Marianne Schneider-Petsinger
Geoeconomics Fellow, US and the Americas Programme
The British vote to leave the EU will slow progress on a transatlantic trade deal, but it also removes some UK sticking points from the process.
A sign promoting the TTIP free trade agreement in Berlin. Photo by Getty Images.A sign promoting the TTIP free trade agreement in Berlin. Photo by Getty Images.

With Britain’s decision to leave the EU, the clouds of uncertainty hanging over the proposed US-EU free trade deal (known as the Transatlantic Trade and Investment Partnership or TTIP) have become darker. The negotiations were formally launched three years ago and have stalled because of transatlantic differences (for instance over issues of investor protections and public procurement) as well as growing public opposition. For now, both the US and the EU negotiators are determined to weather the storm and continue talks when they meet in Brussels from 11-15 July.

The result of the UK’s EU referendum will blow a strong wind into the face of TTIP negotiators on three fronts. First, the Brexit vote will delay the TTIP talks as EU officials will focus their attention and political capital on the future UK-EU relationship. Once the UK government triggers Article 50 of the Lisbon Treaty, both sides have two years to sort out the separation proceedings. Only after it has become clear what Britain’s relationship with the EU will look like will the European side stop navel-gazing. The TTIP negotiations will likely continue in the meantime, but will be put on the back-burner.

Second, any progress on TTIP will require clarity on what both sides are bringing to the negotiating table. But until the final nature of the UK-EU relationship is known, it will be difficult for the American side to assess exactly how valuable the access to the remaining EU market is. This raises the question of whether American negotiators will put forth their best offers if they don’t know what benefits they will obtain for making concessions.

Third, with Britain’s vote to leave the EU, TTIP has just lost one of its greatest cheerleaders. French and German officials are increasingly expressing concerns about TTIP. Within three days of the Brexit vote, French Prime Minister Manuel Valls dismissed the possibility of a US-EU trade deal, stating TTIP was against ‘EU interests’. In addition, 59 per cent of Germans oppose TTIP – up from 51 per cent – according to the most recent Eurobarometer survey. Britain’s voice for further trade liberalization will be sorely missed by American negotiators eager to strike a deal.

Despite the dark Brexit clouds on the TTIP horizon, there might be a silver lining. Britain’s decision to leave the EU could bring some benefits to the US-EU trade talks in two ways. First, financial services regulation might no longer be a sticking point in the TTIP negotiations. Given London’s role as a financial centre, the UK had insisted on including a financial services chapter in the trade deal. The US, however, has resisted this. The removal of this friction could help move the TTIP negotiations along.

Second, European trade negotiators will no longer have to address British fears that TTIP could put the National Health Service (NHS) at risk. Much of the TTIP-debate in Great Britain has focused on how this deal might impact the NHS. Opponents of TTIP have argued that including healthcare in the agreement could lead to privatization and ultimately the death of the NHS. EU Trade Commissioner Cecilia Malmström spent resources and energy in correcting these misconceptions. UK withdrawal from the EU means that she can now focus on fighting other myths surrounding TTIP, which could potentially help advance the trade deal.

For now and the immediate future, Britain will remain a member of the EU and the European Commission will continue to negotiate trade deals on behalf of all 28 member states. Both the US and EU negotiators are committed to advancing the trade deal despite Brexit. The British decision to leave the EU has not weakened the case for TTIP. Speaking on the outcome of the EU referendum, United States Trade Representative Michael Froman said ‘the economic and strategic rationale for TTIP remains strong’. And his counterpart Cecilia Malmström went even further, saying that the British decision to leave the EU creates more of an impetus for TTIP to be finished this year.

Though this timeline is unlikely to be met, TTIP is likely to survive the British decision to leave the EU. However, Brexit is a serious blow that will probably push back the conclusion of TTIP by at least two years. Any deal will need to take into account the future nature of the UK-EU trade deal, which may not be known before 2018. Meanwhile, elections in Germany and France (two countries with strong public opposition to TTIP) will take place in 2017. On the other side of the Atlantic, the US presidential election adds yet another layer of uncertainty as the trade policy of the next administration remains unknown. When US and EU trade negotiators meet again this week, they should not be too worried about the Brexit storm but rather the changing climate for TTIP in France, Germany and the US.

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