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Europe in Crisis
The Reality of Brexit and Trade Deals

President Obama is in the UK today, and during his meeting with Prime Minister David Cameron, he has been weighing in on the raging Brexit debate. The Wall Street Journal:

Mr. Obama warned that if Britain exits the EU, it could significantly delay bilateral U.S.-U.K. trade deals, saying that the United States would focus first on negotiating a large, multi-nation agreement with members of the European Union.

The president said a trade deal with Britain “might happen someday.”

“But it’s not going to happen anytime soon,” he said. “The U.K. is going to be in the back of the queue.”

Without opining one way or another on the wisdom of the President’s intervention, we will note that talk about whether the U.S. would negotiate a trade deal with a UK that has chosen to get out of the EU is ultimately misplaced. Of course we would want a trade deal—as would the UK. A trade deal will be negotiated.

However, the UK does need to understand in that case that they would need the deal much more than we would, so they would not get a better deal from the U.S. that way. The same would obviously happen with the EU. Something would no doubt be worked out, but the EU would have better cards in its hand than the UK would. So the UK would by default end up getting a worse deal both with Europe and the U.S. than it has now.

We certainly wouldn’t want to punish our allies or grind their faces in the dust, but it’s in the nature of things that power realities get reflected in the structure of trade deals.

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