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Here’s How President Obama Should Deal With Brexit

U.S. Markets React To Historic "Brexit" Vote In UKU.S. Markets React To Historic "Brexit" Vote In UK
A one-way street.Photograph by Spencer Platt via Getty Images

Alan Wm. Wolff is an international trade lawyer who is Chairman of the National Foreign Trade Council and served as a senior trade negotiator in Republican and Democratic administrations. The views expressed here are personal.

A century ago, the Irish poet William Butler Yeats wrote, “Things fall apart; the centre cannot hold.” He was looking out at a world scarred by the First World War. And while current conditions are not as bad, they aren’t that good either. The Middle East is in turmoil, which the European Union and the United States failed to contain, and the resulting flow of refugees had to be a major factor in the English voting by a large majority to leave the EU. Aside from the geopolitical aspects, Brexit is not good news for the world economy, and other countries may follow suit.

What could happen next? Scotland and Northern Ireland may decide to leave the U.K. There will be pressures from right-wing parties in France and other EU countries to consider holding their own referendums on leaving the EU. A strong response is needed. This is a time for leadership, and not just from central bankers.

Having failed to intervene in the Middle East, as there were no sure choices there, what should the U.S. do now to bring some promise of stability to a Europe that is feeling strong centrifugal forces? It is not to cheer that process of disintegration, as Donald Trump has done. It is to be proactive, providing the kind of leadership for continued global integration that presidents Franklin Roosevelt and Harry Truman demonstrated in planning for the post-World War II period.

President Obama should call together the leaders of Congress and tell them that he proposes to enter into a trade agreement with Britain and to accelerate negotiations with the EU (now minus the U.K.) for the Transatlantic Partnership—and ask for their strong public statements of support. He should ask for authority from Congress to suspend tariffs on all trans-Atlantic trade for the next two years, provided that there is full reciprocity from these trading partners. Doing so should reassure financial markets.

 

This does not mean either side abandoning its commercial interests. There are a lot of non-tariff barriers on both sides of the ocean. But dealing with them is complicated. It would be good, for example, if both sides simply accepted each other’s automobile standards for the time being, since Europeans care as much about safety as the U.S. does. But trying to reduce these barriers now—the EU being more open to genetically advanced grains, for example—will generate more heat than light, and would quickly destroy momentum.

Various interest groups, including bureaucrats, are not going to stand by and accept changes in internal regulation. But since the World Trade Organization’s rules allow free trade areas to be formed, provided that substantially all trade is covered, the U.S. and the EU, and the U.S. and the U.K., should each suspend the tariffs that they apply to the other. For most trans-Atlantic trade, this would be merely symbolic, as most tariffs are already low. It would be an important step toward restoring confidence and improving the prospects for global growth.

Yeats went further in his poem: “Mere anarchy is loosed upon the world.” The world isn’t anywhere near that set of circumstances, but cool-headed leadership could diminish uncertainty and lessen the economic damage that disunity brings.

Could the president and Congress work together? The two branches of government came to agreement on four major pieces of trade legislation last year, so there is a legitimate basis for considering that they could cooperate on trade again this year. What is needed now is action—not words.