Washington softens Britain tone
THE US looks unlikely to follow through on a threat to relegate Britain to secondclass trade status once its ally leaves the EU, as it weighs the potential costs of undermining the countries’ close diplomatic and military ties.
US President Barack Obama had warned ahead of last Thursday’s Brexit referendum that Britain would move to the back of the queue on US trade priorities if it voted to leave the bloc, well behind a much larger US-EU trade deal now under negotiation.
But in the face of a severe financial market reaction to the vote to leave the EU, American officials are making statements about the strength of the US-UK “special relationship” that are more supportive, while stressing that they are still analysing the effect of Brexit on the European trade talks.
Security and trade experts said Washington was wary of adding to Britain’s economic pain, which could hamper its ability to maintain its commitments to Nato and US-led efforts to fight terrorism. A poorer Britain may not be able to afford its pledge to spend 2% of its GDP on defence at a time of increasing threats from Russia, nor a new fleet of nuclear submarines that form a crucial part of the West’s nuclear missile deterrent.
“The UK could become smaller and weaker. If that happens, then you wonder if they can sustain the defence spending and the effort to be globally oriented,” Nicholas Burns, a former US ambassador to Nato, told reporters on Monday. “That’s what we worry about with Britain leaving. Britain was the strongest American partner inside the EU.”
Some trade experts also said that a deal on the US-European Trans-Atlantic Trade and Investment Partnership (TTIP) was unlikely for years now without Britain at the table, which could open an opportunity for a separate deal with the UK.
“The ‘back of the queue’ statement will be forgotten by the next administration, if not sooner,” said Gary Hufbauer, a senior fellow at the Peterson Institute of International Economics. “In my view, TTIP is either dormant or dead in the wake of Brexit.”
It may be easier for Washington to negotiate a bilateral trade deal with Britain, a “like-minded” country that was more open to free trade than the 27 remaining EU members, said Miriam Sapiro, a former deputy US trade representative. “A US-UK agreement could create leverage to get TTIP done more quickly, and it’s an easier agreement to do.”
As US Treasury Secretary Jack Lew and Secretary of State John Kerry sought to contain the damage from Brexit in public appearances on Monday, they both refrained from repeating Obama’s trade warning.
Lew told CNBC that a trade deal with the EU remained a priority because it had been under negotiation for several years, but he did not rule out the possibility of separate talks with Britain once Europe and the UK agree on separation terms.
“Any separate negotiation with the UK will have to take a course in part determined by what happens between the UK and EU,” Lew said.
“So it is, I think, very much in the interest of all parties to maintain open trade relationships. The US and the UK have a special, deep relationship that will continue,” he said.
White House spokesman Eric Schultz added that the administration was “working through” how the Brexit vote would affect the TTIP talks.