PD Editorial: Don’t think Brexit matters here? Think again

Theresa May, the United Kingdom's prime minister, survived a no-confidence vote on Wednesday, but even that might not be enough to stave off a hard British exit from the European Union. The U.K. might be half a world away, but if Brexit happens, California will feel its effects.

In 2016, a year of bad electoral outcomes worldwide, British voters chose to leave the European Union. Since then May has been negotiating the divorce with the EU, but the deal she struck satisfied almost no one. Hours before Parliament was to take up the deal earlier this week, it was clear that it would go down, and the prime minister postponed the vote.

Many U.K. residents never wanted Brexit, and recent polls show that support has waned now that the consequences are clear. Some opponents are calling for another referendum, but May refuses to hold one. Wednesday's events won't have changed her mind.

The situation is dire. The U.K. is scheduled to leave the EU on March 29. If no deal is reached, it will be a “hard Brexit,” thrusting European and global markets into uncharted territory.

The European Court of Justice ruled this week that the U.K. could call the whole thing off right up to the deadline. That would be the best outcome, but it looks less and less likely.

The U.K. is one of America's largest trading partners. Even California has a robust trading relationship with the U.K. despite a continent and an ocean between us. Last year, California exported more than $5 billion worth of goods to the U.K. - 10th among our international trade partners - and imported about the same amount. A quarter of the goods we ship that way are electronics, but wine accounts for hundreds of millions of dollars, too.

And that's just the direct economic benefit. The U.K. is the point of entry to other European markets thanks to the country's membership in the EU and to the benefits of shared history and language between our two countries. We also benefit from British tourism. Visit California reports that 680,000 people visited California from the U.K. in 2017, and they spent $1 billion.

The value of the pound (the U.K.'s currency) has declined, and a hard Brexit could drive it even lower. A weaker pound is good for Californians visiting the British Isles, but that takes money out of California. Meanwhile, if America is more expensive to visit, fewer Brits might come here for a vacation.

Likewise, a weaker pound impacts trade balances. Importing British goods would be cheaper, but selling American goods over there would be tougher. That's the road to a larger trade deficit.

And under a hard Brexit, the U.K. becomes a much less functional entry point to Europe for American companies. Businesses that have invested in London, Edinburgh or Guernsey might need to absorb higher costs of opening offices on the continent.

American politics have plenty of drama right now, but it behooves Californians and all Americans to follow the Brexit drama. How it plays out in the coming weeks will matter here, too.

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