Brexit Will Deter Other EU Member States From Leaving EU, Trade Experts Say

U.S. and global companies should not be concerned about other European Union member states withdrawing from the EU in the near future, trade experts said. A lengthy and complicated Brexit became a source of division within the United Kingdom, the experts said, which should serve as a deterrent for other EU member states that may have considered leaving the EU.

“If you’re another member state and you’re looking at how long this process has been dragged out [and] its effect on investment … I would be very hesitant to go the Brexit route,” Michelle Egan, an American University professor and fellow at the Wilson Center's Global Europe Program, said during a Feb. 6 teleconference hosted by the Wilson Center. “It’s also a warning lesson of how difficult it is to extract yourself from a large economic trade bloc.”

Brexit will specifically ward off thoughts from smaller countries of leaving the EU, said Garret Martin, an AU professor and co-director of AU’s Transatlantic Policy Center. “If the U.K., one of the largest member states, had such difficulty negotiating with the untied block, imagine what it would be like for a much smaller country,” Martin said during the teleconference.

This is compounded by the fact that Brexit is “far from over,” Martin said. In addition to negotiating a series of potentially complicated trade deals, the U.K. will be forced to make decisions on a range of foreign policy issues that also affect trade, including its continued approach toward the Joint Comprehensive Plan of Action (see 2001140020), Martin said. The U.K. “already had to make some awkward choices” over Huawei, he added. “For the foreseeable future, I don't anticipate any [other EU member states] following the same path,” Martin said.

Although Brexit has taken longer than expected and the transition period may be extended past the current Dec. 31 deadline, the U.K. and other companies should not wait any longer to start preparing their business for negative trade impacts, said Chris Deans, managing director of Crane Worldwide Logistics Ireland. Deans said he is advising clients to start examining every aspect of Brexit that may affect their trade, including changes in tariffs, value-added taxes, customs duties and more. “This is a key transition period for everybody to review their business,” Deans said, speaking during a Feb. 7 webinar hosted by Crane Worldwide Logistics. “I would nearly go as far to say to look at and review your overall supply chain.”

Deans said companies should not wait for the U.K. to negotiate trade deals with the European Union and the U.S. before assessing how they may be impacted. The top advice he gives to clients, Deans said, is to use the trade disruption as an opportunity to find new trading destinations. “Take the opportunity to look at other markets that you may never have looked at as a potential customer base,” he said. “Don’t wait to see how the UK negotiates through this, because one way or another we will all be impacted.”

Although the U.K. wants to sign trade agreements with both the U.S. and the EU, it may have to choose which one to complete first, Martin said. The U.K. “will have to make certain choices over trade,” Martin said, and it “may not be able to do both.” But Dame Carolyn Fairbairn, the director-general of the Confederation of British Industry, told the Atlantic Council Feb. 5 that the U.K. can handle both negotiations simultaneously. “Trade deals don't happen in isolation,” she said. “This should not be seen as an either-or choice. We can do a deal with the EU and a deal with U.S. if we approach them in the right way.”

Fairbairn also said a U.K.-U.S. deal should “show the world how to secure a trade agreement fit for the future.” It should set global standards on e-commerce trade and artificial intelligence, she said. “A.I. has traditionally not been covered by global trade agreements,” she said. “We have an opportunity to change that.”

Peter Rodwell, a trade logistics compliance manager at Crane Worldwide Logistics, stressed that U.K. and EU companies that trade dual-use goods -- which could eventually include A.I. technology -- will face disruption after Brexit. All U.K.-EU trade involving dual-use items will require licenses, Rodwell said, and it is unlikely that the EU and the U.K. will agree to remove that requirement. "There will be no [way] to move dual use without a license,” Rodwell said during the Crane Worldwide Logistics webinar. “I don't see any way we will actually have an agreement that wraps that up.”