Two huge developments on Brexit this week.
Two huge developments on Brexit this week.
Ilya Somin offers a typically thoughtful case for why a second Brexit referendum would not be a betrayal of the 2016 result. His argument, as I read it, is this: Theresa May’s likely defeat on her dreadful proposed Withdrawal Agreement grants an opportunity to reassess the wisdom of leaving the EU. Given a referendum was the means of making the decision to leave, a referendum is a perfectly legitimate mechanism to test whether the public still wants to. Ergo, deciding to ultimately Remain in a second referendum would not betray the result of the first vote.
A second referendum so soon would violate the U.K.’s convention of having one-off constitutional referendums, the results of which are respected for a generation. The U.K. has had major referendums in the past on remaining within the European Economic Community (1975), changing the general election voting system (2011), deciding whether Northern Ireland should join the Republic of Ireland (1973), and Scottish Independence (2014). The results of all these constitutional decisions have been implemented without discussion of the need to check again whether people really meant to vote as they did. In the case of the EU, the gap between the EEC vote and 2016 was 41 years.
That is why, in the government leaflet that was sent to all households during the referendum campaign urging people to vote remain, the government promised to implement the result. It told the public “This is your decision. The Government will implement what you decide.” The implication was clear: the vote would be respected and delivered upon. And the result was clear: people wanted to leave the EU. Reassessing now would be an explicit breach of that promise.
Where Brexit negotiations are concerned, we have reached (as they say in Britain) “squeaky bum time.” The triggering of Article 50 on March 29th 2017 started a 2-year countdown for the UK and EU to negotiate a withdrawal agreement for a binding international treaty.
For an economist, it’s rare that events occur enabling us to directly test our economic theories and assess them against outcomes. Britain’s Brexit vote last year was one such moment. As the formal Article 50 process for EU withdrawal begins today, it’s worth re-examining the consensus view on what a “Leave” vote would mean. Those warning of impending doom today are many of the same people who predicted a decision to exit would bring immediate economic slowdown.
The Economists for Brexit group of which I was a founding member was busy refuting anti-Brexit reports pre-referendum. Britain’s Treasury led the way, claiming GDP would be 6.2 per cent smaller after 15 years if Britain exited the EU and single market (replaced with an EU-UK bilateral trade deal, as Prime Minister Theresa May now desires). Importantly, they forecast the mere act of voting to leave would trigger an immediate 4-quarter recession with 500,000 people losing jobs, higher inflation and lower house prices. There would be a “profound economic shock.” The IMF warned that a path towards leaving the single market would mean a recession in 2017. The OECD predicted a “major negative shock.” An Economists for Remain letter signed by 12 Nobel Laureates likewise said “a recession causing job losses will become significantly more likely.”
Yet the UK economy has proven robust. Immediate financial market turbulence following the unexpected vote quickly subsided. Far from contracting at the Treasury’s forecast 0.4 per cent annualized rate, the economy is currently growing at 2.8 per cent per year. The employment rate for 16 to 64 year olds is at its highest ever level, 74.6 percent, with unemployment at just 4.7 percent. House prices are currently increasing at 6.2 per cent per year. Annual broad money growth was 6.6 percent in January – suggesting robust nominal GDP growth through 2017. Even after Theresa May pledged to leave the single market and customs union, forecasters were revising growth estimates upwards for 2017.
The economic consensus did forecast correctly the pound’s fall on a trade-weighted index (around 13 percent decline), as did the Economists for Brexit analysis. This will raise the UK inflation rate. But even the recent uptick in inflation to 2.3 percent is in part driven by increasing commodity prices affecting U.S. and German inflation rates too. The flipside has been strong export order books, highlighted by the Confederation of British Industry’s buoyant survey last week. What happens to the pound in the longer term of course depends on the economic fundamentals, but what is clear is that so far the doom-mongers have been wrong on the macroeconomic impact overall.
Inside U.S. Trade reports that there may be a confirmation hearing for President-elect Trump’s pick for Commerce secretary, Wilbur Ross, “as early as next week.” Here are some questions I would ask him. Some of these are designed to poke him a bit on inconsistent statements he has made, but for others, I’m just curious to see what exactly the Trump administration has in mind for its trade policy.
The European Union’s leaders said they wanted the United Kingdom to remain in the EU. But Brussels offered only minimal concessions to British Prime Minister David Cameron, undercutting his effort to sell the benefits of continued EU membership.
Now the Eurocrats who dominate EU policy are attempting to push the UK out the door. London should slow down the process and maximize its leverage.
The vote to Leave shocked Eurocrats across Europe. Even many Brexit advocates believed that Remain would carry the day. The British government is not prepared to announce a Brexit program.
However, EU leaders almost immediately began pressing London to act. They want the UK to trigger Article 50, which begins a two-year process to renegotiate a departing member’s relationship with the EU.
Once taken the decision cannot be reversed. And if no agreement is reached within two years the country is unceremoniously defenestrated without any special access to the European market.
But the UK need not hurry. The British government should hold off until it is ready.
The United Kingdom will exit the European Union. The shock waves first hit Scotland. The secession-minded government plans to hold another independence vote. Next time a majority of Scots may see no reason to stay.
Both the Conservative and Labour Parties face bitter, internecine strife. Calls already have been made for the resignation of opposition leader Jeremy Corbyn. Prime Minister David Cameron announced his intention to resign and the rest of his government is likely to be swept away as well.
On Thursday, Britain will vote on whether or not to leave the European Union (EU).
A few years ago President Barack Obama urged members of the European Union to admit Turkey. Now he wants the United Kingdom to stay in the EU. Even when the U.S. isn’t a member of the club the president has an opinion on who should be included
Should the British people vote for or against the EU? But Britons might learn from America’s experience.
What began as the Common Market was a clear positive for European peoples. It created what the name implied, a large free trade zone, promoting commerce among its members. Unfortunately, however, in recent years the EU has become more concerned about regulating than expanding commerce.
We see much the same process in America. The surge in the regulatory Leviathan has been particularly marked under the Obama administration. Moreover, the EU exacerbated the problem by creating the Euro, which unified monetary systems without a common continental budget. The UK stayed out, but most EU members joined the currency union.