The benefits of an interim deal
An interim deal would bridge the gap between the two-year period which the UK will have to agree withdrawal from the EU (stipulated under Article 50) and the time it takes to agree a future deal.
Given the complexity of trade deal negotiations, it is unlikely we will agree our future relationship with the EU in two years. Conservative estimates say it could take 5-7 years to agree (including ratification by all 27 member states and 11 regional assemblies). Less conservative estimates put it at more than 10 years (based on Canada and the Comprehensive Economic and Trade Agreement (CETA)).
If these negotiations are not completed at the end of the two-year negotiating window, then the European treaties would simply cease to apply to the UK overnight. UK trade with Europe would revert to a World Trade Organization-based relationship with substantial tariff and non-tariff barriers, and limited access to the EU market in services.
Our access to European institutions such as the European Single Aviation Market (which allows UK airlines to fly over Europe) and the European Medicines Agency (which license pharmaceuticals) would be unclear. These issues could be resolved in the fullness of time, but without an interim deal there is a risk that we face a legally uncertain ‘hard Brexit sandwich’ between full EU membership and some looser form of co-operation.
The risk to UK businesses and economy of entering such a period of uncertainty could put pressure on the Government to accept a deal with the EU before the two-year window expires. Putting in place an interim deal would provide a safety net – the promise of legal and economic continuity, as the future relationship is thrashed out.
What would an interim deal look like?
An interim deal would need to cover:
- the UK’s relationship to the Single Market
- a position on the extent to which free movement still applies to the UK
- clarity on the role of the European Court of Justice
- the rights of UK businesses to access EU institutions like the European Single Aviation Market (for airlines) and the European Medicines Agency (for pharmaceutical companies).
But an interim deal could be difficult to agree
While there are clear benefits to securing an interim deal, it is by no means a given that one will be agreed. There are three major challenges:
1. It isn’t clear what kind of agreement process an interim deal would require.
The key benefit of an interim deal is that it could be agreed within the two-year Article 50 window, because it would only require a Qualified Majority in the European Council and the approval of the European Parliament. However, if the interim agreement is a ‘mixed agreement’ – i.e. it affects national competences (which includes some Single Market regulations) as well as EU competences (such as the Customs Union) – then it would require ratification by all 27 national parliaments and 11 regional assemblies, taking far longer.
2. The EU doesn’t want this to drag on.
An interim deal would extend the period that the EU must spend negotiating with the UK, presenting a distraction from other pressing issues such as the migrant crisis and Eurozone challenge. And the content of an interim deal would not be agreed lightly – both sides would be conscious of the possibility that the interim deal will end up solidifying into the new status quo if no other relationship could be agreed. Neither the UK Government nor the EU institutions will want to admit early in the negotiation process that an interim deal is needed, as doing so would suggest that the Brexit process could drag on indefinitely.
3. ‘Brexit means Brexit’.
An interim deal – even in the short term – could be politically controversial and a hard-sell to the UK electorate – particularly if the interim deal was still in place at the time of the next election. But this political risk needs to be weighed against the consequences of failing to agree a deal within the two-year window.
Is there an alternative to an interim deal?
The other option, if negotiations are not completed at the end of the two-year negotiating window, is that all 27 member states and the UK – if they were unanimous – could decide to extend the negotiating window. If agreed, this would buy the UK and EU more time to agree a deal that covers all the necessary issues.
Sir Simon Fraser, former head of the Foreign Office, said that the UK Government should seek some ‘sort of interim relationship between leaving and establishing the long-term, permanent relationship’, to prevent uncertainty at the point when the UK exits. Many others agree with him.
But while there would be many benefits to securing such an interim deal, there will also be big legal and political barriers to be overcome.
Ultimately, it is for the UK Government and the EU to decide how to balance the benefits and risks of pursuing an interim deal. But without the safety net of an interim deal, the prospect of a ‘hard Brexit sandwich’ will hang over the Brexit negotiations, creating uncertainty and putting pressure on the UK Government to accept a deal.