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Analysis

Extending the transition won’t be easy

by Hugo Dixon | 12.01.2018

Theresa May says a two-year transition will be long enough to cushion the blow if we quit the EU next March. It won’t. Insofar as the prime minister realises this, she may hope it will be easy to get an extension. But that’s not true either.

A two-year transition – or what May inaccurately calls an “implementation phase” – won’t do the trick because we’ll only start negotiating a new trade deal with the EU once we’ve left. That will take years, after which we’ll need to ratify and implement it. The other EU countries have started discussing this likelihood, according to the FT. But by refusing to focus on the problem, the prime minister is merely shifting the cliff edge to 2021.

Optimists say that doesn’t matter. If we need longer, we can just ask the EU for a few more years. The snag is that the process for agreeing an extension will be laborious, unless we prepare for the possibility now.

Some observers think that, since a transition would be agreed under Article 50 of the Lisbon Treaty, an extension could be agreed in the same way. That would require a qualified majority in the Council of Ministers after obtaining the European Parliament’s consent – a set of hurdles that might not be too hard to jump.

But this misreads the legal position. Steve Peers, professor of EU Law at the University of Essex, told InFacts Article 50 can only be used to determine the exit deal of a member state which wishes to quit the EU. After we leave, we wouldn’t be a member state, so it couldn’t be used for any new arrangement – including an extension of the transition.

In such a situation, a new treaty would be required. Given that this would cover the whole gamut of our temporary relationship with the EU, it would almost certainly require unanimous approval of the other member states. It might also require ratification by their parliaments, not just the European Parliament. That’s a much more cumbersome and time-consuming process.

Money, money, money

It might still be thought that simply rolling over a deal shouldn’t be too hard. The problem is that, at least in one important respect, money, it wouldn’t be a matter of rolling things over.

The existing EU budget deal finishes at the end of 2020, roughly when May’s hoped-for implementation phase is supposed to end. If we wanted to keep the benefits of the EU’s single market after that, we would need to pay for it. The £39 billion the prime minister has already agreed to pay as part of our divorce deal covers the past not the future.

What’s more, the other EU countries would almost certainly expect us to pay the full fee – without Margaret Thatcher’s famous rebate – for the privilege. That works out at another £12 billion net each year. If we needed a further three years, that would be another £36 billion.

We could, of course, argue for a lower payment. But what chance of getting that? Time would again be ticking, we’d be over a barrel and the EU would know it.

A partial solution

One partial solution is to bake the possibility of extending the transition into the treaty setting out our exit deal. It could set out a streamlined process for agreeing such an extension – say qualified majority approval in the Council of Ministers perhaps supported by European Parliament consent.

There would still, though, be a couple of issues. First, the extension would have to be time limited, according to Peers. Otherwise, the EU would effectively be using Article 50 to create a permanent new relationship, whereas it’s only supposed to be used to set out the divorce deal and the framework for a future relationship.

Second, there would still be the question of money. The fees we’d have to pay in any extension would have to be negotiated as part of the divorce – or, at the very least, that deal would have to set out a process by which they would be determined.

Despite these difficulties, reaching an agreement now that provides for the possibility of extending the transition is clearly in the national interest – as it would minimise the risk of falling off a cliff in 2021.

Sadly, we have a prime minister who is more concerned with holding her fractious party together than protecting our wellbeing. May won’t want to admit now that we could be stuck paying into the EU budget and following all its rules without a say on them for many years after we’ve theoretically quit the club.

Hardline Tory Brexiters might go apeshit. Even pro-Europeans won’t be happy, as it would be far better to stay in the EU as an influential member.

But just because the prime minister doesn’t want to face the facts, doesn’t mean we should let her get away with it. We’ve got to smoke her out.

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Edited by Luke Lythgoe