Out of Luck?

I hadn’t taken Obama’s statement that a post-EU UK would have to go ‘to the back of the line’ for trade negotiations that seriously. I’d seen it as more a nudge to ward off any expectation that trade relations with the US would be instantly restored on some crash course negotiation. But the possibility of the break-up of the UK itself (which seems like a very real possibility to me over the 4 to 5 year time horizon) hadn’t occurred to me as a drag on potential negotiations.

Overall, I liked your post about Brexit. I will have to say though that I’m doubtful the US will make a deal with the UK outside the EU a priority.

1) If Brexit makes it look like the UK may split apart within 5 years, the opportunity costs of negotiating with the UK just are high. USTR isn’t that large an office, so negotiations with the likes of EU states (TTIP) and China are probably going to take a higher priority when deciding how to use scarce resources. TPP will probably have to go back to the negotiating table somehow for another round of negotiations if it’s going to pass the next Congress. A temporary US-UK deal may not be worth the manpower. If anything, we’ll probably be more concerned about where to locate the UK’s nukes that are currently located in Scotland.

2) My general impression from the people I know at USTR is that the failure of TPP (and also the Sanders and Trump campaigns) has left a lot of people there shellshocked. USTR needs a win for it to be taken seriously, but spending time on negotiating with a country that might not exist in 5 years would just look foolish.

3) The next president also doesn’t want to intentionally annoy the major EU states. The next British PM is probably going to be weak until elections are held. Chances are Clinton (if she wins) will care more about our productive relationship with people like Merkel than some blowhard like Boris Johnson, who is just a bull in a china shop. The major remaining EU states together – Germany, France, Spain, Italy and Poland – matter to us more than the UK by itself. These EU states and the EU as a whole would be annoyed by the US playing nice with a country that just openly insulted Europe. If anything, the EU will want to increase the economic pain on the UK to create disincentives to leaving. That is why EU officials are talking already about fast-tracking the UK’s exit.