5 September 2017

A standstill agreement would break the Brexit deadlock


The Brexit negotiations are deadlocked, with the divorce bill the biggest sticking-point. Some are suggesting that the Government should call the EU’s bluff and threaten a no-deal Brexit, but as I argued yesterday, to do so would be catastrophically counterproductive.

Instead, ministers need to take a deep breath and think strategically. To get out of the impasse, the Government must make a bold move that may initially seem politically unthinkable but should, in fact, prove palatable to both hard and soft Brexiteers, Remainers and the EU.

The wise way forward would be to formally propose a post-Brexit transitional arrangement – that much is uncontroversial. But the only practical one would be a temporary standstill agreement that would involve us remaining in the single market and customs union for a few years. That would break the deadlock, allow discussions to move on to the future trading relationship between the UK and the EU, and enable the smoothest possible Brexit.

That such a standstill agreement is now supported by the Labour Party – or at least by its Brexit spokesman Sir Keir Starmer – is a bonus, not a bug. If it were to propose one, the Government would also shoot Labour’s fox.

Article 50 of the Lisbon Treaty provides for such a temporary standstill as part of the exit deal: it stipulates that “the Union shall negotiate and conclude an agreement with that State, setting out the arrangements for its withdrawal [my italics], taking account of the framework for its future relationship with the Union”. The European Council’s April 29th negotiating guidelines explicitly mention the possibility of a “time-limited prolongation of Union acquis”. So the EU could scarcely reject such a UK proposal.

Since a standstill agreement would involve continued contributions to the EU budget of, say, £10 billion a year for, say, three years, it would go a long way towards settling the Brexit bill, for which the EU is demanding a net payment of up to €60 billion (£55 billion). It would also make the payment less politically controversial since the UK would be getting something in return. And, having broken the deadlock, there would then be scope to negotiate a lower compromise figure.

A temporary standstill would also postpone the intractable problem of how to avoid the imposition of a hard border with customs and immigration checks between Northern Ireland and the Irish Republic when the UK leaves the single market and the customs union. And it would make the thorny issue of protecting the post-Brexit rights of EU citizens in the UK (and UK ones in the EU) less pressing. In short, it would help avert both a chaotic no-deal Brexit and a cliff-edge one, in which the UK shifted to trading with the EU according to World Trade Organisation rules overnight.

The good news is that the Chancellor, Philip Hammond, has done sterling work over the summer in convincing the cabinet of the need for a transition agreement. It is finally sinking in that it is impossible to negotiate and ratify both an exit deal and a complex, multi-faceted trade agreement within 24 months, let alone the 19 ones that remain.

The bad news is that the Government remains committed to leaving both single market and customs union on Brexit day. And a transition period that differs from the status quo is neither practical nor achievable.

The primary purpose of a transition period is to give businesses and government bureaucracies time to prepare for, and adjust to, a post-Brexit environment. If the transition arrangements were to differ from the status quo, businessmen and bureaucrats would need to adjust twice within a few years: first on Brexit day and again at the end of the transition period. That defeats the point.

In any case, there isn’t enough time to negotiate a bespoke transition deal, for the same reason that a full trade deal cannot be finalised and ratified. While the UK starts from full compliance with EU law and standards, as soon as one starts to unpick the current arrangements negotiations become extremely complex.

Last but not least, the EU is hardly going to agree to a bespoke transition deal. It is adamant that there can be no cherry-picking, so it wouldn’t be possible for some sectors to remain in the single market and/or the customs union and others not. And it won’t accept an arrangement that provides the benefits of single-market and customs-union membership without the obligations.

That, of course, means that a temporary standstill arrangement would require continued compliance with all single-market obligations, including the jurisdiction of the European Court of Justice (ECJ) and two-way freedom of movement.

At this point, Brexiteers may protest that a standstill agreement wouldn’t be Brexit at all. But it would be. From 30 March 2019, Britain would no longer be an EU member: it would have no say in setting EU rules, no EU Commissioner, no seat at the European Council and no MEPs. If voters were to change their minds about Brexit, the UK would need to reapply to join the EU through the Lisbon Treaty’s Article 49 process like any other candidate country. The only explicit mandate of the referendum – to leave the EU – would have been delivered.

Yes, a standstill would involve a delay in “taking back control” – but only a temporary one. Would that be so terrible? Curbing EU migration would, in any case, be economically harmful and the political saliency of doing so has plunged since the referendum. Moreover, net migration from the EU is already falling sharply; it was 127,000 in the year to March 2017, down from 178,000 in the same period a year earlier.

Indeed, given the revelation that the Government has inflated the number of foreign students overstaying their visas by nearly 100,000 a year, the absurd net migration target is much closer to being met.

Temporarily staying in the customs union would also preclude the signing of new trade agreements. But none will be ready to be inked on Brexit day. And however hard International Trade Secretary Liam Fox may try, the UK’s trade partners won’t negotiate with him in earnest until the UK’s future relationship with the EU is settled.

Brexiteers’ biggest fear is that a temporary standstill would become permanent: that the UK would remain half-in the EU indefinitely and never fully withdraw. But that is very unlikely. The European Council guidelines state that any transitional arrangements must be “limited in time”; and legally while these can be agreed by qualified majority as part of the Article 50 deal, a permanent arrangement would require unanimity among EU governments and ratification by national and some regional parliaments.

From the UK perspective, while both Remainers and soft Brexiteers want to stay as close to the EU as possible for now, it seems politically implausible that the UK would forever accept to implement EU rules that it had no say in shaping. Britain is not Norway.

It is, of course, possible that Britons may decide that they prefer becoming rule-makers within the EU again to the limited sovereignty of being a middling economy on the EU’s doorstep. But that possibility exists with or without a standstill agreement. Unless and until Brexit is broadly seen to be a success, the political pressure to remain in, or rejoin, the EU will not disappear.

Philippe Legrain is a senior visiting fellow at the London School of Economics’ European Institute and the founder of OPEN, an international think-tank on openness issues