Brexit: A Thaw in the Special Relationship
August 12, 2016
By Carter Goodwin, C’18
The short-term currency and financial shock aside, there are very real long term implications of Britain’s decision to part ways with the EU. As Britain’s star wanes, the United States will likely begin to look elsewhere in Europe and the close ties will thaw considerably.
The impending Brexit places the Anglo-American military cooperation in serious jeopardy. While commercial and investment connections have a greater day to day impact on British and American citizens, this Special Relationship grew from close cooperation countering military threats, ranging from Germany (twice) to the Soviet Union to modern day counterterror operations. The Brexit significantly weakens the utility of Britain as an ally. The jolt to the British economy will reduce revenues available for military spending; while this is only a certainty in the near future, long run economic slowdowns or stagnation would leave the government cash strapped and cast doubt on its willingness to fund serious military endeavors at our side as it has in Iraq and Afghanistan. Similarly, the Brexit might force Scotland to separate from the UK, depriving it of its current base for nuclear armed Vanguard Submarines.
Militarily, Britain’s intentional drift from Europe is a major setback to overall security cooperation. Apart from the EU, Britain becomes less useful as an ally in potential defense policy shaping. As Britain turns its back on the European Defense Agency, it relinquishes its ability to influence wider European defense policy. This incentivizes the US to reach out to Germany or France as a means of reaching a larger network of cooperating nations. While some argue the presence of NATO would limit the geopolitical fall out of the Brexit, Britain—preoccupied with domestic issues and further removed politically from Europe—would lose its position as a leader. As Britain retrenches itself in isolation, it becomes less attractive of a partner.
Britain is not only less capable of an ally, but also—given the current geopolitical structure—a less necessary one. With a resurgent Russia eying vulnerabilities in a fractured Europe, the United States may be more inclined to cooperate with the major EU countries rather than Britain. While Britain has a capable military, the Brexit vote signals a populist push for a return to unilateral action and a separation from Europe. Now politically, as well as already geographically, removed from Europe, Britain will not have access to the institutions that facilitate cooperation. As the Mayor of Moscow noted himself, Britain will no longer be able to advocate for anti-Russian sanctions or continue to lobby for support of the US effort in Afghanistan. Britain’s strategic reach will be significantly diminished; it will no longer be able to cooperate with the EU militarily, lacks the geographic footprint of its former Empire, and in all likelihood will continue to become more inwardly focused as it redefines its nationhood. On balance, Britain will have a greater difficulty projecting force around the world, suggesting it would be of limited usefulness responding to security threats outside of Western Europe.
While the Special Relationship was founded as a wartime necessity, it has continued as an important commercial opportunity. In the short term, we have already seen the ripple effects of the Brexit on our economy as 401Ks dropped in value and the dollar experienced fluctuations. Further down the road, the Brexit suggests that there will be reduced future economic activity between the United States and Britain. The TTIP, a free trade agreement (FTA) between the US and EU, will no longer include Britain. At the very least, Britain and the US will miss out on the economic benefits of trading with each other as negotiations would have to begin for a bilateral treaty separate from the TTIP. This is made difficult by the prospect of an anti-globalization populist government replacing David Cameron, foreshadowing long and frustrating trade talks. Furthermore, the EU may have better access to American markets than Britain, facilitating a natural shift of economic activity and transactions away from an Anglo-American axis and towards more US-EU collaboration.
On a more individual level, American companies will have less interest in working in the United Kingdom. Separated from Europe, Britain will no longer be subject to the same regulations as the EU nations. While Leave proponents see this as a boon to economic deregulation and self-rule, in reality this means companies based in the UK do not have the same level of access to European markets. Expect and American company with a large presence in the UK to shift personnel to the EU, as JP Morgan has already warned. The EU would likely not make it easy for Britain to continue their current economic practices, as barriers to trade and foreign direct investment would arise; this places any American company based in Britain at a major disadvantage economically. As Kori Schake of the Hoover institute notes, the EU will likely make it “expensive” for Britain to participate in the EU common market. Compounding this issue, Britain itself could become a less lucrative trading partner. A slowed British economy with a weakened Pound has less purchasing power for American exports to Britain. If parts of the United Kingdom vote to leave, it shrinks the market and further minimizes potential incentives to trade with Britain. In contrast, Europe could become a more attractive trading partner. Now driven primarily by Germany and France, the EU could become more economically integrated without the Eurosceptic Britain dragging its feet. As a result, the TTIP negotiations may become more nimble and mutually beneficial. As Britain loses out on the common market, it may become a less useful economic partner.
The extent of the fallout has yet to be determined; British officials will negotiate the separation from the European Union and hopefully will mitigate the damage. This is complicated by a dearth of domestic political leadership in the wake of the Leave victory. The anti-globalization populism that drove the Brexit could continue to aggravate Britain’s position in the world. If Britain continues to isolate itself, the US may choose to look to continental Europe in the future instead.
Additional Blog Posts
Student Blog Disclaimer
The views expressed on the Student Blog are the author’s opinions and don’t necessarily represent the Penn Wharton Public Policy Initiative’s strategies, recommendations, or opinions.