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What happens on exiting?

Key Questions

What is the process for starting and managing the negotiations?

What are the options for the final agreements?

What are the likely outcomes?

 

Article 50

It is assumed currently that the Prime Minister has the right to trigger Article 50 without Parliament’s approval. However, Parliament will have to involved eventually since it must approve new legislation in place of the European Communities Act (ECA).

Article 50 of the Treaty on European Union reads as follows:

Article 50

1.Any Member State may decide to withdraw from the Union in accordance with its own constitutional requirements.

2. A Member State which decides to withdraw shall notify the European Council of its intention. In the light of the guidelines provided by the European Council, the Union shall negotiate and conclude an agreement with that State, setting out the arrangements for its withdrawal, taking account of the framework for its future relationship with the Union. That agreement shall be negotiated in accordance with Article 218(3) of the Treaty on the Functioning of the European Union. It shall be concluded on behalf of the Union by the Council, acting by a qualified majority, after obtaining the consent of the European Parliament.

3. The Treaties shall cease to apply to the State in question from the date of entry into force of the withdrawal agreement or, failing that, two years after the notification referred to in paragraph 2, unless the European Council, in agreement with the Member State concerned, unanimously decides to extend this period.

4. For the purposes of paragraphs 2 and 3, the member of the European Council or of the Council representing the withdrawing Member State shall not participate in the discussions of the European Council or Council or in decisions concerning it. 
A qualified majority shall be defined in accordance with Article 238(3)(b) of the Treaty on the Functioning of the European Union.

5. If a State which has withdrawn from the Union asks to rejoin, its request shall be subject to the procedure referred to in Article 49.

 

Links

The Constitution Unit on Article 50

The Text of the Lisbon Treaty

The formal mechanics of exiting

The Prime Minister has said that the UK will not trigger Article 50 until his successor is appointed.

We have 2 years from the time we trigger Article 50 in which to agree not only how we exit but also our relationship with the EU after we exit. We will automatically exit at the end of 2 years unless the other 27 members unanimously agree to extend the timetable.

The withdrawal agreement needs to be supported by what is called a Qualified Majority Voting (a formula for voting) in the Council and the European Parliament also has a veto over the terms. We will not take part in the discussions about the terms.

This means that no single Member State could veto the deal, but that it would need to reach a critical level of support. (Specifically, it would need to be agreed by 20 out of 27 Member States, representing 65 per cent of the population).

During those two years nothing changes in our relationship with the EU but we will be planning how to change existing agreements, laws and practical issues like funding agreements.

We will have to change our trading and other agreements with non-EU countries so that they reflect our change in status outside any EU agreements. Some of them might be unwilling to commit to anything until they know more about our future relationship with the EU.

Article 50 does not specify how much the withdrawal agreement itself should say about the future relationship between the EU and the departing Member State.

Any sort of detailed relationship would have to be put in a separate agreement that would have to be negotiated alongside the withdrawal agreement using the detailed processes set out in the
EU Treaties.

There is so much legislation and agreements that it will take a lot of people and a lot of time to organise the exit and to finally put it into effect (some agreements will be extending beyond the 2-year deadline).

It is going to be a complicated and difficult process and no-one can presume how the negotiations will work:

  • If all parties have a positive approach and recognise that it is in everyone’s interests to remove the uncertainty as quickly as possible (if only for travel and security), there is no reason why a way forward can’t be agreed quite quickly.
  • If the EU members use the time to promote their own agenda then it will be a painful process
  • If the UK does not have adequate resources to cover all the issues then we will be weak from the start
  • If Scotland decides to hold its own Referendum then it could become chaotic

Links

Treasury report on process for withdrawing

Wikipedia on mechanics

What are the models for an exit?

There are no exact models for exit because the situation of the UK is unique in almost every way: member for 40 years, major trading partner, service economy, size and location of population, EU residents, other alliances within the EU, wider political situation etc. etc.

There is going to be a trade-off between the attraction of the UK as supplier and customer, the level of access to the Single Market (i.e. tariffs and trade barriers), and freedom from EU regulations. If both sides want a quick solution then there will have to be a pick-and-mix of existing arrangements; if anyone wants to start from scratch then it will take a lot of time and resources.

It will probably all come down to the personalities and the EU politics at the time. The UK has no obvious lead negotiator: The PM has surrendered our negotiating position, the Exit team has provoked many people. At the same time there will be major elections in the EU including Germany and France which will hold up the process. Someone will have to set the rules of engagement at the beginning otherwise it will be chaos.

These tabs are the models being discussed by both sides (we have invented the titles)

The European Economic Area (EEA): Norway and two other tiny countries are “the EEA”. They have full access to the EU but they have to contribute to the EU budget and comply with a whole range of laws on matters like consumer protection and the environment. Financial services are small parts of their economies and are not covered in the agreements. They are not stuck with the provisions of the Common Agriculture and Fisheries Policy, the rule of the Court, and EU trade policy.

The European Free Trade Association (“EFTA”) is a free trade agreement between Iceland, Norway, Switzerland and Lichtenstein. The UK was a member of EFTA before we became a member of the EU. It allows the free movement of goods, services, people and capital but they have to make financial contributions towards the EU budget and other programmes.

Switzerland has 120 bilateral agreements with the EU and other countries but it does not have to adopt the EU’s relevant legislation. It does comply with regulations on the goods that it trades with the EU and although its financial services sector has access to the EU market, it has had to depend on London for much of its banking.

If there is no agreement with the EU in two years then our trade will have to comply with the WTO rules. They will also apply to all our non-EU trade unless we have signed new agreements. They have a range of tariffs that each side can charge although there is an agreement that, unless agreed otherwise, each nation must be treated equally.

Turkey has a free-trade agreement with access to free markets in manufactured goods but not in financial services or agricultural products amongst other things.

Canada and the EU have recently signed a new trading agreement to scrap nearly all their tariffs over time (with the notable exception of some agri-foods). Canada will not contribute to the EU budget, and there are none of the EU rules on the free movement of people. The big gap for us is that there is no “passport” for Canadian financial institutions who will have to establish a presence in the EU.

Scotland

Scotland (62%) voted to remain in the EU.

Nicola Sturgeon said that another independence referendum was highly likely if more than 60% of the voters were in favour of the EU. However, she needs the authorisation of Westminster to call a new Referendum. In any event, the Parliament will expect to be asked for its consent before Westminster can ratify the terms of any Exit agreement.

There are three fundamental issues:

  • The strength of the economy with oil at $50 per barrel
  • The requirement for new applicants to adopt the Euro as its currency
  • Border controls for movement of goods and people

If it applies for independence before the UK leaves the EU then it will not to be considered a new applicant and so it might pay to hold the referendum sooner rather than later.

Possible Format for Exit

There are various options that could suit the general approach to negotiations but none of them covers everything.

“Pick-and-mix” seems perfectly sensible. It picks out the relevant bits of existing treaties and bolts them onto new clauses.

If we already have treaties with non-EU countries, then it seems logical that in many instances we can just change the name.

Many EU suppliers will want to continue trading with us on the same terms. We could work with negotiated tariffs for the others.

There is no reason to end any agreements on intelligence and arrest warrants.

Existing EU and UK citizens’ rights to travel, work and live should not change.

Future migrations will be controlled initially on benefits tourism and then we can work out a fairer system.

Non-EU migration will be controlled immediately.

Links

The text of the Lisbon Treaty

The Centre for Economic Review on the difficulties of exiting

British Influence: What would happen if we voted to leave with 10 questions to ask

LSE reviews of what the other countries would accept with an exit

UK foreign policy if it leaves the EU

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