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After compromise, Britain's May set to avoid defeat in parliament on customs

By Elizabeth Piper and William James

By Elizabeth Piper and William James

LONDON (Reuters) - British Prime Minister Theresa May looks set to avoid an embarrassing defeat in parliament on Wednesday over her post-Brexit trade plans, a day after she defused a rebellion in her party over plans to leave the European Union.

On the second day of debate on changes to May's EU withdrawal bill, lawmakers will vote on amendments handed down from the upper house of parliament over Britain's relationship to the bloc's customs union and single market.

The prime minister had faced the prospect of a losing a vote after rebels had indicated their support for a change introduced by the House of Lords to require ministers to report what efforts they had made to secure a customs union.

But a government proposal to instead report its efforts to secure a customs "arrangement" seems to have been enough to postpone a more searching debate about government policy, with future debates the more likely stage for a rebellion.

Britain's future relationship with the EU, which will define its trade for decades, has become the lightning rod for the divisions that have plagued May's Conservative Party over Brexit. With the compromise, May has now got more time to hammer out an agreed position on trade with her ministers.

It was not as simple on Tuesday, when May was forced to defuse another rebellion in parliament by offering a compromise that could hand lawmakers more control over Brexit.

The fall-out from Tuesday's vote, which the government won to wipe out a change that could have given parliament the power to force ministers back to the negotiating table, looked set to all but overshadow Wednesday's votes.

The deal to avert the rebellion, thrashed out on the benches of the House of Commons just minutes before voting, was for the government to discuss changes to the bill which would hand lawmakers more control over the Brexit process.

Some of the pro-EU rebels said they had been assured by May that elements proposed by Conservative lawmaker Dominic Grieve would be brought into the EU withdrawal bill, which will sever ties with the bloc and "copy and paste" its laws.

But Brexit campaigners feared it could weaken Britain's negotiating stance in talks to leave the EU and the Brexit ministry was quick to put out a statement saying: "We have not, and will not, agree to the House of Commons binding the government's hands in the negotiation."

"It's probably too early to say," said one pro-Brexit lawmaker on what will happen next.

The government must start talks with a group of pro-EU Conservative lawmakers to find a new wording for its position on giving parliament a "meaningful vote" on a Brexit deal. They should find an agreement by the end of the week before the bill returns to the House of Lords.

On Wednesday, votes on whether to remain a member of the European Economic Area, which hands countries single market access in return for accepting the free movement of people, goods, services and capital, may expose the deep divisions in the main opposition Labour Party.

Earlier this month, the Labour leadership drafted its own amendment to replace the one of the EEA, demanding a vote on negotiating a new single market deal with the bloc.

"Now it's Labour's turn to show its dysfunction," said one Labour lawmaker.

(Editing by Catherine Evans)