The best UK/EU transition plan? If we can, extend the Article 50 period

On 30th June 2016, just one week after the EU Referendum, I wrote this:

It has swiftly become clear, if it were not already so, that neither the government nor the leaders of the Brexit campaigns had anything resembling a plan for what to do if the people voted in favour of leaving the EU.  As Mark Carney rather mordantly put it in his speech today,

“In Tim Geithner’s famous dictum, “plan beats no plan.” And in my experience, a plan that is clearly articulated and transparently executed is best of all.”

In other words, addressed to the off-stage Brexiters, but also to the government whose decision it was to hold the referendum, “you’ve dumped us here without your having any idea what to do next.”

Alas, over a year later, there is still no plan – and awareness that the Conservative government has simply dumped us here without any idea what to do next is becoming overwhelming.  Nor, reading between his lines today, do we sense that Mark Carney is any more reassured on this front. 

My June 2016 proposals were based on Parliament playing a lead role in determining the framework and outcome of negotiations, and included the following:

4. Authorise and require the government to give notification under Article 50(2), and to conduct the negotiations in accordance with it

5. Require the government to report to Parliament within 20 months on either the draft conclusion of an agreement which can be recommended for approval, or on the state of the negotiations to that point

6. If there is a draft agreement which Parliament considers satisfactory and approves, then the withdrawal proceeds

7. If there is a draft agreement which Parliament does not consider satisfactory, then a second Referendum should be held before the end of 2 years from the date of giving the Article 50 notification, asking the question whether (a) to accept the terms of the agreement and confirm the withdrawal from the EU, or (b) not to accept the terms negotiated, and to withdraw the notification and remain a Member of the EU.

8. If there is no draft agreement, then a second Referendum should be held asking the question whether (a) to confirm the withdrawal from the EU notwithstanding that no negotiated agreement has been reached, or (b) to withdraw the notification and remain a Member of the EU

9. The above time limits may be extended if the EU’s Council agrees to extend the 2 year period specified for the negotiation

Nothing has really changed in the meantime, given the government’s paranoia and inertia – and its futile effort to try to stop Parliament from voting on the Article 50 notification.  My proposal fully respected the result of the 2016 Referendum, but recognized that harsh reality could lead Parliament to decide – if it thought the outcome of negotiations to be damaging – to refer the final decision to the British people.

Yet the chances of a felicitous outcome appear increasingly remote, given the absence of any clear, unified, sensible  government policy for the short, medium or long term.  And after over a year of neglectful drift, indecision and meaningless platitudes under Theresa May’s “leadership”, time is fast running out. The 20 months I had foreseen expire in November next year, just 15 months away.

So what are the true choices that now face us?

Ian Dunt, editor of Politics.co.uk, has just written a useful article arguing that a transitional agreement of some kind is inescapable, as there is simply not time left to sort out the issues. He suggests that there are three broad transitional options – continuity, off-the-shelf and bespoke.  

He rightly says that there are two possible “continuity” paths.  The first is to leave the EU as planned in March 2019 but with an interim agreement, for a specified period, that replicates the current EU Treaty position as closely as possible, by definition maintaining the jurisdiction of the European Court of Justice, full freedom of movement of workers, and so on.  And of course includes significant continuing payments in, for having access to the EU’s market, programmes etc. This is more or less what Philip Hammond has suggested, and been criticized by 'colleagues'. 

The advantage of this, of course, is to give more time to work out the future, given how little has been done at the UK government end to date. The downside for hard-line Brexiteers is obvious – the old EU rules apply for several more years… which might even be extended… The downside for those not, or not yet, convinced that the final Brexit terms will provide a good solution for the UK - is that from March 2019  we are out of the EU, without any certainty about the UK’s future, and no way back.

The other means to a “continuity” transition – the one I had referred to back in 2016 – is an agreed extension by the EU and UK to the 2 year Article 50 period.  This would keep the UK in the EU membership on present terms for the transition period.  It means too that we would continue to have a voice (albeit very weak) in the EU institutions.  But far more importantly, if the British people change their collective intention, via a second Referendum, leading to a withdrawal of the Article 50 notice, we would stay in on existing terms, and retain the present Treaty opt-outs, e.g. in relation to adopting the euro, or the perverse “excessive deficit” penal provisions of the Treaties.  

(Were we to leave and then apply to rejoin later, it is almost certain that these current opt-outs would not be on offer. Ditto if e.g. Scotland became independent from Rest of UK, and sought to join).

Dunt’s second transition type is an “off the shelf” agreement, by which he understands “signing up” to the European Free Trade Association, “and through that stay in the European Economic Area (EEA)”, joining Norway, Iceland and Liechtenstein.  I confess that I find this option, especially if seen as a transitional one, to be hugely complex and have few advantages over the direct transitional agreement.  

It is the three EEA states, not EFTA itself, who are parties to the EEA Agreement with the EU Member States.  As I understand it, the UK would, at the moment it leaves the EU (presumed March 2019) automatically quit the EEA Agreement, since to be a party to it, you must be a member of the EU or of EFTA. The EEA Agreement then provides that any state joining EFTA may apply to become party to the EEA Agreement. That application must be made to the EEA Council, which comprises “the members of the Council of the European Communities and members of the EC Commission, and of one member of the Government of each of the EFTA States.”  Thus the UK would need, in a coordinated bundle of agreements:

  • To apply to join EFTA – the EFTA Convention provides that “Any State may accede to this Convention, provided that the Council decides to approve its accession, on such terms and conditions as may be set out in that decision”, i.e. after agreeing terms with the existing members, which also include Switzerland though it is not in the EEA.
  • To apply to the EEA Council to become party to the EEA Agreement, which means reaching agreement with the EU member states, the European Commission, and the three EEA EFTA states
  • Alongside this, we would still absolutely have to reach agreement with the EU states under Article 50, “setting out the arrangements for [the UK’s] withdrawal, taking account of the framework for its future relationship with the Union".  So all the present difficult 'divorce' issues have to be resolved in the near future, as well as clarifying the longer term 'framework'
  • If we want to remain part of the customs union for the transition period, this will also have to be negotiated in a separate agreement with the EU, as the customs union is not part of the EEA remit. 

[Litigants' paradise corner: I should add that my interpretation that the UK would need to apply afresh to join EFTA and the EEA Agreement is in line with the UK government's lawyers' view, but disputed by those who point to the fact that under Article 127 of the EEA Agreement, a contracting party (which the UK currently is, as a member of the EU) may give 12 months’ notice to leave the agreement, i.e. leaving is not automatic.  

I think this is wrong, as there are various clauses that imply that EEA members are only the members of the EU and EFTA; in any event, the Agreement expressly applies (Article 126) solely to “the territories to which the Treaty establishing the European Economic Community is applied and under the conditions laid down in that Treaty, and to the territories of Iceland, the Principality of Liechtenstein and the Kingdom of Norway”.  Thus, not to the UK’s territory once we leave the EU. So my belief is that the UK's present membership of the EEA Agreement would be deemed to be contingent on its EU membership, and that it would therefore need to join EFTA, at least to have any meaningful role.]

The final “continuity” option which Ian Dunt suggests, but only to dismiss, is the “bespoke” transitional agreement: 

A bespoke transition is the least realistic of the three options and therefore obviously the government's favoured policy. It demands that we negotiate some sort of specific deal to cover the transition period - presumably one which got rid of free movement and European Court of Justice jurisdiction while maintaining frictionless trade, as per Theresa May's red lines. This option isn't possible…

He is of course right – there simply won’t be agreement to a transitional agreement in which the EU’s basic rules do not apply. 

This brings me back to my starting point.  There are, for me, only two serious strategic options for the long-term:

(1) to be a Member State of the European Union, albeit for the future in an “outer orbit” of members, paying our dues and with a strong say and vote in future policy-making, and making alliances to change the bad features of the Treaties etc. (which are real, notably key elements of economic policy); in short, to work to build a progressive alliance in the EU, and to prevent the further self-destruction of social democracy through yet more surrender to harsh neoliberal doctrine and policy;

(2) to leave the EU and stand alone in the world, as the Brexiteers wish. hoping to negotiate one's way across time and space, making any sacrifices (notably by the poor) that prove necessary along the way.

The much-promoted third way - to remain part of what is inexactly called the single market, without a say in its rule-making, I simply cannot see the long-term (as against transitional) advantage of.  We would remain obedient (but paying) "rule-takers" for all eternity. (This acceptance of the EU internal market rulebook plus payments in, but without any say in the rules, could either be achieved via the EFTA/EEA route, or by a separate but similar agreement with the EU).  

The modest but real advantages of leaving (substantially outweighed in my mind by the political as well as economic downsides of Brexit) such as making your own state aid, public ownership, public procurement or competition rules, would be lost.  

It seems to me that any Brexit which offers the appearance of "greater sovereignty" is in the end going to be a hard Brexit, but also a chimera - it will almost certainly lead to greater economic and political subservience to the USA, reinforcing hard right, political extreme free market forces in the UK.  And the way the government has set about “negotiating” with the EU has been a total disaster, calculated to maximise opposition to and in the EU.  We have for over a year combined a failure to decide on any negotiating strategy or viable terms to offer, with an approach based on a mix of insults and jingosim, under-preparation and under-estimating the other party.

In conclusion, given the government’s failure, it is essential to gain more time for real negotiation and thinking through and dealing with (planning, implementing) the myriad issues that arise from any final terms of separation and future relationship.  There needs also to be a real chance for the British people to decide on what is in their best interest, when able to see the key points of what is proposed for our future.  

There is only one effective way to achieve that, and that is to seek not a new transitional agreement after leaving the EU, but an agreement to extend the Article 50 notice period by, say, a further 3 years.  This would be by far the best line for the Labour Party to take.

It means that we remain for a few more years at least in the EU’s internal market and customs union. It gives time to develop a (hopefully) viable strategy for the UK’s future.  It gives a clear political vantage point for responding to the government’s negotiating record as it unfolds. And it would give time, if used well by government, to reset the relationship with our partners in the EU, and rebuild trust and confidence for a more fruitful negotiation. Above all, it gives time for people to make rational choices, based on much clearer options, without burning all bridges behind us now.