Is Your Ability to Conduct Trans-Atlantic Trade in Jeopardy?

The impact of the UK’s exit from the European Union following a positive June 23 referendum result has long been questioned. But now, the focus is also on what a “Brexit” will do to trans-Atlantic trade.

U.S. trade representative Michael Froman has warned that if the UK parts ways with the EU, it would, in its dealings with the U.S., face the same tariffs and trade barriers as other non-EU countries, including China, Brazil and India, according to BBC.com. At present, tariffs paid by UK exporters on goods sent to the U.S. are relatively low (about 3%) because of the former’s status as an EU member country, the news outlet said. The U.S. is the UK’s largest export destination, a market worth about $5 billion. BBC.com characterized the variety of goods exported from the UK to the U.S. as “huge,” noting that it ranges from “gin and industrial chemicals to live animals and vegetable fats.”

“If British people vote to leave the EU, it will put the TTIP talks in shambles.”

Yet, changes in tariffs are only the beginning of how the UK’s departure from the EU could affect trans-Atlantic commerce. “Brexit” also puts the potential Transatlantic Trade and Investment Partnership (TTIP) deal between the EU and the U.S at risk, Yahoo News reported. Currently being negotiated, TTIP is intended to “ease non-trade barriers and harmonize bureaucratic rules that impede commerce and investment between the EU and the U.S. As one of the largest trading economies in the EU, Britain would play a major role in the TTIP, creating the world’s largest free trade zone.

Some say TTIP will implode if Brexit comes to fruition. “If British people vote to leave the EU, it will put the TTIP talks in shambles,” Gary Hufbauer, a former U.S. Treasury official who is now affiliated with the Peterson Institute for International Economics, Washington, D.C., told Yahoo News. “There will be no way of going forward because there will be so many uncertainties.”

Edward Alden, a trade expert at the Council on Foreign Relations, concurred. Alden told Yahoo News a Brexit would “throw the whole TTIP project into the air” as the EU and Britain struggle to adjust to the change. “Conclusion of the TTIP would fall down on the agenda,” Alden said. “Everybody would be scrambling to try to figure out what … the new relationship [is] between Great Britain and Europe.”

Yet even if TTIP does not fall apart in the wake of a Great Britain’s exit, the trade dynamic between the U.S. and the UK will change drastically. According to Bloomberg, President Obama stated during TTIP negotiations in Germany that if the UK quits the EU, it will be left behind, while EU-U.S. trade relations get a “boost” from the treaty. Asked what the outcome would be should the “Brexit” vote swing in this direction, Obama asserted that while the UK might eventually score a bilateral trade deal with the U.S., “it’s not going to happen any time soon. The UK’s going to be at the back of the queue,” Bloomberg reported.

Interestingly, some observers believe the “Brexit threat” could propel TTIP negotiations forward. Former senior U.S. diplomat Daniel Hamilton, director of the Center for Transatlantic Relations at Johns Hopkins University in Baltimore, noted that a solid message from the negotiations that TTIP is moving ahead could remind the British that they will “miss out” if the UK exits the EU, according to Yahoo News. Hamilton said negotiators for both sides will be compelled to “go faster to try to influence the public debate in Britain.”

Hufbauer agreed. “It could be used as an argument to help the ‘remain’ camp to prevail in the ‘Brexit’ vote.”

Bloomberg said it has been tracking the likelihood of Brexit over the past few months in conjunction with Number Cruncher Politics. According to its most recent forecast, there is presently a 21% chance that Great Britain will sever its ties with the EU.

CEOs with business ties to England should meet with their European business heads to discuss how the ramifications of such a drastic move would affect their customer and partner relationships, as well as their profit margin, and plan accordingly.


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