Brexit’s Ripple Effect: Time For US Companies to Reassess Their European Strategy
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The UK’s relationship with the institution created by its European neighbors, has long been fraught with seeds of discontent. Squabbles over payments to the European Union’s budget, complaints by small businesses about regulations emanating from Brussels, opposition to the expansion of policy-making beyond trade, worries about handling financial crises, and anger over immigration both from other member states and lands beyond finally delivered the result that the “leave” campaign sought.
While virtually every analyst expected a close outcome, the result is shocking financial markets and companies. Eventually the dust will settle, currency and stock markets will stabilize, and a “negotiated divorce” will take place over the next two years.
This will be an important time for U.S. companies to reassess their European strategy and operations. U.S. companies have $588 billion dollars invested in the UK. That represents 23 percent of U.S. corporate investment in the EU. Now the UK is likely to see its position diminish as a favored launching pad to enter the European market. With trade barriers, mainly tariffs, likely to rise for products exported from the UK to the 27 other EU countries, the UK will be a less desirable location for U.S. firms.
Perhaps more important will be the disappearance of London’s voice in EU matters that are of concern to U.S. commercial and foreign policy interests.
London’s position on financial services regulations issues more closely match Washington’s than any other European country. These include imposition of sanctions on Russia, relations with the Middle East, and the still-under-negotiation Transatlantic Trade and Investment Partnership – which is now almost certainly dead as a result of the Brexit vote.
It is all but certain that the UK will be a less valuable ally to U.S. interests, not just in Europe, but globally. By the end of President Clinton’s or Trump’s second term in the White House, the phone number for 10 Downing St. will be further down on the president’s call list.
With Brexit, we find new challenges for U.S. grand strategy because it has just been dealt a double whammy.
Not only has America’s strongest ally in Europe just voted to relinquish its seat at the table in Brussels, but the new reality of Brexit means that decision-makers in Washington will now be having to fight fires in Europe instead of catering to more pressing geopolitical exigencies.
The U.S. has long depended on a united, strong, and vibrant Europe to help anchor the rules-based international order that it hopes will persist long into in the 21st Century. And since joining the European Economic Community in 1973, Britain has been an effective ally in the service of this goal, always a reliable proponent of an enlarged European Union organized around liberal economic principles.
Without London as an interlocutor, the U.S. will have to undertake the costly endeavor of shifting its diplomatic footprint from London to Berlin, Paris, or Brussels. How to push through the free trade deal between the U.S. and EU? How to make sure that Europe does not bend in the face of Russian predation? Britain is now far less able to help deliver on such issues.
Even more worrying from the U.S. perspective, however, is the potential that more EU nations will begin to contemplate leaving the organization. This danger should not be underestimated: the EU has malcontents across the continent, and even pro-EU leaders can find themselves consenting to plebiscites against their better judgment. After all, David Cameron only pledged a referendum on Brexit in January 2013 as a gambit – ill-judged, it now seems – to placate restive Eurosceptics within his party.
All of this comes at an incredibly bad time for U.S. strategic planners, who are in the midst of an ambitious “pivot” to Asia that they see as critical to safeguarding the international security architecture of the Western Pacific and wider world. For them, disunity in Europe is an unwanted, costly, and tragically unnecessary distraction.
This article was originally published on The Conversation. Read the original article.
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Recent memories on MMA.
I was accused of Islamophobia when I critisized extreme Muslims on MMA and I was proven right.
I predicted Britain would leave The EU and I was proven right.
I predicted Oldham Athletic would win The European Cup.
Oh well….two out of three ain’t bad eh? 😉
The EU will die or reform and, if it reforms, we will be cheered back in again for saving them from deserved oblivion.
Given their arrogance I strongly suspect it will be the former.
Britain saved Europe once (with your help) and, I suspect, has done so again. The EU is a corrupt and undemocratic organisation that, despite Britain’s best efforts, refused to change.
Now Britain has left The EU is aware that it’s own death knell is sounding unless it changes dramatically.
Denmark, Holland and Sweden are rumoured to be considering referendums on their membership and France, Germany and Greece in particular are suffering the growth of far right political groups as their citizens increasingly hate the EU in it’s current format and nationalism grows.
Of course, I could be totally wrong. I could be barking mad.
Mark my words old bean.
Either The EU reforms dramatically – in which case we will be invited back as it’s saviour – or it will dissolve in chaos.
How much do you want to bet against my hypothesis?