Iraqi Kurds and Catalans vote on independence. NAFTA negotiations enter round three. Republicans attempt to repeal Obamacare one last time. All in The Week Ahead.
Iraqi Kurds vote on statehood
This Monday, Iraqi Kurds will vote on whether or not to secede from Iraq and form their own independent state. Although the measure is not legally binding — the Iraqi constitution has no mechanism for regions to secede and form their own state — the referendum is likely to secure a majority vote in favor of secession. The Turkish, Iranian, and Syrian governments, as well as the Iraqi government, have all criticized the referendum, with Israel the only country to openly support the referendum. The Turkish, Iranian, and Syrian governments have all become concerned that a successful “yes” vote in Iraqi Kurdistan could lead to pressures from their respective Kurdish regions to hold their own referenda on independence, which would further complicate domestic politics.
The final consequences of a “yes” vote are not entirely certain: Iraq is almost certain to reject the vote outcome, but may be more willing to negotiate with Kurdistan on a a better power-sharing arrangement; Turkey and other regional powers have threatened economic retaliation, but some believe that Turkish reliance on Kurdish oil imports may limit its ability to respond; and some, including the United States, are concerned that such a move will inflame tensions between Iraq and Iraqi Kurdistan, making the fight with ISIS more difficult. This could also have repercussions for the next Kurdish parliamentary elections in early November and Iraqi parliamentary elections next spring, depending on how other players in the region respond to the vote.
NAFTA negotiations underway in Canada with an uncertain outcome
This week, NAFTA renegotiations will continue in Ottawa, following several official and unofficial meetings between parties in Mexico, the United States, and Canada. Although the three countries have agreed broadly on an update to the agreement, including measures relating to digital trade and updated standards, many of the thorniest political issues in trade remain. All three countries will try to protect highly sensitive industries that rely on carve-outs in NAFTA — dairy in Canada for example. Despite the harsh political rhetoric that has come out against NAFTA in the United States, and increasingly Mexico, several major industries have grown successful due to complex, interlinked value chains across the continent. A withdrawal by one country or substantial NAFTA rewrite would likely create huge disruptions. Although the auto industry is the most obvious industry that has forged much of its success on NAFTA, the pharmaceutical and tech industries have also benefited from the relatively unencumbered flow of goods across the three borders. In addition to the thorny political and economic issues to be resolved, there is also the issue of time: Mexico will elect members to both its Chamber of Deputies and Senate, as well as president in July 2018. Members of both houses will not be able to consider a NAFTA rewrite if it is presented too closely to the election. Although there has been progress in some areas, without a firm conclusion to the NAFTA renegotiation within at most a few months, the deal could likely collapse due to both Mexican and US elections in 2018.
Catalonia push ahead with independence vote despite Spanish backlash
This Sunday, Catalan voters, as of this writing, are slated to head to the polls to decide whether or not to secede from Spain and form an independent state. The vote would come following a significant escalation in efforts by the Spanish central government to ensure the independence referendum is not held: last week the Spanish police seized ballots and campaign literature and arrested several Catalan officials tied to the referendum, which the Spanish government has denounced and the Supreme Court has indicated is unconstitutional. This throws into question whether the Catalan government will have the capacity to hold a referendum if it is unable to secure the proper documents to reflect the will of Catalan voters. If the Catalan vote proceeds, however, the outcome still remains highly uncertain. Although over 70% of Catalans support having an independence referendum, polling shows a much narrower divide on whether to actually move forward with independence: a recent poll showed approximately 41% in favor of independence and 48% against.
Republicans attempt to repeal Obamacare for the final time
This Wednesday, the U.S. Senate is expected to take up legislation to repeal many of the key regulations of the Affordable Care Act (ACA), also known as Obamacare, and replace major sources of funding with individual block grants for U.S. states that are eventually phased out. The exact schedule, however, remains in flux: with news breaking Friday that Senator McCain planned to vote against the measure. In addition to the likely no votes from Senators Collins and Paul, and possibly also Senator Murkowski, it doesn’t appear that there is a clear path to the 50 votes needed to pass. States are expected to lose hundreds of billions of dollars in current healthcare funding over the next 10 years if the bill passes leading to opposition from health insurance companies, doctor and nurse associations, several governors from Democratic and Republican parties, and uniform opposition from Democrats in Congress.
The bill may also suffer another blow this week; the Senate parliamentarian may rule that several of the regulatory changes introduced by the Cassidy-Graham-Heller-Johnson bill are out of order and may be stricken from the bill. If that were to occur, the regulatory structure and requirements from the ACA would remain in place with less money to pay for any of it, making passage even less likely. Despite these concerns, there is still substantial pressure from conservative activists and donors to pass some form of repeal to the ACA, which may be sufficient to push a few no votes to a yes. Should it pass the Senate, it may quickly pass the House and is likely to be signed by the President. Should this occur, chaos is likely: each state will need to form a new healthcare structure within a short 2 years, states will quickly lose billions, and insurance companies will begin to hike premiums.
The Week Ahead provides analytical foresight on the economic consequences of upcoming political developments. Covering a number of future occurrences across the globe, The Week Ahead presents a series of potential upside/downside risks, shedding light on how political decisions affect economic outcomes.
This edition of The Week Ahead was written by GRI Senior Analyst Brian Daigle.
