It's Always Raining Over the Border

There is a suggestion that Theresa May was trying to use the outline deal on the Irish border to bounce the cabinet into agreeing "continued regulatory alignment" of the entire UK with the EU. The political logic was that this could square the DUP by ensuring no divergence in standards between Northern Ireland and the Republic, and thus no need for a hard border, while also avoiding the North having special status or any regulatory divergence from Britain, thus maintaining the integrity of the UK. The risk is that a permanent commitment to regulatory alignment with the European Union would be indistinguishable from continued membership of the Single Market and Customs Union - the softest of soft Brexits - and would thus negate the chief economic benefits of leaving the EU, namely the ability to negotiate independent trade deals and to dispense with EU "red tape". Though the deal was being described as a form of words that would keep the specifics suitably vague until the trade talks got under way, it looked more like membership of the European Economic Area (EEA) than the basis for a bespoke, comprehensive trade deal.

This scenario looks suspiciously like a remainer fantasy. I doubt that membership of either the EEA or the EFTA (the European Free Trade Area) is likely. Theresa May clearly stated in January of this year that leaving both the Single Market and the Customs Union was an inevitable consequence of the 2016 referendum, a point she reaffirmed in her Florence speech in September. That speech also explicitly ruled out both the option of EEA membership (the Norway model) and a "traditional free trade agreement" (the Canada model), positing something unique in between. The EU27 in turn ruled out any bespoke deal: it's either Norway, Canada or no deal (Switzerland, which is in the EFTA but not the EEA, due to a referendum reverse, has a series of bilateral deals with the EU but is considered an anomaly, not a precedent). There is no doubt that the EU27 would prefer the UK to adopt the Norway model, and that many "releavers" consider this to be the least-worst outcome, however it would be a bridge too far for most Brexiteers.

Assuming the report of a continued role for the European Court of Justice in respect of EU citizens' rights is well-founded, and adding in the concession on the £50 billion "divorce bill", the decoupling process was beginning to look less like a soft Brexit than a Brexit in name only, which would obviously be unacceptable to the ultras. It was therefore critical that any deal on the Irish border was framed in such a way as to avoid the suggestion that continued membership of the Single Market and Customs Union might yet be possible. You can understand why Nicola Sturgeon and Sadiq Khan spun the news otherwise, and there are plenty of remainers in the media who were only too happy to point up the implications, but what is remarkable is how quickly the idea gained currency, causing an apparently spooked DUP to row back. Not for the first time, the UK government has shown itself to be less than tactically astute when it comes to handling negotiations, which hardly bodes well given the importance it has placed on future free trade deals with all and sundry.

There is no doubt that the government was briefing on Monday morning that a deal was about to be done and that a form of words had been agreed that was acceptable to the UK and the EU27. According to an RTE leak, those words were: "In the absence of agreed solutions, the UK will ensure that there continues to be no divergence from those rules of the internal market and customs union which, now or in the future, support north-south cooperation and protection of the Good Friday agreement". Apparently, "no divergence" was then amended to "regulatory alignment". Assuming this is accurate, it indicates three things. First, that this position was envisaged to be a back-stop in the event that further terms were not agreed during the phase 2 negotiations. Second, that the scope of the rules in question was limited to those that support all-Ireland cooperation, not to the entirety of the Single Market and Custom Union. Third, that the entrenchment of the Good Friday Agreement within the framework of the EU was to be replaced by its entrenchment within the final deal between the UK and the EU27. There is ambiguity in the language, but there is also a clear acknowledgement of the island of Ireland as a special case.

It is difficult to believe that this wasn't squared with the DUP in advance, and I'm sceptical about the idea that it was kept from the likes of Michael Gove and Boris Johnson with the intention of being presented as a fait accompli later in the day, not least because David Davis and other Brexit true-believers were surely in the know. Media commentators tend to place far more weight on the concept of "constructive ambiguity" than is usually warranted, essentially to excuse their own uncertainty of interpretation, but on this occasion it does appear as if the language was sufficiently opaque to support multiple readings, up to and including continued membership of the Single Market. One explanation for this would be a desperation on the part of the UK to get to phase 2, in the hope that "something will turn up" to resolve the border issue later. Another explanation is that the British government is not sincere (Varadkar's emphasis on May "negotiating in good faith" was volunteered unprompted, which is often a sign of doubt) and that it always intended to use the threat of a semi-hard border (i.e. a minimalist interpretation of the scope of north-south cooperation) as leverage for a trade deal.

There is still a possibility that a form of words can be agreed that would allow progress to phase 2, however I suspect this will have to be far more concrete than "continued regulatory alignment", not least to avoid introducing generic elements that might be hijacked by the First Minister of Scotland or the Mayor of London. I suggested last week that a deal could take the form of a Northern Irish commitment to mirror EU regulation in specific sectors such as agriculture and energy, justified on the grounds that these are all-Ireland markets that require coordination, combined with a UK commitment to accept exports of specific goods from the entire island of Ireland without any customs control (in effect giving the Republic a bye ahead of the phase 2 haggling), which would avoid an Irish Sea border. This could be achieved by building on the foundations of the Good Friday Agreement, which already covers a number of Island-wide concerns via the North/South Ministerial Council, and might allow further matters to be quietly incorporated during phase 2. The problem is that it would require the DUP to be willing to extend the GFA and accept greater cooperation with the Republic, which is at odds with its raison d'etre.

The failure to secure common ground among all parties on Monday will have two consequences. The DUP has now retreated to its comfort zone of obdurate victimhood, in which "never" is the stock answer and the London government can be cast as untrustworthy. This was always likely at some point, and a cynic might suggest that the party deliberately led Number 10 along with this very outcome in mind (though, to be honest, I don't think they're that Machiavellian), but I can't help feeling that a more subtle operator than Theresa May, whose negotiating style also appears to be a mix of the pathetic and the obdurate, might have manoeuvred the DUP into a better space rather than simply backing them into a corner. Now, her only real option is to call the DUP's bluff by proposing a more specific compromise tied to the GFA that could potentially command support among less hard-line unionists in the North. This would leave the DUP at risk of revealing itself to be a party that prioritises weakening the Good Friday Agreement over the health of the Northern Irish economy.

The second consequence is that May herself is now vulnerable to challenge within the Conservative Party. You don't have to believe the myth that she was planning to gut Brexit to see that her solution is likely to fall some way short of the ultras' vision. They appeared to be willing to give her the benefit of the doubt over the money, but the continued role of the ECJ in respect of citizens' rights and the possibility of future EU regulations being unilaterally applied to a part of the UK represent an unacceptable compromise with their conception of sovereignty (the Leave Means Leave letter published on Friday looks like another back-stop, ruling out further regulatory alignment beyond March 2019, which might indicate that they had got wind of the proposed deal terms last week). May has managed to remain as Prime Minister, despite the General Election debacle, because no one else wants the poisoned chalice of having to sell a final deal that would disappoint almost everyone to a degree. Now, with the possibility that she might be more of a saboteur than a patsy, it becomes necessary for the ultras to unseat her before a loss of momentum leads to a demand for a second referendum. It's going to be an interesting week.