Brexit and US Trade

Introduction

The choice of Britain to exit the European Union has cast the nation into instant turmoil of change, uncertainty, and questions. However, the choice opens up new possible vistas of trade between the United Kingdom and the United States which could strengthen both. This break down of allegiance could lead to a resurgence of alliance, or further weakening of an already unsteady political climate. The desires of trade are part of the vaster network of cultural values which drive collaboration, chief of which is national security. The insecurity of the next two years may have drastic results for how future trade discussions go between the United States and the United Kingdom. 

New Moves

President Obama quickly changed his tune once the choice was made for Brexit. Only a short time before the vote the President had warned that the choice to exit would move Britain to the back of the queue concerning trade allegiances. However, “in the face of a severe financial market reaction to the vote to leave the EU, U.S. officials are making more supportive statements about the strength of the U.S.-U.K. ‘special relationship’ and stressing that they are still analyzing the impact” (Lawder). Indeed the change is large, and will take time and sensitivity to analyze. However, the United States’ reaction (as well as the warning) was done from a position of concern over military issues, as so many responses are. 

The United Kingdom was the strongest ally for the U.S. in the European Union, and the reality that the nation may become poorer has immediate impact on the American agendas. The U.S. sees that “A poorer Britain may not be able to afford its pledge to spend 2 percent of its GDP on defense at a time of increasing threats from Russia, nor a new fleet of nuclear submarines that form a key part of the West's nuclear missile deterrent” (Lawder). That nuclear deterrent is in part the submarines which are up for renewal this year, as “The British government is scheduled to make a final decision this year on replacing the four aging submarines that carry its Trident intercontinental nuclear ballistic missiles, a program that could cost as much as $167 billion” (Lawder). With the drop in their currency and the insecurity troubling the financial and investment sector this type of investment may not be made, much to the concern of the U.S.

The newfound insecurity of Brexit has not yet settled, and may lead to greater instability in the region. Especially concerning, “Britain's submarine fleet is based at Faslane on Scotland's west coast. Should Brexit prompt Scotland to make a second, successful bid for independence, Britain may be faced with having to spend billions to build a new submarine base” (Lawder). If Britain is poorer, which is looks to be outside of the EU, it may have difficulty holding up its promises to the U.S. and NATO to fight terrorism and stave off Russia’s growing strength in the region (Lawder). The United Kingdom had been a major player in the defense of the region, but that may have to change as budgeting priorities shift as the chief Treasurer of the U.K. suggests. However, this reality could be staved off with a stronger U.S.-U.K. trade accord which will help bolster this transitional period. 

Discussion about the possibility of strengthening the trade between the U.S. and the U.K. is not new, but the political and economic has changed a great deal since the last foray into such waters. It was in the 1990s and the early 2000s that conservatives from both nations analyzed the North American Free Trade Agreement, and the options for greater ties. At this time, conservatives on both sides of the Atlantic pushed the U.K. to spurn the EU and join the nascent trilateral trade bloc. In 1999, the Senate Finance Committee even commissioned a report to study the scenario. ‘This report demonstrates the potential benefit of cementing our strong relationship with Britain by joining with them in a free-trade partnership,’ Senate Banking Committee Chairman Phil Gramm said in 2000. ‘I am also convinced that such a partnership would go far toward removing the trade barriers that are being built around the European Union.’ (Oreskes and Guida). It appears that this insight may still hold true today even with the many changes. 

The TTIP Debate

This change comes at a time when the U.S. has finally accepted that the U.S.-European Trans-Atlantic Trade and Investment Partnership (TTIP) is probably not going to pass muster for the U.S. It was struggling before Brexit, but without Britain at the negotiating table it is highly unlikely to succeed outside of the single market (Lawder). Indeed, there are many in the EU and Britain who do not want the massive free-trade agreement to pass for fear of its power to shape and modify consumers’ health, environment, and warp social protections. Some used this justifiable concern to manipulate the British public into thinking that Brexit would save them from the difficulties of TTIP, but that is just not the case. 

Considering that many analysts believe that TTIP will still go through without Britain’s involvement this may mean that both the U.S. and U.K. will face its impact when dealing with the European Union. This is alarming due to the complexity of the measure, its sweeping standards, and some controversial aspects. Britain has been one of the largest supporters of TTIP, and it is likely that any U.S.-U.K. trade agreement may have some similar aspects. The American public would do well to consider this especially in such cases as, when the European Commission, swayed by public criticism, started to waver on one of the most controversial aspects of TTIP – the bit that allows a multinational company to sue a government for millions if it dares undermine said company’s ability to profit – the UK got a load of other member states together to tell the Commission they wanted it kept in. (Lowe)

This is alarming considering the trends of American corporations already rewriting and overwhelming environmental and human protection standards. With this in one would ask if the U.S.-U.K. trade agreement would benefit the peoples of these nations, or simply the corporate/military interests. This is especially worrisome concerning “The UK has long been one of the biggest drivers of deregulation within the EU” (Lowe). It appears that Britain was being balanced out by being a part of the EU in this regard, and if they bring this disregard for protections to the table with the U.S. this could lead to a compounded lack of consideration for public protection. Whether or not this makes both nation’s money, or increases international security, it will not be in the best interests of the citizens if this is the case. After all, the fact remains that the U.K. trades over half of its goods with the EU, and they will be required to fulfill all the standards of TTIP if it passes. 

Time to Consider

There is time to consider the various implications and benefits of stronger trade between the U.S. and the U.K since the U.K. has two years to negotiate its exit from the EU (Oreskes and Guida). To complicate the process of preparing, the U.K. “would be prevented from negotiating separately with the U.S. until it has fully extricated itself from the bloc. The former empire would also have to sort out its relationship with the World Trade Organization” (Oreskes and Guida). American advisers admit a two way trade agreement will be much easier to pass through Congress than sweeping reform like TTIP, but just because something is easier to do does not mean it is the right thing to do. Considering that trade agreements have intense long-term impact on culture and the environment they should not be made in order to satisfy the needs of the present. All too often these needs are political in nature and subject to fast change, while the detritus of law they leave behind are not. 

Little considered is the benefit that could arise from a U.S.-Russia trade agreement, which is already in place moderately through their joint involvement in the World Trade Organization (WTO). Rather than bolstering allies and strengthening defenses, citizen health would be better served by finding sustainable and mutually beneficial relations between super powers. After all, progress was made in this direction when Russia joined the WTO in 2012, but has since been derailed by conflicting interests in the Ukraine (USTR). This created a climate of possibility, as; on December 21, 2012, the United States and Russia both filed letters with the World Trade Organization (WTO) withdrawing their notices of non-application and agreeing to have the WTO apply between them. The application of the WTO agreement between the United States and Russia will benefit U.S. businesses and workers by improving market access for U.S. exports of goods and services and bringing Russia into a system of established, enforceable, multilateral trade rules. (USTR)

In the Here and Now

While there is great opportunity for improvement with the Brexit change, there is also threat of degradation of international relations, of which trade is only a small part. President Obama was conciliatory and did not add to the feelings of panic clearly coming from the newly released nation, but his comments reflected a lack of empathy characteristic of Americans who are not seeing their currency devalued; my main message to Cameron, Merkel others is that everybody should catch their breath, come up with a plan and a process that’s orderly, transparent and that people understand, and then proceed with the understanding that both sides have a stake in getting this right. And I think that will be a difficult, challenging process but it does not need to be a panicky process. (Revesz)

While the state of the EU does seem to be disjoined, and difficult the effort is still in its early stages, and it is hard to draw conclusions about whether or not it is a failure or not. In such opinions as in the market, so much depends on trust. The surge of violence and terrorism in the region has led to increased nationalism across the board, which is anathema to trust, and most likely plays a large role in Brexit. The goal of the EU is to increase peace and prosperity for all in their charge, and in times of threat and recession it is all to easy to cry failure (Ivanovitch). 

Conclusion

There is no question that Brexit will change international trade, and culture radically. However, this change will not happen overnight, and much is left to be discovered in the interim period where Britain and the U.S. will no doubt seek to strengthen their relations.

Works Cited

Ivanovitch, Michael. “Nevermind the Brexit, UK will emerge with a good trade deal.” CNBC, 27 Jun. 2016. Retrieved from: http://www.cnbc.com/2016/06/27/nevermind-the-brexit-uk-will-emerge-with-a-good-trade-deal.html

Lawder, David. “U.S.-UK alliance seen outweighing Brexit trade concerns.” Reuters, 28 Jun. 2016. Retrieved from: http://www.reuters.com/article/us-britain-eu-usa-alliance-analysis-idUSKCN0ZE04Q

Lowe, Samuel. “No, we can't protect ourselves from TTIP by leaving Europe. Here's why.” The Independent, 4 Feb. 2016. Retrieved from: http://www.independent.co.uk/voices/no-we-cant-protect-ourselves-from-ttip-by-leaving-europe-heres-why-a6853876.html

Oreskes, Benjamin, and Victoria Guida. “The bright side of Brexit? A U.S.-U.K. trade deal.’ Poltiico.com, 24 Jun. 2016. Retrieved from: http://www.politico.com/story/2016/06/brexit-us-britain-trade-deal-224776

Revesz, Rachel. “Brexit: Obama says US trade is the least of the UK’s problems right now.” The Independent, 30 Jun. 2016. Retrieved from: http://www.independent.co.uk/news/world/americas/brexit-obama-says-us-trade-is-the-least-of-the-uk-s-problems-right-now-a7110081.html

Shapiro, Gary. “Why Brexit Is Actually Good News For U.S. Trade.” Fortune, 29 Jun. 2016. Retrieved from: http://fortune.com/2016/06/29/brexit-u-s-treade-uk/

USTR. “President Obama's Signature Paves Way for Permanent Normal Trade Relations with Russia and Moldova.” Office of the United States Trade Representative, 2016. Retrieved from: https://ustr.gov/Russia