:00:07. > :00:14.Welcome to the Brexit Effect with me Christian Fraser.
:00:15. > :00:18.We have heard lots of big talk this week about Article 50
:00:19. > :00:21.and Brexit but what does it really mean to our future,
:00:22. > :00:25.the economy, the way we live our lives?
:00:26. > :00:31.Tomorrow, Theresa May heads to Brussels, face-to-face
:00:32. > :00:34.for the first time with 27 other leaders and the summit agenda
:00:35. > :00:37.We'll take a closer look at how the negotiations might unfold
:00:38. > :00:40.and we will hear the thoughts of a key figure in Germany,
:00:41. > :00:53.I have also a feeling that they do not know certain conditions which
:00:54. > :00:56.you have to know in order to make a realistic plan.
:00:57. > :01:03.How will the way we trade with other nations change after Brexit?
:01:04. > :01:09.We'll look at some of the options on the table.
:01:10. > :01:13.We have an expert panel this evening to debate the big issues with us.
:01:14. > :01:15.Lord Lamont is with us, the former Conservative Party Chancellor,
:01:16. > :01:18.a prominent supporter of Brexit, who led Britain out of the ERM.
:01:19. > :01:20.From Brussels, John Bruton, the former Irish Prime Minister
:01:21. > :01:23.whose own country has a huge stake in the outcome.
:01:24. > :01:24.Alice Enders, for 20 years a senior economist
:01:25. > :01:27.at the World Trade Organisation, she is an expert on game theory.
:01:28. > :01:33.And Roger Bootle, a leading member of Economists
:01:34. > :01:37.And Roger Bootle, a leading member of Economists for Brexit.
:01:38. > :01:41.And the view from other European countries, we have a special report
:01:42. > :01:43.from Warsaw about what people in Poland want
:01:44. > :02:01.It has been an extraordinary three months in which the Brexit vote has
:02:02. > :02:04.already had an effect in so many ways, on our politics,
:02:05. > :02:07.on the economy, and, of course, on our relations with Europe.
:02:08. > :02:11.Tomorrow in Brussels, Theresa May will be joining the EU's
:02:12. > :02:13.27 leaders for the first time since the vote, having already
:02:14. > :02:17.served notice that she will trigger Article 50 by early next year.
:02:18. > :02:19.She is hoping that will encourage a more open,
:02:20. > :02:24.At the Conservative Party conference two weeks ago,
:02:25. > :02:27.there was plenty of optimism about the choice Britain has made,
:02:28. > :02:30.but in the days that have followed no end of heated debate over
:02:31. > :02:44.A revolution, in which millions of our fellow citizens stood up and
:02:45. > :02:49.said they were not prepared to be ignored any more.
:02:50. > :02:53.APPLAUSE If Theresa May was a reticent
:02:54. > :02:57.remayber there have been no half-measures since the vote. Brexit
:02:58. > :03:01.means Brexit wax the message through the summer and in case you missed
:03:02. > :03:07.the point here was a speech to underline it. Article 50 will be
:03:08. > :03:11.triggered by the end of March, followed by her great repeal bill.
:03:12. > :03:15.That means that the United Kingdom will be an independent Sovereign
:03:16. > :03:19.nation, making its own laws. Still, we know very little of what kind of
:03:20. > :03:24.Brexit we are going to get. Negotiation has been cast as a game
:03:25. > :03:27.of poker. And in poker the winning player doesn't always hold the best
:03:28. > :03:31.hand. The trouble is the longer the
:03:32. > :03:34.Government hides the cards it will be playing, the more restless the
:03:35. > :03:38.opposition becomes. Everybody, including people like myself, who
:03:39. > :03:41.campaigned for us to remain in the European Union, of course accept the
:03:42. > :03:46.mandate from the British people to pull us out of the European Union.
:03:47. > :03:49.But what the Government doesn't have, because the Brexiteers
:03:50. > :03:52.withheld from the British people what they meant by Brexit is whilst
:03:53. > :03:58.the Government has a mandate to pull us out of the European Union, they
:03:59. > :04:03.don't have a mandate how to do that. And what of the negotiations? This
:04:04. > :04:06.week's summit puts Theresa May in front of fellow leaders for the
:04:07. > :04:10.first time since she took office T seems Brexit is on the menu or at
:04:11. > :04:14.least they will talk about the talks. Brussels says there will be
:04:15. > :04:19.no indepth discussion until Article 50 is triggered.
:04:20. > :04:24.That uncertainty weighs heavy on sterling. The record fall good news
:04:25. > :04:33.for the FTSE 100, but not such good news for stocks of mar might, PG
:04:34. > :04:37.Tips or Helmans mayonnaise. Tesco and Unilever began a trade war. But
:04:38. > :04:40.the implications of price rises for consumers is the real story behind
:04:41. > :04:43.the headlines. We know Article 50 is going to be
:04:44. > :04:47.triggered but there is not much detail about what that really means.
:04:48. > :04:51.And also if it went wrong, what could we fall back on? Into that
:04:52. > :04:58.gap, if you like, then a lot of emotion seems to have appeared.
:04:59. > :05:00.So, after all the optimism that flowed from the Conservative Party
:05:01. > :05:05.conference, the size of the challenge is clear to everyone.
:05:06. > :05:06.A task that is made all the harder by the persistent division between
:05:07. > :05:13.leavers and remainers. Let me start with you, no running
:05:14. > :05:16.commentary is what the Prime Minister has told us so far, are you
:05:17. > :05:21.broadly satisfied three months into this on what you have heard from
:05:22. > :05:25.her? Yes, I think the goal was set in advance, the goal is to leave,
:05:26. > :05:30.which means not being the subject of the European Court of justice, it
:05:31. > :05:33.means being able to have friendly relations, to trade with the EU but
:05:34. > :05:38.to be an independent Sovereign nation. This is a complicated
:05:39. > :05:42.exercise and there are lots of different options. I think it's
:05:43. > :05:46.entirely understandably the Government should take its time to
:05:47. > :05:49.decide exactly which package of trade-offs is intends to pursue. Do
:05:50. > :05:52.you think some of the things she said about freedom of movement, do
:05:53. > :05:55.you think that puts paid to any idea that some of the remainers have
:05:56. > :06:00.advocated that there may be a chance of a soft Brexit, maybe a Norway
:06:01. > :06:06.option s that now out of the window? I think a Norway option replicated
:06:07. > :06:10.exactly as Norway has it would be very difficult, because of the
:06:11. > :06:14.freedom of movement principle and it was clear from the arguments and the
:06:15. > :06:21.debates during the referendum campaign there was a lot of concern
:06:22. > :06:26.about absolute freedom of movement. You know, the EU is - freedom of
:06:27. > :06:29.movement of labour, I don't think it's justified an economic theory,
:06:30. > :06:33.it's been compromised repeatedly in the history of the EU and I don't
:06:34. > :06:39.see why it shouldn't be compromised again. John Bruton in Brussels for
:06:40. > :06:44.us, John, you have vast experience of these kind of summits, what sort
:06:45. > :06:50.of reaction do you think Theresa May will get when she arrives in the
:06:51. > :06:55.room tomorrow? I think there won't be very much reaction really.
:06:56. > :07:01.Because the settled opinion of the 27 heads of Government has been that
:07:02. > :07:06.they will not engage in any negotiation until Theresa May writes
:07:07. > :07:11.the letter, the Article 50 letter. In that letter she will have to
:07:12. > :07:16.indicate a number of things. First of all, that she intends to withdraw
:07:17. > :07:22.Britain from the European Union. But also she will need to indicate what
:07:23. > :07:26.sort of framework of future relationships she might want. In
:07:27. > :07:31.that I think the UK will have to think very deeply, perhaps in a way
:07:32. > :07:35.it didn't before the referendum, about what sort of relationship it
:07:36. > :07:42.wants with Europe in the longer term, what sort of Europe it wants
:07:43. > :07:44.in the longer term? Britain has been involved in European, continental
:07:45. > :07:50.European politics for hundreds of years. Its interventions in two
:07:51. > :07:53.world wars were directed at saving countries in Europe from being
:07:54. > :07:57.occupied by other countries. So Britain can't turn its back on the
:07:58. > :08:02.future security or peace structure of Europe, which is the European
:08:03. > :08:06.Union. They will need to say, given they're leaving the European Union,
:08:07. > :08:11.how they intend and what they would want in terms of their relationship
:08:12. > :08:17.with the European Union for the next 40, or 50 years. OK. Vp
:08:18. > :08:20.Before we go any further, let's just Vp remind
:08:21. > :08:24.There are still many questions about the mechanism
:08:25. > :08:26.and the many complexities ahead, but some of the process
:08:27. > :08:33.Well, there's plenty of jostling for position as everyone waits
:08:34. > :08:42.She says she will trigger Article 50 of the Lisbon Treaty before
:08:43. > :08:47.Now this is what Article 50 says and it's never been used before.
:08:48. > :08:49.But it's the official route for any member state to withdraw
:08:50. > :08:52.from the union in accordance with its own constitutional
:08:53. > :08:55.The other 27 countries shall then negotiate and conclude an agreement
:08:56. > :08:59.Article 50 gives them two years to do it.
:09:00. > :09:01.That deadline could be extended if everyone agrees but
:09:02. > :09:06.Could the UK change its mind before two years are up?
:09:07. > :09:09.Some argue that that's legally possible.
:09:10. > :09:14.So two years for the most complex divorce imaginable with plenty
:09:15. > :09:20.The negotiations themselves will be difficult, partly because they'll
:09:21. > :09:27.The EU and the UK will have to split up joint assets
:09:28. > :09:33.Budget commitments already made mean Britain will be faced with a bill
:09:34. > :09:39.Then there are things like pensions for British EU staff and possibly
:09:40. > :09:42.money for new ways of co-operating in the future.
:09:43. > :09:45.Also up for discussion what happens to three million EU citizens
:09:46. > :09:48.here in the UK and well over a million Brits in the EU?
:09:49. > :09:54.And don't forget this is not just about what the UK wants,
:09:55. > :09:58.the changing demands of the other countries, all 27 of them,
:09:59. > :10:03.Both France and Germany hold elections next year,
:10:04. > :10:06.serious political discussions can only happen once these results
:10:07. > :10:10.are in and new leaders have new ideas.
:10:11. > :10:13.But almost every country has specific issues to address.
:10:14. > :10:16.Spain wants to bring the status of Gibraltar into the mix.
:10:17. > :10:19.Ireland has huge concerns about its border with Northern Ireland.
:10:20. > :10:23.And countries in Eastern Europe will want to make sure they don't
:10:24. > :10:29.The European Commission will take the lead on many of the technical
:10:30. > :10:33.details but national EU leaders will be closely involved.
:10:34. > :10:36.Whatever divorce deal they end up offering the UK it also
:10:37. > :10:39.has to gain the consent of the European Parliament
:10:40. > :10:41.so who knows what that deal will look like here
:10:42. > :10:46.Except it's not really the finishing line at all.
:10:47. > :10:49.The race goes on and on because don't forget, the Article 50
:10:50. > :11:00.negotiations are only about the terms of the divorce,
:11:01. > :11:08.they're not about the UK's future relationship with the EU.
:11:09. > :11:10.It could take a decade, even more to get
:11:11. > :11:14.So attention is already focussed on what kind of transitional
:11:15. > :11:17.arrangements could come into force on the day the UK leaves.
:11:18. > :11:18.What will the trading relationship be?
:11:19. > :11:21.What access will the UK have to the single market?
:11:22. > :11:23.Economically a smooth transition obviously makes sense for everyone.
:11:24. > :11:25.But politics and emotions will also come into play.
:11:26. > :11:27.All sides are now talking about a hard Brexit.
:11:28. > :11:30.This really is unchartered territory.
:11:31. > :11:33.So it would be wise to be sceptical of anyone who says they know
:11:34. > :11:43.Roger, you are shaking your head because it's extraordinarily complex
:11:44. > :11:47.and complicated that, does it need to be so complex? Well, it is a
:11:48. > :11:51.complicated subject. I have to say, though, there is a way of cutting
:11:52. > :11:54.through these complications and I think it's possible we might
:11:55. > :12:00.actually get to that, that's to say if we think there is not much chance
:12:01. > :12:05.of progress, the option is to say actually, we're out and
:12:06. > :12:11.unilaterially we are going to declare free trade. Actually, what
:12:12. > :12:15.you have in the EU is a mindset completely dominated by the producer
:12:16. > :12:18.interest. These people don't understand the economic gain isn't
:12:19. > :12:21.about piling up more production, it's about living standards. I think
:12:22. > :12:24.that's a serious possibility, if we reach the point we think we can in
:12:25. > :12:31.the make progress, that's what I think we should do. Why don't we do
:12:32. > :12:35.that now, why go through this protracted first part of the
:12:36. > :12:40.negotiation with all the... ? Two reasons. First of all, there are a
:12:41. > :12:44.series of questions which aren't about tariffs or trade access
:12:45. > :12:49.particularly, questions about pensions and rights of residence, we
:12:50. > :12:53.have to have those talks, it is just like a divorce. Over and above that,
:12:54. > :12:59.with regard to the trade question, I want to try, at least, to get a
:13:00. > :13:03.better deal, to try to get a deal under which we got something like
:13:04. > :13:07.free trade between us and the EU. Haven't got fantastic hopes we are
:13:08. > :13:10.going to secure it by the way, but it's worth trying. If we reach the
:13:11. > :13:15.conclusion they're not going to give it to us that's when we should say
:13:16. > :13:20.the game is not worth a gamble. Alice is that more difficult with
:13:21. > :13:24.your game theory hat on, does it become more difficult because their
:13:25. > :13:29.focus is on keeping the European project going? I think that is
:13:30. > :13:36.absolutely the dominant problem right now in the EU, is to figure
:13:37. > :13:39.out how to accommodate the obvious shared interest in the economic
:13:40. > :13:47.integration we have achieved to date, whether it's in goods or
:13:48. > :13:51.services. And to reconcile somehow keeping that integration there,
:13:52. > :13:56.while at the same time solving the existent problem this has created
:13:57. > :14:00.because if one EU member state has Brexited, in theory, there could be
:14:01. > :14:04.another one and I think that question really goes to the heart of
:14:05. > :14:09.the problem for the European Union and I don't think just like here we
:14:10. > :14:13.are keeping all our options on the table, or secret or whatever, that
:14:14. > :14:18.that issue of the options is also a very major preoccupation and it's
:14:19. > :14:21.going to take time and it's going to, I think, require us to first
:14:22. > :14:26.declare what exactly we have in mind and we will find out in due course.
:14:27. > :14:29.You wanted to come back on something that John was saying earlier about
:14:30. > :14:34.the relationship that Britain wants with Europe. What is it you
:14:35. > :14:37.particularly have concern about? Well, the natural relationship for
:14:38. > :14:41.Britain, building on what's been achieved ever since 1972, and I
:14:42. > :14:46.speak as somebody who voted and spoke in parliament in favour of our
:14:47. > :14:52.joining, the natural relationship is one of free trade. That has been
:14:53. > :14:55.immensely beneficial to both sides. Trade is not warfare, it's for
:14:56. > :14:59.mutual advantage. Listening to the Europeans sometimes I think they
:15:00. > :15:06.think it's a form of warfare. It is not. It's a form of co-operation.
:15:07. > :15:09.It's the most sublime form of co-operation. Really the natural
:15:10. > :15:16.instinct to both sides in both their interests ought to be for this to
:15:17. > :15:20.continue. Instead of which, llogically they say you must pay a
:15:21. > :15:24.price for breaking what has been the past relationship. But the past
:15:25. > :15:30.relationship is beneficial and that will be what the British Government
:15:31. > :15:33.is looking for. Alice's point about they're afraid that it will lead to
:15:34. > :15:38.other countries leaving the European Union, is that an argument in favour
:15:39. > :15:42.of the European Union? Is that a good advertisement for the European
:15:43. > :15:46.Union that they have to put a ball and chain around people so they are
:15:47. > :15:55.not tempted to leave it? This is a pathetic argument.
:15:56. > :16:02.There is a point that European seems to be scuttling a democratic vote.
:16:03. > :16:06.That is the point? The attitude of the rest of the European Union has
:16:07. > :16:13.been very united in the face of the British decision. If anything, this
:16:14. > :16:19.decision has made the 27 more united than they were previously. As to
:16:20. > :16:23.trade, yes, all trade can continue, but particularly when it comes to
:16:24. > :16:27.services it has to take place in accordance with a common set of
:16:28. > :16:32.rules. These rules have to be agreed in common and there has to be some
:16:33. > :16:38.system of adjudicating disputes when disputes arise about the rules. If
:16:39. > :16:42.Britain leaves the European Union, and leaves the jurisdiction of the
:16:43. > :16:45.European Court of Justice, there were have to be some alternative
:16:46. > :16:51.method for adjudicating disputes in trade. In any of the association
:16:52. > :16:57.agreements we have, the European Court of Justice is involved in that
:16:58. > :17:00.adjudication mechanism. Even if Britain has an association agreement
:17:01. > :17:04.with the European Union, like the one Ukraine has, the European Court
:17:05. > :17:11.of Justice will be involved in the dispute settlement mechanism. People
:17:12. > :17:16.in Britain don't understand that trade requires common rules and the
:17:17. > :17:36.EU is a rule maker which helps trade. And they have adjudicated. In
:17:37. > :17:43.goods, but not in services. In with. , Britain's system of regulation for
:17:44. > :17:50.financial services is identical to that of the EU, but we ought to move
:17:51. > :17:55.to one of being recognised as equivalent, equally effective, but
:17:56. > :18:05.over time it may change. There needs to be a system of changes at me and
:18:06. > :18:17.you. Both sides have to agree to that thoroughly youth. Common sense
:18:18. > :18:21.indicates iniquity. We to agree, but we do not have to. The problem you
:18:22. > :18:32.are ignoring is when are in the European Union... Is the point here
:18:33. > :18:36.that it is about tariffs and more about regulation is going to be the
:18:37. > :18:43.first in dealing with the European Union stop the issue of dispute
:18:44. > :18:47.settlement is incredibly important. The rule of law in international
:18:48. > :18:52.trade relations is extremely important. Obviously the EU trade
:18:53. > :19:01.with China and the US and Japan on the basis of the WTO. The WTO has a
:19:02. > :19:06.dispute settlement system. That has proven to be relatively ineffective,
:19:07. > :19:10.but it is very different from the jurisdiction of the European Court
:19:11. > :19:14.of Justice and to my understanding there are trade agreements that the
:19:15. > :19:19.EU has concluded that do not have the European Court of Justice in the
:19:20. > :19:22.middle of it. I can think of a free-trade areas and goods
:19:23. > :19:27.agreements involving developing countries and so on. Obviously if
:19:28. > :19:33.you are asking for something like the EU- Ukraine agreement, which has
:19:34. > :19:37.investment provisions and all of this, all of which does not exist in
:19:38. > :19:42.the EU today among its own members, then of course the European Court of
:19:43. > :19:48.Justice might be a necessary ingredient. Investment protection is
:19:49. > :19:52.not needed within the European Union because countries can appeal if they
:19:53. > :19:56.do not like a court decision in another country, they can appeal to
:19:57. > :19:59.the European Court of Justice, but that does not happen in the case of
:20:00. > :20:04.a country that has left the European Union. When Britain leaves, we will
:20:05. > :20:10.need to ensure that investments by Irish and other European countries
:20:11. > :20:14.into Britain are protected by a strong disputes settlement
:20:15. > :20:17.mechanism. We will also need to have anti-dumping arrangements to ensure
:20:18. > :20:25.there is no dumping from Britain into the European market. Let me
:20:26. > :20:29.bring Roger in on that. These are important issues, but compared to
:20:30. > :20:33.the big issue, they are pretty minor. The big issue is you do not
:20:34. > :20:38.need to be a member of the single market in order to sell into the
:20:39. > :20:43.single market. All around the world countries do it, America and China
:20:44. > :20:48.and so on. If they can do it, why cannot we do it? I would hope we
:20:49. > :20:53.could get something a bit better than that, but the full-back
:20:54. > :20:56.position of being like China, America and Korea, all selling into
:20:57. > :21:03.the single market, what is so terrible about that? I want to get
:21:04. > :21:07.As in any European negotiation the German voice speaks
:21:08. > :21:10.The Chancellor Angela Merkel is known to be pragmatic
:21:11. > :21:12.but in recent weeks has warned German bosses they must weigh
:21:13. > :21:15.the short-term hit of a 'hard' Brexit against the long-term risk
:21:16. > :21:17.of allowing the EU project to unravel.
:21:18. > :21:19.A senior figure in her CDU party and the current chair
:21:20. > :21:22.of the foreign affairs committee in the European Parliament is Elmar
:21:23. > :21:25.Last month, he sat with the foreign secretary
:21:26. > :21:29.And I asked him what he'd made of that first conversation.
:21:30. > :21:31.I've met Boris Johnson for a few hours meeting.
:21:32. > :21:34.Privately we know each other since more than 25 years.
:21:35. > :21:40.This interesting debate is surprising sometimes.
:21:41. > :21:47.and what they know about the European Union
:21:48. > :21:51.and which conditions they have to fulfil to come to a deal.
:21:52. > :21:56.I have sometimes the feeling that after all this happiness
:21:57. > :22:00.after Brexit the reality has not arrived in this city
:22:01. > :22:03.what are the real conditions for coming to a deal
:22:04. > :22:16.But do you have a clearer idea of their plan?
:22:17. > :22:18.I have no idea of their plan because they have no
:22:19. > :22:24.You don't think they have an idea of what they want to do?
:22:25. > :22:27.I have not got the impression they know where they want to go
:22:28. > :22:30.and I have also the feeling that they do not know certain
:22:31. > :22:33.conditions which you have to know in order to make a realistic plan.
:22:34. > :22:35.How do you mean they don't know the conditions?
:22:36. > :22:38.If they believe for example they can get into part of the internal market
:22:39. > :22:41.without financing structural funds, that is the minimum of conditions
:22:42. > :22:44.So they thought they could have access without spending the money?
:22:45. > :22:52.They said no to two things, structural funds and free
:22:53. > :22:59.That is not a German position alone, it is the position of most
:23:00. > :23:04.You said before that the negotiation must be done by 2019,
:23:05. > :23:07.or at least by the European Parliamentary elections.
:23:08. > :23:12.Surely you must anticipate that is not achievable in two years?
:23:13. > :23:16.First of all, it will be a nasty divorce agreement
:23:17. > :23:20.because of all the bad things you have in a divorce agreement.
:23:21. > :23:24.It means for example how long Britain has to finance the pensions
:23:25. > :23:28.of all the European civil servants who have worked in the last few
:23:29. > :23:37.In the future there is another treaty and this treaty must be
:23:38. > :23:40.negotiated by Britain as a third-party not as a member
:23:41. > :23:43.You are talking about two negotiations?
:23:44. > :23:47.A divorce proceeding and then a separate negotiation
:23:48. > :23:54.Yes, this is indeed two agreements, two agreements which could be
:23:55. > :24:04.parallel, but the divorce agreement is much earlier because such
:24:05. > :24:07.a complicated trade agreement cannot be done in two years and therefore
:24:08. > :24:10.we have to look for a transitional period to avoid the hard results
:24:11. > :24:14.of a heartbreak split in order to come to the time for a trade
:24:15. > :24:18.agreement to be ready in four or five years' time.
:24:19. > :24:20.But surely they would have to run parallel
:24:21. > :24:24.because the British Government is not going to leave the EU
:24:25. > :24:28.and the benefits of trade that it has at the moment without some
:24:29. > :24:30.guarantee of what it is going to get.
:24:31. > :24:33.That is the British choice, Britain has decided Brexit,
:24:34. > :24:40.You are not going to very well leave the European Union without some
:24:41. > :24:43.reassurance of what you are likely to get in that future deal.
:24:44. > :24:48.I said we can have the framework about it, but not the details
:24:49. > :24:53.I do not think that such a trade agreement about the WTO can be
:24:54. > :24:55.done in two years' time and for the divorce agreement
:24:56. > :24:58.it is clearly written in the treaty two years' time limit.
:24:59. > :25:01.In which case the transitional arrangements, the period
:25:02. > :25:04.after the two-year deadline, have paramount importance
:25:05. > :25:07.to exporters here in the UK and also to exporters in Germany.
:25:08. > :25:14.It would mean that until we find a final agreement, Britain should be
:25:15. > :25:16.advised to stick to the present European rules so that they continue
:25:17. > :25:19.in a way as if Britain were members of the European Union,
:25:20. > :25:23.not to abolish all these rules and trade mechanism and so on.
:25:24. > :25:28.So it would mean that Westminster for the moment we are relatively
:25:29. > :25:35.quiet in order to not have a major break in our economies
:25:36. > :25:49.because of the break of the transition period.
:25:50. > :25:51.Do you go into this negotiation aiming to find a deal
:25:52. > :25:54.that is of mutual benefit to Germany and Britain, or do EU countries go
:25:55. > :25:57.into it intent on proving to everyone that Brexit
:25:58. > :26:02.Emotions can lead us into such a situation.
:26:03. > :26:10.It should be constructive, but from both sides.
:26:11. > :26:12.I think Brexit is punishment enough for Britain.
:26:13. > :26:14.We should not increase the punishment and therefore
:26:15. > :26:16.we should look for a good partnership in the future
:26:17. > :26:21.because of economic and political reasons.
:26:22. > :26:30.But he called him a clueless blow with the kind of federalist that
:26:31. > :26:35.Eurosceptics do not like. But he raises important issues. There are
:26:36. > :26:39.going to be two negotiations and there will be the divorce procedure
:26:40. > :26:43.which will take two years and then the future negotiation which may not
:26:44. > :26:54.run parallel which could take anything up to five or six years.
:26:55. > :26:58.Europe, which is necessarily use the army is definitely a European
:26:59. > :27:04.federalist. He is more extreme than a lot of German mainstream opinion,
:27:05. > :27:15.though I am not certain of that. And that he is a European federalist.
:27:16. > :27:21.Threatens to that. I can understand that. But what he is ignoring is
:27:22. > :27:25.that the maximum free trade between the UK and Europe is in the
:27:26. > :27:34.interest, not just of the UK, but of Europe as well. Very much in the
:27:35. > :27:38.interest of Europe. Has to serve the interests of the economy and the
:27:39. > :27:46.citizens of Europe and that seems to me to the absolute in the way he is
:27:47. > :27:51.presenting his case. As of the report of the European Court of
:27:52. > :27:58.auditors, published last week, which shows that the debts have jumped 10%
:27:59. > :28:03.to 340 billion, debt is not covered by the EU budget. If you take
:28:04. > :28:06.Britain out of the pot, who contribute a considerable amount of
:28:07. > :28:11.money, you can see why they are quite intent on the contributions. I
:28:12. > :28:17.can see why they want Britain to cough up for the next eight years.
:28:18. > :28:25.But trade is much more important than this and Norman is absolutely
:28:26. > :28:32.right, trade is the really big thing. These budget numbers are more
:28:33. > :28:37.tangible. If we saw a collapse of trade between Britain and the EU, it
:28:38. > :28:44.would not only harm us, but it would also harm the rest of the EU. I did
:28:45. > :28:48.talk about German cars, they sold ?32 billion worth of German cars
:28:49. > :28:52.into the UK last year. If the worst-case scenario was to happen,
:28:53. > :28:58.would they be able to control what German companies do? I think the
:28:59. > :29:04.real issue here is that our exports into the EU would face a tariff
:29:05. > :29:09.unless we had a conditional agreement as was suggested. A
:29:10. > :29:13.transitional agreement would be incredibly desirable, as Norman
:29:14. > :29:20.suggested, to retain the economic benefits. But if it is absent, it
:29:21. > :29:23.will be problematic. As Roger says, we can maintain free trade, and I
:29:24. > :29:29.agree with him that the consumer would maximise their benefit around
:29:30. > :29:34.that, but on the other hand it is a bit much to ask the EU to not apply
:29:35. > :29:42.its customers regulation to third countries like the UK. If we become
:29:43. > :29:48.a third country to the EU, we must expect to perhaps trade on WTO
:29:49. > :29:54.terms, provided we can assume our WTO membership in due course. But
:29:55. > :30:00.that would still leave a problem because as you know the EU has a
:30:01. > :30:03.relatively low tariff policy on manufactured products, but when you
:30:04. > :30:09.get into agriculture and agricultural products, you see an
:30:10. > :30:13.awful lot more restriction and in fact the Commonwealth countries have
:30:14. > :30:18.always complained about the lack of access. I would be very concerned
:30:19. > :30:23.not about the situation of farmers, I would also be concerned about the
:30:24. > :30:29.service sector, bearing in mind that, as Roger mentioned, I estimate
:30:30. > :30:31.no more than 43% of our exports of services to the EU are regulated as
:30:32. > :30:40.such. Can I comment. Alice says it is
:30:41. > :30:44.natural they should want to impose the tariff on us, I don't think it's
:30:45. > :30:47.natural at all. We have been in a trade relationship since 1972, we
:30:48. > :30:51.have developed this integrated economy, we have free trade between
:30:52. > :30:56.the countries. It is in both our interests. Is this project so
:30:57. > :30:59.imbedded in people's minds they're determined to lower the standard of
:31:00. > :31:05.living of people in Europe in order to further the project? It does not
:31:06. > :31:10.make sense. The WTO is a fallback option. The thing that would be most
:31:11. > :31:13.in interests of Germany and the citizens of Europe would be to
:31:14. > :31:19.maintain the existing relationship as much as possible.
:31:20. > :31:24.Sorry, Norman... Could I come in to say that I believe that if Britain
:31:25. > :31:30.is to have a trade agreement with the European Union, whether it be
:31:31. > :31:34.for goods alone or for services, and is not to pay tariffs as a result,
:31:35. > :31:38.that trade agreement will have to be agreed by everyone of the 27
:31:39. > :31:42.countries. Now there are a number of countries in central and European
:31:43. > :31:47.Europe like Poland and Lithuania, who take it badly that Britain wants
:31:48. > :31:52.to exclude their nationals from the British labour market. So, they will
:31:53. > :31:56.need to be persuaded to accept any trade agreement, it may make a lot
:31:57. > :32:04.of sense to Norman that there should be free trade between Britain and
:32:05. > :32:08.France, but that doesn't necessarily cut any ice when others will have to
:32:09. > :32:13.vote on any agreement that is made. I think it's important to understand
:32:14. > :32:15.that there is politics in Europe too and there are political
:32:16. > :32:18.constituencies in Europe as well that need to be satisfied. This is
:32:19. > :32:23.not just a British drama. OK. I want to talk more about trade.
:32:24. > :32:26.You are watching the Brexit Effect, our special programme on how
:32:27. > :32:28.the referendum vote will change life in Britain.
:32:29. > :32:30.So much of the future debate will come down
:32:31. > :32:32.to what we want our future trading relationship to be.
:32:33. > :32:35.What factors will govern - or limit - the UK's choices?
:32:36. > :32:39.Rachel Horne has been taking a look at where we stand now,
:32:40. > :32:41.and what models might be up for discussion.
:32:42. > :32:46.Well, the UK is the fifth largest economy in the world and the second
:32:47. > :32:54.Trade is vital to the UK economy and we import more than we export,
:32:55. > :32:56.both with the EU and the rest of the world.
:32:57. > :33:00.Now at the moment we're part of the EU single market.
:33:01. > :33:08.That means we can trade freely with other members without tariffs,
:33:09. > :33:17.Currently, countries inside the EU allow the free movement of goods,
:33:18. > :33:22.services, capital and people between one another.
:33:23. > :33:24.There's also a framework of common standards that all businesses
:33:25. > :33:30.Now when it comes to the single market the definition of access has
:33:31. > :33:34.Everyone else has access to the single market,
:33:35. > :33:36.the question is how free and unrestricted is it?
:33:37. > :33:39.If we give up our membership and want control of our borders,
:33:40. > :33:48.we will probably face some new restrictions.
:33:49. > :33:51.Theresa May says keeping them to a minimum is a high priority.
:33:52. > :33:54.What we are going to do is be ambitious in our negotiations,
:33:55. > :33:57.to negotiate the best deal for the British people and that
:33:58. > :33:59.will include the maximum possible access to the European market
:34:00. > :34:02.for firms to trade with and operate within the European market.
:34:03. > :34:05.But I am also clear that the vote of the British people said
:34:06. > :34:08.that we should control the movement of people from the EU into the UK.
:34:09. > :34:11.So when it comes to access, what choices have we got?
:34:12. > :34:13.Here's the BBC's business editor Simon Jack.
:34:14. > :34:20.It's a member of the single market but has some carve-outs
:34:21. > :34:24.for fisheries and agriculture, but they have to pay into the EU
:34:25. > :34:26.budget and accept the freedom of movement of people.
:34:27. > :34:32.That's not a member of the EU but has access to the single market
:34:33. > :34:35.through lots of tiny bilateral deals, but currently it has
:34:36. > :34:37.to accept the freedom of movement of people, although they're arguing
:34:38. > :34:43.It can't sell financial services into the rest of Europe -
:34:44. > :34:49.Clearly not a member of the EU, it has tariff-free access in goods
:34:50. > :34:52.but not in some services and some areas of agriculture.
:34:53. > :34:55.Plus, it took seven years to negotiate.
:34:56. > :34:58.Which leaves the World Trade Organisation, what we might fall
:34:59. > :35:05.Now that has no freedom of movement of people,
:35:06. > :35:09.10% on cars, up to 27% on meat.
:35:10. > :35:13.The truth is that none of these models will fit the UK specifically.
:35:14. > :35:17.We are going to have a bespoke version of our own.
:35:18. > :35:19.The problem is that takes time to negotiate.
:35:20. > :35:23.The clock will be ticking when we trigger the process
:35:24. > :35:26.of leaving at the end of March next year.
:35:27. > :35:30.And while we wait, businesses fret and don't invest.
:35:31. > :35:34.So any post-Brexit trade deal will be one of the more complex
:35:35. > :35:36.parts of the negotiations but for businesses to remain
:35:37. > :35:39.confident and invested in the UK, it's something
:35:40. > :35:55.Part of the problem has been this access to the single market has been
:35:56. > :36:01.confeuds in the mandz -- in the minds of many people. In the case of
:36:02. > :36:06.services, you have to recognise that if you look at the WTO, obviously
:36:07. > :36:10.it's an awful lot less access than what we have today. For example,
:36:11. > :36:14.there aren't passporting rights for financial services, and we also know
:36:15. > :36:20.that, for example n the case of the EU that it excludes audio visual.
:36:21. > :36:23.Today our exports to the EU of cultural products are very
:36:24. > :36:30.important. So, of course we have concerns around that. I think we
:36:31. > :36:33.have to agree that the WTO for services is far from what we have
:36:34. > :36:41.today. At the same time, if we are a member of the WTO, we may be able to
:36:42. > :36:45.energise the WTO to do better. You advocated the Canadian model before
:36:46. > :36:49.the Brexit vote, it might not be approved by the European Union, but
:36:50. > :36:54.the big drawback with it doesn't have provision for services.
:36:55. > :37:00.Absolutely. I said it had to cover financial services as well. I would
:37:01. > :37:06.hope that could be done on the basis of equiff Lance. John has tried to
:37:07. > :37:12.throw a cold towel over all of that, thinks it's not necessarily going to
:37:13. > :37:16.be agreed. But the point I would make about financial services There
:37:17. > :37:20.is a mutual interdependence. It's true that we have a surplus in
:37:21. > :37:24.financial services with the EU. But the City of London is extremely
:37:25. > :37:29.important to the EU. A lot of Sovereign debt is raised in London.
:37:30. > :37:35.A lot of wholesale finance is raised in London. I am not saying that we
:37:36. > :37:41.won't lose some people perhaps to Paris or Frankfurt but actually I
:37:42. > :37:44.think the advantage to the EU is huge of having the financial
:37:45. > :37:48.expertise in the City of London and I think in common sense they want to
:37:49. > :37:58.retain access to that, as well. John, you don't appreciate the value
:37:59. > :38:02.of London? No, I do, of course. But equivlance isn't the same as
:38:03. > :38:05.passporting rights, that's a guaranteed access to sell your
:38:06. > :38:08.services. Equivlance can be granted or taken away. It is important to
:38:09. > :38:12.recognise that there are people in the rest of the European Union as it
:38:13. > :38:18.now is, including in Ireland, who want some of the business that's
:38:19. > :38:23.currently in London. And who would like, by virtue of the fact Britain
:38:24. > :38:28.has decided to walk away from the EU to persuade some to move to Dublin
:38:29. > :38:32.or to Paris or to move to Frankfurt. So, you can't expect that this will
:38:33. > :38:35.be sort of the equiff Lance will be granted to you as a free gift.
:38:36. > :38:40.Everything that you get, once you have left, and you are applying as
:38:41. > :38:44.inexternal party to get an agreement, everything you get you
:38:45. > :38:48.will have to pay for, unfortunately that's the way trade negotiations
:38:49. > :38:53.work. They're not a charitable exercise. This is the most
:38:54. > :38:56.extraordinary description of trade. Trade is about co-operation. It's
:38:57. > :39:00.about... I am talking about trade negotiations. Everyone of John's
:39:01. > :39:04.arguments is there is a political interest here and there. They may
:39:05. > :39:09.want to do this. You know, actually we ought to think what is to the Ben
:39:10. > :39:14.fit of our citizens? The advantages of the City of London to Europe is
:39:15. > :39:17.that it lower he is the cost of capital, it helps the governments of
:39:18. > :39:20.Europe. It is political, because there is a lot of capital in London
:39:21. > :39:24.that Frankfurt and Paris would like their hands on. Yes, I don't think
:39:25. > :39:29.they're going to succeed come what may. It's right for our Government
:39:30. > :39:33.to try to get full access, open access, whatever the words are, to
:39:34. > :39:38.selling our financial services in the EU, maybe we can get some sort
:39:39. > :39:42.of deal which is the equivalent of passporting, after all, Norway has
:39:43. > :39:45.its carve-out as you described it for fish. We could try to get a
:39:46. > :39:50.carve-out for financial services. Will we succeed? I don't know, I
:39:51. > :39:54.agree with it's in the EU's interests to do a deal on all of
:39:55. > :39:59.this. Will it? It's possible it will play hard ball for the reasons John
:40:00. > :40:03.has said. Now, how serious would that be? We don't know but I suspect
:40:04. > :40:10.it would not be that serious actually. The advantages of London
:40:11. > :40:15.are so enormous, forget Paris and Frankfurt and apologies to John,
:40:16. > :40:18.forget Dublin, it's been interesting recent days to hear American bankers
:40:19. > :40:24.say if London loses passporting rights they're going to transfer
:40:25. > :40:29.business, not to Frankfurt or Paris, but to New York! What does that tell
:40:30. > :40:33.you about this argument? It would be extraordinary that your own trading
:40:34. > :40:40.would be based in a country outside the European Union, why would that
:40:41. > :40:46.continue? Look, London became the centre of the euro dollar before the
:40:47. > :40:50.euro exist there was something called the external dollar market.
:40:51. > :40:53.London became the centre of that despite attempts by Americas to
:40:54. > :41:02.retain trading in dollars within the United States. It would not be
:41:03. > :41:05.possible for the EU to determine that all euro trading took place
:41:06. > :41:09.within the eurozone. That wouldn't be possible. I mean, you know, all
:41:10. > :41:14.this talk about financial services, we do live in a digital age. It is
:41:15. > :41:18.not possible actually to put all these barriers up in the way that's
:41:19. > :41:22.being suggested for financial services and particularly when it
:41:23. > :41:25.comes to wholesale financial services. You have got to recognise
:41:26. > :41:31.the fact we do live in a digital age. Talking about digital age...
:41:32. > :41:36.Can I just say to Norman... You wanted to comment. We should mention
:41:37. > :41:39.the digital single market because the UK Government has been very
:41:40. > :41:44.supportive of that project and I think there is an awful lot at stake
:41:45. > :41:50.for media and tech companies. A big part of the economy here. We are
:41:51. > :41:53.world-class in e-commerce and I am always concerned about a discussion
:41:54. > :41:57.that becomes all about the passporting rights of the financial
:41:58. > :42:01.services sector when the digital single market and media and Telecoms
:42:02. > :42:08.are an important part of the EU today. And very important part of
:42:09. > :42:12.its future growth story. Do you spy opportunity, John? I was surprised
:42:13. > :42:18.at David Cameron when he was seeking to reform the European Union didn't
:42:19. > :42:22.insist on the completion of the digital single market as a
:42:23. > :42:26.pre-requisite for negotiations. Instead he focussed on introducing
:42:27. > :42:31.red regards -- red cards and things like that which would slow down the
:42:32. > :42:36.creation of a sing market. I would say this to Norman, can you imagine,
:42:37. > :42:40.given that the EU has to ultimately guarantee the banks in the eurozone,
:42:41. > :42:45.and is setting up institutions to enable it to do that, that it would
:42:46. > :42:50.allow financial services, that it is regulating and may have to be paid
:42:51. > :42:54.for, to be conducted outside the European Union? In London, where the
:42:55. > :42:57.European Union would have no jurisdiction over what was happening
:42:58. > :43:06.in circumstances that could create a systemic risk to banks in the
:43:07. > :43:09.eurozone? I don't - these issues are very, very serious for Europe and I
:43:10. > :43:13.don't think London will be indulged in that. That's the most
:43:14. > :43:18.extraordinary thing to say f I may say so with great respect to John.
:43:19. > :43:22.The regulatory authorities in London, the Bank of England, the
:43:23. > :43:26.banking supervision system we have in this country, I think are well
:43:27. > :43:33.regarded and actually when it came to the point of a decision on these
:43:34. > :43:38.matters, if some US banks in Europe had to decide where they wanted to
:43:39. > :43:43.be regulated in Europe or in London, actually I think many of them might
:43:44. > :43:48.want to decide they wanted to be regulated in London. I don't think
:43:49. > :43:52.that the Fed would automatically take it as easy that people should
:43:53. > :43:57.move headquarters to Europe, rather than be in London. OK. We are get
:43:58. > :43:59.ago feel that everyone of the 27 EU states will look to put its own
:44:00. > :44:01.interests first in these talks. But some will be
:44:02. > :44:03.particularly engaged. Among them Poland, keen
:44:04. > :44:05.to look after the interests of thousands of their citizens now
:44:06. > :44:08.living and working in the UK. Winter is on the edge
:44:09. > :44:16.of the wind in Warsaw. But the thoughts of many Polish
:44:17. > :44:19.families are turning to the chilly political atmosphere they detect
:44:20. > :44:22.towards them in Britain in the wake Julia and her husband
:44:23. > :44:31.came home to Warsaw Shocked to discover that Brexit
:44:32. > :44:39.voting friends and colleagues saw the size of the Polish community
:44:40. > :44:44.as a problem. Every single one told me
:44:45. > :44:46.you're not the problem, Now, she can't be sure the deal
:44:47. > :44:58.Britain will eventually negotiate with the rest of the EU
:44:59. > :45:02.will give her the right to go back We still don't know what will happen
:45:03. > :45:12.after Brexit, if we will be allowed If you're young, you want to settle
:45:13. > :45:22.and have a family, you have this feeling of stability but not
:45:23. > :45:29.in the UK. In this atmosphere, Poland's liberal
:45:30. > :45:31.opposition politicians broadly agree with its Conservative government,
:45:32. > :45:36.that Poland should add its voice to the favourite refrain of the EU
:45:37. > :45:42.chorus at the moment - no free acess to the single market
:45:43. > :45:45.for Britain unless it allows the free movement
:45:46. > :45:52.of European workers. If you are gonna restrict
:45:53. > :45:54.the freedom of movement, Limit the freedom of movement,
:45:55. > :46:02.you should expect... I am sure UK negotiators are aware
:46:03. > :46:10.of it and probably those voting Leave in the referendum
:46:11. > :46:21.were not fully aware. It remains profoundly
:46:22. > :46:33.Catholic, for example. But ordinary Poles have seen their
:46:34. > :46:38.lives transformed by EU membership. It's meant not just better lives
:46:39. > :46:42.and better roads but the guarantee of a democractic future in a country
:46:43. > :46:46.that was a Communist police state For that reason, Britain's
:46:47. > :46:54.negotiators may find the issue of freedom of movement into the UK
:46:55. > :47:00.is more important and more emotional to many Europeans
:47:01. > :47:06.than they might have imagined. I remember after we joined,
:47:07. > :47:09.for the first time at an airport I could join the EU Citizens aisle,
:47:10. > :47:16.go without much control, To be deprived of that
:47:17. > :47:28.will be hurtful. As in all the former
:47:29. > :47:31.Communist states that came late to EU membership,
:47:32. > :47:37.a sense that Brexit is a big moment So the chill of autumn is descending
:47:38. > :47:47.on Warsaw like the chill of Brexit is descending on the EU,
:47:48. > :47:49.and Poland's leaders are preparing to fight on the issues
:47:50. > :47:52.that matter to them, And just like all of the other
:47:53. > :48:04.countries remaining in the EU, Poland can veto any deal that
:48:05. > :48:07.doesn't suit it. But, of course, Brexit has
:48:08. > :48:16.dramatic implications for other countries too,
:48:17. > :48:19.not least the Irish Republic. The UK shares its only land border,
:48:20. > :48:22.a common economic area and of course The Dublin government has convened
:48:23. > :48:29.a cross-border summit next First and foremost, there is deep
:48:30. > :48:37.uncertainty over what will happen to the border between Ireland
:48:38. > :48:40.and Northern Ireland after Brexit. Few want a return to checkpoints,
:48:41. > :48:43.yet maintaining a fully open border will
:48:44. > :48:45.present a challenge. Britain is Ireland's
:48:46. > :48:50.largest export partner, Ireland is Britain's fifth biggest
:48:51. > :48:54.trading partner, with ?1.35 billion Exporters are already being hit
:48:55. > :49:01.by the weakness of sterling. There are some opportunities,
:49:02. > :49:05.not least in financial services. Dublin could start attracting banks,
:49:06. > :49:09.hedge funds, other businesses who want access to Europe
:49:10. > :49:28.and are wary of investing Some of the emotional things we are
:49:29. > :49:32.hearing in Poland apply also to the Republic of Ireland. Yes, the fact
:49:33. > :49:37.that Britain and Ireland together joined the European Union in 1973
:49:38. > :49:41.completely changed the psychological atmosphere between Britain and
:49:42. > :49:47.Ireland. No longer was it the case of Big Brother and small brother.
:49:48. > :49:51.With all the psychological difficulties you have in that. No
:49:52. > :49:56.British Prime Minister in office ever came to visit Ireland to meet
:49:57. > :50:01.their Irish counterpart between 1922 and 1974. The year after Britain
:50:02. > :50:07.joined the European Union Edward Heath came to Dublin. That
:50:08. > :50:12.symbolised in every way a complete change in the relationship between
:50:13. > :50:16.the two countries, which created the conditions in which the two
:50:17. > :50:20.countries could together negotiate the Anglo-Irish agreement and
:50:21. > :50:24.together negotiate the Belfast agreement and the Sunningdale
:50:25. > :50:29.agreement as well. They have created a structure of peace in Ireland. The
:50:30. > :50:34.border is there in certain sectors, but it is not there in terms of
:50:35. > :50:40.being a barrier for people, goods or services moving in either direction.
:50:41. > :50:45.Sorry to interrupt, but what with the implications be of checkpoints
:50:46. > :50:48.returning on the border? It would create an immense sense of isolation
:50:49. > :50:53.of the nationalist community in Northern Ireland. People in Britain
:50:54. > :50:59.should remember that unfortunately that brutal sense of isolation led
:51:00. > :51:03.to dreadful acts of terrorism being committed by so-called Republicans
:51:04. > :51:10.in the mainland Britain, including an attempt to assassinate one of
:51:11. > :51:14.your Prime ministers. A totally deplorable act. But that illustrated
:51:15. > :51:19.in a sense the sense of desperation that existed in a community that
:51:20. > :51:25.felt disregarded and isolated. If he were to have a border again, that
:51:26. > :51:30.sense of isolation could, I am not saying it would, but it could arise
:51:31. > :51:35.again, as well as the fact it would do tremendous damage to cross-border
:51:36. > :51:40.trade. In food products for example 30% of all the milk produced in
:51:41. > :51:45.Northern Ireland is passed to the south. You wanted to come back on
:51:46. > :51:49.that. You were heavily involved in the government in the 1990s when
:51:50. > :51:56.these things are being discussed. I understand part of what John says,
:51:57. > :52:00.but looking at this discussion more broadly by contrast the tone of all
:52:01. > :52:07.this stuff about we must have a price, we must punish Britain, there
:52:08. > :52:13.must be conditions, I contrast that with 1922 when the free State was
:52:14. > :52:21.established and Lloyd George took the view that there would be a
:52:22. > :52:27.common travel area between the Irish Republic and the UK. That was done,
:52:28. > :52:31.as he said at the time, on the basis of the everlasting friendship
:52:32. > :52:36.between the peoples of Ireland and the people of the UK. That ought to
:52:37. > :52:41.be the attitude to this whole discussion between Europe and the
:52:42. > :52:46.UK, instead of which it is all about costs, advantages and negotiation.
:52:47. > :52:52.Coming back to the issue of migration. Again I understand the
:52:53. > :53:00.concern of people in Poland, but the UK will have not have nil
:53:01. > :53:06.immigration, we need immigration, and skilled as well. But Britain has
:53:07. > :53:11.had very large immigration into the country and the population is
:53:12. > :53:16.growing at the fastest rate for 100 years and we want to have some
:53:17. > :53:18.control over that. That is not incompatible with having good
:53:19. > :53:23.commercial relationships and free trade as well. One issue is freedom
:53:24. > :53:27.of movement and the British Government does not want others to
:53:28. > :53:32.use the back door to come into the UK, and the other issue is the UK
:53:33. > :53:38.does not want exports flooding through Ireland into Europe. What
:53:39. > :53:42.can be done? This is the most difficult issue and I do not claim
:53:43. > :53:50.to have the answer. If we do not find some sort of way of making this
:53:51. > :53:55.viable for Ireland, the issue of Ireland leaving the EU will appear,
:53:56. > :53:59.particularly after the recent attempt of the EU, probably
:54:00. > :54:03.successful, to alter Ireland's tax regime with regard to major
:54:04. > :54:11.international companies. John may not want to acknowledge this, but it
:54:12. > :54:15.presently being outside the EU, I wonder how long it will be before
:54:16. > :54:20.people will want to leave the EU. Do you want to come back? There is no
:54:21. > :54:24.question of Ireland leaving the European Union and following Britain
:54:25. > :54:30.into what we fear may be an economic wilderness. Ireland is very proud as
:54:31. > :54:35.a country and as a people to be members of the European Union and to
:54:36. > :54:39.be an equal member of the European Union with lots of other countries
:54:40. > :54:44.and we will not be giving up that privilege. You say you have an
:54:45. > :54:51.answer for that. I picked the Norwegian, Swedish situation is one
:54:52. > :54:56.we ought to copy. Of the card reader is the other a very light border
:54:57. > :55:03.controls and very light touch customs controls. They have used
:55:04. > :55:07.modern technology and they managed to an arrangement that is impede the
:55:08. > :55:12.flow of people and traffic across the border. I think something like
:55:13. > :55:20.that should be applied in Northern Ireland. I agree, we should try to
:55:21. > :55:24.do that if we can. Ireland is trying to get its own negotiators onto the
:55:25. > :55:27.team in Brussels and they have a special interest in Britain
:55:28. > :55:32.resolving this issue as quickly as possible. Is that a card with the
:55:33. > :55:38.UK, that the Irish are on the inside? It is not just the Irish.
:55:39. > :55:43.Everybody wants to be on the inside because they have important linkages
:55:44. > :55:50.that they wish to make. It is up to us to define it. The Irish have a
:55:51. > :55:53.very special relationship. They do and they have very special economic
:55:54. > :55:58.stakes compared to other members, but the key issue is we need to
:55:59. > :56:01.define the scope of what we wish to achieve in a framework that is
:56:02. > :56:06.sufficiently narrow so as not to blow up the negotiation with many
:56:07. > :56:12.linkages that cannot be mutually satisfied. That is a real challenge
:56:13. > :56:16.on both sides. I remember being at an open Europe session with you
:56:17. > :56:20.before the vote and you were talking to Europeans then and they did not
:56:21. > :56:28.have a full appreciation of the relationship and the history behind
:56:29. > :56:31.it. Do they understand it better? I do not think British politicians
:56:32. > :56:35.during the recent referendum debate had a very good understanding of the
:56:36. > :56:42.implications of Brexit either. This initiative to have referendum is a
:56:43. > :56:50.British initiative that your country took. I think it is even more
:56:51. > :56:56.worrying that the effect on Ireland hardly weighed on the minds of most
:56:57. > :57:00.voters in the UK at all. But now we have to face this, these two islands
:57:01. > :57:07.are together. As the fall of sterling an effect? Yes, a number of
:57:08. > :57:12.countries have gone out of business and the purchasing power of the
:57:13. > :57:14.British economy is reduced which means the British market will be
:57:15. > :57:22.less attractive to our island in that respect. But the important
:57:23. > :57:30.thing to worry about here is if the option of the WTO is something that
:57:31. > :57:33.you might opt to during the negotiations if they were not going
:57:34. > :57:41.well, that would mean immediately having to put up customs posts to
:57:42. > :57:46.charge the common external tariff on any food or motor products that were
:57:47. > :57:49.coming into the Republic of Ireland from Northern Ireland. That is
:57:50. > :57:56.something we would be required to do overnight by virtue of our
:57:57. > :58:00.obligations as an EU member. You are nodding. This has not been
:58:01. > :58:07.considered seriously by those who are talking blithely about the WTO
:58:08. > :58:14.option. I think the WTO option is a fallback option for the UK. As Alice
:58:15. > :58:18.has said on previous occasions, it would be compatible with a
:58:19. > :58:26.transitional period of free trade between the EU and the UK. But the
:58:27. > :58:30.simple point I want to get across is a basic free trade arrangement is in
:58:31. > :58:36.the interest of the EU as much as the UK and it would be a tragedy if
:58:37. > :58:40.in their ideological dedication to a political project they put politics
:58:41. > :58:47.well before the welfare of their own citizens. It is an ideology that is
:58:48. > :58:53.working here. We have seen the Canadian agreement blocked. We are
:58:54. > :58:57.Well that's where we must leave it for now,
:58:58. > :59:00.but no doubt there's more detail and argument to come over
:59:01. > :59:05.Thanks to all my guests this evening - Lord Lamont, John Bruton,
:59:06. > :59:16.And thanks to you for watching The Brexit Effect.