EU Leaders will meet in Austria today, 20^th September, and will discuss the progress of the Brexit negotiations with UK Prime Minister Theresa May to try to map out a path towards a deal before the looming October Summit deadline.

Negotiations, although entering their final weeks, remain stuck, largely on the issue of the Northern Irish backstop. The draft agreement still contains the original proposal that, in the event future EU-UK trade requires border controls, Northern Ireland will remain within the EU Customs Union for VAT and excise purposes and within a “common regulatory area” in order to ensure North-South alignment. The UK had initially agreed to this in December 2017 in order to ensure negotiations could progress, but now wish to remove it, in favour reaching an agreement on a customs relationship for the entire UK, as outlined in the government’s Chequers plan.

The Chequers Proposal seeks:

• An “association agreement” (the EU has one with Ukraine, for example) which would include a “free-trade area” for goods, with common rules and standards and a “facilitated customs agreement” for industrial goods and agriculture, but would keep the UK separate for digital and services sectors.
• No quantitative restrictions and zero tariffs on EU-UK traded goods and the elimination of routine requirements for rules of origin.
• The proposed “Facilitated Customs Arrangement” seeks to develop a combined customs territory which would remove the need for customs checks and controls between the EU and UK and allow third country imports to circulate freely between the EU and UK (as is the case in today’s Customs Union). However, the proposals also seeks to allow the UK to control its own tariffs for its trade with the rest of the world.
• In terms of regulatory co-operation, it calls for a “common rulebook for agriculture, food and fisheries products”, alongside UK participation in EU agencies that facilitate goods being placed on the EU market. This co-operation would be limited to rules that would necessitate border controls. It also seeks recognised equivalence of other regulations related to wider food policy (i.e. the UK would not continue within the CAP but would seek to develop a policy which the EU would recognise as having similar outcomes/goals). To achieve this harmonisation, it proposes that necessary EU regulation would be enshrined in UK law (at the discretion of the UK Parliament) and would be interpreted by UK courts, with due regard for EU case law (but not through direct oversight by the EU Courts). Consistent interpretation and potential disputes would be reviewed through a “joint institutional framework”.
• A “mobility framework” to allow UK and EU citizens to travel and apply to study or work to each other’s territories. Details are limited and will be set out in another white paper on immigration due this autumn.
• The UK would additionally commit to a common rulebook on state aid rules and establish “co-operative arrangements between regulators” on competition. It would also commit to maintaining high environmental, climate change, social, employment and consumer protection standards.

The proposal’s aim to exclude services from the remit of the future EU-UK relations would be a division of the four EU single market freedoms and therefore is considered an unacceptable attempt at “cherry-picking” by the EU.

It is possible EU leaders will agree at the meeting on Thursday to revise the text on the Northern Irish backstop, potentially to allow solely UK officials conduct customs checks in Northern Ireland, rather than the initial proposal of a joint EU-UK service, therefore making it more acceptable to UK negotiators to sign up to the backstop, allowing the Withdrawal Agreement to be concluded and the focus to then be moved to negotiations on the future relationship.

Should an agreement not be found in time for the 18^th October Council Summit, it is expected that another special summit will be called on 13^th November to hammer out a final deal.

By Alison Graham

European Affairs Executives