Brexit ‘transition’ agreement talks will not be for faint-hearted

It had been suggested by many commentators that in the next round of Brexit talks, the strand dealing with arrangements for a transition period would be the easiest to agree. Importantly, all agree, it must be done soon to provide business with a degree of certainty.

Both sides are agreed about the basic shape of transition – a continuation for the UK of the rights and obligations of member states as if it had not left – except of course that, having left the EU, the UK would not be able to participate in decision-making. The transition, both sides appeared to be agreed, would only last about two years.

Simple, one might think. But then some on both sides began to ask what was meant by “all the rights and obligations”. Did that mean the UK would not, for example, be able to negotiate trade treaties with third parties until the end of the transition (a right reserved by the European Commission)? The answer is yes.

Or would the commission turn a blind eye to negotiations as long as no agreement was signed until after transition? Well, perhaps.

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What about the rights of EU immigrants to the UK? Surely the UK would be allowed to phase in its new controls, or at least limit these latecomer migrants’ rights to stay permanently? Well, no. Not if the UK wants to enjoy all the benefits of membership.

Status quo

Attempting to remove any such “ambiguities”, member states preparing draft negotiating directives for the commission have in the last few days sought to clarify what they mean by a continuation of the status quo.

The text also clarifies rules for setting fishing quotas – the UK will have to accept quotas set under the old EU fisheries regime

But even spelling out such clarifications will inevitably be misunderstood in the febrile atmosphere of Brexit talks. Reports in the British press talk of the toughening up of conditions. Toughening up, yes, if you previously believed that anything would go during transition. But the draft negotiating directives being worked on are really only about establishing and confirming current practice, not raising the bar.

British ministers, for example, will need to seek “authorisation” from Brussels to continue benefiting from EU trade deals the UK would otherwise fall out of on Brexit day.

This could be a real difficulty, Sam Lowe writes in a report for the Centre for European Reform think tank. When it leaves the EU in 2019, even though entering a period of transition, the UK will no longer be a signatory to some 40 free trade deals that the EU has negotiated. These FTAs are with states receiving 11-15 per cent of UK total exports.

‘Free trade agreements’

This could result in a scenario, Lowe writes, “in which UK exporters are no longer able to take advantage of the EU’s existing free trade agreements, but exporters located in countries with EU FTAs would continue to benefit from preferential access to the UK market on the same terms as now.

“To give a practical example: during the proposed transition, Korean car exporters would still be able to sell cars into the UK without being subject to border tariffs under the provisions of the EU-South Korea free trade agreement. UK car exporters selling into Korea, on the other hand, would no longer be covered by the agreement and would face Korea’s tariffs of 8 per cent.”

It’s not beyond the wit of UK negotiators, with the assistance and goodwill of the EU27, to find a way around this, but it will not be easy.

Moreover, the UK will be severely constrained in trying to broker longer-term permanent free trade agreements.

Existing rights

"During the transition period, the United Kingdom may not become bound by international agreements entered into in its own capacity in the fields of competence of union law, unless authorised to do so by the union," according to the draft, a significant easing of the current requirements on member states.

Poland and other central and eastern European countries have also insisted on confirming that migrants to the UK will keep their existing rights until the end of transition in 2021.

The text also clarifies rules for setting fishing quotas – the UK will have to accept quotas set under the old EU fisheries regime.

According to Bloomberg, the draft document also signals that the UK may be liable to pay a share of any new obligations, including financial commitments, undertaken by the EU during the transition period, without having a say over those deals. That could increase the overall withdrawal bill, but the UK will be benefiting from such programmes.

The draft is not proposing a total ban on UK attendance at EU decision-making meetings – it proposes, however, that the UK will only be invited to attend regulatory committees “exceptionally on a case-by-case basis”. Which, admittedly, is better than being completely excluded.

In the last few days some member states and the European Central Bank have reportedly also questioned whether the two-year transition will be long enough.

Only when, or if, the transition talks are completed – they are due to start at the end of January, once the EU has finalised its position – will the 27 launch into the longer-term talks on the future relationship.

Among the many other pressures that will then be brought to bear on these will be, the Guardian reports, the reality that "repeated representations" have been made by Oslo over their fears that an overly generous offer to the UK will fuel calls in Norway to renegotiate its ties with the bloc, according to senior diplomatic sources.

For good reason, the commission has been insisting that no deal with the UK can be more favourable or generous than one already agreed.