The Institute of Directors (IoD) are the latest to jump in to the "transition" debate, with their paper "Bridging the Brexit Gap" written by Allie Renison, IoD's head of EU and trade policy. Renison has come under attack from Leave supporters Jago Pearson and John Longworth, describing her report as pro-Remain propaganda, advocating remaining in the EU and being a direct attack on democracy.
Are Pearson / Longworth right ? I don't think so - the report reads as a pragmatic case for transition:
1) The IOD agree with the Government that current membership of the Customs Union and Single Market is "neither practical nor desirable."
2) The report states "there will eventually be some increase in transactional costs to trading with and doing business in the EU". That's fair enough there will be trade-offs in Brexit. Leaving the Customs Union clearly brings additional trade cost (in both directions) in terms of Rules of Origin, routine customs declarations and processes. Regulatory divergence over time will add to costs of trade and business. We will have looser relationship with the EU in exchange for greater freedom at home and in trade with the Rest of the World.
3) The case for transition is made with the aim of "allowing both companies and government infrastructure the necessary time to move towards our longer term objectives." There is now greater public awareness of the need for technology and infrastructure development needed to mitigate the impact of introducing a new customs border. Similarly replacing current regulatory arrangements centred on EU agencies will take time and investment. These actions will minimise the disruption to business activity and also minimise the additional transactional costs.
4) Most importantly, the report defines transition as a "bridging period during which the UK and EU would negotiate the technical detail" based on "new regulatory cooperation outlined in the withdrawal agreement's framework for future relations". In other words, the future relationship is agreed in outline during Article 50 and implemented in detail during transition.
The report also discusses transition options. Extending Article 50 is "politically very contentious" (that's an understatement !). EEA is "contingent upon our EU membership" according to legal consensus (so the UK will need to negotiate re-entry) and in any case does not address the issue of a new customs border. A transitional customs agreement will delay a new customs border - and the report makes useful points on: Transit, VAT and Intrastat returns, a joint UK-EU customs cooperation committee, a dedicated Brexit trade contact group and continued participation in the EU’s Customs Policy Group.
Unfortunately, the impact of Free Trade Agreements (FTAs) on a customs arrangement is not covered. During an interim customs agreement, the UK will be unable to implement any new FTAs. EFTA membership, which requires members to adopt/harmonise EFTA's FTAs, is also incompatible with a customs arrangement - another problem for those advocating EFTA EEA as transition.
Nonetheless, phased implementation/reduction so that transition is a step-by-step process of leaving the EU is crucial point - otherwise what we have is an interim arrangement with another cliff-edge at the end. Combined with some ideas borrowed from Dr Simon Usherwood's blog "How to achieve a new UK-EU deal" my own thoughts on a possible transition model are:
- UK commits to applying EU acquis during transition
- EU commits to respect UK transitional status in new EU decisions/law.
- UK will dis-apply sectors of EU acquis as replacement arrangements are implemented.
- Sunset clauses should be agreed and implemented.
- Dispute resolution mechanism: 3-judge panel - UK + EU + mutually agreed neutral judge.
- A standing EU-UK committee.
But to return to my original premise, I think it is a complete mis-characterisation to represent the IOD paper as anti-Brexit. While I believe Allie Renison was a Remain supporter in the EU Referendum, she and the businesses she represents accept Brexit as a reality and are committed to making Brexit work. Here are just 2 of her recent tweets (of many) that support this :
"I can't believe I have to keep saying this. #Brexit doesnt have to be a disaster. Many battles still to be won on how we do it. Carry. On."