Report. Juncker called the deal ‘fair and balanced’ but others called for caution: ‘History tells us parliaments may not like the agreement.’

Johnson has a Brexit deal based on vague promises and tax tricks

Will there be a soft Brexit on Oct. 31? “There is no need for prolongation,” was EC President Jean-Claude Juncker’s statement—a gift to Boris Johnson—after a deal was reached in Brussels on Thursday, a few hours before the start of the European Council.

According to EU chief negotiator Michel Barnier, the text brings “legal certainty and certainty where Brexit creates uncertainty.” First of all, for the European citizens in the UK and British citizens in the EU, the agreement is the same one that was concluded a year ago (settled status for residents, but the rules for future immigrants are still vague). It also offers certainties for businesses. There was obvious relief in Brussels, but the deal is still hanging by a number of frail threads.

First of all, on the UK domestic front, Prime Minister Boris Johnson will not have an easy time getting the deal passed in Westminster on Saturday. The European side, after they avoided responsibility for a failure to agree on a deal with the approval of Thursday’s compromise, must closely analyze all the deal’s clauses, and the text must be translated and evaluated by the legal authorities in the 27 states. It may be necessary to hold a new European Council summit before Oct. 31 to resolve any technical issues (while a rejection of the deal in Westminster would reopen the possibility of an extension of Article 50, for at least three months). Then, the text would be up for a vote in the European Parliament.

European Commission President Jean-Claude Juncker spoke of a “fair and balanced” deal as he stood next to the British Prime Minister, who called it an “excellent” one. For the Irish Prime Minister, Leo Varadkar, the agreement “is good for Ireland and Northern Ireland,” which recognizes “the unique history and geography” of the latter, avoids “physical barriers” and protects the EU single market. 

However, the Irish Foreign Minister, Simon Coveney, called for “caution.” This was also the message from French President Emmanuel Macron: he said that while the deal was good news, “based on past experience, we have to be reasonably cautious … History tells us parliaments may not like the agreement”—referring to the fact that Theresa May’s deal was rejected by Westminster three times in a row. The President of the European Council, Donald Tusk, stressed that the EU’s “hand should always remain outstretched” towards London, but also that “it is high time to complete the withdrawal process.”

The divorce agreement between Britain and the EU has preserved most of the 600-page text that had been agreed with Theresa May. The changes are connected with the compromise, reached after five days of relentless negotiations on the fifth floor of the Berlaymont building in Brussels, on the most controversial point: the issue of the border between Ireland and Northern Ireland, the only land border between Britain and the EU, as well as the political declaration on future relations, at present nothing more than a statement of good intentions for the future.

Johnson managed to get rid of the backstop, the emergency measure that would have kept Northern Ireland in a customs union with the EU in the case of failure to reach an agreement on the future EU-UK trading relationship, needed to avoid setting up a visible border between the two parts of the island, a provision expressly included in the 1998 Good Friday peace treaty (which put an end to decades of civil war). The new solution, set up in order to prevent Northern Ireland from being separated from the rest of Britain and to stop the border region between the two Irelands from becoming a haven for smugglers and rule breakers, was that Belfast, which will remain in British customs territory, will apply EU tariffs for goods arriving in Northern Ireland which are destined for the EU market (with the verification and collection processes entrusted to the British customs).

At the last moment, the issue of the VAT was resolved as well: a “mechanism,” Barnier explained, would maintain the consistency of taxation rates and protect the integrity of the EU single market. That is, Northern Ireland will apply the same VAT as the EU, and the British customs will collect it on the latter’s behalf. The EU has safeguards: it will verify that the British are not failing to perform their duties, and, in case of disputes, there will be a framework set up for resolving the conflict. In other words, Northern Ireland will be in what amounts to a dual customs union, with both the UK and the EU.

The DUP, the Unionist Northern Irish party, will not have any veto rights on the occasion of the Northern Irish Parliament’s consultative votes on this EU-UK agreement (which will take place every four years, a concession made by the EU). During the transition period, at least until the end of 2020 (although this “could be extended for one or two years,” Barnier said), the UK will remain in the EU Customs Union.

The political declaration sets out good intentions for the future: there, the EU promises a trade deal which will be negotiated during the two years (or more) of transition, “with zero tariffs and quotas,” and no longer calls for a special agreement between the EU and Britain, but at the same time asks London for “guarantees,” while the latter commits to “align” its future regulations with EU norms regarding competition, the environment and social policies. In other words, London is making vague promises not to pursue fiscal, social and environmental dumping policies right at the gates of the EU, i.e. to refrain from setting up a Singapore on the Thames, a prospect that frightens Europe. The EU, in turn, is pretending to believe it.

Meanwhile, Barnier added that, through this agreement, “financial commitments undertaken as 28 shall be honored”—that is, London will pay the around €40 billion it owes to the EU for ongoing programs that have already been approved (funds that Johnson had threatened to refuse to pay in case of a hard Brexit).

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