Brexit Deal Helps Lock U.K. Into Customs Union the EU Wanted

(Bloomberg) -- Follow @Brexit on Twitter, join our Facebook group and sign up to our Brexit Bulletin.

For months, the struggle to work out a temporary fix for the Irish border stood in the way of a Brexit deal. Now, it turns out the solution looks neither temporary nor solely for the Irish border.

Many on the EU side of the negotiations believed -- and hoped -- this would always be the outcome.

As the agreement gets picked over by Theresa May’s Cabinet, it will become clear that in signing up to the so-called backstop to avoid a hard border on the island of Ireland, the U.K. may be committing itself to something more permanent. The U.K. will be in a customs union with the bloc indefinitely, unless a better idea emerges in the next two years.

Brexit Deal Helps Lock U.K. Into Customs Union the EU Wanted

Sabine Weyand, the EU’s deputy chief negotiator went further. She told member states on Friday that the deal means the EU has succeeded in making the customs union “the basis of the future relationship,” according to a diplomatic note of her meeting with representatives of EU governments.

Since the start of the Brexit negotiations, EU officials have said privately they believe the U.K. would ultimately remain in the customs union even as May repeatedly ruled it out as a betrayal of the referendum result. People familiar with the negotiations even said the EU’s strategy was to gradually push the U.K. into this position.

Brexit Deal Helps Lock U.K. Into Customs Union the EU Wanted

While May is still able to say the arrangement set out in the draft agreement is temporary -- and may never be used because it won’t start until 2021 at the earliest -- the Brexit deal stipulates that it can only come to an end if a permanent trade deal keeps the Irish border invisible. Barring huge technological advances, it’s hard to imagine how that would come to pass.

The U.K. ended up in this situation as a result of its own negotiating bid: It rejected the EU’s fix for the Irish border and proposed instead a temporary customs union for the whole U.K. The EU was initially opposed, and then accepted after adding some stringent conditions, including measures to make sure the U.K. doesn’t undercut the EU by ripping up regulation.

What May has won in exchange is that the original EU backstop -- the one May branded unacceptable -- is now "buried” in the divorce deal, an EU official said. That was meant to help May keep her key Northern Irish allies on board. Trouble is, they aren’t buying it.

©2018 Bloomberg L.P.