What's Up With the World: Brexit
Undoubtedly, Brexit and the trade war are the biggest political issues which have affected the world markets in 2019 - Brexit for the largest part of 2018 as well. Now, both appear to be on their way to be resolved. Can we trust this?
Let's first note that it is to everybody's best economic interests if both issues are resolved. Naturally, what makes sense for the economy has not stopped administrations from acting on the end of the spectrum: the Trump administration imposed tariffs, China for asked for a full revocation of the tariffs before reaching an agreement, and the UK from asking to leave the EU in the first place. Thus, rational thinking is really out of play in this case - what we are left with is purely emotional negotiations, building on previous bitter experiences and opinions on what is right or wrong. As in any case, what is right and what is wrong can be fundamentally different depending on which side of the table one is sitting.
What follows is the Wolf's view on how things are expected to play out with Brexit.
News pieces have been published suggesting that an agreement is being formed between the EU and the UK. Even though a legal text of the agreement was expected to have been completed by midnight, negotiations will drag on today as well. In the case that an agreement is reached, what remains to be seen is how this will address the Irish backstop issue. At the moment, Boris Johnson's proposal was of zero practical use, while the EU still remains adamant on the topic, effectively dividing Northern Ireland and the Republic of Ireland, and putting UK borders in the Irish Sea.
Latest news suggest that Boris Johnson has made major concessions to EU demands over the Irish border - essentially agreeing to the same type of deal that the Parliament has turned down when Theresa May was the PM. If a similar deal is brought to voting, it is unlikely that it will get the green light from the UK Parliament, given that Johnson will have to persuade hardline Brexiteers such as the DUP and the ERG within the Tory party. If the deal is rejected, the UK will be forced to ask for an extension for January 31, something which will also mean that general elections are highly likely.
The probable outcome of a Brexit vote in the UK Parliament is very hard to gauge: if the deal is the same, then there is no reason to back it up, other than the fact that MPs like Boris Johnson more than did Theresa May. Forecasts by the Guardian suggest that the deal will pass, however this is doubtful. There are still many unknown factors in the UK Parliament, for example how the 21 Conservative moderate MPs who were expelled by Boris Johnson will be voting. On the other hand, hardline Tory Brexiteers would likely vote in favour of the Brexit deal, as they prefer a bad deal to the possibility of a Labour-promoted second referendum. Boris Johnson was smart enough to get these Tory "Spartans" under his payroll and thus ensure their support for any proposal that comes after the negotiations. In the Labour camp, things are still uncertain given that some dissidents would be willing to vote for a Brexit deal in order to prevent a no-deal Brexit - a bit of an odd justification as this is prohibited according the legislation passed last month.
Where does this lead us? Excluding the seven Sinn Fein MPs, the Speaker and his three deputies who usually don't vote, a total of 639 MPs remain. We expect that all 288 Tory MPs will be voting in favour of the deal, with approximately half of the expelled 21 MPs also supporting it. Around 10 Labour rebels are also likely to vote in favour of the deal, leading to 308 votes. Even assuming that 10 out of the remaining 14 independent MPs will vote for the deal, this makes the total at 318.
On the opposite camp, 235 Labour MPs (excluding 10 dissidents), plus 35 SNP, 19 Liberal Democrats, 5 from the Independent Group for Change, 4 Plaid Cymru MPs, and a Green MP make a total of 299 votes. With the assumption of 4 independent MPs plus 10 from the list of expelled Tory MPs, the total stands at 317 votes. Not what you would call a wide margin - especially since we made the strong assumption that independent MPs will mostly be in favour of the deal.
Which leaves us with the DUP. The 10-MP party voted both against the Theresa May deal, as well as against blocking a no-deal Brexit. As in the Theresa May deal, the DUP can be the decisive force as to whether or not the deal is accepted. DUP does not like deals with the EU, but, on the other hand, it also doesn't like the thought of another referendum. Thus, if the DUP is persuaded that a new referendum take place, it will vote in favour of the deal - otherwise, it would be far more likely to vote against the deal, especially if it means general election. Still, the most decisive factor will likely be whether or not Northern Ireland is viewed as part of the UK or not.