The Brexit Effect

Welcome to the Brexit Effect with me Christian Fraser.

We have heard lots of big talk this week about Article 50

and Brexit but what does it really mean to our future,

the economy, the way we live our lives?

Tomorrow, Theresa May heads to Brussels, face-to-face

for the first time with 27 other leaders and the summit agenda

We'll take a closer look at how the negotiations might unfold

and we will hear the thoughts of a key figure in Germany,

I have also a feeling that they do not know certain conditions which

you have to know in order to make a realistic plan.

How will the way we trade with other nations change after Brexit?

We'll look at some of the options on the table.

We have an expert panel this evening to debate the big issues with us.

Lord Lamont is with us, the former Conservative Party Chancellor,

a prominent supporter of Brexit, who led Britain out of the ERM.

From Brussels, John Bruton, the former Irish Prime Minister

whose own country has a huge stake in the outcome.

Alice Enders, for 20 years a senior economist

at the World Trade Organisation, she is an expert on game theory.

And Roger Bootle, a leading member of Economists

And Roger Bootle, a leading member of Economists for Brexit.

And the view from other European countries, we have a special report

from Warsaw about what people in Poland want

It has been an extraordinary three months in which the Brexit vote has

already had an effect in so many ways, on our politics,

on the economy, and, of course, on our relations with Europe.

Tomorrow in Brussels, Theresa May will be joining the EU's

27 leaders for the first time since the vote, having already

served notice that she will trigger Article 50 by early next year.

She is hoping that will encourage a more open,

At the Conservative Party conference two weeks ago,

there was plenty of optimism about the choice Britain has made,

but in the days that have followed no end of heated debate over

A revolution, in which millions of our fellow citizens stood up and

said they were not prepared to be ignored any more.

APPLAUSE If Theresa May was a reticent

remayber there have been no half-measures since the vote. Brexit

means Brexit wax the message through the summer and in case you missed

the point here was a speech to underline it. Article 50 will be

triggered by the end of March, followed by her great repeal bill.

That means that the United Kingdom will be an independent Sovereign

nation, making its own laws. Still, we know very little of what kind of

Brexit we are going to get. Negotiation has been cast as a game

of poker. And in poker the winning player doesn't always hold the best

hand. The trouble is the longer the

Government hides the cards it will be playing, the more restless the

opposition becomes. Everybody, including people like myself, who

campaigned for us to remain in the European Union, of course accept the

mandate from the British people to pull us out of the European Union.

But what the Government doesn't have, because the Brexiteers

withheld from the British people what they meant by Brexit is whilst

the Government has a mandate to pull us out of the European Union, they

don't have a mandate how to do that. And what of the negotiations? This

week's summit puts Theresa May in front of fellow leaders for the

first time since she took office T seems Brexit is on the menu or at

least they will talk about the talks. Brussels says there will be

no indepth discussion until Article 50 is triggered.

That uncertainty weighs heavy on sterling. The record fall good news

for the FTSE 100, but not such good news for stocks of mar might, PG

Tips or Helmans mayonnaise. Tesco and Unilever began a trade war. But

the implications of price rises for consumers is the real story behind

the headlines. We know Article 50 is going to be

triggered but there is not much detail about what that really means.

And also if it went wrong, what could we fall back on? Into that

gap, if you like, then a lot of emotion seems to have appeared.

So, after all the optimism that flowed from the Conservative Party

conference, the size of the challenge is clear to everyone.

A task that is made all the harder by the persistent division between

leavers and remainers. Let me start with you, no running

commentary is what the Prime Minister has told us so far, are you

broadly satisfied three months into this on what you have heard from

her? Yes, I think the goal was set in advance, the goal is to leave,

which means not being the subject of the European Court of justice, it

means being able to have friendly relations, to trade with the EU but

to be an independent Sovereign nation. This is a complicated

exercise and there are lots of different options. I think it's

entirely understandably the Government should take its time to

decide exactly which package of trade-offs is intends to pursue. Do

you think some of the things she said about freedom of movement, do

you think that puts paid to any idea that some of the remainers have

advocated that there may be a chance of a soft Brexit, maybe a Norway

option s that now out of the window? I think a Norway option replicated

exactly as Norway has it would be very difficult, because of the

freedom of movement principle and it was clear from the arguments and the

debates during the referendum campaign there was a lot of concern

about absolute freedom of movement. You know, the EU is - freedom of

movement of labour, I don't think it's justified an economic theory,

it's been compromised repeatedly in the history of the EU and I don't

see why it shouldn't be compromised again. John Bruton in Brussels for

us, John, you have vast experience of these kind of summits, what sort

of reaction do you think Theresa May will get when she arrives in the

room tomorrow? I think there won't be very much reaction really.

Because the settled opinion of the 27 heads of Government has been that

they will not engage in any negotiation until Theresa May writes

the letter, the Article 50 letter. In that letter she will have to

indicate a number of things. First of all, that she intends to withdraw

Britain from the European Union. But also she will need to indicate what

sort of framework of future relationships she might want. In

that I think the UK will have to think very deeply, perhaps in a way

it didn't before the referendum, about what sort of relationship it

wants with Europe in the longer term, what sort of Europe it wants

in the longer term? Britain has been involved in European, continental

European politics for hundreds of years. Its interventions in two

world wars were directed at saving countries in Europe from being

occupied by other countries. So Britain can't turn its back on the

future security or peace structure of Europe, which is the European

Union. They will need to say, given they're leaving the European Union,

how they intend and what they would want in terms of their relationship

with the European Union for the next 40, or 50 years. OK. Vp

Before we go any further, let's just Vp remind

There are still many questions about the mechanism

and the many complexities ahead, but some of the process

Well, there's plenty of jostling for position as everyone waits

She says she will trigger Article 50 of the Lisbon Treaty before

Now this is what Article 50 says and it's never been used before.

But it's the official route for any member state to withdraw

from the union in accordance with its own constitutional

The other 27 countries shall then negotiate and conclude an agreement

Article 50 gives them two years to do it.

That deadline could be extended if everyone agrees but

Could the UK change its mind before two years are up?

Some argue that that's legally possible.

So two years for the most complex divorce imaginable with plenty

The negotiations themselves will be difficult, partly because they'll

The EU and the UK will have to split up joint assets

Budget commitments already made mean Britain will be faced with a bill

Then there are things like pensions for British EU staff and possibly

money for new ways of co-operating in the future.

Also up for discussion what happens to three million EU citizens

here in the UK and well over a million Brits in the EU?

And don't forget this is not just about what the UK wants,

the changing demands of the other countries, all 27 of them,

Both France and Germany hold elections next year,

serious political discussions can only happen once these results

are in and new leaders have new ideas.

But almost every country has specific issues to address.

Spain wants to bring the status of Gibraltar into the mix.

Ireland has huge concerns about its border with Northern Ireland.

And countries in Eastern Europe will want to make sure they don't

The European Commission will take the lead on many of the technical

details but national EU leaders will be closely involved.

Whatever divorce deal they end up offering the UK it also

has to gain the consent of the European Parliament

so who knows what that deal will look like here

Except it's not really the finishing line at all.

The race goes on and on because don't forget, the Article 50

negotiations are only about the terms of the divorce,

they're not about the UK's future relationship with the EU.

It could take a decade, even more to get

So attention is already focussed on what kind of transitional

arrangements could come into force on the day the UK leaves.

What will the trading relationship be?

What access will the UK have to the single market?

Economically a smooth transition obviously makes sense for everyone.

But politics and emotions will also come into play.

All sides are now talking about a hard Brexit.

This really is unchartered territory.

So it would be wise to be sceptical of anyone who says they know

Roger, you are shaking your head because it's extraordinarily complex

and complicated that, does it need to be so complex? Well, it is a

complicated subject. I have to say, though, there is a way of cutting

through these complications and I think it's possible we might

actually get to that, that's to say if we think there is not much chance

of progress, the option is to say actually, we're out and

unilaterially we are going to declare free trade. Actually, what

you have in the EU is a mindset completely dominated by the producer

interest. These people don't understand the economic gain isn't

about piling up more production, it's about living standards. I think

that's a serious possibility, if we reach the point we think we can in

the make progress, that's what I think we should do. Why don't we do

that now, why go through this protracted first part of the

negotiation with all the... ? Two reasons. First of all, there are a

series of questions which aren't about tariffs or trade access

particularly, questions about pensions and rights of residence, we

have to have those talks, it is just like a divorce. Over and above that,

with regard to the trade question, I want to try, at least, to get a

better deal, to try to get a deal under which we got something like

free trade between us and the EU. Haven't got fantastic hopes we are

going to secure it by the way, but it's worth trying. If we reach the

conclusion they're not going to give it to us that's when we should say

the game is not worth a gamble. Alice is that more difficult with

your game theory hat on, does it become more difficult because their

focus is on keeping the European project going? I think that is

absolutely the dominant problem right now in the EU, is to figure

out how to accommodate the obvious shared interest in the economic

integration we have achieved to date, whether it's in goods or

services. And to reconcile somehow keeping that integration there,

while at the same time solving the existent problem this has created

because if one EU member state has Brexited, in theory, there could be

another one and I think that question really goes to the heart of

the problem for the European Union and I don't think just like here we

are keeping all our options on the table, or secret or whatever, that

that issue of the options is also a very major preoccupation and it's

going to take time and it's going to, I think, require us to first

declare what exactly we have in mind and we will find out in due course.

You wanted to come back on something that John was saying earlier about

the relationship that Britain wants with Europe. What is it you

particularly have concern about? Well, the natural relationship for

Britain, building on what's been achieved ever since 1972, and I

speak as somebody who voted and spoke in parliament in favour of our

joining, the natural relationship is one of free trade. That has been

immensely beneficial to both sides. Trade is not warfare, it's for

mutual advantage. Listening to the Europeans sometimes I think they

think it's a form of warfare. It is not. It's a form of co-operation.

It's the most sublime form of co-operation. Really the natural

instinct to both sides in both their interests ought to be for this to

continue. Instead of which, llogically they say you must pay a

price for breaking what has been the past relationship. But the past

relationship is beneficial and that will be what the British Government

is looking for. Alice's point about they're afraid that it will lead to

other countries leaving the European Union, is that an argument in favour

of the European Union? Is that a good advertisement for the European

Union that they have to put a ball and chain around people so they are

not tempted to leave it? This is a pathetic argument.

There is a point that European seems to be scuttling a democratic vote.

That is the point? The attitude of the rest of the European Union has

been very united in the face of the British decision. If anything, this

decision has made the 27 more united than they were previously. As to

trade, yes, all trade can continue, but particularly when it comes to

services it has to take place in accordance with a common set of

rules. These rules have to be agreed in common and there has to be some

system of adjudicating disputes when disputes arise about the rules. If

Britain leaves the European Union, and leaves the jurisdiction of the

European Court of Justice, there were have to be some alternative

method for adjudicating disputes in trade. In any of the association

agreements we have, the European Court of Justice is involved in that

adjudication mechanism. Even if Britain has an association agreement

with the European Union, like the one Ukraine has, the European Court

of Justice will be involved in the dispute settlement mechanism. People

in Britain don't understand that trade requires common rules and the

EU is a rule maker which helps trade. And they have adjudicated. In

goods, but not in services. In with. , Britain's system of regulation for

financial services is identical to that of the EU, but we ought to move

to one of being recognised as equivalent, equally effective, but

over time it may change. There needs to be a system of changes at me and

you. Both sides have to agree to that thoroughly youth. Common sense

indicates iniquity. We to agree, but we do not have to. The problem you

are ignoring is when are in the European Union... Is the point here

that it is about tariffs and more about regulation is going to be the

first in dealing with the European Union stop the issue of dispute

settlement is incredibly important. The rule of law in international

trade relations is extremely important. Obviously the EU trade

with China and the US and Japan on the basis of the WTO. The WTO has a

dispute settlement system. That has proven to be relatively ineffective,

but it is very different from the jurisdiction of the European Court

of Justice and to my understanding there are trade agreements that the

EU has concluded that do not have the European Court of Justice in the

middle of it. I can think of a free-trade areas and goods

agreements involving developing countries and so on. Obviously if

you are asking for something like the EU- Ukraine agreement, which has

investment provisions and all of this, all of which does not exist in

the EU today among its own members, then of course the European Court of

Justice might be a necessary ingredient. Investment protection is

not needed within the European Union because countries can appeal if they

do not like a court decision in another country, they can appeal to

the European Court of Justice, but that does not happen in the case of

a country that has left the European Union. When Britain leaves, we will

need to ensure that investments by Irish and other European countries

into Britain are protected by a strong disputes settlement

mechanism. We will also need to have anti-dumping arrangements to ensure

there is no dumping from Britain into the European market. Let me

bring Roger in on that. These are important issues, but compared to

the big issue, they are pretty minor. The big issue is you do not

need to be a member of the single market in order to sell into the

single market. All around the world countries do it, America and China

and so on. If they can do it, why cannot we do it? I would hope we

could get something a bit better than that, but the full-back

position of being like China, America and Korea, all selling into

the single market, what is so terrible about that? I want to get

As in any European negotiation the German voice speaks

The Chancellor Angela Merkel is known to be pragmatic

but in recent weeks has warned German bosses they must weigh

the short-term hit of a 'hard' Brexit against the long-term risk

of allowing the EU project to unravel.

A senior figure in her CDU party and the current chair

of the foreign affairs committee in the European Parliament is Elmar

Last month, he sat with the foreign secretary

And I asked him what he'd made of that first conversation.

I've met Boris Johnson for a few hours meeting.

Privately we know each other since more than 25 years.

This interesting debate is surprising sometimes.

and what they know about the European Union

and which conditions they have to fulfil to come to a deal.

I have sometimes the feeling that after all this happiness

after Brexit the reality has not arrived in this city

what are the real conditions for coming to a deal

But do you have a clearer idea of their plan?

I have no idea of their plan because they have no

You don't think they have an idea of what they want to do?

I have not got the impression they know where they want to go

and I have also the feeling that they do not know certain

conditions which you have to know in order to make a realistic plan.

How do you mean they don't know the conditions?

If they believe for example they can get into part of the internal market

without financing structural funds, that is the minimum of conditions

So they thought they could have access without spending the money?

They said no to two things, structural funds and free

That is not a German position alone, it is the position of most

You said before that the negotiation must be done by 2019,

or at least by the European Parliamentary elections.

Surely you must anticipate that is not achievable in two years?

First of all, it will be a nasty divorce agreement

because of all the bad things you have in a divorce agreement.

It means for example how long Britain has to finance the pensions

of all the European civil servants who have worked in the last few

In the future there is another treaty and this treaty must be

negotiated by Britain as a third-party not as a member

You are talking about two negotiations?

A divorce proceeding and then a separate negotiation

Yes, this is indeed two agreements, two agreements which could be

parallel, but the divorce agreement is much earlier because such

a complicated trade agreement cannot be done in two years and therefore

we have to look for a transitional period to avoid the hard results

of a heartbreak split in order to come to the time for a trade

agreement to be ready in four or five years' time.

But surely they would have to run parallel

because the British Government is not going to leave the EU

and the benefits of trade that it has at the moment without some

guarantee of what it is going to get.

That is the British choice, Britain has decided Brexit,

You are not going to very well leave the European Union without some

reassurance of what you are likely to get in that future deal.

I said we can have the framework about it, but not the details

I do not think that such a trade agreement about the WTO can be

done in two years' time and for the divorce agreement

it is clearly written in the treaty two years' time limit.

In which case the transitional arrangements, the period

after the two-year deadline, have paramount importance

to exporters here in the UK and also to exporters in Germany.

It would mean that until we find a final agreement, Britain should be

advised to stick to the present European rules so that they continue

in a way as if Britain were members of the European Union,

not to abolish all these rules and trade mechanism and so on.

So it would mean that Westminster for the moment we are relatively

quiet in order to not have a major break in our economies

because of the break of the transition period.

Do you go into this negotiation aiming to find a deal

that is of mutual benefit to Germany and Britain, or do EU countries go

into it intent on proving to everyone that Brexit

Emotions can lead us into such a situation.

It should be constructive, but from both sides.

I think Brexit is punishment enough for Britain.

We should not increase the punishment and therefore

we should look for a good partnership in the future

because of economic and political reasons.

But he called him a clueless blow with the kind of federalist that

Eurosceptics do not like. But he raises important issues. There are

going to be two negotiations and there will be the divorce procedure

which will take two years and then the future negotiation which may not

run parallel which could take anything up to five or six years.

Europe, which is necessarily use the army is definitely a European

federalist. He is more extreme than a lot of German mainstream opinion,

though I am not certain of that. And that he is a European federalist.

Threatens to that. I can understand that. But what he is ignoring is

that the maximum free trade between the UK and Europe is in the

interest, not just of the UK, but of Europe as well. Very much in the

interest of Europe. Has to serve the interests of the economy and the

citizens of Europe and that seems to me to the absolute in the way he is

presenting his case. As of the report of the European Court of

auditors, published last week, which shows that the debts have jumped 10%

to 340 billion, debt is not covered by the EU budget. If you take

Britain out of the pot, who contribute a considerable amount of

money, you can see why they are quite intent on the contributions. I

can see why they want Britain to cough up for the next eight years.

But trade is much more important than this and Norman is absolutely

right, trade is the really big thing. These budget numbers are more

tangible. If we saw a collapse of trade between Britain and the EU, it

would not only harm us, but it would also harm the rest of the EU. I did

talk about German cars, they sold ?32 billion worth of German cars

into the UK last year. If the worst-case scenario was to happen,

would they be able to control what German companies do? I think the

real issue here is that our exports into the EU would face a tariff

unless we had a conditional agreement as was suggested. A

transitional agreement would be incredibly desirable, as Norman

suggested, to retain the economic benefits. But if it is absent, it

will be problematic. As Roger says, we can maintain free trade, and I

agree with him that the consumer would maximise their benefit around

that, but on the other hand it is a bit much to ask the EU to not apply

its customers regulation to third countries like the UK. If we become

a third country to the EU, we must expect to perhaps trade on WTO

terms, provided we can assume our WTO membership in due course. But

that would still leave a problem because as you know the EU has a

relatively low tariff policy on manufactured products, but when you

get into agriculture and agricultural products, you see an

awful lot more restriction and in fact the Commonwealth countries have

always complained about the lack of access. I would be very concerned

not about the situation of farmers, I would also be concerned about the

service sector, bearing in mind that, as Roger mentioned, I estimate

no more than 43% of our exports of services to the EU are regulated as

such. Can I comment. Alice says it is

natural they should want to impose the tariff on us, I don't think it's

natural at all. We have been in a trade relationship since 1972, we

have developed this integrated economy, we have free trade between

the countries. It is in both our interests. Is this project so

imbedded in people's minds they're determined to lower the standard of

living of people in Europe in order to further the project? It does not

make sense. The WTO is a fallback option. The thing that would be most

in interests of Germany and the citizens of Europe would be to

maintain the existing relationship as much as possible.

Sorry, Norman... Could I come in to say that I believe that if Britain

is to have a trade agreement with the European Union, whether it be

for goods alone or for services, and is not to pay tariffs as a result,

that trade agreement will have to be agreed by everyone of the 27

countries. Now there are a number of countries in central and European

Europe like Poland and Lithuania, who take it badly that Britain wants

to exclude their nationals from the British labour market. So, they will

need to be persuaded to accept any trade agreement, it may make a lot

of sense to Norman that there should be free trade between Britain and

France, but that doesn't necessarily cut any ice when others will have to

vote on any agreement that is made. I think it's important to understand

that there is politics in Europe too and there are political

constituencies in Europe as well that need to be satisfied. This is

not just a British drama. OK. I want to talk more about trade.

You are watching the Brexit Effect, our special programme on how

the referendum vote will change life in Britain.

So much of the future debate will come down

to what we want our future trading relationship to be.

What factors will govern - or limit - the UK's choices?

Rachel Horne has been taking a look at where we stand now,

and what models might be up for discussion.

Well, the UK is the fifth largest economy in the world and the second

Trade is vital to the UK economy and we import more than we export,

both with the EU and the rest of the world.

Now at the moment we're part of the EU single market.

That means we can trade freely with other members without tariffs,

Currently, countries inside the EU allow the free movement of goods,

services, capital and people between one another.

There's also a framework of common standards that all businesses

Now when it comes to the single market the definition of access has

Everyone else has access to the single market,

the question is how free and unrestricted is it?

If we give up our membership and want control of our borders,

we will probably face some new restrictions.

Theresa May says keeping them to a minimum is a high priority.

What we are going to do is be ambitious in our negotiations,

to negotiate the best deal for the British people and that

will include the maximum possible access to the European market

for firms to trade with and operate within the European market.

But I am also clear that the vote of the British people said

that we should control the movement of people from the EU into the UK.

So when it comes to access, what choices have we got?

Here's the BBC's business editor Simon Jack.

It's a member of the single market but has some carve-outs

for fisheries and agriculture, but they have to pay into the EU

budget and accept the freedom of movement of people.

That's not a member of the EU but has access to the single market

through lots of tiny bilateral deals, but currently it has

to accept the freedom of movement of people, although they're arguing

It can't sell financial services into the rest of Europe -

Clearly not a member of the EU, it has tariff-free access in goods

but not in some services and some areas of agriculture.

Plus, it took seven years to negotiate.

Which leaves the World Trade Organisation, what we might fall

Now that has no freedom of movement of people,

10% on cars, up to 27% on meat.

The truth is that none of these models will fit the UK specifically.

We are going to have a bespoke version of our own.

The problem is that takes time to negotiate.

The clock will be ticking when we trigger the process

of leaving at the end of March next year.

And while we wait, businesses fret and don't invest.

So any post-Brexit trade deal will be one of the more complex

parts of the negotiations but for businesses to remain

confident and invested in the UK, it's something

Part of the problem has been this access to the single market has been

confeuds in the mandz -- in the minds of many people. In the case of

services, you have to recognise that if you look at the WTO, obviously

it's an awful lot less access than what we have today. For example,

there aren't passporting rights for financial services, and we also know

that, for example n the case of the EU that it excludes audio visual.

Today our exports to the EU of cultural products are very

important. So, of course we have concerns around that. I think we

have to agree that the WTO for services is far from what we have

today. At the same time, if we are a member of the WTO, we may be able to

energise the WTO to do better. You advocated the Canadian model before

the Brexit vote, it might not be approved by the European Union, but

the big drawback with it doesn't have provision for services.

Absolutely. I said it had to cover financial services as well. I would

hope that could be done on the basis of equiff Lance. John has tried to

throw a cold towel over all of that, thinks it's not necessarily going to

be agreed. But the point I would make about financial services There

is a mutual interdependence. It's true that we have a surplus in

financial services with the EU. But the City of London is extremely

important to the EU. A lot of Sovereign debt is raised in London.

A lot of wholesale finance is raised in London. I am not saying that we

won't lose some people perhaps to Paris or Frankfurt but actually I

think the advantage to the EU is huge of having the financial

expertise in the City of London and I think in common sense they want to

retain access to that, as well. John, you don't appreciate the value

of London? No, I do, of course. But equivlance isn't the same as

passporting rights, that's a guaranteed access to sell your

services. Equivlance can be granted or taken away. It is important to

recognise that there are people in the rest of the European Union as it

now is, including in Ireland, who want some of the business that's

currently in London. And who would like, by virtue of the fact Britain

has decided to walk away from the EU to persuade some to move to Dublin

or to Paris or to move to Frankfurt. So, you can't expect that this will

be sort of the equiff Lance will be granted to you as a free gift.

Everything that you get, once you have left, and you are applying as

inexternal party to get an agreement, everything you get you

will have to pay for, unfortunately that's the way trade negotiations

work. They're not a charitable exercise. This is the most

extraordinary description of trade. Trade is about co-operation. It's

about... I am talking about trade negotiations. Everyone of John's

arguments is there is a political interest here and there. They may

want to do this. You know, actually we ought to think what is to the Ben

fit of our citizens? The advantages of the City of London to Europe is

that it lower he is the cost of capital, it helps the governments of

Europe. It is political, because there is a lot of capital in London

that Frankfurt and Paris would like their hands on. Yes, I don't think

they're going to succeed come what may. It's right for our Government

to try to get full access, open access, whatever the words are, to

selling our financial services in the EU, maybe we can get some sort

of deal which is the equivalent of passporting, after all, Norway has

its carve-out as you described it for fish. We could try to get a

carve-out for financial services. Will we succeed? I don't know, I

agree with it's in the EU's interests to do a deal on all of

this. Will it? It's possible it will play hard ball for the reasons John

has said. Now, how serious would that be? We don't know but I suspect

it would not be that serious actually. The advantages of London

are so enormous, forget Paris and Frankfurt and apologies to John,

forget Dublin, it's been interesting recent days to hear American bankers

say if London loses passporting rights they're going to transfer

business, not to Frankfurt or Paris, but to New York! What does that tell

you about this argument? It would be extraordinary that your own trading

would be based in a country outside the European Union, why would that

continue? Look, London became the centre of the euro dollar before the

euro exist there was something called the external dollar market.

London became the centre of that despite attempts by Americas to

retain trading in dollars within the United States. It would not be

possible for the EU to determine that all euro trading took place

within the eurozone. That wouldn't be possible. I mean, you know, all

this talk about financial services, we do live in a digital age. It is

not possible actually to put all these barriers up in the way that's

being suggested for financial services and particularly when it

comes to wholesale financial services. You have got to recognise

the fact we do live in a digital age. Talking about digital age...

Can I just say to Norman... You wanted to comment. We should mention

the digital single market because the UK Government has been very

supportive of that project and I think there is an awful lot at stake

for media and tech companies. A big part of the economy here. We are

world-class in e-commerce and I am always concerned about a discussion

that becomes all about the passporting rights of the financial

services sector when the digital single market and media and Telecoms

are an important part of the EU today. And very important part of

its future growth story. Do you spy opportunity, John? I was surprised

at David Cameron when he was seeking to reform the European Union didn't

insist on the completion of the digital single market as a

pre-requisite for negotiations. Instead he focussed on introducing

red regards -- red cards and things like that which would slow down the

creation of a sing market. I would say this to Norman, can you imagine,

given that the EU has to ultimately guarantee the banks in the eurozone,

and is setting up institutions to enable it to do that, that it would

allow financial services, that it is regulating and may have to be paid

for, to be conducted outside the European Union? In London, where the

European Union would have no jurisdiction over what was happening

in circumstances that could create a systemic risk to banks in the

eurozone? I don't - these issues are very, very serious for Europe and I

don't think London will be indulged in that. That's the most

extraordinary thing to say f I may say so with great respect to John.

The regulatory authorities in London, the Bank of England, the

banking supervision system we have in this country, I think are well

regarded and actually when it came to the point of a decision on these

matters, if some US banks in Europe had to decide where they wanted to

be regulated in Europe or in London, actually I think many of them might

want to decide they wanted to be regulated in London. I don't think

that the Fed would automatically take it as easy that people should

move headquarters to Europe, rather than be in London. OK. We are get

ago feel that everyone of the 27 EU states will look to put its own

interests first in these talks. But some will be

particularly engaged. Among them Poland, keen

to look after the interests of thousands of their citizens now

living and working in the UK. Winter is on the edge

of the wind in Warsaw. But the thoughts of many Polish

families are turning to the chilly political atmosphere they detect

towards them in Britain in the wake Julia and her husband

came home to Warsaw Shocked to discover that Brexit

voting friends and colleagues saw the size of the Polish community

as a problem. Every single one told me

you're not the problem, Now, she can't be sure the deal

Britain will eventually negotiate with the rest of the EU

will give her the right to go back We still don't know what will happen

after Brexit, if we will be allowed If you're young, you want to settle

and have a family, you have this feeling of stability but not

in the UK. In this atmosphere, Poland's liberal

opposition politicians broadly agree with its Conservative government,

that Poland should add its voice to the favourite refrain of the EU

chorus at the moment - no free acess to the single market

for Britain unless it allows the free movement

of European workers. If you are gonna restrict

the freedom of movement, Limit the freedom of movement,

you should expect... I am sure UK negotiators are aware

of it and probably those voting Leave in the referendum

were not fully aware. It remains profoundly

Catholic, for example. But ordinary Poles have seen their

lives transformed by EU membership. It's meant not just better lives

and better roads but the guarantee of a democractic future in a country

that was a Communist police state For that reason, Britain's

negotiators may find the issue of freedom of movement into the UK

is more important and more emotional to many Europeans

than they might have imagined. I remember after we joined,

for the first time at an airport I could join the EU Citizens aisle,

go without much control, To be deprived of that

will be hurtful. As in all the former

Communist states that came late to EU membership,

a sense that Brexit is a big moment So the chill of autumn is descending

on Warsaw like the chill of Brexit is descending on the EU,

and Poland's leaders are preparing to fight on the issues

that matter to them, And just like all of the other

countries remaining in the EU, Poland can veto any deal that

doesn't suit it. But, of course, Brexit has

dramatic implications for other countries too,

not least the Irish Republic. The UK shares its only land border,

a common economic area and of course The Dublin government has convened

a cross-border summit next First and foremost, there is deep

uncertainty over what will happen to the border between Ireland

and Northern Ireland after Brexit. Few want a return to checkpoints,

yet maintaining a fully open border will

present a challenge. Britain is Ireland's

largest export partner, Ireland is Britain's fifth biggest

trading partner, with ?1.35 billion Exporters are already being hit

by the weakness of sterling. There are some opportunities,

not least in financial services. Dublin could start attracting banks,

hedge funds, other businesses who want access to Europe

and are wary of investing Some of the emotional things we are

hearing in Poland apply also to the Republic of Ireland. Yes, the fact

that Britain and Ireland together joined the European Union in 1973

completely changed the psychological atmosphere between Britain and

Ireland. No longer was it the case of Big Brother and small brother.

With all the psychological difficulties you have in that. No

British Prime Minister in office ever came to visit Ireland to meet

their Irish counterpart between 1922 and 1974. The year after Britain

joined the European Union Edward Heath came to Dublin. That

symbolised in every way a complete change in the relationship between

the two countries, which created the conditions in which the two

countries could together negotiate the Anglo-Irish agreement and

together negotiate the Belfast agreement and the Sunningdale

agreement as well. They have created a structure of peace in Ireland. The

border is there in certain sectors, but it is not there in terms of

being a barrier for people, goods or services moving in either direction.

Sorry to interrupt, but what with the implications be of checkpoints

returning on the border? It would create an immense sense of isolation

of the nationalist community in Northern Ireland. People in Britain

should remember that unfortunately that brutal sense of isolation led

to dreadful acts of terrorism being committed by so-called Republicans

in the mainland Britain, including an attempt to assassinate one of

your Prime ministers. A totally deplorable act. But that illustrated

in a sense the sense of desperation that existed in a community that

felt disregarded and isolated. If he were to have a border again, that

sense of isolation could, I am not saying it would, but it could arise

again, as well as the fact it would do tremendous damage to cross-border

trade. In food products for example 30% of all the milk produced in

Northern Ireland is passed to the south. You wanted to come back on

that. You were heavily involved in the government in the 1990s when

these things are being discussed. I understand part of what John says,

but looking at this discussion more broadly by contrast the tone of all

this stuff about we must have a price, we must punish Britain, there

must be conditions, I contrast that with 1922 when the free State was

established and Lloyd George took the view that there would be a

common travel area between the Irish Republic and the UK. That was done,

as he said at the time, on the basis of the everlasting friendship

between the peoples of Ireland and the people of the UK. That ought to

be the attitude to this whole discussion between Europe and the

UK, instead of which it is all about costs, advantages and negotiation.

Coming back to the issue of migration. Again I understand the

concern of people in Poland, but the UK will have not have nil

immigration, we need immigration, and skilled as well. But Britain has

had very large immigration into the country and the population is

growing at the fastest rate for 100 years and we want to have some

control over that. That is not incompatible with having good

commercial relationships and free trade as well. One issue is freedom

of movement and the British Government does not want others to

use the back door to come into the UK, and the other issue is the UK

does not want exports flooding through Ireland into Europe. What

can be done? This is the most difficult issue and I do not claim

to have the answer. If we do not find some sort of way of making this

viable for Ireland, the issue of Ireland leaving the EU will appear,

particularly after the recent attempt of the EU, probably

successful, to alter Ireland's tax regime with regard to major

international companies. John may not want to acknowledge this, but it

presently being outside the EU, I wonder how long it will be before

people will want to leave the EU. Do you want to come back? There is no

question of Ireland leaving the European Union and following Britain

into what we fear may be an economic wilderness. Ireland is very proud as

a country and as a people to be members of the European Union and to

be an equal member of the European Union with lots of other countries

and we will not be giving up that privilege. You say you have an

answer for that. I picked the Norwegian, Swedish situation is one

we ought to copy. Of the card reader is the other a very light border

controls and very light touch customs controls. They have used

modern technology and they managed to an arrangement that is impede the

flow of people and traffic across the border. I think something like

that should be applied in Northern Ireland. I agree, we should try to

do that if we can. Ireland is trying to get its own negotiators onto the

team in Brussels and they have a special interest in Britain

resolving this issue as quickly as possible. Is that a card with the

UK, that the Irish are on the inside? It is not just the Irish.

Everybody wants to be on the inside because they have important linkages

that they wish to make. It is up to us to define it. The Irish have a

very special relationship. They do and they have very special economic

stakes compared to other members, but the key issue is we need to

define the scope of what we wish to achieve in a framework that is

sufficiently narrow so as not to blow up the negotiation with many

linkages that cannot be mutually satisfied. That is a real challenge

on both sides. I remember being at an open Europe session with you

before the vote and you were talking to Europeans then and they did not

have a full appreciation of the relationship and the history behind

it. Do they understand it better? I do not think British politicians

during the recent referendum debate had a very good understanding of the

implications of Brexit either. This initiative to have referendum is a

British initiative that your country took. I think it is even more

worrying that the effect on Ireland hardly weighed on the minds of most

voters in the UK at all. But now we have to face this, these two islands

are together. As the fall of sterling an effect? Yes, a number of

countries have gone out of business and the purchasing power of the

British economy is reduced which means the British market will be

less attractive to our island in that respect. But the important

thing to worry about here is if the option of the WTO is something that

you might opt to during the negotiations if they were not going

well, that would mean immediately having to put up customs posts to

charge the common external tariff on any food or motor products that were

coming into the Republic of Ireland from Northern Ireland. That is

something we would be required to do overnight by virtue of our

obligations as an EU member. You are nodding. This has not been

considered seriously by those who are talking blithely about the WTO

option. I think the WTO option is a fallback option for the UK. As Alice

has said on previous occasions, it would be compatible with a

transitional period of free trade between the EU and the UK. But the

simple point I want to get across is a basic free trade arrangement is in

the interest of the EU as much as the UK and it would be a tragedy if

in their ideological dedication to a political project they put politics

well before the welfare of their own citizens. It is an ideology that is

working here. We have seen the Canadian agreement blocked. We are

Well that's where we must leave it for now,

but no doubt there's more detail and argument to come over

Thanks to all my guests this evening - Lord Lamont, John Bruton,

And thanks to you for watching The Brexit Effect.