Trade Knowledge Exchange > Commentary > More time for Brexit Negotiations?

More time for Brexit Negotiations?

Extending the time limit for negotiating the UK’s withdrawal from the European Union looks increasingly like the only realistic course. But the difficulties and risks are enormous, not least because there is no common view as to the duration of that extension. And because of that, the risks of a “no-deal” outcome remain substantial.

Background

Article 50 of the Treaty on European Union provides that where a member state has given notice of withdrawal, terms of departure must be negotiated within two calendar years. Failing which, the country concerned drops out with no agreement on terms.  An extension of negotiations beyond two years may be allowed subject to unanimous agreement of the parties.  In the case of the Brexit negotiations, that would mean unanimity between the United Kingdom on one hand and on the other the governments of all 27 other member states (the EU27) acting through the legally responsible agencies of the European Council, Commission and Parliament.

Article 50 deals in the first place with the mechanics of departure of a member state. For example how to tie up the host of legal loose ends which withdrawal must leave, and calculation of a fair settlement of budgetary obligations. It requires the parties to “take account” of the framework (Note: only the framework) for future relations. This process of “taking account” can be quite detailed, as is the UK/EU Political Declaration accompanying the draft Brexit Withdrawal Agreement. But it neither requires nor accommodates detailed negotiation of a future relationship such as a new trade agreement, which is clearly envisaged as a post-withdrawal undertaking. There should be no surprise that little or no concrete progress has been made on post-Brexit relations.

Almost three years have passed since June 2016 when the UK referendum produced a narrow majority for withdrawal.[1]  The two-year period for negotiating withdrawal terms runs from the date of notification under Article 50 on March 29 2017 until 11 p.m. GMT on Friday March 29 2019, when UK law specifies that the UK must leave.  So far there is no Europe-wide agreement on terms, let alone on the future relationship between the UK and the EU27.

UK negotiating conditions

At the outset of negotiations the UK Government laid down a series of so-called “red lines”, meaning conditions on which the UK would not compromise.  These were, in summary:

  • No jurisdiction in the UK of the Court of Justice of the EU (CJEU);
  • No compulsory contributions to the EU budget;
  • An end to free movement of people between the UK and the EU27;
  • A fully independent trade policy for the UK, meaning that the UK must be free to make binding trade agreements with non-EU countries outside the current confines of the EU common commercial policy.

In the specific case of Northern Ireland the UK made further commitments:

  • Recognise the integrity of the Republic of Ireland within the EU;
  • Guarantee the integrity of Northern Ireland as part of the United Kingdom;
  • Avoid a “hard border” on the island of Ireland, particularly as regards tariffs, regulatory requirements and customs procedures;
  • Maintain the common travel area between the UK and the Republic of Ireland which was first implemented in 1923;
  • Avoid any difference in legal or procedural treatment between Northern Ireland and the rest of the UK;
  • Ensure that no new regulatory barriers develop between Northern Ireland and the rest of the UK unless, consistent with the 1998 Agreement [the “Good Friday” Agreement] distinct arrangements are appropriate for Northern Ireland.

These stipulations and commitments severely limited the UK’s negotiating freedom.  Further, the commitment to avoid any difference in legal or procedural treatment between Northern Ireland and the rest of the UK is contradicted by the stated willingness in some circumstances to contemplate “distinct arrangements” appropriate for Northern Ireland. Maintaining the UK/Ireland common travel area clashes with the basic determination to end free movement of people between the UK and the EU27.

Negotiators on both sides engaged in mental gymnastics over many months trying to devise withdrawal terms that complied with the various limitations in the UK position. Compromise predictably became unavoidable, and when eventually a draft agreement on withdrawal terms was endorsed by the European Council on 28 November 2018 it did indeed involve compromises.

EU negotiators recognized the political imperatives for the UK of ending automatic free movement of EU nationals into the UK and of creating space for the UK to get on with preparations for negotiating the new bilateral trade agreements with non-EU countries which it hopes to make.  Detailed arrangements for customs cooperation are set out, as well as provisions regarding ongoing legal proceedings before the UK and European Courts.  It is proposed to set up a supervisory Joint Committee to oversee the implementation of the Agreement, supported by a number of Specialised Committees, and together with arbitration arrangements in the event of disputes.  All these elements inevitably entailed some continuing direct or indirect involvement of the UK with the CJEU.

Throughout the negotiating process the EU27, while not hostile to the UK and with some appreciation of UK political priorities and constraints, have shown impressive common purpose in the interests of the Union as a whole and of preserving the Single Market.  Successive “charm offensives” by British ministers with individual EU27 heads of government have been met with courtesy and some understanding, but have not dented that unity.  By contrast, it has been all too clear to the EU27 partners that the UK’s problems in negotiating with them largely derive from bitter policy conflicts within UK political parties, principally the ruling Conservatives, but to a lesser extent Labour also.

Irish “backstop” – the sticking point

Nowhere are these intra-UK conflicts clearer than in the controversial proposal, attached to the draft Agreement, for a “backstop” arrangement governing border trade between Northern Ireland and the Irish Republic.  This would come into effect only if at the end of the transition period (end-2020) the UK and EU27 had failed to agree on terms for the future economic and trade relationship, which it would hope to have negotiated during the transition period.  While the UK would then legally drop out of EU trade procedures, the backstop would avoid a physical or administrative trade border across the territory of Ireland by keeping Northern Ireland temporarily within the EU customs union and regulations until a comprehensive future UK/EU relationship could be settled at some point after 2020.  On an alternative proposal floated by UK ministers, and in order to avoid differentiating between Northern Ireland and the rest of the UK, the UK as a whole might temporarily remain within the customs union after 2020 on the same basis.

The backstop proposal, in either form, has been the major factor holding up agreement on Brexit withdrawal terms until the present late stage.  It causes fury among UK supporters of Brexit because it would keep Northern Ireland in the customs union after 2020 and thus discriminate between the Province and the rest of the UK, creating “a border in the Irish Sea” that would breach the Government’s pledge on unity of the United Kingdom.  If extended to the UK as a whole it would, even though temporary, effectively mean continued EU membership, and so breach most of the UK Government’s red lines.  Brexit supporters demand at the very least that a legally enforceable end-date be written into the backstop proposal permitting the UK to withdraw by unilateral decision.  EU negotiators have refused to accept this, on the basis that the backstop is designed as an insurance policy to protect the trading interests of a member state – Ireland – for as long as the UK/EU trade future remains unsettled, and that if legally time-limited it could not fulfil that function.

The Democratic Unionist Party (DUP) in Northern Ireland bitterly oppose the backstop proposal, not just because it would create a degree of discrimination between NI and the rest of the United Kingdom, but for the deeper reason that they fear this might be the first stage in pressure for a reunited Ireland.  Brexit supporters oppose it because it would keep a part, or conceivably all, of the UK in the customs union beyond the planned transition period.

The EU side for its part seems unwilling to do more than reiterate assurances that the backstop is intended only to be temporary, and if it were time-limited its essential quality of an insurance would be lost.  The EU is unwilling to undermine the Single Market and damage the prospects of a member state. The most recent round of talks on the backstop, on 6 March, appears to have done little to resolve the impasse.

Defeat in the House of Commons

The draft Withdrawal Agreement was agreed in 2018 between the negotiators respectively for the EU27 and the UK, and endorsed by the EU Council in November 2018.  From the European point of view therefore it is – or should be – a done deal, permitting the UK to leave in an orderly manner and all the parties to concentrate on sorting out the long-term relationship on the basis of the accompanying Political Declaration.

This is not the majority view on the UK side, where pro-European UK politicians and members of the public also detest “Mrs. May’s deal” because self-evidently it would leave the UK subject to all the requirements of EU economic and trade law without having its current say in how that law is made.  All the different reasons for objection to the draft coalesced in the much-postponed House of Commons “meaningful vote” on 15 January 2019 when the draft Agreement was rejected by an overwhelming majority of 230.  No Deal therefore looks much more of a possibility although its damaging economic and trading consequences have become clearer, there is overwhelming political opposition to such an outcome and all but a very few diehard Brexiteers have abandoned the previous mantra that it would be “better than a bad deal”.

The UK Government has been engaged in frenzied attempts to “renegotiate” the backstop in terms which could satisfy the DUP and hard-line Brexiteers while safeguarding the interests of the Republic of Ireland in terms acceptable to the EU.  Depending on the outcome of those efforts, yet another Commons “meaningful vote” on the May deal or any negotiated variant of it is scheduled for March 12. It looks as though following recent unsuccessful talks in Brussels the Government will have little or nothing new to offer.  If the deal is rejected again, there will be a further vote the following day on whether the Commons would accept a No Deal outcome.

Practical alternatives

It seems clear that the Commons would not support No Deal, so on that assumption there would then be four available options:

  • Accept the prospect of No Deal. There is no parliamentary majority for this, and recent reports from across the whole UK economy have sharply highlighted the potential damage to both sides, but particularly the UK.

 

  • Withdraw the Article 50 withdrawal notification and remain a member state on current terms, as the CJEU has determined would be possible. Politically that looks very unlikely, though it could at the eleventh hour avoid the economic wreckage of No Deal. Such a seismic political reversal would require an immediate General Election.

 

  • Opt for a further referendum (“People’s Vote”) which is now widely accepted as possibly the only viable course. Settling the question(s) to be put to the public would be contentious, though the most-favoured option seems to be between a variant of the current draft deal and Remain.

 

  • Seek a delay for further negotiations as permitted by Article 50.

The pressure is on

Any action to get agreement to the May deal, or otherwise to avoid No Deal, has to be done within only three weeks, and in that light an extension of the Article 50 two-year period is being openly discussed. If such an extension were implemented, it would effectively keep the UK as a member state beyond March 29 2019, subject to all EU laws and policies and unable to conclude independent trade deals with non-EU countries.

Article 50 extension differs from the transition period to end-2020 as proposed in the Withdrawal Agreement. Under the latter, although not much would change in the practical conduct of trade during those 21 months to transition, the UK would have left the EU and no longer be part of its legal or policy structures except as set out in the Agreement. It would also not benefit from free trade agreements that the EU has negotiated with non-EU countries, unless these countries agree to roll over existing arrangements.

Extension is bitterly opposed by hard-line Brexiteers, mainly but not exclusively in the Conservative Party, who suspect a plot to subvert the 2016 referendum and keep the UK within the EU.  It is strongly supported by others who for example argue for a People’s Vote.  A new referendum however would require primary legislation, taking at least several weeks in Parliament to settle the terms including the all-important formulation of the question(s), together with the necessary administrative provisions.

Indications are that the EU27 and institutions would be prepared to agree to an extended negotiating period in order to avoid the Europe-wide disruption to trade caused by No Deal, though some especially President Macron of France insist that this could not be automatically granted, and would require a fully reasoned and justified submission by the UK.  There are three main possible approaches to extension:

  • As recently hinted by Prime Minister May in Parliament, seek a limited extension of not more than three months to permit negotiation and Parliamentary acceptance of the current draft Withdrawal Agreement, or a variant of it including fresh backstop proposals. This would risk looking like “kicking the can down the road” yet again.

 

  • Seek a longer extension, of possibly nine months or a year, to permit orderly and properly worked-out conduct of either a People’s Vote or, if it came to that, a General Election. This could solve practical problems but would be opposed by those who reject a further referendum, and also by those who object to any continuation of EU membership.

 

  • Agree with a proposal which it is understood is favoured within the EU, namely a longer extension of perhaps two years to permit substantive negotiations on the longer-term UK/EU relationship on the basis of the bilateral Political Declaration, and in the hope at the end of achieving a comprehensive basis for future relations. Though logical, this approach would run into determined opposition from Brexiteers who reject the idea of staying in the EU for a day longer than absolutely necessary.

Any course other than the shortest possible extension period will be opposed by important factions within the UK Parliament.  But with March 29 so closely looming, any decision on an extension of whatever length has to be taken with the utmost urgency.  It isn’t just a matter of UK politicians reaching a view on one or other of the main options; as stressed above, extension under Article 50 requires the unanimous agreement of 27 EU member states, supported by the institutions, and that also needs to be done within less than three weeks.  Member states may have differing views on departing from the terms of the current draft Agreement, and some of them may have domestic procedures which they have to go through in determining their position.  This could take time, and perhaps more time than UK law and repeated UK procrastination now allow.  In that case No Deal, with all the risks of Europe-wide trade disruption which are now clearly perceived to arise from it, looks painfully possible.

[1] The referendum produced a majority for Brexit, but the margin of majority was just over 3% of all the votes cast.  Pro-Brexit voters represented just 37%, of the registered electorate or slightly more than one-third.


About the Author

Michael Johnson

Michael
Johnson

Michael Johnson was a senior official of the UK’s former Department of Trade and Industry, where he worked on international commodity policy, UK bilateral commercial relations with developed country markets, and the UK’s input to EU external trade policy. He is in demand as an independent consultant, and has advised governments of more than twenty developing or former Communist countries on trade policy formulation and on trade-related development projects.


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