24 October 2019

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JOHNSON'S DILEMMA

New British Prime Minister has only three months to have a decision on Europe

Author:

01.08.2019

In his first speech as Prime Minister, Boris Johnson promised that he would insist on a completely new deal with the EU, since minor changes could not make him happy. He underlined that regardless of the outcome of negotiations with Brussels, the UK will leave the EU on October 31.

Marking his stance on Brexit as “Do it or die! Whatever happens,” he criticized his predecessor Theresa May for “hesitation”. “It’s time to act, make decisions and change this country for the better,” Johnson said, and expressed his confidence that by 2050 the UK becomes "the greatest place on earth."

 

Optimists and pessimists

It is hardly possible to recall any other British prime minister in the recent history, who has caused so much controversy both in the country and around the world. Supporters respect him as a public figure who secured the victory of the Brexit campaign in the 2016 referendum, and a person who can guarantee the UK's withdrawal from the EU no later than October 31.

Pro-Europeans believe that Johnson's victory in 2016 was due to his exaggerated view on economic benefits of leaving the EU, as well as frankly false statements. According to Max Hastings, a former editor-in-chief of the Daily Telegraph, Johnson “is unfit for national office, because it seems he cares for no interest save his own fame and gratification.”

European optimists hope that after taking the chair of the Prime Minister, Johnson will try to sit there as long as he can, bringing the situation to exit from the EU without an agreement. Pessimists predict "many meaningless meetings" with him, exactly the same as it was in 2015 with Greek Finance Minister Yanis Varoufakis during the Greek debt crisis. They believe that everything will also end with Brexit without a deal. According to the Dutch newspaper De Telegraaf, “Johnson will be received in Brussels politely... But will he surrender and start new negotiations? No way!" In a telephone conversation with Boris Johnson, President of the EU Commission, Jean-Claude Juncker, also underlined that the withdrawal agreement with Theresa May was “the best and only possible one” for Brexit.

Boris Johnson's strategy in negotiations with EU can be described as follows: by letting the EU know that he is serious about the UK's leave from the EU under any circumstances by October 31, he hopes that Brussels will soften its position. He thus expects that under the current conditions of the slowing down European economy, the EU leaders can finally acknowledge the inevitability of British leave without an agreement. Will their determination to support Ireland continue, when they are compelled to explain to their citizens the decline in salaries?

Johnson's team believes that the tough position of Brussels, at least in part, was based on the assumption that there is almost no chance of British leave without agreement.

Johnson is right that the EU has more room to manoeuvre around the Brexit deal than London, but he clearly overestimates the EU's flexibility. Perhaps Brussels will go for some minor amendments in the agreement, but it is still confident that Brexit without an agreement is much preferable for Europe than a “bad deal”. EU leaders believe that Europe is better prepared for a sharp breakup with the UK instead of going for big concessions to London that can create an impression that blackmailing Brussels is a way to go to get as many benefits as possible.

 

Irish border revisited

Many supporters of Brexit do not the agreement with the EU mainly because of the backstop provision — a binding condition that can keep the UK subject to the EU customs agreements until a solution is found to avoid a 'hard' borderline between the Irish Republic and the Northern Ireland.

According to the Good Friday Treaty concluded in 1998, which put an end to the lengthy bloody conflict on the island, there should be no physical border between the two parts of Ireland.

Currently, the United Kingdom (which also includes the Northern Ireland) and the Republic of Ireland are part of the single market and the EU Customs Union. But if the UK leaves the EU without an agreement, the two parts of Ireland will find themselves in different customs and regulatory regimes. To avoid border posts that could threaten the peace process, Theresa May’s cabinet and the EU agreed on a backstop. According to it, Northern Ireland will indefinitely remain part of the EU Customs Union, which will preserve the unimpeded border on the island. But this actually means the economic exclusion of Northern Ireland from the UK.

Boris Johnson wants to postpone the border problems to the next phase of negotiations, but Brussels insists that the issue of backstop is necessary for the success of the deal. If the UK leaves without an agreement and then wants to start free trade negotiations with the EU, Brussels will refuse to conduct them until the border issue is resolved. In principle, this is perhaps the main, if not the only, stumbling block of the Brexit agreement.

 

No agreement

According to the estimates of the Bank of England, if the UK and the EU fail to reach an agreement, this could cut UK gross domestic product by 8% in the very first year. Without a 21-month transition period, the UK immediately loses duty-free access to the world's largest trading bloc, which accounts for 48% of its exports.

Initially, the trade between the UK and the EU will have to be in line with the rules established by the World Trade Organization (WTO). Import taxes will apply to most of the British goods exported to the EU. Prices for many imported goods in British stores will rise. Some manufacturers will move their operations to the EU to avoid taxes and delays in the supply of components across the border.

Currently, the volume of financial, legal and medical services accounts for 79% of the British economy and 45% of British exports. According to the Centre for European Reforms, the exit from the single European market can reduce the British export of financial services by 59%.

The UK will be free to establish its own immigration rules on EU citizens, and the EU can do the same for British nationals. The fate of immigrants (1.3 million British citizens in the EU and 3.7 million Europeans in the UK) is still unclear.

The UK is losing the continuity of trade relations with many of the 70 countries that have concluded preferential trade agreements with the EU. Trading with them accounts for 11% of total UK trade. London has already begun separate negotiations with these countries, but they can continue for years.

The UK may refuse to pay its financial obligations to the EU (£33 billion) but this is unlikely to contribute to the conclusion of a new economic agreement.

 

Five key dates

On August 24, France will host a G7 summit, where the Brexit will become one of the main topics of discussion. By that time, Boris Johnson will have completed his tour to the main capitals of Europe, while Emmanuel Macron and Angela Merkel will most likely have a certain plan of joint action. Johnson's administration also expects a face-to-face meeting with Donald Trump.

On September 3, a new session of the British Parliament opens. The deputies do not have much time to make important decisions for the country. On September 29, the Conservative Party will hold a congress, at which, just one month before the X-Day, Boris Johnson will have to report to his party members about his progress.

On October 17-18, EU leaders will gather for a meeting, perhaps with a one and only issue on agenda - Brexit. By that time, this issue will be resolved. There are only three options so far: the agreement is signed and the parties discuss a general strategy for the transition period; the agreement is not signed but further discussions are required to set a path for future; or London asks for another delay, which is possible due to extraordinary parliamentary elections or a new referendum in the UK.

October 31 is the day of Brexit. The date was not chosen by chance, since the new EU leaders will take up their duties in November.

 

New in British politics

There is no majority in the British Parliament supporting the withdrawal from the EU without an agreement. Therefore, it is expected that Johnson faces the concerted efforts of opposition and conservative rebels, including several former high-level ministers from the May government, who are ready to block the course of events. In this situation, Johnson may have no choice but to appoint general parliamentary elections.

But this one is not simple either. The times when only two parties (Conservatives and Labourites) fought for power have long passed. The chaos created by Brexit and internal party squabbles have undermined the reputation of both parties. Their ratings are record low. That is why the sympathies toward the centrists and the liberal democrats (PLD) are rapidly growing.

Feeling that they had a chance to play a more serious role in the UK political life, liberal democrats just recently (July 22) elected a new young and charismatic leader, the 39-year-old Jo Swinson. It is likely that PLD can claim victory in the elections if they are held now.

When Swinson took the office, she said it was time to join forces to “stop Johnson, Farage and Corbin,” and called on conservatives and Labourites, who were disillusioned with their leaders, to join her party.

Johnson has not much time left to prove that he can be a British politician and citizen.



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