LEADING THE WAY OUT OF THE EU

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Tuesday 30 January

A run through of the EU’s tortuous position on transition to be negotiated over the next few weeks. 

On Monday, representatives from the EU27 sitting in the Council of Ministers (not to be confused with Council of Europe) gave the European Commission approval to proceed with negotiating a transitional phase to begin at the end of March 2019.

One of Brussels’ top Brexit adviser, Sabine Weyand broke the news in the early afternoon, tweeting: “Status quo transition without institutional representation, lasting from Brexit date to 31 December 2020.”

Her boss, Michel Barnier had sat in on the Council’s session, where the terms of transition had been approved a few moments earlier. Set out in two documents (a council decision and an annex), the terms agreed on Monday will be incorporated into the Council’s May 2017 negotiating mandate. They paint a picture only slightly bleaker than, to use Weyand’s words, the “status quo.” Contrary to the present circumstances, under transition, Britain will cease to have a say in EU affairs:

The United Kingdom will however no longer participate in or nominate or elect members of the Union institutions, nor participate in the decision-making or the governance of the Union bodies, offices and agencies.

Jacob Rees-Mogg cried foul. “This will be the first time since the Norman conquest that the UK has accepted rules imposed by a foreign power without having any say over them. That’s a really big constitutional issue,” he told BBC Radio 4, urging that Theresa May “negotiate back.”

Terms of transition

But the predicament Britain now faces is entirely at the prime minister’s bidding. She is the one who asked for transition and gift-wrapped the withdrawal agreement that fully anticipated a delay on Brexit. Written in the annex:

In line with the European Council guidelines of 15 December 2017, any transitional arrangements require the United Kingdom’s continued participation in the Customs Union and the Single Market (with all four freedoms) during the transition.

Continued Free movement and single market membership are just the tip of the iceberg of course. The dreaded withdrawal agreement is also referenced on the subject of continued ECJ jurisdiction.

The United Kingdom will however no longer participate in or nominate or elect members of the Union institutions, nor participate in the decision-making or the governance of the Union bodies, offices and agencies.

“There can be no cherry picking” the EU ministers also insist. Appallingly, they also take the liberty of extending the window for permanent UK residency to December 2020:

In particular, the provisions of the Citizens’ rights part of the withdrawal agreement should apply as from the end of the transition period. The ‘specified date’ referred to in paragraph 8 [originally the 29 March 2019] of the Joint Report should consequently be defined as that of the end of the transition period.

When will that be, one might ask. Further to Weyand’s tweet, the Council’s decision confirms: “the transition period should apply as from the date of entry into force of the Withdrawal Agreement and should not last beyond 31 December 2020.”

Note the open-endedness of this statement, supporting strong expectations among the EU27 that Britain will fail to conclude trade negotiations in time for the final month of the decade.

British and EU negotiators will hash out the precise terms of transition between now and March. The only likely sticking point not covered is fisheries. The annex informs us “total allowable catches” will be negotiated over the next few weeks. But the EU is united on this and May is on the back foot. Yet again, our fishermen will be sold down the river. There is no mention of Britain’s future ability or inability to sign trade deals. Although, in the unlikely event the UK does get other trading partners interested in new deals, they would not take effect until after transition thanks to the customs union stranglehold.

United but for how long? 

Transition, barely a word in the Brexit vocabulary until September of 2017 is essentially a hangover from the first phase of negotiations. The EU will publish additional guidelines for negotiations towards the permanent terms of trade in March of this year. However, the annex states that these talks can “only progress as long as all commitments undertaken during the first phase were respected in full and translated faithfully in legal terms as quickly as possible.”

There is now little prospect of Theresa May taking the eye-watering sums of cash offered in 2017 off the table. Equally, there is also little chance of the brand of transition being promoted here by the EU being exchanged for a more UK-centric version – perhaps one that actually transition from full membership to much looser ties before leaving altogether, thereby avoiding the “cliff edge” May and Philip Hammond fear so much but do the maximum not to avoid. Despite the failed objective of Transition, May will want to get these sideshow negotiations out of the way quickly in order to crack on with the real business of trade.

Before she does that, she would be well advised to take a deep breath and consider the Whitehall forecasts leaked to Buzzfeed on the same day as the EU’s transition decision. According to estimates from presumably the same HM Treasury economists who predict a 1% drop in output in the first three months after a Leave vote – instead, the economy grew 0.5% – the British economy will take an 8% hit over the following fifteen years in the event of a true Brexit. An off the shelf trade deal – i.e. one not including provisions for services – will pinch growth by 5%, while staying in the single market will only have a 2% negative effect.

Put the dubiousness of a forecast a decade and a half into the future made by economists who cannot even estimate growth over the next quarter aside for a moment and ask yourself: is half a percentage point in lost growth a year a price worth paying for independence? Of course it is.

Mrs May would do well to bear that in mind. The WTO option is acceptable for the world’s fifth biggest economy. She still has the option to walk away from the trade talks and squeeze out a decent trade deal covering goods and services – an outcome the government curiously neglected to model in its forecasts. The upside to that course of action is to divide EU27 and extract more concessions.

It is increasingly apparent that some EU countries are far more willing to play hardball with the UK over trade than others. Luck is also on Britain’s side. Germany excepted, those countries most vulnerable to a downward turn in British exports are the wealthier countries in the North West. Meanwhile, Germany will be in no position to dictate, even once Angela Merkel forms what promises to be a shaky coalition.

Countries to the South and East are less economically dependent on the UK, but are also far less zealous about “protecting the integrity of the single market.”

2017 may have started with the image of a bizarrely united Europe. That may yet change. All we need is for Mrs May to get her act together. If she does not, a new bolder leader must take the helm.