EU Membership Committee

:00:16. > :00:21.Second evidence session on the costs and benefits of European Unhon

:00:22. > :00:27.membership for the UK's rold in the world. Mr Avery, I apologisd for the

:00:28. > :00:38.slightly late start of thesd proceedings. Perhaps you cotld

:00:39. > :00:43.introduce yourself for the record. Excuse me, I have had a terrible

:00:44. > :00:51.cold. I must get my cough sweets out. I worked first of all for the

:00:52. > :00:55.British Government, I was a very junior member of the team

:00:56. > :01:00.negotiating Britain's accession to the European Community 's, `nd then

:01:01. > :01:05.I worked for 33 years in thd European Commission. Here I speak

:01:06. > :01:10.entirely in a personal capacity I don't pretend any more to rdpresent

:01:11. > :01:16.the EU European Commission, though I still have good contacts in Brussels

:01:17. > :01:20.with friends from other countries. One of the privileges of retirement

:01:21. > :01:25.is that I can now say exactly what I really think, and I shall do that.

:01:26. > :01:30.And sometimes I will critichse the European Union. I've submitted a few

:01:31. > :01:34.pages of evidence in which H have concentrated on the question, but

:01:35. > :01:40.would British foreign policx look like if we left the European Union?

:01:41. > :01:45.I think one of the weaknessds of the present stage of the debate is that

:01:46. > :01:51.serious examination of the practical consequences of leaving is not

:01:52. > :01:56.generally done, so I am glad we are examining that. I have not tried to

:01:57. > :02:03.examine in any detail econolic and financial questions raised by

:02:04. > :02:09.except, we have other experts we are talking to about that. Let recently

:02:10. > :02:15.said that although I think these economic all and trade questions are

:02:16. > :02:17.important, I don't think thdy are the most important questions

:02:18. > :02:25.concerning British men Bishop of the EU. I think too much -- British

:02:26. > :02:30.membership. I think too much focus is on a profit and loss account of

:02:31. > :02:39.membership, and in foreign policy it is difficult to make such an

:02:40. > :02:45.analysis. Anyway, one thing is clear to me, the main reason why countries

:02:46. > :02:51.joined the EU is to obtain ` seat at the table and to vote in thd

:02:52. > :02:59.decision-making process. Th`t is why it we applied to join 50 ye`rs ago,

:03:00. > :03:06.not just for trade and prosperity, and by the same argument thd most

:03:07. > :03:11.important thing we lose if we leave is our place at the table.

:03:12. > :03:19.I had hoped for the session that you would be joined by Sir Nigel, who

:03:20. > :03:23.had a distinguished career representing the UK in the Foreign

:03:24. > :03:29.Office, sadly he has somethhng else to do today. Also -- so we `re not

:03:30. > :03:34.good to get the benefit of his advice to this committee. Btt I am

:03:35. > :03:41.sure you will more than makd up for, and problem we share a perspective

:03:42. > :03:48.with his. -- probably. I wotld like to invite Andrew Rossendale to lead

:03:49. > :03:55.all with our questions. In our last evidence session,

:03:56. > :03:59.witnesses said that the UK had the best of both worlds in forehgn

:04:00. > :04:06.policy because it could act through the EU or unilaterally. Do xou agree

:04:07. > :04:10.with that? I think it is a slight exaggeration

:04:11. > :04:15.to say that Britain can act unilaterally, when we do th`t it is

:04:16. > :04:19.often less effective. But it is certainly the case that the main

:04:20. > :04:25.characteristic of the EU's foreign and Security policy is that it is

:04:26. > :04:30.decided by unanimity, therefore you can block anything you do not want

:04:31. > :04:34.to go along with, and you c`n take independent action also frol time to

:04:35. > :04:39.time. I think that our partners in European Union have always greatly

:04:40. > :04:45.appreciated the professionalism of British ministers and diplolats and

:04:46. > :04:48.their contribution to the foreign policy which the EU is trying to

:04:49. > :04:55.create. Indeed, I think that that would be one of the things that they

:04:56. > :05:00.would both -- most miss if we leave. They have looked to us for ` lead in

:05:01. > :05:05.this field of EU Foreign Policy Chief.

:05:06. > :05:13.So how significant are the benefits of UK diplomacy working through the

:05:14. > :05:16.EU, compared to the ability of our own country to do what we h`ve

:05:17. > :05:26.traditionally done and decide our own diplomatic strategy? How can it

:05:27. > :05:28.be argued that it is better to pause decision-making in that respect

:05:29. > :05:34.compared to what we have traditionally done as a country

:05:35. > :05:40.If I felt that the decision,making of the EU within foreign policy

:05:41. > :05:46.including in the more broaddr fields of development policy, enlargement,

:05:47. > :05:52.neighbourhood policy, if I felt that that had constrained Britain from

:05:53. > :06:00.maximising its influence on the world, I would be more sceptical. I

:06:01. > :06:05.don't think it has. I have talked... I was never in the Foreign Office so

:06:06. > :06:08.I can speak independently about Britain's diplomats, and I want to

:06:09. > :06:12.say in front of this committee that some of the people I have most

:06:13. > :06:16.admired in my professional career have been British diplomats, and I

:06:17. > :06:21.don't think the British public understands how well served it is by

:06:22. > :06:26.British diplomacy. But I put this question to one or two of mx friends

:06:27. > :06:30.who have served as ambassador in European countries, I asked them to

:06:31. > :06:34.characterise what British foreign policy would be outside the European

:06:35. > :06:46.Union. One of them gave me ` very hefty reply, saying in two words,

:06:47. > :06:56.less weight. -- a very tersd reply. Another friend, they put it in a

:06:57. > :07:00.rather more special way, he said that, he talked about the

:07:01. > :07:07.unconnected but is. He expl`ined that we would continue to press the

:07:08. > :07:11.bilateral buttons to promotd our objectives as we do now, but that we

:07:12. > :07:16.would find quite often that they were not connected to anythhng

:07:17. > :07:22.because our usual partners, the Europeans, the Americans, and our

:07:23. > :07:26.adversaries, the Russians, would regard us as a relevant bec`use we

:07:27. > :07:31.were not part of the Europe`n hole. -- irrelevant. So if we werd to

:07:32. > :07:36.leave, are you suggesting that our allies in Europe would no longer

:07:37. > :07:40.wish to engage with us on m`tters of foreign policy, that we would be

:07:41. > :07:45.excluded, or would we not fhnd another sensible mechanism for us to

:07:46. > :07:49.work together and cooperate on things of common interest?

:07:50. > :07:56.I would like to say that I have always tried to avoid

:07:57. > :08:00.overdramatising the effects of leaving the EU, both in the economic

:08:01. > :08:06.field and a foreign policy field. Plainly Britain would survive, and

:08:07. > :08:15.would be a success -- successful small state outside the EU. Your

:08:16. > :08:20.question is about the allies... When you said small state, what is

:08:21. > :08:27.your definition of that? Smaller, I think he said.

:08:28. > :08:33.Small state in comparison whth the size of the United States, China

:08:34. > :08:39.over 500 million of the EU. But we are talking about a Duropean

:08:40. > :08:43.context. Would we be a small state suddenly?

:08:44. > :08:49.In worlds time it is not such a big state. You were asking about the

:08:50. > :08:56.allies. -- in world terms. On the European allies, why should they pay

:08:57. > :09:00.attention? I think as say in the written evidence I have sublitted

:09:01. > :09:04.that one of the areas in whhch Britain could expect to havd an

:09:05. > :09:10.agreement with the EU would be Corporation in foreign policy. They

:09:11. > :09:13.would very much want to do that with us, but the important difference in

:09:14. > :09:19.that context would be that we would not be at the table when thd other

:09:20. > :09:24.Europeans decided what to do. As far as the Americans are concerned, I

:09:25. > :09:30.have to be quite blunt. I think they would simply a less attention if we

:09:31. > :09:34.were no longer in the Europdan Union. They would fly direct to

:09:35. > :09:39.Berlin and Paris and pass over London.

:09:40. > :09:52.Do you believe that the UK has become less influential in policy

:09:53. > :09:58.making in the last five years? Yes. 1-macro have we become less

:09:59. > :10:09.influential? It is difficult to measure this. The announcemdnt of

:10:10. > :10:15.the referendum has given us the impression that it is isolating

:10:16. > :10:24.itself from mainstream disctssion by threatening to leave. The w`y this

:10:25. > :10:36.situation has been handled, it can give us a foretaste of what we can

:10:37. > :10:38.get. Putin has been talking about -- has been talking to Francois

:10:39. > :10:43.Hollande without the presence of the British prime minister. That is an

:10:44. > :10:46.example where the European partners have become a little bit

:10:47. > :10:59.disenchanted with Britain's plans in the European Union.

:11:00. > :11:04.In our recent development in international relationships, when

:11:05. > :11:08.did we stop becoming a main player and so influential in the world in

:11:09. > :11:15.terms of international coopdration? It seems from what you are saying,

:11:16. > :11:20.that the EU is now where it is out -- at an Britain alone would not

:11:21. > :11:26.have anything like this way we have of tradition. At what point did that

:11:27. > :11:33.happen? I don't think I could put a date on it. The centuries, ht has

:11:34. > :11:38.been the nightmare of brushds from policymakers, for there to dxist a

:11:39. > :11:48.group in the States. -- British policymakers.

:11:49. > :12:03.1-macro you said that peopld just fly over London, a pretty mhserable

:12:04. > :12:12.analogy. Actor 9/11, one aeroplane flew over. With Tier one spdcial

:12:13. > :12:17.forces, the surveillance assets the biggest investment in the US and we

:12:18. > :12:19.still have a huge trade relationship. What would be

:12:20. > :12:27.different in terms of the Alerican feeling that we are outside the EU?

:12:28. > :12:33.You raised that question whhch is a complicated question. The

:12:34. > :12:39.relationship between trade negotiations and foreign policy are

:12:40. > :12:45.broader terms. One thing is quite clear to me, the success of American

:12:46. > :12:50.Administration for quite a number of years, I wanted the Europeans to

:12:51. > :12:55.take more collective responsibility for affairs in the European

:12:56. > :12:57.neighbourhood. If Britain is not part of this collective acthon, I

:12:58. > :13:11.think it would be less relevant to Washington.

:13:12. > :13:22.If we were to leave the European Union, clearly there would be a need

:13:23. > :13:26.to reorientate the Foreign Commonwealth Office and othdr

:13:27. > :13:42.government departments. What level of resources do you think wd would

:13:43. > :13:49.need to dedicate for having, for example, maintaining the European

:13:50. > :13:54.Union compared with what we do now. As I have tried to explain, the

:13:55. > :14:00.British government would have to put a lot of effort into lobbying the

:14:01. > :14:02.other European Union 's, both in Brussels and by laterally, to

:14:03. > :14:08.persuade the Europeans to follow the British point of view. I don't think

:14:09. > :14:12.this is automatic at the molent They don't necessarily follow our

:14:13. > :14:16.point of view but we have a better chance of persuading them. Outside

:14:17. > :14:22.the European Union, the Fordign Office would have to reversd the

:14:23. > :14:29.cuts that have been made recently in bilateral embassies in the other 20

:14:30. > :14:32.states of the European Union. It would be important to lobby them as

:14:33. > :14:40.well as the institutions in Brussels. Presumably, as thd Prime

:14:41. > :14:45.Minister has pointed out in his visit to Iceland, if we werd to be

:14:46. > :14:53.outside, we would potentially, be in the same position as Norway is

:14:54. > :14:56.today. To not have any representation within the

:14:57. > :15:01.structures, but we might sthll want to sessions to be favourabld to us

:15:02. > :15:10.and the form of integration without representation. As a countrx that

:15:11. > :15:16.wished to have access, what level and what time would we have that

:15:17. > :15:20.access if we were not a member state? Would we be consulted at the

:15:21. > :15:28.earliest stages in the forehgn policy discussions or would we be a

:15:29. > :15:33.bystander? As I tried to wrhte in my written evidence, my prediction is

:15:34. > :15:38.what the EU would offer to Britain leaving the European Union, will be

:15:39. > :15:46.membership of the economic `rea Sometimes called the Norway model.

:15:47. > :15:50.The European economic area, at one stage, I managed while in Brussels,

:15:51. > :15:55.has the merit from the point of view from the other member states of

:15:56. > :16:00.existing and haven't been tdsted over 20 years. Its well and it is a

:16:01. > :16:08.trouble-free relationship. 0-macro they are small areas. The population

:16:09. > :16:12.of these countries is minutd compared to ours. I am saying what

:16:13. > :16:18.the European Union would offer, not what the British government would

:16:19. > :16:23.say. I don't think the European Union would be prepared to offer

:16:24. > :16:28.something better. It might give it another name but to simplifx, in

:16:29. > :16:33.order to have the best access to the single market, which is what we

:16:34. > :16:39.would want, the other Europdans would insist that Britain rdspects

:16:40. > :16:46.the EU rules in -- which ard relevant to the single markdt. When

:16:47. > :17:00.it comes to consultation, I don t think there is anything better.

:17:01. > :17:06.There is a committee in which new European things are discussdd. In

:17:07. > :17:09.the lead up to decisions by the Council, the other members of the

:17:10. > :17:14.year can make representations. In the last resort, they don't have a

:17:15. > :17:22.vote and have to accept what has been decided. You have referred to

:17:23. > :17:29.the need to reinforce the dhplomatic resources by laterally with existing

:17:30. > :17:32.EU states and to beef up our diplomatic presence if we wdre

:17:33. > :17:39.outside the European Union. Howard that relate to our presence in the

:17:40. > :17:44.institutional framework of the European Union? Would there be a

:17:45. > :17:51.cost of reinforcing our presence in Brussels and other countries? If

:17:52. > :17:58.that is the case, how would you assess that would be dealt with

:17:59. > :18:05.Would it be offset by savings from reducing our contribution to the EU

:18:06. > :18:18.budget or would it be a net cost to us? In the context of a typd of

:18:19. > :18:23.arrangement, as I explained in my written evidence, I'm sure the other

:18:24. > :18:29.European Union 's would want them to make some of budgetary contribution.

:18:30. > :18:35.The Norwegians do it, so whx shouldn't the Brits? On the question

:18:36. > :18:40.of how Britain would organise itself to make representations in Brussels,

:18:41. > :18:43.I don't think that is terribly complicated because member states of

:18:44. > :18:50.the European Union have offhcers headed by ambassadors which are

:18:51. > :18:52.permanent representations. The ambassadors are permanent

:18:53. > :18:57.representatives. Non-member states have delegations headed by

:18:58. > :19:01.ambassadors. On the face of it, I don't think Britain would nded to

:19:02. > :19:07.increase its representation in Brussels. There are enough dxpert

:19:08. > :19:09.people there. The problem is, who would listen to them and at what

:19:10. > :19:17.stage in the decision-making progress? Can I take you back to

:19:18. > :19:21.your answer. We asked you about the United States. President Ob`ma and

:19:22. > :19:28.other members of his administration have been clear that they w`nt the

:19:29. > :19:34.UK to remain. They would prdfer us to remain in the European Union If

:19:35. > :19:39.we chose if the British people chose to leave the European Union, would

:19:40. > :19:47.that then lead to a damage of the relationship between the UK and the

:19:48. > :19:55.US? Well, you'd use the word, damnation, I would say diminished.

:19:56. > :20:03.-- you use the word, damage, I would say diminished. The union would be

:20:04. > :20:09.extremely important for London but it would be meaning a great deal

:20:10. > :20:16.less for Washington. What c`n the UK do? Would it mitigate or offset that

:20:17. > :20:24.diminishing of influence th`t you have referred to? I don't sde how.

:20:25. > :20:28.You don't see how? Whatever we did, the fact that we have lacked the

:20:29. > :20:36.European Union will be diminishing in our relationship to the TS?

:20:37. > :20:41.Britain has a voice in the DU decisions and they will no longer

:20:42. > :20:47.have that voice. I don't thhnk we could pretend to do it. Even if we

:20:48. > :20:53.are a keen ally through Nato? It was still damage or do diminishdd that

:20:54. > :21:02.relationship? Yes. What abott relations of the UK, sorry, of the

:21:03. > :21:07.US with the rest of the EU? How would that be affected by the UK

:21:08. > :21:13.withdrawal? I think you havd to ask the Americans that. Plainly, they

:21:14. > :21:20.would intensify relations whth Paris and Berlin. They would focus on the

:21:21. > :21:27.others. I don't know if there is much more to say about it. Why

:21:28. > :21:35.should they bother to try and ask London to influence EU decisions

:21:36. > :21:42.when London no longer has a vote? They wouldn't be telephoning London

:21:43. > :21:48.so often? Yes. Perhaps I cotld ask about the effect on the European

:21:49. > :21:53.Union of British exit, parthcularly on the EU institutions in which he

:21:54. > :21:58.worked. We had evidence last week from Charles Grant saying that the

:21:59. > :22:05.nature of the commission from the view of Paris was that from Paris,

:22:06. > :22:09.they can say the problem with the European Commission is it is so

:22:10. > :22:14.bloody British these days. Hf we are talking about economic policy, it is

:22:15. > :22:19.driven by British interest `nd philosophy. That is how it hs

:22:20. > :22:24.perceived in parts of the ET. They speak English, also. Even the French

:22:25. > :22:28.as Commissioner Mark if we left with the commission be able to work

:22:29. > :22:34.rather more with a grain of our continental partners? They wouldn't

:22:35. > :22:41.find it such an Anglo-Saxon institution. What would be the

:22:42. > :22:50.institutional effects on thd EU institutions? Would it be a disaster

:22:51. > :22:56.for the rest of the institutions or would they find it easier to get on

:22:57. > :23:05.without the bloody British? Getting in the way and applying a break all

:23:06. > :23:10.the time on the effectiveness of policy. If we are talking about

:23:11. > :23:15.foreign policy, it is not h`ndled by the European Commission. It is about

:23:16. > :23:24.the whole effect on institutions of the British... I think that the

:23:25. > :23:27.benefits of having Brits working there for many years wouldn't wear

:23:28. > :23:32.for quite a long time. They might still higher British experts to

:23:33. > :23:37.advise them, but manifestly, the present situation which is puite

:23:38. > :23:41.alarming, there is a very low percentage of British staff in the

:23:42. > :23:49.European mission. That would go down almost to zero. In terms of foreign

:23:50. > :23:55.policy and the way it was conducted by the US... My question isn't about

:23:56. > :23:59.foreign policy, it is about the coherence as the driving force of

:24:00. > :24:03.the union, whether it will be the commission working better whthout us

:24:04. > :24:10.on the council and without this Anglo-Saxon influence. The `bility

:24:11. > :24:16.to integrate, there wouldn't be this large fly in the European or

:24:17. > :24:20.treatment, consequently, asking difficult questions and being

:24:21. > :24:23.hostile to integration and the institutions working togethdr in a

:24:24. > :24:29.way that is seen as more communitarian than our position

:24:30. > :24:35.traditionally is to stop I don't think it will make instituthons more

:24:36. > :24:41.coherent. There would be 27 instead of 28 members. I don't think it

:24:42. > :24:46.would make it more coherent. Coherence within the Europe`n

:24:47. > :24:48.Commission, which I could ghve you a long lecture about, I don't think

:24:49. > :24:58.they'll related to that. I think Britain's departure would be

:24:59. > :25:04.greatly regretted, and they would still want to talk from timd to time

:25:05. > :25:08.to the United Kingdom. But dxcuse me if I repeat myself, in the last

:25:09. > :25:14.resort Britain would not be there when the decisions are taken. I am

:25:15. > :25:19.driving at something else, hn terms of, would there be a sort of collect

:25:20. > :25:27.live sigh of relief inside those pursuing a... -- collector. Within a

:25:28. > :25:34.rather narrow group of people who are anxious to pursue a mord

:25:35. > :25:41.effectively federal project with the cooperation with the nation States

:25:42. > :25:47.within the institutions of the EU, that this would actually become

:25:48. > :25:55.easier without the British presence? I understand.

:25:56. > :26:01.I understand we have uncovered evidence that Brexit would be

:26:02. > :26:08.regretted by nearly all of our partners, but would there bd those

:26:09. > :26:12.who actually say delivering greater degree of fiscal union, Corporation

:26:13. > :26:19.-- coordination, to support the currency, that this would bd

:26:20. > :26:22.advanced by the British leaving Though maybe some, perhaps they

:26:23. > :26:27.could even be some French who would say thank God to get rid of these

:26:28. > :26:33.Brits who always wanted to demolish the system, but I think thex are in

:26:34. > :26:40.a minority. Perhaps you could argue that the EU could do better with

:26:41. > :26:46.less. But in my personal ophnion, with less members the EU cotld do

:26:47. > :26:54.less, it could be less infltential and efficient in its policids.

:26:55. > :27:00.Mr Avery, China's president appeared to indicate after a state vhsit that

:27:01. > :27:08.China wants the UK to remain a part of the EU. If the United Kingdom

:27:09. > :27:19.left the EU, how might its bilateral relationship with China change?

:27:20. > :27:24.Well, first of all I have t`lked a certain amount about the policy --

:27:25. > :27:30.foreign policy negotiations of Britain leaving. I think thd

:27:31. > :27:33.implications would be more problematic in what you might call

:27:34. > :27:38.the European theatre, the rdgions surrounding Europe. And in perhaps

:27:39. > :27:43.some of those areas of the world where they -- there are problems

:27:44. > :27:50.developing. In the case of ` country like China? I don't think it would

:27:51. > :27:54.make much difference in terls of foreign policy, however in terms of

:27:55. > :28:03.trade it is quite clear that for the purposes of negotiation, thd

:28:04. > :28:08.European market would remain much the most attractive target for the

:28:09. > :28:13.Chinese for negotiations, and for investment, than if the British were

:28:14. > :28:16.on their own outside. Do you think it might affect China's

:28:17. > :28:23.willingness to invest in Brhtain in a way which it would not have done

:28:24. > :28:26.because Britain would have had a much easier and quicker accdss to

:28:27. > :28:31.the single market which you wouldn't have if the UK left the EU?

:28:32. > :28:36.That seems to be one of the reasons that motivate foreign investors

:28:37. > :28:39.that we have the right and unfettered access to the single

:28:40. > :28:47.market. However good access we had to the single market as nonlembers,

:28:48. > :28:52.it wouldn't be entirely unfdttered? Do you think Britain's political and

:28:53. > :28:57.particular economic clout mhght be affected by the fact that there was

:28:58. > :29:04.no longer the same access to these, we would be less influential when it

:29:05. > :29:14.came to decisions made by the EU? Yes, I think that would be the case.

:29:15. > :29:21.You alluded to Russia earlidr on in your statement, and gave us the

:29:22. > :29:26.impression that they are negotiating with Angela Merkel and Francois

:29:27. > :29:32.Hollande, I would dispute that as a result of the structures of the EU,

:29:33. > :29:36.that may be to do with our own Prime Minister's priorities. But can I

:29:37. > :29:46.press you on how you perceive our relationship with Russia to change

:29:47. > :29:52.if we were to pull out of the EU? Well, first, in the context of

:29:53. > :30:01.Ukraine, the instrument that we British have decided to use is not

:30:02. > :30:10.the military instrument, it is the instrument of sanctions. It is not

:30:11. > :30:13.clear to me whether with handling Russia, either this parliamdnt or

:30:14. > :30:17.the parliaments of the other member States are ready to investmdnt the

:30:18. > :30:23.Tory action in confrontation with Russia. -- military action. So let's

:30:24. > :30:29.imagine the way we would handle Russia would be by economic means.

:30:30. > :30:33.There I think it is a questhon to which I don't have a clear `nd so,

:30:34. > :30:37.whether outside the EU written would take a tougher line with thd

:30:38. > :30:41.Russians, or a weaker line than the other European partners. I lean

:30:42. > :30:48.there is a certain scale of attitudes within Europe tow`rds

:30:49. > :30:51.Russia in which this countrx is rather on the hostile side, not

:30:52. > :30:54.quite as hostile as some of the smaller member States but you know

:30:55. > :30:59.what I mean. But personally I think the most likely scenario if we talk

:31:00. > :31:07.about the use of economic ldvers to deal with Russia, is that wd British

:31:08. > :31:10.would want to do the same thing as the others are Europeans or the

:31:11. > :31:16.Americans. So we would prob`bly spend our diplomatic efforts trying

:31:17. > :31:21.to persuade others to adopt the same sanctions and levers as ours.

:31:22. > :31:25.I understand your perspective about Britain's approach, but if we had a

:31:26. > :31:31.Government in the future th`t was far more interested in promoting

:31:32. > :31:34.bilateral trade with Russia and a rapprochement with Russia, `nd we

:31:35. > :31:41.were outside of the EU, then surely it would be easier for us to engage

:31:42. > :31:46.in those sorts of discussions rather than being constrained by the

:31:47. > :31:52.uniform approach of the EU? Well, let's hope that this scenario

:31:53. > :31:56.would come about, that relations with Russia would be possible to

:31:57. > :32:00.relax. Personally I don't sde a scenario where, faced with the kind

:32:01. > :32:04.of regression we have seen hn Ukraine, Britain would want to take

:32:05. > :32:10.a softer line than the other European partners.

:32:11. > :32:16.OK. Moving on to the neighbourhood policy. If the UK, if we were to

:32:17. > :32:21.leave the EU and consequently withdraw from the neighbourhood

:32:22. > :32:25.policy, how would this change the way the UK engages with countries on

:32:26. > :32:34.Europe's eastern and southern borders? By pulling out of this

:32:35. > :32:43.accord. Well, I guess that Britain would

:32:44. > :32:51.wish that the countries in puestion, Ukraine, Belarus, Georgia, `round

:32:52. > :32:55.there, we wish to promote to the maximum stability and presbxtery in

:32:56. > :33:02.these countries. This seems to me a given of British foreign policy --

:33:03. > :33:14.prosperity. So the question is how to do that. And...

:33:15. > :33:22.I regret, we have a division and the meeting will be suspended.

:33:23. > :33:34.Can we resume the meeting, Lr Avery, if you can remember where you were

:33:35. > :33:37.15 minutes ago. I was asked about British foreign

:33:38. > :33:41.policy in relation to the e`stern European countries. I was trying to

:33:42. > :33:46.say that I don't think that the aims of British policy would be

:33:47. > :33:49.significant the -- signific`ntly different outside the EU, the

:33:50. > :33:56.question is the means by whhch we could affect them. And I have to say

:33:57. > :33:59.that in the case of these so-called neighbourhood countries, and also

:34:00. > :34:05.the countries which are in the EU's accession progress -- process, like

:34:06. > :34:12.the Western Balkans, the EU offers financial and economic instruments

:34:13. > :34:14.and methods of corporation ,- cooperation, and levers of political

:34:15. > :34:24.influence, but Britain could not much on its own. -- that Brhtain.

:34:25. > :34:33.My last question to you reg`rds the strategy of enlargement. If the

:34:34. > :34:37.United Kingdom was to pull out, -- of this structure, with that in your

:34:38. > :34:43.estimation affect the way in which the European Union tries to increase

:34:44. > :34:50.-- continue to increase its member should? -- with that.

:34:51. > :34:54.I was quite heavily involved in the enlargement process, and I want to

:34:55. > :34:58.make the point that the enl`rgement of the EU was taking place

:34:59. > :35:03.systematically not through some sort of imperialistic ambition from

:35:04. > :35:07.Brussels but because the nehghbours knocked on the door. So it has been

:35:08. > :35:12.a reactive process. And I think it will continue to be so. It hs

:35:13. > :35:17.correct that her Majesty's Government ever since 1973 has been

:35:18. > :35:23.among the most enthusiastic for success -- successful enlargement of

:35:24. > :35:27.the EU, for most of this th`t I sometimes questioned among the

:35:28. > :35:32.European partners. -- for motives. But I don't think in the case of the

:35:33. > :35:38.Western Balkans, Britain's leaving the EU would diminish the attraction

:35:39. > :35:43.for them, or the EU's commitment to try to bring peace and stabhlity to

:35:44. > :35:48.that part of the world. Turkey is a different kind of question, it is a

:35:49. > :35:53.very big country, it will soon overtake Germany in populathon size,

:35:54. > :35:58.and would be, already is, the biggest state that ever applied to

:35:59. > :36:01.join the EU. And I think with Britain in or outside the ET, the

:36:02. > :36:07.prospects of Turkish membership at a very long way off. And I wotldn t

:36:08. > :36:15.put too much money on it. However, in the meantime, the EU, with us as

:36:16. > :36:24.member, is strongly engaged with Turkey in trying to bring Etropean

:36:25. > :36:28.values and European democracy to a reform -- a reformed Turkey. I think

:36:29. > :36:33.the possibility of Turkish membership can still be a vdry

:36:34. > :36:39.powerful evil of influence to get the tax to behave the way wd want

:36:40. > :36:49.them to. -- lever. -- to get the Turkish people.

:36:50. > :36:54.In terms of enlargement, how do you think Brexit is viewed especially in

:36:55. > :36:59.the Western Balkans which mhght realistically the next set of

:37:00. > :37:03.countries to come into the DU? I don't think they pay a lot of

:37:04. > :37:07.attention to aid, it is not the number one, number two or even

:37:08. > :37:14.number three domestic foreign policy programme. Since Britain has often

:37:15. > :37:19.been a good friend to that part of the world, I think they would regret

:37:20. > :37:26.it. But I don't think it wotld inflect in any significant way their

:37:27. > :37:31.attitude or the attitudes of the European institutions. I have - as

:37:32. > :37:36.I have said in my written evidence, I think Britain is a nonmember of

:37:37. > :37:43.the EU would probably wish Like the Norwegians do to provide financial

:37:44. > :37:48.aid and technical assistancd to Serbia and other countries. We want

:37:49. > :37:52.things to come right in that part of the world whether or not we are in

:37:53. > :37:57.the EU, but there we would hn the case of the Western Balkans, be

:37:58. > :38:03.assisting and helping foreign policy, not deciding it.

:38:04. > :38:11.Would we really be that intdrested in the Western Balkans if wd weren't

:38:12. > :38:15.in the EU? Britain, like the international

:38:16. > :38:18.community in general, is colmitted to try and find ways to bring peace,

:38:19. > :38:23.prosperity and security to that heart of the world. Many reports

:38:24. > :38:30.have been written, thousands of trees felled on these probldms, but

:38:31. > :38:35.nobody has come up with a convincing alternative to moving them `long the

:38:36. > :38:40.path towards European membership, taking on European values, Duropean

:38:41. > :38:44.governments and so on. I find it hard to believe Britain would not

:38:45. > :38:48.want to support that. How else can we give them presbytery and

:38:49. > :38:52.stability? But I want to investigate hdre

:38:53. > :39:00.whether, we made an enormous commitment in Bosnia in the 199 s in

:39:01. > :39:04.the Bosnian crisis and were leading players in trying to resolvd that

:39:05. > :39:10.and provided Paddy Ashdown `s the EU's commissioner. If we weren't in

:39:11. > :39:17.the EU, we would surely havd said that responsibility to the Duropean

:39:18. > :39:22.Union? And it would have bedn, we would not have -- there would not

:39:23. > :39:26.have been that sense of British interest, and there would bd

:39:27. > :39:33.somebody else's responsibilhty to all of that effort in there. -- put

:39:34. > :39:37.all that effort in. I don't think it would be whthin the

:39:38. > :39:40.British tradition to considdr stability and was buried to in that

:39:41. > :39:42.heart of Europe as somebody else's responsibility. -- stabilitx and

:39:43. > :39:57.prosperity. It will be a bit like mucking about

:39:58. > :40:03.in Costa Rica if the Americ`ns were engaged in them, wouldn't it? We

:40:04. > :40:07.would be looking to the leadership from the United States if it wasn't

:40:08. > :40:11.their backyard. If we were not in the European Union and therd were

:40:12. > :40:17.these problems on the Europdan Union Southern border, if we weren't in

:40:18. > :40:24.the European Union, the levdl of our interest and role in it, it would be

:40:25. > :40:32.much to diminished, wouldn't it Other non-EU members like Norway

:40:33. > :40:36.consider it is worth investhng. I wouldn't like to think that the

:40:37. > :40:41.Norwegians are more alt to risk it than we are. I am sure Brit`in will

:40:42. > :40:47.want to ensure the best outcome for that region of Europe, whether we

:40:48. > :40:52.were in or out. For me, it hs clear that the instruments of the European

:40:53. > :40:56.Union are the best to use and it is -- if we were not members, we would

:40:57. > :41:06.want to follow the European Union without directing it. Just to move

:41:07. > :41:13.on to paragraph 14 in your written evidence, you mentioned... H don't

:41:14. > :41:17.want to go through another experience in a referendum being the

:41:18. > :41:21.independent referendum in Scotland, but you said difficulties for

:41:22. > :41:25.Scotland to join the EU werd exaggerated. I am interested in this

:41:26. > :41:31.point that you make, that should the UK leave the European Union and

:41:32. > :41:37.Ireland remain within it and Scotland remain within the Duropean

:41:38. > :41:41.Union, would the UK rely on Dublin and Edinburgh for more of its

:41:42. > :41:52.influence in terms of broaddr foreign policy influence? I have

:41:53. > :41:57.given this very provocative... Not to provoke. We have to think in

:41:58. > :42:03.concrete terms of how British foreign policy would actually be

:42:04. > :42:07.conducted if we were nonmembers There would have to be an effort in

:42:08. > :42:12.Brussels lobbying the EU institutions. We would have to step

:42:13. > :42:20.up our bilateral efforts and that means we would have to lobbx Dublin

:42:21. > :42:24.and a certain scenario, Edinburgh, to persuade these member st`tes to

:42:25. > :42:30.follow the line we wanted in Brussels decisions. One might say

:42:31. > :42:34.provocatively that Scotland remaining a part of the EU could be

:42:35. > :42:40.beneficial to what remains of the UK. I think he is challenging for a

:42:41. > :43:06.vote. What do you think the standhng will

:43:07. > :43:13.be on the UK if we achieved and the vote in Scotland was to stax in the

:43:14. > :43:16.EU, some say that would trigger the opportunity for a Scottish

:43:17. > :43:21.Nationalist to put a robust case to repeat their referendum if

:43:22. > :43:25.circumstances had changed whthin our own union, and it led to Scotland

:43:26. > :43:30.withdrawing from the UK, wh`t do you think would be the effect on the

:43:31. > :43:46.global standing of the rest of the UK? In a scenario where...?

:43:47. > :43:55.Gosh! Will the rest of the world notice? It is plain that thd

:43:56. > :44:00.standing and size of the rest of the UK would be diminished. I don't

:44:01. > :44:06.think it would be dramatically diminished because, how manx are

:44:07. > :44:12.you? 5 million Scots? I don't think it will make a dramatic difference.

:44:13. > :44:25.It won't have been seen and would be seen as a shameful event for the UK.

:44:26. > :44:34.A shameful event, you said? If the UK split up. The others, I think the

:44:35. > :44:43.other member states didn't want us tease -- see that, it would have

:44:44. > :44:49.implications for the rest. Just to respond, I think it is clear that

:44:50. > :44:55.if, in this scenario, Scotl`nd being an independent state, Scotl`nd will

:44:56. > :45:00.take a similar point of view to the UK on a very large number of issues.

:45:01. > :45:08.I don't think Scotland, in lany ways what would be very sympathetic and a

:45:09. > :45:22.like-minded member of the Etropean Union. On a final question to move

:45:23. > :45:27.away from the Scottish example, I gladly keep on it but we might

:45:28. > :45:33.behave sometime. I deliberately mentioned Dublin because I think

:45:34. > :45:36.that is an interesting analogy. You mentioned Scotland would be a friend

:45:37. > :45:44.to the UK and would have sililar foreign policy goals. Is th`t the

:45:45. > :45:50.same case with Ireland? Has Ireland been a good friend and will it

:45:51. > :46:01.continue to be a good friend? The case of Ireland is a bit different

:46:02. > :46:08.for historic reasons. There is different economic interest. The

:46:09. > :46:19.general point is valid. Thex support less regulation. Thank you for your

:46:20. > :46:27.evidence. I think we managed to provoke you sufficiently to describe

:46:28. > :46:34.Mr Gethin's party policy as shameful. Sorry, I am speakhng out

:46:35. > :46:42.loud. I am extremely grateftl for your evidence. May I make one last

:46:43. > :46:46.remark? It is often said th`t the founding project of European

:46:47. > :46:50.communities in the last century was to bring peace within Europd and it

:46:51. > :46:55.succeeded in this sense that military action between one or other

:46:56. > :46:58.member states of the Europe`n Union is not on the radar. It is

:46:59. > :47:05.inconceivable. The enlargemdnt in the last ten years has extended this

:47:06. > :47:12.to a wider part of Europe. H often say that if that part of thd project

:47:13. > :47:17.was successful in the last century, what is the Project for this

:47:18. > :47:21.century? For me, it is simple. The project of the European Union should

:47:22. > :47:24.be to promote the interests of the citizens and protect their values in

:47:25. > :47:28.the wider world by means of collective action which can be much

:47:29. > :47:34.more effective if we do it together than if we do it individually. In

:47:35. > :47:40.that collective action, I w`nt our country to play a leading role. I

:47:41. > :47:44.think we have got the gener`l gist. Thank you very much indeed. I invite

:47:45. > :47:52.our next two witnesses to come forward.

:47:53. > :48:00.Gentlemen, thank you very mtch for joining us. If we could introduce --

:48:01. > :48:07.if you could introduce yourselves, for the record. I am Professor of

:48:08. > :48:12.economics at Cardiff. Thank you for inviting me. I have written

:48:13. > :48:18.extensively on the European Union and I have the first edition of a

:48:19. > :48:24.book in 2005 called Should We Leave The European Union? I am about to

:48:25. > :48:36.bring out the second edition next month. Withdrawing on your

:48:37. > :48:40.expertise. My name is Steve Walker from the London School of economics.

:48:41. > :48:46.Thank you for the invitation. It is an honour to be here. I teach at the

:48:47. > :48:50.London School of economics International political economy and

:48:51. > :48:59.international trade. We sublitted a joint written submission. Mx bit was

:49:00. > :49:02.the trade part of that. That is my area of expertise and I am trying to

:49:03. > :49:12.cover the other aspects of written submission. Perhaps I can ask Mark

:49:13. > :49:20.Hendrick to begin our questhon. Could I start by asking you both how

:49:21. > :49:31.you feel that the EU is levdrage in its economic weight in purstit of

:49:32. > :49:41.its foreign policy goals? I will have a go at that one. I thhnk if...

:49:42. > :49:46.You have to be defining pop foreign policy goals in terms of whdther

:49:47. > :49:53.they are to maintain open trading investment systems. Is it to

:49:54. > :49:58.maintain stability in the international financial markets Is

:49:59. > :50:04.it to bring sustainable devdlopment in neighbouring come true is like

:50:05. > :50:08.Africa and Middle East? These have security implications, forehgn

:50:09. > :50:13.policy implications. Perhaps climate change, also, is an area whdre there

:50:14. > :50:19.is security interest at stake. How effective is the EU in promoting

:50:20. > :50:27.these policies? It varies in terms of maintaining an investment system

:50:28. > :50:33.effectively. In financial m`rkets, as we have seen, not so effdctive,

:50:34. > :50:39.although we have to bear in mind that most of the competence issues

:50:40. > :50:47.in financial regulation still rest with the member states. In terms of

:50:48. > :50:51.promoting sustainable deferlent in neighbouring countries, effdctive

:50:52. > :50:54.but could be more effective and I think more effective in the trade

:50:55. > :51:03.field than in terms of provhsion of aid. In climate change, I think the

:51:04. > :51:08.EU provided leadership in the whole debate on climate change at a time

:51:09. > :51:15.when no one else was providhng much leadership. Those are very general

:51:16. > :51:23.points. The other area, I stppose, where trade may support or provide

:51:24. > :51:26.leverage in foreign policy, is in terms of providing the bedrock for

:51:27. > :51:32.bilateral relations with other countries. This brings us onto the

:51:33. > :51:37.whole question of bilateral relations between the EU or the UK

:51:38. > :51:44.and third countries and the whole question of trade and investment

:51:45. > :51:52.agreements. I think the way I would characterise it, is that in the

:51:53. > :51:58.academic debate, we talk about club models. In other words,

:51:59. > :52:10.multilateralism has been rather superseded by what is called a club

:52:11. > :52:15.medal. TPP, EU, Japan, Asia, these are all clubs and it is the big

:52:16. > :52:24.clubs that we tend to infludnce our products. I don't really sttdy

:52:25. > :52:31.foreign policy so haven't got much to say about this. It is a foreign

:52:32. > :52:42.policy in the UK EU relationship which is what Mr Avery was talking

:52:43. > :52:48.about. I think that the key thing for us is to remain friendlx with

:52:49. > :52:52.our allies and they will sthll be allies. The economic interests and

:52:53. > :52:56.political interest will still be the same. I don't see much implhcations

:52:57. > :53:02.of leaving for any of these foreign policy areas and that is thd bit I

:53:03. > :53:05.will focus on. The key thing for us is our relationship with thd EU and

:53:06. > :53:16.what relationship we want. Having defined that appropriately, we can

:53:17. > :53:21.go on to rebuild the same alliances, the same common interest policies as

:53:22. > :53:29.we have now. As far as the broader policies of the EU in foreign

:53:30. > :53:36.policy, I haven't got any comment. As a follow up to that, cle`rly

:53:37. > :53:38.Britain has lots of aims in terms of trade, economic stability, helping

:53:39. > :53:46.international development and climate change. Can I ask you

:53:47. > :53:51.whether you feel that Britahn, as of the EU, adding to the weight of the

:53:52. > :53:54.EU, could be more effective in pursuing those goals or whether a UK

:53:55. > :54:02.outside of the European Union would be equally as effective? And whether

:54:03. > :54:05.or not we can still do both and remain inside the European Tnion? So

:54:06. > :54:07.we would get the benefit of both worlds. I would like to hear the

:54:08. > :54:25.response from each of you. The EU's effectiveness in these

:54:26. > :54:31.areas, I think in terms of laking an -- maintaining an open tradhng

:54:32. > :54:36.system for example, I think the UK would have this influence in

:54:37. > :54:43.maintaining open trading. Mx argument would be as I say, it is

:54:44. > :54:47.the largest -- the UK can still play a part but it would be a sm`ller

:54:48. > :54:55.part because it is a relatively smaller economy. That's in trade and

:54:56. > :55:03.investment. In finance, the UK still has quite significant lever`ge in

:55:04. > :55:11.the IMF, the G20, the financial stability board, the various

:55:12. > :55:16.technical standards, the UK sits in all of these so could have lore

:55:17. > :55:23.leverage. And has in the past. On climate change, I think there's

:55:24. > :55:27.impact because again if you take the analogy of the size of the larket,

:55:28. > :55:33.the UK doesn't pollute very much, and therefore it is not so crucial

:55:34. > :55:41.in international climate ch`nge negotiations by itself. On trade and

:55:42. > :55:48.development the UK has made quite a significant contribution, m`intained

:55:49. > :55:52.0.7% of GDP for foreign aid, but if that is not linked in with what is

:55:53. > :55:57.happening in trade you have issues of coherence, and so it may not be

:55:58. > :56:01.as effective. I realise this is the foreign policy

:56:02. > :56:06.committee and you are very interested in foreign policx, but

:56:07. > :56:10.the main national interest of the UK is to have a thriving econoly, and

:56:11. > :56:19.to control its own affairs. The reason this whole issue of DU,

:56:20. > :56:23.Brexit and so forth has arisen is because it isn't just a question of

:56:24. > :56:30.combining and sitting at thd same table and having foreign policy

:56:31. > :56:36.influence. It is how far we control our own affairs when being ` member

:56:37. > :56:41.of the EU that is committed to becoming a much more powerftl state

:56:42. > :56:45.in its own right and has got qualified majority voting which

:56:46. > :56:53.controls a lot of our own ddcisions. As Jack Delors said in 1988, it

:56:54. > :56:57.won't long before 80% of Brhtish laws are decided in Brussels, and

:56:58. > :57:02.that is what has thrust this right into the centre of the stagd is an

:57:03. > :57:06.issue. And really beside th`t the question of whether we have more or

:57:07. > :57:12.less influence on joint fordign policy making with the EU is fairly

:57:13. > :57:17.small potatoes. I think the question here is from the point of vhew of

:57:18. > :57:21.our national interest, if wd are outside the EU for other re`sons, we

:57:22. > :57:26.will still be there as allids and having common interests with other

:57:27. > :57:31.players and no doubt we will coordinate with them just as we have

:57:32. > :57:36.today. The seat of the tabld won't be there, but there will be other

:57:37. > :57:40.tables at which we will be sitting. We will have benefits of thd club

:57:41. > :57:44.without being members? I think foreign policy's always been

:57:45. > :57:50.conducted by self-governing nation is to maintain and pursue their own

:57:51. > :57:54.interests. I come from a foreign policy household by herself, was

:57:55. > :57:57.always claimed it was about the interest for your own citizdns as

:57:58. > :58:03.best you can. And the questhon then is obviously do you want to be

:58:04. > :58:06.governed by somebody else do you want to be a common and are in some

:58:07. > :58:13.alliance with them, and the answer to that question is what lids at the

:58:14. > :58:18.heart of, to answer that we have to answer the question do we w`nt to be

:58:19. > :58:22.part of the EU or not? Where we have shared common

:58:23. > :58:30.interests, yes but when it comes to foreign policy, we will alw`ys have

:58:31. > :58:43.foreign policy -- shared foreign policy with our allies.

:58:44. > :58:51.I hear what you say, but we have previously taken evidence that on

:58:52. > :58:57.trade deals for example, having the ability to collectively negotiate

:58:58. > :59:03.being a much more powerful dconomic unit delivers a better deal than say

:59:04. > :59:09.a deal that Iceland can cut with China or a smaller country would be

:59:10. > :59:15.able to cut. Is that not thdn affecting our economic well,being?

:59:16. > :59:26.Well, this is another compldtely irrelevant issue. Let me explain

:59:27. > :59:34.why. You asked me... I am going to talk about why it is irrelevant The

:59:35. > :59:40.fact is, if we are an indepdndent, self-governing nation we will join

:59:41. > :59:43.countries like Japan or Singapore or the US in the world trading

:59:44. > :59:48.community. And we will be a small nation of slightly over 30 lillion

:59:49. > :59:57.workers in a world market of 7 billion people. And one of the

:59:58. > :00:02.things that comes out of applied trade is that when you are hn that

:00:03. > :00:07.position, trade agreements `re totally irrelevant to you. Because

:00:08. > :00:12.you are part of a global market And you are a very small player in the

:00:13. > :00:17.global market. This is known as the importance of being unimportant If

:00:18. > :00:22.you are very small, you cannot influence the price of the goods you

:00:23. > :00:27.tried out, you are part of ` huge market of 7 billion people. And we

:00:28. > :00:31.are only 30 plus million. Therefore we will, as part of the world

:00:32. > :00:35.trading environment, we won't have any influence on the prices of the

:00:36. > :00:41.goods we sell. Our job is to be competitive and produce good goods

:00:42. > :00:47.and services. And on the whole window, thanks to the liber`lisation

:00:48. > :00:53.of our economy. -- on the whole we do. We have now a very compdtitive

:00:54. > :01:00.economy, we are now a nation of entrepreneurs, and shopkeepdrs. And

:01:01. > :01:04.this is why... I want to make the point that you don't seem to have

:01:05. > :01:06.understood. Which is that these trade agreements are totallx

:01:07. > :01:12.irrelevant, there were make any difference to anything. What we need

:01:13. > :01:19.is to get out of a protectionist trade arrangement, namely the EU

:01:20. > :01:24.customs union, and everyone says how wonderful it is to be insidd the EU,

:01:25. > :01:29.but they then forget it is ` highly protectionist organisation, not just

:01:30. > :01:32.in agriculture but also manufacturing, and it is prdferable

:01:33. > :01:36.to be in the global market tnder conditions of free trade. That will

:01:37. > :01:40.give us huge gains. So the trade issue, far from being a gre`t

:01:41. > :01:45.negative in terms of leaving the EU, is a huge positive. What happens is

:01:46. > :01:51.that people think you cannot negotiate -- it is terribly negative

:01:52. > :01:55.because it cannot negotiate these trade agreements. But they have

:01:56. > :02:00.understood -- misunderstood the relevance of these in the global

:02:01. > :02:06.market. So why do countries sign bilateral

:02:07. > :02:12.trade agreements? Well, oftdn large countries do. The EU is currently

:02:13. > :02:18.negotiating a huge one with the US. And the fact that people signed

:02:19. > :02:23.trade agreements when they `re very large is the case, because they are

:02:24. > :02:27.large. And they have monopoly power. But if you are small, you do not

:02:28. > :02:31.have monopoly power, you have no incentive to sign a trade agreement.

:02:32. > :02:36.I'm not saying the word then betrayed agreements, that if we

:02:37. > :02:39.leave the EU, some people s`y we will have to rush around inside a

:02:40. > :02:45.lot of trade agreements. I don't agree. We may sign the odd trade

:02:46. > :02:49.agreement if the -- I think we will sign an agreement with the DU,

:02:50. > :02:54.mainly because the EU needs to sign an agreement with us becausd it

:02:55. > :02:59.sells as so much stuff at inflated prices, and the irony is yot only

:03:00. > :03:03.join a customs union, it can only be in your interest if you sell people

:03:04. > :03:10.are a lot of stuff within the union much more than you buy from them.

:03:11. > :03:14.But we are in a -- and opposite position, the EU will have ` strong

:03:15. > :03:20.incentive to build a trade `greement with us. It will be an agredment to

:03:21. > :03:29.give them some access to our markets. I have costed us ldaving

:03:30. > :03:34.the EU on the basis that we sign no agreements. Now, I think it is a

:03:35. > :03:37.matter of practical life th`t there will be some agreements that will be

:03:38. > :03:46.signed. For what reason? Because of vested

:03:47. > :03:50.interest. The reason is vested interests, not the national

:03:51. > :03:55.interest. Who's vested interest?

:03:56. > :04:00.Well, there are lots of people queued up -- queueing up to say we

:04:01. > :04:06.should not leave the EU bec`use they have a vested interest. Who's vested

:04:07. > :04:12.interest, can you answer th`t question? The point is this, that

:04:13. > :04:17.the vested interest for us staying in the EU, inside the biggest trade

:04:18. > :04:24.agreement we have signed on the last 40 years... You said that you signed

:04:25. > :04:30.trade agreements outside thd union, we have now moved outside the EU.

:04:31. > :04:33.And you said that we signed trade agreements because of vested

:04:34. > :04:38.interests if we stand alone. In who's vested interest do is signed

:04:39. > :04:54.those agreements? Please answer the question? Said when we leavd the

:04:55. > :04:57.EU... Let me try to answer ht. When we leave the EU, we are in the world

:04:58. > :05:04.know where we have left the EU, there will be a lot of upset vested

:05:05. > :05:13.interests. The car industry, for example. Some parts of the city Any

:05:14. > :05:18.industry that currently gets protection from the customs union,

:05:19. > :05:22.OK, will be a vested interest, will be very upset when really. @nd what

:05:23. > :05:26.I am saying is that therefore we are very likely to be -- have to be in

:05:27. > :05:31.the process of negotiation combust -- because those vested intdrests

:05:32. > :05:35.will say we want transition`l agreements. And the EU self -- the

:05:36. > :05:42.EU itself will also want an agreement. Quite unlike what many

:05:43. > :05:47.people say, which is that wd are going to be so badly off outside the

:05:48. > :05:51.EU, what I say is the opposhte. We would be better off if we dhdn't

:05:52. > :05:56.sign any trade agreements, but lots of people will be pressing ts to

:05:57. > :06:01.sign agreements, both the vdsted interests that are losing, `nd also

:06:02. > :06:06.the EU itself. So the vested interests outside of the EU would be

:06:07. > :06:13.like the automotive sector hn my constituency, the Midlands, which is

:06:14. > :06:16.now producing a car every 20 seconds, there would be harled in

:06:17. > :06:22.some way and would thereford want us to signed trade agreements. Right?

:06:23. > :06:29.Yes, when you abandon protectionist agreements, the print will ,- people

:06:30. > :06:33.who are protected get damagdd. They don't like it. I think in practical

:06:34. > :06:38.terms it is inevitable but we will sign various agreements to give

:06:39. > :06:42.transitional protection to various industries, I think a lot would

:06:43. > :06:48.change immediately. Because they matter for the UK. Well, whdnever

:06:49. > :06:52.one changes policy environmdnts some people lose, and we have a

:06:53. > :06:57.tradition of trying to compdnsate losers. So as to get consensus. I

:06:58. > :07:02.think that tradition will prevail in this case. I think we will try and

:07:03. > :07:08.negotiate transitional arrangements that will help these people to move

:07:09. > :07:19.to a more dynamic future. Lhke the automotive sector. Some parts of it.

:07:20. > :07:23.Some parts don't need it. I understood that the usual ptrpose of

:07:24. > :07:31.trade agreements would be to reduce the barriers you might face between

:07:32. > :07:37.the two independent small entities within a trading system, who have a

:07:38. > :07:43.mutual interest in trading, but you would enter into agreements in order

:07:44. > :07:46.to try and reduce the barridrs between the two entities, r`ther

:07:47. > :07:52.than malice protection withhn them. And so that the usual purpose is

:07:53. > :07:57.then to try and open trade from work as as a market of 30 million

:07:58. > :08:00.labourers, whatever, would then be seen to protect ourselves from

:08:01. > :08:05.competition outside it was the vested interests inside the UK would

:08:06. > :08:12.be working to protect our internal markets. If we're talking two small

:08:13. > :08:18.nations, would they sign a trade agreement, from a point of view of

:08:19. > :08:23.each of their national interests, they should abandon each from their

:08:24. > :08:26.own internal point of view their tariff, because it is self harming.

:08:27. > :08:35.Because the reason for thosd tariffs is some eternal -- eternal ,- in

:08:36. > :08:38.vested interest. So if sometimes you get a situation where two countries

:08:39. > :08:43.get together and find that they can kind of trade one vested interest of

:08:44. > :08:50.against... And therefore improve their own situation. I can just

:08:51. > :08:55.about the gap -- get that. But in terms of the kind of politics and

:08:56. > :09:00.facts of trade agreements, what you are actually trying to do is is

:09:01. > :09:05.impossible to get that perfdct situation and then abandon the

:09:06. > :09:12.barriers completely, and th`t trade agreements are a rip to redtcing

:09:13. > :09:17.this barriers progressively,, beginning to address the policy of

:09:18. > :09:22.protectionism in countries. They are a route to begin to sweep the

:09:23. > :09:26.barriers away. I would buy the free-trade argument, I think no

:09:27. > :09:35.barriers are best of all, btt they exist.

:09:36. > :09:48.If the UK were to abandon free and unilaterally free-trade, whhch would

:09:49. > :09:52.be his best policy, bar in vested interest, then there would no point

:09:53. > :09:56.in engaging in any trade agreements with anybody because we havd already

:09:57. > :10:02.reduced its own self harm from its own tariff barriers will stop if you

:10:03. > :10:07.are a small nation, a tariff barrier has the effect of self harmhng you.

:10:08. > :10:11.You create inefficiencies in your own economy. You don't affect

:10:12. > :10:16.anybody else. You raise the prices in which other people sell to you,

:10:17. > :10:21.to your consumers, and your tariff between them and the world larket.

:10:22. > :10:25.When you abandon the tariff, you lower the price to your consumers

:10:26. > :10:30.and make your consumers and economy better off. If we had already gone

:10:31. > :10:35.to free trade, there would be no point on any other trade agreements.

:10:36. > :10:40.In the real world, we probably wouldn't go to complete fred-trade

:10:41. > :10:42.and anything we could do to persuade our own vested interest to `bandon

:10:43. > :10:58.certain sorts of protection would be good.

:10:59. > :11:09.The Econometrics -- economics position is perfectly reasonable and

:11:10. > :11:16.history of British liberalism. history of British liberalism.

:11:17. > :11:23.Unfortunately, trade agreemdnts don't quite work that way today

:11:24. > :11:30.Most trade agreements are b`sed on reciprocal commitments betwden

:11:31. > :11:34.parties, meaning that your negotiating leverage in an `greement

:11:35. > :11:38.depends on the size of your market and how open your market is. If you

:11:39. > :11:45.have a large market which is relatively closed, you have

:11:46. > :11:52.significant negotiating levdrage. If you have a relatively small market,

:11:53. > :11:56.it is very open and you havd very limited to go shooting leverage The

:11:57. > :12:04.EU has a bit more but it is also fairly open. On white countries sign

:12:05. > :12:17.agreements, I have sat throtgh any discussions with NGO's. The reason

:12:18. > :12:23.is that with tariffs down to low levels, 2%, 3%, it is about

:12:24. > :12:43.nontariff barriers. 80% of the benefits from TTIP, and the TPP

:12:44. > :12:46.agreement between the US and Asia, 80% of the benefits will cole from

:12:47. > :12:55.removing nontariff barriers to trade. This goes on to regulation.

:12:56. > :13:00.These agreements are geared to facilitate trade. You have

:13:01. > :13:04.standards, in terms of health, safety, environment, food standards,

:13:05. > :13:11.which differ between the economies. What the parties to these agreements

:13:12. > :13:14.are trying to do now is fachlitate trade by negotiating how yot can

:13:15. > :13:20.find equivalence between thd different standings. This is why the

:13:21. > :13:36.trade negotiations are taking place today. That is the main focts of the

:13:37. > :13:40.effort. It is not really th`t. There are always vested interests in

:13:41. > :13:46.trade. Some of the major tr`de agreements have been agreed between

:13:47. > :13:52.large economies and they ard effective in removing some of this

:13:53. > :13:57.vested interest. If you look at the liberalisation commitments tnder

:13:58. > :14:04.tariffs, we are talking abott 9 % of tariff lines being liberalised. Even

:14:05. > :14:13.in agriculture, there has bden significant movement in gridvance --

:14:14. > :14:20.agreements. It is important in terms of the multilateral system but these

:14:21. > :14:25.agreements have taken over from what was agreed as more true nattral

:14:26. > :14:29.professionalism. It is only about specific binding commitments. You

:14:30. > :14:36.can still trade and liberalhse, but what you don't have, is any

:14:37. > :14:50.guarantee that you won't face discrimination in the Chinese market

:14:51. > :14:55.or the Japanese market. One quick point, we would like to see a day

:14:56. > :15:00.where we don't have to have trade agreements and where we havd a

:15:01. > :15:08.proper market globally. The main point of this is by not being in the

:15:09. > :15:13.EU, the United Kingdom could have whatever trade deals it chose to

:15:14. > :15:16.have with other countries around the world, to harness the Commonwealth

:15:17. > :15:23.English-speaking world, global market which is in our country. It

:15:24. > :15:27.restricts us from that freedom to do just that. With the trade ddficit we

:15:28. > :15:31.have with the EU, the only losers would be if you tried not to trade

:15:32. > :15:37.with us or put barriers up which will be the European Union htself.

:15:38. > :15:49.We have the ace card. We have the upper hand on this. This is the key

:15:50. > :15:58.point. By leaving the EU, wd abandon the customs union. In the 1875

:15:59. > :16:03.campaign, they tried to explain that it wasn't a great idea to join a

:16:04. > :16:07.customs union because it was highly protectionist. He got nowhere will

:16:08. > :16:13.stop he didn't get his point across. It has come back now 40 years later

:16:14. > :16:17.and it is central to this whole thing. What people are saying is if

:16:18. > :16:26.we leave the EU, it is disastrous because of the legal leverage. The

:16:27. > :16:30.truth is, we will move if wd have got any sense, to liberalisd the

:16:31. > :16:38.economy, fundamentally under free trade will stop it isn't in our

:16:39. > :16:43.interest not to have free trade It pays us to be a global playdr under

:16:44. > :16:47.free trade. It pays us to sdll our goods to other people in thd world

:16:48. > :16:52.market and to take their goods at world prices. That will lowdr our

:16:53. > :16:57.cost of delivering. We have done a simulation of leaving the ET and the

:16:58. > :17:05.first thing that comes out hs an 8% drop in the cost of living on day

:17:06. > :17:11.one. Because of the move from EU prices to world prices. That is

:17:12. > :17:21.really worth having. It means that we then are in a world which we can

:17:22. > :17:25.sign and trade agreements. We will be forced by the EU for the reason

:17:26. > :17:29.you have given, that they sdll so much to us, to have an agredment

:17:30. > :17:34.with them. The last thing they will want us to do is walk away without

:17:35. > :17:41.some sort of free trade agrdement with the EU. They are so dependent

:17:42. > :17:46.on our markets relative to our dependence on them. They ard selling

:17:47. > :17:54.us stuff at inflated prices at a massive scale. There will bd that

:17:55. > :18:02.trade agreement with them bdcause they will push for it. Otherwise, as

:18:03. > :18:07.I have argued already, we don't need to do trade agreements with anybody

:18:08. > :18:11.else. Frankly, we can take the world price. If we do a trade agrdement

:18:12. > :18:16.with New Zealand or something, it won't affect the world pricd you

:18:17. > :18:21.get, it will affect what New Zealand has to pay for that our goods. The

:18:22. > :18:27.New Zealanders, if they put a tariff on that, their consumers have to pay

:18:28. > :18:34.more. It is a problem for them and not for us. I am sure we will do

:18:35. > :18:36.trade agreements. I am saying that they are not necessary for our

:18:37. > :18:50.well-being in terms of leavhng the EU. They would be a nice add-on for

:18:51. > :18:57.people like the New Zealanddrs. Can I just ask a question, which is the

:18:58. > :19:02.current situation we are in the European Union. We are wherd we are.

:19:03. > :19:13.At this point, with what we have got, to what extent of the Duropean

:19:14. > :19:16.Union current interest in trade reflect the national interest? Does

:19:17. > :19:20.it acts as a multiplier for our economic influence in the world or

:19:21. > :19:34.is it effectively putting constraint on us, the current situation?

:19:35. > :19:47.I will let my colleague spe`k. In many respects, the UK has bden part

:19:48. > :19:52.of the customs union and it has formed part of a single European

:19:53. > :20:00.market. You have this framework agreement. Over the past 15, 20

:20:01. > :20:06.years, the UK preferences h`ve been reliant with the rest of thd EU In

:20:07. > :20:14.that sense, the EU reflects the UK preferences. I think the UK has been

:20:15. > :20:19.fairly effective in shaping the European Union trade policy. It has

:20:20. > :20:23.been one of the key players in making it more liberal, helped by an

:20:24. > :20:27.enlargement to include some other countries. You can make a c`se that

:20:28. > :20:36.on agriculture, the UK may be more liberal. Broadly speaking, ht is in

:20:37. > :20:42.line with UK interests. Takhng away from the economics of it, what about

:20:43. > :20:50.in terms of how influential has the UK been, in determining priorities

:20:51. > :21:03.for the European Union's economic diplomacy? I think it has h`d a

:21:04. > :21:07.major impact. The UK has bedn very effective in shaping the detailed

:21:08. > :21:11.debates within the trade policy committee, within the commission and

:21:12. > :21:18.shaping the views and opinions within Europe. It has been one of

:21:19. > :21:24.the main protagonists of promoting open trading systems that some

:21:25. > :21:34.people would say supported by other countries. Yes, I am not sure I can

:21:35. > :21:38.say any moron that. Those who favour us staying in the European Tnion

:21:39. > :21:42.often say that if you are in the European Union, you were able to

:21:43. > :21:49.influence what is going on `nd from what you have just said, it seems up

:21:50. > :21:57.till now, Britain, being in the European Union, has been able to add

:21:58. > :22:02.positive effect and affect changes in the European Union? Yes, I think

:22:03. > :22:05.so. In a previous session, xou asking questions about what will

:22:06. > :22:11.happen in a future which is difficult to answer. I would make

:22:12. > :22:17.the case that the UK will h`ve more influence being a member of this

:22:18. > :22:21.bigger club. If you are looking at how the rules of trade and

:22:22. > :22:30.investment are being set, they are being set through negotiations. One

:22:31. > :22:35.of the core elements in TTIP is regulatory regulation betwedn the US

:22:36. > :22:40.and EU. If the UK is not sitting at the table, is not part of the EU in

:22:41. > :22:45.these negotiations on how you reconcile different domestic

:22:46. > :22:52.regulations, the UK won't h`ve any influence. The UK can be a price

:22:53. > :22:57.taker, but it will have to `dopt the regulations that have been `greed

:22:58. > :23:06.between the EU and the US. Ht can still trade, but it won't h`ve any

:23:07. > :23:11.more influence on the outcole. It would have more influence if it was

:23:12. > :23:16.in the EU. 1-macro I love this fact is that we have this great hnfluence

:23:17. > :23:25.on the EU and make it a much better place. It may be true. Your question

:23:26. > :23:31.originally asked, what was the cost for the UK in this arrangemdnt? That

:23:32. > :23:39.is the thing that worries md. I have already answered about the fact that

:23:40. > :23:45.the customs union is extremdly expensive to us. The regulations

:23:46. > :23:49.that are increasingly put on as in labour markets, financial m`rkets,

:23:50. > :23:55.very onerous to us and cost us serious resources. They also hold

:23:56. > :24:03.back growth. Many of these regulations are not in line with

:24:04. > :24:10.free-market principles. When you add all these things up, it may well be

:24:11. > :24:17.that we have a forceful libdralism inside a fundamentally illiberal EU

:24:18. > :24:23.political and economic philosophy. The costs to us large. The

:24:24. > :24:27.questionnaires, in our national interest, it may be great for us to

:24:28. > :24:32.contribute to the wider world interest by making the EU a more

:24:33. > :24:37.liberal place and encouraging trade agreements, but at huge cost to

:24:38. > :24:40.ourselves in being in this particularly -- particular club The

:24:41. > :24:43.club wants to have more and more control over what we do and its

:24:44. > :24:48.control doesn't seem to be hn our interest.

:24:49. > :24:57.review the optimal friendshhp - review the optimal friendshhp -

:24:58. > :25:01.framework for the UK's relationship with the EU if it chooses to

:25:02. > :25:06.withdraw its membership? Ard looking in particular that the so-c`lled

:25:07. > :25:12.Swiss or Norwegian model is that people have talked about. -, I am

:25:13. > :25:21.looking. -- models. Optimal model if the UK with Drew --

:25:22. > :25:27.If there is such a thing. If there is such a thing.

:25:28. > :25:31.Let me build a scenario frol my previous point, the point I was

:25:32. > :25:37.trying to make is that it is not that the EU is imposing regtlations

:25:38. > :25:42.on the UK, the health, safety, environment standards that `ll

:25:43. > :25:46.countries have two comply whth. If the UK left it would still have

:25:47. > :25:50.to show compliance with the standards if it wants to export to

:25:51. > :25:56.the US or any other market. And in terms of the costs, the nontariff

:25:57. > :26:02.barrier costs, nontariff eqtivalent cost of entering the US market are

:26:03. > :26:11.something like 20%. One esthmate is 20%. So if the UK didn't negotiate

:26:12. > :26:16.bilateral agreement with thd US its exporters would be at a 20%

:26:17. > :26:20.disadvantage to the EU if the EU was able to negotiate an equivalence

:26:21. > :26:27.agreement with the US on terms of market access. Sorry, bit tdchnical.

:26:28. > :26:33.What about the relationship between the US and the EU... The pohnt I'm

:26:34. > :26:37.trying to make is that the TK would still have to adopt the samd

:26:38. > :26:42.standards, either EU standards or some other international st`ndards.

:26:43. > :26:46.So the more optimal way would be to keep with the European standards

:26:47. > :26:52.because at least we have had some role in influencing those. So then

:26:53. > :26:57.if you are looking at other options, if you look at the Swiss option

:26:58. > :27:02.maybe a bit closer than the Norwegian one, Switzerland

:27:03. > :27:07.negotiated bilateral agreemdnt with China. So this is a scenario that

:27:08. > :27:14.the UK could negotiate bilateral agreement with China. You nded to

:27:15. > :27:18.look at the details of this, though. And it calls for some caution

:27:19. > :27:32.because this was negotiating with China was really not much more than

:27:33. > :27:37.existing commitments on services, it has got nothing on investment,

:27:38. > :27:44.nothing on these nontariff barrier measures. So in other words all got

:27:45. > :27:50.was a tariff agreement and some provisions of intellectual property.

:27:51. > :27:57.So this is an illustration that the UK would have more leverage. But the

:27:58. > :28:02.UK, it is difficult to say, you cannot really predict what the UK

:28:03. > :28:17.would get outside of the EU. But if you look at what the Swiss got it

:28:18. > :28:23.wasn't very much. Can answer this 1) I will answer it again becatse

:28:24. > :28:29.Doctor Wilcox, a great expert on trade agreements, but as I have said

:28:30. > :28:33.they are totally irrelevant to the UK in this respect because he is

:28:34. > :28:38.talking about trade agreements with large blocks, large and knobbly

:28:39. > :28:46.suppliers, and my answer to you if you want to hear the answer, maybe

:28:47. > :28:53.you don't want to hear it. H ask you to look at the Swiss model `nd the

:28:54. > :29:00.Norwegian model. I was good to say, we do not want either model. I did

:29:01. > :29:05.answer this, the model we w`nt is the model of a standard,

:29:06. > :29:12.self-governing country. Why does everybody is so we have got to

:29:13. > :29:16.become a small dependence of the EU even when we leave? In order for the

:29:17. > :29:24.new regions and this Swiss to trade with the EU, you have to colply with

:29:25. > :29:28.many rules and regulations which I as a former MEP have sat down and

:29:29. > :29:33.worked on directives and rules that actually you have to comply with in

:29:34. > :29:36.order to trade. You saying the EU is suddenly going to drop all these

:29:37. > :29:41.requirements to comply with certain standards on food quality, `ir

:29:42. > :29:44.standards or so rules on how services operate, just becatse

:29:45. > :29:49.Britain chooses to leave thd EU and wishes to dip -- behave differently

:29:50. > :29:56.to other nations like Norwax Osasuna?

:29:57. > :30:01.9% of our GDP is exported to the EU. -- Norway and Switzerland.

:30:02. > :30:09.Every exporter has two is comply with all they countries -- standards

:30:10. > :30:13.of the country they exported to But if you ask me do we need all the

:30:14. > :30:19.regulations of the EU to sell but then percent of the GDP to the EU, I

:30:20. > :30:23.would say no, because the other 91% will be free of those regul`tions,

:30:24. > :30:27.and it will operate according to the regulations we as a self-governing

:30:28. > :30:36.country think are good for our industries. There is no reason to be

:30:37. > :30:44.the same as the EU. If the DU insists on certain things, hf you

:30:45. > :30:54.export to the UK you will h`ve to do it. If you are telling me that the

:30:55. > :31:00.other 91% of the economy has got to comply with everything in the EU in

:31:01. > :31:13.order to comply with that 9$, I say where has that come from? On all

:31:14. > :31:21.exports, as thick if you ard exporting to other markets xou have

:31:22. > :31:27.to comply with the standards expecting. -- I think. But lutual

:31:28. > :31:34.recognition rather than necdssarily harmonisation. Yes, but those have

:31:35. > :31:39.to be negotiated. Certainly the UK standards could be lowered. If that

:31:40. > :31:52.is what the voters want, yot could do that.

:31:53. > :31:56.Related to this then, can I ask how significant this will be for the

:31:57. > :32:02.political relationship tween the US and the EU, and how would Britain,

:32:03. > :32:19.the UK in particular, fair outside an arrangement? In terms of

:32:20. > :32:22.political relations, I think to consolidate transatlantic

:32:23. > :32:44.relationships -- relations. So if the UK were not part of that,

:32:45. > :32:52.it may have some knock on effect, I'm not quite sure what. I would

:32:53. > :33:05.look more at the economic ilpact, and that would be the UK wotld still

:33:06. > :33:12.face, UK exporters into the US market, and US financial services

:33:13. > :33:19.exports into the US market, would face a disadvantage compared to the

:33:20. > :33:25.rest of the EU. Because the EU, a TTIP, if it is successful, but it

:33:26. > :33:31.won't happen overnight, the TTIP, if TTIP is successful, then it will --

:33:32. > :33:38.exporters from another part of the EU would have a preference `s to

:33:39. > :33:41.what these agreements are, preference of the UK. So thd UK

:33:42. > :33:47.would then have to negotiatd an equivalent agreement in orddr to

:33:48. > :33:53.match those preferences. And as we have heard from the US negotiator,

:33:54. > :34:03.the US with no doubt negoti`te with the UK but other bigger markets

:34:04. > :34:08.would take priority. If we were outside of the EU, presumably the

:34:09. > :34:16.standards we would be left with we would have to negotiate simhlar But

:34:17. > :34:31.can I ask you, what other prospects you believe for a successful

:34:32. > :34:39.conclusion of ten two? -- TTIP. TTIP, my own view is that TTIP is

:34:40. > :34:50.going to take some time for it to be fully implemented. If you look back

:34:51. > :34:56.at EU, US efforts at deepenhng market integration, they have come

:34:57. > :35:02.in fits and starts, so it whll take some time before it has any real

:35:03. > :35:12.impact. And can I ask you, hf the UK were excluded from TTIP, do you

:35:13. > :35:17.think it would risk falling behind the transatlantic curve on setting

:35:18. > :35:24.standards and regulations? Xes, I mean, the approach to dealing with

:35:25. > :35:32.these trade facilitating regulations will be shaped by the EU and US in

:35:33. > :35:37.this regulatory corporation. -- cooperation. So the UK will have to

:35:38. > :35:41.follow either export accordhng to US standards or export according to the

:35:42. > :35:47.EU standards. And these standards are very very important. Very often

:35:48. > :35:53.they are aimed at promoting health, safety, for example with cars, crash

:35:54. > :35:58.testing standards in terms of making sure that when there is an `ccident

:35:59. > :36:03.passengers have a good chance of being safe. In a sort of frde-market

:36:04. > :36:09.world scenario, without these sorts of standards, what sort of ` global

:36:10. > :36:14.market might exist if we didn't have the sort of standards being set

:36:15. > :36:22.through TTIP between the EU is - EU and the US? This comes to the whole

:36:23. > :36:26.globalisation debate, and whether globalisation is a race to the

:36:27. > :36:31.bottom in terms standards, health, environmental, social stand`rds But

:36:32. > :36:34.the case for TTIP and these other agreements is that it sets `n

:36:35. > :36:40.international level below which there were a pressure, in other

:36:41. > :36:48.words downward pressure, resulting in globalisation, accommodation

:36:49. > :36:59.between economies, would be stabilised on the basis of what the

:37:00. > :37:02.Americans set. And if we had our own trade agreement with for ex`mple

:37:03. > :37:08.China, outside of the EU, how effective do you think we would be

:37:09. > :37:12.in terms of making sure that for example children's toys or other

:37:13. > :37:15.exports from China that werdn't uncovered by the sorts of standards

:37:16. > :37:19.we would like to see, how effective we would be leaving in making sure

:37:20. > :37:25.that goods and services that we bought from Japan were safe and

:37:26. > :37:30.reliable? -- China. The UK could still prohibit the importathon of

:37:31. > :37:37.unsafe products according to whatever UK standards were. If you

:37:38. > :37:44.had health and safety stand`rds for children's toys you can still

:37:45. > :37:49.import. So the economic powdr to be able to exert influence is needed to

:37:50. > :37:53.put things right politicallx within China, to change the way thd market

:37:54. > :37:57.operates? On the case you mdntioned, I think yes, because the Chhnese

:37:58. > :38:03.have done this, they have shifted into accepting those kind of

:38:04. > :38:06.international standards, in an area where China hasn't yet quitd adopted

:38:07. > :38:12.international standards I think it would probably be much harddr to get

:38:13. > :38:17.them to shift, to change for example one area is on Government

:38:18. > :38:25.procurement. I figured it would be very difficult for the UK to get any

:38:26. > :38:31.kind of fair treatment in the Chinese procurement market outside

:38:32. > :38:38.of the EU. Thank you. Can I bounce my own thesis of both

:38:39. > :38:42.of you. For the United Kingdom, our unique selling points as it were,

:38:43. > :38:46.things like legal services, financial services, education

:38:47. > :38:51.services, culture and media, pharmaceuticals perhaps, thdse are

:38:52. > :38:56.all things with a global market rather than a regional one. Is it

:38:57. > :39:02.possible if we are outside the European Union for us then to pursue

:39:03. > :39:07.a much more aggressive and specialised agenda around those

:39:08. > :39:16.industries and services? In terms of trying to get market entry to other

:39:17. > :39:27.markets. Or I suspect Professor Minford would probably say we don't

:39:28. > :39:31.even need to. But let's... Doctor Wilcock has told us a lot about why

:39:32. > :39:35.we need these trade agreements. They economically they are prettx small

:39:36. > :39:41.potatoes. I think the main thing is to have Robert that people want

:39:42. > :39:45.Pharmaceuticals, -- products. You had a list of industries whdre we

:39:46. > :39:49.are very competitive. Peopld falling over themselves to buy our products.

:39:50. > :39:53.And that is what you want in a global market, you need to be highly

:39:54. > :40:00.competitive, producing a lot of interesting products that 30 odd

:40:01. > :40:01.million people get good prices in world markets because they have got

:40:02. > :40:10.good products. The key thing is we should be part

:40:11. > :40:15.of that global markets. Abld to compete with it and in it bdcause we

:40:16. > :40:22.are buying imports from the global market and not from a protected EU

:40:23. > :40:36.market which is excessively expensive. We make ourselves much

:40:37. > :40:42.more competitive and we are focusing our advantage which is to produce

:40:43. > :40:47.the things you just listed which are high-tech, skilled labour intensive

:40:48. > :40:55.products. This is where our advantage lies. What is happening,

:40:56. > :41:03.and this is the big cost to us that comes with this baggage, thd cost is

:41:04. > :41:08.we are forced with a lot of injuries as who are protected in the EU. --

:41:09. > :41:14.industries. We are distorted into industries that we are not very good

:41:15. > :41:18.at. The global market, we c`n focus on these industries where wd are

:41:19. > :41:23.good and make sure they are highly competitive and then, as I said

:41:24. > :41:27.earlier, we don't need tradd agreements. I am not against them. I

:41:28. > :41:34.am happy for other people to have trade agreements and there lay be

:41:35. > :41:39.minor things. In the case of the US, it is our oldest trading partner.

:41:40. > :41:43.Massive trade with the US in these products you are talking about

:41:44. > :42:01.already. The EU has much less trade with the EU and the US than we do.

:42:02. > :42:11.For us, TTIP is a minor extra element in the story. I don't

:42:12. > :42:15.disagree. We need goods and services and we need to be able to produce

:42:16. > :42:25.those competitively in order to sell them. I am not saying free trade

:42:26. > :42:30.agreements is the only thing. Let me illustrate with an example. Trying

:42:31. > :42:35.to sell insurance services hnto India. Are we better off dohng that

:42:36. > :42:41.would the heft of the Europdan Union, trying to negotiate dntry for

:42:42. > :42:50.British insurance companies through them all would be -- we'd bd better

:42:51. > :42:53.on our own or are we able to survive by not attempting to broker

:42:54. > :43:02.agreements with India but hoping they will buy British products? The

:43:03. > :43:07.trade agreements only ensurd that there would be unfair treatlent of

:43:08. > :43:13.UK suppliers or EU suppliers. It doesn't mean to say that thd UK

:43:14. > :43:22.insurance industry can't go to India and try and sell the servicds to the

:43:23. > :43:25.Indian government. If the insurance sector is regulated in Indi` that it

:43:26. > :43:33.precludes foreign investment, then you face... Batters by the benefit

:43:34. > :43:41.of the trade agreement comes in -- that is where the benefits of the

:43:42. > :43:45.trade agreement comes in. Wd have to get into negotiation with India to

:43:46. > :43:51.investment in the insurance sector. investment in the insurance sector.

:43:52. > :44:02.How does the UK get past thd vested interest of the Vernon -- Indian

:44:03. > :44:05.insurance industry, so they can buy Indian politicians to delivdr the

:44:06. > :44:13.regulations in order to protect them? It is a matter of massive

:44:14. > :44:18.indifference to us whether the Indians inflict harm on thelselves

:44:19. > :44:22.by refusing to buy insurancd services or not. Our insurance

:44:23. > :44:27.industry is well competitivd. It is not infinitely large. It has a

:44:28. > :44:36.definite size and is limited in size. It is a -- it is in a nation

:44:37. > :44:41.of 30 million workers. If the Indian economy decides not to allow British

:44:42. > :44:44.insurers, there's plenty of other people who will be ready to buy

:44:45. > :44:49.British insurance. It is a global market. The insurance industry in

:44:50. > :44:55.the City of London is the world s biggest market and it deals with

:44:56. > :45:02.every part of the world. It is not dependent on any one countrx to sign

:45:03. > :45:07.a trade agreement. The insurance industry is going to survivd fine,

:45:08. > :45:13.whether or not India wants to liberalise. We would prefer it if

:45:14. > :45:17.India liberalise. It is good for India. From our point of vidw, the

:45:18. > :45:22.bigger issues here do we want to be part of the global market whth free

:45:23. > :45:34.trade or inside the EU come inside a customs system with excessively

:45:35. > :45:40.interventionist mobility -- regulatory policies. They dominate

:45:41. > :45:50.this detail of trade agreemdnts once we leave this organisation. May I

:45:51. > :45:59.return to the world trade organisation. There was concern

:46:00. > :46:05.expressed by those saying there was punitive tariffs on the UK by the

:46:06. > :46:12.EU. We know it is not in thdir interest to do so. We offer a large

:46:13. > :46:25.deficit and I accept that point I doubt whether they will be `llowed

:46:26. > :46:34.to do so. There is a concern out there that the EU could would tell

:46:35. > :46:44.at eight -- could retaliate with massive punitive tariffs. C`n I take

:46:45. > :46:51.your view on that? Most-favoured-nation is means you

:46:52. > :47:03.keep the tariffs as they ard at the level of other countries. Whth the

:47:04. > :47:11.states, ... That will be my understanding. In the worst,case

:47:12. > :47:17.scenario, what can the EU do to us? The EU is a member of the WTO. It

:47:18. > :47:24.will have to offer tariffs to the UK. It means that as far as these

:47:25. > :47:29.tariffs are, there is no tariffs higher than the EU at the moment so

:47:30. > :47:36.there may be an increase in tariff. Can you give us a scale? It depends

:47:37. > :47:49.on the products. Agricultur`l projects -- products can go up 4%,

:47:50. > :47:59.cars, 8%. It will be signifhcant. More importantly, the tariffs are

:48:00. > :48:10.going down. You can negotiate an agreement. It is the nontarhff costs

:48:11. > :48:13.that will come in. If the UK is not part of the EU and not part of the

:48:14. > :48:21.customs union and if it has different tariffs, then it has to

:48:22. > :48:27.prove origin status. If you are exporting from the UK to thd rest of

:48:28. > :48:32.the EU, you have to prove status. The costs of proving that c`n be 5%

:48:33. > :48:37.of production costs. You have border control costs which can be 4% of

:48:38. > :48:45.production costs. The trade costs that are more important than the

:48:46. > :48:51.tariff issue, there is some of the issues that would need to bd there.

:48:52. > :49:03.The UK could keep the existhng tariff, but there is no point in

:49:04. > :49:06.leaving the EU. On some things, there is a government procurement

:49:07. > :49:15.agreement that has been negotiated within the WTO. That would have to

:49:16. > :49:22.be renegotiated. It is based on bilateral commitments betwedn the EU

:49:23. > :49:37.and the US. The other signatories also. The UK would have to

:49:38. > :49:43.renegotiate that and tried to get access. That might be difficult to

:49:44. > :49:47.negotiate. I cost of the business of leaving the EU with the asstmption

:49:48. > :49:56.that we have no disagreements with anybody. The EU applies any

:49:57. > :50:00.non-tariffs and what happens is we become a normal country outside the

:50:01. > :50:05.EU, which is something that many countries are and we face world

:50:06. > :50:11.prices. That is immensely bdtter than being inside the EU's wonderful

:50:12. > :50:15.tariff wall. If a text too lany bad industries. Compared with what we

:50:16. > :50:23.would have if we were out there in the global market, selling the

:50:24. > :50:27.things we are good at. It is enormously liberating for us and

:50:28. > :50:32.would stop is thinking of otrselves as a regional player, which we are

:50:33. > :50:38.not. Give us the mindset of a global player facing world markets. We are

:50:39. > :50:43.a small global player. We h`ve to produce things that are good. We can

:50:44. > :50:48.sell for high prices to anybody around the world. As I have said,

:50:49. > :50:54.the world is a big market place If summary wants to put extra tariffs

:50:55. > :50:57.on us, it makes no difference to my calculation. I believe the DU wants

:50:58. > :51:05.to sign an agreement with us because it is in our interest. It sdlls so

:51:06. > :51:08.much stuff. The boot will bd entirely on the other foot to what

:51:09. > :51:14.most people say. Instead of going cap in hand saying, please sign an

:51:15. > :51:21.agreement, please sign an agreement with us because we want to sell to

:51:22. > :51:26.you. We are not wanting to keep you here as long as Hillary Clinton was

:51:27. > :51:32.kept here by the progression committee! Thank you both vdry much

:51:33. > :51:40.indeed. Always stimulating to have your evidence, Professor. Thank you

:51:41. > :51:44.for your expertise. It is vdry much appreciated. Thank you so mtch to

:51:45. > :51:47.both of you. Order, order, this meeting is now adjourned.