Johnson confident parliament will back his Brexit deal

October 18, 2019 07:41
Britain's Prime Minister Boris Johnson speaks at a news conference during the European Union leaders summit in Brussels on Thursday. Photo: Reuters

The United Kingdom's Prime Minister Boris Johnson expressed confidence that British lawmakers will back the Brexit deal he clinched with the European Union, saying most agreed it was time to “get this thing done”, Reuters reports.

Johnson, the face of the 2016 campaign to leave the EU, brushed off suggestions he could not persuade enough lawmakers to pass the deal at the weekend after his allies, Northern Ireland’s Democratic Unionist Party, rejected his new agreement.

“I’m very confident that when my colleagues in parliament study this agreement they will want to vote for it on Saturday and then in succeeding days,” he told a news conference in Brussels.

“There is, as I say, a very good case for MPs (lawmakers) across the House of Commons to express the democratic will of the people, as we’ve expressed many times to do, and to get Brexit done.

“I don’t think there is any case for delay.”

Johnson’s team hopes the threat of Britain leaving without a deal on his deadline of Oct. 31 will concentrate minds in parliament, which rejected an agreement negotiated by his predecessor, Theresa May, three times.

He hopes his new mantra of “new deal or no deal, but no delay” is shared by other EU leaders, tired of Brexit negotiations that have dominated their meetings for more than three years.

“I don’t think delay is to the advantage of the UK or indeed of the whole of Europe. I think people want to move this thing on. It’s been going on for a long time and that’s the view that seems to be quite widely shared,” he said.

After Brexit, he said, “it will be a very exciting period now, as it were, to get to that positive side of that project. The extraction having been done, the building now begins.”

More distant ties

If Johnson does win parliamentary backing for his deal, Britain will be on course for more distant economic ties with the EU, analysts told Reuters.

Compared with the deal his predecessor Theresa May reached last year – which parliament rejected three times – Johnson’s deal aims for less regulatory alignment with the EU, and greater trade barriers between Britain and its largest trading partner.

“Even if Boris Johnson does manage to close the deal, investor celebration of this might soon be dampened by the recognition that this is a fairly hard Brexit,” said Paul O’Connor, a fund manager at Janus Henderson.

Britain’s finance ministry and almost all external economists have forecast that increased trade barriers will cause the British economy to grow more slowly than if it were to stay in the EU, and the damage increases as trade barriers rise. 

Based on what was known of Johnson’s plans last week, UK in a Changing Europe estimated that they would make Britons more than 6 percent poorer on a per capita basis than staying in the EU equivalent to 2,000 pounds (US$2,570) per year in the medium term.

May’s deal would have reduced income by just under 5 percent per head, while a so-called no-deal Brexit – which would leave Britain trading purely on World Trade Organization terms – would lower incomes by just over 8 percent.

Anand Menon, UK in a Changing Europe’s director, said the estimates did not need to be changed significantly after Thursday’s deal.

He expected Johnson to push back against the "level playing field" requirements on regulatory alignment that the EU wants in a close future trading relationship.

By contrast, the opposition Labour Party has said it would seek a closer trading relationship with more alignment with EU rules on the environment and worker protections if it was in charge of talks after Britain left the EU.

British Finance Minister Sajid Javid rejected attempts to show Johnson’s deal would have a bigger hit on the economy than May’s one, saying it was “self-evident” that it would end the uncertainty that has held back company investment.

Javid, speaking to reporters in Washington, also said Johnson’s plan offered more promise for striking trade agreements with countries around the world because of the more distant proposed relationship with the EU.

If Britain leaves the EU on Oct. 31, as scheduled, Johnson’s agreement ensures a transition period lasting until at least the end of 2020 during which there will be no big economic change.

This period can be extended until the end of 2022, while Britain and the EU negotiate a new trade arrangement with fewer shared rules and new restrictions on cross-border trade in goods and services.

Financial markets

Financial markets have reacted positively to the deal, as it lowers the risk of a disruptive no-deal Brexit.

But Dean Turner, an economist with UBS Wealth Management, said that although it might give a brief fillip to British growth, there was too much uncertainty about the longer-term trading environment to revive moribund business investment.

“I wouldn’t be getting the flags out just yet,” he said. “I think we will see a little bump in activity, but not anything that will be meaningful enough to get the UK out of a weak growth trend.”

The Centre for European Reform estimated that Britain’s economy was already nearly 3 percent smaller than it would have been if it had voted to stay in the EU in June 2016’s referendum.

While the bulk of the Johnson deal was seen as largely the same as that agreed between the EU and May, analysts noted that May’s aspirations for a close future trading arrangement had been watered down in the political declaration accompanying it.

Whereas the May version aspired to “as close as possible” a future trading relationship with the EU, that line was replaced by merely “ambitious” in the revised text.

“Theresa May’s deal would have ended up in a softer arrangement than just a free trade agreement,” Alex Stojanovic of the Institute for Government said.

“This government appears to want an FTA and that is very different: that means there would still be regulatory barriers particularly in goods between Great Britain and the EU.”

Rachel Kent, a financial services lawyer at Hogan Lovells, said the original political declaration already tied regulatory alignment to market access in a future UK trade deal with the EU, Britain’s biggest financial services customer.

But the revision made this more explicit, she said. British regulators have said they do not want to become ‘rule takers’ rather than rulemakers after Brexit, increasing the chance of divergence and barriers between British and EU financial services markets.

Stojanovic added that Britain’s new freedom to sign its own bilateral trade deals around the world was unlikely to offset the lost economic activity.

“If the UK did a deal with everybody ... it would benefit in 15 years the UK GDP by 0.2 percent. Most free trade agreements do not benefit GDP very much.”

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