The Malthouse amendment: just because it’s a compromise doesn’t mean it will work

In the last 24 hours, a group of MPs representing different strands of opinion within the Conservative Party has put forward the “Malthouse Amendment” as a proposed way forward on Brexit. The amendment consists of a Plan A (a revised withdrawal agreement without the Ireland/Northern Ireland backstop) and a Plan B (a suggested way forward without a withdrawal agreement).

Unfortunately, neither Plan A nor Plan B works.

As for Plan A, the background is that the backstop negotiated between the EU and the UK seeks to fulfil the declared commitments of both sides to maintain an invisible Irish border. It does so by providing a fall-back if the EU and UK are unable to negotiate a final trade deal by the end of the transition period (now extendable to 2022 but not beyond), that enables the border to be kept open. Controversially, it keeps Great Britain and Northern Ireland in a customs union with the EU and Northern Ireland (in effect) in large parts of the single market for goods.

The backstop is expressed to be both temporary and in default of agreed alternative arrangements to keep the border invisible: and, as I argued in an earlier piece for Prospect, the detailed mechanisms in it should satisfy any politician who (a) genuinely believes that maintaining an invisible border is important and (b) genuinely believes that alternative arrangements, of a kind that meet both the UK’s and the EU’s reasonable requirements, can be made to secure an invisible border even in the absence of a customs union or strong regulatory alignment for goods. It is hard to see why the backstop is such a problem for politicians who claim to be believers in both those things.

In any event, Plan A is touted as an alternative to the backstop. It cross-refers to a document hopefully entitled “A Better Deal,” which was produced by the pro-Brexit European Research Group and its knitting circle of selected trade advisers in December. This proposal aimed to replace the backstop with a somewhat “back of the envelope” annex (which could in any event be terminated after 10 years) providing for zero tariffs plus an agreement to agree on rules of origin, a general mutual recognition obligation, and a requirement that the UK and Ireland cooperate on technical solutions to avoid a hard border.

Features of the “Better Deal” that made most trade experts somewhat dubious about its connection with reality included: the fact that “mutual recognition” turned out to mean, in effect, obtaining the benefits of being in the single market but without enforcement by the European courts; and the hope in technical solutions, which was—as the Northern Ireland Select Committee found after having heard lengthy evidence from experts from various countries on the question—hard to square with the existence of very visible borders even between the EU and the EFTA States (which are in the single market or, in the case of Switzerland, in it for goods for all practical purposes).

As far as Ireland (and hence the EU) is concerned, this is not so much a backstop as a wish list: it is simply not a robust guarantee that a visible border will not turn out to be required. It is difficult, in analysing Brexit, to rule anything out as completely impossible: but the chance of any of this being remotely acceptable to the EU are vanishingly small.

Plan B is supposed to be a strategy for a “no deal” Brexit: however, it is as optimistic and unconvincing as Dr Pangloss’s explanation of why the Lisbon earthquake was a Good Thing. The starting point is that, somehow, in order to “secure time,” the transitional period could be agreed in return for payment: but since the only legal basis for a transitional period is a withdrawal agreement under Article 50 entered into before Brexit day, and since this is supposed to be a plan for the world in which Brexit day has passed without a withdrawal agreement, it is impossible to see how this is supposed to be legally possible. Another element is to seek an “interim GATT XXIV compliant trading arrangement,” referring to the General Agreement on Tariffs and Trade that was a forerunner to the World Trade Organisation. But as former WTO staffer Peter Ungphakorn has explained, the concept of an “interim” GATT Article XXIV agreement is a red herring and offers no advantages over a “bare bones” free trade agreement of a kind that is far less comprehensive or useful than either EU/EEA membership or even a “Canada +++.”

So what Plan B would really involve is leaving without a deal, reverting to WTO tariffs on goods and losing all the non-tariff-barrier benefits, in both goods and services, of being in the single market. It would mean suffering the extensive disruption a no deal Brexit would cause in all aspects of our national life from criminal law to security cooperation to economic damage, with the hope of agreeing a “bare bones” trade deal at some point followed by a more comprehensive trade deal at a final point. That is not obviously an attractive outcome for businesses or individuals.

The Malthouse Plan is apparently being presented as a compromise. However, it is hard to see how it is a compromise between anything other than different elements of the Conservative Party. It is not much of a compromise with reality.