SPONSORED:

Trump may regret meddling in UK Brexit negotiations

British Prime Minister Boris Johnson threw cat among the pigeons Wednesday by asking the queen to prorogue parliament until October 14.

Proroguing (suspending) parliament until October 14 will leave barely three days for a parliamentary Brexit debate before the all-important European Summit on October 17. That summit will be the last chance for the UK to secure a Brexit deal before Johnson’s self-imposed October 31 deadline for the United Kingdom to leave Europe with or without a deal.

Judging by the opposition’s hostile reaction to his bold political move, Johnson’s initiative is likely to usher in a prolonged period of political uncertainty. That will not be good for a weakened UK economy. It also comes at a bad time for the European economy, which already is having to cope with a German economy that is now in recession and an Italy which is in the throes of yet another political crisis.

ADVERTISEMENT

While UK politics is now in the greatest degree of flux, Johnson’s move would seem to have narrowed the its path forward to two seemingly unattractive options.

The first is that the UK will indeed crash out of Europe without a deal on October 31. Heightening that possibility is the unlikelihood that the European Commission will now offer Johnson any substantive changes to the Brexit deal that it negotiated with Johnson's predecessor, Theresa MayTheresa Mary MayWill Ocasio-Cortez challenge Biden or Harris in 2024? The Hill's Morning Report - Biden takes office, calls for end to 'uncivil war' Money talks: Why China is beating America in Asia MORE. In particular, it is unlikely to drop its insistence on the Irish backstop, which is one of Johnson’s redlines. Fearing the precedent that it might set for other European Union members, the commission will not want to be seen to be caving in to Johnson’s Brexit brinksmanship.

The second possibility is that next week parliament will either succeed in passing legislation to force Johnson to ask the Europeans for an extension of the October 31 deadline or succeed in bringing down Johnson’s government by a no-confidence vote. It would seem that under either of these two scenarios Johnson would be forced to have early elections.

The Bank of England and the IMF have indicated that if the UK were to crash out of Europe without a deal, within a year or two UK output could be as much as 5 percent below where it otherwise would have been. This view is echoed by most mainstream economic forecasters. It is also basically shared by the UK business community, which is imploring Johnson not to risk a no-deal Brexit.

While forcing Johnson to seek an extension of the October 31 deadline or else by successfully passing a no-confidence vote, parliament might spare the country from the worst-case economic scenario. But it would not be without considerable risks.

ADVERTISEMENT

Early elections might usher in a far-left Jeremy Corbyn government that would take the country back to the failed policies of the 1970s. Alternatively it might see Boris Johnson winning that election on a hard-Brexit platform. That in turn only will have delayed by a few months the UK’s crashing out of Europe with all of its negative consequences.

To its great discredit, the Trump administration has been egging Johnson on to leave Europe without a deal. It has done so by making him the illusory promise of a speedy U.S.-UK free trade deal on the most favorable of terms for the UK.

Sadly, the chances are now high that the Trump administration will get the hard-Brexit that it has been wanting. But the chances are also very high that the Trump administration will come to regret its role in engineering that outcome. It will do so when it sees the immediate damage that a hard-Brexit will do to the UK and the negative spillover effects that a hard UK economic landing will have on a global economy that is already slowing down markedly.

Desmond Lachman is a resident fellow at the American Enterprise Institute. He was formerly a deputy director in the International Monetary Fund's Policy Development and Review Department and the chief emerging market economic strategist at Salomon Smith Barney.