Article 50 one year on: transition

Transition has not been one of the flashpoints in the Article 50 negotiations to date. Both the EU and the UK have treated it largely as a technical exercise intended to carry arrangements over from the end of the UK’s membership in March 2019 to the start of the new relationship.

However, while the broad outlines of what transition will look like have been agreed, there remain several points of contention, to which must be added a bigger set of questions about democratic legitimacy.

From the Article 50 notification, the EU was clear that it would only discuss the winding up of British membership of the Union, rather than simultaneously negotiating the new relationship.

This implied that, in addition to the phase one issues, the only other points on the agenda would be the agreement of a framework for those new relationship talks, and arrangements for the interim period.

Transition will be defined by two fundamental dimensions: what form it might take and how long it lasts. On substance, both sides in the negotiations appear to have settled for a model that keeps as much of the current, pre-withdrawal situation in place as possible, while still allowing the UK to formally leave the EU.

The Prime Minister’s original proposal, made in her Lancaster House speech, for a “phased implementation” period was therefore clearly misleading. As the new relationship will not be negotiated by the time transition begins, there will be nothing to implement. It would be more accurate to describe it as a ‘standstill period’.

According to the current draft of the withdrawal agreement, under transition there will be no British representation in the institutions or decision-making – bar its presence (still with no vote) in decisions of particular relevance, such as fishing quotas.

At the same time, the UK will continue to pay into the EU budget, follow all rules and regulations, continue to implement EU policies (including freedom of movement) while remaining under the authority of the Court of Justice of the EU.

The UK has even conceded, reluctantly, that EU nationals who move to the UK during the transition period will be able to remain after it ends and, eventually, acquire the right to permanent residence.

The logic of this ‘full monty’ model is three-fold. Firstly, it provides a high level of certainty for economicoperators and citizens, who do not have to make immediate changes come 29 March 2019.

Secondly, it has made drafting the text relatively simple: any alternative, with special provisions on specific areas of activity risked becoming another complex item for resolution by October. Finally, in the continuing absence of agreement on a new relationship, a standstill looks prudent, if only to avoid having to undo decisions taken now at a later date.

The EU has accepted a number of relatively minor modifications to the agreement to recognise UK concerns; it has agreed to the creation of a Joint Committee to manage transition and consider the options for handling disputes.

While giving the UK a more formal standing within the transition framework, questions have been raised about whether such a committee would be needed for what is intended to be a relatively brief period of time: most rules that might be agreed in that period have already begun their long journey through the EU’s decision-making process.

This is the flip-side of keeping the UK on a full roster of obligations and commitments: transition is foreseen to last for less than two years.

Both sides have also accepted the December 2018 statement by the European Council that transition should conclude at the end of 2020, roughly 19 months after the UK leaves.

This fits into the EU’s multiannual financial planning framework and removes the need to engage in politically difficult renegotiations of the 2019 and 2020 annual budgets. It also aligns with the underlying desire of the EU27 to get Brexit off their agendas as quickly as possible, to allow them to focus more fully on the other challenges confronting them.

For the UK’s part, London’s original suggestion that an end date be left unspecified was driven partly by the fact that the government’s own modelling suggests that a minimum two years will be needed to get a new relationship in place, and partly by concerns that domestic preparations for exit will take longer than the time being offered.

So the intention is that transition should be deep but short. Unfortunately, a number of substantive issues remain unresolved.

At the legal level, while rolling over the UK’s involvement post-membership might be the simplest option, it does create other, external problems. Third countries with agreements with the EU will have to be asked to allow the UK to remain within these after March 2019.

While many have recognised that the situation is a very particular one, this has not stopped some – such as South Korea and Chile – suggesting that some terms of trade will have to be reviewed and, possibly, renegotiated.

Even if this happens only exceptionally, ensuring these arrangements are rolled over will be a complex and time-consuming undertaking, as Lorand Bartels and Samuel Coldicutt set out in this report.

More substantially, the proposed model of transition creates issues with the World Trade Organisation (WTO). The WTO does allow for provisional agreements on preferential trade, but these have always been preludes to the completion of full legal instruments, the contents of which are known at the point that the WTO is informed about the provisional agreement. Here, that content is likely not to be known, given that neither party in the Article 50 process has a settled view of what is to be concluded.

Consequently, a challenge by a party to the WTO is a distinct possibility, especially if the need arises to extend the transition period.

Which brings us to timing. During the 19-month transition, it is intended that the EU and the UK negotiate and ratify an extensive package on their new relationship: “the broadest and deepest possible partnership”, in Theresa May’s words at Mansion House. However, many elements of this package have not been attempted before, so negotiators will have to work from scratch in drafting the text.

Moreover, experience of other extensive free-trade deals – such as the one the EU has signed with Canada – is that the EU will need roughly a year to complete the ratification process alone, which will involve every member state (along with several sub-national assemblies).

That leaves just seven months to pull together an innovative text, the broad outlines of which do not exist in London, Brussels or any other European capital. Meanwhile, there will be the huge bureaucratic and administrative task, for the UK in particular (albeit not exclusively), of creating new customs systems, regulatory frameworks, and so on.

All of which suggests that a debate may need to be had on extending transition. Recall that the key purpose of a transition period is to avoid having a cliff-edge in March 2019: does it make sense to simply shift this to December 2020?

Interestingly, the EU has rowed back from its position in December, when it stated that the period should be fixed and non-extendable. Whatever the eventual text actually says, the possibility of extension is likely to remain a live one throughout the period.

Indeed, it might appear to serve everyone’s interests to let transition run on. For the EU, having the UK continue to be a functional part of its policy area – and a net budgetary contributor – while not having a vote, looks like an ideal arrangement.

For the current British government, removing the time pressure they face within Article 50 might allow for the natural emergence of a new consensus on how to proceed.

However, transitions are unstable by their very nature. The pressure to find a more durable resolution will grow over time, as the compromises and costs become clearer to all.

Politically, the impression that Britain has become a ‘vassal state’ – to use Jacob Rees Mogg’s words – will grow, as the costs of not having a vote in EU rules that still apply to the UK become more evident.

More broadly, the notion of being subject to a system in which one has no representation is highly problematic for democratic legitimacy and accountability, whatever one’s views. The particular form of transition might solve some practical problems but does nothing to answer the critique that democracy is an afterthought in the corridors of power.

That said, the EU itself may find that the effective abrogation of power by the European Council to manage and extend transitional arrangements becomes the subject of legal challenges to the European Court of Justice.

While this might address the balance of power within the European institutions, it does not necessarily change arrangements for the UK and its representation in what might be longer than-hoped-for period.

While the time pressure of Article 50 will no longer apply, this will not mean that there are no perils involved. Most of the legal and organisational elements might stand still in the proposed model, but the politics will continue to move, in ways that risk throwing up ever more uncertainties.

By Dr Simon Usherwood, Deputy Director of The UK in a Changing Europe. You can read the full report ‘Article 50 one year on’ here. Click here to watch Simon explain transition using lego.

Disclaimer:
The views expressed in this analysis post are those of the authors and not necessarily those of the UK in a Changing Europe initiative.

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