The Brexit mood is turning to optimism. Last December, Britain and the European Union agreed on the issues of citizens’ rights and of money. Last week, a possible transition period was agreed. It would allow Brexit to happen legally on 29th March 2019, but its economic effects to be delayed until January 2021. For Britain, this is much needed.
But there are problems. This transition can happen only if a Withdrawal Agreement (WA) enters into force before 29th March 2019. This is by no means easy. The WA must be ratified by the British and EU Parliaments, and thus be signed by around October 2018. The most difficult issues—the Irish border and the framework for future trade relations—must thus be solved within the next seven months. Whether this will happen is doubtful.
Britain has refused both the European Economic Area (Norway) model or a straight free trade agreement (Canada). It hopes for bespoke access to the EU single market.
Yet for the EU only member states can benefit from the single market. They are bound by the four freedoms (including for people), by all EU law without choosing between different sectors or “baskets,” by the interpretation of these rules by the Court of Justice of the European Union, by the primacy of these rules over national laws, by sanctions for incorrect implementation, and so on.
These elements are sine qua non conditions for the single market to be credible for companies and investors, both in the EU and around the world. The 23rd March negotiation guidelines of the European Council are therefore clear.
First, a proper solution must be found for the Irish issue. Second, the British decision to leave the customs union and single market will have consequences. Non-EU members cannot have same rights as EU members. “A balanced, ambitious and wide ranging FTA” is the only solution. It “cannot however amount to participation in the SM or parts thereof.”
“The EU will not have the legal power to extend the transition period after Brexit”
This will have negative effects for Britain: in trade of goods, due to necessary checks and controls; in trade in services, due to the fact that “the Union and the UK will no longer share a common regulatory, supervisory, enforcement and judiciary framework”; in law enforcement and judicial cooperation; in participation in EU programmes; in cooperation on foreign and security policy, to cite just some examples.
The British and EU positions are far apart. Negotiations will be difficult. Success is far from certain. The Article 50 period cannot be extended: 29th March is fixed in the EU Treaty. It could be delayed by common agreement, but the parties will not go beyond a few weeks. They want to avoid a weird British participation in the May 2019 European elections.
A failure of the negotiations would entail a cliff edge on 30th March 2019, with very bad economic consequences, especially for the UK. There is no reason for optimism. But let us be as optimistic as possible. Let us now imagine that a WA could somehow be concluded on time. What could it contain?
First, the WA might contain unclear provisions on the Irish issue. It could refer to a soft Irish border which would not be sufficiently “waterproof” to avoid fraud, and also not be fully compatible with the Good Friday Agreement. This would carry risks. Second, for trade, the political declaration accompanying and referred to in the WA would probably not be clear enough. The WA cannot contain precise provisions on future relations between the UK and the EU, neither on trade nor on other matters. This is for the FTA. The 23rd March European Council recalled that the FTA “will be finalized and concluded once the UK is no longer a Member State.”
“The UK could remain an EU member State, with its current opt outs”
Experts in negotiations of similar agreements think that the 21 month transition, even after informal discussions from now until March 2019, will not be enough for this. Their advice is to extend the 21 month period by at least two years, or make it renewable. However, this is not legally possible. The agreed transition period does not provide for any renewal. Article 50 is a single-barrelled gun. The EU will not have the legal power to extend the transition period after Brexit.
A failure to have an FTA agreed and signed in such a short time, necessary to permit its provisional application, would thus not be surprising. This would entail a cliff edge on 1st January 2021. Again, there is no reason for optimism. The economic consequences would be severe. Political effects could be graver still and long-lasting. As written recently by a Danish diplomat “Britain’s global role depends on being a European power. This could be coming to an end—fast.”
Is there a way out? Yes. The British Parliament could find a way. Legally, on 29th March 2017, Britain decided to “notify the European Council of its intention” to leave the EU. Legally, nothing prevents Britain, in accordance with its constitutional requirements, from changing its intention and withdrawing Article 50. The current situation would prevail. The UK would remain an EU member State, with its current opt outs.
Is that unrealistic? It is up to the British Parliament and people to decide. They are better informed today on what Brexit means than they were in June 2016.