in place in 2015 are really appropriate for this new kind of era. and in some ways, by rolling them back, whether we're actually going to see -- or whether or not the new rules that we're going to be living under are actually appropriate for the moment that we're living in. >> companies are concerned about having to pay to reach consumers. that's a pretty big fear. especially -- not so much the bigger guys who have the money and could pay, but some of the smaller websites too. etsy, reddit, they've been very active in this space because they say, if we have to pay a toll to reach consumers, that's really going hurt us. we can't afford to do that. >> watch the communicators d tonight at 8:00 eastern on c-span2. >> the woodrow wilson international center for scholars hosted a panel discussion about the range of potential brexit implications

and outcomes for the united kingdom, the european union and the united states. panel ivets discuss a study on the rand corporation about the implications of brexit. the u.k. will exit the european union in march of 2019. his is just under two hours. >> good morning, everyone. welcome to all of you and to the wilson center for our discussion this morning of brexit. i'd just like to open by remembering, go back a year and and f or so, june, 2016, the u.k. public's vote in favor of brexit felt like a tectonic shift and it was a major change with consequences that were both ar-reaching and unclear. brexit changes everything, but how? so businesses, institutions and

policymakers have been looking at this ever since. rand's study that we're going to talk about today looks at some possible outcomes and what they mean for our economic policy and for our cooperation. so i'm delighted to see many friend of the wilson center here today and of rand. i'm going to introduce our expert panel and my idea is that whether he here from charlie about the results of this study. turn this over to then michelle for some comment. and then ask fran and howard to weigh in. who are these people, you ask? well, charlie, vice president international at rand. he's a former u.s. ambassador to greece and with distinguished state department career, ncluding for europe. minister of counsel for economic affairs in london and at the european union. in iraq he served as coordinator for economic transition from

2007 to 2008. fran is adjunct staff member at the rand corporation. she's also a distinguished fellow at the atlantic council and senior advisor at an association. until january, 2017, she served as vice president for european union and special initiatives at the council. howard, senior economist at rand corporation, director of rand initiated research. and a professor at the party rand graduate school. he specializes in international economics and economics and national security. and has written on so many varied studies that i am hard-pressed to find something he hasn't written on. michelle, next to him, is our nonrand expert and we claim her as one of our own here at the wilson center. she's a fellow in our global europe program. she's a professor at american university school of international service and coordinates their european and russian studies program. so, with that, i know you're all waiting for the main

presentation. i'm turning it over to charlie. here we go. >> thank you very much. robin didn't introduce herself. but i will mention that she's just back from having our top political jobs at the u.s. embassy in london and the u.s. embassy in berlin. and knows quite a bit about the subject herself. i hope she'll intervene in the discussion period. i'd like to also thank wilson center for hosting us today. and i look very much forward tower discussion afterwards. now, rand corporation's mission is to help improve policy and decision making through research and analysis. we are a nonprofit, nonpartisan research organization and of course as such we take no position on brexit itself. the british voters who decided to undertake this your honory. but through this study we seek to provide independent, impartial, evidence-based insights on what will be, without any doubt, one of the biggest moments for the u.k. and 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 researchers from rand u.s. and rand's affiliate in europe, rand europe. as already introduced with me today, fran and howard, fran took a lead in the political analysis of this study and howard is our resident expert on foreign direct investment. funding for this report was provided by donors and the independent research and development provisions of rand's contracts with the department of defense-funded research centers. in addition, a grant from the foundation supported the work on game theory in relationship to brexit. as well as some of the outreach and dissemination activities we're undertaking. what we've produced is a new piece of analysis that looks at the economic impacts of brexit under different trade scenarios. for the u.k., the e.u. and also for the u.s. this not only provides a thorough economic analysis, but

uses the game theory insights to explain the strategies the parties are choosing. through economic impact scenarios and game theory analysis, our study helps to explain the significance of the decision reached by the e.u. jft last week to move to phase two in the negotiations with the u.k. the discussion of the union's future economic relationship with the u.k. so let me begin by discussing the scenarios. our base case could be considered the no-deal case. that is, that the u.k. leaves the e.u. in 2019 without reaching any agreement for preferential trade with the remaining members of the e.u. we've called this case w.t.o. rules. because of course in such a circumstance, britain would trade with the e.u., the u.s. and every other country under only w.t.o.-bound tariff rates for goods and established market access or insurance for services. we then compared the following four sent air dwrose this base case.

first -- scenarios to this base case. first, the successful negotiation of a u.k.-e.u. trade agreement. pretrade agreement. which the u.k. is seeking. second, the creation of a u.s.-u.k. free trade agreement, which the u.k. also has begun to discuss with the u.s. trade authorities. although it cannot formally begin negotiations until it withdraws interest the e. -- withdraws from the e.u. and its common commercial policy. third, the creation of a u.k.-e.u.-u.s. flee trade agreement based on the model of the u.s.-e.u. transatlantic trade and investment partnerships or t tip, which was under negotiation between 2013 and 2016, but is now frozen in light of political developments on both sides of the atlantic. and, finally, an extended transition period during which the e.u. and the u.k. trade arrangements do not change materially, but other nontariff barriers to trade progressively come into effect. now, for the sake of completeness, we also assess the

economic impact of three so-called soft brexit scenarios. unlike the hard brexit scenarios, these scenarios assume that the u.k. will maintain access to the e.u. single market in some way and apply its common external tariff toward the rest of the world. three such soft brexit scenarios are, one, the norwegian model, which would involve the u.k. becoming a member of the european economic area. two, the swiss model, which would have british trade with the e.u. be based on a series of sector al bilateral arrangements that give the u.k. wide market access but obligate to appliest. u. standards and regulations. is -- e.u. standards and regulations. and finally a customs union like the one e.u. has with turkey. for each of the post-brexit trade scenarios, we used mod -- modeling to measure the percentages and monetary changes in g.d.p. growth, per capita, trade and foreign direct

investment for the u.k., e.u. and u.s. for each scenario we analyzed the effect of changes of three kinds of trade quests. one, changes in tariffs. two, immediate changes in nontariff barriers such as imposing rules of origin, customs, measures and standards on the entry into force of another agreement. and third, likely changes in nontariff barriers over time. through the progressive divergence of regulations. so what did we find from this economic analysis? the big takeaway is that the u.k. will be economically worse off outside of the e.u. under most plausible scenarios. the key question for the u.k. is how much or soft will it be? the option of leaving the e.u. with no deal and simply applying the w.t.o. rules will lead to the greatest economic losses for the u.k. it's clear that no deal is the worst deal for the british economy post-brexit.

our analysis at this scenario shows trading under w.t.o. rules would reduce the u.k.'s future g.d.p. by about 5% after 10 years. which is a loss of $140 billion. in lost growth. this would be approximately 45% of the u.k.'s expected economic growth over the decade. found in deal, the e.u. would also lose out economically, but by nowhere near the same proportion as the u.k. the economic loss to the e.u. after 10 years would be about 0.7% of its overall g.d.p., which is a loss of $97 billion. so the u.k. would lose more proportionly and more absolutely than the e.u. under a no-deal scenario. so why would the no-deal scenario be so damaging? well, because the u.k. would face tariffs at w.t.o. levels on its goods exports to the e.u. and would -- and what in turn apply them to e.u. exports to

britain. although the tariff levels themselves are not so high, we determined that the u.k. would have to inspect and value all cross-border trade as would the e.u. countries. and we assessed that the u.k. would move away from e.u. standards over time, resulting in significantly increased nontariff bar yes, sir on goods. -- barriers on goods. but the sent air ye would be even worse for service disease -- but the scenario would be even worse for services. u.k. service exporters would have access to only limited market access. and not the single market enhanced virtually friction-free access it has now. while the no-deal scenario is by far the worst outcome, the u.k. would be worse off in nearly all of the trade scenarios that we considered. as compared to its current status as a full e.u. member. a free trade agreement with the e.u., second scenario, essentially that the spoke trade agreement that the u.k. is now

seeking, would be modestly better. this difference is because the f.t.a. would prevent an increase in tariffs. however, just as in the w.t.o. scenario, such an f.t.a. would nonetheless involve a host of nontariff barriers to trade. sol would a free trade agreement with the u.s., which would only of course be possible once britain left the e.u., be able to substitute for the u.k.'s preferential access to the e.u.? our nail sis suggests that it would not -- our analysis suggests that it would not. a u.s.-u.k. f.t.a. would only be four percentage points of growth better than the no-deal baseline. thus, it would be significantly worse for the u.k. than the equivalent f.t.a. might be with the e.u. largely because existing levels of goods and services traded

between the u.s. and the u.k., while significant, are substantially less than between the u.k. and its european neighbors. for the u.s. moreover, the value of an f.t.a. with the u.k. alone is negligentable it. would provide only .2% -- percentage poinlts of gain for the much larger u.s. economy. so the only truly beneficial trade scenario for the u.k. that we found would be a trilateral u.k.-e.u.-u.s. agreement. much like the t-tip might have been. we found for the u.k., the timbings-tip scenario would be seven percentage points of gp better than the w.t.o. rules baseline. even better than continued e.u. membership alone. since through it the u.k. would get preferential access to both he u.s. and e.u. marketplaces. one reason for this outcome being so good is in addition to the e.u. and the u.s. themselves

would also benefit economically. and the pull effect of enhanced growth from these two larger economies would help the u.k. however, we fully recognize that a t-tip like arrangement is seen as very unlikely in the current political environments on both sides of the atlantic. as i mentioned we assessed other scenarios, including a transitionle arrangement -- transitional arrangement. the transitional arrangements would be good economically for the u.k. for as long as the nation remained within the single market. but economic uncertainty would hurt investors. the for thisway-swiss and turkish -- the norway, swiss and turkish models would be good for economic growth but would come with a significant loss of u.k. sovereignty over regulations and standards and significant budgetary contributions from the u.k. to the e.u. on those grounds, these options don't seem politically viable in the u.k.

there's a new online calculator which is now live on our website. the calculator allows policymakers and economists to alter the key trade assumptions in order to understand their economic impact on the u.k., e.u. and the u.s., after brecks. i it also allows users to -- brexit. it also allows users to create other options. chapter four of our study is based on an application, as i mentioned, of the social science of game theory. our aim in using this methodology was to create a better understanding of how a wide variety of structural factors are influencing the contours and outcome of the brexit negotiations. in particular, game theory helps explain why the e.u. sought first to settle the terms of the divorce settlement before moving on to discussions of the future relationship. and why the decision now to move to phase two talks in a future

relationship is so important to the u.k. by using its leverage to commit britain to painful terms of financial settlement before entering into trade negotiations , the e.u. sought to discourage other would-be leavers. which we assessed is the e.u.'s top priority. from this standpoint, the e.u.'s approach could be seen as a zero-sum strategy. in which it wins when it can show the u.k. loses. for the u.k., game theory suggests it should avoid an attempt to pick apart european unity, since all member states have more at stake from the core than the u.k. can offer to match. and effort therefore would be likely to back fire. it's also a sensible strategy for the u.k. to seek to broaden the negotiation beyond the phase one issues as soon as possible, as the more issues on the table will help arrange positive sum tradeoffs. this explains why prime minister

may made the commitment in florence a couple of months ago to pay its obligations as a member, rather than put them on a negotiating table. finally, in the game theory chapter, -- finally in the suddeny we asessd u.s. interests in the brexit process. our most important find something that core u.s. economic interests actually are not at stake. the only scenario we examined that had a material impact on the u.s. economy and a positive one was the trilateral t-tip-like outcome. which seems a distant prospect for now. but the u.s. will miss the loss of the prague natic -- generally pragmatic british voice in e.u. economic policy. and as far as 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 than trade arrangements. we therefore conclude that the

bigger u.s. stake in brexit is its potential impact on european decision making. where the u.s. properly worries about political insecurity issues and on european cohesion more generally. the worst outcome for the u.s. would be if brexit led to a greater, broaderdy didn't gration of the european construction -- broader dedidn't gration of the european construction. as a previous rand european study explored in more detail, in the aftermath of brexit, the political and security struck turs of europe will have to response -- structures of europe will have to respond to ensure our common interest, most likely by strengthening nato-e.u. relationships. to sum up, the overriding message from our study is that it's in the best interest of the u.k. and to a lesser extent the e.u. to achieve some sort of open trading and investment relationship post-brexit. the big challenge for the brexit negotiations around trade are 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 conflicting negotiation -- negotiating positions of positive sum versus negative sum game. and that's why the agreement this week to move to phase two is so important. in public, both sides have declared their intent to have a . sitive partnership but if the differ interests and aspirations lead the e.u. and u.k. to walk away from the table without a deal, disruption would be significant. this is likely to pose a number of political challenges for the u.s. as well. the common ground for the u.k. and the e.u. is the fact that the no-deal option will be economically damaging to all parties. trying to avoid this worse-case option could be at top of the agendas for the u.k. and the e.u., as the economic talks begin. now there's much more to our study, but to me these are the

highlights. howard, fran and i look forward to our discussion and michelle's comments and look forward to moving on to our discussion period. thank you. >> thanks very much. i'm going to give the non-rand member of our panel an opportunity to give her impressions of this. did the reports' conclusions align with your expectations? you've been looking at brexit and talking about this for a while. did it this cement what you had thought or did this come out wildly different industry in >> that's a great question. and besides recommending the report, because i would start off and say it britain tends to have a very transactional view of europe. and so this is a transactional report. the report's conclusion, no brexit outcome is the best scenario versus no deal is the most costly. i think accords with what many other reports and analyses have

concluded, including her majesty's treasury, some think tanks and others. and so from the sense that this is one of the worst and best options, i would conquer. but i also think -- concur. but i also think that it emphasizes something else which is the british economy itself is very unbalanced. it's heavily geared and weighted towards services and so within britain itself, there is a dimple pact across regions. the city of london is obviously deeply concerned about financial services. so i think we need to store the of -- sort of unpack the difference between trade in goods versus trade in services. and that's very, very important here. but i think the report tells us something very important that tends to be forgotten in the sort of press. the first thing is this, as the report points out, the is he consequential nature of the

agreement -- see consequential nature of the agreement being in three phases really puts the advantages to the e.u. over the u.k. the u.k. wanted things simultaneous and lost that argument. and i would point out that this report turns out and says, first of all, we need the terms of the u.k. exit, which has just been agreed upon, sort of this week. the second issue, which is framed differently in the press, but the second stage is the establishment of a framework for a future relationship. that's not a trade deal. that's a framework. the third issue is the establishment of the necessary transitional arrangements and this report really lays out clearly why that sequence benefits the e.u. relative to the u.k. d it also highlights the asymmetry cal level of these negotiations. the leverage goes to the e.u. by putting up all of these

different scenarios, it actually really helps us differentiate something that's not always clear to many audiences. and that's the distinction between a customs union and a single market. the customs union is about trading goods. it's about zero tariffs. and you have to have an identical trade policy with respect to nonmembers. so the u.k. doesn't get its own trade policy in that scenario. and that's a very important choice. it doesn't get back sort of trade sovereignty. the single market is very different. that's about the oomplity and indy visibility of the four freedoms. goods, capital, services and labor. and it's something where the british tried, wanted and opt-outs me sort of in terms of free movement of

labor. and it will also be enforced by the european coufert justice, something that the british -- court of justice, something that the british after the referendum indicated that they didn't want. so i think it's very, very important that the e.u. is a legal order and that's something that it will not sort of allow britain to cherry pick. i think you make that very, very clear. and i think the distinction's very important in choosing these options. and the report also tells me something which i thought was very obvious. but is not talked about very much in advanced industrial economies. which is the tariffs. we often dismiss them as small. when we talked about ttip here in the united states, we often said, well, the tariffs are small. they're only 2%. but i think that, you know, now this has opened up, what are the e.u.'s w.t.o. commitments? what are the restrictive quotas and high tariffs in things like agriculture? as you point out, 34% of u.k. exports to the u.s. are

tariff-free. but that means a lot more, 70%-plus, are now at risk. and so for me, i think attention is not just needed on the u.k. and e.u. negotiating tariff rate quotas and dealing with the tariff issue, it's not just let us divide what this is, i think they're now starting to realize that there's others who will be affected by this, other w.t.o. states who won't say this is just a u.s. -- a u.k.-e.u. deal. and so i think that this will broaden the debate about tariffs. the second issue i think is that this report really brings home that this is not just about trade. there are many, many unintended consequences or issues that the u.k. and e.u. will have 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 we may or may not have a new border, it won't be just about cuss toms clearance and the -- cuss toms clearance. and the irish -- customs clearance. and the irish tell me 80,000 trucks go back and forth every day it. won't be just about that. it will be one of the mosts me interest trade issue which is rules of origin. the second issue will be the british will be subject to e.u. competition policy. americans and acquisitions, anti-dumping and so forth. so the british will not be lowed to undercut, because then their firms would be subject to anti-dumping issues. third liquor the e.u. has a lot of trade -- third lirks the e.u. has a lot of trade -- thirdly, the e.u. has a lot of trade remedies. the british will now be subject in those trade remedies they participated in. fourthly, the budget. it's not just a bill for the prior commitments, through the budget cycle of 2020, that this report indicates.

12% to 15% of that budget is paid for by the u.k. at happens to the subsequent redistribution? which other member state subsequently are going to pick up the british bill? then finally, the issues that perhaps we don't think about because we are so focused on trade. but the british are part of tembings uraton with nuclear materials. what are the costs of moving snose how will british get access to nuclear cooperation? and lastly, regulatory agencies. the europeans over the last couple of decades have created a large number of regulatory agencies in areas of interest to the united states, to create a much easier access for medical products, pharmaceuticals and so forth. those regulatory agencies in britain have now moved. and secondly, what kind of access will the british have? and perhaps finally, the one

that struck me as less salient in trade terms, but quite astounding, is that we will now have border issues in spain. we will also have the issues of territories and military bases in cyprus. so the range of things we think about is really interesting. and for the british, i think there's something different. in the united states, you have a nafta template, when you negotiate a trade agreement. this report tells me that the british are going to have a patchwork of trade agreements that they're going to have to negotiate. not just those that are m.s.n. status, but there is sort of a preferential trade agreement. there are customs unions that the e.u. has. there are generalized systems of preferences with less developed countries. the e.u. has a much more patchwork of trade agreements than perhaps the u.s. does in terms of its free trade agreement. so for the u.k., they're going to be change -- there are going

to be changes in trade costs to third countries. which the e.u. has a preferential trade agreement with. and so i would say that's something that the british will have to confront. and i think the report also tells us, not just about tariffs, but also about nontariff barriers. they're hard to quantify. they're hard to deal with. and i think that the report gives us a kind of caution here, which is very important in this debate. overnight the british regulations are not going to diverge. brirn britain's going to accept them into domestic law. but over time, they will diverge. and i think that's a very, very important economic impact. and the last two things would be that the e.u.'s move on. the e.u. is developing not only implementing ceta with canada, e.u. mexico, e.u. japan, e.u. others. but the british are not part of

that. the question is, those greefments that are already signed -- agreements that are already signed, now the british exit -- will the e.u. have to relook at them because the british are not part of them? so, i think this is very, very important. and i also think, from the british point of view, you know, the scenarios you create that don't look terribly good for the british, the e.u. is now realizing just how different trade and investment is. and they are separating their trade and investment treaties. so if i was the british, and i looked at how politicized investment agreements are in the e.u., they're going to get a trade deal. trade on goods. but investments, quite a long way off. do you want me to continue or finish? [laughter] >> i happen know that in the audience there are a lot of people with some very lively views. so i think that what we'll do is turn to fran now.

and then to howard. and then open it up. because i am confident it's going to be the wilson center's generally lively debate going on here. fran, i'm going turn it over to you. my shill's highlighted these range of additional issues and this is something i think you're well placed to have a discussion of. we're in the next phase now, right? that has happened since your study. tell us what that means and what other strategic policy consequences we may face. fran: well, i think actually today 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 frantically trying to find out if the guidelines had been puck litsched yet, but they haven't -- published yet, but they haven't been. but this is -- >> point out the council is a summit. fran: yes. this is the summit of all the european leaders. this was one county conducted at 27, i.e. the british were not there. teresa may was at dinner last

night in brussels and then left. and the main point of this was to confirm, which they did do, that sufficient progress, those magic words, has been made. and that we can move to the next phase. they have, in the agreement that was approved this past week, the report that was approved this past week, made some decisions and come to an agreement about citizens' rights. and about the financial settlement. there are still questions in both of those areas, but these are not insignificant accords. where they have really kicked the can down the road is on the agreement about ireland. where you can read this and see directly contradictory provisions, some to satisfy the d.u.p., which is the minority party that's holding up teresa may's government, and others to satisfy the irish, who have threatened to use their veto

over the final, if they think that there will be a hard border. a real border between the republican and north of ireland. so -- republican and the north of ireland. so that set -- republic and the north of ireland. so that set of issues is going to go into the next phase, even though it should have been resolved. i think we are now looking for the next few months, to be focused on two things. one is the transition. and i think it's entirely possible that they will reach a relatively fast accord on the transition. because, as has been stated earlier, the e.u. holds almost all the leverage on this. and the british have slowly come to the realization that you cannot negotiate a trade agreement in six months. wean best friends. it's really just -- even with best friends. it's really just not done. so the transition that the e.u., that president has laid out, which would be one in which the u.k. adheres to all the rules,

adheres to all the financial responsibilities and obligations . and adheres to e.c.j. jurisdiction for peard of two years, perhaps a bit more -- for a period two of years, perhaps a bit more. that's one of the see -- decisions, how long can it go on? but will not be at the table. so they will be a taker, a recipient of e.u. rules. one issue that i can see coming up in this, that is unclear to me from what i have seen so far, is whether the british will continue to receive their rebate. i think that is going to be a problem or a sticking point as they work toward the transition. there were also comments as the leaders were leaving the summit today that within the transition there needs to be some kind of understanding about n'diaye bralter -- about n'diaye bralter. there is in the guide -- about gibralter. there is in the guidelines an agreement about the e.u. that the spanish will have it.

this could be a real sticking oint over the long term. once it's agreed, march is the time frame we're looking at, once that is done, then one would move on to the future relationship. and here, the priority issues are the trade agreement and including customs. and the challenge has been that the u.k. has been rather schizophrenic about what it wants. schizophrenic might not be the right word. but it's been actually uncertain. does it want a canada type agreement? based on the e.u. canada agreement? that has just been done? but british politicians have been saying that they're going to get canada plus, plus, plus. and nobody quite notes what that means -- knows what that means. but as michelle pointed out, cherry picking, deciding that

you can have parts of the single market, is just not going to work out. so, the other problem with these types of agreements is that depending upon what is included, the negotiation of a trade accord operates under either qualified majority voting, so not everyone has to agree, or unanimity. which is a much more difficult hurdle. and after the singapore -- the decision of the e.c.j. on the singapore trade agreement, there's now a division in e.u. trade policy where if it includes things that have member-state competents, investor protection being one of those, it appears. there are still issues to be worked out, then everybody must approve. and you can go through a situation as you did with canada, where you were waiting for the -- if you keep it to a more narrowly focused trade agreement, it just gets approved

at the e.u. level. so it's not clear exactly what will happen. and even on that, even if it's ust the e.u., articles with -- agreements with third parties, and britain will now be a third party, which is a big mental leap, it will nobt a member, it will be just the same as we are, just the same as japan. in terms of its -- the elationship. and if you have an agreement, if it includes services and intellectual property, then it's unanimity. and so this is a high barrier. because services is the major economy. e u.k. so we have some procedural issues that have to be dealt with here. that will play into what type of

agreement ising if to be pursued. let me just -- is going to be pursued. one issue that charlie and michelle did not bring up so far is data. though the transfer of data, which is a huge issue in the e.u.. the u.k. will adopt the g.d.p.r. -- gdpr, the general director -- i can't -- that protects privacy, person privacy and the transfer of data. but it is unclear whether after they leave and as their own privacy regulations may start to diverge a little bit, will they have to get an adequacy agreement as we do through privacy shield? think about the amount of data that goes back and forth between the continent, between different banks and all sorts of things. all the private areas. as they talk about the trade greement, including customs, that will again brib bring up the irish border question and i

expect that will be one of the last things that will be a determinant in how they finally figure out what a border is. we will also have to see where financial services is negotiated. is it part of the trade agreement, a stand-alone agreement? is there an agreement? and what regulations in the meantime does the e.u. take to rule about euro clearing and whether euro clearing needs to be done in a member state? the other element of calculation is that while this is going on between the e.u. and the u.k., as has already been brought up, the u.s. is already starting to scope out what a u.s.-u.k. free trade agreement would look like. and there will be pressure applied on the u.k. to not agree geographical ngs, indicators by the americans, so that they can have a more

positive agreement between the u.s. and the u.k. and so that will be in a sense f a triangulr negotiation. one of the things i think we all learned in writing this and in watching brexit is how the unpredictable becomes the norm. and how every day you learn there's some new complication that needs to be resolved. whether it's agencies that provide certification, etc. but there's all sorts of stuff that you don't anticipate that is going to come up. i think also we don't know how the personalities involved are going to get through this phase of negotiation. spectacularlyeen, over the last couple of weeks, is the weakness and divisions within the may government. and the ability, i would say surprisingly so, of the e.u. to

remain united behind their negotiators. there are little squabbles on edges, but they're staying pretty firm. so i think we have still a difficult and uncertain road ahead, to actually find out what will be the future relationship. i can stop there but i do want to say that president tusk has also outlined as other areas of negotiation in this initial phase, if you will, and thinking about the new relationship, anti-terrorism/police cooperation. and foreign policy and particularly defense insecurity. so we will see i think some negotiations along those lines. will the british, what access will they have to the european defense fund? they did not join this new mechanism, pesco, but will they have relationships with it? i would point out that atlanta, which is perhaps one of the most successful e.u. military

missions andity piracy missions, is currently headquartered in the u.k. there are all sorts of issues to be worked out about future defense and security cooperation as well. robin: i'm going give howard a chance to come in here but i'm confident we'll come back to this question of the security and defense policy implications as well. howard, i was quite taken with the calculator, i must say. because -- and i was wondering, if you could give us a little bit more on that. but also a little bit more on what would you program in there if you were going to come up with additional scenarios and give us a little look into that, if you can. howard: certainly. let me start with the sens. the calculater is designed -- scenarios. the calculater is designed to show the results of the scenarios first and then i'll talk about what you can do with the calculator. we chose eight scenarios to model. and we chose really the most likely scenarios that the u.k.

would face. the hard brexit scenario is w.t.o., of course this is the no-deal scenario. but the other three of them, free trade agreement with the e.u. or the u.s., or both together, make a tremendous. a sense because in general countries trade with those partners who are closest to them. charlie mentioned early that we used a gravity model. that's the underlying logic behind a gravity model. then we looked at the soft brexit scenarios which we do not have in the calculator. you can say when you look at the hard brexit scenarios, well, what about a global britain? we took global britain very seriously. might hink that, you describe global britain. the global britain idea is that the u.k. now is not part of the e.u. customs union or single market, can do multiple trade deals with any partners it wants. so it can do trade deals with

australia, china, any countries in asia, latin america. and thus build a free trade network that could be better than its agreement with the e.u. y doing -- by modeling u.k.-u.s. agreement or u.k.-e.u. agreement, we're really showing something of an upper bound. because the u.s. is 20% to 25% of the global economy. the e.u. is about the same size. doing a 1-1 trade deal with the u.s. is much easier than doing multiple trade deals with multiple countries, especially with multiple large countries. and i think we've just seen an example of that with trudeau's trip to china and his desire to start free trade negotiations with china. and the ultimate failure of that attempt. so a global britain idea would be many years and probably not really duplicate the size of the u.s. economy. so we start with those

scenarios. then get into the calculator. underlying all of those scenarios are assumptions. what would staff i haves -- tariffs look like in a ttip scenario? what would tariffs look like in a u.k.-u.s. free trade agreement? we have to make assumption about what they might look like in the future. what would nontariff barriers look like? how much higher would then than they are now? we can't say that our assumptions are correct. we make reasonable assumptions based on available data. so what the calculator allows you to do is to go in and say, ok, rand, i disagree with you that nontariff barriers under a u.k.-e.u. free trade agreement will rise by 5% relative to what they are now. i think that we will have nontariff barriers that won't rise. we'll have no nontariff barriers. they'll be zero percent. you can program that in to a

custom scenario and the model results calculate the for differenting a are a gates. what will u.k. g.d.p. look like with no tariff barriers? what will u.k. trade look like? you can look at nontariff barriers for services. services are a major issue for the u.k. 38% of their exports are services exports. that's where their trade surplus is, in services. their trade deficit is in goods. and so you can say, well, what will the u.k. economy look like? what will the u.s. economy look like? what will the e.u. economy look like? if services trade is frictionless, if there are no nontariff barriers? and in general what we find or what you will find is the u.k. is still worse off, sometimes much more worse off, sometimes slightly, than it would be economically under full e.u. membership. robin: ok, all right.

thanks very much. now, i know that many of you in the audience have questions. i know some of you to be very good questioners and talkers. so i actually am going open it up to the floor. i warn you, i start asking questions myself and then you're just hostage to me. but i'd rather that you all be engaged in this, since we have our experts here. so i'm going to take a couple of questions at a time. but you need to, a, wait for the microphone. and b, identify yourself. we want to know where you're coming from. [laughter] o i open it up to you all. oh, don't tell me. ok. ale. questioner: i'm gale maddox. i'm at the u.s. naval academy. i look more at the security

issues than the economic issues. but there is an area that's overlap and i'd be really interested to hear your reactions. and you mentioned that is the e.d.f. the european defense fund. i was a little skeptical when it was first announced. i thought, oh, yeah, here's another attempt. but i don't know. it seems to me that the union has really been pacing itself and has seemed to at least want to appear that it's really going to go down this path. as well as with the pesco. i guess i'd like it hear your analysis of that. how the brexit is going to impact some of the security issues and in particular the sort of nexus of the e.d.f. and the industrial industry, defense industries. i think there's a lot of overlap there with what you all have

been looking at. thank you. robin: perfect question. i'm going to ask you to go ahead and at that -- and take. that >> you are right. the e.d.f. -- for those in the audience who don't know about the e.d.f., the idea here is hat for once, after a lot of efforts to build the more could heernt e.u. defense -- coherent e.u. defense policy, that would then give the european union a political defense power base, that it would not only be linked to the united states and to nato. charlie: the e.d.f., the innovation of that is that it would allow for common acquisition of high-priced defense assets that then could be shared among e.u. member states and dedicated to what contingencies they might need. and it is overperforming

expectations. and this is a good thing, i think, for what matters to the united states, which is that the european countries collectively build more defense capabilities and thereby make a greater contribution to our common security issues. keep in mind, many european union countries, or not many, but a handful of european union countries are actually not members of nato. getting their contributions to building up defense capacities that would give more pause to adversaries on their borders and elsewhere in the world, is a gd thing. one impact that we didn't make much of in the chapter on this, but if our economic assessments are right, the u.k. is in for a period of slower growth than it

would have had otherwise. and we're already seeing some very serious budget austerity in he u.k.. and if we're right it will only get worse as the u.k. leaves the single market and suffers the economic consequences that we're modeling. and that will effect the amount that the u.k. can put into its defense sector. brexit itself will have an impact on the u.k.'s defense sector. the companies like british aerospace that are major players in the defense -- supply of defense goods worldwide. how successful, what kind of access would they have to this e.d.f., this spending on e.d.f., and the way the defense sector works, it is in a sense one of the more nationalistic sectors.

there is a binational or at least bieuropean instinct and i do know that many major companies in the british defense business are worried about that. and so that is likely to be a consequence. robin: i know you want to come in on this as well. fran: it's a broader discussion than the european defense fund. in that a few years ago the e.u. started passing legislation, which is now on the books, and implemented by the member states, to not discriminate in defense procurement, that did not involve large research projects. e.i. -- i.e., airbus doesn't need to worry about this because their proth projects have a lot of research. but if you're trying to buy boots, ammunitions, uniforms, that kind of stuff, you are not supposed to discriminate between e.u. members. it has always basketball very clear whether there is -- it has

always been very clear whether you can discriminate against non-e.u. members, such as the united states. and it has been a matter of concern. but i think the british are now going to find themselves on the other side of that. i think, along with the things that charlie said, there is a gradual move within the e.u. to bring the defense industry into the single market. it will be slow, it will be stop and go. there are very much nationalist impulses. so i don't expect that the big projects will be affected in the short term. but it is there and the british will find themselves outside. it will be another trading issue. robin: can i ask you a question on that myself? the last u.k. security and defense review was in 2015. and then of course the brexit vote was in 2016. would you anticipate that they would need to do another defense review prior to five or 10 years

down the road fran: yes, i would imagine so. david may have something to say about that. but what i think and what would make logical sense is not necessarily what governments do. so i don't know whether they will actually take that strategic perspective. i think given what chafrly said about the budget, which -- charlie said about the budget, which i very much agree, with it's rather a divisive issue want u.k. so i'm not sure that doing something that clarifies that is necessarily what governments want to do. and i think we face this larger question as well of the government stability. as we head toward 2022. i think elections have to be held by 2022. and so -- if not before. charlie: the elections, we didn't really talk about the elections last summer in june, in which the prime minister may tried to increase a majority of

the government in order to increase her negotiating situation with the e.u. and lost that bet very seriously. such that they are actually reliant on a support agreement for them staying in office. and that could fall apart. either just because of passage of time and problems within the party, or because when we get close to march, 2019, when the end of the first two years of negotiations about leaving the e.u. have to be resolved or extended, and the irish questions that you referred to will come to the foreand the party has very -- fore and the party has very firm views on irish questions. .

if her majesty's government in london adopted an outcome which problem t solved the on the island by establishing a hardboarder or inspections for goods back and forth between northern ireland and the rest of great britain that would probably be a government ending outcome. frances: wow. ok. i am going to go over here to peter. don't worry, y'all. 'm coming back to you. [laughter] steve: i'm steve. i teach at american university. i have a couple quick questions that may entail longer answers. just following on what fran said about the unexpected becoming possible and what charlie just said, what do you think a corbin government would

do with brexit? and the second one is to howard. howard, did you consider any general he can which libry up -- equal libry up models and what would that look like? howard: well, corbin in the election last summer was rather vague. they seem to be tending a little bit towards softer brexit options that -- charles: and the continuum and we tried to capture this in our scenarios. there is a continuum of options that are generally characterized as the soft brexit. and there's the norway. there's turkey and swiss. ith, the deputy prime -- shadow -- yes. that's what i meant. the shadow deputy prime minister candidate or the

spokesman for the labor party on e.u. matters has recently been talking about how they -- the labor party would not want to leave the e.u. customs unity. maybe a little diversion for those in the audience who aren't deep trade hawks. but a customs union is what the e.u. started out as being which is there is a common external tariff that all 28 members of the e.u. apply to trade with every other country in the world except the one country, turkey, which is in a customs union. so turkish goods enter into -- turkish industrial goods enter into the e.u. duty-free and turkey is obliged to apply the common external tariff to everyone. so if the outcome of brexit were to be that the u.k. leaves the e.u. -- so longer a member of the single market in which

its customs union is, they have essentially adopted the same regulatory matters and they don't have any customs inspections so -- but they stay within the customs union, the result of that would be that they would give up the vision of a global britain because in a customs union, if the u. krment stayed in a customs union they wouldn't be able to negotiate a free trade agreement with the united states or canada or anywhere else. they would only take those agreements like the canada one that the e.u. itself collectively negotiated. and my own guess is that when labour really has to get serious -- right now they're sort of against and pointing out the conservative party's internal conflicts and taking advantage of difficulties as

most opposition parties do, they talk about the government's shortcomings rather lay out in great detail what they would do but it seems like what they are talking about is more on the customs union area rather than the single market because a single market soft option would, like the norway option, would involve free movement of labor d that is unpopular in the labor base, the long labour constituencies because famous polish plumber and other e.u. nationals that moved to britain under free movement of labor have been unpopular with the labour base. so i think my own guess is that's what they're talking about but they are trying to keep their options open. >> question included one for howard. howard: so let me talk a little bit about the modeling. first of all, all credit due to

martin who did most of the modeling. a very good example of trans-atlantic opposition. seamless. everything worked out very well. charles: data transfer too. howard: services trade at its best, i'd say. so we used the structural gravity model which is quantitative trade model. it allows us to multiple sectors, multiple countries, intermediate goods. but it just gives end points. it's not dynamic. right. our other choices could have been computeable general equilibrium model. we opted not to do that for a number of first. first, the structural gravity model has shown in the past to give good answers and we have a odel we could use.

[[laughster] not just good answers. -- [laughster] nod just good answers, accurate answers. it was vetted and accepted in the profession. a general equilibrium model, we would have had to program that from the start and we had to make several choices. we would have chosen the parameters for those example of parameter we would have chosen, how does trade respond to changes in prices? how does it respond to tariff barriers, changes in tariff barriers. there were a number of modeling choices. the other issue against the you al equilbrium model, don't know how you get the answer and it's heavily dependable on a lot of assumptions. there are advantages. how we had more time, had we been able to do that, we could have seen the pathway to trade. so with the structural gravity

model we have the end points. we end up this much poorer, less trade. with the general model we would have seen how that trade evolved. had we been able to include sectors we would have seen how different sectors changed over time. so modeling choices, we looked at that. we thought the answers in the end given the cost and effort would really be not much different, not much better and possibly worse. that's the first thing. the second thing, i should add we did model foreign direct investment. now there we used a simpler gravity model because in general foreign direct investment data are not rich enough to use more complicated models. and the results of f.d.i. were very similar to frayed which is that the u.k. just does not do as well under any arrangement as it does in the e.u. and the e.u. and u.s. gained from titipp.

robin: steve, i know you will be reading the append sees because there are generally scary equations. ok. i am going to go first to moira and then to you. and i am going to take two questions at a time. moira: former wilson fellow. and my question is about ireland. brexit has made jor implications for ireland. i was wondering looking at your scenarios, did you look at the -- how each scenario might affect ireland and their economy and also, do you have any thoughts on what the most likely or perhaps -- well, most likely and perhaps also the best scenario for ireland and the u.k. on border and trade? moving forward? robin: all right. we have the ireland question. i am going to take yours too.

garrett: hi, there. garrett workman. i wanted to get into the e.u.-u.k. assumptions a little bit more. as far as the f.t.a. goes, did you assume the e.u. 27 will remain pretty aligned in their wishes what that will look like? it seems like there might be more divergenses between the e.u. countries and second base than there were in the first phase. fim simly, did you look at any existing tree trade agreements with canada, japan, south korea, etc., and would they be able to exceed themselves as a third party or are you assuming they won't be part of it? what about u.s.-e.u. agreements? will the u.k. be added to those ahead of brexit in your assumption? thanks. robin: ok. terrific. who wants to start with ireland? >> let me make a couple

comments about ireland. since you want to speak a little bit to ireland. i -- on ireland, i mentioned this a little bit with respect to the common external tariff when i was talking about it earlier. charles: the problem, good friday accord, basically was an arrangement that was a political arrangement that took place in the context of the single market. a it was possible to achieve settlement to the long standing fight between catholics and prot stands in northern ireland -- protestants in northern ireland by having sort of a one island solution. i don't want to go on at length about good friday. but critical to that is the fact that the citizens of the u.k. in northern ireland could

choose to become irish citizens and the irish agreed to have that happen. and that there was essentially a single ireland regulatory and trade arrangement so there was no borders in the a.d. -- 8,000 trucks and so forth. among the scenarios, if there were a tree trade agreement between the u.k. and the e.u., this would mean that the two sides -- we can talk about this with respect to the second question but the two sides eliminate tariffs on industrial goods and make some arrangements and agriculture between them. ut the u.k. in theory would be -- could change the ebbs ternl which would require a -- external which would require a whole set of checks to make sure chinese goods aren't entering into the u.k. and then

being trans-shipped into ireland and onto other e.u. markets and thereby undermining the common external tariffs in the single market. and that's what we talk about rules of origin and there are standards issues and so forth. those would progressively arise because right now the u.k. and the e.u. have the same external tariffs. u.k. being a member of the e.u. and the same regulations. that would mean if the f.t.a., our second scenario or first scenario, for that matter, that e u.k. is only on w.t.o. rules, that wooble -- would be bad for ireland because you would have to have some variety of a border. now, the agreement last week to start phase two had an irish component in which the british

government committed to alignment of regulatory measures such that it would not involve a hardboarder. the problem with this is no one's quite sure, and i think there's deliberate ambiguity how you would achieve that, how you would maintain it. because if that means that the u.k. promises now and forevermore to apply e.u. regulatory standards and for that matter external tariff rates then one might ask the question -- then what are they getting in terms of enhanced sovereignty by leaving the e.u.? there is another option which is you basically agree that northern ireland, which is after all a very small part of the u.k., would in large part function as part of the irish economy and you would have yu customs checks over the irish seas. for trans-shipment of goods from bringing ham to londonary would be subject to those customs checks and so forth and

that's acceptable to the d.u.p. those problems arise with any of the hard brexit scenarios that we're talking about because they basically involve the u.k. out of the single market. if the u.k. were to be like norway, they would be in the single market but they still are responsible for their own external tariffs and in principle you would still have a little bit of that. the customs union options would be better for ireland and that's a little bit my reasoning of why labour may come down on that side as well. but it's hard to know. i don't know whether you want to say anything more about ireland on the political side? michelle: just a couple of things. first off, the situation is complicated by the fact you don't northern ireland government. robin: right, at the moment. and -- howard: and hasn't -- charles: and hasn't been for

uite sometime. frances: i very much agree with charlie and the problems they are facing. the good friday accord includes a lot of funds from the e.u. and a lot of north-south cooperation on the island of ireland. i actually think those can condition. the e.u. can decide this is a zone of conflict prevention and put it in a different part of the budget and it will all work out. the customs border, the border itself, this is -- charles: and services, banks. frances: just trying to figure out where this border is going to be unless the u.k. stays in the customs union is really an issue and it affects all sorts of different industries. there is a great article i saw somewhere about the impact on the racing industry where, you know, horses are going back and forth and back and forth all

the time and you can't make them wait eight hours at the border. because they'll miss their race and it's not good for them. i think there are all sorts of things we have not thought about. there are supply chains that take products back and forth across the border between the republic and north ireland multiple times. and people have invested in northern ireland on that assumption. charles: so let me speak to garrett's question about the question about how did we come up with the f.t.a. options and so forth? in large part we used the most recent european -- most recent kind of most modern european union free trade agreement, that is the canada one, as a proxy. and this is before we had david davis who's the neeshtor for the u.k. in this -- negotiator for the u.k. in this process. say specifically he wanted canada free trade agreement plus, plus, plus.

so we were just modeling it for the standpoint what would be the trade effects in our scenario. we assume zero tariffs for goods trade. some substantial agricultural access but no financial services access in an f.t.a. that's a technical question for you. and the same applies for the u.s. -- the u.s., u.k. and for hat matter ti -- ttp scenario. you can tell me if you think this is wrong, but if there were to be a u. k.u.-e.u. free trade agreement which could only happen if britain chooses to do -- to be under w.t.o. rules or in an f.t.a., it can't happen in most of the softer brexit options.

we're assuming that even if the u.s., the u.k. would not succeed in getting coverage of financial services. with the e.u., the issue is really a competitive one. euro zone countries have always resented the fact that the u.k., which chose not to join the e.u. -- not to join the euro managed through the power and efficiency of the city of london and its financial services sector to nonetheless become the center of euro clearing and all kinds of securities transactions related to the rest of the 28. and once the british made the ecision to leave the e.u., paris, frankfurt, dublin, malta was after investments by banks

and they were pretty clear there would not be single market-like, passport -- so-called under passporting access for u.k.-based banks in the european financial services market. so it's a competitive issue, really. with the u.s., there is that, but we've already had experience in titpp where they wanted to -- the u.s. was firm, even with the entire 28, the whole e.u. we were not nterested in that. and you know more about this than most. it is more regulatory. we have a variety of regulatory pproaches to our banks and

even before we were tariff finance, we have anti-money laundering rules and the federal reserves and the treasury -- comptroller of currency are unwilling to asically delegate those. even the united kingdom regulatory agencies. we were to assume if there were f.t.a. it would not include financial services. one of the things the u.k. is discovering in this brexit process is in the context of negotiating with the united states and the european union, they are a small player. they're a small player in negotiating with the e.u. as we're seeing. and barn yea is calling the -- barnier is calling the tune. if they turned around and negotiated with us they would

similarly be a small player. we are relatively indifferent. there is not a big stake we would have economically so we would look at this negotiation from the standpoint of our own principles and our own relationships. as fran mentioned with geographical indications, you know, we got felta cheese made in wisconsin -- fet cheese made in wisconsin. and wine made in california and we would have our own reasons for wanting to make sure that british committed to letting wisconsin feta and california cchablis. the british would quickly find themselves in a choice between two powerful players that wanted to impose their own circumstances and their own

negotiating approach on them as the bryce price of the agreement. i think this administration even more so than past once. howard: may i add something to -- robin: yes, then michelle. i know you have dodged e.u. cohesion and f.t.a. and i want to give her a chance to comment. howard, you first and then michelle. howard: i hope i say not what michelle was going to say and i tee her up. we did look at cohesion within the e.u. as part of the game theory. analysis. and we found -- we showed several cleavages, potential cleavages and so i won't go into those because i assume michelle will do a better job. what i will say is despite those cleavages, the e.u. has a very powerful tool to stay aligned even if there's great disagreement within the e.u.

and that is as we discussed in the game theory section, after two years the e.u. is out. because there is not a large economic effect to the overall economy, there are large effects to particular sectors in particular countries. the e.u. really can walk away and so doing some kind of internal negotiation to satisfy everybody is not necessarily a high priority for the e.u. michelle: just three very brief points. i think it's forgotten that the trade patents that the u.k. have with member states vary and it's something that the report really picks up on. this is significant for ireland, as it's come up. but it's particular for malta, cyprus and the netherlands. now you have global chains and you have issues of logistics, you have issues of integrated

production, it has a broader impact. the question becomes, if the malta and cyprus are so dependent on u.k. exports whether there will be a trade diversion effect if the u.k. is no longer a member. the second point going to garrett workman's point is that there are critical agreements in almost every international sector. you mentioned open skies and aviation. one of the things i would like to see policymakers look at is, how many agreements are there when both the u.k. and the e.u. are signatories? because there was a period of time when the e.u. was not a legal entity. so there will be some agreements. we are not going to fall out of everything in the u.k., but there are going to be ones we will in the u.k. have to renegotiate. so the fact we got 750 protocols and agreements, some of which the u.k. is an independent signatory, may mean that it will be less critical. the third point that canada

plus, plus bespoke agreements, i'm just -- like everybody else, there is a whole new language going on here. if i know anything about trade and i look and i actually read the e.u.-canadian agreement, he e.u.-japan agreement, and i look at other deals, there are implications. if you give it to the u.k., i'm assuming then you have to give it as well to canada and fake a look at the text because it's very, very finey grain. howard: only if it's a -- this is really wonky but if the free trade agreement qualifies as a preferential trade agreement under article 24 -- charles: of the w.t.o., then ey do not have to -- provide m.f.n. treatment. but if they went the suisse oute and did a bunch of --

swiss route and did a bunch of other things, it would be a standard of the w.t.o. robin: right. i know there are other questions. and then we're going to go to the guy behind. casey: i am at the state department. i am from the western europe office. needless to say we are focused on brexit. thank you for putting together this study because it's a great resource for us as we start to think through how the united states should approach brexit. that's the question i have, needless to say also, we're focused on how u.s. interests are at stake in this. what did your study either show or indicate for u.s. interests under some of the other scenarios, the transition -- the transition to swiss or norwegian model and do they offer meaningfully better

outcome for u.s. interests and the others? robin: and we are going to take the question behind. in am a two-month fellow the netherlands. to follow up on some of the other questions. and also congratulations on this report. i'm intrigued in particular by this trilateral arrangement the u.s., e.u. as you said yourself it will be very complex. i would be interested in some more details about that. it is a trilateral agreement which would be different -- resting on two pillows. or is it one you assume the u.k.-e.u. agreement and two separate things but they wouldn't be coordinate and how would you see that coordination going? and did you look at the u.s. appetite with an agreement like that which as we talk about now

already it doesn't seem to cover very much. tip. like it seems like minus, minus? does the u.s. want something like that? >> ok. let me tackle those two and others can come in as well. casey asked about the scenarios. from the standpoint of the u.s. economic interest, all the scenarios except the ttip scenario have trivial impact on the u.s. economy. charles: the report has for each one of the scenarios each scenario there is the in there is a g.d.p. impact. the long-term tenure of the g.d.p. impact on each of the three. 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 didn't 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 there's 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 free-trade 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 didn't look at the internal distributional questions within the united kingdom. >> you mentioned focusing on the larger trading partners so i am a follow-up 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 don't see a shift if you look at form policy. it is in line with what she but i don't 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 don't 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 buyer's 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 don't 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 i'm not optimistic that the eu will be generous but the other recommendation is to think about staying in the customs union. don't 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]

>> house is coming back in about 30 minutes for legislative business. that's at 4:30 p.m. eastern. eight bills on the calendar including one that calls for continued cooperation between the u.s. and israel on space policy, any recorded votes will be held at 6:30 p.m. eastern. of course tomorrow the house take thips tax reform conference report. later in the week they'll work on extending federal spending through january 19. more live house coverage when the gavel comes down here on c-span. later in about an hour, the

house rules committee meets to set the guideline for tax reform and changes to the dodd-frank wall street reform protection act. live coverage beginning at 5:00 eastern on c-span3 and online at c-span.org or listen on the free c-span radio app. >> tonight on "the communicators." brian if you think of the -- brian fung of "the washington margaret mcgill talk about net neutrality. >> it's a question of if the rule pus in place are good nor new era. in some ways voting them back, whether we're going to see the -- whether or not the new rules that we're going to be building under are actually present for the moment that we're living in. >> tech companies are concerned abt