KDEC and WTC-KY Joint Luncheon on Brexit, TPP and NAFTA

by KDEC on December 17, 2016

By Rick Grana and Robert Brown

fullsizerenderOn December 8, World Trade Center Kentucky and Kentucky District Export Council co-hosted a lunch for Tristram Hunt, member of the British Parliament, who spoke on Britain’s recent vote to exit from the European Union (BREXIT) and Robert Brown, Chairman, National District Export Council and Kentucky District Export Council who shared his research on BREXIT, Trans-Pacific Partnership (TPP) and the North American Free Trade Agreement (NAFTA).  Courtesy of Robert and Richard Grana are notes from our meeting.


Tristram noted that the BREXIT vote was really driven by rural voters and those who did not regularly vote. While the urban areas were in favor of remaining in the European Union, a heavier than usual turnout pushed the vote against remaining. As to next steps, he emphasized that it is difficult to know and that the status was a bit uncertain. One alternative is the Norway approach where the United Kingdom could be outside the EU but enable its goods to enter the EU at EU tariff rates, but he emphasized that this would likely require the United Kingdom to pay a hefty fee. He indicated that it might be difficult for Scotland to split away from the United Kingdom and join the EU on its own since some existing members of the EU might not want to set a precedent allowing regions to split away and join the EU on their own. As to the impact on Northern Ireland, he thought that it could actually lead to tighter border controls if it was to split away from the United Kingdom, as Northern Ireland would have to create its own customs force just for its area. One of Tristram’s key messages was to “keep investing in the United Kingdom” for jobs and trade.


Following Tristrams presentation, Robert Brown spoke in his role as Chairman, National District Export Council. He indicated that the 2016 US presidential election had a lot in common with the BREXIT vote in that the rural area voters and a heavier turnout of those who do not usually vote decided the election. He noted that Washington’s failure to approve the Trans-Pacific Partnership was directly impacted. Two days after the election, Congressional leaders announced they would not be bringing up TPP for approval. Shortly thereafter, the White House reported it would not be seeking approval during the lame duck session. At the same time, the coalition supporting TPP suspended its operations. Robert noted this is the fifth phase this year of whether TPP would be approved by the US. In April, the consensus was that it would not be approved in 2016. However, in May, there was an emerging mood of optimism that it would be approved. This quickly changed when the Democratic and Republican conventions featured delegates holding anti-TPP signs. By late August, the mood changed once again, with talk that President Obama wanted TPP as his legacy. What the future holds is unclear, just as with BREXIT.


Robert also discussed whether Donald Trump could follow through with his stated goal of revising NAFTA. He noted that the North American Free Trade Agreement Act authorized the US president to exchange notes with Mexico and Canada after he was satisfied with it. One argument is that the president still has the authority to issue a notice of withdrawal, possibly on the basis of no longer being satisfied. Mr. Trump could use this possibility to renegotiate NAFTA. Robert noted that amendments to US laws created by NAFTA would have to be approved by the US Congress if the US withdraws. In addition, in that case, Mexico could still rely on most-favored-nation treatment under World Trade Organization. Canada is in a better position since the US-Canada Free Trade Agreement was only suspended by NAFTA, not cancelled. As a result, it would come back into force.


In closing, Robert noted that it would be a shame to lose TPP since nearly all the tariffs being reduced (18000 in total) are foreign ones that raise the cost of US exports. In addition, TPP will establish US standards as the primary standards. He suggested the US should also be concerned that China will step into any Asian void if the US steps away from TPP. China has already reached out to most TPP countries seeking a bilateral free trade agreement. China also indicated its desire to create a China-based Asian development bank. Both of these actions are not in the best interests of the United States and the remaining 11 TPP countries.

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