[House Hearing, 115 Congress]
[From the U.S. Government Publishing Office]


                      BREXIT: A NEGOTIATION UPDATE

=======================================================================

                                HEARING

                               BEFORE THE

         SUBCOMMITTEE ON EUROPE, EURASIA, AND EMERGING THREATS

                                 OF THE

                      COMMITTEE ON FOREIGN AFFAIRS
                        HOUSE OF REPRESENTATIVES

                     ONE HUNDRED FIFTEENTH CONGRESS

                             FIRST SESSION

                               __________

                            DECEMBER 6, 2017

                               __________

                           Serial No. 115-100

                               __________

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                      COMMITTEE ON FOREIGN AFFAIRS

                 EDWARD R. ROYCE, California, Chairman
CHRISTOPHER H. SMITH, New Jersey     ELIOT L. ENGEL, New York
ILEANA ROS-LEHTINEN, Florida         BRAD SHERMAN, California
DANA ROHRABACHER, California         GREGORY W. MEEKS, New York
STEVE CHABOT, Ohio                   ALBIO SIRES, New Jersey
JOE WILSON, South Carolina           GERALD E. CONNOLLY, Virginia
MICHAEL T. McCAUL, Texas             THEODORE E. DEUTCH, Florida
TED POE, Texas                       KAREN BASS, California
DARRELL E. ISSA, California          WILLIAM R. KEATING, Massachusetts
TOM MARINO, Pennsylvania             DAVID N. CICILLINE, Rhode Island
MO BROOKS, Alabama                   AMI BERA, California
PAUL COOK, California                LOIS FRANKEL, Florida
SCOTT PERRY, Pennsylvania            TULSI GABBARD, Hawaii
RON DeSANTIS, Florida                JOAQUIN CASTRO, Texas
MARK MEADOWS, North Carolina         ROBIN L. KELLY, Illinois
TED S. YOHO, Florida                 BRENDAN F. BOYLE, Pennsylvania
ADAM KINZINGER, Illinois             DINA TITUS, Nevada
LEE M. ZELDIN, New York              NORMA J. TORRES, California
DANIEL M. DONOVAN, Jr., New York     BRADLEY SCOTT SCHNEIDER, Illinois
F. JAMES SENSENBRENNER, Jr.,         THOMAS R. SUOZZI, New York
    Wisconsin                        ADRIANO ESPAILLAT, New York
ANN WAGNER, Missouri                 TED LIEU, California
BRIAN J. MAST, Florida
FRANCIS ROONEY, Florida
BRIAN K. FITZPATRICK, Pennsylvania
THOMAS A. GARRETT, Jr., Virginia
JOHN R. CURTIS, UtahAs of 
    12:44 pm 11/29/17 deg.

     Amy Porter, Chief of Staff      Thomas Sheehy, Staff Director

               Jason Steinbaum, Democratic Staff Director
                                 ------                                

         Subcommittee on Europe, Eurasia, and Emerging Threats

                 DANA ROHRABACHER, California, Chairman
JOE WILSON, South Carolina           GREGORY W. MEEKS, New York
TED POE, Texas                       BRAD SHERMAN, California
TOM MARINO, Pennsylvania             ALBIO SIRES, New Jersey
F. JAMES SENSENBRENNER, Jr.,         WILLIAM R. KEATING, Massachusetts
    Wisconsin                        DAVID N. CICILLINE, Rhode Island
FRANCIS ROONEY, Florida              ROBIN L. KELLY, Illinois
BRIAN K. FITZPATRICK, Pennsylvania
JOHN R. CURTIS, UtahAs of 
    12:44 pm 11/29/17 deg.
                           
                           C O N T E N T S

                              ----------                              
                                                                   Page

                               WITNESSES

Nile Gardiner, Ph.D., director, Margaret Thatcher Center for 
  Freedom, The Heritage Foundation...............................     6
Ms. Marjorie Chorlins, vice president for European Affairs, 
  Executive Director of U.S.-U.K. Business Council, U.S. Chamber 
  of Commerce....................................................    16
Thomas Wright, Ph.D., director, Center on the United States and 
  Europe, Brookings Institution..................................    28

          LETTERS, STATEMENTS, ETC., SUBMITTED FOR THE HEARING

Nile Gardiner, Ph.D.: Prepared statement.........................     9
Ms. Marjorie Chorlins: Prepared statement........................    19
Thomas Wright, Ph.D.: Prepared statement.........................    30

                                APPENDIX

Hearing notice...................................................    48
Hearing minutes..................................................    49
Questions submitted for the record from the Honorable F. James 
  Sensenbrenner, Jr., a Representative in Congress from the State 
  of Wisconsin, to Nile Gardiner, Ph.D...........................    50
Questions submitted for the record by the Honorable Robin L. 
  Kelly, a Representative in Congress from the State of Illinois.    51

 
                      BREXIT: A NEGOTIATION UPDATE

                              ----------                              


                      WEDNESDAY, DECEMBER 6, 2017

                       House of Representatives,

         Subcommittee on Europe, Eurasia, and Emerging Threats,

                     Committee on Foreign Affairs,

                            Washington, DC.

    The subcommittee met, pursuant to notice, at 2:00 p.m., in 
room 2200 Rayburn House Office Building, Hon. Dana Rohrabacher 
(chairman of the subcommittee) presiding.
    Mr. Rohrabacher. I call to order this hearing of the 
Europe, Eurasia, and Emerging Threats Subcommittee.
    The topic for this afternoon's hearing is the United 
Kingdom's exit from the European Union and to understand better 
where those negotiations currently stand.
    The Brexit vote represents a self-determination of the 
British people. It reflects an inherent desire of people to 
control their own destiny rather than be under the domination 
of another country or another group of countries.
    Around the world, populations are increasingly seeking to 
exercise their right of self-determination. When done 
peacefully through the ballot box, such as what happened in the 
United Kingdom and, I might add, in the United Kingdom as 
happened to Scotland, I believe the world would be a much 
better place if people were allowed to make that choice in that 
peaceful manner.
    After 40 years of membership in the EU and its predecessor 
organizations, the British people voted last year by a clear 
margin to end that membership.
    It has set the U.K. on a course which I guess would be on 
March--in March 2019 for exit. Between now and that date, a 
wide variety of issues remain to be resolved.
    Many speculate that the major pieces of the transition must 
be set far ahead of that date in order to allow industry and 
business to adapt to the new rules.
    Both sets of negotiation and the negotiating teams appear 
to be dedicated to approaching their task with good will. But 
the breadth and complexity of the challenges would be imposing 
on any group of people trying to find those type of solutions.
    While I have great sympathy for those in Britain who want 
to return political power from Brussels to London and believe 
that the EU countries--there probably are other EU countries 
who want to follow their lead.
    But whatever decision people make in terms of their own 
self-determination, clearly, Americans have friends on both 
sides of this issue and are inclined to support people who are 
longing for their freedom as--and representative government.
    As my colleagues and I get into this discussion with the 
panelists, I especially want to talk about Ireland and learn 
what progress has been made to ensure there will be no hard 
border between the Republic of Ireland and Northern Ireland.
    The return to a hard border, I fear, would be a needless 
blow to the peace process that has achieved so much in that 
part of the world over the last few decades.
    The United States is, of course, not a party to the Brexit 
negotiations. But we do have a keen interest in what the 
outcome of those negotiations will come up with.
    I hope to learn from our witnesses how the United States 
Congress can play a positive and constructive role as both 
sides work to establish a new relationship.
    I also want to recognize that several members of the Irish 
Parliament are with us today and we welcome you. And let me 
just say this. I have a special place in my heart for Ireland.
    I learned all about the real political facts of life from 
the greatest Irish American President, Ronald Reagan, who--with 
whom I spoke and met and worked with for 7\1/2\ years of my 
life in the White House. So it is a pleasure to have you here 
with us.
    And let us also note--my staff didn't put this in my 
notes--but let us also note that the Irish were really beside 
the Americans, were the first ones to strike a blow for self-
determination and we are happy that their British--their former 
British landlords now have learned a lesson and are now 
establishing early self-determination in Europe.
    So welcome aboard. And thanks to our witnesses. And without 
objection, all the members will have 5 legislative days to 
submit any written questions for you.
    I would appreciate if you would basically limit your 
testimony to 5 minutes each and then open up for the members to 
ask what questions they have and we could have a dialogue.
    With that said, I recognize my ranking member, Mr. Meeks, 
and who we worked together very well and this shows you just 
how people can work together with various different points of 
view. I would say enough for my Irish parliamentarians over 
there.
    Mr. Meeks. Indeed. Thank you, Mr. Chairman. I want to thank 
you also for calling this timely conversation on the Brexit 
negotiations.
    To be honest, I see the Brexit process as a lose-lose-lose 
situation. The UK, the EU, and the United States--in other 
words, the West, will take an economic and political hit.
    Of course, there may be small pockets of economic winners 
joined by cultural elites who will benefit. The vote did 
reflect real grievances with the status quo.
    America, meanwhile, is losing its closest ideological ally 
in the European Union and the influence that came with it in 
Great Britain.
    Many remain to believe that Brexit negotiations will be 
simple--that the EU would succumb to the British demands and a 
global Britain will emerge, ready to strike trade deals and 
still be able to set rules and standards at home.
    In the past weeks, though, reality is beginning to bite. 
More specifically, the Northern Island question--something my 
colleagues on both sides of the aisle care deeply about, is 
unresolved.
    The Good Friday agreement, a delicate consensus that we 
helped foster, is at risk. The essential question for the Irish 
Government, and they have been--and they have the backing of 
the EU with their veto just as every member state does, and 
this is just one example of the similarly countless hurdles in 
the negotiations that must end in March 2019. That is, unless 
there is a transition period on extension as agreed upon.
    The March 2019 deadline was imposed by the UK when it 
triggered Article 50, thereby starting the 2-year clock.
    Other red lines were perhaps prematurely set early such as 
the refusal to entertain the customs union as an option, done 
without considering the economic consequences.
    Must of the Prime Minister's government, including the 
Prime Minister herself, campaigned to remain. These questions 
are all related or complicated and the EU is negotiating from a 
unified position with a weak partner government. Not sure about 
what it wants.
    In the realm of bilateral U.S.-U.K. trade, we learned in 
our February hearing that there is not much to gain nor is it 
clear when we could even start negotiating, given the practical 
constraints.
    The potential gains are either not there, already 
exhausted, or protected. In reality, the U.K. would be coming 
to American negotiators looking for a deal, any deal. In our 
negotiations, we look to extract the best deal for America.
    So what does this mean for the special relationship? 
Reckless hateful tweets from our Presidential--from our 
President aside, and with the help of delicious British imports 
we will carry on.
    Our histories and our political ties are stronger than 
that. We will continue to work closely with the U.K. and NATO 
and encourage the U.K. to continue to support sanctions in the 
Kremlin.
    In the Brexit negotiations, as highlighted by Prime 
Minister May in Philadelphia, our close relationship with a 
strong EU is in both America's and the U.K.'s interest.
    In that spirit, I hope the U.K. and the EU remain very 
close partners that we, the United States, can count on and 
cooperate with.
    I encourage both sides to avoid the cliff edge no-deal 
scenario. Come back to reality and compromise where possible. 
There are forces driving Brexit that would like to see the 
Transatlantic relationship unravel.
    But we need each other today more than ever to protect the 
values we fought for together in the 20th century. It is more 
important now that the West stays together and does not allow 
us to be divided for it is our values today in a collective way 
that can lead the rest in a world that is more interconnected 
and globalized than ever, and we may want or think that 
globalization--some may like it and some may not.
    But globalization is here and I think that we need to 
utilize it to bring us closer together, set standards together, 
and lead together from the west so that others can follow.
    And with that, I yield back.
    Mr. Rohrabacher. Thanks very much, and I guess you can see 
where there is a difference between Republicans and Democrats 
on this. Just glad that the French decided to side with self-
determination for our side rather than back up the British.
    Ms. Kelly, please feel free.
    Ms. Kelly. Thank you, Mr. Chairman, for holding a hearing 
on the developments of the Brexit negotiations.
    Given the issues earlier this week and the negotiations, it 
is a particularly relevant time for this hearing. Time is 
passing quickly and pressure is building to get a deal done by 
March 2019, as you have already heard.
    For the United States, there are important trade, national 
security, and foreign policy implications for the United 
Kingdom leaving the European Union.
    The promises by the lead camp are likely to be broken with 
agreements to the European court of justice and the costs of 
leaving likely difficult pills to swallow.
    While the U.S.-U.K. relationship is likely to change 
following the exit from the EU, the bond between our two 
nations will endure.
    I look forward to hearing from the witnesses today about 
Brexit and the best way for Congress to plan for the future.
    I yield back.
    Mr. Boyle. Yes. Well, thank you. I want to thank the 
chairman and the ranking member.
    Before I begin, I want to acknowledge a few dignitaries 
with some elected officials from the Republic of Ireland who 
are here this week in Washington for meetings and specifically 
this hearing.
    So Senator Billy Lawless, Deputy Darragh O'Brien and Deputy 
Sean Barrett, you are--you are welcome here at any time in the 
halls of Congress.
    As perhaps the chairman and ranking member may now, and 
certainly Chairman Royce will remember, last--in 2016 about a 
month or two before the Brexit vote in June 2016, I went to 
Chairman Royce and Ranking Member Engel and I said I would 
really like to--for us in the Foreign Affairs Committee to hold 
a hearing on Brexit.
    And I think I have been pestering them every month or so 
since then because at the time I thought there was a much 
higher possibility of a vote for Brexit than was commonly 
thought in the mainstream media either in the U.K. or the U.S. 
And sure enough, by 52-48 Brexit ended up happening--one of--a 
couple very interesting and surprising election results in that 
year.
    One of the reasons why I was so concerned about Brexit was 
the impact, obviously, on the U.S.-U.K. relationship, a very 
important relationship. Losing the U.K. as a voice at the Ryder 
EU table, which I believe would hurt U.S. influence, but also 
and especially the unintended consequence it would have on the 
peace process in Northern Ireland.
    One of the great achievements of American, Irish, and 
British foreign policy, one of the few achievements in foreign 
policy peace processes in my lifetime has been the Northern 
Ireland peace process, and both Democrats and Republicans on 
Capitol Hill can be proud of that because we played a leading 
role in pushing our own U.S. administration at the Presidential 
level to get diplomatically involved.
    It was at the urging of Republican Congressman Pete King 
and Democratic Congressman Richard Neal and Joe Crowley and a 
number of others who have retired that President Clinton gave a 
visa to Gerry Adams, brought Sinn Fein into a political 
process.
    At first it was controversial but the British eventually 
saw the wisdom in that. We ended up having a cease fire and, 
sure enough, especially through the good work of George 
Mitchell and the support of Dublin and London, were able to 
reach the Good Friday agreement.
    But now because of Brexit, what for 20 years has been a 
seamless border, I have crossed it by accident--you can 
literally be driving along the road and not realize that you 
have crossed the border in fact a couple times--now that is 
suddenly all at risk, and as you may have noticed just recently 
as this week, you saw the--apparently, British Prime Minister 
Theresa May had reached an agreement only an hour later to 
reverse that and here we are.
    So when I ask my questions I am going to focus specifically 
on the border issue. There are a number of very important 
aspects of Brexit, specifically for the United States.
    And so, again, we will commend the leadership of the 
subcommittee for holding this hearing and I thank you.
    Mr. Rohrabacher. Well, thank you, and welcome aboard.
    And a new welcome aboard, of course, was John Curtis. Do 
you have an opening statement for us today?
    Mr. Curtis. Thank you, Mr. Chairman.
    Just briefly I do, and would like to mention due to other 
commitments I won't be able to answer my questions in person 
but would like to submit those and look forward to hearing from 
you.
    However, I would want to make sure that I express my 
appreciation for me and my constituents in Utah for the great 
relationship that we have with the United Kingdom for the many 
years of history of that relationship for the mutually 
beneficial things that flow from that relationship and look 
forward to maintaining that.
    In addition, hoping that as this Brexit moves forward it 
can be done as gracefully as possible so that we can enjoy that 
same relationship with others in the European Union, and thank 
you for being here today.
    Mr. Rohrabacher. I will now introduce our panelists and, 
again, thank you to each and every one of you today and, as I 
say, if you could put it down to about 5 minutes then we can 
all have a nice dialogue about the points that you've made.
    So, first, what I will do is I will introduce all of you 
and then we will go one by one.
    First we have Nile Gardiner, and he's the director of the 
Margaret Thatcher Center for Freedom at the Heritage 
Foundation, and don't let anybody every suggest because I love 
the Irish, as my boss, Ronald Reagan, did, that we didn't also 
love Margaret Thatcher. So on the record there.
    Dr. Gardiner is an expert on USA-U.K. relationships and 
previously served as an aide to Lady Thatcher from 2000 to 
2002. He earned a doctorate in history from Yale and holds 
degrees from Oxford University as well.
    And Marjorie Chorlins--all right--as vice president for 
European Affairs at the U.S. Chamber of Commerce and the 
executive director of the U.S.-U.K. Business Council.
    She has worked in both the private and public sectors with 
increasing seniority. She served as a deputy assistant 
secretary within the Commerce Department and held senior 
positions with Motorola as well.
    She is a graduate of John Hopkins School of Advanced 
International Studies and Wellesley College.
    Finally, we have with us Thomas Wright. He is the director 
of the Center on the United States and Europe at the Brookings 
Institute.
    Previously, he was executive director at the Chicago 
Council on Global Affairs, a lecturer at the University of 
Chicago and a senior researcher for the Princeton Project on 
National Security.
    He has earned a doctorate from Georgetown University and 
other degrees from Cambridge University and the University in 
Dublin.
    Your full written statements will be made part of the 
record and so Mr. Gardiner, you may proceed.

STATEMENT OF NILE GARDINER, PH.D., DIRECTOR, MARGARET THATCHER 
          CENTER FOR FREEDOM, THE HERITAGE FOUNDATION

    Mr. Gardiner. Yes. Thank you. Chairman Rohrabacher, Ranking 
Member Meeks, and distinguished members, thank you for the 
opportunity to testify before your committee.
    For reasons of time, I will be summarizing parts of my 
written statement. Today's hearing takes place at a crucially 
important moment for the United Kingdom, America's closest 
friend and ally.
    On June 23rd, 2016, 17.4 million Britons voted to leave the 
European Union in a historic referendum with nearly 52 percent 
of the vote. Turnout was over 72 percent of the electorate.
    A majority of the British people voted to retake control of 
Britain's borders, laws, trade, and destiny with an emphatic 
declaration of national sovereignty and self-determination.
    On March 29th, 2019, Great Britain will leave the European 
Union and, for the first time in nearly half a century, it will 
be free to negotiate its own free trade deals and fully shape 
its own path.
    Brexit offers the British people an opportunity to forge a 
new future as a truly global outward-looking, innovative, and 
prosperous world power, a standard bearer of economic freedom 
and liberty.
    Despite the dire warnings presented by opponents of Brexit 
in what was dubbed Project Fear, Britain has thrived since the 
Brexit referendum with growing inward investment into the U.K., 
falling unemployment, and a soaring stock market.
    The British Government is presently negotiating a post-
Brexit arrangement with 27 other members of the European Union 
who are represented by the European Commission.
    The talks, which began in June this year, have already gone 
through several rounds with the seventh due to take place later 
this month.
    The negotiations are highly complex and have at times been 
tense, especially over the EU's financial demands, which have 
been rightly criticized in the U.K. in some quarters as 
excessive and even extortionate.
    The European Commission's extremely aggressive approach is 
driven by several factors, including the desire to extract as 
much money as possible from the British people before they are 
freed from the shackles of the EU combined with the deep-seated 
hostility toward Brexit among EU officials who see it as a 
direct challenge to the European project.
    The European Commission has taken the wrong lessons from 
Britain's EU exit. Brexit sent a clear message that Europe 
needs greater sovereignty, decentralization of power and 
increased political accountability.
    This should be a moment for humility rather than arrogance 
from European Union officials. Yet, the response of European 
Commission President Jean-Claude Juncker has been to double 
down and call for even greater powers for Brussels.
    His recent State of the Union address before the European 
Parliament was a delusional rallying cry for a Federal Europe 
at a time when voters across Europe are increasingly opting for 
a very different vision.
    The EU's unelected and unaccountable ruling elites fear 
that Britain's exit will encourage other countries in the EU to 
go down the same path as the U.K.
    They believe that the terms of Britain's exit must be 
severe and harsh in order to act as a deterrent and as a 
warning to others that there are major risks and consequences 
for going down the same path.
    The European Commission's demand for a vast Brexit bill 
before trade talks can even begin are, in my view, mean 
spirited, unrealistic, and insulting.
    Additionally, they are potentially an insurmountable 
stumbling block to any agreement being reached between London 
and Brussels.
    If the EU continues to insist on making demands that are 
onerous and unacceptable, the United Kingdom should be prepared 
to walk away from talks with Brussels and pursue a no-deal 
option whereby Great Britain trades with the European Union 
under World Trade Organization rules.
    This would be a far better course than accepting terms 
which are unpalatable to the British people. Britain is a 
global economic power, but now it conducts more business with 
the rest of the world than it does with the EU.
    While a genuine free trade deal with the EU would be ideal, 
Britain can thrive and prosper if necessary without one. 
Britain's a huge export market for European producers and goods 
and services will continue to flow between the U.K. and EU 
regardless of whether a formal agreement is in place.
    To be a truly sovereign nation, Britain must be outside of 
the EU single market, customs union, and the jurisdiction of 
the European Court of Justice. These should be clear red lines 
for the Brexit negotiations.
    The United States has a major strategic interest in the 
long-term success of Brexit as well as an enduring 
transatlantic alliance which has remained the foundation of 
post-war U.S. global leadership.
    An independent Britain will be a stronger ally for America 
than one submerged within an increasingly Federal Europe.
    Britain in the Brexit era is a powerful force on the world 
stage, playing a leading role in bolstering NATO's eastern 
flank in the Baltic States, acting as the second biggest 
contributor to U.S.-led operations against ISIS, and preparing 
to launch two world-class air craft carriers, far from 
retreating to isolationism.
    Brexit Britain is emerging as a growing force to be 
reckoned with across the globe. Brexit will only strengthen the 
transatlantic alliance rather than weaken it, leading to a more 
self-confident Britain that is better able to stand with the 
United States.
    Thank you for giving me the opportunity to testify before 
you today. In conclusion, Britain's decision to leave the EU 
should be a cause for celebration here in America, and as 
Britain's foreign secretary, Boris Johnson, noted in his speech 
to the Conservative Party Conference in Manchester recently, it 
is time to let the British Lion roar again on the world stage, 
a formidable force for freedom alongside the American eagle.
    Thank you.
    [The prepared statement of Mr. Gardiner follows:]
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STATEMENT OF MS. MARJORIE CHORLINS, VICE PRESIDENT FOR EUROPEAN 
AFFAIRS, EXECUTIVE DIRECTOR OF U.S.-U.K. BUSINESS COUNCIL, U.S. 
                      CHAMBER OF COMMERCE

    Ms. Chorlins. Thank you, Mr. Chairman and Mr. Ranking 
Member, distinguished members of the subcommittee, thank you 
very much for the opportunity to testify today on the economic 
impact of Brexit and how we can strengthen relationship between 
the U.S. and the U.K.
    The Chamber established the U.S.-U.K. Business Council to 
provide a platform for American businesses to be heard as the 
U.K. resets its relationship with the EU.
    Our members are eager to deepen our bilateral relationship 
after Brexit takes place, up to and including negotiation of a 
free trade agreement when the time is right.
    The Council has provided inputs to Brussels and London on 
several issues, including the future of U.K.-EU economic 
relations, the urgent need for an early agreement on a 
transition period, and the dangers of a no-deal Brexit.
    Today's hearing is another useful opportunity to ensure 
American investors' voices are heard. The longstanding special 
relationship between the U.S. and U.K. is built on deep and 
abiding economic and security ties.
    The durability of this alliance derives from our shared 
commitment to rule of law, democratic norms, and free 
enterprise.
    American companies have long looked to the U.K. as a safe 
and certain market. Even though the U.S. has no direct role in 
the negotiations between the U.K. and EU, we have a 
responsibility to advocate for a minimally disruptive outcome.
    If Brexit is mismanaged or if the U.K. crashes out of the 
EU without an agreement, the economic consequences would be 
substantial.
    As had been noted, to date progress in these complicated 
divorce proceedings has been limited, especially on the three 
primary issues of citizens' rights, border in Ireland, and the 
U.K.'s financial obligations.
    European leaders do acknowledge that some progress is made, 
but as of today they believe momentum is not yet sufficient to 
move to discussion of the future relationship.
    Our hope is that they will finally agree to move forward 
with that broader discussion at the European Council meeting 
later this month.
    Still, that leaves less than a year to negotiate and ratify 
the final terms of the U.K.'s exit and to outline the terms of 
their future relationship. The clock is ticking, and time is 
running short.
    Bilateral economic ties between the U.S. and U.K. are 
significant. We are each other's single largest foreign 
investors, and more than 2.5 million jobs depend directly on 
those investments.
    U.S. companies have invested approximately $600 billion in 
the U.K., which represents nearly a quarter of U.S. investment 
in Europe and approximately 12 percent of all U.S. foreign 
investment worldwide.
    British companies have invested more than $480 billion 
here. One point one million Americans work for these companies.
    Every American state has jobs that are connected to or 
originated from an investment by a U.K. company. These are high 
quality and high-paying jobs.
    The U.K. is our fourth largest export destination. U.S. 
goods and services exports to the U.K. exceeded $120 billion in 
2016, building a $15 billion trade surplus.
    Over 42,000 American firms directly export to the U.K. and 
more than 7,500 American companies have operations there. Given 
the depth of our existing relationship, the Brexit negotiations 
and follow-on U.K.-EU talks matter deeply for American 
business.
    It is important to underline that much of the U.S. 
investment in the U.K. was made with an eye toward accessing 
the much larger EU single market.
    A future U.K.-EU trade agreement will almost certainly not 
replicate the economic advantages of Britain's current 
membership in the single market.
    For example, financial services firms are likely to lose 
their passporting rights to operate in all EU jurisdictions 
from their U.K. headquarters. Changes in the regulatory space 
also are anticipated.
    Divergences between the U.K. and EU rules will make 
compliance more difficult and expensive for U.S. companies with 
interests across Europe.
    Digital privacy compliance mechanisms would also be in 
legal jeopardy if the EU and U.K. do not negotiate an agreement 
on data flows.
    This will affect every American company that does business 
on either side of the English Channel. A no deal Brexit with no 
negotiated outcome governing the future terms of trade 
regulation or the movement of labor would be a disaster for 
U.S. companies. The consequences will be immediate and severe.
    For trade, implementing the so-called ``WTO option'' would 
likely lead to sizeable losses in two-way trade and investment. 
The WTO has not liberalized international trade in services to 
nearly the same degree as the EU.
    Services represent an outsized share of U.S. companies' 
investment in and exports from Britain. So a lack of regulatory 
certainty would be particularly damaging.
    How many jobs will leave Britain and where they may end up 
is among the most difficult changes to predict. Many companies 
are understandably waiting for further clarity before green 
lighting any new investments in the U.K.
    American investors have developed worst case contingency 
plans, which they may be forced to execute if clarity isn't 
forthcoming quickly.
    Even as the Brexit negotiations play out, the U.K. is and 
will remain a vital economic partner for the United States. The 
U.K. has a talented English-speaking and tech savvy workforce.
    Its government has traditionally preferred a regulatory 
model that rewards innovation and encourages competition, much 
like the American model.
    The U.K. has been a consistent advocate for the digital 
economy, ensuring regulatory decisions are fact based and rely 
on sound science and has supported a predictable and 
transparent business climate.
    While we will miss that voice in Brussels, the U.K.'s 
departure creates opportunities for the U.S. to strengthen our 
bilateral ties, up to and including a possible free trade 
agreement when the time is right.
    Any commercially meaningful U.S.-U.K. agreement should 
focus heavily on the services sector and also on setting global 
standards in important areas such as digital trade, regulatory 
cooperation, investment protection, promoting trade 
opportunities for small and medium sized enterprises, 
competition, and treatment of state-owned enterprises.
    While traditional market access barriers are low between 
the U.S. and U.K., removing all tariffs would still yield 
significant benefits.
    This is especially true for small companies for which a 5 
percent tariff or an extra customs form may be the difference 
between a profitable sale and a missed opportunity.
    In closing, even as we pursue closer U.S.-U.K. ties, 
strengthening our ties with the rest of Europe also must remain 
a priority.
    The U.S. has promoted a more integrated European market for 
the past seven decades. This has proven tremendously successful 
for the transatlantic alliance and for American companies that 
do business in Europe.
    With that in mind, we must ultimately endeavor to deepen 
trade and investment ties with both Britain and the EU in the 
years ahead.
    Thank you.
    [The prepared statement of Ms. Chorlins follows:]
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    Mr. Rohrabacher. Thank you very much.
    And Dr. Wright.

  STATEMENT OF THOMAS WRIGHT, PH.D., DIRECTOR, CENTER ON THE 
        UNITED STATES AND EUROPE, BROOKINGS INSTITUTION

    Mr. Wright. Thank you.
    Chairman Rohrabacher, Ranking Member Meeks, and 
distinguished members, thank you for the opportunity to testify 
in front of this committee.
    We are gathered here at a crucial moment in the history of 
post-war Europe. The U.K.'s decision to exit the EU I think is 
the most significant and important decision it has taken since 
the end of the Cold War. It raises fundamental questions about 
Europe's future and the United States has a vital interest in 
how these questions are resolved.
    In my written testimony, I provide my analysis of where the 
negotiations stand and where I think they are likely to end up.
    I believe there will eventually be a deal largely along the 
lines laid out by the EU side and I am happy to elaborate that 
in the questions.
    But I would like to use the time allotted to me to speak 
now about American interests in U.S. policy in the Brexit 
process.
    In my view, if Brexit is going to occur, the United States 
has a vital interest in a Brexit that produces as strong and as 
prosperous a U.K. as possible and as strong and as prosperous 
an EU as possible, working closely with each other and with 
America.
    This should be the organizing principle of U.S. policy 
toward Brexit. We should actively consider any steps that can 
facilitate this outcome and we should oppose any steps that 
undermine it.
    With that in mind, I am concerned by the current policy 
pursued by the Trump administration. The Trump administration 
has supported Brexit rhetorically put in practice it has done 
the U.K. few favors.
    Just two quick examples--in a major speech on U.S.-U.K. 
relations in November, the U.S. Secretary of Commerce Wilbur 
Ross made it clear that if the U.K. wanted a free trade 
agreement with the U.S., the U.K. would have to choose between 
the United States and the EU. The U.K. would have to choose 
U.S. regulatory standards and diverge from those of the EU.
    Secretary Ross' logic is clear. The U.K. is in a weak 
position and needs trade deals with third parties so the United 
States can afford to take a maximist position in negotiations.
    Second example--at the World Trade Organization in October, 
the Trump administration sided with Brazil and other countries 
to oppose a deal already reached between the U.K. and the EU to 
divide agricultural import quotas between then, greatly 
complicating Britain's diplomacy.
    More generally, the Trump administration has pursued a very 
passive approach to the negotiations. It sees it purely as an 
internal issue and has not identified any U.S. equities 
including maintaining the Good Friday agreement, preserving 
security cooperation between the U.K. and EU 27, or ensuring 
there is a negotiated settlement between the parties.
    On the contrary, it has given the impression that the U.K. 
and the EU's problems may present the United States with 
immediate opportunities.
    I am in favor of closer economic ties between the U.S. and 
the U.K. But at this time, I do not believe that Washington and 
London should pursue a bilateral FTA along the lines of that 
proposed by Secretary Ross and the Trump administration.
    There are very few tariffs between the U.S. and U.K. so any 
FTA would have to focus primarily on regulatory standards.
    The Trump administration's current policy is to use all of 
the leverage at its disposal including the threat of tariffs to 
compel the U.K. to diverge from the EU regulations and adopt 
ours.
    That, I think, has two problems. The first is that the 
negotiations are unlikely to succeed on these terms and will 
alienate much of the U.K. population. I can expand more on that 
later.
    The second and I think even more critical problem is that 
in the unlikely event that they do succeed on the terms set by 
Secretary Ross, they will by definition reduce the U.K.'s trade 
access to the EU. The more the U.K. diverges from the EU 
regulatory standards the less assess they will have to the 
single market.
    The next effect of this will be to damage the economy of 
the U.K. and the EU, which will also damage U.S. economic and 
strategic interests.
    It should be noted that closer economic ties between the 
U.K. and the EU is, as close as possible, is the official 
position of the U.K. Government, which is seeking a 
comprehensive trade deal. They should be free to do so without 
being pressured and by the United States.
    And more generally, the U.S. should make it clear to the 
U.K. and the EU that it favors a negotiated agreement. We can 
live with almost any deal acceptable to both parties but a 
Brexit without a deal would not be in our interests.
    The United States--finally, as I am running out of time, I 
would like to say a word about Northern Ireland. We are 
approaching the 20th anniversary of the Good Friday agreement, 
an agreement, as members have noted, that many Americans on 
both sides of the aisle have helped to bring about and sustain.
    It is absolutely necessary for the United States to remain 
engaged on preserving the peace in Northern Ireland. I 
elaborate this--on this in my written testimony but suffice to 
say here that this peace I think is threatened by the current 
state of the negotiations.
    If there is not a special--a consideration for Northern 
Ireland to ensure that there is an open border I think it does 
put the Good Friday agreement at risk.
    As a first step, the Trump administration should 
immediately reinstate the position of special envoy for 
Northern Ireland, which I understand was abolished by Secretary 
Tillerson along with other envoys and prioritize and 
preserving--and preserving the Good Friday agreement should 
also be in issue in relations with the U.K. and the EU.
    Thank you very much.
    [The prepared statement of Mr. Wright follows:]
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    Mr. Rohrabacher. Thank you all very much for your 
testimony, and let's just--what I am going to do is I am going 
to make sure my colleagues--you know what I am going to do?
    I know that you have a special place in your heart for 
Ireland, just from what you've said, so I am going to give you 
a chance to talk about the Irish part of this right now before 
we ask the rest of our questions. You can be the lead off guy.
    Mr. Boyle. Thank you. You are very gracious and thank the 
indulgence of my colleagues.
    Dr. Wright, I wanted to follow up and actually this is a 
perfect segue because you just completed on this. I noticed in 
your written testimony you mentioned the recent study by the 
U.K. Government and the EU Commission which identified--and 
this was, frankly, a higher number than even I expected--the 
U.K. Government EU Commission report identified a 142 areas of 
cross-border activities, from health care to agriculture, which 
I was familiar with. There are 142 areas, all of which would be 
detrimentally impacted by Brexit.
    Could you expand on the findings of the report specifically 
as it relates to the border communities, whether they are--
regardless of which side of the border they currently sit on?
    Mr. Wright. Yes. The study showed that the cross-border 
cooperation that was provided for under the Good Friday 
agreement really rests on regulatory alignment between the 
Republic of Ireland and Northern Ireland.
    So the fact that they have the same regulations on 
agriculture, on health, on these wide array of issues, means 
that that they are able to cooperate on these issues, and in 
the aggregate this really, I think, has had a very progressive 
impact in terms of the peace process. It has built trust across 
the two communities and across the border. If there is 
significant divergence in regulations all of those areas of 
cooperation, my understanding is, either come to an end or are 
significantly reduced.
    And so the Irish Government and the EU 27 and the British 
Government I think are concerned by the broader impact of 
Brexit on Northern Ireland separately than the border issue 
which, of course, is also a very severe issue with major 
implications.
    Mr. Boyle. I'll just share one specific anecdote that I 
just heard the other day that crystalizes part of what you're 
talking about.
    The Irish Government funds a world class cancer research 
center and in order to reach the northern counties it decided 
to situate it in Derry, even though Derry is in fact not a part 
of the Republic of Ireland.
    But just geographically, in order to reach that part of the 
Republic of Ireland and the counties in Northern Ireland that 
are part of the U.K. decided that that would geographically be 
the smartest place to put it as that's a big population center.
    Now they are concerned what happens if you have different 
regulations regulating health and the research that goes into 
cancer, what that will do for pharmaceuticals. Essentially, it 
creates a massive headache.
    With the breakdown of talks on Monday where one moment 
Financial Times is reporting breakthrough deal and the BBC 
reporting the same thing, and then about an hour later, not so 
fast.
    This week has, obviously, been tumultuous--probably the 
most tumultuous on the border issue. Again, Dr. Wright, if you 
could discuss the various political issues at play.
    I have had a number of colleagues come up to me asking me 
so what exactly is this about, and if you could elaborate on 
the issues that have prevented an agreed-upon solution to 
prevent a hard border, even though it seems to be something 
that Washington, London, Dublin, nationalists, and unionists 
all agree on and yet in practice difficult to achieve.
    Mr. Wright. Yes. Thank you.
    The British Government, after Brexit, made it clear that 
Brexit meant leaving the single market and the customs union. 
So it would leave and the market that allowed for free movement 
of good, capital, services, and people and the common tariff 
area.
    It is widely believed that if Britain leaves the customs 
union and the single market that there will have to be a 
customs border between Northern Ireland and the Republic of 
Ireland--that without it there would be too--there will be 
danger of smuggling. There will be all sorts of problems that 
would arise.
    And so in order to prevent a hard border from happening, 
either the U.K. has to remain inside the single market and 
customs union as a whole or there needs to be what the 
diplomats I understand call--called regulatory alignment 
whereby Northern Ireland chooses to maintain the regulations of 
the single market and customs union so there would be no gap 
with the Republic of Ireland and there could be an open border.
    And that position is unacceptable to the Democratic 
Unionist Party, which is providing support through a competence 
and supply agreement with Theresa May's government.
    So they are unable to get that through without their 
support and as a result we are at a deadlock because the EU 27 
including the Irish Government is very strongly of the view 
there is going to be a hard border. The DUP is opposed to the 
proposed solution.
    The British Government also says it doesn't want a hard 
border. But it finds itself unable, I think, to support the 
solution that was identified.
    Mr. Boyle. Finally, I just want to ask about the special 
envoys. They are not specifically related to Brexit but, 
obviously, this is an area where a special envoy could help.
    Could you speak a bit about the importance of the U.S. 
maintaining a special envoy, something that was supported by 
the Bush administration, obviously created under the Clinton 
administration.
    That was the formal official role that George Mitchell had, 
something that has happened for the previous 20 years. And 
also, if you could address perhaps a perception by some in 
Washington who maybe aren't intimately involved in this issue 
who just assume oh, that's--that's all well and good, right?
    Didn't they achieve peace and everyone lives happily ever 
after and maybe doesn't quite recognize them. Unfortunately, 
reality is not necessarily as rosy as that picture.
    Mr. Wright. Yes. Very briefly, you know, the U.S. has had a 
crucial role in the Northern Ireland peace process from the 
very beginning, and I think that's been critical to its 
success.
    Secretary Tillerson abolished this position along with 
other special envoys. I think it made sense if this hadn't been 
happening because even though there are problems with the 
governance in Belfast. But with Brexit, I think it is 
particularly important to have U.S. engagement.
    I would just raise one other issues as well that I didn't 
have in my written testimony. But I think there is also a role 
for a nongovernmental involvement by the former diplomats and 
political leaders who have been involved in Northern Ireland.
    For instance, the Irish Government and EU, the U.K. could 
agree to set up an international commission led by an American 
that would try to identify solutions to the--to Brexit that 
uphold the Good Friday agreement.
    They may be seen as more independently minded than the 
Irish Government is by the unionist community. So I think there 
are imaginative ways that we could proceed here.
    But simply having no engagement whatsoever and treating it 
purely as an internal issue with no role for the United States 
I think is regrettable.
    Mr. Boyle. Yes, because, obviously, as we saw throughout 
the '70s and '80s, the British Government is not going to be 
perceived as a neutral arbiter by the nationalist community and 
the Irish Government in Dublin is not going to be perceived as 
a neutral arbiter by the unionist community, hence, the 
positive role that the U.S. can play, having a strong 
relationship with all sides.
    Thank you very much.
    Mr. Rohrabacher. And yes, we are friends with both our 
British friends and our Irish friends, which makes us the 
perfect in between.
    Let me just note there will always be a logical explanation 
of why we need to give all of our rights to make our own 
decisions away to some central government, maybe even some 
global government, and that led to some real problems even at 
the level that Great Britain had given up certain rights, as 
Mr. Gardiner had mentioned. The centralization and the 
bureaucracy that it spawned was not necessarily, or at least 
the British people obviously did not think it was in their 
interests.
    Maybe you can tell us, Mr. Gardiner, what--your analysis of 
where the British people are at in all of this. Obviously, they 
voted by very recognizable majority that they wanted to 
separate from Brussels. What was their reason and tell us going 
from there.
    Mr. Gardiner. Well, thank you very much for the question, 
and a very important question.
    I think the reasons for Brexit are multiple. Primarily, the 
British people voted to leave the European Union to reestablish 
their own full sovereignty as a sovereign nation state, to take 
back control of British laws, Britain's borders, Britain's 
destiny as a free country, and I think the issue of self-
determination was absolutely the heart of Brexit.
    It was also, I think, a desire on the part of the British 
people to be able to really take full control of their own 
border, decide who comes into the country.
    At the moment, Britain does not have that full control in 
terms of people coming in from the European Union.
    But this was also, I think, a rejection of the European 
Union ruling elite seen as increasingly unaccountable, aloof, 
undemocratic.
    It is not just in Britain I think that you have this 
momentum. You see it all over Europe in many European countries 
and the reality is that the European project today is viewed by 
I would say the majority of the British people as outdated.
    It hasn't moved with the times. It is seen as a hugely 
centralized entity, a supranational entity that tramples upon 
the rights of individual nation states.
    And so national sovereignty is fundamentally important to 
the British people and I believe that the U.S. Government 
actually fully understands that and I think the support given 
by the present U.S. administration for the British Government 
over Brexit has been very much welcomed by the British side and 
it is good that, you know, the White House supports Brexit and 
views Brexit as a powerful force that will strengthen the 
special relationship actually which indeed it will do.
    But at the end of the day, Brexit was all about the desire 
on the part of the British people to once again be a truly free 
sovereign people. Those are universal extremely powerful 
principles.
    Mr. Rohrabacher. Excuse me. Is this same spirit not 
identified in several other areas in Europe where we have in 
Spain you have people who want to have their own government and 
you have various peoples now throughout the world actually that 
are suggesting that the right of self-determination is not 
something that just no longer exists in the souls of human 
beings in this modern age.
    Let me just note that I believe that that same type of 
desire for a group of people to control their own destiny and 
not to be controlled by even a group of nations or a group of 
other people is just--it is part of what America was all about 
in the beginning and that--that spirit is still around in 
different parts of the world today.
    And the more you have centralization I know that that's a 
different way of looking at government. The more centralized 
your government and distant is it, the more likely that those 
people holding power will be arrogant and less responsive than 
if you have someone in your local community or your state or 
even in your own country handling those same type of 
governmental decision making.
    And could you, okay--could you please let us know what the 
trade is like between the United States and the EU versus the 
United States and just Great Britain?
    Ms. Chorlins. Certainly. The U.K., as I mentioned, is the 
U.S.'s fourth largest export destination and our seventh 
largest trading partner overall.
    The EU is our single largest trading partner if you look at 
it as a unified market.
    Mr. Rohrabacher. Now, does that include Great Britain?
    Ms. Chorlins. Yes, it does.
    Mr. Rohrabacher. Okay. So how much--I am trying to see how 
much of that trade thing is Great Britain and the two entities 
as compared to one another?
    Ms. Chorlins. I don't have specific facts at my disposal 
but I am happy to provide that in my written answers to the 
subcommittee.
    Mr. Rohrabacher. I'd like to--please do, because when we 
are trying to figure out the economic, you know, impact of 
this, exactly whether or not the EU is in itself absent of 
Great Britain is--dominates or whether Great Britain is 
actually a major force in this. We need to know. Dr. Gardiner 
already has mentioned that the stock market in Great Britain is 
soaring. Is that correct?
    Mr. Gardiner. Well, it has soared since the Brexit 
referendum and I'd say that, you know, Britain is doing 
extremely well in the Brexit era, including in terms of foreign 
direct investment, which has risen significantly over the past 
year and tens of thousands of new jobs have been created in the 
U.K. since the Brexit referendum.
    It is significant that Google, actually, is building a 
brand new European headquarters in London at the cost of $1 
billion, employing 7,000 people.
    It is a sign of U.S. confidence in Great Britain and the 
United States has invested in the U.K. about $5 trillion worth 
of corporate assets. That's 22 percent of America's total 
overseas corporate assets invested.
    Mr. Rohrabacher. Now, I find that predictions of gloom and 
doom when someone is trying to make political determinations 
usually are absolutely wrong--I mean, just totally wrong.
    And we had--don't want to rub it in too much but the fact 
is that we were going to face a major economic crisis and the 
stock market was going to the bottom if our current President 
was elected and it has had--and we have seen just the opposite.
    And so when trying to determine what economic viability is 
we should actually look at the figures, figure out what is--and 
let me ask Dr. Wright.
    So what do you predict in terms of economically this--a 
separate entity with Great Britain? Is this going to be a 
positive economic force for both Britain, maybe even Europe, or 
is this going to be a negative force?
    Mr. Wright. I think it is negative for both the U.K. and 
the EU Brexit, I think, will damage the U.K. in several 
respects.
    The first is that the proposal by the British Government is 
to engage on this global economic diplomacy to secure trade 
deals with all sorts of countries including the U.S. They are 
doing so at a time when protectionist sentiment is at post-Cold 
War high. So it is extremely difficult to negotiate trade deals 
in that environment.
    The city of London, which is probably Britain's most 
important services economy I think will lose much of its 
ability to do business for the EU because of the lack of what's 
called passporting rights that it enjoys under the single 
market.
    Mr. Rohrabacher. So you're predicting a, for----
    Mr. Wright. There will, I think, be something of a--
something of a decline. The other--the other--I don't know how 
large it will be but I think it will--it will damage the 
British economy overall.
    And the final point is that it is often said that Britain 
can deregulate if it leaves the single market and reduces the 
number of regulations.
    The opposite is also possible. If Jeremy Corbyn were to be 
elected Prime Minister, he will be free to massively increase 
U.S. regulation beyond that which is enjoyed--which is imposed 
by the EU at the moment.
    So you could easily see the arrow going the other direction 
as well. So I think it is quite risky. That being said, they 
have decided to leave, which is why I have argued for as close 
an economic relationship between the U.K. and the EU and 
between the U.S. and the U.K. and the EU.
    So I think it is important to make sure that this works if 
this is what they want to do. But I don't think we should 
believe that there is enormous economic opportunities out there 
that have not been availed of to date.
    Mr. Rohrabacher. And Dr. Gardiner, you're not--you're 
pretty optimistic as compared to pessimistic?
    Mr. Gardiner. Yes. Actually, I mean, just in response to 
Dr. Wright's comments, I would say that there is no evidence 
whatsoever of any flight of capital out of the city of London 
since the Brexit referendum. In fact, quite the opposite is 
happening.
    And as we saw, when Britain decided not to be part of the 
European single currency, the city of London, the world's 
biggest financial center, thrived and prospered outside of the 
single currency and I think we are going to see the same thing 
with Britain outside of the--outside of the European Union, 
freed of the immense regulatory burdens that exist within the 
EU.
    And so there is not a shred of evidence to suggest that 
Britain's economy or the city of London will suffer as a result 
of being outside of the European Union. Not one U.S. investment 
bank, for example, has decided to close its offices in London 
and relocate elsewhere in Europe.
    So American confidence and global confidence in the U.K. is 
extremely high and already Britain is beginning to enter into 
trade discussions--negotiations with over 70 countries across 
the world.
    And so there is every reason to believe there will be a 
highly successful U.S.-U.K. free trade deal and trade 
agreements between the United Kingdom, the world's fifth 
largest economy, and nations across the--across the globe.
    Mr. Rohrabacher. Well, thank you, and we will wait and see 
what happens and then we will--some--one of you guys are going 
to have to buy the round of drinks for whoever--whoever was 
right on this one.
    Ms. Chorlins. Mr. Chairman, I would just note that while it 
is the case that jobs may not yet have moved from American 
companies who are present in the U.K., it is very much the case 
that American companies have significant contingency plans in 
place and some of them have in fact announced their decision to 
move some part of their employee base from the U.K. to the 
continent because of this uncertainty about the relationship in 
the future. That's just the practical reality.
    Mr. Rohrabacher. So when--we will wait and see if Britain 
has a market that will attract more companies back. Then it is 
making its own decisions as compared to whether it is making 
its economic decisions with all those other countries being 
involved and setting the policy that Great Britain will have 
just like everybody else.
    So with that said, Mr. Meeks.
    Mr. Meeks. Thank you, Mr. Chairman.
    I was going to ask that very same question because I know 
in our--talking to some of our--coming from New York, my 
financial services community where we have got, you know, huge 
trade in financial service and in services that they are 
talking about contingency plans now as to whether they move.
    Some, of course, coming back to New York and staying there 
but others are looking at some other European cities because 
they also want that connection with the EU because they are, 
you know, as you said, collectively part of our largest trading 
bloc collectively and they are trying to figure out how they 
will continue with both because they are significant--it is 
significant for both the EU and the U.K.
    I am just--one of my concerns, of course, is I think that 
the unity of the EU and setting rules collectively together, 
working together, and we have been looking at standards even 
with the United States.
    It helps us with global trade and the economies all of over 
the place. The lack of that is why I started out in my 
statement of lose-lose-lose.
    I see there is opportunities for each and every one of us 
to lose in that regards if we don't figure out how to make sure 
that we are working on doing this thing collectively, which is 
why--and I'll start with you, Dr. Wright.
    I didn't, you know, try to figure out why then would Prime 
Minister May commit to bringing the U.K. outside of the custom 
union and single market, thereby having a hard Brexit early in 
the negotiations since, certainly, it would make sense for 
Britain to remain within the customs union, I think, similarly 
like Turkey has, considering how much trade the U.K. and the 
EU. does.
    So, I mean, can you give me any--fathom of the reasons why 
or difficulties that are----
    Mr. Wright. Yes, absolutely.
    I think that the--it is a terrific question. I think the 
short answer is that to remain part of the single market, which 
would allow them to essentially continue to trade in the 
financial services sector and all of its other service 
industries, would have meant accepting the free movement of 
peoples because there are four freedoms to the single market--
goods, services, capital, and people.
    And the EU has said that those are indivisible. You cannot 
cherry pick and say we are going to take three of the four.
    The U.K., I think, would like to cherry pick and would like 
to take some of those and keep their access on those but reject 
the others and the EU has rejected that because the integrity 
of the single market is of vital importance to them and as a 
result Theresa May's--Theresa May's government has said it is 
leaving the single markets and customs union.
    I would be interested in Nile's view on that, too. I am not 
sure we'd probably disagree much on the diagnosis of why that's 
the case. But I think that's the nub of the--of the 
disagreement.
    Mr. Gardiner. Yes, that's an excellent question.
    So I think Dr. Wright has made some very good points. It 
would be really impossible for the United Kingdom to remain 
inside the customs union and the single market if it is to 
become a truly sovereign nation.
    If Britain remains inside the customs union it would not be 
able to negotiate its own free trade agreements and this--this 
is a big part of Brexit, the idea of Britain being a truly 
global actor free to negotiate its own free trade deals all 
over the world including with the United States.
    As a member of the--as a member of the customs union, 
Britain would not be able to that. As a member of the single 
market, Britain, as Dr. Wright mentioned, would not be able to 
control its borders.
    It would have no say really over who comes in from the rest 
of Europe. And so fundamentally important issues.
    And so the British view to retake control and reasserts its 
sovereignty. And so remaining in the single market and the 
customs union would be impossible if it was to honor those 
commitments.
    Mr. Meeks. It sounds to me that you're talking about part 
of the issue with Brexit has more--has also to do with 
migration and the problems that was taking place on the 
European continent as opposed to talking about, as Mrs. 
Chorlins is talking about, the integration of markets where we 
can do trade and collectively there is the free flow of 
business going across these borders. Is that not correct?
    Mr. Gardiner. I think certainly that's--the issue of border 
control and immigration was an important factor in the Brexit--
in the Brexit referendum--a major issue.
    But I do believe that Britain is in a position to negotiate 
a strong free trade agreement with the European Union. Britain 
should continue to be able to have that access to European 
markets.
    It is in the interest of the United Kingdom and the EU to 
reach an agreement that is good for both sides. After all, a 
huge amount of exports from the EU go into the U.K.
    You look, for example, at the German car market. About one 
in every four or five German cars goes to Britain. And so it is 
Germany's interest to strike a good--a good deal.
    And I think that a free trade agreement between both sides 
actually would be in the interest of both Britain and the--and 
the European Union.
    Mr. Meeks. Except I have found that, you know, sometimes 
initially it is thought that the EU would just accept whatever 
the U.K. said in this.
    U.K. would be able to dominate that discussion and the U.K. 
I think is finding out now that the EU is not just going to 
give them whatever they want. That is not what the realities 
are starting to show, and as a result, there is going to be a 
give and take.
    And I know in talking to some of our companies in the 
United States as a result because one of the things that 
business does not like--and I'll ask Mrs. Chorlins--is 
uncertainty where you don't know, because they have to plan for 
five and 10 and 15 years down the road.
    They can't move, you know, just with--on whim with an 
uncertainty. So I think that would have--that's going to affect 
overall how we determine and where we negotiate free trade 
agreements.
    In fact, Mrs. Chorlins, you said that we will want to do 
something with the U.K. when the time was right. That was an 
important piece--when the time is right. When would that be?
    I mean, I understand from the agreement with the--with 
Brexit and that you can't negotiate anything until at least 
after 2 years after the deal is done.
    So how far down the road is it and how does that affect the 
thinking of our American companies as to how they are going to 
do business or where they are going to do business, whether it 
is in the EU or the U.K. or anyplace else and try to do a deal.
    Ms. Chorlins. Mr. Ranking Member, I think you touched on a 
very important point about the need for certainty and that's 
why the business community has been as active in pursuing or 
following these negations.
    As far as when the U.S. and U.K. could actually negotiate a 
trade agreement between themselves, that's driven largely by 
when the EU and U.K. complete their negotiations.
    Until we know what the U.K.'s relationship will look like 
with the EU, it will be impossible really for us to know what 
the right terms should be for a U.K.-U.S. negotiation.
    So the timing really is largely driven by the pace at which 
the U.K. and the EU negotiate their own future trade 
arrangement.
    But you're absolutely right, certainty is something that 
the business community is eagerly looking for in this process, 
and we have gone out of our way to make clear to both the U.K. 
and the EU governments that uncertainty about the way forward 
is going to have a detrimental economic effect.
    Mr. Meeks. And then, you know, because it becomes 
important, you know, to me still once Brexit is done that the 
EU and the U.K. still have relationships.
    But my question is how will the U.K. be able to maintain a 
friction-free trade with the EU's internal market after leaving 
it because it rules out the European court of justice 
jurisdiction and continued regulatory alignments.
    So how is that going to work?
    Ms. Chorlins. Mr. Ranking Member, I think you've put your 
finger on what is the I don't know how many billion euro 
question.
    But the real issue is, indeed, how do you structure a 
relationship that minimizes the friction when you have to 
thrash out issues such as the Irish border where we risk 
serious delays if a border is reimposed and there is real 
economic cost associated with that.
    I think that we have yet to see from either the U.K. or the 
EU clear indications of what their thinking is about the future 
relationship between those two.
    Clearly, both sides want to sustain a strong relationship. 
They need each other. But how that works in practical terms is 
very much an open question and one that both sides are working 
through in very real time.
    Mr. Meeks. Mr. Wright, do you want to add anything? Dr. 
Wright. Excuse me.
    Mr. Wright. Yes. There is no way, I think, for the U.K. to 
have as much access as it currently does if it leaves to single 
market and the customs union. It is just impossible.
    Any deal that they do will be significantly less in terms 
of access. A deal will not be agreed by March 2019. By March 
2019, they propose only to have a broad political statement 
about what the deal would look like.
    It would then take many years for the trade deal to be 
negotiated. It has to be ratified by every single country in 
the EU including several by referendum.
    So during that period of time there will be a transition 
deal under which it almost looks certain that Britain will have 
to abide by all of the rules of the single market and customs 
union without any influence or votes. And so there is a problem 
about how that deal would be structured.
    I think that--I very much agree with you. I think that is 
why remaining in the customs union and the single market would 
be a better choice for the U.K.
    But this government has decided not to do that. 
Interestingly, it was not necessarily a key part of the 
referendum campaign. Some people said that. Some people did 
not.
    And so there wasn't a unified position on it in advance. 
But I think therein lies the risk for the U.S. economy because 
the U.S. really needs a strong U.K. and a strong EU. It was 
mentioned a number of times in this but the U.S. actually does 
benefit from the EU.
    If there is a Eurozone crisis or a breakup of the Eurozone, 
that will cause a global financial crisis. The EU is a vital 
partner of the U.S. and economic security like sanctions that 
isn't a part of NATO or any other military organization.
    You know, so it has all of these--it has all of these 
benefits for the U.S. So I think moving the lose-lose-lose to a 
win-win I think is a major challenge.
    Mr. Meeks. And the way we do things today when you're 
talking about trade I think Mrs. Chorlins talked about it--data 
flows, which is important and how that's worked, and supply 
chain.
    You know, as we are talking about trade now, supply chain 
is important. This is the way it develops. We no longer, you 
know, the economy and trade we did it in the 19th and 20th 
century.
    This is the 21st century. Globalization is here. Things go 
faster in speed than ever imagined before and there is 
interconnectedness that depends upon our strength and if there 
is a part of the chain that is weak then it could hurt and be 
devastating to everybody as we saw what took place when we had 
the financial crisis in the United States in 2008.
    It affected everybody and not just the United States, and 
that's why this is so important to all of us, whether you come 
from--whether you're part of the EU or now a part of the U.K. 
and, of course, the United States and why I feel that we have 
got to make sure that there is, and we tell them this so that 
can be a win-win-win because if we don't, we all will be 
victimized and lose from it.
    And I yield back to you.
    Mr. Rohrabacher. Well, thank you very much and thank you, 
Mr. Meeks. I think we have had a very worthwhile discussion. I 
am going to wait and see which one of you two guys in 
particular--she was right there in the middle of all the facts 
but you guys had your--have your opinions on this. This isn't a 
safe seat or this is so we will watch and see.
    Let me just note that I am really proud that the United 
States led the way on this whole idea of self-determination. I 
think that our Declaration of Independence says it all. 
Government only derives its powers from the consent of the 
governed and people have a right and must declare their right 
to control their own destiny, and we declared that in our 
Declaration of Independence.
    That spirit, I think, is alive today and not just in Great 
Britain but in other areas of the world where people are no 
longer accepting the domination of other groups of people. And 
I think that when you have a bureaucracy, and bureaucracies are 
always arrogant, even if they are local bureaucracies, but they 
become ever more arrogant and ineffective as far away from 
those people who they are regulating as they go.
    The farther away they go, the more arrogant it is, and I 
think of the people I know in Great Britain who talked about 
Brussels had a deep-seated just antagonistic relationship with 
Brussels--people over there who they don't know who they are 
and maybe don't even like people in Britain are making 
decisions for them, economic decisions that affected their 
lives.
    I think that whole spirit--I know there are a lot of people 
who think the spirit of nationalism is a negative force in this 
world. I think that those--the greatest sins that have been 
committed against the people on this planet, the human race, 
have been done so by some not nationalistic enterprise but 
instead by some global vision of whether it is radical Islamic 
global world or whether it is some sort of communist world--
some ideal that they were going to superimpose and that all the 
different things would then disappear because you'd have a 
centralized government or based on benevolence and the 
benevolence of those people would just come out naturally. I 
don't think so. I don't think that's what government--I don't 
think that's what happens. I don't think that's what actually 
history will record, as the bigger the government gets and the 
further away and the more it is going to control our lives for 
the benefit of all, the more people get stepped on and the less 
progress there is.
    This is especially true, I believe, in this modern age, and 
the fact is today smaller entities of government, whether it is 
Great Britain as compared to all of Europe or whether it is 
Singapore, whether it is--whatever entities are there, you can 
do now--you've got global communications and global transfers 
of wealth in one form or another in order to do business, and 
that didn't happen in the years before. Maybe you needed a 
bigger government at that time. But now you can have small 
entities that are communicating with big entities all over the 
world.
    I'll be waiting to see whether or not, once this thing is--
all these things are settled--whether or not more people will 
be trying to invest in Europe or whether more people will go to 
Great Britain that is a--that is now separated from the EU. 
That will be a very important historic occasion and it is ours 
to see what happens with this.
    So thank you for leading our discussion today. Thank you, 
Gregory, for your major--he always contributes. It is always 
right to the matter. We disagree on some things. But he is 
really a genius and we love him.
    So with that said, thank you all. This hearing is 
adjourned.
    [Whereupon, at 3:56 p.m., the committee was adjourned.]

  
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