Brexit Deal in Sight as Negotiators Wrestle With the Details

(Bloomberg) -- Follow @Brexit, sign up to our Brexit Bulletin, and tell us your Brexit story.

The U.K. and European Union signaled a Brexit deal is in sight, with negotiators heading into intensive talks in Brussels as a potential compromise over the Irish border starts to emerge.

With EU officials saying Boris Johnson had indicated a possible path to detailed talks, the U.K. prime minister planned to update his Cabinet on Sunday on progress toward a Brexit deal. Speculation that Britain will avoid dropping out of the EU without a divorce accord lifted the pound last week to its biggest two-day gain in a decade, though both sides cautioned that much work remains to be done for Britain to leave by Johnson’s Oct. 31 deadline.

At issue are the prime minister’s plans to take Northern Ireland out of Europe’s customs union and give Stormont, its power-sharing assembly, a veto over the arrangement. The first would trigger the return of checks on goods crossing the frontier, something the Irish government and the EU oppose. The second would hand Northern Ireland’s Democratic Unionist Party an effective veto over the deal, something unacceptable south of the border.

DUP deputy leader Nigel Dodds rejected any weakening of Northern Ireland’s custom ties with the U.K. and said his party is awaiting the outcome of the talks in Brussels, Italy’s La Repubblica newspaper quoted him as saying in an interview.

A possible compromise is a British idea for Northern Ireland to technically leave Europe’s customs union but for the province to adhere to EU customs rules and tariffs, according to two officials. This would have the twin benefit of preventing a border on the island of Ireland and enabling the U.K. to strike trade deals around the world.

It’s similar to a “customs partnership” plan the EU rejected in 2018, and would leave Northern Ireland with a different customs regime to the rest of the U.K. British authorities would have to collect tariffs on behalf of the bloc on goods crossing the Irish Sea. EU officials said the proposal is extremely complicated and needs work before it could be considered to be a solution, but didn’t rule out that it could emerge as the compromise.

“Getting Brexit done by 31 October is absolutely crucial, and we are continuing to work on an exit deal so we can move on to negotiating a future relationship based on free trade and friendly cooperation with our European friends,” Johnson said in a statement.

Backstop

EU officials view the only sure-fire solution as an arrangement that keeps Northern Ireland in the customs union, the so-called backstop. While there’s no discussion yet of putting a time limit on that arrangement, something the EU has previously rejected, one EU official said that it could yet be considered.

Any agreement would have to be backed by Parliament in London, where Johnson is reliant on the DUP. The party staunchly opposes subjecting Northern Ireland to different customs rules than the rest of the U.K.

After EU officials said Johnson indicated he was prepared to make sufficient concessions to allow detailed talks to begin, teams from both sides started work Saturday to explore whether they can arrive at the basis of an accord ahead of a summit of EU leaders that begins Thursday.

Can Johnson Get a Deal Through Parliament? Silence Is Golden

In a meeting with envoys of the bloc’s remaining 27 countries on Friday, the EU’s chief Brexit negotiator, Michel Barnier, suggested that Johnson is softening his stance on both customs and Stormont’s consent. In what would potentially be a significant climb-down, Johnson acknowledged there should be no customs border on the island of Ireland, two officials said. When asked in a pooled interview for British television, Johnson declined to say whether Northern Ireland will leave the EU’s customs union.

“There is a joint feeling that there is a way forward, that we can see a pathway to a deal,” he said. “That doesn’t mean it’s a done deal. There’s work to be done.”

Ship of State

In an article for the Sunday Telegraph, Jacob Rees-Mogg -- whose hardcore anti-EU stance has peppered the airwaves since the 2016 referendum -- suggested that some Brexiteers will have to come around to accepting Johnson’s compromises.

“As a Leaver, Boris can be trusted,” Rees-Mogg wrote. “If he thinks the ship of state is worth an extra ha’porth of tar, he deserves support.”

While negotiations are heading into a new intensive phase, they aren’t headed into the full “tunnel,” the formal Brussels process by which the actual legal text of an agreement is thrashed out in secret.

This suggests that the EU still has reservations about the chances of getting a deal done, and that member states are unwilling to outsource the process entirely to Barnier and his team.

The European Commission will update the EU’s national envoys Sunday, with the aim of having something concrete for EU affairs ministers to look at when they meet in Luxembourg on Tuesday to prepare for the summit.s

DUP Leader Arlene Foster fired a warning shot against trying to keep Northern Ireland in the EU customs union, though she stopped short of explicitly withholding support from the prime minister.

“Those who know anything about Northern Ireland will appreciate that these issues will only work with the support of the unionist as well as the nationalist community,” she said in a statement.

For all the optimism, there’s still a long way to go.

European Council President Donald Tusk said the U.K. hadn’t yet “come forward with a workable, realistic proposal.”

But there are “promising signals,” he said.

(Updates with DUP leader’s comments in fourth paragraph, Johnson comments in seventh)

--With assistance from Dara Doyle, Nikos Chrysoloras and Alexander Weber.

To contact the reporter on this story: Ian Wishart in Brussels at iwishart@bloomberg.net

To contact the editors responsible for this story: Ben Sills at bsills@bloomberg.net, James Ludden

For more articles like this, please visit us at bloomberg.com

©2019 Bloomberg L.P.