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Diplomatic Eye-Rolling

On Friday, EU leaders were in 'disbelief' after Theresa May Presented Unchanged Brexit Demands.

Theresa May has left European diplomats in a state of “disbelief” following a series of phone calls to EU leaders in which she made no change to her demands despite her Brexit plan being voted down by a 230-vote margin this week.

Senior EU diplomatic sources said that Mrs May’s unchanged stance was “greeted with incredulity” following a call with the German Chancellor Angela Merkel on Thursday night.

“It was the same old story - the same set of demands - all unchanged despite the defeat,” said the source with knowledge of the calls.

Mrs May is understood to have repeated the same performance in conversations with the French president Emmanuel Macron, the Dutch prime minister Mark Rutte and the Irish Taoiseach Leo Varadkar, provoking what one source called “diplomatic eye-rolling” in Brussels.

Labour Refused to Meet With May

Theresa May met with those who opposed her plan last wee with the exclusion of Labour leader Jeremy Corbyn. I labeled that a "Fundamental Mistake".

Corbyn asked May to rule out hard Brexit, even though that is logically impossible.

Customs Union Math

Please consider the Cost of Too Great a Customs Union Compromise Becomes Clear.

Liam Fox has given an interview to the BBC warning that a Customs Union compromise so that Britain remained part of it “would not be in my view delivering Brexit”. The International Trade Secretary seems to have felt compelled to act given the idea of compromising on the customs union has been gaining momentum.

Taking to Twitter today, the International Development Secretary urged the Government to remember to convincingly prepare for a no deal, arguing that then “we’ll maximise our chances of a deal”.

This comes as the cabinet’s best known alumnus, Boris Johnson, continued his campaign for a better Brexit deal today. The former Foreign Secretary said the Prime Minister needed to turn her focus on Brussels rather than trying to heave MPs back into place behind a "pseudo-Brexit".

"It is time for us to go back to Brussels fortified with the emphatic and conclusive mandate of Parliament and demand real change to that backstop – and mean it this time – so that Britain can get out unilaterally," he told workers, in a speech swiftly viewed as another tilt for the Tory leadership, at JCB's headquarters in Staffordshire.

Such interventions are a reminder that if Mrs May pursues too soft a compromise in the hope of appeasing other parties, she could find more Brexiteer colleagues joining Mr Johnson on the backbenches. She will have her chance to reveal on Monday what her intended Plan B is, knowing it will not come without consequences.

Customs Union Guide

The Telegraph has an excellent Guide to the Customs Union and Its Impact on Brexit.

When a group of states agree to stop charging tariffs - a levy on imported goods - amongst themselves and set the same tariffs for external countries, they are in a customs union. This is precisely what the EU’s customs union involves. The advantage of this is that goods can move around the trading bloc with no customs delays or checks.

However, the adoption of the EU’s common external tariff means that the UK cannot decide to lower tariffs on imports from non-EU member states. Eurosceptics say this is one of the reasons the customs union would tie the UK’s hands post-Brexit.

This brings us to the talk in Westminster of joining “a” customs union with the EU along the lines of Turkey, rather than full membership of “the” EU customs union.

This is useful for Turkey as it reduces a great deal of friction with the EU, though the major trade off is allowing Brussels to control their trade policies to a significant degree.

The partial customs union is also asymmetrical in that it forces Turkey to open its market to third countries which have signed free trade deals with the EU, while reciprocal benefits are not guaranteed.

A Turkish-style customs union would allow the UK to pursue its own deals in certain sectors, while smoothing the path for UK-EU trade in goods thanks to the lowering of tariffs.


The hard Brexit crowd does not want any dependencies on the EU in setting trade deal. It wants a a “highly streamlined arrangement,” and a “deep and special partnership” while in Brussels it is dismissed as the “unicorn option.”


Not even a full customs unions squares the problem with Ireland.

If the UK adopts a partial customs union, the state of the border between Turkey and EU member Bulgaria suggests there would still be some checks and delays, as on that crossing queues can stretch as long as four miles.

Full-on customs union membership doesn’t square the circle, either. It would spare the UK from costly rules of origin requirements, but checks to ensure goods meet EU regulatory standards would still have to be carried out.

Problems by Design

The Irish backstop problem is by EU design. Had May stood up to the EU in negotiations, there could have been solutions. Now? At the 11th hour?

EEA - EFTA - Norway

Please consider Frequently Asked Questions on EFTA, the EEA, EFTA Membership and Brexit.

EEA Agreement

All relevant Internal Market legislation is integrated into the EEA Agreement so that it applies throughout the whole of the EEA. The core of these rules relates to the free movement of goods, capital, services and persons throughout the 31 EEA States. In addition, the EEA Agreement covers horizontal areas such as social policy, consumer protection, environment, company law, statistics, tourism and culture. In order to ensure equal conditions of competition throughout the EEA, the EEA Agreement mirrors the competition and state aid rules of the EU Treaties. It also provides for participation in EU programmes such as those for research and education.

Financial Contributions

The financial contributions of the EEA EFTA States to the EU related to the EEA Agreement are twofold. First, the EEA EFTA States contribute towards reducing economic and social disparities in the EEA through the EEA Grants. Currently the beneficiary states include Bulgaria, Croatia, Cyprus, Czech Republic, Estonia, Greece, Hungary, Latvia, Lithuania, Malta, Poland, Portugal, Romania, Slovakia and Slovenia. In addition to the EEA Grants, Norway has funded a parallel scheme since 2004 – the Norway Grants. The funding period covering 2014-2021 has a total financial envelope of approximately EUR 400 million per year. These contributions are not managed by the EU, but by the EFTA Financial Mechanism Office in collaboration with the beneficiary countries. Second, the EEA EFTA States contribute towards the EU programmes and agencies that they participate in on the basis of the EEA Agreement.

EFTA Migration

Migration: The EFTA Convention guarantees the free movement of people between the Member States. This would also apply between the UK and the current EFTA States in the event of a UK membership in EFTA.

EFTA - Trade

EFTA States are not obliged by the EFTA Convention to conclude preferential trade agreements as a group. They maintain the full right to enter into bilateral third-country arrangements.

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Super Norway? Not So Fast

For starters, there is that thorny agreement over migration. The UK has a carve-out now, but that would have to be renegotiated.

The EFTA does allow bilateral trade deals but based on the customs unions discussion above, there are many open issues and restrictions on doing so. It's not as easy as it seems which lead to discussions of "Super-Norway"

Promoted by the Conservative former minister Nick Boles, the Norway-plus option also means joining the European Free Trade Area, which also includes Switzerland. The plan would help the UK minimize the economic impact of Brexit, but would also mean accepting EU rules on goods, services, people and capital, as well as competition and state aid.

Senior officials say the UK would have to follow the relevant parts of the EU rulebook in full and would not be allowed to delay the adoption of laws, a cause of perennial tension between Brussels and EFTA countries. The EEA agreement consists of 6,000 EU legal acts, up from 1,875 when the treaty came into force in 1994. About 500 EU laws are yet to be adopted by the four EFTA countries, including scores of banking regulations that the EU passed after the financial crisis.

Setting on the path towards a Norwegian-style status does not require any change in the Brexit 585-page withdrawal treaty or the non-binding political declaration, which leaves Briain’s options open. The EU would be ready to craft new language on EEA-EFTA membership to help the UK government, if necessary.

Yet EU officials have long been skeptical about the UK choosing the Norway option, which curbs sovereignty. “Norway is the worst of all outcomes for the UK because that is Brexit in name only,” said the senior EU source.

Super-Norway? Why bother leaving.

Norway Vetoes Super-Norway

The whole option is moot anyway because Norwegian Politicians Reject UK's Norway-Plus Brexit Plan.

The Norway-Plus plan was rejected by Heidi Nordby Lunde, an MP in Norway’s governing Conservative party, and leader of Norway’s European movement. Lunde told the Guardian: “Really, the Norwegian option is not an option. We have been telling you this for one and a half years since the referendum and how this works, so I am surprised that after all these years it is still part of the grown-up debate in the UK.

Explaining Norway’s fear of the UK joining the Efta club, she said: “The three countries in Efta have to agree on all the regulations coming from the EU, so if one country vetoes something we all have to veto, which means that if the UK enters the Efta platform and starts to veto regulations that we want, this will affect not just the UK but also us as well. Part of the success we have had with this EEA agreement is for the last 25 years is that we do accept the rules and regulations that do come out of the EU, mostly because it is in our interest.

If, as I understand, UK politicians do not want to be ruled by regulations coming from other countries, why would they accept a country with 38,000 citizens like Liechtenstein being able to veto regulations that the UK wants. That would be the reality.”

Even if the EU were to agree to Super-Norway, Norway won't, and the UK needs Norway’s permission to join its EFTA club.

It's amazing that UK PMs cling to options that cannot possibly happen.

Customs Union Off the Table

In addition to Norway taking a customs union off the table, which is by itself sufficient, so has Theresa May.

May ruled out both a second referendum and a customs union. Technically, she can do neither because she can be removed in a vote of no confidence. The next PM could hold a referendum or put Super-Norway back on the table except for the fact that Norway has ruled out Super-Norway.

Therefore any referendum that listed super-Norway as an option would not even be valid.


Super-Canada is a crafted trade agreement between the EU and UK.

I favor Super-Canada but it has a major problems. The EU will not give the UK a good trade deal.

More precisely, the EU won't until the UK leaves. Second, trade agreements with the EU take a very long time to negotiates. But in this case, the UK has enormous bargaining chips such as payments and fishing rights to work with. In addition, German exports are about to collapse.

The way to get to Super-Canada is to leave.

Immediate Options

  1. WTO-Brexit
  2. Super-WTO-Brexit (same as above but delayed to work out better arrangements)
  3. Current Deal, Unrevised
  4. Current Deal with Backstop Revised With Legal Timeline
  5. Stay In

That's it. You can throw Super-Norway out the window as well as a referendum.

Even new elections will not put Super-Norway in play.

No Deal Planning

Please note that France Activates No-Deal Plan.

After the UK Parliament rejected the withdrawal agreement, Mr Philippe said laws had to be passed and millions invested in French ports and airports.

An EU official will now visit all 27 capitals to co-ordinate no-deal plans.

EU countries with close UK ties have already begun preparing for its departure on 29 March without a deal.

"We are taking this very seriously now as the possibility of a no-deal Brexit is becoming more possible after Tuesday night," said European Commission spokesman Margaritis Schinas. "This is work which is ongoing and it's developing fully. We are not taking any chances."

It's not just France planning for no deal.The entire EU is planning. As well it should. Germany and France have the most to lose.

Assessing the Odds

By far, the two most likely options are Super-WTO-Brexit and Current Deal with Backstop Revised. I believe that order is correct.

We cannot rule out the current deal, unrevised, but the margin of defeat of May's plan was so overwhelming the odds are strongly against that happening.

If out want to bet on something, take your pick between Super-WTO-Brexit and Current Deal with Backstop Revised.

New elections are possible but it does not resolve the Brexit question. Moreover, Cobyn wants a customs unions but Norway says no.

The default option has not changed: WTO-Brexit, either managed with a delay or unmanaged and immediate.

Mike "Mish" Shedlock