Great Britain has stirred up a host of global economic debate as the country prepares to hold a referendum election on June 23 to determine whether or not it will split from the European Union.

Supporters of the so-called “Brexit” say that continental Europe’s economic upheavals are holding back the British economy, while opponents contend that abandoning the EU could discourage investment in the UK market and lead to a recession.

In Canada and the United States, leaders are warning that a Brexit would have a profound economic impact on this side of the Atlantic Ocean.

New trade agreements will be years in the making

For both Canada and the U.S., the UK is a significant trade partner. Britain is Canada’s largest European trade partner and its third largest trade partner overall, behind the U.S. and China. For the United States, Britain is its seventh largest trade partner. Should the Brexit occur, the UK will be out of the EU trading bloc and will have to forge its own trade deals.

The need to hash out new trade agreements presents a long-term issue for the UK that could leave all countries trading with Britain, and companies dealing with trade, facing a period of uncertainty.

North American trade agreements could take some time to hash out. In speaking out against a potential Brexit, U.S. President Barack Obama said that if the UK votes to leave the European Union, the United States will not prioritize establishing a bilateral trade agreement with the UK. As such, Obama warned, it could take five to 10 years for the U.S. and the UK to reach an agreement.

In a news conference in Britain in April Obama said:

I think it’s fair to say that maybe some point down the line there might be a UK-U.S. trade agreement, but it’s not going to happen any time soon because our focus is in negotiating with a big bloc, the European Union, to get a trade agreement done.

“The UK is going to be in the back of the queue.”

A UK-Canadian trade deal could suffer the opposite fate: Britain could be the one putting the establishment of a deal with Canada on the backburner as it works on relations with larger trade partners, including the United States, China and Japan.

Unclear fate for EU trade deals

Both the United States and Canada are in the midst of establishing trade deals with the European Union that could be jeopardized if the EU loses one of its largest and most powerful members.

For the past three years, leaders in the United States and the European Union have been hashing out the details of the Transatlantic Trade and Investment Partnership (TTIP).

The TTIP has been hailed as an all-encompassing trade deal for the 21^st century, covering nearly all sectors of the economy, including, agricultural goods, textiles, telecommunications, and intellectual property. The deal, between the largest economic bloc and the largest single-market economy, is meant to ease trade by lowering tariffs and regulations.

The TTIP faces opposition on nearly all sides. With the turmoil caused by a Brexit, the TTIP negotiations could be delayed. If the deal is not approved before Obama is out of office at the end of this year, the deal could face increasing delays, warned U.S. Under Secretary of Trade and International Commerce Stefan Selig in a May 16 press conference.

I think it’s clear to both us and our European colleagues that if we miss the opportunity to conclude [TTIP] negotiations this year, it might be months and perhaps even years before we are in the position to constructively re-engage on substantive negotiations, given not only the political calendar here but also in the Atlantic.

In an even longer process, Canadian officials have been working with the EU for seven years on the Comprehensive Economic and Trade Agreement (CETA), which, like the TTIP, addresses industries across the board and is meant to make it easier for corporations to do business between Europe and Canada. Should the EU’s largest economy — the UK — exit the union, it may cause Canadian officials to rethink some terms of the deal. And while the hope is that CETA will move forward as early as next year, progress could be put in limbo as the EU copes with the Brexit.

Weathering the uncertainty

Perhaps the most profound economic impact of a potential Brexit will be on the markets, as they deal with the uncertainty of the political situation and how it could impact trade deals, currencies and corporations.

That uncertainty is likely to build, and potentially spook investors building up to the June 23 vote. Currently, it is nearly impossible to tell which way Britain’s referendum vote will go. A May 15 Financial Times poll shows Briton split 46-44% against approving a Brexit.

If the Brexit is defeated, much of that uncertainty will be squashed. If the Brexit referendum is approved, however, the economic repercussions could be profound. International Monetary Fund Managing Director Christine Lagarde and Bank of England Governor Mark Carney have both cautioned that a Brexit could trigger a recession.

Upon approval, the UK would enter into a never before tested EU exit process. During that time, the UK and the EU would have to determine how they would sever existing ties and how they would form new trade agreements and regulations. There also is a concern that if the UK votes in favor of a split with the EU, it could lead the way for other discontent EU countries could follow.

When it comes to the economic and trade repercussions of a break-up between the EU and the UK, only time will tell if the 40-year-old political and economic bloc will break, and how such a break will impact North American and global trade.

The post How a ‘Brexit’ could affect the UK’s trade with North America appeared first on Trade Ready.

Though talk of international trade these days is often dominated by trans-oceanic agreements like the TPP, TTIP, CETA and other FTAs, Canada, the United States and Mexico all continue to rely heavily on trade with one another.

Even amidst increasing global opportunities for growth, the fate of the three economies remains largely intertwined. Many agree that the North American nations’ best path towards international economic growth is through increased cooperation and trade with one another.

Gathering to talk about North American trade

During the Hill Times event “A New North American Future” on March 24, these arguments were expanded and reinforced by a group of experienced senior trade experts.

Mexican Ambassador to Canada Agustin Garcia-Lopez introduced the event and began by explaining that “When I was young, a North American trade agreement would have been considered taboo.”

Since NAFTA was put in place in 1994, trade between the three North American powerhouses has quadrupled, eclipsing the one trillion U.S. dollar mark for the first time in 2015.

There are now approximately 647,000 cross-border visits per day between NAFTA countries, and two million dollars’ worth of trade per minute.

The Ambassador explained NAFTA’s success by observing that, “there are now well-integrated global value chains in aerospace, manufacturing. In 1993, not even the most optimistic could have imagined such amazing results.”

He concluded by arguing that the TPP will only strengthen the relationship between the trilateral relationship, and stated, “desperate calls for protectionism must be dampened…We must privilege a North American future based on solidarity and mutual respect.”

Freer borders and stronger negotiating tactics

As panel members spoke, they each explained the benefits of closer North American ties from their perspective. Eric Miller, VP of Policy, Cybersecurity and North America for the Business Council of Canada, argued that the three countries needed to use digital tools to improve border security through pre-clearance procedures and shared no-fly lists.

Even if the TPP is formally adopted, he argued, trade between NAFTA countries would still hold inherent advantages because of their proximity and shared landmass. Improving border efficiency would only magnify these advantages.

Miller argues the TPP make sense for all three countries because it involves existing major trade partners.

On top of the trans-pacific agreement, the top 80 Canadian exporters also have a combined 200,000 suppliers, so the effects of increased trade can multiply exponentially down the supply chain.

Miller’s main suggestion for improvement was the concept of cross-cumulation in North American trade agreements.

While European countries can negotiate as a single block, North American countries cannot reap the same advantages, even when they have separate trade agreements with the same countries.

By finding ways to integrate the various North American trade agreements with international markets, they could improve their bargaining position and secure better terms for exporters in their countries.

Manufacturing still key to North American prosperity

Matthew Wilson, VP of National Policy for Canadian Manufacturers and Exporters (CME), added that despite the waves of outsourcing over the past 15-20 years, manufacturing is still the basis of North American trade as 80% of it has consisted of manufactured goods.

New technology has also created opportunities to build factories within North America over the past five years, particularly in the aerospace and automotive industries.

Nearly a million new manufacturing jobs in the U.S. have been created since 2010, and Mexico is now rising fast in the rankings of the world’s top 10 auto manufacturing countries.

Since the extensive North American parts trade means that the average car crosses a North American border seven times before its final sale, open borders and strong trading relationships are essential to continuing to foster this manufacturing resurgence.

Wilson also backed Miller’s call for greater cross-cumulation in North American trade agreements, and argued that ultimately, North American companies will have trouble domestically if they’re not entering new markets and succeeding there: “If we’re not competitive in North America, we won’t drive investment in manufacturing.”

Don’t fear the specter of recession

Mairead Lavery, Senior VP, Business Development at Export Development Canada (EDC), focused on how the strength of North American trade shows a future of growth, not recession.

While many based fears of recession on falling commodity prices, Lavery counterintuitively argued that the trend was actually a positive sign.

“We truly believe that when we look at this volatility, it’s actually because during the financial crisis, companies had invested money in bonds and commodities.”

“Now, they’re pulling money out of commodities, which drives prices down but the money will be used for global investment and growth…If growth can take root and sustain itself, it creates demand for Canada and Mexico to sell more to the U.S., and serves as a pillar for growth.”

She also discussed the importance of leveraging North American supply chains for companies to go global. North American countries present excellent export markets for one another.

Most Canadian companies begin their international business by exporting to the U.S. before expanding to other OECD countries, and then finally to emerging markets.

Though only 40,000 Canadian companies are direct exporters, statistics show that there are actually 100,000 Canadian companies involved in exporting once service exports and indirect exports which go through other companies are taken into account.

These companies must now continue to strengthen their North American ties to facilitate increased global growth and success.

The post The future for North American trade is actually brighter than ever appeared first on Trade Ready.