Without a Brexit divorce deal, all the transition talk will have been a waste

There is an air of unreality about the debate that has been raging this summer over a Brexit transition deal. The mere fact that this debate is taking place at all is unreal. There was never the slightest chance that the UK and European Union would be able to negotiate and ratify both a divorce agreement and a new free trade deal in the two years allowed under the Article 50 timetable, let alone the 21 months that remained after Theresa May squandered the first three of those months on a snap general election. So the fact that it has taken until now for the cabinet to accept that a transitional deal will be essential — even as government policy remains that a Brexit trade deal can be agreed by March 2019 — is alarming.

But there is an air of unreality about the substance of the debate too. Only now is it dawning on the political class that a transitional deal cannot possibly take the form of interim membership of the European Economic Area alongside Norway, Iceland and Liechtenstein: not only is the area outside the EU’s customs union — and so does nothing to shield the UK from one of the most damaging Brexit cliff edges — but securing temporary membership would require complex, time-sapping, negotiation in its own right. The only plausible transitional deal is a standstill arrangement under which the EU and UK agree to maintain all existing rights and obligations for a limited period of time. The EU Commission realised this nearly a year ago and it is clearly set out in the EU’s negotiating directives. Yet even now, some in the UK still fantasise about a bespoke interim deal that would allow it to restrict EU immigration or sign new trade deals during the transition.

Some Brexiteers also worry that a standstill transitional arrangement could end up becoming permanent or, worse, a ruse to enable the UK to slip back into the EU. These fears too are unreal. A standstill agreement must inevitably be time-limited not just because the EU has itself ruled out any open-ended deal but because one is impossible under World Trade Organisation rules: the EU cannot offer the UK indefinite preferential market access without a comprehensive trade deal. And once Britain leaves the EU on March 29, 2019 there is no path back on its current terms. If it wanted to rejoin, it would have to submit a new membership application, which under the EU treaties would require it to commit to joining the euro and the Schengen passport-free travel zone. By the same token, the window of opportunity for those who want to reverse Brexit will slam shut in March 2019.

But what is most unreal about the current debate is the way it has diverted attention from the core issue at the heart of Brexit: what is the UK proposing to transition to? The cabinet — and the leadership of the Labour Party — may have agreed that the UK’s future lies outside the EU customs union and single market. Yet even outside of these, a wide spectrum of future relationships is possible, ranging all the way from the prime minister’s goal of a “deep and special partnership with the EU” to her insistence that Brexit means “taking back control of our borders, our money and our laws”. In essence, the UK must choose between being a rule-taker, keeping preferential access to EU markets in return for continuing closely to follow EU rules and most likely continuing to accept indirect European Court of Justice jurisdiction via the European Free Trade Association court, or becoming a rule-maker, gaining greater scope to pursue its own trade deals but facing new barriers to entry to EU markets.

What is impossible — as much of the government now appears to accept — is Boris Johnson’s fantasy of a have-your-cake-and-eat-it Brexit; or as one senior EU official puts it, “the UK cannot have a deal that gives it Norway’s degree of market access in return for Canada’s obligations”. Yet Downing Street is still far from resolving this dilemma, officials acknowledge. That’s hardly surprising since there are no good options, as was clearly illustrated in a row last week over whether the UK should allow the import of American chlorinated chicken, banned in the EU, under a future US free-trade deal, even if this would probably cost British farmers access to EU markets. Downing Street’s problem is that while it is willing to contemplate the UK being a rule-taker in sectors such as chemicals, there are others such as financial services where this would be unthinkable. Yet the EU is adamant it won’t allow cherry-picking.

Mrs May doesn’t have long to make up her mind. After all, the UK and EU are due to start discussing their future relationship in October, assuming sufficient progress has been made on resolving outstanding questions over citizens’ rights, the UK’s financial obligations and the Irish border.

Unless she can quickly unite her government, her party, parliament and the country behind a realistic vision of a future relationship, there won’t be a divorce deal. And without a divorce deal, all this debate about transition will have been a complete waste of time.