Donald Trump’s victory is a momentous event that will have considerable impact on Britain’s plans to leave the EU. Here is a summary of the implications of the US election — and other events this week — for Theresa May’s Brexit planning.
Inside Mrs May’s cabinet, some hard Brexiters think Mr Trump’s election is good news. They believe it opens up two opportunities. First, they hope the new president will signal his intention to sign a free-trade agreement with the UK, a move that would give leverage to the British in their talks with the EU. Second, some believe his ambivalence over Nato will make it harder for eastern European states to take a hostile line towards the UK, Europe’s biggest defence spender, in Brexit talks.
For most of the British establishment, the Trump election is much more troubling. British diplomats believe Mr Trump is against much of what the UK has stood for on Nato, free trade, nuclear non-proliferation and climate change. In their view, this means Britain needs to make common cause with like-minded members of the EU, something that runs up against calls for a hard Brexit.
For US investment banks, Mr Trump’s victory could provide a major new incentive to move operations out of London and back to New York. The president-elect’s pledge to “dismantle the Dodd-Frank act” has considerable attraction to US bankers. Dodd-Frank reformed a spread of banking practices that were seen to have contributed to the financial crisis. The global head of banking at KPMG told the Financial Times this week: “Making America great again could mean expanding New York as a financial centre and giving the US banks freer rein to operate around the world.”
Away from events in Washington, it was a mixed week for Mrs May’s efforts to boost Britain’s trade links. Her visit to India, the first outside the EU as prime minister, was dominated by renewed complaints from Narendra Modi’s government that the UK is clamping down on visas for Indian students. Mrs May had a little more luck with a visit to London by the Chinese vice-premier Ma Kai, which laid the foundation for a boost in financial services links.
New light was thrown on the need for Britain to agree a transitional arrangement with the EU to avoid “falling off a cliff” after the UK leaves the bloc. The Guardian reported that ministers are pressing for Mrs May to make an interim deal an explicit option in the government’s formal Article 50 letter to Brussels next year. In the FT, Philip Stephens said Mrs May was minded to play the negotiations long: “Her preference, though nothing yet is decided, seems to be an Article 50 negotiation that has as one of its central objectives agreement on a long transition period — five years or more — in which most of the trickier aspects of the divorce are settled.”
The week’s events are a reminder of just how much the course of Brexit will be determined by developments outside the UK. Much attention is focused on the debate in Westminster, in particular whether there will have to be a Commons vote before Mrs May can trigger Article 50. But after the Trump victory, the main question is whether the populist wave will spread to Europe, endangering the EU itself. In the next 10 months there will be a referendum in Italy and elections in Netherlands, France and Germany. We may have to wait until at least autumn next year to have any idea of what Britain’s relationship with the EU will look like.
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Many commentators are quick to assume that the Brexit referendum and the Trump election victory are part of a common phenomenon, the rise of the dispossessed against elites. John Curtice, the veteran polling analyst, points out some key differences in support for Trump and Brexit.
Following the Trump vote, Ian Kearns argues in Prospect that the EU is now so fragile that the UK has to make its survival a goal of Brexit policy.
Malcolm Chalmers of RUSI says the UK’s defence establishment will face huge new challenges as the US disengages from Europe.
Nikita Sud of Oxford university writes on the LSE Brexit blog that Indians were not impressed by Mrs May’s concessions on migration this week.
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The FT’s Future of Britain project is asking readers to join politicians, academics and FT commentators to brainstorm ideas and solutions for the future of Britain outside the EU. Its latest question is: What future is there for the EU post-Brexit?
The Bank of England has cast doubt on the idea that the weak pound will lead to a boom in exports, warning that companies will not invest until they know the country’s future terms of trade following the Brexit vote.
Sterling has lost a fifth of its value on a trade-weighted basis during the past year and a similar depreciation when the UK left the European exchange rate mechanism in 1992 provided a significant boost to net trade.
But opinion is divided over whether this year’s fall in the pound will lead to exports rising and imports falling, as domestic consumers buy British instead. Some economists point to the aftermath of the financial crisis for proof that UK trade flows are insensitive to the value of sterling.
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