How America Can Reap the Benefits of Brexit

A British departure from the EU could be a good thing for the United States — with some careful planning.

By Peter E. Harrell
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How America Can Reap the Benefits of Brexit

The conventional wisdom is that a decision by British voters this June to leave the European Union would be bad for the United States. The White House is on record against the so-called “Brexit,” and President Barack Obama is reportedly planning to weigh in publicly against a vote to leave the EU when he visits London this week.

But by focusing on the downsides of Brexit, the administration may be missing its possibilities. In fact, with smart U.S. policies, Brexit could present an opportunity to deepen the U.S.-U.K. alliance and would likely boost the troubled European project in the process.
As a former State Department official, I understand the reflexive desire of American diplomats for Britain to remain in EU. The U.K. often serves as an ally for U.S. positions in negotiations with Brussels. Britain played an important role in convincing the EU to align with the United States on sanctions against Russia in 2014 and on more recent efforts to combat the Islamic State. U.S. officials also have strong memories of the 2008 financial crash and the market turmoil caused by the Greek sovereign debt crisis and worry that Brexit could spook global markets.


Both of these fears, however, are overblown. The simple fact is that America’s relationships with key continental European states are sufficiently strong that the United States should be able to achieve alignment with the EU on issues such as Syria and Russia even if the U.K. steps back from Brussels.

As Germany continues its emergence as the driving engine of Europe, the U.S.-German relationship will become the most important focus of EU policy — regardless of whether the U.K. remains an EU member. In recent years, the United States has also managed skillfully to deepen relationships with France, Italy, and other large EU players on key issues such as counterterrorism and Europe’s migration crisis. A post-British EU would force our diplomats to spend more time in continental Europe and less in London, but they will be able to adapt to the new circumstances.

The economic risks of Brexit can also be contained. With public polls on the referendum showing a close vote, markets should have time to adjust, and a decision to leave should not come as a shock. Major European and multinational companies have already begun to develop contingency plans. Companies understand that a Brexit vote itself would only be the start of the process, triggering a two-year negotiation on the terms of exit, providing time to adapt. While the U.K. may not be able to negotiate the highly favorable trading terms with the EU that some British supporters of Brexit aspire to, given the importance of the U.K. to the wider European economy, it is likely that the U.K., like Norway and other non-EU European countries, will be able to reach some kind of adequate economic accommodation with the European Union.

Furthermore, the United States can take steps to mitigate these risks. Instead of spooking markets by talking up Brexit fears, the United States should calm them by making clear that it would stand ready to help an independent Britain. For example, the United States could affirm that it would include an independent Britain in any future Transatlantic Trade and Investment Partnership agreement with Europe, which would provide Britain an avenue to mitigate any potential adverse trade ramifications from Brexit. The United States could also explore the feasibility of inviting Britain to join its most important trading block, NAFTA, which already covers roughly $20 trillion in combined GDP, something not currently possible since the EU is responsible for European trade policy. As an aside, potential new NAFTA negotiations would enable the United States to seek reforms of outdated provisions that lag behind recent, higher-standard trading agreements.

So Brexit need not be a diplomatic and economic disaster for America. But how might the United States actually stand to benefit?

First, contrary to conventional wisdom, Brexit is likely to strengthen the project of European integration — a project the United States has supported and benefited from for 40 years. Since the 2008 global financial crisis forced northern EU member states to begin bailing out their southern neighbors, the EU has trended toward a “two-track” union with a core that wants greater political and economic cohesion and a periphery that, for economic and political reasons, wants to remain less integrated. Keeping Britain, with its deep ambivalence about the EU and opposition to further European political integration, inside the union is likely to slow the emergence of the cohesive, united core Europe needs to reach common ground on issues that matter to the United States, like the migration and sovereign debt crises.

Second, the United States and an independent U.K. could deepen cooperation in ways that aren’t currently possible across the spectrum of global security and development issues. Take development policy: The Obama administration has already established partnerships between USAID, the U.S. development agency, and the Department for International Development, Britain’s counterpart. If Britain leaves the EU and stops delivering a large share of its global development assistance through European Union vehicles, the United States could expand the U.S.-U.K. development partnership and align a greater share of the two countries’ development assistance. More importantly, Brexit would enable the United States to strengthen bilateral cooperation on financial issues such as sanctions and prudential financial regulation.

Currently, many of these issues are controlled in Brussels and must be negotiated with the entire EU membership, which can slow decision-making and lead to a “lowest common denominator” approach. With an independent U.K., the United States and Britain could develop a more efficient, streamlined process for financial cooperation between the world’s leading financial centers, New York and London.

The U.K. and the United States share common interests and positions on a host of issues, from cyber-enabled IP theft to preventing currency manipulation that undermines both countries’ competitiveness in the global marketplace. There’s a reason we refer to it as a “special relationship”: On issues from intellectual property protection and entrepreneurship to intelligence collection and the use of military force, our values tend to be even more aligned with Britain than with the broader continent. The United States and an independent U.K. could establish a formal strategic partnership to collectively address joint economic challenges and develop bilateral trade remedies, rather than the U.K. having to manage a number of these issues through EU processes.

Exiting the European Union would be a dramatic move for Britain. U.K. voters need to carefully consider numerous issues, such as their vision for Britain’s role in Europe, how Brexit could affect Scotland’s simmering bid for independence from the U.K., Britain’s financial interests, and a host of domestic U.K. economic and regulatory issues. As an American, I do not profess to know whether Brexit is in Britain’s interest. For Washington, however, the question is simpler: Is Brexit in America’s interest? With smart policies, the answer to that question is yes.
 
 
 Peter E. Harrell is an adjunct senior fellow at the Center for a New American Security.

 
Photo credit: MATTHEW LLOYD/Getty Images

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