Brexit Fallout: What Elite Strategy in the U.S. and Europe Got Wrong

By Todd Tucker |

The Brexit vote demonstrated the limits of U.S. pressure.

While the U.S. has a long history of intervening in votes in developing countries, recent years have seen a more widespread abandonment of neutrality. In 2014, the U.S. weighed in against the Scottish independence vote. This year, President Obama traveled to England to push Remain, and the U.S. Trade Representative threatened an increase in trade barriers against the UK if Leave succeeded.

It didn’t work this time. The failure of the Remain campaign has now triggered political blowback on both sides of the Atlantic and both sides of the aisle.

The consequences of the exit shouldn’t be overstated. As a legal matter, nothing has yet changed and the UK government is free to ignore the referendum results. Let’s say, however, that the UK pulls out (effective after two years) or the EU forces it out (which would be unprecedented but could happen sooner). As Paul Krugman notes, there are some economic upsides to that scenario, although more downsides. And the downsides would be realized only if countries refused to immediately reset relations to the current status quo. The U.S. has given some indication this morning that it isn’t such a country.

The real action will be with EU officials. For years, they’ve seen economic management through the lens of game theory and tried to structure incentives to punish defections from the EU project.

Getting the incentives right has an appealing logic in business contracts between evenly matched private parties. It makes less sense as a theory of democratic governance or rational economic policymaking.

Indeed, the Brexit vote is an affirmation of the logic of principal-agent relationships in national and international affairs. Sovereign voters delegate governance responsibilities to their elected officials, who delegate to transnational officials. There are good reasons for this in some cases, but the legitimacy of the arrangement stems from the ability to revoke it. The growing complexity of international institutions has led somemyself included—to doubt whether the “principal” metaphor is really an apt description of how international relations works. But Brexit is an argument in its favor.

Looking forward, the Trans-Atlantic Trade and Investment Partnership, already on thin ice, is probably dead for now. Brexit may also increase worries in Congress about the blowback over the Trans-Pacific Partnership. The Obama administration is currently pushing for a TPP vote in the lame duck Congress (a session that takes place after the next Congress has been elected but before many members leave or are replaced). While this gets an A+ for shrewd Beltway tactics, it gets an F- if the goal is to build popular support for a forward-looking international agenda. The Brexit vote shows this support to be in short supply.


Also published on Medium.

Todd N. Tucker is a Fellow at the Roosevelt Institute. His interests revolve around global economic governance, including dispute settlement and the domestic regulatory implications of international trade, investment, and tax treaties.