Thursday, July 25, 2019

Will Boris Johnson Deliver Brexit?

How Will Boris Johnson 'Deliver Brexit'? These Are His Best Options

There are 99 days left between now and Oct. 31 - the day the UK is set to leave the European Union. And newly elected Tory leader Boris Johnson (soon to be prime minister, barring some unforeseeable circumstance) will need every one of them to try and negotiate his way out of the mess that Theresa May is leaving behind.
Unlike May, Johnson is a leading voice in the "Brexiteer" faction of the Conservative Party. He has insisted that the UK will leave the EU on Oct. 31 with or without a deal. Of course, he would prefer to succeed where his predecessor failed and strong-arm the EU into a deal that excludes the troublesome Irish Backstop - the contingency in the prior agreement which would have allowed for the border between Ireland and Northern Ireland to remain open. But EU officials have insisted in recent days that they have no plans to change the withdrawal agreement negotiated with May; they are only open to making changes to the political declaration that accompanied it.
Moving forward, only one thing is clear right now: May's deal is dead. Johnson, who will officially take over as prime minister this afternoon, and who is currently scrambling to fill the top jobs in his government, is giving off the impression that he would have no problem with taking the UK over the no-deal cliff, and President Trump is dangling a US-UK trade deal in front of Johnson that would make such an outcome slightly more palatable, politically.
Among the personnel rumors circulating early on Wednesday were that Sajid Javid might be tapped to serve as Chancellor, while Dominic Raab might be tapped to serve as foreign secretary.
So, what are the options available to Johnson? These are four of the most likely scenarios, according to Bloomberg:

Renegotiate Withdrawal Deal

Johnson wants to scrap the deal Theresa May struck and restructure the whole negotiation that was agreed at the start of the process.

Obstacles: The EU has repeatedly said it’s not prepared to renegotiate the Withdrawal Agreement, and it’s the only deal on the table. It’s also said a backstop must be part of any withdrawal accord, because it wants to lock in a guarantee that no hard border will emerge. The exit bill is also part of the divorce deal, and is due to be paid whatever trade terms are eventually negotiated. EU law dictates that Brexit should happen in two parts: First the exit negotiation, and once the U.K. has left, formal trade talks can begin.

Leave on Oct. 31

Johnson has said that after May twice delayed Brexit, the U.K. must now leave the bloc on Oct. 31, “do or die,” whether a new deal has been negotiated or not. He’s refused to rule out suspending Parliament - known as proroguing - to achieve that.
Obstacles: The timetable is tight to negotiate an entirely new deal. And the U.K. Parliament is opposed to a no-deal Brexit. That was made clear again last week when Conservative rebels joined the opposition to pass an amendment aimed at preventing Johnson suspending Parliament. The EU side has indicated it would prefer another extension to a no-deal split.

Standstill Period After Brexit

Johnson is seeking to negotiate a "standstill" period with the European Union after Oct. 31, during which there would be zero tariffs and zero quotas to "smooth things over for business" - much the same as the transition period negotiated by May. He said it would end “well before the next election,” which is due in 2022.
Obstacle: The EU has said any form of transition period is contingent on there being a withdrawal agreement, which must contain an Irish backstop.

Use WTO rules if EU won’t cooperate

Johnson has said that if the EU won’t offer a new deal, the U.K. will be able to use Article 24 of the World Trade Organization’s General Agreement on Tariffs and Trade to ensure the terms of commerce remain the same after Brexit.
Obstacles: The clause Johnson cites applies to countries negotiating a trade deal rather than a country leaving a trading bloc. It would also require the agreement of the EU, and a clear timetable for the negotiation of a trade agreement -- neither of which would be guaranteed in the event of an acrimonious no-deal Brexit. The WTO and EU have said this won’t work, and Johnson revealed a hazy understanding during the campaign as to why it would.
Oddly, Bloomberg's options don't include 'general election', which is widely seen as possible as the Conservatives' majority is set to shrink to just one vote (and that's with Northern Irish DUP's votes included). Many expect that Johnson will be stuck in a similar impasse to May's and that he will need to call a general election - much like May once did - to strengthen his mandate. A group of strategists at UBS believe a general election toward the end of the year has the highest probability of all these outcomes, and many suspect that the odds of a vote and, once it's declared, the polls, will have a similar impact on UK markets that the original pre-referendum Brexit polls had.
If an election is called, the strategists believe the Bank of England is more likely to cut rates to boost sentiment, stocks with international exposure would outperform domestically focused shares and the FTSE 100 would move modestly lower.

Boris Johnson makes sweeping cabinet changes. Half are gone, more coming. He reiterates his promise to deliver Brexit.

Cleaning House

No comments: