Tale of two deals

It was a weird day today, that began with one successful deal and closed with another one failing. Brexit expectations and Sterling were measured and affected by news of the two deals. First the pound rallied, and then, by the end of the day tumbled, as it was confirmed that a Brexit deal was not happening today. May will be meeting with EU officials later this week to resolve remaining issues.

After days of talks, the British government has agreed to the Republic of Ireland’s terms that there won’t be a hard border between the Republic and Northern Ireland. This is a positive step in the negotiations and gives great comfort to Theresa May’s government, knowing that, as the European Council meeting on December 14-15 is drawing closer, the UK has tried to settle and meet all the demands of the EU for the trade talks to begin. 

Irish border

The provisional deal on the Irish border was struck minutes before Theresa May’s lunch meeting with Jean-Claude Juncker, the European Commission president. 

As the EU’s chief Brexit negotiator, Michel Barnier, said to MEPs, Ireland will be considered a unique case with “continued regulatory alignment” between the north and the south after Brexit. A 15-page statement comprised by the European commission and the UK government includes a promise by the British government that guarantees the existence of a “continued regulatory alignment” with the single market and customs union. This significant progress has reassured the Irish government, and the prime minister Simon Coveney told RTE News that there was certainly “indications … that we are in a much better place than we have been in Brexit negotiations to date. We have now a language that gives us the safeguards we need.”

It appears that the UK government is hoping to strike a great trade deal, but in the case of a “bad” deal, Dublin and London have agreed that Northern Ireland will manage to keep key aspects of the single market and customs union.

“Regulatory alignment”

The concept of “regulatory alignment,” is, however, considered to be “ambiguous,” according to Brian Lucey, professor of finance at the school of business at Trinity College, Dublin. As he stated today: think alignment is the more ambiguous form of words that give wriggle room. There will always be subtle divergence between two jurisdictions and it is always up to two national governments to decide what they are.” As the Guardian pointed out, Ireland and Northern Ireland have different duties and VAT levels despite both being in the EU. Lucey explained that “the big question is that regulatory alignment has to imply a regulatory or customs barrier in the Irish sea unless the UK aligns itself too.” This would cause further problems, since both Brexiteers and the Democratic Unionist Party (DUP) would find this unacceptable.

David Phinnemore, professor of European policy at Queen’s University also wondered about the details of such an alignment. He asked: “How do you define regulatory alignment? Who is going to oversee it? What kind of dispute resolution mechanism is there? Is this going to be the responsibility of the devolved government and, if there isn’t an assembly, is it the responsibility of London and Dublin?”  

DUP Reaction

The DUP’s Jeffrey Donaldson has argued that the UK has not signed up to full regulatory alignment. As he told Jack Maidment, there won’t be any “regulatory divergence on island of Ireland on single market/customs union post-Brexit: ‘That is not our understanding of the UK Government’s position.’”

The DUP party has stated that the Irish border deal is just “a draft document,” and nothing more. DUP’s Sammy Wilson also reiterated how “unacceptable” the “draft” was: “The government have made it very clear and even today again, that there will no agreement made which would impact and create differences, not just on a constitutional basis but on an economic basis, that would make a difference between Northern Ireland and the rest of the UK. We will do nothing that would separate us from our main market which is the UK.”

Wilson was critical of the Irish government and told the Press Association: “I think that this is emanating from the Irish government, obviously, trying to push the UK government into a corner in the negotiations. It is not well thought through. I don’t think, given its promises, the British government could concede on this.”

But the Irish deputy prime minister emphasised that the relationship between the British government and the DUP was their own private affair. While, he said, they would listen to what the DUP says, this didn’t mean, however, that they wouldn’t listen to others’ opinions. 

Scotland, Wales, London: Demand same deal as Northern Ireland

The Welsh first minister Carwyn Jones, Nicola Sturgeon and Sadiq Khan have all expressed their desire for a piece of that sweet pie Northern Ireland will be tasting. On Twitter Carwyn wrote: “We cannot allow different parts of the UK to be more favourably treated than others. If one part of the UK is granted continued participation in the Single Market & Customs Union, then we fully expect to be made the same offer.”

But before such voices are heard, it would suffice to say that today ended not with a bang, but with Juncker’s disappointing comments. After his meeting with May, Juncker explained that they have not reached an agreement on phase one of the Brexit negotiations, since two or three issues remained undecided. However, he was confident that there will be an agreement before the EU summit in December. He also praised May for being a “tough negotiator.” May repeated that there won’t be a deal today and that she will be returning to Brussels later this week. Since the deal that should have concluded the first phase of negotiations won’t be struck today, the coming weeks before the mid of December will be crucial to how the talks progress.