A Brexit Negotiated by Trump Would Have Been a Wild Ride

Ryan Bourne

How would Donald Trump have approached negotiating Brexit?

A few months ago, several commentators mused over this exact question.

The current game of chicken between the President and Democrats in Congress, resulting in a partial US government shutdown, is perhaps the best insight we’ll get.

And it shows the wild ride that a Prime Minister Trump would have taken us on.

May — or whoever comes after her — should be wary of following the lead of the US President.

Unlike Theresa May, when Trump implies “no deal is better than a bad deal,” he appears to mean it. The President is still refusing to sign legislation to fund parts of the government unless Democrats grant $5.6bn for his desired concrete border wall with Mexico.

As a result, the shutdown now runs into its third week.

There has been some talk of eventual compromise, trading off wall funding for protections for immigrants. But the President has taken a resolute public position, claiming that he’d keep the government shut for “months, maybe even years” to deliver the wall.

His team teased commentators last weekend with talk of taking the concrete wall off the table, only to clarify that they’d be willing to settle for a steel structure instead.

Should the stalemate continue, Trump has even threatened to declare a national emergency, using military funds to push ahead with the project.

My Cato colleagues David Bier and Alex Nowrasteh have ably demonstrated that such a wall would be costly and ineffective. There are good reasons for the Democrats to oppose it as a matter of principle, and they are right to dig in.

But for Trump, this is a rare matter of high principle as well: meeting an important 2016 campaign promise. “Wall means wall,” some might say (even if he did claim that Mexico would pay for it.)

The partial closure may only affect a quarter of government spending, but that still means that 800,000 employees are impacted, most of whom are currently sat at home without pay. Having so many people suddenly finding themselves unclear of when they are about to be paid is going to delay consumption decisions.

Just one in eight workers employed by America’s tax collection agency (the Inland Revenue Service) are currently working too, meaning that taxpayers and businesses won’t be getting answers to questions that could determine important financial decisions.

Then there’s the role that (sadly) the government plays in facilitating other economic decisions.

The Small Business Administration and the Department of Housing and Urban Development are affected by the closures, and these dish out a bunch of loans and grants, applications for which are currently in limbo.

As a result, even President Trump’s council of economic advisers think that GDP will be 0.1 per cent lower for every two weeks that the government is closed.

Nonetheless, Trump seems perfectly prepared to let the US economy take a short-term hit in order to get what he wants.

So would this bluff-calling tactic have been effective if Trump were running the Brexit negotiations? It might be tempting to think so. But there are two crucial differences between Brexit and the wall.

First, few would expect a temporary shutdown and subsequent deal to permanently affect the level of US GDP. The convention is for federal employees to eventually be paid back for lost earnings, and agencies and departments will catch up with the backlog of work.

There is no evidence, for better or worse, that partial US government closures affect the future size or scope of the state either, though they may well deter people on the margin from a career in government. The only real effect that such episodes might have is to highlight the dysfunction of American politics, and the bad policymaking that this generates.

In contrast, Britain’s future relationship with the EU will be semi-permanent at the very least, and requires economic adjustment. The stakes of getting Brexit right are therefore much higher.

Second, and more fundamentally, the disagreements between the parties on the wall’s desirability are inherently zero-sum. Trump wants a wall and the Democrats oppose it.

This simply isn’t the case with Brexit — whatever happens with the withdrawal agreement, it is mutually beneficial and desirable for both the UK and the EU to sign a free trade deal in the longer term. The disagreements come on details and the underpinning mechanisms embedded within them.

It may be fun to use this example to envisage how Trump’s “don’t blink” strategy might have stared down the EU. But it would have been a major risk, and there are no “total victories” to be had when it comes to negotiating trade.

The economic impact of Trump-like intransigence on Brexit would be far higher than that of shutting down the US government. May — or whoever comes after her — should be wary of following the lead of the US President.

Ryan Bourne occupies the R Evan Scharf Chair in the Public Understanding of Economics at the Cato Institute in Washington DC.