Tom Parker / Apr 2018
Theresa May and Donald Tusk. Photo: European Union
Over Easter week Brexit was again making headlines in the UK, as the prospect of the 12 month countdown to the UK’s withdrawal from the EU began. For some, including Theresa May on her tour around the country, a definitive tone of “we will be leaving the EU March 2019” was the order of the day. Others rightly pointed out that the UK’s parliamentary and civic democracy could still have a say. Time will tell?
What most, if not all had forgotten to mention was the substance of the draft UK-EU withdrawal agreement negotiated the week before! No comment was made of the centre piece transition arrangement, designed to facilitate the UK’s exit by pushing back the practical impact of Brexit until 31 December 2020. Certainly no mention was made of the small footnote on page 77, which suggests that the UK will remain an EU member state until that time.
The footnote says that in relation to international agreements concluded by the EU or on its behalf, the other parties to the agreement should treat the UK as an EU Member State during the transition period. As drafted, the scope of the paragraph is limited to the EU’s external actions. However, if 3rd countries are being asked to view the UK as an EU member state until the end of the transition period, it remains to be seen how it can be anything else.
The significance of this single, footnoted paragraph should not be underestimated. In its absence, the transition agreement could be subject to legal challenge under the WTO most-favoured nation (MFN) principle. While most WTO members will look for stability as the UK exists the EU, the potential for a politically motivated challenge to the transition cannot be ignored.
The fact that the UK is quietly prepared to accept this provision as a requirement of transition raises the question why transition is so important? Particularly given that under the terms of transition, the UK will have to continue to apply EU law and be subject to the rulings of the European Court of Justice (ECJ) while not taking part in the decision-making or governance of the EU - effectively becoming a rule taker, not maker.
The UK appears to have won a significant concession, having the freedom to negotiate and ratify (but not enact) trade deals with 3rd countries, while simultaneously benefiting from the international agreements the EU has negotiated e.g. the FTAs with Canada and South Korea (Liam Fox the ball will be very firmly in your court at that time) during the transition. But there must be more to it than that?
The need for a transition deal is often presented as a priority of the business community, and indeed some companies have acute Brexit problems that need a short term extension and most will certainly welcome the additional time now available to check customs procedures, undertake regulatory impact assessments, carry-out tax audits and review suppliers…. However, for many businesses the additional twenty-one months are too short, do not address their fundamental Brexit concerns and view the draft withdrawal agreement as the final signal to make their plans for a hard Brexit, if they have not already done so.
More likely, the priority given to transition is a way for UK government to smooth out the many hard edges of Brexit in the eye of the public and soften attitudes before the leap into the unknown. Come 30 March 2019, the PR machine will swing into action and we will be told the UK has left the EU without a hitch, as there will be no tail-backs at Dover or Calais, no grounded flights or problems with delivery of goods and services because the UK will still be an EU Member State. The real date for Brexit fallout is the morning after 31/12/2020 but who knows, even that could change, and the more time goes by the more we are likely to forget.
Exactly where the transition period will take us at the end of twenty one months remains to be seen, with the future EU-UK relationship still to be negotiated. Theresa May has time and again indicated that the UK will be outside the single market and customs union but given the importance of regulatory alignment from an EU market access point of view, how far outside is not clear. Will the UK become a new type of associate member, as some are suggesting? Will it pivot away towards new partners, with a lighter regulatory regime? Time will tell but in the meantime uncertainty, the greatest Brexit frustration of business and a growing number of UK and EU citizens, continues.