On the 29th January, the EU Council adopted their most recent negotiating directives for the next phase of the Brexit negotiations, dealing with the transitional arrangements first referenced by Theresa May in her Florence speech several months ago in September 2017.
The EU has proposed that the transitional period should last until the end of this current EU budget period, 31st December 2020, though the possibility of extending that period has not been ruled out. The directives also state that the UK will be required to continue to apply the entirety of EU law (the acquis), as if it were a member state. This would involve continued budget contributions as at present, continued jurisdiction of the European Court of Justice, continued collection of tariff revenues for the EU and continued implementation of any new EU law coming into force in this period. The UK would, in essence, be an EU member state in all but name.

Unsurprisingly, these proposed transitional terms have created immediate discord in the Conservative Party. Jacob Rees-Mogg, currently chair of the Eurosceptic European Research Group in Parliament and speaking on the Brexit select committee, described the proposed arrangements as making the UK into a ‘vassal state’. Additionally, veteran Eurosceptic campaigner Bill Cash asked in the HoC ‘is the Government going to reject this new EU ultimatum’, whilst fellow eurosceptic John Rewood wrote in his blog that the Government should not entertain any thought of a transitional period which binds us to the EU.

The Government has said that it will contest the transitional proposals put forward by the EU, arguing that the UK should not be affected by rules it does not have any influence on, as well as a desire to implement new immigration rules during a transitional period. This problem could become especially acute if the transition period is extended for any reason, leaving the UK implementing laws made during a transition period over which it has no influence. With such a divided Conservative party and a hard line from the European Union, May’s twin negotiating principles of protecting the economy, whilst respecting what she has deemed to be the overriding messages from the referendum result, seem impossible to satisfy. To accept what Mr Rees-Mogg termed ‘vassal state’ status would be politically humiliating for the UK. Yet to reject the proposed terms risks leading to a breakdown in the negotiations, something the UK has already gone to considerable lengths to avoid, such as a politically contentious financial settlement.

It is important to note that some ‘soft brexiteers’ have warned of the potential for exactly this outcome for the UK from well before the referendum.

The Flexcit plan, authored by Dr Richard North and regularly updated in his daily blog, clearly outlined what has come to pass; that the UK would face a fairly binary choice in these negotiations; accept a transitional agreement in order to negotiate a longer term trade agreement, or leave with no agreement.

As North argues, there never has been a third option. The Article 50 talks were never going to involve negotiating a longer-term trade agreement, something which is explicitly clear in EU law. As such, that was and is legally impossible, and there is no politically realistic outcome changing that. Consequently, a transitional, and not an ‘implementation’, period was always necessary to make Brexit work in avoiding a no deal scenario. The fact that it has taken so long for this reality to settle in with the Government is a testament to their incompetence.

What North and his supporters also correctly argued was that if a transitional agreement is necessary, then it makes sense to attempt to get the best transitional agreement possible. And it is here that he turned to the so-called ‘Norway’ option, remaining a member of the Single Market after leaving the EU, as the best transitional agreement.

This would be done, as is the case with Norway, Iceland and Liechtenstein, by becoming a member of the European Free Trade Association (EFTA) and then attempting to remain in the European Economic Area (EEA) (the EEA covers EU states in addition to Norway, Iceland and Liechtenstein). Thus, the UK could switch from being an EU/EEA state to an EFTA/EEA state, maintaining current single market membership, as the EEA involves single market membership, though importantly not customs union membership. Since we are already EEA members, this has the benefits of being logistically much easier than arranging a bespoke transitional agreement.

Though the EEA Agreement that we would be subscribed to, at least during the transition, is far from a perfect deal, North correctly perceived that it would guarantee us certain rights that we almost certainly will not get in any bespoke transitional agreement, which the Government proceeded to foolishly tie itself to. For instance, the EEA Agreement guarantees rights of influence on EU law affecting the EEA for EFTA states (articles 97-104), including the potential to veto EU law being implemented in the UK as an EFTA/EEA state (article 102) and guarantees safeguard measures for EFTA states over free movement which the UK could attempt to use (articles 112-114). Even more importantly, it is not a permanent solution. It simply provides the time needed to reach a longer-term solution, whether that be a UK-EU free trade agreement or reformed single market membership, as envisaged by North in Flexcit.

Unfortunately, because of the dogmatic obsession of some ‘brexiteers’ with denigrating and misrepresenting the EEA Agreement, helped along ably by the official remain campaign in the referendum campaign, we are now in danger of getting a transitional agreement with none of its redeeming features, and all of the downsides constantly attributed to it. This would be the very worst of the ‘worst of both worlds’ described by David Cameron during the EU referendum. This was all predicted by soft brexiters such as North prior to the referendum.

But more importantly, what remains to be seen is whether the parts of the Conservative party which cannot tolerate such a harsh transitional agreement with the EU will act to remove Theresa May as Conservative Party leader, hoping to put in place a strong leave figure from the referendum. It is also debatable whether by attempting to do so they will destabilise the negotiations to the point of making any agreement with the EU unworkable.
If the EU is aware of this risk, and it seems unlikely that they are not following British politics enough to perceive it, then the EU may allow the UK some small concessions which Theresa May can sell the agreement with, but it is questionable whether they could possibly go far enough to save the Government from political humiliation.

To take a charitable viewpoint, it might be that the EU has proposed such harsh initial terms in an attempt to coax the UK into remaining in the EEA during the transitional period, as this would allow May to claim an improvement over the initially proposed transitional period, keeping both sides mostly happy.

Regardless, Theresa May has made her job considerably more difficult due to her desire to appease the misinformation surrounding the EEA from the referendum, rather than confront it. That may have seemed politically sensible at the time as the easier option, but it is rapidly damaging the UK’s negotiating position during these phase 2 discussions.

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