Explained: A transition deal and what it would actually mean for Brexit

LONDON — As Britain edges closer to the start of Brexit talks with the European Union, one of the biggest questions is whether Prime Minister Theresa May will be successful in negotiating a transition deal.

The government indicated that it intends to strike an “implementation phase” in its official Brexit White Paper.

It said: “We will seek a phased process of implementation, in which both the UK and the EU institutions and the remaining EU Member States prepare for the new arrangements that will exist between us.”

Adding: “There may be a phased process of implementation to prepare for the new arrangements. This would give businesses and individuals enough time to plan and prepare for those new arrangements.”

The EU Commission said in its draft negotiation plan released last week that it is willing to allow Britain a transitional arrangement after Article 50 talks are over   — but for a period lasting no longer than three years. 

Here’s everything you need to know about what a Brexit transitional deal would mean for Britain and the EU.

What is it?

A transitional deal would be a temporary arrangement which would be in place from the minute that Britain leaves the EU at the end of the two-year Article 50 process until an expiry date agreed during the negotiations.

Basically, it would be a bridge between Britain ceasing to be an EU member in March 2019 and a point further down the line when May feels the country will be ready and equipped to complete its full divorce from all EU institutions.

A transitional deal is even more likely now the EU has publicly stated that it will not sign a future trade agreement with Britain until the Article 50 period is over. International trade deals typically take a number of years to finalise, meaning Prime Minister May will almost certainly seek to secure a transitional deal to cover this period of time. 

It goes by a host of other names including transitional agreement, transitional arrangement, implementation period, and phased process of implementation.

It’s difficult to estimate how long it would be in place for until the government states what it hopes a transitional deal will entail. EU Commission President Donald Tusk said last week that it can last no longer than three years.

What could it entail?

Again, it is difficult to predict the specifics of a Brexit transitional deal before Article 50 talks have got underway.

However, the whole point of a transitional deal would be to prevent Britain’s economy from falling off a cliff by providing a period of stability for British businesses and industries as they prepare for life outside of the EU.

The EU’s single market accounts for 40% of all British exports. Dropping out of this market is a really big deal. 

Interestingly, it is looking ever more likely that Britain could remain in the single market beyond 2019 until the transitional period expires. Tusk stated in his guidelines that the EU’s “core principles” must be respected during this period while May hinted this week that she is considering extending the country’s stay in the free trade arena.

An option available to May is to keep Britain in European Economic Area (EEA) and continue to enjoy full access to the single market from outside the EU. This is an arrangement that Norway enjoys i.e. “The Norway Model.”

However, the Department for Exiting the European Union ruled out this option last week. 

Either way, a Brexit transitional deal looks set to keep Britain closely wedded to the EU’s internal market until a long-term trade arrangement comes into effect. It will make Brexit smoother and less bruising, in theory.

This is a sensible move — isn’t it?

Most business people and City figures are pushing hard for a transitional deal, while the vast majority of academics and industry figures have stressed the importance of May successfully negotiating one.

Most MPs agree that it wouldn’t be at all wise to drop out of the EU without a transitional phase agreed, either.

Brexit committee chair Hilary Benn said it’s a matter of “common sense” at an event in central London that Business Insider attended in February. The Labour MP said: “I don’t care what you call it — it’s common sense. If you are going to move from one set of rules and regulations to another you need a process to ease the transition.”

The fact that May and even the most staunch Brexiteers in her cabinet have hinted at a transitional deal indicates that the political and intellectual consensus is firmly in favour of some kind of implementation phase.

So who is against a transitional deal? And why?

Some hardline Eurosceptics are against it because they fear it would mean Britain effectively staying in the EU for years after the Article 50 period has expired — and they kind of have a point. 

If Britain was to stay in the single market beyond March 2019 then it would also have to continue to follow the rules of single market membership, including accepting the free movement of EU citizens. 

Clearly, this would be a tough sell for May, with immigration being such a huge concern for many Leave voters in the June referendum. Polling data presented by academic John Curtice earlier this week revealed than even a majority of Remain voters believed there should be tighter restrictions on migrants coming to Britain from the EU. 

Even if free movement continued for a period as short as 18 months, it would still likely be spun as a betrayal of the public will by staunch Brexiteers. However, it is one that the government is definitely considering.

The Brexit white paper states: “There may be a phased process of implementation to prepare for the new [immigration] arrangements,” adding that “this would give businesses and individuals enough time to plan and prepare for those new arrangements.”

Is immigration the only issue?

It is not. European leaders like Malta’s Prime Minister Joseph Muscat have said that Britain will remain subject to the European Court of Justice (ECJ) until the transitional period is over.

“It is not a transition period where British institutions take over, but it is a transition period where the European court of justice is still in charge of dishing out judgments and points of view,” he said earlier this year.

This would be especially frustrating for May, who was a critic of the ECJ as Home Secretary long before succeeding David Cameron as prime minister. This is why prominent Brexit MPs are so hostile towards a transitional deal.

Bernard Jenkin MP, who co-directed the Vote Leave campaign, said last month:”An extended period of transition really is the worst possible scenario for the EU and the UK.”

Will May be put off by angry Brexiteers?

In short: probably not. 

May has been reluctant to give much away when it comes to any transitional deal. She’s even avoiding using the phrase “transitional deal” and has used language such as “phased period of implementation” instead. 

But the prime minister, Chancellor Philip Hammond and Brexit ministers Boris Johnson and David Davis have all publicly acknowledged the importance of implementing an orderly or “smooth Brexit”, rather than one that crashes Britain out of the EU with no safety net in place. 

Will it be easy to negotiate?

Not as easy as some people think.

A transitional deal may only be a temporary measure but like any international trade arrangement, it is likely to be complex and require compromise from both parties. This will certainly be the case if May and Britain’s ambassador to the EU Tim Barrow request a transitional deal that is not simply a continuation of single market membership. It will be a challenge for both sides to finalise a trade deal in the 18 months or so of talks allowed by Article 50. 

A proposed transitional deal will also subject to approval from all other 27 EU member states just like any other international trade arrangement. Any single national parliament of an EU member state could veto the deal if they don’t agree with it and put the entire process in jeopardy.

A recent example of this was when the Belgian regional government of Wallonia vetoed the EU-Canada free trade deal until the 28-nation bloc agreed to a series of significant concessions. In other words, it will be by no means straightforward. 

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