​May’s soft-Brexit Chequers deal: What it means

Prime minister Theresa May has strong-armed her cabinet into backing a new vision for a soft Brexit.

A three-page government statement, issued after a marathon cabinet meeting on Friday at Chequers, Mrs May’s country residence, represents one of the most significant expositions of UK economic policy since the 2016 referendum vote to leave the EU.

But Mrs May’s vision remains incomplete, and her statement is peppered with ambiguities that she must eventually confront as she battles to win round Brussels without losing the support of the Conservative party or parliament.
What are the big policy shifts in Mrs May’s plan?

The UK position crucially “evolves” in two ways that would allow for a Norway-style Brexit deal covering at least part of the EU single market.

The first is Britain’s proposal for a “free trade area for goods” involving the UK and the EU that in effect continues existing regulatory and customs arrangements for manufacturing and agricultural products after Brexit. This is achieved by the UK becoming a rule-taker, with a treaty-based commitment to “ongoing harmonisation with EU rules on goods”.

Just as important is Britain’s concession on enforcement. UK courts would pay “due regard” to European rulings in cases relating to EU-set rules. In other words, while Britain is a separate legal jurisdiction after Brexit, the European Court of Justice would be supreme in interpreting the UK-EU goods rule book.

There are caveats — for example the British parliament could veto changes to the rule book if it accepts the “consequences for market access”. But taken together, the safeguards offer no more freedom than Norway enjoys as a member of the European Economic Area.
Which issues are fudged in the document?

Many policy issues remain ambiguous, or unaddressed.

This is most obvious in the area of customs and trade. Britain wants a “facilitated customs arrangement” with the EU, which allows the UK to control tariffs and pursue an independent trade policy. But in practice Britain also wants to continue “as if” it were within the EU customs territory. One senior EU official called the hybrid model “the fudge of the century”.

Services, which cover 80 per cent of Britain’s economy, are largely skirted over. The cabinet agreed to retain “regulatory flexibility” and accept less EU market access as a result.

The UK stance arouses suspicion in Brussels, with negotiators arguing it is hard to detach services from goods trade. They note that in areas such as financial services Britain still seems to want to replicate single market style access from outside.

Britain’s stance also splits the four freedoms of the single market. Asked about the viability of continuing free movement for goods while limiting access for services, capital and people, one EU Brexit negotiator said: “No way, no way, no way.”
What are the other policy battlefronts?

The UK government statement is replete with unresolved tensions that will play out during negotiations in Westminster and Brussels.

It calls for frictionless access to EU markets for UK fish products, at the same time as insisting the UK will take control of waters, potentially restricting the bloc’s access. The UK wants control of the common agricultural policy, while still automatically applying the EU’s agrifood rule book.

Such goals are hard to reconcile with the EU’s insistence on a level playing field after Brexit. While the UK pledges to maintain “high regulatory standards” for environment, social and employment law, it stops short of the harmonisation the EU expects from single market participants.

One other highly sensitive policy area is left in the balance: immigration. Mrs May’s cabinet agreed to end EU free movement rules, but want to offer a “mobility framework” for tourists, students and workers, which would potentially replicate some existing arrangements.
What happens next?

The British government’s white paper on future UK-EU relations, due to be published this week, will explain the policy “evolution” in more detail. The battle over drafting is expected to be fierce.
How will the plan go down in Brussels?

Senior figures on the EU side accept the Chequers deal opens a new phase in the Brexit negotiations, requiring the bloc to change too. But at present they say it will be more in tactics — through a more engaging tone and approach to UK ideas — rather than substance.

Even though it has evolved, Britain’s position on future relations with the EU still fundamentally contradicts principles laid down by the bloc’s leaders in their Brexit “guidelines”. Crucially these called for the “indivisibility” of the single market, a position the European Commission and France want to defend — even if the price is a no-deal Brexit.

Others in the EU camp are more sympathetic to the idea of a goods area involving the UK, ranging from central European countries such as Poland or Hungary to Ireland and some figures in the German government.

But at present diplomats say this is unlikely to shift the overall EU approach. One senior EU diplomat handling Brexit said it was still “difficult to see” how the UK ideas “are workable”.

For many in Brussels, the big focus remains the unfinished withdrawal treaty negotiations, including provisions relating to the Irish border.

Britain sees its UK-EU goods area proposal solving the Irish border question.

EU officials are more encouraged by a different reference in the Chequers statement: Britain’s acceptance that a sub-optimal “backstop” arrangement will be needed in the exit treaty. Brussels hopes this means the UK will propose additional Northern Ireland specific solutions.