Transition Impossible?

by Brian Mooney

The scale of the EU’s takeover of national life means that Brexit was always going to be a process rather than an event. Civil servants such as from HMRC suggest a ‘transition period’ for putting new arrangements in place at a pace they can cope with.

I thought I was seeing things when I saw the EU’s latest negotiation guidelines. Are they seriously expecting us to leave the EU in name only, be subject to control by EU institutions for two years after we’ve left and unable to make our own trade deals?

Yet they are apparently only willing to offer us a Brexit transition if we comply with the above. Maybe it’s because they sense that the May government is so weak and wobbly, it will be willing to outdo Blair as the doormat of Europe?

Wake up Britain!

Our masters must start batting for Britain not Brussels. The EU and our 27 neighbours are bound by international rules. The world’s predominant treaty, the UN Charter, upholds the principle of self-determination and obliges nations to negotiate in good faith; military, political and economic coercion are banned by the UN Charter as interpreted by UN Resolution 2625.

Read the World Trade Organization (WTO) GATT and GATS treaties and they also give the obligations to work for the stability of the world trading system, reduction of trade barriers and the liberalisation of trade. The European Court of Justice has long accepted that Treaty goals are binding.

In other words, the EU should back off trying to dictate to us and just ensure that the trade agreements we’ve let it negotiate for us get transferred into our own name for 2019.

The excuse that “We cannot sign such a FTA until we are a third party country.” (i.e. outside the EU) doesn’t wash. Under current EU rules, there is no absolute Treaty block on us signing agreements with non-EU countries so long as they do not come into force until we leave. Trade (‘Common Commercial Policy’) may be an ‘exclusive EU competence’, but it would be possible to act by dispensation, and the government should demand this before the EU gets a sniff of any taxpayers’ money.

If the EU is to live up to its official stance of supporting trade liberalisation within the WTO, then it should readily agree that dispensation!

The EU should also provide trade and business stability by announcing that UK-EU free trade will continue across the board and there will be no ‘cliff edge’. Our masters should acknowledge the EU’s recently agreed ‘Trio Presidency’ goal of ambitious balanced and comprehensive Free Trade Agreements (FTAs), without prescribing we are excluded. This basically just restates EU policy towards ‘fair and free trade’.

The main adaptation will probably be in the area of customs, but all EU members are bound to respect the WTO Trade Facilitation Agreement to cooperate on customs matters, and work towards for expediting the movement, release and clearance of goods.

Managing the transition

Estimates for negotiating the long-term UK-EU trade deal range from a non-committal ‘couple of years’ to over 6 years. Remember that the UK has not negotiated its own trade deals for over 40 years.

A former EU commissioner with responsibilities for trade, Pascal Lamy, considered that 5-6 years would be needed for a full FTA between the UK and the EU27, because of more complex matters such as public procurements and tax concessions. However he considered basic topics like trade in goods and import quotas could be agreed far earlier.

There are various possibilities for a way forward.

One is the WTO Waiver system, whereby default WTO rules governing trade could be suspended for an agreed period so long as both parties were working towards a clear FTA plan. This would enable preferential (i.e. zero) tariffs to be maintained.

This could theoretically preserve the existing free trade footing in the European Economic Area (EEA, otherwise referred to as ‘the Single Market’) without unwanted political baggage from non-trade matters. The WTO agreements only concern themselves with trade matters.

The EEA Agreement is not perfect, but it is the only comprehensive ‘off the shelf’ arrangement available and we have experience in working to it.

The ultimate FTA between the EU27 and the UK could be phased in as new chapters became agreed. Or like CETA, Canada’s FTA with the EU, it could be provisionally worked to, pending approval by national parliaments.

Regardless of the options chosen, there would probably be free movement of labour in practice. This is because of a range of factors – the government’s liberal stance on skilled migration, WTO rules on service provision and the guarantee of EU citizen rights.

However, outside the EU, the UK would be free to tailor its own policies. The EEA Agreement notably allows interim controls on labour migration for economic or social reasons.

Conclusion

The EU clearly wants a deal. It is not in its interests to be self-destructive and engineer a cliff edge in breach of wider international agreements (such as at G20). Common sense dictates that it will not wish to create havoc for European economies just before the European Parliament elections, adding a populist backlash to all its other problems.

The UK government needs to hold the EU to its commitment in the Lisbon Treaty to seek peaceful cooperation with neighbouring countries towards an area of prosperity.

Brian Mooney is an independent management consultant

References

EU negotiation guidelines, Dec 2017 http://www.consilium.europa.eu/media/32236/15-euco-art50-guidelines-en.pdf

PAC report covering transition https://publications.parliament.uk/pa/cm201719/cmselect/cmpubacc/558/558.pdf

International law, UN Charter and Resolution 2625 http://www.un.org/en/documents/charter/index.shtml
(Articles 1, 2, 55, 103) https://www.usnwc.edu/getattachment/721cb2a7-876b-4cbf-91a3-4cbc19f1a593/The-Law-of-Economic-Sanctions.aspx  http://legal.un.org/avl/ha/dpilfrcscun/dpilfrcscun.html  http://www.newalliance.org.uk/intlaw.htm

EU and WTO contexts
EU policies and plans https://www.eu2017.ee/trio-programme  https://www.eu2017.ee/sites/default/files/2017-06/Trio%20programme.pdf  http://www.newalliance.org.uk/tradefull.htm
http://ec.europa.eu/trade/policy/countries-and-regions
“The EU is firmly committed to the promotion of open and fair trade with all its trading partners. The EU has specific trade policies in place for all its partners and abides by the global rules on international trade set out by the World Trade Organisation.”

ECJ on Treaty goals; http://curia.europa.eu/juris/document/document.jsf;jsessionid=9ea7d0f130d5edeee418412a48ecbb0ac117ae34eb86.e34KaxiLc3eQc40LaxqMbN4Oa3aNe0?docid=47730&pageIndex=0&doclang=en&mode=lst&dir=&occ=first&cid=923605  http://curia.europa.eu/juris/document/document.jsf;jsessionid=9ea7d0f130de86b0844a6b854d7d9378e81f4b509c4f.e34KaxiLc3eQc40LaxqMbN4NchuOe0?docid=47731&pageIndex=0&doclang=en&mode=lst&dir=&occ=first&cid=3303
(Cases 11/00, 15/00)
http://ec.europa.eu/archives/lisbon_treaty/full_text/index_en.htm
(Treaty of Lisbon, TFEU Article 3, TEU Article 8) https://www.wto.org/english/tratop_e/tradfa_e/tradfa_e.htm
(WTO Trade Facilitation Agreement) http://www.freetradeagreements.co.uk/projects/pascal-lamy
https://www.instituteforgovernment.org.uk/blog/pascal-lamy-brexit-trade-deal-not-possible-two-years
(Lamy) https://ecampus.wto.org/admin/files/Course_382/Module_537/ModuleDocuments/eWTO-M8-R1-E.pdf
(WTO Waivers) http://www.efta.int/legal-texts/eea
(EEA Agreement, Article 112) https://hansard.parliament.uk/Commons/2017-11-06/debates/FEEE4AD5-7465-47A4-97CA-A9B41B9DCAD9/EuropeanEconomicAreaUKMembership
(Hansard EEA Debate) http://ec.europa.eu/trade/policy/in-focus/ceta/

G20 Leaders’ agreement,  http://www.g20chn.org/English/Documents/Current/201609/t20160906_3395.html  http://europa.eu/rapid/press-release_STATEMENT-16-2967_en.htm
… commit to enhance an open world economy by working towards trade and investment facilitation and liberalization.
… We reiterate our opposition to protectionism on trade and investment in all its forms.”

Interpretations on goals and obligations of WTO-GATT Treaties
WTO Marrakesh Analytical Index – particularly references 8, 9, 11, 13 https://www.wto.org/english/res_e/booksp_e/analytic_index_e/wto_agree_01_e.htm
“security and predictability of ‘the reciprocal and mutually advantageous arrangements directed to the substantial reduction of tariffs and other barriers to trade’ is an object and purpose of the WTO Agreement

concessions made by WTO Members should be interpreted so as to further the general objective of the expansion of trade in goods and the substantial reduction of tariffs. arrangements entered into by Members be reciprocal and mutually advantageous

the purpose of such agreements should be to facilitate trade between the constituent territories and not to raise barriers to the trade of other Members with such territories; and that in their formation or enlargement the parties to them should to the greatest possible extent avoid creating adverse effects on the trade of other Members;

regional trade agreements and those of the GATT and the WTO have always been complementary, and therefore should be interpreted consistently with one another, with a view to increasing trade and not to raising barriers to trade….”

WTO Director-General Robert Azevedo http://www.ibtimes.co.uk/brexit-unlikely-disrupt-uk-trade-says-wto-director-general-1588422
In an interview with Sky News, the WTO boss said he was not of the opinion that the Brexit vote was “anti-trade” and added that the UK would not suffer trade setbacks during or after its negotiations with the EU.