Brexit Bulletin: War Cabinet

(Bloomberg) -- Today in Brexit: May’s war cabinet meets as a bitter fight rages about what Brexit should look like. Her best option could be to postpone a decision.

The meetings are held in strict privacy. There’s no official account released to the press. And even the senior ministers involved don’t get to read the plans they’ll be discussing until the night before.

Today is the day Theresa May’s Brexit war cabinet convenes to debate the customs model Britain will seek with the EU. But if the prime minister’s tight grip on the secretive committee is aimed at stopping the rival factions fighting, it hasn’t worked.

She is facing coordinated opposition from euroskeptics within her Conservative Party to what the media is led to believe is her preferred choice: a new “customs partnership” between the U.K. and the EU. It’s been given other names, too, some of which are unprintable.

Brexit Bulletin: War Cabinet

Whatever it’s called, the Cabinet’s heavyweight Brexiteers—Boris Johnson, Liam Fox, David Davis and Michael Gove—hate the idea and are mustering their forces to kill it off. Jacob Rees-Mogg’s bloc of euroskeptic Tory MPs, the European Research Group, has sent a 30-page report to May, telling her how bad the customs partnership idea would be and warning that her government could be brought down over it, the Telegraph reports. It also says Brexit Secretary David Davis has written to the PM and could even quit over the issue. 

The proposal would involve British customs officers collecting the EU’s tariffs on imports on the bloc’s behalf and conducting all the same border checks on goods arriving, even though the U.K. won’t be a member any more. Companies whose products don’t end up in the EU will be refunded any difference in tariffs, because British customs processes will be tracking those goods as they move.

It sounds complicated, but officials in May’s team rate it as the perfect intellectual solution to the customs conundrum and one that would also avoid a hard border with Ireland.

The EU also rejects it. And for Brexiteers, the plan amounts to staying in the worst parts of the EU customs union, which they hate. It could, they fear, leave the door open to betraying or even reversing the 2016 vote to leave. 

In the face of such opposition, it’s quite possible the PM will try to disown the idea herself. Certainly, her office has not publicly endorsed it, insisting all along that there are two options on the table.

The other is the one Brexit backers would accept. It’s known as “Max Fac,” which sounds like a character in a John Le Carre novel but is in fact short for “maximum facilitation.” In this scenario, the U.K. designates some firms as “trusted traders” and uses sophisticated new technology to minimize—but not totally eliminate—the need for border checks. The problem is, any new frontier procedures are unacceptable to Ireland and, by extension, the EU. This would put the overall deal in doubt.

How will May tackle this impossible dilemma? She’ll probably do what she often does: wait and see, and hope it goes away.

Brexit Bulletin: War Cabinet

Today’s Must-Reads

Brexit in Brief

Davis Ambitions | Davis set out a bold vision for how much of the future trade deal can get done before the U.K. leaves the EU. He said he wanted it sketched out by October and set out “in legal terms pretty much by the time we leave.” But the EU has promised just an outline political statement, which isn’t binding, leaving the nitty-gritty negotiations to the transition.

Money for Trade | Davis also hinted that the divorce bill the U.K. has agreed to pay could be somehow conditional upon getting a future trade deal. He suggested that a clause could be included in the withdrawal treaty to that effect. It’s hard to see the EU signing that, as they view the bill as liabilities for the past, unconnected to the future.

Irish Demands | Ireland continues to press for progress on the border issue by the end of June, insisting it’s not a “false deadline.” Davis is aiming for October. Irish Deputy Prime Minister Simon Coveney also said on Tuesday he’s “hopeful” the U.K. may revisit its negotiating red lines, making the future relationship tighter and therefore the border issue easier to solve. 

On the Markets | Sterling is vulnerable to Thursday’s local elections in England, the resurgence of Brexit uncertainties and the resignation of one of May’s key pro-European allies in government, Charlotte Ryan reports. The currency has already fallen more than 1 percent this week.

Tough Job | Chief EU Brexit negotiator Michel Barnier got a grilling from an unlikely source Tuesday on his tour of Northern Ireland: elementary school children. “Do you have a difficult job, Mr Barnier?” the Frenchman tweeted ruefully, alongside photos of him posing with school kids. “Yes, very.”

Michel Barnier @MichelBarnier
“Do you have a difficult job, Mr Barnier?” “Yes, very.”Great opportunity to meet local school children today from… https://t.co/xL7v6j5fGh

Coming Up | Brexit negotiations resume in Brussels, Withdrawal Bill back in the Lords, May faces Prime Minister’s Questions at noon, Brexit Minister Steve Baker questioned by parliamentary committee at 2:45 p.m. Local elections on Thursday where May is expecting a poor result.

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To contact the authors of this story: Tim Ross in London at tross54@bloomberg.net, Emma Ross-Thomas in London at erossthomas@bloomberg.net.

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