Stephen Booth is Head of the Britain in the World Project at Policy Exchange.
Brexit may have been relegated from the front pages but it certainly hasn’t gone away.
There is increasing speculation that, due to the disruption caused by the Coronavirus crisis, an extension to the transition period beyond the current December 31 deadline is all but inevitable.
An extension can be requested by either side, but the UK Government remains insistent it will not seek one.
Given the uncertainty over how the crisis may play out over the months ahead, we cannot rule out that the Government may change its mind, but this currently appears unlikely for several reasons.
Clearly, the crisis has eaten into a timetable that was already tight. Understandably, political bandwidth in the UK and across the EU is currently preoccupied by the pandemic and there are logistical challenges, in the absence of face-to-face talks for negotiators to contend with.
Nevertheless, work between UK and European Commission negotiators has continued in the background. Draft texts have been exchanged, although the UK text has not been shared publicly with the member states and some issues, such as fishing, have been omitted.
The Joint Committee has met to begin discussions on how to implement the provisions of the Withdrawal Agreement, and by far the most complex issue to be worked out is the operation of the Northern Ireland Protocol. However, the Northern Ireland Protocol is sui generis, distinct from the future trade relationship.
It is not clear that more time is needed, purely to negotiate. There are real, but relatively few, challenges to reaching a trade agreement, and the options available are well known to both sides.
Provisions to ensure a so-called level-playing field on social and environmental rights, and in particular EU demands that the UK adhere to the EU’s legal framework on state aids, is the major sticking point.
However, the issue is not that complicated. If the EU insists on UK alignment with EU law, it is almost impossible to see how a deal can be reached. A compromise solution will require commitments based on a neutral legal framework, enforced by an independent dispute settlement regime.
The UK has so far resisted dispute settlement on these issues in the EU talks, but has indicated it has no problem with the principle in the context of a trade agreement with the US.
On fishing, the EU’s opening bid that the status quo should be maintained clearly isn’t viable. A deal will need to respect the UK’s independence to regulate access to quotas but there will continue to be opportunities for EU boats to fish in UK waters.
Both sides agree on the need for a governance and dispute settlement arrangement to cover the operation of the trade agreement. The EU wants to refer matters of EU law to the European Court of Justice, but this issue does not arise unless EU law forms the basis of the agreement, and the UK insists that it cannot.
The politics of requesting an extension are problematic. Prolonging the transition period will require a negotiation over further financial contributions and the UK would immediately be in the position of being a demandeur.
Despite the breathing room of a healthy majority, changing the Withdrawal Agreement Act, which currently precludes an extension request, would be symbolically important. Government backbenchers would be difficult to placate.
The Withdrawal Agreement states that an extension, for a period of up to two years, must be agreed by July 1. Legally, it would be a one-shot deal. There is no minimum time limit on how long an extension could last, so it could be a matter of only months. But once agreed, there can be no further extensions.
In June, both the UK and the EU will be over the first peak of the crisis but no one knows whether or when there might be a second wave – what would be the right length? Would three months be enough?
One solution that has been mooted is a so-called “flextension” that would enable a long extension to be cut short once a deal is reached. However, once a hard deadline is removed, the negotiations are likely to continue to fill the time without conclusion and could easily become a running sore.
The most compelling concern raised in the wake of the crisis is business and public sector preparedness to implement and adjust to a new trading relationship, given the strains that Covid-19 is placing on the economy and resources.
There is an argument that disruption to supply chains and trade flows resulting from Brexit will pale in comparison to the shock currently underway, so why not reshape them now? More significant is that extending the time to negotiate does not solve the uncertainty facing businesses.
There are some things that businesses and Government will need to do in any scenario. However, until the negotiations conclude businesses will not know exactly what it is they will be required to do, deal or no deal. We should recognise the reality that negotiating and implementing a new relationship are distinct issues.
If a deal can be reached, the UK and the EU could bake in a genuine implementation period to allow business and the public sector to work together to put in place the systems and processes that will be required under the new regime. This shouldn’t be controversial. It is commonplace for trade agreements to be phased in over time, once they have been agreed.
Equally, if there is no deal and UK-EU trade moves to World Trade Organisation terms, the UK and the EU should cooperate on unilateral measures to ease the adjustment. Certainly, the UK should revisit the wisdom of its decision to place full reciprocal controls on imports from the EU.
The May government sensibly proposed unilateral actions to ease the flow of goods and waive certain procedures to keep goods moving and reduce the burden on traders and infrastructure. These measures could be put back in play.
The UK and the EU should aim to conclude a deal this year. Adjusting to a new relationship was always going to be a challenge and it has been compounded by the current crisis. Both sides should approach the issue of implementation pragmatically and flexibly.