A Bill That Threatens EU-U.K. Trade Talks Makes Progress

(Stratfor)

In a development that will complicate the trade negotiations between the European Union and the United Kingdom, the Internal Market bill cleared its first hurdle at the British Parliament on Sept. 14. The bill violates British commitments under the 2019 EU-U.K. Withdrawal Agreement, and if passed, reduces the probability of a trade deal between London and Brussels before the end of the year. Announced last week, the proposed measure would allow London to unilaterally make decisions on state aid and tariffs in Northern Ireland. The European Commission believes that the mere existence of the Internal Market Bill violates the Withdrawal Agreement, even if London does not use it to make any unilateral decisions.

The Withdrawal Agreement keeps Northern Ireland aligned with EU single market rules in order to allow for the land border with the Republic of Ireland to remain open after Brexit and preserve the deal that brought peace to the long-troubled region.
British Prime Minister Boris Johnson's government argues the new bill is necessary to clarify vague aspects of the Withdrawal Agreement while ensuring the free movement of goods, including food, between the British Isles. London also argues that the bill is a matter of national sovereignty, because it will preserve the unity of the United Kingdom's internal market and prevent the European Union from making decisions that would undermine it.
Critics argue that the bill would weaken the United Kingdom’s international credibility and make it harder for the country to sign free trade agreements around the world.

Rebel Conservative British members of parliament will try to amend the bill in the coming weeks, but may not have the numbers to do it, and amendments may not be enough to assuage Brussels since EU officials want London to drop it, not modify it. Thirty rebel members of parliament from Johnson's Conservative Party abstained on the first vote on the bill on Sept. 14, and two voted against it, but the government still won by a comfortable majority of 77 votes. The bill will now move to committee stage, and then another vote will take place at the Commons on Sept. 22.

At that juncture, rebel Conservative members of parliament plan to propose amendments to give Parliament a say on issues related to the Withdrawal Agreement in a maneuver that will allow them to voice their concerns even if they can't prevent the bill's passage.
If passed in the House of Commons, the bill would move to the House of Lords later in the month, where peers may try to introduce further amendments. This could delay but probably not block the bill, because whenever there are legislative disputes between the Lords and the Commons, the latter has the final say.
The European Union has given London until late September to drop the bill, after which it says it will take legal action against the United Kingdom, which could result in financial sanctions.

Free trade talks between the European Union and the United Kingdom continue as both sides seek a comprehensive trade agreement. A deal that eliminates all tariffs between the European Union and the United Kingdom could make the Internal Market Bill irrelevant because there would be no duties or customs controls between the British Isles. Nonetheless, the European Union has said there cannot be a trade deal with the United Kingdom unless the bill is scrapped, reducing the probability of a deal before trade disruptions start Jan. 1, 2021, when the United Kingdom will exit the single market. The timing of the bill suggests it is probably part of London's strategy to extract concessions as negotiations continue, as London has said it wants a deal by Oct. 15. This means time remains for political solutions to the ongoing disputes. The current standoff between the European Union and the United Kingdom, however, is not conducive to a trade deal because Brussels and London are accusing each other of acting in bad faith.