obligations.’
Judging by the reaction of Brexit-supporting media and political figures, it seems Theresa May has delivered the vision of Brexit that was wanted. The Daily Mail described Theresa May as ‘the new Iron Lady’, the Express ran the headline ‘Deal or no deal we will leave the EU’ and the Telegraph described her speech as ‘May’s bold terms for Brexit’ and featured an opinion piece by Boris Johnson stating;
‘It is no exaggeration to describe this speech as a defining moment in British politics, one that will one day be remembered in the same light as Lady Thatcher’s famous Bruges address, which launched the modern Eurosceptic movement.’
Former UKIP leader Nigel Farage observed that Theresa May had used some UKIP language in her speech – a sentiment echoed by current UKIP leader Paul Nuttall, who commented;
‘Some of it did sound like a UKIP conference speech and the Prime Minister is now applying some of the things that we’ve been talking about for many, many years, so I would give her seven out of ten for this effort.
But I am concerned that what we’re getting is some sort of slow-motion Brexit where she is speaking about interim measures, or a transitional period, which will only begin after April 2019. She has given no end date to these transitional measures.’
Meanwhile, Co-Chair of pro-Brexit group ‘Leave Means Leave’ Richard Tice stated that the group welcomed ‘[May’s] commitment to delivering the democratic will of the people’. Change Britain, a group co-founded by leading Brexiter Michael Gove said;
‘Theresa May’s announcement that the UK will no longer be a member of the EU’s single market provides certainty to both the British people and businesses. The public voted to take back control of our laws, borders, money and trade, and it is right that the Prime Minister is taking the necessary steps to achieve this. It will also enable businesses to start planning their future operations outside the EU.’
So, while we still don’t know exactly what type of Brexit we will get, it seems that – providing MPs don’t drastically amend Theresa May’s Article 50 bill – Brexiters are getting more-or-less the kind of exit hoped for.
The Supreme Court decision aside, the plans the Prime Minister announced certainly lean heavily towards what Remainers call a ‘Hard Brexit’. Those on the Leave side may dispute the term, suggesting it implies something bad, but the fact that EU supporters are unhappy with the Prime Minister’s aims would suggest it is a good plan, from a Brexiter’s point of view.
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