More than 40 months after the June 2016 referendum vote to leave the European Union, Britain will exit the EU on January 31. But nearly a fortnight since Prime Minister Boris Johnson’s landslide general election victory, Downing Street has scotched all speculation about a smooth transition out of the bloc a year hence. On Friday, the House of Commons voted 358-234 for the Withdrawal Agreement Bill. The new version of the Bill has several key changes, of which three are particularly significant.
First, a new clause outlaws an extension to the standstill transition period that would expire on December 31, 2020. The contentious step fulfils the Conservative Party’s election promise, and precludes the possibility of seeking any further extension beyond December 2020. Following the announcement, the pound slid 1.1% against the dollar relative to the gains after the election results, reviving market anxiety.
The hostile stance on an extension is rooted partly in the Tories’ resentment going all the way back to Margaret Thatcher’s premiership, against the country’s EU membership contributions. Besides the £33 billion settlement contained in the withdrawal deal, any extension after next December would entail additionally about €10 billion a year. The resistance also carries echoes of the Tory Eurosceptic stance in the previous Parliament. Eliminating the threat of leaving without an agreement, the party had argued, would diminish the government’s negotiating position vis-à-vis the EU.
Second, the bill dispenses with the need for parliamentary approval, for the government’s negotiating mandate as well as the final agreement on the country’s future relationship with the bloc. The blueprint is to be ready by the end of February and the defining post-transition agreement by November. The provision risks sidestepping normal democratic channels for industries and trade unions to influence the shape of their future trading relations with the EU, worth an estimated £90 billion.
Third, guarantees on labour rights previously included in the withdrawal bill have been removed. This vindicates sceptics’ fears about a drift to a low-tax low-regulation U.K. economy after Brexit. EU leaders have described Mr. Johnson’s cramped time-table as highly problematic to finalise a zero-tariffs, zero-quotas free trade agreement. Brussels is wary of granting these concessions to a major economy such as Britain. In exchange for any flexibility, the EU insists on a close regulatory alignment and a level playing field on state subsidies, competition policy, and labour and environmental rights to safeguard its single market. Such demands are at odds with the Eurosceptic vision of Britain wresting control of its laws and borders. In any case, a narrow ‘goods only’ deal excluding the large services sector from any agreement would deprive Britain of the benefits from its pre-eminence in financial and digital services. If no agreement is within sight by this time next year, a cliff-edge exit on WTO terms is a very real possibility.
Under the terms of withdrawal, Northern Ireland will continue to remain within the EU jurisdiction after Brexit. The government will enforce customs checks for goods traded across the Irish Sea to the rest of the U.K., increasing costs for the bulk of small enterprises. The regulatory divergence within U.K. territory is the compromise London has conceded to protect the EU’s single market. The arrangement would maintain the existing soft border between Northern Ireland and the Republic of Ireland, which has underpinned the region’s tenuous peace since the 1998 Good Friday Agreement. The new scenario could strengthen demands in Belfast for unification with Dublin, potentially imperilling the U.K.’s constitutional integrity. Brexit has strengthened calls for a second referendum on independence by the Scottish National Party, which won a big majority in the UK elections. Mr. Johnson faces challenges on many fronts.