ISSN 2330-717X

Risks Inherent In UK’s Brexit Transition Period – OpEd

By

By Andrew Hammond*

With the UK set to leave the EU on Friday, the nation will begin an 11-month “transition period.” While some have been reassured by this phase, which is designed to help smooth the Brexit process, the months to come offer much risk, as well as many opportunities, for both sides.

During the transition period, London and Brussels must agree a future relationship centered on a new trade deal. Simple as this may sound, timeframes will be exceptionally tight — unless UK Prime Minister Boris Johnson U-turns on his pledge that the transition period will not be extended. 

One reason why the schedule this year will be so restricted is that Brussels is not legally allowed to conduct formal negotiations on a new trade deal until the EU27 has approved a joint negotiating mandate. That could take weeks, meaning formal discussions may not begin until March at the earliest. And, because a deal would need to be ratified, negotiations realistically must be completed by early autumn, if not late summer.

While the Brexit withdrawal deal was ultimately ratified at a relatively fast speed in December and January, this may not necessarily be the case with an agreement on the future EU-UK relationship. The potentially difficult nature of these talks was highlighted by the troubled approval process for the Canada-EU Comprehensive Economic and Trade Agreement (CETA), which came close to breaking down in 2016. The turbulence came to a head in October that year, when Wallonia — one of Belgium’s six legislatures — indicated to Canada that its opposition to key provisions were “red lines.” The opposition delayed, and nearly derailed, the Belgian government’s approval.

While Wallonia’s concerns were ultimately smoothed over by Ottawa and Brussels, the episode underlined that, unlike the Brexit withdrawal deal just agreed, big trade deals from CETA to any next phase Brexit deal need the approval of about 40 national and regional parliaments across Europe before they can be ratified and implemented in full. 

The 2016 incident gave rise to concerns among senior EU officials, who appeared exasperated that the comparatively small region of Wallonia, with a population of about 3.5 million, could derail CETA for the EU’s approximately 500 million residents and Canada’s 35 million. For instance, then-EU Trade Commissioner Cecilia Malmstrom asserted that “if we can’t make (a deal) with Canada, I’m not sure we can make (one) with the United Kingdom.”

So, with ratification potentially taking months, this leaves a lot to be done in not much time this spring and summer. Take the example of converting the 600-plus page withdrawal agreement into a trade deal. As the Canadians found in their efforts to secure CETA, such a feat could take several years. Even the approximately 25-page political declaration that headlines the future EU-UK relationship will require intense negotiations as it is translated into hundreds, if not thousands, of pages of legal documentation.

Another challenge of reaching a deal is the fact that, post-election, the UK government has doubled down on its message that it wants significant freedom to diverge from EU regulations. On Jan. 18, for instance, Chancellor Sajid Javid asserted, in the context of manufacturing, that “there will not be alignment, we will not be a rule-taker, we will not be in the single market and we will not be in the customs union.” While Javid has so far declined to specify which EU rules the Johnson team wants to drop, his pointed intervention highlights the problems of realizing the pre-election pledge of securing “frictionless trade” with the EU post-Brexit.

In this context, the EU’s chief Brexit negotiator Michel Barnier has said a “bare bones” trade agreement is probably the best that can be hoped for in 2020, and not the kind of deep trade deal promised by some Brexiteers in 2016. The challenge of the latter happening in practice is one reason why some European politicians, such as Irish Foreign Minister Simon Coveney, had proposed a five-year transition period. 

Because Johnson has pledged not to extend the transition period beyond Dec. 31, there is a renewed possibility of a “cliff-edge” in negotiations and what would, in effect, be the threat of a disorderly Brexit raising its head again. If this happens, both Brussels and London would almost certainly need to return to the negotiating table in the months that follow, but with a new set of incentives. Such discussions could take significantly longer in this scenario than if Johnson were to secure a deal in the transition period.

Moreover, outside of the transition period, the negotiating process could get significantly harder, with the same trade-offs as before but with the likelihood of added time pressure if the UK’s economy is hurting more than that of the EU. One factor that may make concluding a deal significantly more difficult is that — outside of the transition process, which requires only a qualified majority of states to ratify — EU27 unanimity would be needed. Indeed, the possibility of just one European state blocking an agreement thus remains a key risk for both Brussels and London.

  • Andrew Hammond is an Associate at LSE IDEAS at the London School of Economics

Arab News

Arab News

Arab News is Saudi Arabia's first English-language newspaper. It was founded in 1975 by Hisham and Mohammed Ali Hafiz. Today, it is one of 29 publications produced by Saudi Research & Publishing Company (SRPC), a subsidiary of Saudi Research & Marketing Group (SRMG).

Leave a Reply

Your email address will not be published. Required fields are marked *

This site uses Akismet to reduce spam. Learn how your comment data is processed.