UK vote triggers talks with US

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President Obama received the shocking news late Thursday night after dining with tech executives in Silicon Valley: Britain had voted to leave the European Union. 

Because of the unprecedented vote, the United Kingdom will split from the political and economic bloc of 27 other nations, which together makes up the United States’ largest trading partner. 

{mosads}The move will trigger a series of complicated negotiations that could alter U.S. economic ties with the U.K. and continental Europe.

But that can’t even begin until Britain sorts out its own exit, a messy process that could take two years or more. 

“This is going to be a prolonged, stretched out process,” said C. Fred Bergsten, senior fellow and director emeritus of the Peterson Institute for International Economics. “Until you see how this comes out, it’s hard to say how we will proceed.”

Top U.S. officials spent Friday trying to reassure global financial markets, which plummeted amid swirling uncertainty over the political and economic impact of the vote.

Obama phoned British Prime Minister David Cameron and German Chancellor Angela Merkel, a driving force in the EU, and expressed confidence that the U.K. would carry out an “orderly transition.”

He directed U.S. economic officials to coordinate with their counterparts in Britain and continental Europe to monitor market activity and help ensure stability.

But economists say that tamping down immediate investor concerns is only the beginning when it comes to addressing the fallout from Brexit. 

If and when the U.K. formally separates from the EU, the U.S. must decide how to restructure its trading relationship with both, a process that could last more than a half-decade. 

It’s a diplomatically delicate task that will put the America’s “special relationship” with Britain to the test. 

The most pressing question is over a pending U.S.-EU trade deal known as the Transatlantic Trade and Investment Partnership, or TTIP. The deal would cover nearly $4 trillion in investments, potentially the largest free trade area in history. 

Officials on both sides of the Atlantic have been scrambling to finalize the deal by year’s end. 

But because Britain faces the prospect of renegotiating its trading relationships with the rest of the bloc after it exits, some observers fear the TTIP talks could be put on ice. 

“With the U.K. and EU now preparing to enter into a several-year withdrawal negotiations, it is unclear exactly how the TTIP talks can continue apace,” said Linda Dempsey, vice president of international economic affairs at the National Association of Manufacturers. 

That’s not to mention the anti-free trade furor that fueled the Brexit campaign.

“We’ve already seen free trade as nearly dead in the United States with our candidates all backing off of any kind of free trade agreements,” Diane Swonk, founder and chief economist of DS Economics, said on CNN. “That will have impact down the road.”

U.S. Trade Representative Michael Froman indicated the TTIP deal faces an uncertain future. 

“The economic and strategic rationale for TTIP remains strong,” Froman said in a statement Friday, but added that trade officials are “evaluating the impact” of the Brexit vote and would continue engaging with both British and European officials. 

Bergsten is bullish about TTIP, arguing that European officials will be eager to negotiate a trade agreement with the U.S. in order to get a leg up on the U.K. and punish it for leaving the partnership. 

The outcome will ultimately depend on who’s elected president in November.

Economists believe that Hillary Clinton, who wanted Britain to remain in the EU, will follow Obama’s lead and pursue trade talks with the EU while putting Britain at the “back of the queue” for new agreements.

“The operational question is if the U.K. does go ahead and drops out of the EU, do we change our approach toward the rest of Europe, and the TTIP? There I would say no,” Bergsten said. 

While Clinton has been critical of Obama’s Asia-Pacific trade deal, she hasn’t criticized the European pact. 

She offered a cautious response to the Brexit vote, saying it shows the need for   “experienced leadership” to navigate through the “economic uncertainty.”

Donald Trump, by contrast, cheered Britain’s vote and pledged the United Kingdom would be at the “front of the line” for a trade deal after it left the EU.

America’s trading relationship with the U.K. will not dramatically change in the near term. The two nations do not have a free trade agreement and currently trade under World Trade Organization (WTO) rules, an arrangement that will stay in place. 

But even that could be thrown into flux if Scotland and Northern Ireland — where majorities wanted to remain in the EU — decide to break off from the U.K. 

In the short term, economists are also concerned about Britain’s exit increasing the strength of the dollar, which would make U.S. exports more expensive abroad and possibly hamper economic growth here. 

The pound took a beating after the Brexit vote, falling nearly 10 percent to levels not seen since 1985. 

“We expect most of the effects to be felt in trade,” Swonk wrote on her website. She predicted U.S. firms “will be hit by the stronger dollar, which will make it harder for manufacturers to sell their products outside the U.S.”


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