Trade Pacts Face Another Hurdle With 'Brexit' Vote in EU Referendum
24 June 2016 - 11:47PM
Dow Jones News
By Nick Timiraos
WASHINGTON -- A U.S. trade agenda already buffeted by slowing
global growth and a rising backlash over trade liberalization faces
new obstacles with Britain's decision to leave the European
Union.
The indirect financial spillovers from the "Brexit" vote are
likely to matter far more to the U.S. economy than any direct hit
on trade or import prices with the U.K. Sharp stock and currency
moves, such as those on Friday, threaten to curb investment and
chill growth more broadly.
Global trade earlier this year already registered its largest
decline since the financial crisis of 2008-09 amid big drops in
commodity prices over the past three years.
Slow global export growth "is a bigger issue by far than the
separation of Britain from the EU alone," said Carl Weinberg, chief
economist at High Frequency Economics in Valhalla, N.Y.
The U.K. is America's seventh-largest trading partner but
accounts for a relatively small share, 3%, of U.S. trade. The
Brexit result could have far bigger ramifications for U.S.
investment in the U.K. because many large banks and other
multinationals have located operations there as a gateway to
continental Europe.
Economists and policy makers said Friday that the U.K. vote
marked a sharp backlash against globalization and that its greater
ramifications would be geopolitical. The vote "needs to be a
wake-up call" for pro-trade advocates, said Sen. Mark Warner (D.,
Va.), a strong supporter of the Trans-Pacific Partnership, a treaty
negotiated last year with 12 nations in Asia and the Americas.
Trade advocates "need to more clearly acknowledge" and respond to
the downsides of trade, he said.
Thursday's vote plunges the Pacific trade pact and another such
agreement sought by the Obama administration into further
uncertainty. The TPP has faced a rough reception in Washington
during an election season in which the likely presidential nominees
of both parties have opposed it.
The Obama administration has been in three years of negotiations
on the second agreement, called the Transatlantic Trade and
Investment Partnership, between the U.S. and the 28 member states
of the European Union.
"Without the United Kingdom, it will be far harder to conclude
TTIP in 2017 or beyond" because continental Europe is "less
disposed to free trade and investment than the British," said Gary
Hufbauer, an economist at the Peterson Institute for International
Economics.
Both America and Britain are each other's largest foreign
investors. Some analysts have suggested a Brexit could hasten a
bilateral trade deal between the U.S. and U.K. Such agreements,
particularly between close allies, have generally been easier to
approve than larger multilateral ones.
While TPP can't easily be renegotiated, Mr. Hufbauer said adding
the U.K. to the agreement might help rebrand it, "giving the pact a
decidedly different and more palatable flavor" in Congress and with
the American public.
Write to Nick Timiraos at nick.timiraos@wsj.com
(END) Dow Jones Newswires
June 24, 2016 18:32 ET (22:32 GMT)
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