The recent announcement by Theresa May that she will step down as the United Kingdom Prime Minister coincided with two ground-shifting developments in the U.S.: first, the bitter, ad hominem attacks between President Trump and House Speaker Nancy Pelosi; and second, the Trump Tweet last week signaling future tariffs on imports from Mexico. These developments magnify the rising business risks inherent in two long-standing and increasingly dysfunctional political debates: BREXIT in the UK, and the future here of the new NAFTA deal, now called the "U.S.-Mexico-Canada Agreement" (USMCA).
- Both the BREXIT debate and the political struggle in the U.S. to pass USMCA appear to face an almost identical decision calendar: the EU has imposed an October 31st deadline for the UK to make up its mind, a deadline unlikely to be extended yet again; and for the U.S., the constraints of the Congressional calendar and the beginning of intense presidential campaigning mandate that, if there is to be a new NAFTA deal, it needs to be completed by roughly the same date.
- With a new Tory PM likely to be even more determined to forge a "hard" BREXIT, and the Trump-Pelosi/Trump-Tariffs undermining consensus needed for success in USMCA, the end of October is shaping up to be a historical turning point, one filled with political drama and intense business fright - perfect for Halloween!
The UK political slugfest has been a three-year embarrassment. British Tories will likely select the May replacement by July, with former London Mayor Boris Johnson, and Dominic Raab, former BREXIT secretary, the current betting favorites; both favor leaving the EU with no deal. Of course, with that, THE problem remains: how to resolve the Irish border. None of the eight contenders has mouthed a solution to what is an existential issue for both the Irish Republic and Northern Ireland.
- Further, a UK departure from the EU only makes worse what Atlantic Council president Fred Kemp has described as the three major problems faced by the "European experiment": declining global relevance; unimaginative leadership; and sluggish economic growth. For four decades, the UK has contributed its military, political, and economic heft to an increasingly integrated and peaceful Europe; BREXIT reverses that.
Unfortunately, the U.S. now appears to be marching down the same dysfunctional political road over a core trading relationship; like the UK, our own political debate is fueled by populist rhetoric and disinformation.
- Key for the ultimate USMCA Congressional vote will be House Democrats. Realistically, the White House will probably need at least 30 Democrats to support the NAFTA follow-on. Encouragingly, the president has delegated almost complete responsibility for Congressional wooing to his Trade Representative, Robert Lighthizer. The feedback on his outreach - if not on the substance of the deal - has been uniformly positive, including from the House Speaker.
- In the end, of course, the president will need the Speaker's endorsement. Pelosi's track record on supporting trade deals has been spotty - rejecting our pacts with Colombia and Central America but endorsing Bush43's deals with Peru and Chile. Personal attacks on her by the president, even with some apparent Trump softening during his Tokyo visit, surely don't help in swaying the Speaker.
- And Democrats, in general, may never be satisfied with the labor and environmental enforcement provisions of USMCA, their principal gripe, even with the Lighthizer outreach, and even if Pelosi ultimately favors passage.
So, set calendar reminders for late October; costumes and masks won't obscure the seriousness of the Halloween moment.
