Stratfor's 2018 Second-Quarter Forecast said that the United Kingdom and the European Union would spend the quarter discussing their future trade relationship, but an agreement would remain elusive. We also said that the British government would be internally divided and under domestic pressure to pursue a soft Brexit. An upcoming vote at the House of Commons will be an important signpost in the evolution of these trends.
The next chapter of the Brexit saga will be written on June 12, when the EU Withdrawal Bill, which defines some of the terms of the United Kingdom's exit from the European Union, returns to the House of Commons, the lower chamber of Parliament. In mid-May, the House of Lords, the upper chamber, introduced 15 amendments to the bill, some of which are aimed at achieving a "soft" Brexit in which the United Kingdom would maintain close economic ties with the European Union. While the government led by Prime Minister Theresa May will try to overturn most of the changes, it only controls a slim majority of seats at the Commons. To make things more complicated, her Conservative party is internally divided, which means that many of the votes could be close.
Of all the changes introduced by the House of Lords, three are particularly important. The first is an amendment calling for the United Kingdom to remain in the European Economic Area (EEA). This would amount to a particularly soft Brexit, as the United Kingdom would leave the European Union but still accept EU workers and contribute to the EU budget. Most likely, May's government will win the vote against this amendment, because even Labour, the main opposition party, is internally divided on the issue of full membership in the EEA.
Another amendment calls for the British government to report to Parliament on its efforts to secure membership in the European Union's customs union, which establishes a common external tariff for goods. This is a divisive issue because the Labour party, and even some Conservative lawmakers, want the United Kingdom to remain in the customs union after Brexit. But the government opposes this plan, arguing that remaining in the customs union would constrain its ability to have an independent trade policy. The vote could be especially close because some Conservatives could vote against the government. But a defeat on this amendment is something May can live with. The amendment only demands that the government explain the steps it has taken to keep the United Kingdom in the customs union, not actually remain in it. Still, even a symbolic defeat could open the door for more concrete pressure from Parliament to stay in the customs union.
The third amendment seeks to give Parliament a determining role in the final stages of the Brexit process. If approved, it would give lawmakers the power to veto the final agreement between the European Union and the United Kingdom, and to set guidelines for the British government to go back to the negotiation table with the bloc. Considering that Parliament tends to support a softer version of Brexit than the one currently defended by May's government, the approval of such an amendment could have a significant impact on the outcome of Brexit negotiations. Of all the amendments to be addressed on June 12, this would probably be the hardest defeat for the British government to digest.
The vote in the Commons will take place only weeks before the European Council meeting on June 28 and 29, where Brexit will be one of the main topics. The British government and its EU peers hoped that the summit would allow parties to make significant progress both on the terms of the United Kingdom's departure and on future trade relations. But the question of how to manage the Irish border continues to be problematic, and May's government is considering different plans to keep the border open. Should the United Kingdom and the European Union fail to make significant progress during the June summit, the next opportunity for the European Council to discuss the matter is in late October — only five months before the United Kingdom leaves the bloc in March 2019.