One has to wonder whether Boris Johnson is not already squandering the golden opportunity his recent large election victory gave him to put the UK on a sounder economic footing. One also has to wonder what he might have learnt from the UK’s painful 3 ½ year negotiation of a Brexit Withdrawal Deal with its European partners.
After resoundingly winning last week’s election, Mr. Johnson is now seeking parliamentary approval of legislation that would preclude the UK from asking for an extension of the December 2020 end-date for its transitional arrangement with the European Union.
This leaves Mr. Johnson with very little time to negotiate the UK-European Union free trade arrangement that he is seeking even though such free trade arrangements typically take a number of years to negotiate. By so doing, he is also raising the possibility that at the end of 2020 the UK could crash out of Europe without a deal.
Over the past three years, the prospect that the UK could crash out of Europe has been highly unsettling for investors and has pushed the UK economy to the brink of an economic recession. Now rather than assuring investors that he would use his large parliamentary majority to engage in an orderly negotiation with his European partners on a future trade arrangement, Mr. Johnson is bound to have again unsettled investors by reigniting fear that the UK could crash out of Europe at the end of 2020.
Mr. Johnson’s decision to preclude an extension of the deadline has also given undue leverage to the Europeans in the forthcoming free trade negotiations. With the knowledge that Europe accounts for 50 percent of the UK’s export market and that the UK has set a self-imposed deadline for the negotiations, the Europeans can once again be expected to run down the clock in the forthcoming negotiations and squeeze concessions from a UK all too desperate for a trade deal.
Mr. Johnson is not known for keeping his word. Earlier this year, he asserted that he would rather die in a ditch than seek a Brexit extension before being forced to ask for such an extension. One can only hope that Mr. Johnson reverses his no further extension policy stance soon, before the prospect of a no-deal Brexit again exerts a heavy toll on the UK’s economic performance.
This article by Desmond Lachman appeared at AEI on December 17.