At the latest EU summit, political agreement was reached on the terms of a transition period after Brexit. This will preserve the current trading relationship until 31 December 2020.
What exactly has been agreed on transition?
Agreement in principle has been reached on a “transition period” which will begin on the date the withdrawal agreement takes effect (currently expected to be 29 March 2019) and end on 31 December 2020.
During this period the UK will remain in the single market and the customs union, and continue to be bound by EU law (including full freedom of movement rights for EU citizens). Putting it another way, the transition agreement means that the other terms of the withdrawal agreement will not take effect until the beginning of 2021.
The UK will no longer be a member of the EU during the transition period. That means that it will no longer have the right to participate in its decision making, and will no longer be sending MEPs to the European Parliament. On the positive side, this will allow it to commence negotiating free trade deals with countries outside the EU, though these cannot take effect until the end of the transition period.
What is the status of the agreement on transition?
Like all other elements of the Brexit deal that have already put in place, they are dependent on the resolution of outstanding issues that have not yet been agreed: “nothing is agreed until everything is agreed”.
In addition, even if final agreement is reached in the Council of Ministers on all elements of the Brexit arrangements, ratification will still be required by both the EU and UK Parliaments.
What remains to be agreed?
The transition terms are set out in legally binding detail in articles 121 to 126 of the draft withdrawal agreement.
The withdrawal agreement as a whole has six main sections. Those on citizens’ rights and financial arrangements have now been agreed in full. Other separation issues have largely been agreed, but the two main areas of divergence remain Northern Ireland and the future role of the European Court of Justice.
On Northern Ireland the detailed arrangements the EU is now seeking in order to guarantee an open border have been moved into a protocol to the main agreement. This has been done on the basis that the protocol can be discarded if an alternative solution can be found as part of the new trade relationship to be agreed between the UK and the EU.
As far as the ECJ is concerned, the UK government has already conceded that it will continue to have a role during the transition period when it comes to interpreting EU law. However the sensitive question of how best to police the withdrawal agreement itself has yet to be resolved.
What does this mean for the UK’s future relationship with the EU?
The way the transition period has been negotiated means that it leaves all options open as far as a future trade relationship is concerned. However the UK’s position is constrained by the fact that the Government has consistently ruled out staying in the customs union or the single market.
The EU’s position in response is succinctly summed up in the new negotiating guidelines recently approved by the Council of Ministers:
“The European Council recalls that the four freedoms are indivisible and that there can be no ‘cherry picking’ through participation in the single market based on a sector-by-sector approach, which would undermine the integrity and proper functioning of the single market.”
The EU is therefore clear that the best the UK can hope for as things stand is a comprehensive free trade agreement in relation to goods, plus some limited provision in relation to services and a framework for co-operation in other key areas like transport, research, data protection and security.
The Commission has published a highlighted text of the draft withdrawal agreement it put forward before the latest round of negotiations. Green highlighting indicates the areas already agreed as at the EU summit on 23 March.
The Council has also published negotiating guidelines on the future relationship between the UK and the EU, to inform the preliminary discussions that it has now agreed to open with the UK.