Your Brexit schadenfreude is ill-advised

It may be fun for now to sit back and watch the Brexit disaster unfold. It has almost become a spectator sport as many Americans imagine we don’t have a real stake in the outcome. Why not enjoy a little harmless schadenfreude? 

But the data tells a different story. Estimated export data from the U.S. to the United Kingdom by industry and U.S. congressional district shows a United States that is intimately linked in trade with the U.K.

ADVERTISEMENT

Using 2017 data, the U.K. was America’s fifth-biggest export partner for goods and biggest export partner for services, with about $126 billion in exports. When trading partners are this important, changes to one economy will inevitably affect the other.

Brexit will impact communities across the U.S. New York, Texas and California represent the largest number of jobs supported by exports to the U.K., over 100,000 direct jobs in all three.

But other states will feel the impact as well, like the close to 13,00 jobs directly supported in Florida and Illinois and the over 7,000 jobs supported in Washington, Massachusetts, Georgia, Pennsylvania, Ohio, New Jersey, Virginia and North Carolina. Every state in our country has exports and jobs at stake.

Congressional districts, like New York’s 12th and 10th Districts (think midtown and lower Manhattan) are the ones with the most to lose from Brexit with about 9,500 and 6,600 jobs supported by U.K. trade, respectively.

But there are the districts that you wouldn’t think of as quickly. Utah’s 2nd District represents about 40 percent of the nonferrous metal refining exported to the U.K. This district has over 3,500 jobs that are vulnerable due to Brexit.

Then there's Ohio’s 1st District, where aircraft parts manufacturing represents a significant portion of the over 900 jobs supported by exports to the U.K. In fact, 182 congressional districts have over 500 jobs that are directly supported by exports to the U.K. 

The impact of Brexit will be spread widely across industry. Service industries like the financial sector have over 42,000 jobs, and the film industry has close to 14,000 jobs directly supported by trade with the U.K.

Manufacturing industries like aircraft and aircraft parts manufacturing have close to 12,000 jobs tied to the U.K. There are also about 5,000 jobs in farming, fishing and mining. The vast majority of industries in the U.S. will be affected directly in some way.

Then there are the jobs that are linked to exports to the U.K. but are not part of the exporting industry. They account for about 45 percent of all employment tied to exports with the U.K. and represent about 260,000 jobs overall. Whether workers in those jobs know that or not, they are exposed to Brexit.

When it comes to our entanglement with the economies of the U.K. and Europe, export numbers aren't the only thing to worry about. It’s the numbers that we don’t know that are truly alarming.

Because the U.K. exists as part of the EU customs system, goods and services transfer back and forth, making it hard to determine where the end users of American products are actually located.

This is known as the "Rotterdam effect" in the case of goods. For services using the U.K. as an entry point to the EU, this is known as "passporting."

ADVERTISEMENT

No one knows how much these factors affect U.K. trade. As one U.K. government blog post stated: “[I]t is not possible to estimate, with any certainty, the impact that the Rotterdam effect has on UK Trade … with EU and non-EU countries.” 

If we could account for the missing exports to the U.K., we still need to account for potential shifts in U.S. exports to the EU at large. The U.K. is about 15.2 percent of the total GDP of the EU. The rough equivalent for the U.S. would be if California and Nevada (or Texas, Florida, and Indiana) left the U.S. custom and regulatory system.

Any economic model would struggle to show the full impact of that event on the U.S. and the world at large. But that event is happening. Right now. In Europe. 

So, while you’re looking across the pond, wondering how the U.K. and EU are ever going to deal with such a mess, it might be a good idea to start thinking about closer to home as well. The problem may be international, but the pain of Brexit will be felt the same way as all politics: locally.

Andrew Clough is the managing director at Data Decode, a policy consultancy, and the former senior advisor to the assistant secretary for economic policy at the Treasury Department under President Obama.