Transcripts For CSPAN2 Global Impact Of Brexit 20171216

On cspan3. The ccn cities to work working with our Cable Partners as we explore america. Next a discussion about britains discussion to leave the European Union and potential effect on the uk, the eu in the United States. From the Woodrow Wilson center in washington dc this is two hours. [inaudible conversations] good morning everyone. Welcome to all of you and the most center. Our discussion this morning of brexit. Id like to open by remembering to go back a year and a half ago june 16 and the uk public vote in brexit felt like a tectonic shift and it was a major change with consequences that were both farreaching and unclear. Brexit changes everything but how . Businesses, institutions and policymakers have been looking that ever since. The study that will talk about today looks at the impossible outcomes of what they mean for our Economic Policy and preparation. Im delighted to see many friends of the Wilson Center here today and i will introduce our expert panel. My idea is that we will hear from charlie about the results of the study and turn this over to michelle for comment and then ask fran and howard to weigh in. Who are these people you ask . Charlie is the Vice President of international a brand and hes a former Us Ambassador to greece and was a distinguished state Department Career including postings as possible Deputy Assistant secretary for europe, minister for affairs in london in the European Union. In iraq eservice quinine or for economic transition from 2007 to 2008. Fran is at a staff member at the Rand Corporation. Shes also a distinguished fellow at the Atlantic Council and Senior Advisor at laguardia associates. Until january 2017 she served as Vice President for European Union and special initiatives at the council. Howard is senior economist at Rand Corporation, director of brand initiated research and a professor at the party rand graduate school. He specializes in economics and Economics National security and is written on so many varied studies that i am hardpressed to find something he hasnt written on. Michelle, next to him, is art non rand expert and we claim her as one of our own at the Wilson Center. She is a fellow in our Global Europe Program and professor at the school and correlate their european and russian studies program. With that, i know youre waiting for the main presentation and im turning it over to charlie thank you very much, robert. Robin didnt introduce herself i will mention shes just back from having our top political jobs at the us embassy in london and knows quite a bit about the subject herself. I hope she will intervene in the discussion. Id like to also thank Wilson Center for hosting us today and look forward to our discussion after words. The Rand Corporation mission is to help improve policy and decisionmaking for research and analysis. We are a nonprofit, nonpartisan Research Organization and as such would take no position on brexit itself. British voters who decided to undertake this journey through the study we seek to provide independent and impartial evidencebased without any doubt one of the biggest moments of the uk in europe after the end of world war ii. Our goal is to understand the economic consequences of brexit. To undertake this study we assembled a team of economists and researchers from rand us and rams affiliate in europe, rand europe and as already introduced our fran and howard. Fran took the lead in the political analysis as the study and howard is our resident expert on Foreign Direct Investment. Funding for the report was provided by donors in independent research and Development Provisions of brand contracts with the department of defense funded research centers. In addition to grants from the Iconic Foundation supported the work on game theory in relation to brexit, as well as the outreach and dissemination activities were undertaken. What we produce is a new passive and honest looks at the economic under different trade scenarios for the uk, the eu and also for the us. This not only provides a thorough Economic Analysis but uses the game theory insight to explain the strategies parties are choosing. The Economic Impact scenarios and gave the reanalysis our study helps explain the significant of the decision reached by the eu just last week to move to phase two in the negotiations with the uk. The discussion of the unions future economic relationship with the uk. Our base case could be considered the no deal case that is the uk leaves the eu in the 19 without reaching any agreement for preferential trade remaining members of the eu. We call this [inaudible] because in such a circumstance the eu and the us and every other country wto found tariff rates for goods and established market rates for services. We then compare the following four scenarios to the space case. First, the successful negotiation of the uk eu trade agreements, pre trade agreement which the uk is seeking. Second, the creation of a us, uk reaching agreement which the uk has also begun to discuss with trade though it cannot begin formally discussing trade negotiations until it withdrawals third, the creation of the uk, eu, us Free Trade Agreement based on the model of the us, eu, transplant trade and Investment Partnership or t tip which was under negotiation between 2013 and 2016 for now frozen in political. An extended transition period between the eu and the uk trade arrangements do not change materially but other non Tariff Barriers to trade progressively come into effect. Now for the sake of completeness we also assess the Economic Impact of breeze called soft brexit scenarios. Unlike the hard brexit scenarios these scenarios assume the uk will maintain access to the eu Single Market in some way and apply donna tariff toward the rest of the world. Three such soft brexit scenarios are one the norwegian model which would involve the uk becoming a member of the European Economic area. To this model which have British Trade with the eu be based on a series of sectorial bilateral arrangements to give the uk wide Market Access but obligated to apply eu standards and regulations. Finally and eu uk Customs Union like the one eu has turkey. For each of the post [inaudible] for each scenario we analyze the effect of changes three kinds of trade costs. One changes in tariffs. To immediate changes in nonTariff Barriers such as imposing rules of origin, customs, measures and standards and a third, likely changes in nonTariff Barriers over time through the progressive emergence of regulation. What did you find from this Economic Analysis . The big take away is that the uk will be economically worse off outside of the eu under most possible scenarios. The key question for the uk is how much, how much worse off libby. The option of leaving the eu with no deal in simply applying the wto rules and its clear that no deal is the worst deal with the british economy plus brexit. Our Analysis Shows that trading under wto rules would reduce the gdp by about 5 after ten years which is a loss of 140 billion. This would be approximately 45 of the uks expected Economic Growth over the decade. Under no deal the eu would also lose out economically by nowhere near the same proportion as the uk. The Economic Loss the eu after ten years would be about 0. 7 of its overall gdp which is a loss of 97 billion. The uk would lose more proportionally and more absolutely than the eu under no deal scenario. Why would the no deal scenario be so damaging . Well, because the uk would face tariffs at wto levels on its good exports to the eu and would in turn apply them to the eu exports to britain although the tariff levels themselves are not so high we determined that the uk would have to inspect in value all crossborder trade and we assess the uk would move away from eu standards over time resulting in significantly increased barriers on goods. The scenario would be even worse for services. As a uk Service Expert would have only access to eu 27 markets on the basis of the limited Market Access provided the wto and not the Single Market enhanced virtually friction free access it has now. While the no deal scenario is by far the worst scenario the uk would be worse off in nearly all trade scenarios we considered as compared to the status of the member. Free trade agreement with the eu, second scenario, essentially the uk is seeking is modestly better and some pay Percentage Points of growth after ten years compared to the wto baseline. Fta would prevent increase in tariffs and however as in the wto scenario such an fta would nonetheless involve a host of nonTariff Barriers to trade with custom tracks to verify standards. Would a Free Trade Agreement with the us should only be possible would be able to substitute for the uks preferential access to the eu . Our analysis suggests that it would not. Us uk fta would be for percentage gross better than the baseline and the significantly worse for the uk than the equivalent fta might be the eu, largely because existing levels of goods and Services Trade the us and the uk are significant but substantially less the uk and its european neighbors. For the us moreover the value of an fta the uk alone is negligible. It would provide zeropoint to Percentage Points of gain for the larger us economy. The only truly beneficial trade scenario for the uk that we found would be a trilateral uk, eu, us agreement much like the t tip might have been. We found the t tip scenario would be seven points for gdp better than the wto lines. With the uk get preferential access to both the us and eu marketplaces. One reason for this outcome being so good is that in addition the eu and the us themselves would benefit economically and the full effect and enhance growth from the two larger economy would help the uk. However, we fully recognize that a t tip like arrangement is seen as very unlikely in the current political environment on both sides of the atlantic. As i mentioned we assessed other scenarios including a transitional arrangement for norway, swiss and turkish mode models. The transitional arrangements would be good economically for the uk for as long as the nation remained within a Single Market but Economic Uncertainty would hurt investors. The norway, swiss and turkish models would apply lower trade barriers which would be good for Economic Growth will come with a significant loss of uk sovereignty over regulations and standards insignificant budgetary contributions from the uk to the eu. After trained to to create other scenarios for examination after the brexit negotiations. Chapter four of our study is based on application as i mentioned at the out at the social science of game theory. Our aim in the methodology was to create a better understanding of how a wide variety of structural fact yours are influencing the contours that now come at the brexit negotiations. In particular, game theory helps explain why the e. U. Sought first to settle the divorce settlement before moving on to discussions of the future relationships. And why the decision not to move to phase two talks in the future relationship is so important to the u. K. By using leverage to commit britain to painful terms of financial settlement before entering into trade negotiations, and the e. U. Sought to discourage other would be leaders, which reassesses the e. U. Top priority from this standpoint, the approach could be seen as the zerosum strategy in which airplanes when they can show the u. K. This is pure game three to pick apart your opinion of these since all Member States have more from the core to offer to match therefore would be likely to backfire. Its also a sensible strategy for the u. K. To seek to broaden the negotiation beyond the issues as soon as possible as the more issues on the table will help arrange positive tradeoffs. This explains why Prime Minister may make the commitment in florence a couple months ago to pay its obligations as a member rather than put them on the negotiating table. Finally in the chapter we assess finally this study we assess the u. S. Interest in the brexit trained to process the core u. S. Economic interests are not at stake. The only scenario make salmon that have a Material Impact on the u. S. Economy and a positive one with the trilateral lake outcome, which seems a distant prospect for now. But the u. S. Will miss the loss of the pragmatic generally pragmatic British Voice in e. U. Economic policy in its first direct investment by american firms in britain and british investors in the u. S. Is concerned from the data it appears to be more motivated by domestic Economic Opportunities and trade arrangements. We therefore conclude that the baker u. S. Stake in brexit is its potential impact on european decisionmaking where the u. S. Properly worries about political and Security Issues and on European Cohesion more generally. The worst outcome for the u. S. Would be a brexit led to a greater disintegration of the european construction, which i might add would be good for the u. K. Either. As a previous europe study exporting the detail in the aftermath, the Political Security structures will have to make fun to ensure common interests most likely by strengthening nato unity relationships. To sum up the overriding message from our study is in the best interest of the u. K. Into a lesser extent the e. U. To achieve some sort of open trade in the relationship post brexit. The big challenge for the Brexit Brexit negotiations around trade are likely to be the complications of coming up with such an agreement. A common position between the two parties will be difficult, particularly if the two parties adopt the conflict in negotiations of positive sum game versus negative and thats why in the mood to phase two is so important. In public posts ive have declared their intent to have a positive partnership, but if the different interests and aspirations lead the u. K. To walk away from the table without a future deal would be significant, this is likely to post a number of political challenges for the u. S. As well. The Common Ground for the u. K. And e. U. Is the fact that no deal option would be damaging to all parties come and try to the worstcase option could get the top of the agendas for the u. K. And the u. S. The economic talks. To me these are the highlights. Howard, fred and i look forward to our discussion in michelles comment and look forward to moving on to our discussion. Thank you. Thank you. Im going to get the member of our panel an opportunity to get her impression of days. Do the reports of conclusions align with your expectations . Youve been looking at brexit now in talking about this for a while. Did this cement would you let potter did this come out . That is a great question and besides recommending the report because i would start off by saying britain came out a transactional view of europe and so this is a transactional report. The reports conclusion no brexit outcome is the best scenario versus no deal is the most costly. I think accords with what most reports and analyses have concluded, including her majestys treasury, think tanks and others and from the sense this is one of the worst and best options, i would concur. But i else a ring that it emphasizes Something Else which is the british economy itself is very unbalanced from a heavily geared and waited towards service isnt so within britain itself, there is a differential impact. The city of london is deeply concerned about Financial Services. I think we need to unpack the difference between trading goods versus trade in services and that is very important here. But i think the report tells us something very important that tends to be forgotten in the price. The first thing as the report points out, the sequential nature of the agreement being in three phases really puts the advantages to the e. U. Over the u. K. The u. K. Wanted to simultaneous and that argument. I would point out the report turns out and says first of all we need the terms of the u. K. Exit, which had just been agreed upon and so does transcend chile this week. The second issue, which is framed differently in the press, but the second stage is the establishment of the framework for a future relationship. Thats not a trade deal. Thats the framework of the third issue is establishment of the necessary transitional arrangement on this report lays out clearly by this sequence and if its the e. U. Relative to the u. K. And also highlights the asymmetrical nature of these negotiations, the leverage goes to the e. U. I would also point out by putting up all of these different scenarios, it actually really helps us differentiate some name not always clear to many audiences that his distinction between the customs unit in the Single Market. It is about trading goods, zerocarat and you have a habit identical trade policy with respect to nonmembers. The u. K. Doesnt get its own trade policy in that scenario and thats a very important choice that doesnt get trade sovereignty. The Single Market is very different. That is about the uniformity and indivisibility of freedom. Good, Capital Services and labor in something where the british tried, once again expect good send indivisibility and found Free Movement of labor. It would also be enforced by the code of just this come as something they asked to the referendum indicated they didnt want. Its very important is a legal order and make that very clear in the distinction is important in choosing these options. The report also tells me something which i thought was very obvious, but its not talked about very much in the dense industrial economies, which is the salience of terrorists. We often dismiss them as small here in the United States. We often say they are only 2 , but i think that now this has opened up what are the e. U. s abc of commitments, restrict their quotas and high tariffs and so as you point out, 34 of export our tariff free, but that means a lot more are now at risk. For me, that just aint in the u. K. And e. U. Negotiating tariff rate quotas in the tariff issues, not just decide what this is, they are not getting to realize the others affect the business wont say this is just a u. K. E. U. Deal. This will broaden debate about tariffs. The second issue is this report brings home this is not just about trade. There are many, many unintended consequences or issues the u. K. And e. U. Of a hot to deal with beyond the scenarios and here i was struck by the range of issues that we do not even comprehend yet. First of all, just because they may or may not have been order, it wont be about customs clearance and the irish tellme 80,000 trucks go back and forward per day, so wont be about customs clearance. It will be one of the most messy trade issues, which is rules of origin. The second issue will be the british will be subject to e. U. Competition policy. Mergers and acquisitions, antidumping itself with her the british will not be allowed to undercut because then they would be subject to antidumping issues. Thirdly come to the has a lot of trade revenues of the british will not be subject to some of those very trade revenues they participated in. Fourthly, the budget. Not just a bill for the prior commit an Business Cycle in of 2020 this report indicates. 12 to 15 of the budget is paid for by the u. K. What happens to the subsequent redistribution, which are the members need subsequently will pick up the british bill . Finally, the issues perhaps we dont think about because we are so focused on trade, but the british are part of nuclear fisheries and Nuclear Materials . What are the costs of moving mouse . How would they get access to the rear cooperation . Lastly, regulatory agencies. Europeans over the last couple of decades have a large number of regulatory agencies and areas of interest to the united state to create a much easier access for medical products, pharmaceuticals and so forth. Regulatory agencies in britain have download and them in what kind of accessible the british have been finally, the one that struck me as less salient in in trade terms but quite astounding as we will now have water issues in gibraltar in spain. Lots of the issues of territories and military bases in cyprus. The range of things we think about is really interesting and for the british, i think of Something Different when you negotiate a trade agreement. They will have a patchwork that trade agreements they have to negotiate, not just those that are msn status, but started a preferential trade agreement, customs unit that you have a general systems of preferences with less developed countries. E. U. Has a much more patchwork trade agreement then perhaps the u. S. Does in terms of its Free Trade Agreement. For the u. K. , and they are going to have changes in trade cross, which the e. U. Has a preferential trade agreement with. I would say that is something that redish will have to confront and i think the report tells us not just about tariffs, but also nonTariff Barriers. They are hard to quantify. They are hard to deal with anything to report gives us the kind of caution here, which is very important in this debate. Overnight the british regulations are not going to diverge. Britain will ask the done, but over time they will diverge in that is a very important Economic Impact. The last two things would be the e. U. Is moving on. E. U. Is developing thatll make implementing e. U. Canada, mexico, japan, but the british are not part of that. The question is those agreement already signed, now the british exit with the e. U. Have to read look at them because the british are not part of them. And so, this is very, very important and they also think from the british point of view, the scenarios you create that dont let terribly good for the british from the e. U. Is now realizing just how different trade and investment is a mere separating trade and investment treaties. Because the british looking how politicized investment agreements are in the e. U. , they will get a trade deal. Trade on good but investment is quite a long way off. I happen to know in the audience theres a lot of people with some very lively views. I think we will turn to friend now and then to howard and then open it up because i have confidence will be a generally lively debate going on here. I will turn it over to you. Michelle hyland this range of issues that something they think will have a discussion of peertopeer in the next phase now. Tell us what that means another Strategic Policy consequences they may face. I think it is a great day to be holding this panel because just before we came in the room they concluded the European Council concluded their meeting and i was trying to find out if the guidelines have been published yet, but they havent been. [inaudible] yes, it is a summit. This was conducted at 27. Teresa manley said dinner last night in brussels and then left. The main point that this was to confirm, which they did do a sufficient process. We can move to the next phase. They have been the agreement does approve the last week this last week made some decisions and come to agreement about citizens right in the financial in both of those areas, but they are not insignificant accord. For their kick the can down the road the can download a road to some agreement about ireland, where you can read this and see directly contradictory provisions, some to satisfy the dep, which is the Minority Party holding up to sundays government and others to satisfy the irish who have threatened to use their veto over the final if they think there would be a hard border, a real border between the republican and north of ireland. That set of issues will go into the next phase, even though it should have been resolved. We are now looking for the next few months to be focused on two things. One is the transition and its entirely possible they will reach a relatively fast accord on the transition because as has been treated earlier to hold almost all the leverage on this in the british have slowly come to the realization you cannot negotiated you cannot negotiate a trade agreement in six months. Even with best friends. Its really just not done. The transition that the e. U. Has laid out would be one in which the u. K. Adheres to all the rules, on the financial responsibility and obligation and adheres to be cj jurisdiction for a period of two years, perhaps a bit more. Thats one of the decision, how long can it go on, but will not be at the table, but will be a taker, a recipient of e. U. Rule. One issue that i could see coming up the mess that is unclear to me from what ive seen so far as whether the british will continue to see their rebate and i think that is going to be a problem as they work towards the transition. Theyre also common leaving the summit today that within the transition they to be some kind of understanding about travolta. There is in the guidelines and agreement within the e. U. That the spanish will have essentially approval over an agreement about gibraltar and this could be Sticking Point over the long term. Once the transition is agreed in the next European Council, the next summit could be approved is currently scheduled for march. That is the timeframe were looking at. Once that is done, one would move on to the future relationship in here the Priority Issues are the trade agreement in the challenge has been the u. K. Has been rather schizophrenic about what it wants. Schizophrenic might not be the right word, but its been uncertain. But does upon a Canada Agreement based on the e. U. Candidate agreement data that has just been done, the british politicians have been saying theyre going to get canada plus plus plus and nobody knows what that means, but as michelle pointed out, cherrypicking, decided he can have parts of the Single Market is not going to work out. The other problem with these agreements is depending upon what is included, negotiation of the trade accord operates under a qualified majority voting so not everyone has to agree or unanimity which is a much more difficult hurdle. There now is a division of e. U. Trade policy where if it includes three that member state confidence, Investor Protection been one of those it appears theres still issues to be worked out, then everybody must approve and you can go to a situation as he did with canada we are waiting to approve the agreement. If you keep to a more narrowly focused trade agreement, he gets approved at the e. U. Level. So it is not clear exactly what will happen in the belmont, even just the e. U. , articles with agreements with third parties in britain will now be a third party, which is a big mental leap that will not be a member, itll be just the same as we are, just the same as japan in terms of the relationship. And if you have an agreement with the third party within the e. U. Under article ccvii, if it includes services and intellectual property its unanimity. This is a high barrier because its been pointed out services is a major part of the u. K. Economy. We have some procedural issues that have to be dealt with double play in two what kinds of agreements will be pursued. One issue that charlie and michelle did not bring up so far is data. For the transfer of data, which is a huge issue in the e. U. They will adopt the general director that protects privacy, personal privacy in the transfer of data, but it is unclear after they believe is their own privacy regulations are today verge a little bit, will they have to get an agreement as they do the privacy shield. Think about the amount of data that goes back and forth between different banks and all sorts of things, on the private areas. As they talk about the trade agreement including customs, and apple again bring up the irish border question and i expect that will be one of the last things that will be determined at and how they finally figure out that if order is. We also have to see where Financial Services is negotiated as part of a trade agreement, standalone agreement. Is there an agreement and what regulations in the meantime does the e. U. Take to rule about whether euro clearly needs to be done in a member state. The other element of calculation as well this is going on between the e. U. And the u. K. Assets are to been brought up, the u. S. Is starting to scope out what the u. S. U. K. Free trade agreement would look like. There will be pressure applied on the u. K. Do not agree to certain things. Geographical indicators by the americans so that they can have a more positive agreement between the u. S. And the u. K. And that will be in a sense a triangular negotiation without there being officially so, formally so. One of the things that we all learned in writing this and then watching brexit is how the unpredictable becomes the norm in however a day there becomes some new complication that is to be resolved, whether it agencies that provide certification, better cut that are, but all sorts of other stuff you dont anticipate double. You dont know how the personalities involved to get through this phase of negotiation. What we have seen is that pakula laid over the last couple weeks within the made government in the ability, and its a surprisingly so of the e. U. To remain united behind their negotiators. There are little squabbles on the edges, but they are staying pretty firm. We have a still difficult and uncertain road ahead to actually find out what will be the future relationship. President has outn its initial phase, antiterrorism Police Cooperation in Foreign Policy and defense and security. So we will see i think some negotiations along those lines the british, what accessible they have to defend fund. They did not join this new mechanism, but will they have relationships as we point out that authentic and which is one of the successful at e. U. Military missions off the coast of somalia is currently had ordered in the u. K. And so there are all sorts of issues to be worked out, future defense and security cooperation. Give howard a chance to come in here but im confident we will come back to this question of Security Defense policy implications as well. I was quite taken with the calculator because i was wondering if you could give us a little more on that, but also a little more on what you program in there if you were going to come up with additional scenarios in give us a little look into that. Certainly. Let me start with the scenarios because the calculator is designed to show the results of the scenarios first and then ill talk about what you can do with the calculator. We chose eight scenarios to model and the most likely scenario is that the u. K. Would face. The hard berg brexit scenarios, but the other three of them come a free with the e. U. Or the u. S. Both together make a tremendous amount of sense because in general countries trade with those partners closest to them. Charlie mentioned earlier we used the gravity model. That is the underlying magic and then we look at the soft brexit scenarios which we do not have been the calculator. You can say when you look at the heart of various come a lot about Global Britain very seriously, but we think you might describe Global Britain, what that means. The u. K. Now was not part of the e. U. Cuts as a union Single Market can do multiple trade deals with any deals with any partners that want spitzer to do trade deals with australia and china come any countries in asia, but america and the start of free trade now birkbeck can be better than the agreement with the e. U. Now by doing by madeleine u. K. U. S. Agreements for u. K. E. U. Agreements, really showing the u. S. Is 20 to 25 of the global economy, it used the same size, doing a one trade deal with the u. S. Is much easier than doing multiple trade deals, especially with multiple Large Companies and i think weve seen an example of that was trudeaus trip to china and his desire to start freetrade ingratiations with china and the ultimate failure of that attempt. The Global Britain idea would be many years and probably not delete duplicate the size of the u. S. Economy. So we start with the scenarios. Okay i disagree with you with those nonTariff Barriers under the eu Free Trade Agreement will rise by 5 relative to what they are now. We will have nonTariff Barriers they will be 0 . Can program that to a custom scenario and the model will calculate the results for four different aggregates. What will u. K. Trade look like . Look at that nonTariff Barriers for services that are major barrier of the u. K. They are Services Exports that is where the trade surplus is and the trade deficit. So you can say what will the u. K. , u. S. , eu economy look like if there are no non Tariff Barriers . And in general what we find is the u. K. Is still worse off sometimes more or worse than economically under full eu membership. Thanks very much. I know you have questions so i will open to the floor. I will warn you i can ask questions myself but i would want you to be engaged with this. I will take a couple of questions at a time. But wait for the microphone and identify yourself. We want to know where you are coming from left laugh. [laughter] from the u. S. Naval academy i look more at the Security Issues they hand the economic issues. But the one that is overlap i would be interested to hear your reaction and if the European Defense fund. I was a little skeptical when it was first announced but i dont know. It seems the union has been pacing itself and want to appear it will go down this path as well. So i would like to hear your analysis of how breck set lung dash brexit with the edf and the Industrial Defense industry there is a lot of overlap there. Just go ahead. You are right for those in the audience the idea is that for once after a lot of efforts to build a more coherent defense policy to give the European Union a political defense only linked to the United States the innovation of that is to allow for common acquisition of those assets to be shared among the Member States depending on the contingencies that they may need. And it is over performing expectations and this is a good thing for what matters to the United States that the European Countries collectively build more defense capabilities thereby make a greater contribution to common Security Issues. Keep in mind a handful are not members of nato so to get those capacities would give positive to adversaries on their borders and elsewhere. One impact if our economic assessments are right the u. K. Is in for a period of Slower Growth than otherwise. And we are already seeing budget austerity and it will only get worse as it leaves the market to suffer the economic consequences we are modeling that will affect the amount the u. K. Can put into it Defense Sector and brexit itself like British Aerospace that are major players, what kind of access do they have . With those more nationalistic sectors so that is likely to be a consequence. I just want to say it is a broad discussion more than the European Defense fund a few years ago the eu started to pass legislation now on the books and implemented by the Member States do not discriminate in defense procurement that did not involve Large Research projects like airbus does not need to worry about this but uniforms are that kind of thing you are not supposed to discriminate between the eu members it has always been unclear whether there was a possibility you could discriminate against a non eu members such as the United States and it has been a matter of concern but the british will find themselves on the other side of that now. So i think there is a gradual move within the eu to bring the Defense Industry into the Single Market. It will be slow and stop and go there are natural impulses i dont think the big projects are affected in the short term but the british will find themselves outside. The last defense review was in 2015. Do they need to do another defense review prior . Yes. I would imagine. David may have something to say about that but what i think and would make logical sense maybe they will not do so i dont know if they will take that strategic of a perspective. What charlie said about the budget im not sure doing something clarifies that if that is what the governments want to do so with this larger question the government stability. We didnt talk about the elections last summer in june that the minister try to increase the majority of the government to increase her negotiating situation with the eu and lost that bet very seriously that now they are reliant on the support agreement with the nationalist party to stay in office and that could fall apart. Either just because passage of times or because when we get close to the end of the first two years of negotiations leaving the eu the eu and the irish questions will come to the four, and they have very firm views on those questions. To adopt the outcome in london that solved the problem on the island to establish goods between Northern Ireland and the rest of Great Britain that probably would be a government ending outcome. I am coming back to you. [laughter] i teach at american university. So just following what was said about the unexpected becoming possible, what do you think the government would do with brexit . And second, howard did you consider any Equilibrium Models . What would that look like as far a sure calculator . So in the election last summer was rather vague trending towards softer brexit options and there is a continuum of options that are generally characterized as a soft brexit with turkey and norway and swiss so the spokesman matters has been recently talking about how the labour party would not want to be part of the Customs Union maybe that is a diversion from the Customs Union is what the eu started out to be that all 28 members of the eu apply to trade with every other country in the world which is turkey. The turkish goods enter into the eu dutyfree then they apply the common external tariff to everyone so with brexit the u. K. Leaves the eu so there is no longer a Single Market they have adopted the same regulatory matters. The result of that is they give up the vision of Global Britain because in a Customs Union they would not be able to negotiate a Free Trade Agreement in the United States or canada or take those agreements that the eu itself is collectively negotiating. So they have to get serious. And to point out the conservative parties to take advantage of the opposition parties pointing to those shortcomings but that does mean what they are talking about is more in the Customs Union area like the Single Market soft option like norway, would be Free Movement of labor. With the strong labor constituencies because of other eu nationals for those that have been unpopular with the labor base. My guess is that is what they are talking about and trying to keep their options open. Talking about modeling so a good example of transatlantic cooperation. Everything worked out very well. Services trade at best. So we use that structural gravity model that is a little more than the standard gravity model to redeem goods. It is just an endpoint and not dynamic dynamic could be a general Equilibrium Model we opted not to do that because the structural gravity model and we had a model that we could use. Not just good answers but accurate answers. Not just the answers that you want. But second it had been vetted and was accepted we wouldve had avril different choices of parameters like exactly how this response to changes of crisis or Tariff Barriers. There were a number of other choices the other issue is it something of a black box . It is heavily dependent on a lot of models. Have we had more time . We could have seen the pathway of trade with the structural gravity model we only see the endpoints. So with the general Equilibrium Model we see how that evolves and how different sectors changed over time. Modeling choices so the answers in the and giving the cost and effort are not much different or better and possibly worse. Second, i should add for Foreign Direct Investment we used a simple gravity model because in general they are not rich enough to use more complicated models. But the results were very similar to trade which is that the u. K. Does not do as well under any arrangement as it does with the eu and the u. S. Gain. I need to read the appendices with these genuinely scary equations left last. My question is that brexit has major implications so looking at your scenarios did you look at how that could affect ireland . Also do you have any thoughts the most likely or the best scenario for ireland for the border moving forward . From the u. S. Chamber of commerce, i want to get into the eu and u. K. Assumptions little more. Did you assume they will remain aligned what that will look lik like . It seems there may be more divergences from the first phase and similarly did you look at any existing Free Trade Agreements with canada or japan or south korea and could u. K. Exceed themselves or you assume they will not be a part of it . So what about open skies . Is the u. K. And headed on dash placed ahead of that . Terrific. So to make a couple of comments about ireland, i mention this with respect that the accord basically an arrangement that was a political arrangement that took place in the context of a Single Market. So it was possible to achieve a settlement to the longstanding fights between catholics and protestants in Northern Ireland to have a one island solution. But critical to that is the citizens of the u. K. Could become irish citizens and they agreed to have that happen or a single regulatory arrangement that there are no and support but among that scenario that if we have a freetrade agreement between the u. K. And eu, it means that the two sides eliminate tariffs on industrial goods to make some adjustments on agriculture between them but the u. K. In theory could change the external tariffs and that would require a whole series of checks to make sure that chinese goods are not entering into the u. K. To be shipped into ireland or other u. K. Markets to undermine those tariffs of the Single Market. There are standards issues and those are progressive because right now the u. K. And eu have the same external tariffs with the same regulations. But that would mean with the first or second scenario the u. K. Is only on wto rules, that would be bad for ireland. Because you have to have some variety. So the agreement last week to have that irish component in which the British Government admitted to alignment of those measures substantive that the problem is no one is quite sure that deliberate and you cutie how you maintain that because if that means the u. K. Promises now and forever to apply regulatory standards then you might ask the question what are they getting with enhanced sovereignty by leaving the eu . There is another option that you basically agree Northern Ireland that would in large part function with the Irish Economy with customs checks over the irish sees so for shipment of goods would be subject and that is unacceptable to them. So those problems arise with any of the hard brexit scenarios that we talk about basically involving the u. K. Out of the Single Market. If they were to be like norway , in the Single Market but still responsible for their own external tariffs and in principle the Customs Union options would be better for ireland and that is a little my reasoning why labor may come down on that side but do you want to say anything . It is complicated by the fact there is no government at the moment left left. [laughter] so there is a voice missing so i very much agree with charlie when he lays out the problems they are facing and the good friday accord includes funds from the eu and northsouth cooperation. I do believe those can continue as conflict prevention put it in different parts of the budget and it will all work out. And Services Like banks. Yes. Just trying to figure out where the border will be unless the u. K. Stays that is really an issue and it affects all sorts of Different Industries there is a gray article of the racing industry where those are going back and forth all the time you cannot make them wait eight hours and it is not good for them. There are supply chains that take products back and forth multiple times and people have invested in Northern Ireland on that assumption. So the question of how to become up with those options with the most recent postmodern European Union agreement is the canada one as a proxy even before the negotiator for the u. K. In this process to say specifically he wanted a freetrade agreement plus plus plus so in our scenario we assume zero tariffs. With a substantial agricultural access but no Financial Services access. It is a technical question for you and the same applies to the u. S. And for that matter you can tell me if you think this is wrong but if there is the u. K. Eu freetrade agreement which can only happen if britain chooses to be under the wto rules it cannot happen in most of those brexit options. We are assuming even with the u. K. They would not secede on succeed to get Financial Services. With the eu it is competitive. The euros own countries have always resented the fact that the u. K. Did not join the euro managed the power and defend on in the financial city to become the center with all kinds of securities transactions related to the rest of 28. So once the british made a decision to leave the you, paris, frankfurt, dublin and malta everybody was after the investment by the banks and they were pretty clear they would not be Single Market under the passport access for the u. K. Based banks so it is a competitive issue. With the u. S. We already had experience with the europeans wanting to cover Financial Services. The u. S. Was firm that we were not interested in that. You certainly know more about this than most but it is partly competitive but more regulatory. So we have a variety of approaches after the crisis and even before terrorist finance, antimoney anti Money Laundering into the Federal Reserve and treasury is unwilling to delegate those even the United Kingdom regulatory agencies. So just one other diversion is what they are discovering in this Brexit Process is that in the context of negotiating with the United States and European Union, they are a small player to negotiate with the eu as we are seeing and if they negotiated with us they would be a small player. We are relatively indifferent so we were look at this negotiation from our own principles and relationships. We have set a cheese made in wisconsin and shepley e wine in california. And we want to make sure that each could be sold in the u. K. And to resist the idea we would protect others. But the british will quickly find themselves in a choice between two powerful players wanting to impose their own circumstances and negotiating approach on them as a price of the agreement in this Administration Even more so than past ones. May i . I know you have dodged the question. [laughter] i hope that i can to her up so looking at the eu analysis and we showed potential cleavages so i will not go into those i assume she does a better job but despite that, the eu has a powerful tool to stay aligned even with great disagreement after two years the u. K. Is out. Because there isnt a large economic effect overall. There are large factors but doing sometime the ventricle negotiation is not necessarily a high priority for the eu. Three very brief points it is forgotten the trade patents the u. K. Have that the reports picks up on this is significant and also malta and cyprus and the netherlands now with the global value chain and logistics and integrated production the question becomes if malta and cyprus are so dependent on the u. K. Exports if it they look at the trade diversion effective the u. K. Is no longer a member. The second point, there are critical agreements in every sector. One of the things i would like to see policymakers look at is how many agreements are there with the u. K. And eu as signatory . There was a time when the eu is not legal so we will not fall out of everything but there will be things to renegotiate. Some see them as the independent signatory that it is less critical. The third point of canada plus plus like everybody else it is a whole new language. I look at trade and i read the eu japan agreement and there are implications. If you get into the u. K. Than i assume you have to give it to canada . This is wonky but if the freetrade agreement qualifies preferential under article 24 of the wto that they do not have to provide that treatment but if they went the swiss route with bilaterals and sectors immediately faced with demands for most favored nation treatment. I am at the state department from the Eastern Europe office so my thanks to the ambassador to put together this study for us as we start to think through how of the United States goes through brexit being very focused on u. S. Interests are at stake. What did your study show or indicate for u. S. Interest like the transition or the norwegian model . Do any of those give a more meaningful outcome . Ima truman fellow. But with the other nations on this report i am intrigued by this arrangement that you said yourself with be very complex is it supposed to be trilateral . Or do you assume the u. K. Has two separate fda . And finally if you look at the u. S. Appetite it doesnt seem to cover very much it sounds like minus minus. [laughter] because things are tricky in europe right now. I will tackle those two. So the question of the u. S. Interest of other scenarios with the u. S. Economic interest all have a trivial impact this report has for each scenario there is the in cap solution of the gdp impact of each of those so we calculate that for all of them but it is trivial the only one that makes the difference is the scenario of a trilateral so what does that look like . We only model that we never got it to the structural aspects. If it were done in but at a time in which and already out of the European Union as a member, perhaps it should be a trilateral involving the nafta countries as well. So in this way it would resemble the tpp that is what President Trump withdrew on the first day of the administration so there are 11 countries now and number of them have preferential trade agreements with the undertaking of tpp is all of these contracting parties and also open to other countries so that would be the pattern. And obviously they have had three years of serious negotiations and that faltered on the number of grounds the most important of which was the but the president. Similar aspects to the nafta agreement. If there would be a discussion for the tpp for the atlantic i think i didnt think it was part of ventricle part itself because we have 1 trillion of transatlantic investment so even mildly positive it would not be that big of a deal. But with tariffs and consolidation of border controls across the atlanta one the atlantic that is the possibilities and it may be there is a political environment for that and that is the best outcome for the u. K. By far to get the benefit of trade liberalization with the continent and the u. S. And it takes place between the eu and u. S. We will have to see why it happens. It sounds like full employment for trade negotiatio negotiation. [laughter] very briefly if you are going to have the u. S. And u. K. Agreement it is politically motivated other than those economic consequences for the u. S. Yes. And the problem with the u. K. Is once a political decision has been made to branch a decision that i fully expect even they are saying that and then to renegotiate that putting it out in the u. K. But i think theres is a fantasy. They will look at them as a much smaller entity and we have seen this with what the u. K. Put forward. You have to negotiate. I concur with those difficulties but also to think about the post 2008 economic eight economic climate the british will be negotiating. They talk about Global Britain, open for business but in the context if you look at other countries, extra eu so beyond europe and they are trying to negotiate the freetrade agreements. So this is with and then to go to the Single Market from the 80s . I am here at the Wilson Center for mom dash but with the Regulatory Burden but the u. S. And china that europe is the enormous market have to make eu standards to send the goods he had. Are they but to harmonize. What about the part of that was income distribution. So the rest of us are left behind turning away. Could it be the end of two low words gdp and but also those related to the exports. Let me start. That is a good question. There is for all of the talk of reciprocal negotiations and how difficult it has been to harmonize or make compatible those regular nations across the different sectors. And then the a train but with those agreements that have been achieved but the u. K. Once out of the facing the problem but that gravitational pull and then to have members as a legal obligation but when they succeed to leave that you use it is not a legal obligation but a commercial necessity. You already see that with the british Chemical Industry came out very strongly to say they did not want any suggestions the United Kingdom would cease to apply. Whatever it takes to sell them but the British Trade is in but do be located in the midlands and to meet the requirement to certify. In order to continue export from britain to the u. K. And so at the end of the day but despite the ideas they will break free of the yoke of these policies. But on the question of the impact and turn a lease southern england versus the run on the rest of the less prosperous parts yes i imagine there are changes based on final arrangements but it is kind of hard at this point to determine we didnt look at the internal distributional questions within the United Kingdom. You mentioned focusing on the larger trading partners so i am a followup with Global Britain you talk about the context the u. K. Has the ability to have trade agreements but also we heard that political rhetoric and the inability is the u. K. Relationship to the commonwealth and the u. S. Do you see that senator on center of gravity shifting as they extricate and what is the focus . I really dont see a shift if you look at form policy. It is in line with what she but i dont mom but there will be some Resources Available monetary but also administrative to launch new initiatives with the international priorities. But the budget and the impact and those insurgencies with those traditional should give. But even to have potential partners but instead a middle sized country with a global and teaching perspective and i dont think that will change but with fewer capacities to do that. And also one of the things we have to figure out is to negotiate tree degree trade agreements, there is a real pressure and there is so take over those areas of governance over by you have done a great job to prove what a bad idea this is with your european colleagues. How do they call you fake news or justified this as a way forward and said if they succeed. So what is joe but i presented this study in london on tuesday and in brussels that afternoon. I got a variety of reactions. One was 5 of gdp is nothing. Where. But there a were levied by the beavers but it was done in april 2016 before the referendum. You assume that we made our ways and it may be interesting to look at the possible economic consequences of each. And what those u. S. Stakes are. There is a frequent visitor to london during the Research Phase we had an affiliate in cambridge about how could that go effectively . Or fall apart . When faced with those consequences you could have seen that on tuesday with no relationship but the government lost a key vote that was all about if the parliament has the right or the opportunity. But most would involve a new referendum or the government falls and that we would like to withdraw the article but the lisbon treaty sets out for a country but also to have no procedure for a country changing. There is the more they have voice been exceptional or in trouble but a broader sense across the eu is one of regret. It has been suggested that if they had a electoral mandate so the council makes a decision however that is the only reason between now and march at the end of two years they are not members of the eu unless a unanimous decision with that transition period. So with this buyers regret comes into play then the british but the year is 2022 and somebody wins with a miraculous majority. [laughter] but then you may remember. In this miraculous circumstance where i government applied it would be a heavy lift once they come back in because not only join the euro but allow Free Movement. Lose those rebate provisions but before march 2019 it could be easier. I have to remove the crystal ball from you on this one. I would caution when you look at some of those votes what is going on in the u. K. Of the Prime Minister and the government is doing too much or not enough without parliamentary oversight. This is the sovereignty of parliament and it is hard to privilege the sovereignty of parliament then give it back to brussels. So when you look at these votes you will see as many voting a gay lung it is against the government. Iqs the moderators prerogative for one last question. If you have a recommendation for policymakers, what would it be that i will start with howard. One is difficult but i will try to hold to that. [laughter] that i want to return as a basis that no doubt first of all trade between the u. K. And eu will go on it will be slightly smaller but Services Trade is enormous. It is about 400 billion. And also no doubt that the u. K. Economy was imbalanced toward financial situation lung ash now lung analysis just like the United States there has been talk of the Financial Sector. So the speculation will income be distributed more evenly . At the response is it is a problem the u. K. Could have addressed within the eu then you might say adherence to that Single Market prevented the u. K. From taking certain steps that could make the situation better. Leaving the eu will shrink the Financial Sector by the next question is exactly is your new freedom of action that might spread the benefits of Economic Growth . That is a very narrow set of policy options. I dont think there has been much work at all to have the new freedom of action if any with economic policies. I would preface with one speculation focusing on the council and the parliament but hey careful attention to the European Court of justice talk about Citizens Rights post teefifteen but that would not surprise me if they make a decision if they have something to say about the withdrawal agreement. And with the policymaking perspective there is the assumption regulation will be a commercial necessity but think not just of regulatory alignment but all the ways the u. K. Through those practices International Forums and regulatory dialogue there is a lot more Technical Details that the u. K. And the eu have to deal with. I think the u. K. Is involved in different regulatory bodies. How many are excluded . Since we are in washington i will make a recommendation for u. S. Policy that i cannot constrain myself to only one. [laughter] that the first is easy the United States should resist all tim tatian to put our finger on the scale of the negotiations because while we are friends with all sides and care about the outcome it is likely to turn out badly. Second that in the light of the findings of that study the United States should indicate an openness to actively consider new transatlantic opportunities in the post brexit environment. They will work something out but to engage in a dialogue with the European Union and the United Kingdom and our own industry and ngo sectors about what kind of transatlantic marketplace do we want to have and in touch a way that we get to this future where we are better off . My recommendation is for the u. K. And eu. Something we have not touched on a great deal but there are lots of agencies certification agencies that very much control the movement of products between the two markets and now the u. K. Is faced with a decision whether to buy into these agencies without having a seat at the table or set up their own which could take several years during which Time Products have to be certified it could be a challenge. Also they like the Student Exchange program and have access to the University Research fund. So the british have to be selective with their asking for in this regard but i hope it is generous for a longer transition on these elements. But im not optimistic that the eu will be generous but the other recommendation is to think about staying in the Customs Union. Dont look. Because how goods move through the u. K. And i heard one and if you put them up that 90 seconds each you back up traffic. So no one is quite prepared and even though we are not optimistic to stay in that turkey like arrangement, i think that is one of the most damaging areas with the opportunity to travel. Thanks for giving us so much food for thought also the fabulous questions a round of applause. [applause] [inaudible conversations] johnstons critics say his timidity so undermined the southern war effort to make him a contributing factor in confederate defeat. To these credits he was the real mcclellan of the west. [laughter] who lacked the moral will unless he could be absolutely certain of victory and those circumstances never obtained he seldom saw that if at all. Two days after his return the president s oldest daughter became the bride historically the First White House wedding in 53 years. Abraham lincoln conducted quite a bit of business staying ten days in the first meeting was not held at the white house but here when he introduced himself and his wife he said i want to give you the long and short of the new presidency. Hiring 40 new criminal prosecutors across the country. He took questions from reporters on the president s comments the fbi reputation is in tatters. Twenty minutes. [inaudible