Last editedFeb 20203 min read
On Friday, 31 January 2020, Britain formally left the European Union, entering an 11-month transition period during which it will negotiate its future relationship with the EU. The impact of Brexit on the global economy is likely to be significant, not least for the USA, which is one of Britain’s most important trading and investment partners.
So, how does Brexit affect the United States? We’ve produced a comprehensive guide to what Brexit means for the USA, giving you some insight into what’s happening with the process right now and the potential implications of Brexit on the USA.
What’s happening with Brexit today?
Although the UK has formally exited the European Union, it is now in a transition period before cutting itself off entirely. During the transition period, the UK will continue to follow EU laws and pay money to the EU, while attempting to negotiate and sign trade deals with countries around the world. The transition period is scheduled to end on 31 December 2020.
Could a ‘no-deal’ Brexit still happen?
Leaving the European Union without a trade deal could exacerbate the impact of Brexit on the global economy, heightening European political instability and hampering US growth. Although the UK parliament approved Boris Johnson’s withdrawal deal on 19 December 2019, a trade deal with the European Union has not yet been reached. Given that EU officials and trade experts are deeply skeptical about the possibility of coming to a full UK-EU trade deal by the end of the year – especially since the withdrawal agreement prohibits any extensions to the transition period – ‘no-deal’ Brexit remains a very real possibility.
Have the UK and the USA negotiated a new trade deal?
While the UK remained an EU member, it was not allowed to hold formal trade negotiations with other countries, such as the USA or Canada. Britain is aiming to strike a trade agreement with the USA by the end of the year, and while President Donald Trump remains a strong supporter of Brexit, the complexity of any potential UK-US trade deal may make this relatively unlikely.
What are the potential issues with the UK-US trade deal?
There are many different issues, from trade to security, that need to be settled by the end of the negotiations between the UK and the USA. When it comes to America and Brexit, one of the biggest potential sticking points is Huawei’s access to the UK’s 5G network, which the USA has strong opposition towards. There are also potential disagreements over the UK government’s planned digital services tax, which has led to tensions between London and Washington.
How does Brexit affect the United States?
The UK is the USA’s seventh largest trading partner, as well as the fourth largest export destination for US goods and services. As such, America and Brexit are deeply intertwined, and both the UK and the USA stand to gain from a mutually beneficial trade deal. Brexit could have a broad range of potential implications for US businesses – here’s our rundown of some of the most important:
UK as a ‘gateway’ to Europe
In the past, the UK has been used as a ‘gateway’ for US businesses that wanted to trade or invest in the EU. Essentially, companies would establish a base in the UK as a stepping stone before moving on to trade with other EU countries. Following Brexit, US companies may need to pay double tariffs on goods exported to the UK and then re-exported to the EU.
The impact of Brexit on multinational companies will also extend to employment. EU nationals working in the UK for US companies are currently protected by the EU Settlement Scheme, although once the transition period ends, the government may implement new immigration rules for non-UK nationals. While it’s unlikely that the UK will want to stand in the way of bringing skilled labor into the country, this process will cause headaches for any US companies with branches in the UK.
Another potential impact of Brexit on multinational companies is around existing commercial contracts that US businesses have with UK firms. These contracts could be heavily affected by the terms of any future trade agreements, and it’s possible that Brexit could provide grounds for termination, although this would depend on the terms of the contract.
Another area of concern regarding Brexit and the USA is intellectual property. The UK government has stated that existing EU trade mark/registered community design right holders will be provided with an equivalent trade mark/design in the UK. However, the UK is likely to be excluded from pan-European rights systems, which could lead to divergences between the UK and the EU’s approach to IP law.
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