Chapter 10The Aftermath

The twenty-fourth of June 2016 dawned on an uncertain Europe. In the UK David Cameron arrived at Downing Street at 7 a.m. acknowledging ‘Well, that didn’t go according to plan!’ Kenneth Clarke had predicted that Cameron wouldn’t last 30 seconds if he lost the referendum and he was almost right: Cameron was gone an hour later.¹ A leadership race ensued in which Boris Johnson initially appeared to be the frontrunner, but many Conservative Remainers were horrified by the prospect. They soon settled on Theresa May as an alternative candidate. May was the Home Secretary, and like many other Home Secretaries in the UK and elsewhere was hostile to immigration. In October 2015 she had made a strongly anti-immigration speech to the Conservative Party conference in which she stated baldly that ‘the numbers coming from Europe are unsustainable and the rules have to change.’ She also explicitly linked the question of refugee flows and illegal immigration into Europe with the EU’s rules on free movement for European citizens.² Such considerations led her to strongly support Cameron’s pledge to renegotiate the principle of free movement of people, for as she had written earlier, ‘the biggest single factor preventing us from meeting our objective [to reduce net immigration] is net migration from the European Union.’³

You might not think that such a person would be a logical candidate for Remainers to unite behind: her 2015 conference speech led one MP to describe her as ‘Enoch Powell in a dress’.⁴ But May had in fact backed Remain, if only in the most half-hearted of ways. This made her potentially capable of uniting the Leave and Remain factions within the party, and above all it made her potentially capable of stopping Boris Johnson. That task was made easier on 30 June when Johnson’s main backer, Michael Gove, announced that he had come to the conclusion that Johnson was not up to the job and would be running instead. In the end Mrs May was the last woman standing, and on 13 July 2016 she succeeded David Cameron as Prime Minister. The question was: what kind of Brexit would the new government be pursuing?

Apart from the UK itself, the country where the answer to that question mattered most was Ireland. As we saw in Chapter 6, the fact that both Ireland and the UK were members of the European Union had been crucial in helping to resolve a long and bloody conflict in Northern Ireland. The two communities there remained deeply divided, but there had been some moving symbols of reconciliation over the years, one of the most striking being the friendship that emerged between Ian Paisley, founder of the DUP and opponent of the 1960s civil rights movement, and Martin McGuinness, a former IRA member. The two served together as First Minister and Deputy First Minister of Northern Ireland between 2007 and 2008. The border between Ireland and Northern Ireland had become essentially invisible, bringing important practical benefits to ordinary people. What would Brexit mean for the Northern Irish peace process, or for communities on both sides of the border? And what would it mean for the rest of Ireland? As we saw in Chapters 6 and 7 Irish independence and prosperity had both been enhanced by EU membership, so there was never any question of Ireland following Britain out of the EU. But Britain remained a very important trading partner for an economy that had only just recovered from a devastating banking crisis, so British choices mattered a lot for Ireland.

In addition to the UK and Ireland, the other immediately affected parties were the other 26 member states and the European institutions. In France Jean-Marie Le Pen congratulated the British electorate on its courage and called for a referendum in France. His daughter Marine tweeted: ‘Victory for liberty! As I have been demanding for years we need similar referendums in France and the countries of the EU.’⁵ The result was also immediately welcomed by the far-right Alternativ für Deutschland (AfD) party in Germany and the Dutch populist Geert Wilders.

Not surprisingly, the reaction of President François Hollande in France was very different. He described the referendum result as ‘a painful choice that I deeply regret, for the United Kingdom and for Europe. But it is their choice and we must respect that, taking on board all its consequences … There is a great danger of extremism and populism. It always takes less time to dismantle than to assemble, or to destroy than to build.’⁶ There were similar reactions elsewhere on the continent. But apart from regretting the UK’s decision, the question remained: how would the EU as a whole respond to the challenges posed by Brexit? Since Brexit was a unilateral British decision, the answer to that question would largely depend on what the UK government decided to do next.

What Does the UK Want?

The UK had voted to leave the EU, but it remained to be seen what sort of a future relationship with the EU the UK had in mind for itself. The referendum did not provide much guidance on the issue, since voters had merely been asked ‘Should the United Kingdom remain a member of the European Union or leave the European Union?’: there was nothing on the ballot paper about either the customs union or the Single Market, and different Leave voters presumably had different views on those issues. On the face of it, the electoral logic seemed to imply that the government should pursue what soon became known as a ‘soft Brexit’, that is to say a Brexit that involved the United Kingdom remaining inside the EU’s Single Market, or a customs union with the EU, or both. After all, no less than 48 per cent of voters had wanted to remain inside the EU, and several Leavers had indicated before the referendum that they had no problem with remaining in the Single Market. It seemed reasonable to suppose that, given the choice between different types of Brexit, a majority of voters would therefore have backed a version that left the UK as closely tied to the EU as possible, and that a ‘soft Brexit’ along these lines might provide a way of uniting a bitterly divided society.

That was certainly what many outside Britain hoped for, especially in those countries heavily dependent on trade with the UK such as Denmark, the Netherlands and above all Ireland. But the initial signs were not hopeful. Mrs May took the extraordinary step of appointing Boris Johnson as Foreign Secretary. As we saw in Chapter 8, Johnson had just compared the European Union to Adolf Hitler; he also had a history of saying things that could have been condemned as racist coming from anyone else.⁷ The French Foreign Minister, Jean-Marc Ayrault, reacted by reminding his compatriots that ‘During the campaign he lied a lot to the British.’⁸ May also appointed two further leading Brexiteers to key positions: David Davis was to head the new Department for Exiting the European Union (DExEU), while Liam Fox became Minister in another new department, the Department for International Trade. Davis had argued during the referendum campaign that the UK would be able to negotiate trade deals with individual EU member states after Brexit. In May he tweeted that ‘The first calling point of the UK’s negotiator immediately after #Brexit will not be Brussels, it will be Berlin, to strike a deal.’⁹ At this late stage Davis was apparently unaware that individual EU member states are not allowed to negotiate their own bilateral trade deals with other countries: as you will recall from Chapter 3, a customs union commits all members to having the same external tariffs vis-à-vis third countries, and all EU member states are therefore bound by the EU’s common external trade policy. As for Fox, his department was set up to strike trade deals with non-EU countries, one of the main supposed benefits of Brexit, despite the fact that the UK cannot legally do this until it has finally exited the EU. Giving Fox this job was a strong signal that Mrs May did not believe that the UK should remain inside a future EU–UK customs union.¹⁰

That left the option of the Single Market. But in the summer of 2016 even former Remainers seemed to be accepting the fundamental premise of the Leave campaign, namely that there were too many Europeans in Britain. Not only commentators, but also public figures such as Gordon Brown, argued that the UK should be aiming for a deal that kept it inside the European Economic Area, which we encountered in Chapter 8, and the European Single Market, but which allowed it to restrict the free movement of people. After all, Liechtenstein (population 37,000) had a special deal in place when it came to immigration.¹¹ With Remainers like this, who needed Leavers?¹²

Mrs May herself was, as we have seen, instinctively hostile to free movement, and one of her chief advisers was Nick Timothy – a keen admirer of none other than Joseph Chamberlain.¹³ Another indication that the UK government might not be seeking a soft Brexit. But it was still a shock to this Irishman to hear Mrs May telling the Conservative Party conference in October 2016 that the UK was now going to be free to make its own decisions

on a whole host of different matters, from how we label our food to the way in which we choose to control immigration … It is not, therefore, a negotiation to establish a relationship anything like the one we have had for the last forty years or more. So it is not going to [be] a ‘Norway model’ … We are not leaving the European Union only to give up control of immigration again. And we are not leaving only to return to the jurisdiction of the European Court of Justice.¹⁴

It was when Theresa May started talking about food labelling that it became clear: she no longer wanted the UK to be bound, like Norway, by the common rules that made border formalities redundant in 1993. And the reference to the European Court of Justice (ECJ) confirmed that first impression, since wherever you have common rules you need a form of arbitration to ensure that they are being respected. The message was stark: as far as the British Prime Minister was concerned, the UK would be leaving the Single Market. And the bad news for Ireland was that – as we saw in Chapter 5 – this would mean the re-introduction of border controls between the EU and UK.¹⁵

Mrs May’s hard-line vision was spelled out even more explicitly on 17 January 2017. The Prime Minister gave a speech in Lancaster House that in retrospect feels like one of the last hubristic expressions of Brexiteer triumphalism before reality started to sink in. She reminded her audience of the UK’s historic links with the Commonwealth, and explained to any Europeans who might be listening that ‘Many in Britain have always felt that the United Kingdom’s place in the European Union came at the expense of our global ties, and of a bolder embrace of free trade with the wider world.’ As a friendly neighbour, she advised the EU to cherish difference and reform itself, rather than dealing with different interests by ‘tightening a vice-like grip that ends up crushing into tiny pieces the very things you want to protect’. And most importantly, she set out a series of clear red lines that the UK would adhere to in the negotiations to come. The UK would ‘bring an end to the jurisdiction of the European Court of Justice in Britain’, since ‘we will not have truly left the European Union if we are not in control of our own laws.’ The UK would not be a member of the Single Market, since it could not accept the four freedoms (of goods, services, capital and people), could not accept regulations that had been decided elsewhere, and could not accept the jurisdiction of the ECJ. The UK would therefore no longer be making ‘vast’ financial contributions to Brussels every year. And since the UK wanted to make free trade deals across the world, it would no longer be bound by the EU customs union’s Common Commercial Policy and Common External Tariff.¹⁶

The Brexiteers loved it, but there was a problem: large sections of the British economy depended on the Single Market. There was the City of London, of course: since the early 1990s increasing numbers of financial services had gained passporting rights, ‘based on the principle of mutual recognition and harmonised prudential measures’. Passporting meant that ‘a European financial institution which has been authorised by its domestic authority has the right to establish a branch or provide services in any other European Economic Area (EEA) Member State without the need to seek further authorisation or another licence.’ For example, a French bank wishing to operate in Belgium could simply open a branch there, rather than setting up a Belgian subsidiary. Since a subsidiary would be a new and separate legal entity, subject to Belgian supervision and regulation, and with its own obligations regarding, for example, how much capital it had to hold, passporting was clearly a much more efficient option. And it was not only banks that benefited from passporting: so did investment funds, rating agencies, brokers, firms involved in securities and derivatives markets, and many others.¹⁷

If UK financial services companies lost passporting, their ability to continue to do business within the EU would be thrown into doubt. Some might potentially be allowed to continue as before if the European Commission decided that UK regulations were ‘equivalent’, but such equivalence for third-country providers is established on a far more piecemeal basis, and the Commission would be free to determine that UK regulations were no longer equivalent at any point in the future. Such uncertainty would inevitably harm the City of London. For this reason the British government’s position was that the UK and EU should continue to recognize that their financial regulations were equivalent: in other words, the UK wanted ‘mutual recognition’ of financial service regulations to continue into the future. As the new Chancellor, Philip Hammond, put it as late as March 2018,

the EU’s established third-country equivalence regime … would be wholly inadequate for the scale and complexity of UK–EU financial services trade. It was never meant to carry such a load. The EU regime is unilateral and access can be withdrawn with little to no notice. Clearly not a platform on which to base a multi-trillion pound trade relationship. But the principle of mutual recognition and reciprocal regulatory equivalence … could provide an effective basis for such a partnership.¹⁸

And then there were cars, and other manufacturers depending on complex international supply chains. Take Honda, for example, which manufactures the Honda Civic near Swindon.¹⁹ According to the Financial Times, 2 million components flow ‘like water’ from suppliers in the UK and the rest of the EU to its production line each day, but the warehouses at the plant only have parts for 36 hours’ worth of production. Just-in-time production methods mean that these components are only ordered when they are needed: components from other EU member states can arrive in as little as five to 24 hours. If border controls were re-introduced between the EU and UK, those delivery times would range between two and nine days: if Honda tried to stock enough components to keep production going for nine days this would require a warehouse of 300,000 square metres, equivalent to 42 football pitches. The costs would be astronomical and give rise to doubt about whether important employers such as Honda, Nissan and Airbus, all of whom are reliant on pan-European supply chains, could continue manufacturing in Britain. There was particular political sensitivity regarding Nissan, a major employer in Sunderland – a city that had voted to leave the EU. In consequence, in 2016 the UK Business Secretary Greg Clark wrote a secret letter to the company containing reassurances about the future, on the basis of which Nissan announced that it would build two new car ranges in the city. The details of the letter are still unknown, but we do know that the UK told the company that it would effectively be seeking frictionless trade with the EU for the UK car industry. And in October 2016, as news of the letter started to emerge, there were suggestions that the UK would indeed seek a sectoral deal with the EU, allowing industries that particularly benefited from the EU Single Market and customs union to continue to do so in the future.

But it wasn’t only large car and aerospace companies that felt threatened by the possible re-introduction of border controls: the consequences of only minimal border controls, in a situation where previously there had been none, were potentially enormous for all businesses engaged in international trade. Officials at the Port of Dover have estimated that a border delay of only two minutes per truck would imply a 27-kilometre queue on the M20 motorway. So it is no surprise that in her January 2017 Lancaster House speech Mrs May also said that she wanted trade with the EU to be ‘as frictionless as possible’.

That is of course what many former Tory Remainers wanted as well. And so the British government’s opening position was that it wanted to restrict immigration from the EU, regain control over its own laws, leave the jurisdiction of the ECJ, and therefore leave the EU Single Market; despite this, it also wanted to preserve the City of London’s privileged access to European markets; it wanted to do free trade deals around the world, and therefore did not want to join a new post-Brexit EU–UK customs union; and yet at the same time it also wanted to maintain frictionless trade with the EU – or at least, trade that was as frictionless as possible. In other words, the UK wanted to keep the bits of EU membership that it valued and get rid of the rest: it wanted to have its cake and eat it. Famously Boris Johnson had once said as much, and in November 2016 an aide leaving DExEU was photographed clutching a notepad on which the words ‘What’s the model? Have cake & eat’ were clearly visible to photographers.²⁰ A new word has thus entered the European political lexicon: ‘cakeism’, the policy of wanting to have your cake and eat it.

Viewed from a cakeist perspective a Norway-type solution, in which the UK remained inside the EEA (see Chapter 8), was unacceptable: this would involve the free movement of people, financial contributions to the EU, and acceptance of EU regulations. But a free trade deal with the EU, such as the EU–Canada Comprehensive Economic and Trade Agreement signed by Justin Trudeau in 2016, was also unacceptable, since it would not guarantee a privileged position for the City of London in European markets and would involve border controls. Switching from food to fashion metaphors, the UK government argued that such ‘off the shelf’ arrangements were inappropriate and that an entirely new, ‘bespoke’ deal was what was required.

There then followed a series of proposals from British politicians, each more fanciful than the next, outlining how Britain could indeed manage to have its cake and eat it: how it could leave the Single Market, pursue an independent trade policy, and at the same time avoid the re-introduction of border controls with the EU, preserve frictionless trade, and save the jobs that depended on it. Such a deal would be easy to achieve: ‘one of the easiest in human history’, as Liam Fox put it in July 2017. But early on ministers displayed a worrying lack of understanding of the rules, not only of the European Union, but of the World Trade Organization. Take for example the notion that there could be special sectoral deals for cars and the City: this would involve the UK and EU granting each other preferential access to each other’s markets for just these sectors. But as you will recall from Chapter 2, GATT (and hence WTO) rules do not allow the EU to treat UK imports more favourably than imports from other WTO members. The only exception to this most-favoured-nation non-discrimination rule is if the UK and the EU agree to form either a free trade area or a customs union, and crucially, such arrangements have to involve ‘substantially all the trade’. There is some debate about exactly what that means, but there is no doubt that an arrangement involving just a few sectors would not be legal, and other WTO members would presumably object. In consequence the sectoral approach never went anywhere, at least as regards industrial sectors – as we have seen there have been long-standing British efforts in the negotiations to protect the interests of the City of London.

But there was an even more fundamental inconsistency at the heart of the British position. As already noted, in order for the UK to preserve frictionless trade with the EU it would need to remain in the EU Single Market; it would need to remain in the EU VAT regime; and it would need to form a new post-Brexit customs union with the EU. Mrs May’s red lines ruled all of this out. Her government might well prefer to have its cake and eat it, but in the end it was always going to have to choose. And while Lancaster House suggested that if forced to it would choose a ‘hard Brexit’ and the re-introduction of border controls, the British government continued to insist that it would be possible to obtain a trading relationship with the EU that was frictionless – or at least ‘as frictionless as possible’. It had to do so because of internal Conservative Party divisions – Leavers wanting regulatory independence and swashbuckling new British trade policies, Remainers wanting frictionless trade with the EU – but this was only putting off the moment when decisions would have to be made. And it was still unclear what way the British government would jump when that moment arrived.

Nevertheless, on 29 March 2017 the UK’s Permanent Representative to the EU delivered a letter to Donald Tusk, President of the European Council, informing him of the UK’s intention to leave the European Union. The letter stated that the UK wanted to retain a ‘deep and special partnership’ with the Union, and it apparently wanted this so badly that the phrase was used no less than seven times in the six-page document.²¹ How did the European Union respond?

The EU Reaction

The EU approach to Brexit has been remarkably consistent. On the morning of 24 June 2016 Donald Tusk, the Presidents of the European Parliament (Martin Schulz) and European Commission (Jean-Claude Juncker), and the Dutch Prime Minister Mark Rutte (since the Netherlands at that time held the Presidency of the Council of the European Union) set out some basic facts regarding what had to happen next:

We now expect the United Kingdom government to give effect to this decision of the British people as soon as possible, however painful that process may be. Any delay would unnecessarily prolong uncertainty. We have rules to deal with this in an orderly way. Article 50 of the Treaty on European Union sets out the procedure to be followed if a Member State decides to leave the European Union. We stand ready to launch negotiations swiftly with the United Kingdom regarding the terms and conditions of its withdrawal from the European Union …

The four went on to point out that the concessions obtained by David Cameron in February, and on the basis of which he had fought the referendum campaign, were now null and void. And then they continued: ‘As regards the United Kingdom, we hope to have it as a close partner of the European Union in the future. We expect the United Kingdom to formulate its proposals in this respect. Any agreement, which will be concluded with the United Kingdom as a third country, will have to reflect the interests of both sides and be balanced in terms of rights and obligations.’²²

This immediate reaction by European leaders made several important political points. First, Brexit would have to take place in accordance with the rules of the Union. Second, Brexit should happen quickly. Third, it was up to the UK to decide what it wanted the nature of its future relationship with the EU to be. But fourth, any future relationship between the EU and UK would have to be in the interests of the EU, and would have to balance ‘rights and obligations’.

What rules had to be followed regarding Brexit? The Lisbon Treaty had for the first time spelled these out explicitly: this is the famous Article 50 referred to in the statement above. It was drafted by none other than John Kerr, whom we last encountered hiding under a table in Maastricht, and it states that:

A Member State which decides to withdraw shall notify the European Council of its intention. In the light of the guidelines provided by the European Council, the Union shall negotiate and conclude an agreement with that State, setting out the arrangements for its withdrawal, taking account of the framework for its future relationship with the Union … The Treaties shall cease to apply to the State in question from the date of entry into force of the withdrawal agreement or, failing that, two years after the notification referred to [above], unless the European Council, in agreement with the Member State concerned, unanimously decides to extend this period.

In other words, first the UK would have to notify the European Council that it was leaving. The EU would negotiate a Withdrawal Agreement, based on guidelines agreed upon by the European Council (that is to say, the heads of state or government of the 27 remaining member states). This agreement would above all set out the arrangements under which Britain would leave the EU. It only had to ‘take account of’ what the future relationship between the UK and EU might be. If a Withdrawal Agreement had not been negotiated within two years of the UK’s formal notification that it was leaving, the UK would automatically crash out without any deal at all – unless all 27 remaining member states agreed to extend the deadline. The implication was that unless the UK requested an extension, and everyone agreed to this, it would leave the EU no later than 29 March 2019.

Article 50 suggests a sequence of events: first notification, then negotiation. It may not say explicitly that this is the way things have to happen, but at a minimum it suggests that the remaining member states are under no obligation to negotiate until notification has been received, thus triggering the withdrawal process.²³ And in fact a statement issued by the heads of state or government of the remaining 27 Member States on 29 June was explicit on the subject: ‘there can be no negotiations of any kind before this notification has taken place.’ This made logical sense: why negotiate before you have been officially notified that the UK wants to leave the EU? It also implied that the UK would be under extreme time pressure: it would only have two years to negotiate its exit or else it would crash out without a deal. Indeed, it would have less than two years, since the 27 leaders also decided that the European Council would only agree on its negotiating guidelines after the notification had been received: again, why bother to agree these before it was certain that the UK government in fact wanted to proceed with Brexit? The Article 50 process is therefore stacked against the interests of the withdrawing country, as you would expect.

The Withdrawal Agreement only has to ‘take account’ of the future relationship. But many in Britain were shocked to learn that it would in fact be impossible to agree the future trade relationship between the two sides until after exit had occurred.²⁴ There was some debate about the point in 2016, with the British arguing that trade negotiations should take place in parallel with negotiations about withdrawal, but they eventually conceded the point. It was not clear what the legal basis would be for negotiating a trade agreement with a soon-to-be-non-member that was currently a member, nor how this could happen in practice: it is the EU as a whole that negotiates trade deals with third countries, and how could you have a situation in which the EU, including the UK, negotiated a deal with the UK? But the implications of this were potentially very disturbing, since it takes years for free trade agreements to be negotiated – for example, the Canada–EU free trade deal was only signed after seven years of talks. In the period between Brexit and the successful negotiation and ratification of a new free trade deal, the EU and UK would be forced to impose tariffs on each other’s goods, since otherwise they would be breaking the most-favoured-nation provisions of the WTO.

There is a logical solution to this dilemma. It involves agreeing a post-Brexit transition period during which the UK would no longer be a member of the EU but in practice everything would remain the same. In particular, during the transition period the UK would remain a member of the EU customs union and Single Market. The hope would then be that a new trade deal between the two sides could be negotiated during this transition period. In this manner businesses would only have to adjust once to the new trading environment, when the UK exited the transition phase and entered into the new relationship with the EU, whatever that might be. Whether the transition phase would be long enough to permit this new relationship to be negotiated is an entirely different matter to which I will return.

And what about the requirement that any future relationship would have to be balanced in terms of ‘rights and obligations’? The 29 June statement spelled this out in precise terms: ‘Access to the Single Market requires acceptance of all four freedoms.’ The UK could aim for a future relationship that implied high levels of rights and obligations: it could remain within the Single Market for goods, services and capital if it wished, but it would then have to accept the fourth freedom associated with the Single Market, that regarding the free movement of persons. Or it could aim for a future relationship implying low levels of rights and obligations, and leave the Single Market entirely. It could not remain in just those bits that were of interest to it: as European politicians have frequently put it, the UK cannot have the rights of Norway and the obligations of Canada. The sentence regarding the four freedoms was inserted at the insistence of Angela Merkel: none of the other member states objected. Cakeism would not be tolerated. To use another food metaphor, there was to be no cherry picking.²⁵

This insistence that the UK cannot simply pick and choose those bits of the Single Market that it likes and disregard the rest is easy to understand. The Single Market was negotiated at a time when the European Communities only had twelve members, but even so it was an astonishing diplomatic and political achievement. A complex international deal like this is by definition something that everyone has decided they can live with: allow countries to avoid the bits they dislike and the whole thing risks collapsing. To allow a member state to cherry pick would therefore be dangerous enough (as well as illegal under the treaties); to allow a non-member or ‘third country’ to do so would be absurd. This is simple self-preservation on the part of the EU, which is defined by the treaties: take them away and it ceases to exist.

The insistence that any future trade relationship would have to balance rights and obligations had immediate logical consequences when combined with Theresa May’s Lancaster House red lines. Since Mrs May was ruling out membership of a customs union, and did not want to remain inside the Single Market, the best that could be hoped for was a Canada-style free trade agreement. This would, as frequently stressed in this book, bring frictionless trade between the EU and UK to an end. On the other hand, if Mrs May’s red lines were to evolve, then a deeper relationship would become possible.

Another obvious EU interest is to preserve its own decision-making autonomy. If there is one thing that gives the EU influence on the world stage it is surely its Single Market and the fact that the EU decides what the rules for that market should be. If firms from other countries want to participate in the Single Market they have to follow EU rules. And so any proposals that might undermine that regulatory autonomy posed an existential threat to the European Union. This has been the rock on which UK proposals for mutual recognition of financial service regulations have foundered, for example. The notion that the EU would not retain complete discretion regarding the rules applying to financial services was never going to fly, especially in the aftermath of the 2008 financial crisis.

The EU was also concerned about the possibility that the UK would use its new-found regulatory freedom to deregulate, cutting costs for British businesses and giving them a competitive advantage in the European market. As we saw in Chapter 1, one of the main purposes of supranational European institutions was that they could help to prevent a damaging regulatory race to the bottom, but you will also recall Mrs Thatcher’s fear, expressed in Bruges, of British deregulation being undone by EU legislation. There was therefore every reason to worry about what her heirs in the Conservative Party might do after Brexit, and those fears were given tangible form in January 2017 when Philip Hammond raised the possibility of the UK abandoning the European social model.²⁶ Ensuring a ‘level playing field’ as a condition for the UK being granted deep access to the European Single Market was thus another important negotiating objective for the EU: this goes beyond adherence to Single Market regulations, with implications (for example) regarding post-Brexit UK tax policy.

There were also more mundane matters of concern to the EU, in particular money. The EU had previously agreed a budget that was to run until the end of 2020; the UK had agreed that budget along with everyone else and had assumed financial obligations as a result. Since the UK is a net financial contributor to the EU, the EU had an obvious interest in making sure that the UK paid as much as possible, and preferably all, of what it had signed up to. And then there were the interests of the more than 3 million EU citizens living in the UK to take account of: how could their rights after 2019 be ensured?

The Irish Border

Finally, EU negotiating objectives have been shaped to a remarkable extent by the interests of one small country, namely Ireland. This reflects outstanding work by the Irish diplomatic service, but you also have the sense that Ireland was to a large extent pushing on an open door, for most other European governments instinctively understand that the EU is above all a political project and a peace project. The fact that Fine Gael, the governing party in Dublin, was a member of the European People’s Party that David Cameron had previously abandoned was useful in creating links with governing parties elsewhere in Europe. It surely also helped that the EU’s chief Brexit negotiator was Michel Barnier. A Savoyard, he instinctively understood the concerns of the rural communities who would be most affected, and this French background was complemented by his experience as EU Commissioner when he oversaw the signing of the second EU Programme for Peace and Reconciliation in Northern Ireland and the Border Region of Ireland (2000–2004).

By the autumn of 2016 Irish politicians, businesses and commentators were becoming increasingly worried by the hard Brexit signals coming from London. There were concerns about the future of small Irish-owned, labour-intensive businesses exporting to the British market, and outright alarm about the potential consequences for the Irish border. Because if the UK did indeed leave the EU Single Market, or did not form a new customs union with the EU after Brexit, then border controls would inevitably return. Indeed they would also return if the UK left the EU’s VAT regime, although it took some time for commentators to realize this.²⁷ And this would have potentially catastrophic consequences for small businesses, ordinary citizens, and perhaps even for the peace process itself.

The British were making it clear that they did not want to see border controls returning either, and at first this reassured some in Ireland – but as we have seen these comforting sentiments didn’t necessarily mean very much since the British apparently believed that they could combine a hard Brexit with frictionless trade with the EU in general. There were also worrying indications that the Brexit Secretary, David Davis, was not taking either the problem or the Irish government particularly seriously. In July he referred to ‘the internal border we have with southern Ireland’, which did not go down particularly well in Dublin,²⁸ while in the same month an Irish official received a now-famous email from DExEU which read: ‘the Secretary of State has told me he wants to meet Kenny. Please let us know if Kenny is available.’ ‘Kenny’ was Enda Kenny, the Irish Taoiseach, and the Irish immediately replied to DExEU to inform them that you didn’t refer to another country’s head of government by his surname in this manner, and that in any event the Taoiseach’s interlocutor was Mrs May, not one of her ministers.²⁹

In July 2016 Enda Kenny did meet Theresa May, and both sides agreed that they wanted to keep the Irish border open. But when an EU negotiator asked UK officials how a hard border could be avoided, were the UK to leave the customs union, the response was that ‘We don’t know. We don’t have an answer.’³⁰ Tony Connelly’s gripping book on the Brexit negotiations gives many examples of Irish businesses which could be devastated by the return of border checks – mushroom growers, beef farmers, cheddar cheese producers and others. But the potential impact on rural communities living on either side of the border is even more alarming.

I am writing these words in Saint Pierre d’Entremont, a small village in the Chartreuse. Saint Pierre is divided in two by the Guiers Vif, a river separating the departments of Isère and Savoie and which was until 1860 an international border.³¹ The departmental frontier is both ubiquitous and irrelevant. It makes our lives more interesting, it occasionally causes a little inconvenience, and it essentially doesn’t matter: we have two communes but one school, one post office, one postal code, one set of associations, one cinema, one parish, and so on. There are similar rural communities straddling the Irish border – Pettigo for example, a village divided between County Fermanagh in Northern Ireland and County Donegal in the Republic (see Map 10.1). An old customs hut still stands beside the river that marks the frontier. The border obviously matters more than the border in Saint Pierre – there are different currencies and educational systems on either side of it, for example. But it matters a lot less than it used to.

Figure 10.1
The Irish Border

The 500 kilometre-long Irish border is famously irrational, which makes complete sense since it was never designed to be an international frontier in the first place. Instead it reflects centuries-old county boundaries. Rather than following a major river, like the Rhine, with a limited number of border crossings, it meanders across the Irish countryside dividing communities that naturally belong together, and on occasion bisecting individual farms or even buildings. There are more border crossings between Northern Ireland and Ireland than there are between the European Union and all the countries to its east,³² and it would obviously never have been possible to have established customs checks along all of them. The solution found after 1923 was to designate sixteen crossings as ‘approved’: all dutiable goods, including motor vehicles, had to cross the border at one of these sixteen points.³³ All other crossings were unapproved, and could only be used by people travelling ‘by foot, cycle or horse drawn vehicle’ or by farmers (but only if they were carrying ‘exempt farm produce’). A small number of clergymen, doctors and vets were also issued with permits allowing them to drive across unapproved crossings. As a local inhabitant in Pettigo told Susan McKay in 2017, ‘When the customs was here it was just a substation – the trucks were not allowed to use it … They had to go through one of the main clearance stations. You had to be careful what you bought on either side. You had to have a special pass and if it was after hours you had to make special arrangements.’³⁴

Life along the border was obviously even tougher during the Troubles. Customs posts were the targets of bomb attacks. Unapproved border crossings were now seen as potential security threats and were cratered or otherwise destroyed by the British security forces. People wishing to cross the border had in many cases to make long detours, and were forced to wait at heavily armed military checkpoints before crossing. The impact was dramatic: as one witness living close to the border later told researchers,

living in a cul-de-sac is not a healthy thing to do … Because basically when I left my house there was only one way you went, you only ever went up the road. Unless you were delivering cattle or something. You didn’t do anything else, because there was nothing there. But a hole. But I mean that is crazy when you think about it, isn’t it, you just go somewhere and then there’s a massive hole … I think that’s probably worse than a wall.³⁵

One particularly important way in which life along the border has changed for the better in recent years concerns healthcare. Today patients can access medical services on both sides of the frontier, but it was not always so easy. The RTÉ journalist Tony Connelly tells the story of a man from Donegal whose life was saved in 2016 because when he suffered his heart attack he was taken from Letterkenny to the hospital in Derry (in Northern Ireland) 35 kilometres away. The nearest hospitals in the Republic with acute services are in Galway or Dublin, more than 200 kilometres away: if he had had to be transported to either he would have died.³⁶ Such cross-border cooperation relies on a host of common EU rules, for example data protection rules making it possible to share patient details with healthcare providers across the island. Regulatory divergence making such cooperation legally impossible, or indeed border formalities of any kind delaying ambulances (assuming that these would be allowed to cross the border in the first place), would obviously place patient lives at risk.

But it is the potential political and security implications of a return to a hard border in Ireland, with customs posts once again appearing along approved crossings, that made politicians particularly nervous. The re-emergence of a border would give dissident republicans opposed to the peace process the excuse to resume violence, and it would also give them targets. Asked about the prospect of installing cameras along the border that could scan number plates with a view to making customs procedures more efficient, a Northern Ireland Office official told Tony Connelly that ‘We’re not even contemplating hardware like that along the border. Because the day it goes up, it will be down that night. There will be guys out with an angle grinder. The PSNI^fn1 have already said they will not be policing any customs infrastructure along the border because it will make them sitting ducks.’ The PSNI itself concurs with this assessment. Its chief constable, George Hamilton, told the Sunday Times that physical infrastructure and border officials would be be targeted by dissident republicans and thus require PSNI protection: the result would be that

The purpose for which those checking points and border controls would be put in place would become less and less relevant because they would move away from issues of trade or movement of people to old-fashioned security on a national frontier. That was done during the period of the Troubles rather unsuccessfully, and was sadly the subject of attacks and many lives lost.³⁷

Imagine that whatever village you are most familiar with found itself in a situation in which border controls might suddenly appear along major departmental roads, and in which you were no longer allowed to transport goods along smaller departmental roads or communal roads. Imagine that heart attack patients would no longer be able to access the nearest acute service 30 minutes away, but would be forced to travel to a hospital that was almost four hours away. And imagine that there was even a risk that violence might erupt in the countryside in which you lived. It is no surprise that people living in Irish border communities viewed the return of a hard border as simply unthinkable. But just because something is unthinkable does not mean that it will not happen.

The EU Negotiating Guidelines

Even though the European Council would only adopt its Brexit negotiating guidelines after Britain had officially notified it of its intention to leave, negotiations among the 27 remaining member states regarding what should be in those guidelines obviously started much sooner. Many of the guidelines were uncontroversial, and followed directly from the EU’s initial statements on Brexit and its fundamental interests as discussed above. The Irish border raised more complicated issues however, and it took more time to hammer out a common position on these.³⁸ The process involved Ireland progressively distancing itself from the country that had up until then been its greatest ally inside the EU, namely the United Kingdom.

It took a while for this to happen. As already noted, the Irish were initially somewhat reassured by Britain’s repeated promises that it wanted no return to ‘the borders of the past’, but eventually people started to realize that even if the borders of the future were not the same as the borders of the past they would be borders nonetheless. There was some rather dangerous commentary in sections of the Irish media to the effect that surely the EU wouldn’t make Ireland reinstate border controls, even if the UK as a whole decided to leave the customs union and/or Single Market: the impression was occasionally given that Ireland now faced being squeezed between two behemoths, the UK and EU, and would end up being badly damaged as a result. Academics such as myself pointed out that not enforcing the EU’s external customs border would be both impossible and illegal in such circumstances, but chlorinated chicken proved a far more persuasive argument: in the spring of 2017 reports started to emerge that in the event of a post-Brexit UK–US trade deal the Americans would insist that the British import chicken carcasses that had been washed in chlorinated water.³⁹ The practice is banned in the EU, and the controversy helped people to understand exactly why it is that the EU has to enforce its external borders in order to preserve the Single Market. From then on there were fewer suggestions in the Irish media that there should be an Irish exception to the general requirement that EU member states check imports coming into the Single Market. But that left the question of how to avoid the return of a hard border unresolved.

The first months after Brexit saw a phase in which the Irish tried to come up with solutions to the problems Brexit posed for them. As in Britain, a certain amount of learning was involved. According to Connelly, at one stage in 2016 the Irish Department of Agriculture suggested a bilateral UK–Ireland free trade agreement for agriculture, which would obviously have been illegal.⁴⁰ The idea was immediately squashed by Phil Hogan, the Irish Agriculture Commissioner in Brussels. When the UK House of Lords Committee referred to in Chapter 6 suggested in December 2016 that ‘in the event that the UK leaves the customs union’ there should be a bilateral ‘customs and trade arrangement between the two countries’, the Irish government wasted no time in dismissing the proposal. This represented progress, but the Lords were disappointed.

Irish and European officials spent many hours trying to work out if there were technical ways of avoiding border controls in Ireland, while at the same time ensuring that the Irish border did not become a conduit for smuggled goods entering the European Single Market. Eventually they realized that they were doing the work of the cakeist British who had caused the problem in the first place. If there were indeed purely technical solutions to the Irish border problem it made sense for the British to come up with these; the Irish government was however increasingly of the view that any solution had to be political, not technical. Interest thus started to focus on the question of whether it might be possible to grant some sort of special status to Northern Ireland. As it became clear that Ireland was on the side of the 27, not a lone player trying to bridge the divide between the UK and the 26, relationships between Dublin and London started to cool.

On 15 December 2016 the heads of state and government of the remaining 27 member states confirmed that the European Commission would be negotiating on behalf of the European Union. On 29 April 2017, meeting as the European Council, they adopted the EU’s negotiation guidelines which the Commission then had to follow. They did so unanimously, and the guidelines could only be changed if the 27 countries concerned agreed to this. There were compelling practical and legal reasons why it should be the Commission that negotiated on behalf of all 27: you could hardly have 27 separate bilateral negotiations taking place, or even have all 27 member states in the room at once across the table from the UK. It is the Commission that negotiates accession treaties with new member states and trade deals with third countries, and so it made sense that it be the Commission that negotiated Brexit. It is hard to see how else it could be done even if it were legally possible, but it is important to insist on the point since from the beginning the British government was frustrated by the European insistence that the Commission be its only interlocutor. Indeed, it periodically tried to circumvent the Commission and negotiate with individual countries. And that frustration of course highlights another good reason for Europe to negotiate with a single voice: it increased its bargaining power. As the April negotiation guidelines put it, ‘So as not to undercut the position of the Union, there will be no separate negotiations between individual Member States and the United Kingdom on matters pertaining to the withdrawal of the United Kingdom from the Union.’

But it was also important that the Commission, which is unelected as the Brexiteers constantly remind us, not be allowed to make its own decisions on fundamental matters of principle. Rather, it received its instructions from the democratically elected heads of 27 countries, and it had to follow these instructions. Again, it is hard to see how it could be done any other way, but again this obviously increased the European Union’s bargaining power. Even if the Commission wanted to give in to the British government on some point, it would not be able to do so if this meant going against the agreed negotiation guidelines. Once again this proved intensely frustrating to British politicians, who fulminated against the ‘legalistic’ or ‘theological’ negotiating team in the Commission. Sometimes they went on to express a desire to bypass the Commission and negotiate directly with individual member states, on the basis that they would be more flexible (which presumably meant being more amenable to British demands). But if the Commission was being inflexible, this was because the member states had asked it to be so. Coordinating the activities of 27 very different countries can be difficult and frustrating. But Brexit is a good example of how the rigidities of the European decision-making system can on occasion be a source of considerable bargaining power.

The April 2017 negotiating guidelines were thus an important document, limiting what would and what would not be possible in the future.⁴¹ They stated clearly that the ‘main purpose of the negotiations will be to ensure the United Kingdom’s orderly withdrawal so as to reduce uncertainty and, to the extent possible, minimize disruption caused by this abrupt change’: this took precedence over reaching an understanding about what sort of relationship the UK and EU might enjoy in the future. To that end the guidelines mandated a phased approach to negotiations. The first phase would focus on what became known as divorce issues: it would ‘settle the disentanglement of the United Kingdom from the Union and from all the rights and obligations the United Kingdom derives from commitments undertaken as Member State [sic].’ Three divorce issues came to dominate subsequent discussions. The first priority was to ensure that EU citizens living in the UK, and UK citizens living in the EU, retained the status and legal rights to which they were entitled before Brexit. The second was to reach agreement on the money owed by the United Kingdom to the EU. And the third was to do with Ireland:

The Union has consistently supported the goal of peace and reconciliation enshrined in the Good Friday Agreement in all its parts, and continuing to support and protect the achievements, benefits and commitments of the Peace Process will remain of paramount importance. In view of the unique circumstances on the island of Ireland, flexible and imaginative solutions will be required, including with the aim of avoiding a hard border, while respecting the integrity of the Union legal order.

The European Union was willing to engage in ‘preliminary and preparatory discussions’ about the nature of the future EU–UK relationship, but only in a second phase of negotiations, after the European Council had decided that ‘sufficient progress’ had been made in resolving these ‘first stage’ divorce issues. There could be no question of the UK being allowed to use the divorce issues as leverage in any negotiations about a future trade relationship. Since the UK was above all interested in discussing the future relationship, and since there was less than two years in which to negotiate, this would hopefully give it a strong incentive to deal adequately with the divorce issues as quickly as possible. The Union was willing to consider transitional arrangements, on the basis that they be ‘clearly defined, limited in time, and subject to effective enforcement mechanisms’. If the UK wanted to remain within the customs union and Single Market during the transition, this ‘would require existing Union regulatory, budgetary, supervisory, judiciary and enforcement instruments and structures to apply’.

The European Council reaffirmed that ‘the four freedoms of the Single Market are indivisible’ and that there could be no ‘cherry picking’; that there had to be ‘a balance of rights and obligations’; that there could not be deals for specific sectors; and that any deal had to ‘ensure a level playing field, notably in terms of competition and state aid, and in this regard encompass safeguards against unfair competitive advantages through, inter alia, tax, social, environmental and regulatory measures and practices’. And finally, any agreement could only apply to Gibraltar with the agreement of Spain.

The negotiating guidelines were a remarkable display of European solidarity towards a small country. The Irish government had succeeded in making the Irish border issue one of the three key divorce issues on which ‘sufficient progress’ had to be made before the talks could move on to the second stage. To be sure, avoiding a hard border was only an ‘aim’: no guarantees were provided, and it was made clear in the guidelines that any solution, no matter how ‘flexible’ or ‘imaginative’, would have to preserve the integrity of the Union’s legal order, including its Single Market. But singling out the border issue in this manner was remarkable nonetheless. Furthermore, when the European Council assessed whether sufficient progress had in fact been made on the Irish border question (and the other divorce issues), it would do so on the basis of unanimity.⁴² This meant that the Irish government would have to agree that sufficient progress had been made, in effect giving it (and every other member state) a veto over whether or not talks could proceed to the second stage.

And that was not all. The European Council also agreed that, in the event that Northern Ireland decided to join a united Ireland, it would automatically become a member of the European Union, just as East Germany had automatically become a member of the EC when Germany was reunified in 1990. The British were furious and tried to get the ‘unity clause’ dropped from the minutes of the Council, but to no avail. As a senior Council source told Tony Connelly, ‘Our line was that this is for the Irish … If the Irish request this, they will get it. It’s as simple as that. We said upfront to the Brits, “If this is what the Irish want, we’re going to do it. They are around the table. You are not around the table.”’⁴³

Ireland might indeed have a veto over whether or not the UK could proceed to the second stage of the negotiations, but the signs were that European solidarity was so strong that it would never need to use it. As we will see in the next chapter, the Irish border issue subsequently became the crucial sticking point in the negotiations.