The only thing certain about Britain’s exit from the European Union is “uncertainty” for a country that is Louisiana’s ninth-largest trading partner and a major investor in the state.
The U.K. also is a substantial source of tourists. New Orleans is the second-most popular entry point for English visitors to the United States behind only New York.
“It’s very difficult to say what will happen,” said Dominik Knoll, CEO of the World Trade Center of New Orleans.
The potential spillover is something the World Trade Center is keeping a close eye on now that Britain, the world’s fifth-largest economy, has voted to exit the 28-member European Union in a process that will take at least two years and involve negotiating new trade deals around the world.
Exports through Louisiana topped $1.4 billion in 2015 to the U.K. — the state’s third-largest European trading partner.
“Louisiana’s largest export destinations in Europe are France and the Netherlands and not the U.K.,” said LSU Department of Economics associate professor Areendam Chanda.
By comparison, China is the state’s top trading partner at $6.6 billion.
Petroleum and coal products account for 60 percent of the U.K. activity, Knoll said.
David Dismukes, executive director of the LSU Center for Energy Studies, said there will be no big direct effects on Louisiana. “But this is going to have an indirect impact, and we’ll just have to see how this plays out and how the markets react to this over the next couple of weeks,” he said.
A recent report from the Paris-based Organisation for Economic Co-operation and Development showed the outlook for European growth wasn’t all that strong without Britain’s exit, Dismukes said. The “Brexit” — Britain’s secession — forecast basically showed no growth for Europe.
“If you’re in a commodities business or producing commodity chemicals like the facilities are here, it’s going to be challenging — not just for Britain but for all of Europe and probably the rest of the world because of the hangover effects to everybody else,” Dismukes said.
“It’s history in the making. It’s the first time, other than Greenland, somebody is leaving the EU. So we’re kind of in uncharted territory,” said Kevin Smith, the American Chemistry Council’s chief economist.
“The short-term prospects, a lot of people feel it will shave some economic growth off of the U.K. this year and maybe next year,” Smith said. “To some extent, it may lower exports from the United States.”
The U.S. runs a fairly large chemistry trade deficit with the U.K., much of it in pharmaceuticals, he said.
Britain still must complete the EU exiting process. The move may involve waiting for a new prime minister to be elected, and that could begin the two-year period for negotiating a host of trade deals, Smith said.
One of the consequences of exiting the EU is an end to Britain’s tariff-free access to other EU members. Britain will have to negotiate fresh trade pacts in Europe and with the U.S., until then trading under the rules of the World Trade Organization. That means Britain could be subject to a long period of tariffs and other barriers that slow commerce, according to published reports.
British companies have invested more than $1.4 billion in Louisiana since 2003, according to Louisiana Economic Development.
Drax Group, for example, spent $350 million building a wood pellet storage facility at the Port of Greater Baton Rouge and two wood pellet-producing plants in Bastrop and Gloster, Mississippi. Hunting PLC spent nearly $20 million in 2013 to expand its Houma oilfield supply manufacturing facility and announced last year it was considering a $62 million expansion.
The main thing is that U.K. businesses have a large investment in Louisiana, and they know the state is an excellent place to do business with a great workforce, the World Trade Center’s Knoll said.
“They have a deep history with us,” he said. “We have an advantage with the relationships we’ve developed over many, many years.”
Chanda, the associate professor, noted that some of the European companies with the largest employers in Louisiana are based out of Scotland, adding, “It will be interesting to see how things develop given that they overwhelmingly voted to remain in the EU.”
Some have speculated Britain’s EU exit could inspire Scotland to secede from the U.K.. Others fear more EU members will follow Britain’s lead.
As for British tourism, New Orleans was the entry point for 19.6 percent of English visitors to the United States, according to a 2013 study the University of New Orleans did for the state Department of Culture, Recreation and Tourism. Only New York was a more popular gateway, at 29.3 percent.
On average, English visitors to Louisiana spent nearly $342 per person per day. More than 64 percent of U.K. visitors to the state stopped in New Orleans.
The Brexit could hit Britons’ wallets.
In published reports, the International Monetary Fund has said the British economy could shrink 5 percent because of its EU secession. The London School of Economics estimated that middle-class families face the loss of 4 percent of their income.
Another consequence of the EU secession: It makes it harder for million of Britons to travel freely and work on the European continent.
Others predict the loss of Britain’s status as a financial center. Citigroup and JPMorgan Chase & Co. officials have warned they may move operations and tens of thousands of jobs out of Britain.