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September 9, 2020

Europe

UK/EU: Noise and substance of the internal market bill row

BY Carsten Nickel

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n the future-relationship talks continuing this week, the atmosphere between both sides is at a new low after the UK has begun to contemplate no-deal again publicly. The government has also questioned its own willingness to comply with the existing withdrawal agreement. However, a deal is still possible, for political reasons as well as on the basis of a closer look at the UK internal market bill at the center of this latest Brexit row.

The bill introduced to the Commons today will write into UK law some of the terms agreed with the EU in last year’s withdrawal agreement. But even before the bill’s presentation, there has been intense speculation about the degree to which it will actually be in line with the UK’s obligations, especially regarding Northern Ireland. This situation was made worse by government statements in parliament that the bill would partially “break international law” – i.e., not fully reflect what has been agreed with the EU so far.

This latest episode of Brexit-related grandstanding is obviously bad news for the anyway complicated talks about the future relationship. Further adding to this was PM Boris Johnson’s claim that the UK wanted a deal negotiated by 15 October, or otherwise it would opt for no-deal. This, however, is less of a threat than the wording might suggest. For a trade deal to be ratified on the EU side, it would likely have to be agreed in time for the 15-16 October European Council anyway. If there is no deal by that time, businesses are expected to trigger their prepared no-deal procedures.

Matters are more complicated with the internal market bill. Following newspaper leaks, the question has been to which degree the UK will create national laws to enable the customs and state aid agreements already reached with the EU. Specifically, there is uncertainty over whether the government will force Northern Irish producers to provide customs self-declarations for goods to be exported to Great Britain; and whether the UK government intends to retain the last word on UK state aid decisions on Northern Ireland.

Both questions matter because the territory will effectively remain in the EU’s customs union and single market. However, beyond the negative noise, the substance of the row should be put into perspective. Customs questions around exports from Northern Ireland into Great Britain are likely to be less of a concern for the EU than in the other direction, into the bloc’s single market. Similarly, the question of the last word on UK state aid decisions is a relatively empty debate as long as, first, guidelines for the substance of future UK state aid policy are still lacking, and, second, the governance and arbitration regime has not yet been agreed, through which the EU could object to state aid decisions taken in the UK. Instead, these very issues continue to occupy the negotiators.

Politically, then, the latest round of grandstanding serves as a reminder that the mid-October Council is only five weeks away now, marking the start of the final stretch of the talks. While the latest noise may not be helpful for EU-UK talks, it might still turn out to be less disruptive in terms of selling an eventual deal to the Brexiters at home.