By: Mark Glennon*
Think what you want about whether Britain was wise to exit the European Union, but, now that it’s coming, Illinois should be demanding, as should everybody, that the administration reverse its stated position that the United Kingdom go to “the back of the queue.” The administration is aggravating a manageable, near term disruption and may help blow it into a major crisis.
It matters immensely. Illinois companies export almost $2 billion annually to the UK. Tens of thousands of Illinoisans are employed here by British companies, and vice versa. The Chicago Tribune detailed a host of Illinois companies that may be hurt in the near term.
The issue is bilateral US – UK trade terms, which will be needed to fill the void left as the UK exits the EU. That void means disruption and uncertainty, which markets and employers abhor. It’s that disruption and uncertainty that tanked financial markets and spiked the dollar exchange rate on Friday.
This evening, futures and exchange rates are indicating more losses for Monday. Preventing a rout is what this is about.
Obvious as the need for immediate attention is, the administration’s policy is otherwise. In an astonishing mix of arrogance, meddling and incompetence, President Obama sought in April to discourage Brexit by telling the UK that it would be put in the “back of the queue” on trade negotiations if it exited, and it reaffirmed that position on Friday after the Brexit vote. Obama evidently hopes to punish Britain for not embracing EU membership, a surrender of sovereignty that Americans would never accept for themselves.
Instead, the administration should be calming markets and employers by assuring them that, regardless of whether Britain exits the UK quickly or slowly, the United States will work closely with it to assure smooth transition to friendly trade terms consistent with the special relationship we have with it.
Donald Trump, predictably, reacted stupidly. Instead of calling for seamless transition to bilateral trade terms he would support, he talked mostly about his golf course in Scotland. Hillary Clinton added nothing of substance.
Most importantly, markets and businesses will soon realize, if they haven’t already, that Brexit may set the template for other departures from the EU. More departures are now likely, dooming the EU with it, as well as the Euro. Disruptions from that can descend into chaos if both perceptions and policy aren’t managed sensibly. Consider just the complexity of how to deal with trillions of Euro-denominated debt outstanding.
I’m in the camp thinking Britain was right to reject faceless bureaucrats in Brussels — which will be good for Britain in the long term. But have no doubt about how dangerous and severe the near term mess can get.
UPDATE 7/14/16: Turns out the UK has now been put at the top of the queue, according to the FT, and Obama hasn’t been honest about it.
*Mark Glennon is founder of WirePoints. Opinions expressed are his own.