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.
Expect no retraction or apology. This what they do.
The state’s existing buyout program for its own pensions is the precedent for Chicago, which should be a warning: Look out for similar exaggerated claims and shoddy analysis.
I am currently in Ireland and have been following developments closely over the past week, and could not disagree more. Brexit has been an unmitigated disaster in every respect – it has wreaked havoc on financial markets and UK politics, and is likely to result in a breakup of the UK, as Scotland, Northern Ireland and possibly even Wales secede in order to remain in the EU. If Britain gets rewarded by getting good trade deals from us and from the EU, that will just encourage more countries to leave the EU, which is not in our economic or national… Read more »
You want to exacerbate that “unmitigated disaster” and havoc in order to coerce others to give up their national identity in a way they might not otherwise be inclined to do. How many Americans would accept EU membership or something like it? It’s hypocritical for us to force that on others. Nothing should stop the EU from agreeing to an orderly transition to trade terms with Britain similar to what’s in place now under the EU treaty. Just delete the parts that were objectionable, including open migration, and this could all go smoothly. EU intransigence is what is so disruptive,… Read more »
“Older” people have more wisdom than younger people. That’s just a fact Andrew. And 2/3rds of the laws in England were imposed by Brussels over the last 43 years, the worst of which were about borderless crossings and admitting “immigrants” who are unskilled, cannot read or write English, and as has been proven in England………do NOT assimilate to western civilized norms. I don’t know what you’re thinking, that the will of the people in England should be subverted because the ‘globalists” know best. They’ve proven they do NOT know best. As far as mass immigration of unskilled, poor, uneducateds, when… Read more »
Mark: Agree as always, but your Comment “Trump predictably, acted stupidly” is the one I disagree with. I believe you have “confirmation bias”, so when you hear or read a snippet from MSM about Trump, it confirms your negative opinion of him. In fact, however, he made good comments about Brexit but the media slammed him for his “golf course” concerns. Here’s the whole story: Trump bought the rundown resort Turnberry 2(?) yrs ago and spent $140M to restore / improve the hotel, lighthouse and course. Last Thursday was the re-opening. It’s important it succeeds, for his investment and the… Read more »
I agree that the press typically spins what Trump says in the worst light. as they did here. But I think this was a great opportunity to do something presidential that he blew — getting specific about what he thinks about trade with an especially important partner. Nobody knows to what extent he opposes trade in general or just wants to negotiate better terms, and now, more than ever, the markets need to know where we are going.
He didn’t blow it. He gave his sound-bite-off-the-cuff opinion first when he was at the grand-reopening of the $140M Turnberry Resort, then later that day, an expounded defense of our U.K. partner and the important trade pacts we have that will continue and improve, etc. It was a heckuva lot more comforting than the mealy-mouthed Hillary and her veiled love of globalism……….after-all the Clinton Crime Foundation is also called the Clinton GLOBAL Initiative. Hillary made more deals for self-enrichment while Sec of State, than imaginable. Approved 1/4 of our U.S. uranium mining rights selling to Canadian company, that quickly sold… Read more »
Do you think he accepts the general principle that trade is good? I simply don’t know. I understand his view that deals have been poorly negotiated, and he is right on that, but protectionism is a different issue.
Yes, I do. And I think he knows as much about Smoot-Hawley as you and I do. BTW, Smoot-Hawley was just one of the 4 or so reasons the Depression became so bad. And the Democrats in Congress wanted the high tariffs in 1931. The Republican minority in Congress begged/implored Hoover to reject the huge tariffs, but Hoover sided with the Democrats and signed the legislation. Total disaster, but then FDR made it much much worse with his National Industrial Recovery Act NIRA….called NRA……which put maximum prices on 5,000 products and services in the country. Talk about big federal fascist… Read more »
Ooops……NIRA imposed MINIMUM prices on 5,000 products & services, decided by the geniuses picked by FDR’s minions in their offices in DC. It cost the country’s small businesses freedoms and millions of jobs. It even put many business owners in jail, they defied the law and said, rightfully, that they’d go out of business if they had to raise their prices to equal the big national companies.