The European Council have published their phase two negotiating guidelines after accepting the Commission's recommendation of sufficient progress. The second phase will focus mainly on the terms of the UK's two-year transition from EU membership and a clarification of proposals for the maintenance of a soft Irish border. Upcoming negotiations are designed to outline an overall understanding of the framework of the future relationship, building on the guiding principles established in phase one.
Yesterday's report is light and understandably lacking in detail. There are, however, two important paragraphs which need to be discussed. The first, paragraph 3, touches on the general outline of the approaching transition period, noting:
"3. As regards transition, the European Council notes the proposal put forward by the United Kingdom for a transition period of around two years, and agrees to negotiate a transition period covering the whole of the EU acquis, while the United Kingdom, as a third country, will no longer participate in or nominate or elect members of the EU institutions, nor participate in the decision-making of the Union bodies, offices and agencies."
The second, in paragraph 4, clarifies the EU position on what the UK's obligations will be during the transition, which will form part of the eventual Withdrawal Agreement:
"4. Such transitional arrangements, which will be part of the Withdrawal Agreement, must be in the interest of the Union, clearly defined and precisely limited in time. In order to ensure a level playing field based on the same rules applying throughout the Single Market, changes to the acquis adopted by EU institutions, bodies, offices and agencies will have to apply both in the United Kingdom and the EU. All existing Union regulatory, budgetary, supervisory, judiciary and enforcement instruments and structures will also apply, including the competence of the Court of Justice of the European Union. As the United Kingdom will continue to participate in the Customs Union and the Single Market (with all four freedoms) during the transition, it will have to continue to comply with EU trade policy, to apply EU customs tariff and collect EU customs duties, and to ensure all EU checks are being performed on the border vis-à-vis other third countries."
These terms were to be expected of what is essentially transitional membership. There is no time to negotiate bespoke arrangements which will merely be scrapped and replaced one way or another in the coming years. Business will not stand for it and neither will citizens. The EU clearly recognise this and have set their markers down early. Much like in phase one, these principles will be non-negotiable and the UK Government will need to work through and accept them. There is no other way.
I am not surprised by our staying in the Customs Union and Single Market, nor by our lack of voting rights or the continued exercising of third country controls. All things considered, a departing member of a club should be less or unable to determine its future framework. Nor is our requirement to remain attached to the CCP an issue. Outside of it we would not be able to negotiate anything meaningful because our eventual terms of trade with the EU are yet to be realised. This is one of the major problems with the bilateral route.
The result of all this is an immediate net relinquishing of sovereignty. For a while we will essentially take the form of a vassal state, a passive rule taker without even the solace of a distinct role at international regulatory forums to cling to. This is the worst of all worlds and is precisely why I don't think a transition is a good idea. There is nothing in this relationship which will keep Leavers or Remainers happy, and senior Tories are not likely to stay quiet about it either.
The Brexit vote was a call to shorten the chain of democratic accountability, and this transition, while it lasts, achieves precisely the opposite. I think it is right for the British Government to contemplate extending the Article 50 period as an alternative to sliding into a potentially fairly long-term transition. As noted above, the Council's guidelines describe the time frame as lasting 'around two years', which appears to me to suggest that it could go on longer. I think we should prepare for this possibility.
We are not too late to apply for an extension and I do not see why the EU27 would refuse this request. Phase two talks do not begin in any substantive sense for another few weeks, and additional guidelines will be adopted by the Council in March. There is time to reconsider and seek out other options. I think adding a year, or perhaps two, to the Article 50 period would at least see us avoid any looming vassalage and allow us to retain our voting rights. It makes a lot more sense if we view the future relationship through the prism of maximising sovereignty.
There is also the question of time. The Withdrawal Agreement eventually finalised between the EU and the UK will need ratification and existing treaties will have to be amended to incorporate the provisions of the divorce settlement. I don't know whether this will take three months or six. It will likely be somewhere in between. It therefore follows that phase two will need to be completed some time around the autumn of 2018. This is entirely possible, but given how touch and go the first phase of negotiations were, we cannot be so sure.
Phase two will require specifics across the board. An 'overall understanding' is the goal, as opposed to a guiding outline achieved in phase one. This means, among other things, devising a detailed framework for the Irish border, agreeing on a new VAT regime and establishing agreements covering aviation and recognition of qualifications. We will also need to clarify our intentions as regards our place in separate EU programmes related to security, research and education. There is no trade deal, there is only a withdrawal agreement.
A trade deal, if we get out in any meaningful sense, comes from the point at which we are a third country. This means after we have left the Single Market. This is crucial to remember because many of our politicians still believe we leave with a trade agreement. We do not. The Council refers to our status as a third country as being in effect from day one of the transition, but since we are replicating the same rules, enforcement and surveillance strategy enshrined within the Single Market, this doesn't bear practical resemblance. We become a third country in name only.
All in all my initial thoughts are that I am not convinced a transition is the way to go. We would not be kicking a can down the street so much as an entire cannery, and for all our troubles we emerge with no ability to influence the system's rule-making processes. I join others, like Jonathan Lis, who argue for an extended withdrawal period instead. Otherwise we will lose sense of why we are doing this to begin with.