The British people opted for change when they voted on June 23 for the U.K. to negotiate an “exit” from the European Union. Such a choice is the sovereign right of any member of the EU, but it is also without precedent: The EU has expanded but never shrunk since the 1952 founding of its precursor, the European Coal and Steel Community.
Now comes the hard part. Whether this break with the status quo benefits the U.K. in the long run will depend chiefly on the choices awaiting newly installed Prime Minister Theresa May and her cabinet in the months ahead. Choosing well can assure a prosperous future, just as poor choices may prove costly.
The U.S. business community has a tremendous stake in Britain’s success, and we are rooting for the best possible outcomes. But we won’t be passive observers. American companies’ investments in Britain are worth $588 billion, and many of those investments were made to reach not just British consumers but those in the European mainland as well.
Consequently, U.S. businesses are committed to working with the U.K. government to ensure that the priorities of these stakeholders are taken into account in the debates that lie ahead.
For Britain, last month’s referendum opens the door to a host of negotiations. The U.K.’s first order of business, by far, is to negotiate a new trade and investment relationship with the EU, which accounts for approximately half its trade.
German Chancellor Angela Merkel and other European leaders insist that Britain cannot “cherry-pick” the elements of the EU single market it wishes to retain. They insist the EU’s single market is built on “four freedoms,” that is, the movement of goods, services, capital, and people. For instance, if Britain wishes to limit the movement of people, its exports of goods and services may lose their unfettered access to the continental market.
Also of great importance will be the World Trade Organization (WTO), where the U.K.’s membership is bound to that of the EU in a complex way that must be disentangled.
All of these negotiations will go more smoothly if London opts for a path of openness. Some who backed Brexit argued that leaving the EU would empower a global Britain to more firmly embrace free trade, unilaterally and through bilateral pacts. Others disagreed, and some even cited their opposition to the U.S.-EU Transatlantic Trade and Investment Partnership (TTIP) negotiations as a reason to leave the EU. We know which vision we support.
All these negotiations will take time. David Davis, the British official appointed to negotiate the terms of Britain’s exit from the EU (“Secretary of State for Exiting the European Union”), has suggested formal negotiations will begin in early 2017 and conclude two years later.
Since the Brexit referendum, a number of senior congressional leaders have called for a U.S.-U.K. trade agreement to underscore America’s longstanding commitment to the “special relationship” with Britain and provide new economic opportunities to both countries.
Britain’s new government will likely prioritize its negotiations with the EU and the WTO in the near term. After all, nearly half of all U.K. trade is with other EU member states (vs. about 10% with the United States), and WTO rules are important worldwide. A U.S.-U.K. trade agreement could only be implemented after Britain has formally left the EU.
Nonetheless, the case for a U.S.-U.K. trade agreement — further cementing the relationship — is easy to see and worthy of serious consideration. The United States and the United Kingdom share common values as strong democracies with an enduring commitment to civil liberties and the rule of law. Our laws and regulations offer a similar level of protection for health, safety, and the environment. Our alliance was the most consequential of the 20th century — indeed, perhaps the most important of modern history.
As Senate Finance Committee Chairman Orrin Hatch recently stated: “Expanding U.S. trade with the U.K. would result in major benefits to both American and British businesses, workers, producers, and consumers. Furthermore, a strengthened economic partnership between the U.S. and the U.K. would produce important geopolitical benefits that are in our national interest.”
Just as the U.S. business community will seek to be heard in the U.K.-EU Brexit negotiations, we will assess in depth the merits of a possible U.S.-U.K. trade agreement. We will make our views heard as we consult with our members and explore their commercial priorities.
The pursuit of a bilateral trade pact with Britain should not in any way prejudice the ongoing negotiations with the EU for the TTIP. TTIP remains a critically important strategic initiative with enormous economic benefits even if it concluded without the U.K.
The Chamber was one of the earliest proponents of this accord, and we lead the Business Coalition for Transatlantic Trade, which brings together hundreds of companies and associations from manufacturing, services, and agriculture to provide input on the substance of the negotiations. We’ve been present at every negotiating round, making our members’ voice heard. Our commitment to TTIP has not wavered.
Finally, with regard to Britain’s future, it’s worth reemphasizing the need for steady leadership in the short term. While some uncertainty is unavoidable, the first order of business for the new British government will be to reassure investors and avoid precipitous action in the coming negotiations with the EU.
Free enterprise and free trade were practically invented in Britain, and the U.K.’s role at the fore of the Atlantic Alliance turned the course of history. The U.S. business community will not forget this. It’s why we must redouble the commitments America shares with Britain — openness in trade and investment and the world’s most successful alliance — in the months and years ahead.