Brexit explained: What is the transition period and why is it so important?
The transition period only kicks in if there is a Brexit withrawal deal
The Brexit talks have entered a new jungle of jargon, full of talk of the transition period and the backstop. Let’s look at the key points and, crucially how they are – or are not – linked together.
What is the transition period?
The United Kingdom and the European Union have been negotiating a withdrawal agreement which provides the details of how the UK will exit the EU in March 2019. Part of that agreement is the transition period.
When the UK leaves the EU in March 2019 the plan is that the transition period will apply until the end of December 2020. Without a withdrawal agreement in place there will be no transition period and a so-called “no-deal” Brexit will take place. (What would a no-deal Brexit mean for Ireland? - read here). There has been consideration given during the talks to measures allowing the transition period to be extended.
Assuming there is a withdrawal agreement, during the transition period a kind of standstill will be in place where current trading arrangements between the EU and UK will continue, as will freedom of movement of citizens. The idea is to give time for a new deal on the future relationship between the EU and UK to be worked out after the UK leaves. During the transition period the UK agrees to continue to abide by the EU’s rules and to be subject to the rulings of EU courts, but will have no say around the EU table. This is an aspect of the transition that is not popular with the hard Brexiteers. Partly due to such sensitivities, the UK side often refer to it as the “implementation period”, presumably to give the impression that it is all about getting on with leaving.
So now they are talking about extending it?
Yes, at the Otober EU summit, one option being discussed was that the transition period be extended. Reports suggested that the EU side were willing to extend it by one year, to the end of December 2021. This suggestion led to predictable ire from the Brexiteers, who complain that during the transition the UK has to follow EU rules without having any say. Subsequently Theresa May seemed to row back and say any extension of the transition might be for a “ few months.”However some extension of the transition was among a range of options being discussed in November.
And the link to the backstop?
The original idea of extending the transition was, it appears, to try to help Theresa May. She is facing opposition in relation to the Irish Border backstop (read our explainer on the Border and the backstop here), the guarantee that no matter what future trading arrangements emerge, there will be no hard border on the island of Ireland. The EU is insisting that this be written into the withdrawal agreement. However the EU version of the backstop, which would involve the North effectively staying in the EU trading bloc after Brexit, has enraged the DUP and has been ruled out by Theresa May. One benefit of extending the transition period would be to give more time to negotiate new trading arrangements between the UK and EU after the UK leaves – and thus make it less likely that the backstop would ever be needed. However as the UK remains divided on what new trading arrangements it wants after Brexit, this is all pretty messy.
But some UK commentary has been suggesting that an extended transition period was a substitute for a backstop?
Yes, indeed. In a newspaper article, UK Brexit secretary Dominic Raab, said that the UK could only sign up to an extended transition period as an alternative to the backstop plan put forward by Brussels. So he has turned a concession from the EU side – an extended transition period –into something the UK itself would only offer if the EU dropped its insistence on the backstop. No wonder this is confusing.
Not surprisingly, the Irish side have been out in response. They are saying that whatever happens with the transition period, the Border backstop must stay in place as an insurance policy. They also point out that the UK signed up to this last December. Ireland would be happy to see an extended transition period as well – it gives more time for businesses to adjust and hopefully for future trade talks. But an extended transition was never seen as some kind of substitute for the backstop and Ireland will be concerned that the UK commitment to the backstop has not yet been agreed in a legal form as part of the withdrawal agreement.
What happens next?
The EU is open to also allowing all of the UK to remain in the EU customs union – which allows movement of goods free of customs controls –for some kind of interim period, as a way to avoid some of the Irish Border problems. Linking this to assurances in relation to the Irish Border is complicated. For example, in what terms does the UK-wide only backstop end and what guarantees would be needed for Ireland if future trade talks fail.
If there is no withdrawal agreement then there is no transition period either. This means the UK leaves the EU on March 29 2019 and new trading and regulatory rules come into play overnight, a potentially chaotic scenario. This is what is called a “no-deal” or “cliff-edge” Brexit.
The final point to note is that pretty much everyone agrees that a transition period up to December 2020 will not be enough time to negotiate and agree all future trading arrangements between the EU and UK, barring a UK reversal of course on what is it looking for. So even if there current hurdle is jumped and we do get a withdrawal agreement, more drama lies ahead.