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December 15, 2017

Amendment 9 conundrum

When we grow up, someone will need to explain to us how a vote that makes it dramatically easier for British MPs to veto the Article 50 withdrawal agreement should be good news for a soft Brexit. What we suspect is that the people who make this argument, including some of the MPs who voted for Dominic Grieves' amendment, do not have a clue about the EU's  decision-making procedures and only focus on domestic UK politics. They have probably not even read Article 50. 

We noted a comment by Danuta Hübner, who heads the European Parliament's constitutional affairs committee, saying this:

“Once it is finalised and it is signed by both parties, then any change to it means reopening negotiations, meaning we will not make it within the two years, meaning there is a hard Brexit.”

It really is that simple. The Tory mutineers hope for a different development. Like the Scottish separatists in 2015, and the Catalan separatists in 2017, they believe the EU will come to help them. That won't be so. There is no way the EU will reopen negotiations after an agreement is signed. The rebels may hope that the ensuing political chaos in the UK would unseat Theresa May, trigger elections, and get another leader into 10 Downing Street with an explicit mandate to hold a second referendum. We have heard suggestions that Jeremy Corbyn may base his entire campaign in a hypothetical election on the claim that he would get a better deal. It will take Jean-Clauder Juncker, Donald Tusk, and Hübner, only seconds to debunk such nonsense, should it ever come to this.

A correspondent with a good insight into the political process in the UK wrote to us yesterday that the amendment will in the end not make any substantive difference. Its purpose was mainly to prevent an unforced error on the part of the government, in the extremely unlikely event that negotiations last all the way until March 2019. So, the idea behind the amendment is to prevent a drafting error in the agreement. 

The European Council will today make a formal declaration that sufficient progress has been made. The Guardian writes this morning that government sources suggested they were happy for the EU to offer a fudge on trade policies at the current stage of negotiations, what the paper describes as a "vague declaration on the future trading relationship". Since there will be no trade agreement ready for signature before Brexit anyway, we think it is unlikely that the trade deal will become a subject of heated debate in the run-up to March 2019. The trade talks will only start to get concrete once the UK has entered a transitional period.

In order to avoid further inflaming the political debate, and to prevent defeat, the government has agreed to withdraw its own amendment to the bill, which would have set March 2019 as the irrevocable date of Brexit. Since the government has no intention of extending the Article 50 phase, this amendment is not necessary. Nor would it be meaningful if there were a change in government, since any new parliament can repeal old legislation.

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December 15, 2017

The negligible GDP impact of the single market

This is via Adam Tooze? (@adam_tooze) from the Wall Street Journal. It shows something we have been suspected for a long time - that the long-term economic impact of the single markets has been non-existent.

Note that these are cumulative figures. For a policy to boost GDP per capital by 0.79% on average over a period of 25 years, essentially means that it has had virtually no effect. The slightest measurement error would blow this result out of the water. And even if the numbers are correct, expect there to be real losers as a result of a massive re-distributional effect that resulted from the single market - from smaller to larger companies and from the periphery to the centre. 

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