Obstacles to Transitional Deal are Immense


Published in InFacts.org | 31.10.2016

Is a temporary agreement between the UK and the EU remotely likely? The need for a transition is widely talked about because people now see that disengagement from the EU requires two separate steps. The first step, withdrawal, will take two years. The second step, concluding a trade agreement between the EU and the UK as a third party, may take seven years. If there’s no bridge to fill the gap, the economy could fall off a cliff.

The trade agreement will introduce new trade rules that will replace the single market framework. It will determine if London banks can do business in the EU, whether British cars will be subject to customs formalities and tariffs and whether students, nurses and all others will need visas to travel and work in the UK. Such issues will not be resolved by the simpler withdrawal agreement envisaged by Article 50.

What’s more, a trade agreement will require unanimity, not majority vote, as provided for the withdrawal agreement in Article 50. Moreover, if the trade agreement includes services – which it must, if it is to protect the ‘passport’ rights of the London financial institutions, it will be a ‘mixed’ agreement, covering ground that goes outside the exclusive competence (on external trade in goods) enjoyed by the EU. It will therefore also require ratification by national parliaments (of the 27 remaining member states of the EU). This takes a lot of time and has uncertain outcomes – as shown by the difficulty in getting approval of the Canadian trade from one of Belgium’s regions.

All legal routes are complex

Unfortunately, a transitional agreement would be as difficult to conclude as the permanent agreement. This is because access to the single market is part of a single institutional framework established by the EU treaties. One cannot change it without creating, one way or another, more treaties.

One option mentioned is the EEA model, which currently links Norway to the EU. This model has the advantage that grants its members full access to the single market, which the UK will need if the transition is to be smooth. Unfortunately, the EEA agreement is also an international treaty: it takes the same form as the full trade agreement. The UK joining the EEA, even temporarily, would require the UK, the remaining members of the EU and all the members of the EEA signing and ratifying a new treaty. Negotiating, signing and ratifying such an agreement cannot realistically be done within two years. There is also no guarantee that every parliament will give its consent when asked.

A second option would be to keep the UK in the EU but create a special category of membership on a temporary basis – for example one without free movement of people. Unfortunately, this cannot be done without an amendment to the EU treaties. The obligations that arise from the single market are a result of the four fundamental freedoms that are enshrined in the treaties. They cannot be compromised, even for a short period of time.  

A third option would be to create an entirely new deal with the UK as a third party. This would take effect after the withdrawal was completed in 2019. Here again the problem is that this would be a trade deal with all the required formalities of a treaty between the UK and the EU. In other words, such a transitional agreement would need signing and ratification in exactly the same way as a permanent agreement. And although it may take (one supposes) less time to negotiate, it is unlikely it can be ratified by all parliaments within two years.

Remember that for this to work, everything needs to be negotiated, signed and ratified between March 2017 (the likely moment of notification) and March 2019 (the likely moment of withdrawal). During that time France, Germany and the Netherlands will have general elections. Although imaginable, getting all this done in time seems highly unlikely.

In other words, a temporary agreement, although necessary, seems extremely hard to achieve. There would be both legal and political obstacles in its way. It will take almost as much political capital to conclude it as it will take to conclude the permanent one. The formalities and the veto points will be exactly the same.  A temporary arrangement would be almost as hard to achieve as any permanent one.

Pavlos Eleftheriadis is a fellow in law at Mansfield College, Oxford and a barrister at Francis Taylor Building.