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Monday, April 15, 2024

Head for the Brexit


Why Britain’s exit from the European Union will benefit the United States

It’s generally agreed by many policy experts that, should the United Kingdom vote to unhitch itself from the European Union this June, the United States would suffer. President Obama and his administration are officially opposed to what is being referred to as “Brexit.” When Mr. Obama visited London recently, he strongly urged the public to vote “no” on the referendum. Unfortunately, his ambitions could cause his administration to miss out on the potential positives of a successful ballot for Britain to leave the EU. In fact, should the U.S. play its cards correctly, with lean and intelligent policies, Brexit may provide a shot to strengthen the special relationship (the strong cultural, historic, economic and military ties) between itself and the U.K. By doing this, there is a strong possibility they could improve the problematic EU as a result.

From the vantage point of those who are risk-averse, it seems to be instinctual that the U.K. should stay. After all, Britain consistently acts as a reliable ally for the U.S. during talks with Brussels, the political center of the EU. For example, Britain played an important role in persuading the EU to back the U.S. in placing tough economic sanctions on Russia back in 2014, as well as in the more current fight against the Islamic State. Additionally, the U.K.’s leave from the EU may bring on severe financial consequences. With the infamous 2008 global economic crash, as well as volatile market shockwaves coming from the Greek debt crisis, the last thing that investors and government officials would want is a rash move like Brexit, which would prompt a drop in trade and a lack of confidence in the pound sterling.

But is this caution a bit overzealous? Frankly, U.S. ties with strategically significant European nations are more than strong enough for the U.S. to find common ground with the EU on problems such as Russian aggression and the Syrian crisis without Britain’s membership in the EU.

With all this in mind, it’s reasonable for many to be anxious that a British exit from the EU could cause some serious panic in the global marketplace. Observing the current polls shows that the British people are evenly split. But the market will have time to recalibrate itself, and no one should be floored by the U.K. leaving. Significant global players like Deloitte and BMW, as well as British-based companies like Dechert and Woodford Funds, are already prepared to withstand the shockwaves. They’re briefing support staff, as well as supplying business-to-business managerial and legal advising. (Not to mention the fantastic white paper painstakingly created by Woodford Funds regarding the economic impact of the Brexit).  Firms like these understand that a referendum to leave would only be step one. In the coming years, companies and firms would be obligated to begin a period of ongoing negotiations with clients, governments and other relevant bodies in order to efficiently navigate the new economic and political landscape.

Even though Britain is not in the best position to ensure it receives the trading preferences many proponents of this exit wish to achieve, it would still likely end up with a sufficient trading relationship with the EU. For example, countries like Greenland (which has benefitted handsomely since it left in the 1980’s), Norway (also a significant beneficiary of close but independent ties), as well other countries who have opted out of the EU, have found their commercial relationships unhampered.

Thankfully, America is in a position to mitigate the damages of Brexit. Rather than Mr. Obama’s White House preaching to the marketplace and its leaders by haranguing them with their Brexit-related anxieties, they should instead assuage their concerns by explicitly stating they would support Britain in its bid for independence. An excellent way to make this clear would be to prioritize Britain’s entrance into whichever version of the Transatlantic Trade and Investment Partnership deal comes in the future. This would give Britain an excellent safety net to soften the possible blows to trade that Brexit would create. And by being included in trade agreements with the U.S., they would have backing from a powerful partner.

Put in this light, Britain’s exit should not be seen as anything close to an economic or political fiasco for the U.S. But how exactly would they gain from the split?

While Brexit seems to be a completely awful and counterintuitive idea to many, it actually might further the mission of maintaining and growing a united Europe — something America has celebrated and encouraged for almost half a century.

America and a free Britain might become further aligned in areas like global safety and development. And should Brexit happen, much of British support for the EU would end, strengthening the Special Relationship on these important issues.

In terms of financial concerns, America would have a more close-knit relationship, cooperating on everything from reasonable financial regulation for their countries to prudential sanctions on countries they feel require them. As of now, Brussels possesses a chokehold on these issues — slowing Britain’s ability to make time-sensitive decisions and forcing them to endlessly debate with the full body of the Union’s membership. With a free-flying Britain, they could trim the unnecessary rules and regulations of the EU and jumpstart a more functional relationship between the world’s top two money powerhouses: Wall Street and the Square Mile.

The two countries share a variety of mutual needs and concerns, making them natural allies. These concerns span from sanctioning specific countries and preventing cyber-thievery ― which might dull their edge in the global market ― to joining forces to gather intelligence. By working together, the two nations will improve trade and surmount economic hurdles, which is a much better scenario than Britain jumping through the EU’s hoops on their own.

All this considered, from an American citizen’s vantage point, it seems clear that with careful planning, vigilance, and strong leadership, Brexit should be undoubtedly beneficial to the U.S.

You can reach RYAN DOWNER at rmdowner@ucdavis.edu.


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