With the Brexit negotiations in full flow, Britain is looking for a way to make the transition away from the European Union run as smoothly as possible while ensuring that Brexit happens unimpeded. There are two possible exits. The first is a clean cut that will come into effect on 29th March 2019. The second option is to negotiate a transition deal that will allow Britain to disengage with the EU over a designated period of time. Here on The Bruges Group we have examined how trade can successfully continue outside of the Single Market. It is just a case of how we get there. In this article we look at the advantages and disadvantages of a transitional deal.

For a Transitional Deal

A big concern amongst some leave voters is that Britain is heading towards a cliff edge scenario where no agreement or deal is reached. Many political and business commentators believe that this would leave Britain in a precarious position as all EU laws and regulations would suddenly cease. It is estimated that over 700 treaties have to be renegotiated, ranging from the airline industry to Britain’s nuclear agreement (Euratom), with the EU. With less than two years till the Article 50 deadline there is a strong argument that it isn’t feasible to negotiate every deal in time. This could leave many UK businesses in difficult positions, as they have to suddenly change from one set of regulations to another.

British trade minister and prominent leave advocate Liam Fox has pushed for a transitional deal. The Irish Times reported that Fox told Andrew Marr that a deal of around two years was necessary to give businesses the chance to adapt. He is quoted as saying: “I want to leave the European Union at the end of March 2019. Now once we have done that, once we have fulfilled our promise to the British people, we can look to see what we are going to do in terms of making that a smooth transition… whether that’s 23 [months], whether that’s 25 [months]." The trade minister reassured leave voters by stating that the transition period would have a limited time scale.

Against a Transitional Deal

There are valid fears that a transitional deal could be used by remainers to keep Britain locked into many EU regulations including the Single Market and Customs Union. Business Insider predicts that a transitional deal could be based on the EEA model which would allow free movement of citizens and require Britain to remain under the European Court of Justice. With Britain replicating the EEA model, remainers in the government could use it as a base to push for a permanent EEA status.

The British Government recognises that the British public voted for a clean cut. FXCM notes that May has clearly laid out the terms of Brexit: “Let me be clear. We are not leaving the European Union only to give up control of immigration again. And we are not leaving only to return to the jurisdiction of the European Court of Justice.”

A transition deal could also hinder Britain’s ability to make trade deals with nations outside of the EU. If Britain cannot negotiate trade agreements during the transition, due to EU regulations, businesses in the UK would face even longer uncertainly. For Brexit to be successful. Britain must be able to trade globally without EU interference.

Barely one year after the Brexit referendum, and under four months since the triggering of Article 50, the Financial Times has published a “democratic case for stopping Brexit”, adding to a crescendo in overt calls to upend the exit process. How did we get here? The whole point of the EU referendum, just like the Scottish referendum before it, was to bury a longstanding and contentious political issue. In both cases, this has not been so.

In the case of Scotland, it is clear that the opportunism of the nationalists was to blame for reviving the independence issue. Similarly, in the case of Brexit, it is tempting to point the finger at the “Remoaners” who never really accepted the result of the referendum, protesting against the democratic outcome from the get-go. Their scheming has not been particularly covert, with the entire frame of the “hard” vs. “soft” Brexit debate geared towards eventually thwarting the outcome of the vote.

Yet, the blame primarily lies with the pro-Brexit camp. It is no secret that prominent figures in the Leave campaign had no clear plan for victory, themselves appearing flabbergasted by the result. The present situation is the logical continuation of this reckless incompetence.

Beyond hazy generalities, there is little to believe in with Brexit as it stands. As a result, people will increasingly become disillusioned. If a bad deal is eventually struck and it goes to parliament for approval, either a general election or second referendum could become a legitimate vehicle through which to upend the entire Brexit process. With May’s government barely clinging to a majority, it doesn’t require too much imagination to see how persistent Remainers could eventually get their way.

What is needed, if Brexit is to stop haemorrhaging legitimacy, is an ambitious plan. A favourite example of prominent Brexiteers revolves around the promise of the Anglosphere, so why not start there?

Together, the United Kingdom, the United States, Australia, Canada and New Zealand constitute an Anglosphere of over 450 million people. This is more than the population of the EU 27 (without the UK). On top of this, these people are more prosperous than their EU counterparts, and have been for a long time.

Their GDP per capita is significantly higher than the EU average. In fact, in most cases it is even above that of the eurozone’s main economic success story: Germany. Growth rates have been higher too. While such aggregate figures are not the be all and end all of prosperity for the average citizen, they are certainly indicative.

Globally, the EU has been losing in relative economic importance at breakneck speed. The Western European edge of the Eurasian landmass –represented by the core 15 EU Member States– once dominated the global economy, controlling over a third of global GDP at the end of the 1960s. This was well above the US share of just over one quarter. Asia and Oceania stood at around 15% at the time.

Fast forward to 2011 and the EU15 share had tumbled to around a quarter of global GDP, having been overtaken by Asia and Oceania (driven primarily by China), as well as by the USA, whose share remained constant. Europe’s downwards trajectory has only accelerated as the eurocrisis has worn on.

The standard excuse offered up by sclerotic EU bureaucrats is that this march towards oblivion constitutes a natural “rebalancing” process as Asia, particularly China, regained its economic standing in the global economy. This naturally squeezed Europe’s share of global income.

But what is never addressed is why the US, Australia, Canada and New Zealand were all able to hold onto their relative shares of global wealth compared to the EU. In other words, why were they able to grow faster? Why are they more prosperous? It is obvious that the dramatic rise of China had to displace other economic players in relative terms, but why has this decline fallen squarely on the EU’s shoulders, and not on those of the Anglosphere as well?

The “rebalancing” rationalisations for Europe’s terminal decline are most often offered up by those working for institutions obsessed with “relaunching” Europe, “fresh starts”, “no more business as usual”, “delivering European renewal”, “acting now” or otherwise declaring it “time to act”, cooking up plans to make the EU “the most dynamic and competitive knowledge-based economy in the world”, etc. etc. Yet, these are the same people who shrug at the total and unique failure of Europe’s economy to hold its own in the world. You couldn’t make it up!

The EU has achieved unparalleled economic integration compared to any other regional bloc. And Britain was able to be a part of this union with such diverse nations for decades. Why, then, would some scheme for the Anglosphere be so far-fetched? Why would free movement of workers, for example, among countries with such similar needs and concerns –not to mention entwined intelligence services– be so unthinkable? And if it is not, where is the action?

As regards the limitations on Britain’s right to negotiate alternate trade deals while it remains within the EU, Britain must be careful to observe the letter of the law but certainly not its spirit, which is designed to thwart any successful secession. What is needed is a concrete plan that could be signed as soon as Britain is officially out of the EU, to be confidently presented to the public as a vision of the future after Brexit.

Without this, Brexit will surely suffer the same fate as the Remain campaign. Repeating generalities about executing the will of the people is as uninspiring as hypothesising over the future marginal economic costs of leaving the Union. These are not winning arguments. Leave won the campaign because it developed enthusing stances revolving around sovereignty: “take back control”. What does it offer now?

This article is by Daniel Matthews-Ferrero

4. As EU Commissioner for Regions...

With Article 50 triggered and Brexit negotiations well underway, the UK government looks like it’s carrying out the instructions it received from 17.4 million voters last summer. At best, Britain and the continent will establish a mutually advantageous trade relationship; at worst, the UK and EU will revert to World Trade Organization (WTO) rules, including minor tariffs on the exchange of goods and services. In either case, it seems, the UK will regain control over its finances, its borders, and its laws –all of which are necessary to fulfill the mandate given by voters.

Nevertheless, a growing threat hangs over Brexit Britain.

In hopes of consolidating power, Prime Minister Theresa May called an election in June. Rather than expand her mandate with a comfortable majority in Parliament, May’s Conservatives lost their majority, necessitating the support of Northern Ireland’s Democratic Unionist MPs to govern.

Emboldened by the election result, opposition parties have redoubled efforts to undermine the government’s position in Brexit negotiations. By seeking guarantees that single market access is maintained at all costs, or that, if by March 2019 (the date by which the UK has notified the EU it will leave) negotiations have not born fruit Britain’s current relationship with the EU should be maintained, MPs from Labour, the Liberal Democrats, the SNP and even some Conservatives are undermining the primary objective of last year’s referendum: to leave the EU.

Beyond Westminster, a growing number of voices have added themselves to the anti-Brexit bandwagon.

Devolved administrations in Scotland and Wales have expressed concern over the UK government’s “great repeal bill”, meant to repeal the European Communities Act of 1972, and bring all EU law currently applying to the UK into British statute. Scottish and Welsh first ministers Nicola Sturgeon and Carwyn Jones see the bill as a “power grab” by Westminster, supposedly denying any say to devolved administrations. Despite reassurances from cabinet minister David Davis, the UK’s departure from the EU will likely face many more such episodes from pro-remain Sturgeon and Jones.

A third front of opposition to Brexit has been opened by big business. The British Chamber of Commerce and the Institute for Directors have pushed Theresa May’s government for more clarity regarding the Brexit process, and the importance of avoiding a “cliff-edge” upon expiration of the 2-year transition period triggered in March. Certainty is crucial, but clear pressure is mounting from industry giants not to change the status quo –the very purpose of last year’s Brexit vote.

A fourth, ongoing front against Brexit is from advocacy groups within civil society. Last year’s court challenge of the government’s authority to trigger Article 50, and the persistent efforts of former Prime Minister Tony Blair to slow or stop the UK’s departure from the EU continue to erode meaningful debate on how best to carry out Brexit.

If Theresa May and her government are serious about carrying out the largest democratic mandate in British history, they need to do three things. First, they need to negotiate with the EU in good faith. Taking the first steps on EU citizens’ rights, adopting a constructive, realistic approach to deciding Britain’s share of EU debts, and ensuring the border in Ireland remains open (regardless of what the EU decides to do on its side) will not only give the UK the moral high ground, but also usher in the next part of Brexit talks: trade negotiations.

Second, May and her government need to prepare for the worst. In short, they should assume a “cliff-edge” scenario –involving a complete breakdown of talks– will occur, meaning a reversion to WTO trading rules. Businesses may not like this, but by signalling that no deal is guaranteed to emerge, industry has more certainty, and any future arrangement with the EU will be considered a bonus. This would likely shock the UK economy in the short term, but the ability for businesses and individuals to plan ahead would benefit all in the long term.

Third, the UK must aggressively pursue closer relationships with its international partners. Current negotiations with the EU are important, but Brussels has made clear that they preclude any further talks on a future trade relationship. It seems likely, therefore, that negotiations will start late, and be drawn out. Moreover, the EU has every reason to undermine the UK’s position, so as to discourage other member states from leaving the block. It is therefore quite possible they will negotiate in bad faith. As such, the UK would do far better to direct as many –if not more– resources towards trade with other nations, boosting access to far larger markets than the EU. Hints of this have already emerged, with International Trade Secretary Liam Fox opening discussions with the US, and Foreign Secretary Boris Johnson’s recent visit to New Zealand and Australia. China, Japan and Canada have also expressed interest in trade with the UK, underscoring the enormous opportunity associated with the UK’s newfound sovereignty. Of course, such deals will not be allowed so long as the UK is an EU member state, but they can be arranged for finalisation after the UK leaves, ensuring a smoother transition.

Above all, it must be clear to Britons and the world that there is no going back from last year’s referendum result. Brexit actually does mean Brexit.

This article is from The Eurosceptic

Scottish First Minister Nicola Sturgeon has commented on several occasions in recent weeks on the subject of a second Scottish independence referendum. She first warned that she was not “bluffing” about calling another referendum, should the United Kingdom also leave the European single market. She then ruled out holding such a vote in 2017, effectively holding the threat of it over the British government as it moves ahead with Brexit.

There’s nothing wrong with many in Scotland, as in other European regions like Catalonia, wishing for independence. Indeed, notions of sovereignty, identity, and more representative democracy were all integral to Britain’s vote to leave the European Union (EU). Where such movements lose coherence, however, is in their insistence on remaining in the EU.

Why?

Many, many laws pertaining to the UK, including Scotland, originate in Brussels. Though the exact proportion of British laws stemming from the EU is hotly contested, it is likely quite large, with some estimates ranging up to 62%. What is more important, however, is how significant some of the EU’s competencies are. An “independent” Scotland within the EU would face the same quotas on its fisheries, abide by the same agricultural policy, honour the same trade deals signed devised in Brussels, and have absolutely no control over its borders. Its government also intends to continue using the British pound as its currency. In this sense, the stated intention of being “in the driving seat of [Scotland’s] own destiny and to shape [its] own future” loses its meaning. Without full control over essential areas like borders and monetary policy, a nation is not independent.

Moreover, the EU has always made clear that to secede from a member state is to secede from the Union. As such, Scotland deciding to leave the UK in order to retain its EU membership is not only impossible, but dangerously misleading to Scots.

Beyond the glaring incoherence of the Scottish government’s position, Scots have already decided on the matter of independence, and it is irresponsible for the Scottish government to use the threat of a future referendum as a political shuttlecock. It is common practice to hold referenda once in a generation, especially if their results are as decisive as the last time Scots were consulted, in 2014 (55% in favour of remaining in the UK). Sturgeon’s postponed threat of another Scottish vote depending on how “hard” Brexit ends up being is more of a bargaining chip than a true expression of Scotland’s will. This cynical approach to politics serves no one. Scots wishing to remain in the UK are under constant threat of a second referendum, while Scots wishing for independence are being manipulated for narrow political gains.

The desire for independence is unambiguously good. All willing nations deserve to gain their sovereignty, including most recently the United Kingdom. The Scottish government’s position rejecting Westminster while embracing Brussels does not reflect a genuine yearning for independence. Rather, it smacks of political opportunism. The people of Scotland –both for and against independence– deserve better.

This article first appeared on http://theeurosceptic.com

The deal need not be an official treaty but could take the form of what is called a Memorandum of understanding or MoU.

As the UK government website states:

“An MoU records international "commitments", but in a form and with wording which expresses an intention that it is not to be binding as a matter of international law. An MoU is used where it is considered preferable to avoid the formalities of a treaty – for example, where there are detailed provisions which change frequently or the matters dealt with are essentially of a technical or administrative character; in matters of defence or technology where there is a need for such documents to be classified; or where a treaty requires subsidiary documents to fill out the details. Like a treaty, an MoU can have a variety of names and can also be either in the form of an exchange of notes or a single document. However, the formalities which surround treatymaking do not apply to it and it is not usually published. Confusingly some treaties are called memoranda of understanding. Although an MoU is not legally binding it should be no less carefully drafted than if it were a treaty, given that it is always the intention to perform all HMG's commitments, whether legally binding or not.”[1]

An MoU is an established device In public international law; less official that a treaty but more than a gentleman’s agreement. MoU’s can take various forms and can serve wildly different purposes. They can be short and cover one specific issue or be lengthy, covering a range of topics.

Examples include the Memorandum of Understanding on Trade and Investment (MOUTI) Between the Government of Canada and the Governments of Costa Rica, El Salvador, Guatemala, Honduras and Nicaragua[2] and the Memorandum of Understanding between the Council of Europe and the European Union[3]

While they lack the legal certainty of treaties, the semi-official nature of MoUs means that one (or several relating to different areas of co-operation) could likely be signed quickly, without extensive consultation, parliamentary chicanery or ratification delays – as opposed to a potentially lengthy Free Trade Agreement (FTA) ratification.

These interim documents could help avoid a potential ‘cliff edge’ scenario as the 2 year article 50 period draws to a close in 2019.

Once agreed, the document (or documents) should be signed by the Secretary of State for Foreign and Commonwealth Affairs on behalf of Her Majesty's Government, representatives of the European Council and European Commission (including the High Representative of the European Union for Foreign Affairs and Security Policy) on behalf of the EU and a representative from the EEA Council.

The text of the ‘deal’ should be officially sent to the FCO Treaty Section, The European Commission and The EEA Council. We would then receive their signed copies in exchange, under the established procedure of international law called ‘Exchange of Letters/Notes’.

As a sign of good faith, the MoU(s) (signed by all parties) could then be deposited with the Secretary-General of the United Nations. This would not make the document any more or less binding, but it would be a show of good faith and would reassure businesses and concerned groups that all sides were committed to a stable transition. MoU’s could therefore go a long way towards bridging the gap between our current EU membership and our final negotiated arrangement.

Below is a brief outline of what we believe the UK-EEA MoU could look like.

Memorandum of Understanding

The purpose of this Memorandum of Understanding (hereinafter referred to as "MoU") is to maintain co-operation and secure free trade in goods and services between the signatories of the European Economic Area (EEA) agreement and the UK.

This MoU is intended to maintain where possible the Status quo ante in terms of trade until a more permanent agreement can be reached between the Parties. 

This Memorandum of Understanding is not legally binding on the Parties. This MoU is agreed in good faith between the signatories, on the basis that it is a fair and honest representation of their intentions.

Duration and Term

This agreement is intended to last for a period of two years from the date of signature. It may be renewed once, for a period of 12 months if all Parties agree.

Memorandum of Understanding on Trade and co-operation between the United Kingdom and the EEA

BETWEEN THE UNITED KINGDOM OF GREAT BRITAIN AND NORTHERN IRELAND, OF THE ONE PART, AND THE SIGNATORIES OF THE EEA AGREEMENT:

[THE KINGDOM OF BELGIUM, THE REPUBLIC OF BULGARIA, THE CZECH REPUBLIC, THE KINGDOM OF DENMARK, THE FEDERAL REPUBLIC OF GERMANY, THE REPUBLIC OF ESTONIA, IRELAND, THE HELLENIC REPUBLIC, THE KINGDOM OF SPAIN, THE FRENCH REPUBLIC, THE REPUBLIC OF CROATIA, THE ITALIAN REPUBLIC, THE REPUBLIC OF CYPRUS, THE REPUBLIC OF LATVIA, THE REPUBLIC OF LITHUANIA, THE GRAND DUCHY OF LUXEMBOURG, HUNGARY, THE REPUBLIC OF MALTA, THE KINGDOM OF THE NETHERLANDS, THE REPUBLIC OF AUSTRIA, THE REPUBLIC OF POLAND, THE PORTUGUESE REPUBLIC, ROMANIA, THE REPUBLIC OF SLOVENIA, THE SLOVAK REPUBLIC, THE REPUBLIC OF FINLAND, THE KINGDOM OF SWEDEN, ICELAND, THE PRINCIPALITY OF LIECHTENSTEIN, THE KINGDOM OF NORWAY], OF THE OTHER PART, hereafter jointly referred to as the “Parties”:

RECOGNISING the longstanding alliances between the UK and the nations of Europe;

COMMITTED to renewing their close and lasting relationship that is based on common values, namely respect for democratic principles, the rule of law, good governance and free and fair trade;

DESIRING to maintain currently high levels of trade and investment and seeking to avoid future barriers to mutual trade and investment;

RECOGNISING that UK as a European country shares a common history and common values with the Member States of the European Union (EU) and the member states of the European Free Trade Association (EFTA);

RECOGNISING the importance of International trade and economic cooperation;

COMMITTED to combating organised crime and money laundering, to reducing the supply of and demand for illicit drugs and to stepping up cooperation in the fight against terrorism;

HAVING REGARD to the outcome of the 23^rd June 2016 UK Referendum on EU membership;

BUILDING on their respective rights and obligations under the Marrakesh Agreement Establishing the World Trade Organisation, done on 15 April 1994 (hereinafter referred to as the ‘WTO Agreement’) and other multilateral, regional and bilateral agreements and arrangements to which they are party;

HAVE AGREED as follows:

CHAPTER I:

ARTICLE 1 DEFINITIONS

General definitions

For the purposes of this Agreement and unless otherwise specified:

GATS means the General Agreement on Trade in Services, contained in Annex 1B to the WTO Agreement;

GATT 1994 means the General Agreement on Tariffs and Trade 1994, contained in Annex 1A to the WTO Agreement;

Parties means, on the one hand, the European Union or its Member States or the European Union and its Member States within their respective areas of competence as derived from the Treaty on European Union and the Treaty on the Functioning of the European Union (hereinafter referred to as the 'EU Party'), and on the other hand, the UK;

TBT Agreement means the Agreement on Technical Barriers to Trade, contained in Annex 1A to the WTO Agreement;

TRIPS Agreement means the Agreement on Trade-Related Aspects of Intellectual Property Rights, contained in Annex 1C to the WTO Agreement;

UK-EEA Joint Committee means the UK-EEA Joint Committee established under Article 5.1 (The UK-EEA Joint Committee);

Vienna Convention on the Law of Treaties means the Vienna Convention on the Law of Treaties, done at Vienna on 23 May 1969;

WTO means the World Trade Organization; and

WTO Agreement means the Marrakesh Agreement Establishing the World Trade Organization, done on 15 April 1994.

ARTICLE 2 OBJECTIVES

1. The Parties hereby establish a free trade area on goods, services, establishment and associated rules in accordance with this Agreement.

2. The objectives of this Memorandum of Understanding (hereinafter referred to as "MoU") are:

(a) to liberalise and facilitate trade in goods between the Parties, in conformity with Article XXIV of the General Agreement on Tariffs and Trade 1994 (hereinafter referred to as ‘GATT 1994’);

(b) to liberalise trade in services and investment between the Parties, in conformity with Article V of the General Agreement on Trade in Services (hereinafter referred to as ‘GATS’);

(c) to provide appropriate protection of intellectual property rights, in accordance with the highest international standards, in conformity with TheAgreement on Trade-Related Aspects of Intellectual Property Rights(hereinafter referred to as ‘TRIPS’);

(d) to work to reduce non-tariff barriers between the parties, in conformity with the Technical Barriers to Trade (‘TBT’) Agreement;

(e) to promote peace and security for all Europeans.

Article 3 Relation to the WTO Agreement and other agreements

The Parties affirm their rights and obligations with respect to each other under the WTO Agreement and other agreements to which they are party.

Article 4 Customs duties

No new customs duty on imports shall be introduced in trade between the EEA states and the UK. Parties shall not institute any new taxes or other measures having an equivalent effect imposed on, or in connection with, the exportation of goods to the territory of each other.

Article 5 Joint Committee - establishment

1. A UK-EEA joint committee is hereby established, which shall be responsible for the administration of the agreement and shall ensure its proper implementation. For this purpose, it shall make recommendations and take decisions in the cases provided for in the agreement. These decisions shall be put into effect by the contracting parties in accordance with their own rules.

2. For the purpose of the proper implementation of the agreement the contracting parties shall exchange information and, at the request of either party, shall hold consultations within the joint committee.

3. The joint committee shall adopt its own rules of procedure.

Article 6 Joint Committee - constitution

1. The joint committee shall consist of representatives of the EEA and its signatory states, on the one hand, and of representatives of the UK, on the other.

2. The joint committee shall act by mutual agreement.

3. The joint committee shall meet at least twice a year in order to review the general functioning of the agreement, with the meetings alternating between Brussels/Strasbourg and London.

4. The joint committee shall, in addition meet whenever special circumstances so require, at the request of either contracting party, in accordance with the conditions to be laid down in its rules of procedure.