02 March 2018

Since her Lancaster House speech in January 2017, the Prime Minister has reiterated the need for a “deep and special” partnership with the EU. Finally, writes Jill Rutter, she is offering some detail.

The Prime Minister had done her homework. Her speech at the Mansion House today talked of previous EU trade deals and showed a careful study of how the EU has prepared for its negotiations with the UK.

She used all that detail to argue why it was in the best interests of both the UK and the EU to do a ‘Star Trek’ trade deal – to go where no trade deal had ever gone before.

Setting the mood

She used more EU-friendly language – in the past, speeches nominally aimed at EU audiences were written with an eye more on the headlines in the UK. Indeed, she repeated that she had got the message that the UK faced trade-offs – while making equally clear that the “rights of Canada and the obligations of Norway” were unacceptable to the UK. Cleverly, she pointed out that the EU itself was looking for unprecedented deals where the precedents didn’t suit, for example on fisheries.

She reaffirmed her commitment to the December joint UK-EU report – and took a side-swipe at those in her own party who suggest that a potential hard border along the Irish border is the EU’s problem to solve and who add that the Belfast Agreement (as she was always careful to call the Good Friday accord) is past its sell-by date.

She even stressed the need for UK-EU solidarity against the threat of “a worrying rise in protectionism”. Take that, Donald J Trump.

The Prime Minister signalled some red lines she was willing to cross – or redraw

The substance of the speech was more pragmatic than anything we have heard before. Building on her Munich speech two weeks ago, she made the case for continued UK association, including financial contributions, with EU agencies — and, as a consequence, continued oversight from the European Court of Justice (ECJ). Indeed, she devoted a whole section of her speech to a reality check on how the ECJ would influence UK developments long after Brexit.

Her text about how far the UK would commit to EU regulatory standards was apparently one of the most contested. For goods, the compromise language promised that the UK “would make a strong commitment that its regulatory standards will remain as high as the EU’s. That commitment, in practice, will mean that UK and EU regulatory standards will remain substantially similar in the future”. Parliament could choose to diverge – but in the knowledge “there may be consequences for market access”. The Prime Minister may not have used the words “ambitious managed divergence” – but that was what she was describing, with a clear signal that the bar to divergence might be quite high – the more so if it entailed creating a whole new independent regulatory structure.

The UK, she said, would do things differently on agriculture and fisheries – but UK standards “will remain at least as high as the EU’s”. Left unclear was how this will fit with the desire to do trade deals with countries with different approaches, notably the US. On fisheries, we would control our waters, but “continue to work together to manage shared stocks in a sustainable way”.

But she was not willing to be a rule taker on financial services

On services, she harked back to the now-dormant proposals for an EU trade deal with the US (TTIP) on financial services. More detail on what the UK wants will come from the Chancellor next week. On data protection and sharing, the UK will want more than an "adequacy" arrangement – and has already proposed some ways forward. Options for the audio-visual sector could include mutual recognition – though it remains unclear how keen the EU will be on maintaining rules that allow UK dominance in the sector. Cooperation on energy, transport, science and educational and cultural programmes could all to be added to the mix. Fair enough, but there was little in the speech on how trade in services, which matters more to the UK than trade in goods, will work in practice.

Will the Prime Minister offer a preferential migration regime in a new trade agreement?

The Prime Minister has always accepted that her red line on freedom of movement meant the UK had to leave the Single Market -- and for all the accusations of cherry picking she has never tried to question the indivisibility of the four freedoms. But Mrs May did accept not just the need for people to be able move to provide services, but also the case for continuing mutual recognition of professional qualifications. “UK citizens will still want to work and study in EU countries – just as EU citizens will want to do the same here… Indeed businesses across the EU and the UK must be able to attract and employ the people they need. And we are open to discussing how to facilitate these valuable links”.

The border with Ireland remains the weak link

The least convincing part of the Prime Minister’s speech was on customs. She went back to the two propositions in the Government’s future partnership paper last August – a streamlined arrangement or a new customs partnership. For that to happen, she still needs technology that will work. She referred to the joint work with the Irish authorities – but until a solution is found, the risk remains that the EU will insist on the fallback that surfaced in the draft withdrawal agreement on Wednesday – namely that Northern Ireland goes into a customs union with the south and the UK border is somewhere in the Irish Sea. Alternatively, of course, Labour’s commitment to keep the UK in a customs union with the EU will look like the only viable option.

This speech should have been given in January – if not last year

The Prime Minister's Florence speech last September provided the momentum to drag the phase one talks over the line. This speech gives more meat and more hints that the UK has ideas to bring to the table. As a starting point, and taking into account the political high wire the Prime Minister is walking, it puts forward a lot of potentially reasonable propositions – though as it still requires the EU to take a lot on faith.

But it has come very late in the day. The EU has been discussing the draft guidelines in a vacuum since December. The weeks and months the Cabinet has spent coming to its internal compromise have eaten into the time that should have been spent influencing those guidelines. We will see next week whether they leave enough space for the Prime Minister’s bespoke deal to be crafted.

Even if this speech does prove to be a basis for engagement with the EU, there will be battles to come over the shape of the institutions to oversee the arrangements – and how to turn vague forms of words into concrete trade-treaty text.

Further information

Read our explainer on the Prime Minister's Mansion House speech

Comments

The established EFTA would seem a sensible basis to head back to. A good baseline to build on and negotiate a way forward from. Time is short for EU-UK and this would expedite the process nicely.

The PM should have given this speech before any other speech after she came to power in 20016. It should have been followed by detailed, workable, realistic proposals (effectively draft agreements on withdrawal, transition and future relationship) on all the points. She should have presented these to parliament for consideration and approval before she triggered A50.

Sadly she and her cabinet spent the last 18 months talking nonsense, insulting our informed critics and burning bridges. It is a colossal missed opportunity for a sensible, managed Brexit - and tragedy for the UK's national interests.

@HuwSayer

Though it seems as though she's done some homework, she remains hamstrung by the politics of the Government. I don't see how the EU is ever going to agree a deal which makes it seem that it's better for any Member State to leave than to remain. Essentially that means either 1 no deal 2 a Canada-type deal or 3 effectively remaining in the single market and customs union, close to an EEA-type deal.
As far as the Irish Land Boundary is concerned. If the UK has 2 objectives - no "hard border" and no border between Northern Ireland and the rest of the UK - there is, in practice, only one solution which will be acceptable to the EU. The UK signing up to remaining in the Customs Union and Single Market (in the latter case, in most respects). The idea that technology can solve this problem is baloney. Unless Customs staff can check what is in the back of lorries, etc, it doesn't matter what the documentation says. Oddly enough in my experience, smugglers don't declare the goods they are smuggling but misdescribe them. Without a "hard border" any significant divergence on the part of the UK will be seen as an open door by the rest of the EU to anyone wishing to avoid EU tariffs, quotas, anti-dumping duties, etc by using the ILB. And even if the arch-Brexiters say we don't need to impose a "hard border", the EU certainly will in those circumstances.
Mrs May spoke about the hard choices and need for compromise. Unfortunately, her political circumstances leave her in a position where at soem point she's going to have to choose between what the EU will accept and what the UK Parliament would probably support and the battle within her party with the anti-EU brigade.