U.S.-UK alliance seen outweighing Brexit trade concerns

Tue Jun 28, 2016 3:15am EDT
 
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By David Lawder

WASHINGTON (Reuters) - The United States looks unlikely to follow through on a threat to relegate Britain to second-class trade status once its ally leaves the European Union, as it weighs the potential costs of undermining the countries' close diplomatic and military ties.

President Barack Obama had warned ahead of Thursday's "Brexit" referendum that Britain would move to the back of the queue on U.S. trade priorities if it voted to leave the bloc, well behind a much-larger U.S.-European trade deal now under negotiation.

But in the face of a severe financial market reaction to the vote to leave the EU, U.S. officials are making more supportive statements about the strength of the U.S.-U.K. "special relationship" and stressing that they are still analyzing the impact of "Brexit" on the European trade talks.

Security and trade experts said Washington is wary of adding to Britain's economic pain, which could hamper its ability to maintain its commitments to NATO and U.S.-led efforts to fight terrorism. A poorer Britain may not be able to afford its pledge to spend 2 percent of its GDP on defense at a time of increasing threats from Russia, nor a new fleet of nuclear submarines that form a key part of the West's nuclear missile deterrent.

"The U.K. could become smaller and weaker. If that happens, then you wonder if they can sustain the defense spending and the effort to be globally oriented," Nicholas Burns, a former U.S. ambassador to NATO, told reporters after an Atlantic Council event 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 U.S.-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 U.K.

"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."   Continued...

 
A taxi driver holds a Union flag, as he celebrates following the result of the EU referendum, in central London, Britain June 24, 2016.    REUTERS/Toby Melville