On state rules

I quote from a Twitter thread by Anton Spisak, as it contains much detail, showing that irrespective of what Brexiteers say and might believe, a large part of Brexit is already decided, and why many of them want the UK to rip up the WA:

A reminder, once again, that the WA is an International Treaty, and will apply with or without a trade deal:

First, the facts. Deal or no deal, the UK has already committed to EU state aid rules after the end of the transition period (December 31 2020). Article 10, NI Protocol, Withdrawal Agreement.

This niche but important provision means that any future UK subsidies that "affect trade" between Northern Ireland and the EU will be

(a) bound by EU state aid rules (= the UK will have to follow relevant EU state aid legislation listed in the Withdrawal Agreement);

(b) Future UK subsidies, if they fall under EU rules, will have to be approved by the European Commission, just as today; and (c) the UK will have to comply with the Commission's rulings as if it were an EU member-state

The result is that if, for example, the Commission decided that a UK subsidy was unlawful, the UK Govt would be instructed to withdraw the subsidy from a firm. If it refused to do so, the UK could end up before the European Court of Justice. (Art 12/13, NI Protocol)

The problem for Boris Johnson, whether he likes it or not, is that the bar for subsidies that qualify for these rules is very low. They only have to "affect trade" between NI and the EU, which means that a lot of future UK subsidies to GB firms will be affected too. Why?

Because subsidies given to GB firms that trade within the UK internal market - including with Northern Ireland - could easily affect trade between NI and the EU. Supply chains are pretty complex these days. Realistically, when could this happen?

If, for example, (i) the UK Govt gives a subsidy to a company based in GB with a subsidiary in NI (because extra funds could give a NI subsidiary an advantage over EU companies competing in NI).

OR (ii) if the Govt gives a subsidy to a GB company producing goods which are exported to NI (such as cars assembled in GB, because cheaper goods could unfairly displace EU imports into NI);

OR (iii) if the Govt gives a subsidy for a service provided by a company in GB which leads to a lower price of a good in NI (eg, aid to a GB bank servicing a NI client);

OR (iv) if the Govt gives a UK-wide subsidy benefiting to NI companies and/or consumers (such as a tax benefit for energy consumers or a UK-wide furlough scheme). In other words, a plenty of opportunities for future UK subsidies to meet the low bar in the NI Protocol.

An example: if the Govt awarded future aid to Nissan, a GB-based car manufacturer, this would likely fall under EU state aid rules under the NI Protocol. So, the EU could argue, under the withdrawal agmt, that the UK should seek ex-ante approval for aid from the Commission.

Not ideal, if you're Boris Johnson. The problem grows bigger if the UK doesn't convince the EU that it operates a robust state-aid regime for GB. This would prompt the EU to use the NI protocol to protect itself against potentially unfair subsidies and bring in new disputes.

This legal reality is actually so bad that the UK Govt will no doubt, seek to renegotiate the state aid clause through a Joint Committee under the Withdrawal Agmt. But what reason does Bxl have to drop the stick before it knows the shape of UK post-Brexit state aid policy?

None - Brussels won't renegotiate it before the future UK-EU treaty. So, if there is no other reason why No10 might want a robust post-Brexit state aid regime, it should be to avoid damaging consequences of its own choices from the re-negotiated Northern Ireland protocol.

If No10 doesn't set up a credible state aid regime at home, and instead walks away with no-deal, it risks ending up with both a significant economic cost of no-deal and an extraterritorial limit on its ability to subsidise its businesses.

We're now in a bizarre situation when No10 is prepared to take the risk of no-deal - and to accept its enormous consequences economically and politically - in the hope of securing an unattainable goal of full control of the post-Brexit state-aid policy. Astounding.