Theresa May told her fellow EU leaders at the European Council summit that a transition deal struck earlier in the week could “create a new dynamic” in the Brexit talks | Jack Taylor/Getty Images UK to present new Brexit ‘backstop’ plan on Ireland British and EU negotiators begin intense four weeks of talks on Irish border.

U.K. Brexit negotiators are developing a plan to solve the Irish border issue by keeping the whole of the U.K. aligned with a subset of the EU's single market rules, according to British officials.

The proposal — which also involves a wholly new U.K.-EU customs arrangement — aims to break the deadlock over the border question as both sides embark on a four-week push to rewrite the EU's contentious "backstop" plan for avoiding a hard Irish border.

A team of officials, including some from the U.K. customs authority, Her Majesty’s Revenue and Customs, is coming to Brussels on Monday for the discussions, under the overall leadership of the U.K.’s chief Brexit official Olly Robbins.

Finding a solution that is acceptable to both sides — and to the Democratic Unionist Party, whose MPs Theresa May relies on in Westminster to keep her government in power — is key to forging a successful withdrawal agreement and avoiding a no-deal Brexit. Officials believe the plan being worked on in Whitehall could negate the need for border checks, without separating Northern Ireland from the rest of the U.K.'s internal market.

Negotiators are striving for a deal on the terms of the Brexit divorce in time for the European Council summit in June before a final agreement in October that can then be ratified by the U.K. and European parliaments.

There is concern that the proposal will be blocked by the European Commission who may view it as a form of “cherry-picking."

According to the U.K. officials, who spoke on condition of anonymity, the British proposal is for U.K.-wide “full alignment” single market rules and regulations for trade in goods — alongside a new customs arrangement between the U.K. and EU.

While the Irish government itself is open to the proposal, according to U.K. and EU negotiators, there is concern that it will be blocked by the European Commission, which may view it as a form of “cherry-picking,” using Ireland as a lever to win concessions on trade for the whole of the U.K.

‘Workable solutions’

May told her fellow EU leaders at the European Council summit that a transition deal struck earlier in the week could “create a new dynamic” in the Brexit talks, and she pledged to “explore workable solutions” on the Ireland question.

The U.K. has argued from the start that the key to avoiding a hard border will be found in the “deep and comprehensive free-trade agreement,” which London and Brussels hope to strike sometime during the transition period after Britain has left the bloc. However, the U.K. has accepted that to first get a withdrawal agreement, it will need to sign up to a legally binding “backstop” clause to act as a guarantee that there will be no hard border even if a solution cannot be found via the proposed free-trade deal.

While British negotiators now accept the need for a backstop solution in the withdrawal agreement, they want a fundamentally different text, a U.K. official said.

Dublin appears willing to go along. Speaking as he arrived at the summit on Friday, the Irish Prime Minister Leo Varadkar said that the British accepted the backstop, “or at least a backstop” has to be in the withdrawal agreement.

“It can be changed really only in one way that I can see, which is moving towards … a really close trading relationship between the U.K. and the EU,” he said, suggesting a “really deep free-trade agreement” and “a customs union partnership that would be so close to the customs union that it wouldn’t necessitate some of the elements of the backstop” as possible viable models.

Full alignment

The outline of the potential agreement dates back to December, when the U.K. agreed, as one of the options on Ireland, to “maintain full alignment” for Northern Ireland with the rules of the EU’s single market and customs union in some sectors.

The European Commission has since translated this commitment into legal text — the backstop — proposing a new “common regulatory area” between the EU and Northern Ireland to ensure the “free movement of goods” across the border with the Republic after Brexit. Northern Ireland will also be considered “part of the customs territory of the Union,” according to the draft legal text.

The proposal was dismissed out of hand by Theresa May, who said “no U.K. prime minister” could ever agree to implement such a proposal, which was seen as effectively creating a customs and trade barrier within the U.K. — between Northern Ireland and the rest of the country.

U.K. officials in private say the proposal will have to be rewritten or replaced wholesale. But they also say it is not quite as stark as first portrayed, arguing that the Commission’s opening position was actually that Northern Ireland should remain in “a limited subset of the single market” — following rules that pertain to the Good Friday peace agreement, the all-island economy and the north-south cooperation — not the full single market.

It was also unclear whether this new “common regulatory area” necessarily means the single market and all its rules, or whether it could mean two distinct economies with “equivalent” regulations for the sake of cross-border trade. If the latter, U.K. officials hope, the EU may accept the scope of its initial offer being extended to the whole of the U.K. and not just Northern Ireland.

The key issues for debate, according to one senior U.K. official, is how the two sides can deliver “full alignment” and what the territorial scope of that commitment will be — the U.K. or Northern Ireland.

The starting point of the U.K.’s position will be that “full alignment” should apply to goods and a limited number of services sectors, one U.K. official said.

Customs conundrum

On the customs issue, the proposal that Northern Ireland is subsumed into the EU’s customs territory is a non-starter with London, and U.K. negotiators will push for this clause to be scrapped and replaced.

The alternative would be based on one of the two customs arrangements set out by the government in August last year and reaffirmed by May in her Mansion House speech. They are either a customs partnership — known as the “hybrid” model internally — or the “highly streamlined customs arrangement” known by officials as “max-fac” or maximum facilitation.

The complexity and unprecedented nature of this solution has led to accusations from the Brussels side that it amounts to “magical thinking.”

The hybrid model would mean the U.K. continuing to police its border as if it were the EU’s customs border, but then tracking imports to apply different tariffs depending on which market they end up in — U.K. or EU. Under this scenario, because Northern Ireland and the Republic of Ireland would share an external EU customs border, as they do now, it would remove the need for checks on the land border between the two.

The complexity and unprecedented nature of this solution has led to accusations from the Brussels side that it amounts to "magical thinking."

The “max-fac” model is simpler conceptually but would represent a huge logistical effort for U.K. customs authorities. It would involve the use of technological and legal measures such as electronic pre-notification of goods crossing the border and a "trusted trader" status for exporters and importers, to make customs checks as efficient as possible.

While the U.K. will present both customs arrangements as possible ways of solving this aspect of the Irish border problem, one senior official said that the “hybrid” model was emerging as the preferred option in London, a view supported by one EU diplomat in close contact with the U.K.