Brexit will be no walk in the park for Boris Johnson

Brexit will be no walk in the park for Boris Johnson
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This morning, United Kingdom voters woke up to the news that Boris Johnson’s Conservative Party trounced the Labour Party and won a commanding parliamentary majority in yesterday’s U.K. election.

Johnson pulled off this feat by tapping into extreme voter fatigue with the Brexit issue and by campaigning most effectively on a “Get Brexit Done” platform. He promised that extricating itself from Europe would allow the country to move on to a brighter economic future. It would do so by ridding the United Kingdom of cumbersome European regulations and by negotiating favorable trade deals with the United States and other non-European countries.

One has to wonder how long it will take U.K. voters to wake up to the reality that despite Johnson’s convincing victory, Brexit will not be the walk in the park that he is promising, and that a bumpy economic road still lies ahead for the country.  

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One also must wonder how long it will take UK voters to wise up to the impetus that the Scottish National Party’s strong showing in the election will now prompt another Scottish independence referendum. That could pose a real threat to the continued political integrity of the United Kingdom.

To be sure, Johnson’s comfortable victory will allow him to secure early passage of the Brexit Withdrawal Agreement that he negotiated last October. But that will only set the stage for the U.K. to enter into a one-year transitional period with its European partners to conduct the very much more difficult phase of negotiating a permanent EU-U.K. economic relationship. 

Johnson has put the United Kingdom in a weak bargaining position in the upcoming EU trade negotiations. He has done so by categorically ruling out the possibility of requesting an extension beyond the December 2020 current end-date of the transitional period. This means that the United Kingdom will be desperate to strike an early European trade deal, since failing to strike such a deal would risk having the U.K. crash out of Europe with damaging consequences for its economy.

It would be an understatement to say that the U.K. economy can ill-afford another year of uncertainty as to whether or not in the end the country might crash out of Europe. Yet that is what Johnson has done by ruling out an extension beyond 2020. That leaves the U.K. with very little time to negotiate a complex trade deal that normally takes several years to negotiate.

More Brexit uncertainty would come at an inopportune time for the U.K. economy. Such uncertainty has already exacted a heavy economic toll. Indeed, in the three years since the June 2016 Brexit referendum, the U.K. has gone from being the strongest performing economy among the G-7 countries to being the weakest. At the same time, U.K. investment levels have virtually stagnated and the country is now flirting with an economic recession.  

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In these circumstances, the last thing that the U.K. economy needs is political uncertainty that might be generated by a call for another referendum on Scottish independence. Sadly, it is difficult to see how that can be avoided. Scotland voted overwhelmingly for the Scottish National Party, which had campaigned on a pro-Europe platform. In addition, Northern Ireland’s separate treatment in Johnson’s Brexit Withdrawal Deal has set the precedent for dealing with different parts of the United Kingdom differently as far as their relations with the European Union is concerned. 

In the run-up to the June 2016 referendum, Boris Johnson famously promised that as far as Europe was concerned, the U.K. could both have its cake and eat it. In the run-up to this week’s parliamentary election, Johnson has been promising that he has an oven-ready Brexit deal and that the U.K. will soon negotiate a very favorable trade deal with the European Union.

Sadly, it will not be too long before the U.K. electorate learns that much as Johnson over promised on Brexit in 2016, he has done the same in the latest election campaign. More hopefully, they might find that now that he has a commanding majority in parliament, he will walk back his categorical rejection of asking Europe for an extension of the 2020 end-date so as to give the U.K. more time to reach a favorable permanent EU-U.K. trade agreement.

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.