Brexit transition. Often mentioned by politicians but seldom understood.
In this blog entry I am going to try to make sense of it, and to try to explain why the current effort devoted to this is all probably a waste of time (at least the way the UK is approaching it), why it will also, perhaps paradoxically, be the big Brexit fight of early 2018, and why the question of extending the Article 50 period cannot be avoided.
First of all, what is a Brexit transition period for and why is it necessary?
Article 50 – that sets out how a state can leave the EU – foresees a two year timeframe for exiting but this is generally considered to be too short, due to the complexity of the task. The state leaving the EU needs to tie up the loose ends left by leaving – remaining financial commitments, pensions for staff etc., and to then agree its future relationship with the EU. Trade deals with other countries around the world – like the EU-Canada deal CETA for example – took 5 years to agree.
At the start of the Brexit process the UK side was optimistic that everything could indeed be agreed within the two year Article 50 period, and indeed that might part explain why the UK was so hasty in triggering the exit process. However now both the EU side and the UK side agree that not all Brexit issues can be done and dusted by 29th March 2019 – hence some sort of extension period or transition period is going to be needed. Transition is essentially a way for both sides to buy some time, to acknowledge that some issues will have to be pushed back beyond March 2019.
The question then becomes how to arrange such a period, how long will it be, and what rules will apply during that period.
Second, what do we know so far?
Theresa May said this in her Florence Speech in September 2017 (full text here, quote from 3/4 of the way down):
As I said in my speech at Lancaster House a period of implementation would be in our mutual interest. That is why I am proposing that there should be such a period after the UK leaves the EU.
Clearly people, businesses and public services should only have to plan for one set of changes in the relationship between the UK and the EU.
And the European Council Negotiation Guidelines from December 2017 (see PDF here) state:
3. As regards transition, the European Council notes the proposal put forward by the United Kingdom for a transition period of around two years, and agrees to negotiate a transition period covering the whole of the EU acquis, while the United Kingdom, as a third country, will no longer participate in or nominate or elect members of the EU institutions, nor participate in the decision-making of the Union bodies, offices and agencies.
4. Such transitional arrangements, which will be part of the Withdrawal Agreement, must be in the interest of the Union, clearly defined and precisely limited in time. In order to ensure a level playing field based on the same rules applying throughout the Single Market, changes to the acquis adopted by EU institutions, bodies, offices and agencies will have to apply both in the United Kingdom and the EU. All existing Union regulatory, budgetary, supervisory, judiciary and enforcement instruments and structures will also apply, including the competence of the Court of Justice of the European Union. As the United Kingdom will continue to participate in the Customs Union and the Single Market (with all four freedoms) during the transition, it will have to continue to comply with EU trade policy, to apply EU customs tariff and collect EU customs duties, and to ensure all EU checks are being performed on th e border vis-à-vis other third countries.
5. The European Council calls on the Commission to put forward appropriate recommendations to this effect, and on the Council to adopt additional negotiating directives on transitional arrangements in January 2018.
Note: all parts in bold are my emphasis. Also note that EU chief negotiator has said Brexit transition will need to end by the end of December 2020 – that’s the commonly understood end of the “around two years” on the EU side. However the UK has said that even this is open to negotiation (FT report – €wall).
Third, how do we actually do all of that?
This is where it all becomes much more complicated.
There are three ways that Brexit transition could practically work.
The first option – basically the one outlined in the Negotiation Guidelines quoted above – is that the UK leaves the EU by 29th March 2019, so the UK is out of the EU (as a so called third country) from that date, and the exit agreement concluded prior to March 2019 then sets out how the transition period (presumably until the end of December 2020) will work. An agreement on the future post-2020 trade relationship between the UK and the EU would then need to be agreed by December 2020. This option I will call transition through withdrawal agreement, in that the agreement setting out the terms of the UK’s exit also sets up the framework for the transition period.
The second option – one that neither the UK nor the EU side has been willing to publicly contemplate to date – would be to extend the Article 50 period. The unanimous agreement of all the EU Member States allows the two years foreseen in Article 50 to be extended, and there is no limit on how long this extension can be. One would presume that initially a request would be to extend by about 21 months – to December 2020. This I will call extending Article 50.
The third option is one advanced by Federico Ortino and Holger Hestermeyer in this article, where the UK and the EU agree an exit agreement by March 2019 (that requires only a qualified majority to do, not unanimity), but the actual implementation of the agreement is post-dated to the end of December 2020. The UK’s future relationship with the EU would then be negotiated between March 2019 and December 2020, and be ready for the start of 2021. This option I will call post dated exit agreement.
The important difference between these options is when the UK will legally be out of the EU – in the transition through withdrawal agreement it would be 29th March 2019, while with extending Article 50 or post dated exit agreement it would be 31st December 2020.
A fourth option – using EFTA for transition – has been eliminated, even by the UK side, so I will not consider that one further.
Fourth, what is going to happen?
Transition through withdrawal agreement gives both the EU side and the UK side something that looks politically right – the EU side gets the UK out of the EU before the European Parliament elections and the new Commission in 2019, and the politicians on the UK side can say to the
voters newspapers that Brexit was achieved by March 2019. Both sides have a political interest to not let the timetable slip.
The problem is that, from a practical perspective, transition through withdrawal agreement is horribly messy and difficult. As Eleni Frantziou and Adam Łazowski put it here (at the end), “A good transitional arrangement would have to resolve so many of the sticking points in the negotiations that it would be almost as difficult to achieve as a permanent arrangement“.
The transition agreement would have to sort out the UK’s relationship with the EU’s institutions and – notably – the role of the ECJ in a non-EU state. It would have to work out a system for the applicability of EU law in the UK during the transition period. It would have to answer how the 750 agreements the EU has with non-EU nations apply. Barnier has said the UK would have to begin the process of replicating these agreements (see the FT here), but the work to actually do that has not even started. Would the WTO, for example, simply be able to live with the UK being seen as part of the EU’s quotas and tariffs? Judging by what other WTO members have said to date, I doubt it. There’s also the headache of how to align the transition period with what the UK is doing with its Withdrawal Bill that is summed up here.
Putting it another way: is it really worth all of the practical hassle to go through with all of that to simply buy the UK an extra twenty months of negotiating time?
As I see it, no it is not.
Every single hour the UK spends negotiating the complexities of transition is an hour it could actually be spending on getting the exit agreement right, and hence getting the long term UK-EU relationship right.
At some point – perhaps in January when the Council of the EU needs to agree negotiation guidelines for transition, or perhaps in late March at the next regular European Council (summit schedule here), or perhaps later still if (as is almost inevitable) the schedule to agree transition slips – both the EU side and the UK side will come to see that transition through withdrawal agreement is so complicated and onerous that it ought not be attempted.
Which then brings us back to the other two options that I list above.
Ortino and Hestermeyer’s post dated exit agreement idea, and the option of extending Article 50, both are politically complicated (in that they keep the UK in the EU longer – something that neither side wants), but are administratively considerably easier. These options both throw up the issue that a European Parliament election would probably need to be organised in the UK, and the UK would still have a Commissioner for a couple more years. On the UK side the Brexiteer radicals would scream, and on the Brussels side politicians would bemoan the Brexit process dragging on. But what are the radicals in the UK going to do? Sink May and end up with Corbyn and Starmer in power, and put the whole of Brexit in danger? I cannot see that happening. Meanwhile some on the EU side will undoubtedly complain, but there is still the desire for a negotiated Brexit with the UK and no willingness for the UK to crash out, so EU politicians can be won around to the idea.
So to conclude… wrangling about Brexit transition is all a waste of effort, because the simpler and more logical way to buy time is to keep the UK in the EU a little longer, by extending Article 50 or post dating the exit agreement. The problem is that so far both sides have been talking about transition as a transition through withdrawal agreement, conscious of the politics of this option (that are favourable to both sides) yet not, in public anyway, honest about the administrative headaches this option throws up. When that administrative complexity begins to fully be explored, positions on both sides are going to have to change.
Mark my words: within months we are all going to be discussing extending Article 50 or post dating the exit agreement as the way of buying more time to negotiate Brexit.
Brexit transition must end in December 2020, says Barnier – FT, 20.12.2017
Brexit transition – background from Institute for Government
Brexit Transitional Period: The solution is Article 50 – CEPS paper by Eleni Frantziou and Adam Łazowski, 9.9.2017
Article 50 does allow Britain to negotiate a transitional period – LSE EUROPP blog post by Federico Ortino and Holger Hestermeyer, 15.11.2017
The Trouble with Transition – No Off-the-Shelf Arrangement for the UK after Brexit – Nicolai von Ondarza for SWP, 12.2017
An arrested transition? – Simon Usherwood on the Surrey Politics Blog, 4.1.2018
I agree with Mark Johnston here, why should the withdrawal agreement cover third-country agreements? That’s the problem of the UK and the UK alone. Because if the transition goes as has been indicated then the UK is going for the “Turkey+” transition whereby as part of a customs union with the EU, goods from third countries with FTAs with the EU can freely enter Turkey (and from March 29, 2019, the UK) without those third countries having an FTA with Turkey (or the UK in the future). To give a more concrete example, if the transition takes effect in the way the EU has said it should and as the UK has implicitly agreed then nothing would change for the EU in terms of its FTA with South Africa, but South Africa would suddenly find that it’s goods could still freely enter the UK, but that UK goods were now subject to South Africa’s WTO most-favoured nation tariff rates and tariff rate quotas. So non-reciprocal free trade for 21 months. Why would South Africa not be okay with that since it gives them a temporary advantage and some financial windfall?
Combined with Prof. Korff’s insightful comment, I would suggest that the transition through withdrawal agreement seems to be the most likely option and the option that (some) third countries would quietly support.
although this analysis is correct (the currently pursued “transition through withdrawal” idea, with the UK formally out of the EU but in reality still bound by all EU law and subject to the CJEU, is messy) i dont buy the conclusion. in the real world, politics beat everything for politicians. and as you rightly note, this messy option is favourable to both sides (EU and UK) in political terms. so i believe they (esp the ThMay tories lot) will stick with it, while trying to wriggle out of this “EU law applies and the CJEU still rules” requirement in some slippery way (perhaps by just deviating from EU law when they want to, knowing that it’ll take a long time to fight that out in court …)
UK does not need to agree future relationship within two year period and nor does it expect too. Only a vague declaration due in October. Two years just right in my view.
A 21-month transition may (or may not) be sub-optimal for other reasons but it provides useful cover for the 2014-20 MFF.
Why should Withdrawal Agreement cover third-country agreements? That’s UK’s problem.
The “post-dated” option is already very clear in para 3 of Art 50 and is probably the more likely outcome (e.g. 30 June 2019, half way through year and before new EP mandate kicks-in.)
A very useful summary, and ending up not very far from my own thoughts this morning: http://blogs.surrey.ac.uk/politics/2018/01/04/an-arrested-transition/