Wednesday, November 28, 2018

May should visit India to learn horse trading.

After months of negotiations, Britain and the European Union (EU) have reached a deal for Britain's exit from the EU, dubbed Brexit. However, there are still many problems to be sorted out. Details on trade have to be sorted out as Britain wants open trade with Europe, as well as the right to make independent deals with other countries. Britain has to pay 39 billion pounds and there will be a 2 year transition period, which maybe extended for another two years. During that time Britain will have to abide by EU rules without having any say in formulating those rules. France has demanded the right to fish in British waters, without which it will not allow conclusion of the deal. The biggest problem is the land border between Northern Ireland, which is a part of the United Kingdom, and the Republic of Ireland, which is part of the Eurozone. This is the only land border between Britain and the EU and Britain and the Irish want to avoid a hard border, with customs and immigration checkposts separating the North from the South. Britain wants the whole nation to remain within the customs union for a fixed period but the EU wants separate rules for the border, known as the backstop, which will effectively separate Northern Ireland from the rest of Britain. This has upset the Protestant Democratic Unionist Party (DUP) whose support is crucial for Prime Minister Theresa May's minority government. May has warned the DUP that if it does not support the deal there maybe a backstop to the backstop. A government report says that Brexit will result in a 3.9% contraction of the UK economy in 15 years but a no-deal, or hard, Brexit will result in a 9.3% fall. Hard line members of May's Conservative Party, who do not mind a no-deal Brexit, have dismissed these calculations. The Bank of England warned that a no-deal Brexit would result in an immediate contraction of 8% in the British economy, the pound will crash and house prices will fall by 30%. Conservative MP Jacob Rees Mogg called the Bank's report "project hysteria" and labeled the Governor Mike Carney "a second tier politician". May has defended her deal as the best possible and the alternative is a hard Brexit, with catastrophic results. Any Brexit deal will be worse than no Brexit for the British economy. Is there a Plan B? That is the 'Norway model' which has free trade with the EU without being a member. But that involves free movement of people. Trouble is, that people voted for Brexit in the referendum in 2016 because they want to stop immigration. At the time of the referendum no one, including politicians, knew what the economic cost is going to be and the complications of the Irish backstop. Wouldn't it be more democratic to have another referendum after the pros and cons are simply explained? Conservatives don't want one but Labour may support the idea, hoping to bring down the government and force a general election. In India the ruling party would have distributed sackfuls of taxpayer cash to win over MPs. The Brits should learn from us.

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