Why former foreign secretary David Owen thinks the EU can’t stop a transition deal

David Owen: “absolutely convinced” that we need a two-year transition period.

For most people David Owen needs no introduction. He was foreign secretary between 1977 and 79, and was one of the “Gang of Four” who broke away from the Labour Party to found the Social Democratic Party, which he led between 1983 and 1987. He was made a life peer in 1992.

He was a critic of what he saw as an increasingly federal Europe, he played a key role in pressuring the Labour government to drop the idea of Britain joining the single currency, and was heavily involved with the Leave campaign in last year’s referendum. Having made several major speeches on Brexit, he has agreed to give us his thoughts on what the government’s strategy should be, as it manages the process of leaving the EU.

Immediately after the vote he was “quite confident that the entire process, including a trade deal, could be done within two years of the vote”. However, several things have caused him to modify his views. Firstly, it “came as a shock that no preparatory work had been done by the government in the run up to the vote and that the civil service were banned from doing the research which is a normal part of the process”. He was also “surprised that Cameron left”. After all, had Harold Wilson lost the 1975 referendum, “he would still have stayed on as Prime Minister”. All in all, he has “a lot of sympathy for Theresa May”.

Because of this, Owen has since changed his mind and is “absolutely convinced” that we need a two year transition period. Indeed, he thinks that an immediate “cliff-edge” exit on WTO terms would be “very bad” for the UK economy. However, he is “very upset by Europe’s reaction to the Florence speech”, especially their demand that the divorce bill be agreed before they will even talk about a transition period. Indeed, while “some tensions are inevitable” he found their rejection of Theresa May’s offer to be “slightly ominous” and he now suspects that “they are not negotiating in good faith”. In light of this, he thinks that “we therefore need a different strategy”.

His idea is that we use membership of the European Economic Area as a bridge to give us a breathing space, which we negotiate trade deals with other countries and try and resolve matters with the EU. While the Prime Minister still clings to the idea of a “bespoke transition deal”, Owen thinks that this is unrealistic. After all, “if I want to buy a bespoke suit, I can either waste a lot of time and money getting one made from scratch, or I can buy one off the rack and get a tailor to make any needed alterations”. Clearly, the latter is a much more sensible option.

However, the key difference between Owen and other advocates of temporary EEA membership is that Owen thinks that we don’t need the rest of Europe’s permission to do this. While he acknowledges that some lawyers think that “leaving the EU means leaving the EEA”, Owen is convinced that “there is no relationship at all between the two”. After all, the UK “is a full contracting member of the EEA, rather than a member by virtue of its EU membership”. Owen also points to the example of Austria and Finland, who left EFTA and joined the EU in 1995, but didn’t fully complete the entire process until nine years later. During this period they had EEA membership as a backstop to ensure single market access had negotiations broken down.

Similarly, if Brussels doesn’t come to a reasonable compromise about the divorce bill, the UK should simply announce that instead of giving the required year’s notice to leave the EEA next March (for exit in 2019), it will instead delay this until 2020 (for exit in 2021) instead of next year (for exit in 2019). Of course, Brussels may try to block this. But if it does, Owen thinks that the UK has the right to take the EU to international arbitration via the Vienna court. Indeed, he points out that the European Court of Justice is actually subordinate to Vienna, because the former is only a regional court, while the latter is an international court.

The EU’s demands for tens of billions of Euros in “divorce payments” are “quite unacceptable” argues Owen. After all “there is no such thing as a divorce payment in law”. He accepts that “we should cover the pension payment of UK staff working for EU bodies” but even this “should be offset by the UK’s share of EU assets”. While the EEA has a regional policy that requires members to pay some money to poorer members, and we will need to hand over our share of external tariffs as long as we remain a member of the customs union, “we shouldn’t have to pay anything else”. After all, while Norway does make an extra payment, “this is completely voluntary” and was negotiated at a time when oil prices (Norway’s main export) were much higher.

However, in the longer run, a looser, bespoke trade deal with the EU makes more sense than indefinite EEA membership. This would involve limited immigration controls, which would be “imposed slowly”, and involve some mutual recognition of standards. After all, from his post-politics career selling steel and iron ore, “I know that paperwork and schedules do matter a lot”. At the same time, despite their rhetoric, many in Europe understand that it would be “foolish for them to clamp down too hard on the City of London because the only winners from such punitive action will be New York and Singapore”.

Once the general parameters are agreed, it may be a good idea to put an apolitical figure in charge of negotiating the exact details of a “flexible and friendly” EU-UK deal. Owen suggests that Mark Carney, governor of the Bank of England would be ideal because “he is able to take a broader view”. Above all, our negotiators need to “avoid relying too much on the advice of lawyers, because they are up to their necks with current EU laws and institutions” and therefore unable to provide the objective advice that the government needs.

Whatever the outcome of negotiations with the EU, we need to start negotiating trade deals with the rest of the world. Naturally, the most obvious country to start would be with the US. President Obama’s declaration that we would be at “the back of the queue” if we left the EU was so “transparently false”, “especially since Americans talk about lines rather than queues”, that it “provided the biggest single boost in the polls to the Leave campaign”.

Of course, President Trump’s rhetoric has been much more protectionist than that of Obama. However, Owen thinks that Trump’s commerce Secretary Wilbur Ross “is a hugely experienced businessman” who is open to deals that involve “mutual enrichment”. Indeed, the current negotiations between the US, Mexico and Canada over the future of Nafta (North American Trade Agreement) present an opportunity for us to be added to a revamped trade deal. Whatever America’s attitude, Owen is sure that Britain can quickly use the EU-Canada deal as a template for an agreement with Ottawa.

Finally, Theresa May “needs to make sure that this issue isn’t dominated by party politics”. This involves “consulting more with the opposition about specific elements of the negotiation”. Though obviously if this cooperation is to be successful, the Labour Party, SNP and Lib Dems will need to take a less confrontational stance as well.

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