Richard North, 29/02/2016  

The Government has today published a report on the implications of leaving the EU. This is a modest document (28-pages) which would have it that leaving would create a decade of uncertainty.

In fact, released from the dead hand of Brussels, we could look forward to a decade and more of unprecedented opportunity. But, on one point we do agree. Withdrawal from the EU is a process, not an event – that is the title of the booklet: "The process for withdrawing from the European Union".

With that, the Government is saying that: "a vote to leave the EU would be the start, not the end, of a process". We wholeheartedly agree, and have been saying so for years in Flexcit, adding:
If we see "Brexit" as a process rather than a single event, the act of leaving becomes an enabler rather than an end in itself. In our view, the primary objectives of those managing the withdrawal are to set up the structures and strategies which will provide a sound foundation for the governance and development of a post-exit Britain.
Once this is acknowledged and understood, the whole perspective on Brexit changes. We are able to look at the process as a series of phases, and the concept of a phased withdrawal begins to make absolute sense. Instead of looking for a "sudden death" solution, we can take out time, and manage affairs to mutual advantage, without being troubled by artificial deadlines.

Over the rest of the day, therefore, we're going to look in depth at this report, and the reactions to it, and add to this post to make it our definitive response.

To an extent, some of this report is sensible, measured and factual – and we are not going to disagree with it. For instance, it tells us that the UK's membership of the EU is established by the EU Treaties, and Article 50 is the process set out in the Treaties for Member States to follow when leaving.

It goes on to say that Article 50 "is the only lawful way to withdraw from the EU". It would, it says, "be a breach of international and EU law to withdraw unilaterally from the EU (for example, by simply repealing the domestic legislation that gives the EU law effect in the UK)".

Such a breach would create a hostile environment in which to negotiate either a new relationship with the remaining EU Member States, or new trade agreements with non-EU countries.

This directly contradicts the stupidity of Cummings and other pundits who have argued over term that Article 50 should not be used. At last, we hope, this issue can be put to bed and be done with. When we leave, we will invoke Article 50 – end of. Please let us waste no more time debating this.

Timing of the Article 50 Notification 

Where I would most profoundly disagree with this report is in its reiteration of the Prime Minister's assertion that, as regards triggering Article 50, "the British people would rightly expect that to start straight away".

We address this issue in some detail in Flexcit (see Chapter 3), noting that before any negotiations could begin, there must be some degree of national agreement as to what we might expect from the process.

At another level want to discuss with the leaders of parliaments of the other EU member states what we had in mind, and we would expect our government to mount a "charm offensive", possibly with a programme of reassurance visits to EU capitals.

Successful management of the negotiations will be a major undertaking, requiring cooperation from most Whitehall departments, political commitment and the allocation of sufficient resources. It will also demand a shift in thinking to deal with what amounts to a fundamental change in national strategy, of which existing departments are simply not capable.

As such, it may well be wise to by-pass the Foreign and Commonwealth Office (FCO), which would otherwise be the lead department in relations with the European Union. The Cabinet Office might be a suitable alternative with the negotiating team led by the Chancellor of the Duchy of Lancaster.

This would permit the appointment of a senior and respected person from outside party politics, as the post-holder can be a member of the House of Lords. A good negotiating atmosphere will be vitally important.

Such issues cannot be left to chance. They will require specific actions early on in the process, with the emphasis on presenting the talks as a co-operative exercise. An early appointment of a person committed to the success of the negotiations would send a positive message and would help set the tone.

Given that one of the most powerful complaints about the EU is the lack of democracy in a structure which is said to be inherently anti-democratic, it will be incumbent on the Government to act in a transparent manner, as far as is compatible with the negotiation process.

In deciding the negotiating policy, there is probably no such thing as a best way. Different people and organisations will have different views. Some positions will be passionately held, but driven by emotion and sentiment rather than hard fact. Others will be based on what is believed to be clinical analysis of economic realities.

Nevertheless, sentiment has a place in politics and public opinion must be accommodated. If there is overt public hostility to any particular solution, it may be impossible to implement it.

Furthermore, there will be many uncertainties – not only the known unknowns but the unknown unknowns. To help deal with uncertainty, government should encourage a national debate early on in the negotiations.

This should be kept out of the party political sphere and at arms-length from the government. Specific events may be commissioned and "roadshows" arranged, all under the aegis of the department responsible for the negotiations.

Parliament should have a supervisory role and the appointment of a joint committee of both Houses for the duration could be something worth considering. This could provide material for periodic parliamentary debates. Ministers should make frequent statements to both Houses on the progress of talks.

Additionally, the appointment of an independent Advisory Council – with expert subcommittees – would be highly desirable. Its initial task should be to structure and assist the national debate, to review and explain options and then to advise on the stances Britain might take in the negotiation process.

All of this would take time to set up, and more time to take effect. We cannot imagine that it could take less than a year which means that, if we have a successful outcome to the June referendum, we would not expect to see a notification made before the end of June 2017.

However, there is not much sense in starting the negotiations immediately before the summer period and, in any case, we would be in the middle of the German general election campaign, which does not end until October. We would be far better off, therefore, submitting the Article 50 notification in November 2017.

Given a two-year negotiation period, this would bring us to November 2019, well ahead of the 2020 general election – another factor to be taken into account.

There could, in this context, be a democratic case to make that the start of the negotiations be delayed until the autumn of 2019, so that the outcome could be part of a general election campaign, and the government would have an electoral mandate to pursue its chosen path.

The issues at stake are far too important for negotiations to be rushed. The public would be far more concerned to get a good deal, than be bounced into a bad deal, just for the sake of saving a bit of time.

Duration of the negotiations 

Moving on to the negotiations themselves, the report correctly states that Article 50 provides for a two year negotiation, which can only be extended by unanimity.

Not without justice, it observes that there could be a trade off between speed and ambition. An extension request would provide opportunities for any Member State to try to extract a concession from the UK – placing our negotiators in a very weak position.

On the other hand, failure to meet the deadline or agree an extension would have serious consequences for the UK. Says the report: "an exit without an agreement would leave a large number of important questions unresolved".

That is something of an understatement. Such a failure would have disastrous consequences, bringing UK exports to EU member states to an almost complete halt, and interrupting vital areas of co-operation over a wide range of issues.

It has been our consistent view, therefore, that the UK should aim to complete negotiations within the initial two-year period, without relying on the need for an extension. This, of course, would be easier to achieve if we have settled issues informally before lodging the Article 50 notification.

However, we have also been consistent in noting that to achieve a conclusion within two years could prove very difficult. And predictably, the report comes to exactly the same conclusion. It states:
Trade negotiations are probably the closest equivalent in terms of complexity. Ambitious trade agreements can take up to a decade or more to agree from scoping to ratification, and sometimes take longer. For example, the EU-Mercosur Association Agreement was launched in 2000 and has yet to conclude, and the EU-Canada Trade Agreement (CETA) has taken seven years so far and still has to be ratified by the Council, the European Parliament and National Parliaments.
It might also be noted that the CETA text is not yet binding under international law and will only become so after a legal review and the completion of the ratification process.

On this basis, the chances of reaching a comprehensive deal within two years are extremely slender, leaving the UK with a choice between seeking an extension to the two year time limit and leaving the EU without a proper arrangement in place, trying to rely on WTO rules until a new agreement could be reached.

Since both these options are extremely risky - we then look to another scenario, which even this report agrees is a possibility. "Only where the UK did not seek any special access to the Single Market", it says, "would negotiations be more straightforward and more easily concluded within a shorter time". But, it states, this can only be achieved at "greater economic cost".

It is because of this inescapable conclusion that we came up with the Flexcit scenarios. Essentially, the only way we are going to get out within the allotted time of two years is to compromise and accept a sub-optimum deal – either the Norway option or one of the fallback solutions. And such a deal is only acceptable if it becomes transitional, leading to something better.

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