On March 29, the United Kingdom sent a letter to the European Union invoking Article 50 of the Lisbon Treaty, beginning the two-year separation process. It's fair to wonder why Americans and particularly those of us in the Heartland should care about U.K.-EU relations. If the "special relationship" between the United States and the U.K. isn't enough to warrant concern, surely trade between the two countries is.
A large concern of the looming breakup is that there is no precedent set in place. No other country has ever invoked Article 50 or discarded EU membership. The two-year window is not a lot of time to restructure the thousands of regulations and international standards that link the U.K. to the EU.
Uncertainty and evolving regulations will inevitably lead to concerns about trade, and for Minnesota, that is a sizeable sum. According to data from the U.S. Census Bureau, Minnesota exports to the U.K. reached $567 million in 2016 — making it the state's ninth-largest foreign export market.
In the past four years, state exports have increased 6.7 percent — never seeing an annual decrease. Of Minnesota's top 10 foreign export markets, only Taiwan and South Korea have seen a similar trend during that span.
In Wisconsin, the market is even larger with exports reaching $813 million in 2016. While there has been a 4.4 percent decrease in exports over the past three years, the U.K. still ranks as the state's fifth-largest foreign export market.
Combined, Minnesota and Wisconsin have an export market of roughly $1.38 billion — certainly not a sum to be brushed aside with so much uncertainty ahead.
Does the U.K.-EU separation mean certain doom for some Minnesota and Wisconsin businesses? Not necessarily. Since the U.S. has been unable to reach a free-trade agreement with the EU, it has operated under the World Trade Organization's most-favored-nation clause — which should protect local businesses to an extent.
More concerning is how British consumer spending will react. While a member of the EU, the U.K. enjoyed free trade with fellow union members that were also part of the European single market. Unless the U.K. is able to work out an agreement to keep it in the single market, imported goods may end up costing consumers more. If prices go up, consumers will spend less, impacting businesses here at home.
Complicating matters is the decrease in value of the British pound. However, with a weakening currency, that means the U.S. dollar has improved its exchange rate position. For those who haven't traveled to the U.K., maybe it's time to think about booking the trip. Nothing remedies concerns about the unknown like a discount trip to London, right?