AMERICAN ENTERPRISE INSTITUTE

BETTER OFF TOGETHER? A CONSERVATIVE CASE FOR THE

DISCUSSION PARTICIPANTS:

DALIBOR ROHAC, AEI

ROBERT B. ZOELLICK, GOLDMAN SACHS

PANEL DISCUSSION PARTICIPANTS:

NILE GARDINER, HERITAGE FOUNDATION

MICHAEL LEIGH, GERMAN MARSHALL FUND OF THE ;

DALIBOR ROHAC, AEI

MODERATOR: KIRSTEN D. MADISON, AEI

10:00 AM – 11:30 AM WEDNESDAY, JUNE 15, 2016

EVENT PAGE: http://www.aei.org/events/better-off-together-a-conservative-case- for-the-european-union/

TRANSCRIPT PROVIDED BY DC TRANSCRIPTION – WWW.DCTMR.COM

DALIBOR ROHAC: A very warm welcome to the American Enterprise Institute. My name is Dalibor Rohac and I’m a research fellow with AEI’s foreign policy department. And I’m tremendously excited to host this event today for two main reasons. The first one, obviously, is that we are now eight days from the UK’s referendum, which is bound to be a historic vote no matter what the outcome is.

But I’m excited also for a more selfish reason, which is that this discussion also happens to be the first US event I’m doing on my new book, “Towards an Imperfect Union: A Conservative Case for the EU,” which is available both in hardcover and in very reasonably priced paperback version just outside of this room. And if I may say so myself, it would make for a wonderful gift for your children and your relatives and your Euroskeptic friends.

On a more serious note, they say that the EU combines French wisdom, Italian efficiency, and German compassion. And it might be for this reason that I started my own intellectual journey as a fairly staunch Euroskeptic. I wrote my first diatribe against the EU at the age of 17. I interned at some moment for the office of the president of the , Vaclav Klaus, a fairly prominent Euroskeptic politician who once compared the EU to the former Soviet Union. And if you Google my name, actually a long list of anti-EU articles will pop up published in outlets ranging from the National Review to The New York Times.

And I still believe quite strongly that the EU is in many ways a flawed organization, an organization in need of reform. But over time, I have come to appreciate that it also fulfils a number of roles that actually should be very close to the hearts of free-market conservatives and classical liberals. What I argue in the book is that Europe today, regardless of where you stand on the EU and and Brussels, the EU today is more prosperous, democratic and economically open than at any given moment in history, and I think this should give pause regardless of where we stand on, you know, on Brussels, overregulation, and the crisis.

And, furthermore, Europe is coming these days under an unprecedented amount of stress. Some of it stems from its own internal dysfunctions, but a lot of it is coming from the outside, from Mr. Putin’s aggression and revisionism in Eastern Europe, from the turmoil in the Middle East. And in these circumstances, which really are dramatic at times, I’ve come to believe that it’s irresponsible to be a cheerleader for European disintegration. And some of it, I explore in the book.

And what I propose that we do today is, first, for me to have a conversation with our guest of honor, Robert Zoellick, which will be then followed by a panel discussion on Brexit, which will be moderated by my learned colleague here at AEI, Kirsten Madison.

Now, our special guest today, Robert Zoellick, really requires no introduction. He served as the 11th president of the World Bank. He served as the deputy secretary of state, US trade representative, White House deputy chief of staff under President George H. W. Bush, counselor to James Baker, both in his capacity as secretary of treasury and the secretary of state. He has held since then, countless positions in business, academia and the think-tank world. And I could, you know, spend an hour going through his various affiliations and achievements.

But what I think is more interesting is to actually ask him some questions on the EU and on the US perspective on . In fact, the origins of the European project, one could argue, are very closely linked to America’s role in the world after the Second World War and to its commitment to keeping Western Europe free from Soviet expansionism. And I wonder if Bob could tell us a little bit about that history and about how relevant it still might be for our current discussions about the future of the EU.

ROBERT ZOELLICK: Well, first, thanks to all of you for coming. Thanks to AEI for inviting me. Congratulations to Dalibor on his book. I read it all in manuscript and I will second his suggestion. There’s some very good history, which I think is a useful background for reasons we’ll discuss, but he also comes up in the closing chapters with some interesting ideas in two categories, which I hope we have a chance to talk about.

But as Dalibor mentioned, I think, for me, a good starting perspective is to understand US attitudes toward European integration really in the post–World War II construction of an international order, which in many respects people are now taking for granted, but in my view, whether it’s across the Atlantic or the Pacific, is quite fundamental. And what we even saw over the past years is when the United States creates vacuums, good things don’t necessarily happen.

I, coincidentally at the same time that I was reading Dalibor’s manuscript was reading some draft chapters of a book that Ben Steil is putting together on the Marshall Plan and it probably won’t come up until next year. And Ben produced a very interesting book on Bretton Woods and the creation of the IMF about a year or so ago.

And what’s striking in the history of the Marshall Plan is that far more than the financial sums involved, which are about I think $120 billion in today’s money, was a core US belief that Europe had to achieve an economic and political integration. Indeed, Will Clayton, who’s one of the understated heroes really of the creation of the Marshall Plan — by the way, the man who also really created the GATT for the United States — was strongly committed to the idea of a customs union, which in the literature and the thinking at that time was sort of a, you’ll find it in sort of different venues. And, in fact, this was an idea he was pushing on the Europeans, who were somewhat resistant.

And I think Dalibor talks about this in his book. When you actually go back and you look at the barriers among European economies in the ’20s and ’30s — quite significant. It was not only a question of reducing trade barriers. A very important part of the Marshall Plan’s success was the creation of a European payments union, and a significant amount of the money from the Marshall Plan goes to create the financing of that so people can trust and have the exchange of goods.

Now, of course, there’s a key political economy element, which was — what we were going to do with Germany. Many of you know the history, knew about the Morgenthau Plan, the idea that it was going to be made some pastoral land. One of the practical realities the Americans had to face was they were going to have to subsidize the survival of people in Germany unless they got Germany back on its feet. And it was also clear when you looked at the economic structure, the industrial structure of Europe that unless Germany was part of the economic recovery, there would be no success whether it was coal or iron and steel. An amazing amount, despite the strategic bombing of German industry, had survived but there was also a political dimension, particularly for the French but also from Benelux and others, which was if they were going to allow the Federal Republic of Germany, it was then starting to be created, but the Western European zones to start to recover, then what were they going to do to give political reassurance, because they learned after World War I the failure to do that.

So what you really have is from the core idea an integration of economic notions, political notions, and security notions. And I would argue — this is a larger point — with some stumbles along the way, this is what the United States has tried to create in North America, in the Atlantic, in the Pacific. And while, of course, it’s gone through many adjustments over the past 70 years, if people just think that they can dismiss it or deconstruct it, they’re running a very big risk.

MR. ROHAC: So, Bob, you’ve worked quite closely with then Secretary of State James Baker on German reunification around the time when the Cold War was coming to an end. What role, if any, did the European Economic Community at the time play in the process? Would your job have been easier or more difficult if it weren’t for these political structures that existed on the continent?

MR. ZOELLICK: Yeah. This is a very interesting perspective because, obviously, over the 70-year period I’ve just sort of flown past, there had been critical adjustment periods. And one is clearly the end of the Cold War. And if you go back and look at a speech that Secretary Baker gave in Berlin in December of ’89, so this was shortly after the Wall came down, there was much turmoil. Some of you who studied that period know Kohl had just put out some points and principles about Germany coming together. This was an extremely divisive topic all across Europe and there were a lot of fears.

And so what we did was to put the concept of German unification, which we believed was important to keep our alliance commitment, frankly, to create a democratic Germany, but within the Trans-Atlantic and European structures that had been created over 40 years. So this was partly a united Germany in NATO, but it was also partly the recognition that the EC had to play a role.

Now, there is an interesting dimension to this. President Bush 41, who of course would be facing reelection in ’92, was somewhat concerned about EC ’92. That was the phrase for the integration project. Because he was worried that it would create a more protectionist Europe at the same time that he was going to reelection. Probably the most critical conversation he had wasn’t with me or other people in the US. It was with Manfred Worner, who, at that time, was the German Secretary General of NATO, who explained to President Bush the critical role that the European Community, the EC at that time, becoming the EU, played in a sense of political as well as economic and security comfort in Europe.

So in the speech that Baker gave, he talks about not only the importance of the EC continuing its integration, but a US relationship with the changing EC. And I think this is a key point continuing today. The idea was the United States wouldn’t have to choose whether you’re just going to use European structures or national governments. Frankly, we would work both. But as the European structures were created, we wanted to have special links and bonds with them so that we could try to work those channels as well as the national channel.

There was a third piece. Some of you may recall the CSCE, which became the OSCE, and that was to try to create a broader body — many of you know its origin or the role that it played in the human rights community — to try to see if as Europe expanded and enlarged, and in a sense we had a Europe whole and free, that this could create the basis for institutional support for democratization in Eastern Europe.

And coming back to your own story, a key notion of this was assuring the Germans that we are committed to unification, reassuring the Western Europeans that they were not going to have a unified Germany that they were afraid of, but also making sure that the process of unification for Europe included Eastern Europe. And it was very clear in our thinking that the EC then becoming the EU would be a key portion of that.

And, frankly, we can come back to this a little bit more, but my experience in general with the notion of a single market and the integration of the market was that while we, of course, have frustrations in many areas that we think are based on different concepts, values or pure protectionism that, by and large, the benefits of that, including for reducing barriers and helping the Eastern European countries coming into sort of a democratic community, were absolutely vital. So from the very start, the EC and then the EU become a key point of our thinking.

It’s interesting at the same time for those with the global trade perspective we were trying to complete the Uruguay round, which we did shortly thereafter. In ’92, there was a key agreement that the then Clinton administration was able to complete and pass, also North American integration. So these notions of a regional integration in a global system in my view don’t have to be in contrast, but of course it depends on the policymakers.

One last point I guess on this, which is that another strategic concept of ’89 and ’90 that’s valuable for today was a recognition of Germany’s role. And while part of our commitment to German unification was — (inaudible) — to an ally, part of it was a very practical recognition that in the Europe that would be created, Germany would inevitably be the most influential country. It wouldn’t be the only one, but it would be the most influential one.

And one of the aspects of our strategy that I think has actually waned somewhat in recent years was to try to develop a partnership with Germany, recognize that Germany needs to work through European structures because Germany would be most influential with the issues that would come to the future, which we couldn’t foresee.

MR. ROHAC: One possible response to the account of Europe, EU’s history, would be to say that the Europe today is different from the Europe of early 1990s and it’s even more different from the postwar Europe, during which there was really no alternative to some form of political and economic integration of the continent. So if you sort of step back from a historical approach towards this and look at Europe today, what would you say are America’s interests on the continent and how are they being served by the existence of an integrated political structure in Europe?

MR. ZOELLICK: I think the historical foundation is often useful because you then can build on those concepts. So, one is the security. And if we start with a geopolitical concept and go back to Mackinder and think about Eurasia as the world island and the United States in a sense is the island continent or a North America often ashore, our strategic interest is making sure that we have access, and, if possible, friends on the Western and Eastern and to the degree southern borders.

And avoiding a negative, we never want to have one power or an axis of powers — whether it was Nazi Germany and Imperial Japan, whether it’s the Soviet Union — dominate that space. And so, in that sense, not only having access to Western Europe but having alliance, having friendships, having in a sense some shared role as NATO plays but also as the EU plays is very important.

Second, economic growth. So, look, there’s a lot of complaints about Europe but, frankly, there’s a lot of complaints about everybody’s economy these days. And if you talk about the history over the past period — and, frankly, I would argue going forward — the success of Europeans’ growth, which can be — it still goes back to a lot of issues related to the single market, is absolutely critical to the success of development globally, in the , with whatever happens with the Middle East, with Central and Eastern Europe, with the United States. And a good example of this is, look at the transatlantic business networks. Look at the investment patterns. Look at the trade patterns. There’s an enormous communality of interest. What sometimes happens is the understandable frustrations that diplomats or other students have in different issues sort of swamp the larger dimension.

Then, third, Western Europe, European Union today is a democratic union. Now, frankly, as you know, there’s parts of the union that are having their difficulties. They’ll have to figure out how to deal with some of the reversions, whether it’s in or some of the questions in and others. But, again, as somebody who’s worked globally, all I can say is that to have countries that basically say, share your value system on norms and freedom, is a real plus.

The other piece, and this goes to your institutional dimension, which is, you know, one of the strengths of the US over the past 60 or 70 years is that we operate with allies and coalitions. And if you’d been, you’d had this experience which you recognize as taking each new issue as a matter of first impression is much slower, much more inefficient. You want to have patterns of practice. You want to have patterns of discussion with people. You want to have some sense of history of dealing with problems.

I remember in the First Gulf War, and we were moving a lot of military equipment out of Western Europe. And one of the — and, frankly, the Germans were critical in terms of trying to get a lot of the heavy armor out. And one of them said, oh, I get it. It’s Reforger in reverse, which was the operation to reinforce the Western European forces and we put that in reverse. So it’s easy to forget kind of these sort of commonalities of effort, but I think they’re quite important going forward.

And if I would extent that one more point, I would say that, you know, I would say that — you know, I’ve been doing a lot of work with and East Asia. Well, you know, having the Europeans and others look upon China’s rise not only as an economic issue, but with the political dimensions, with the security dimensions in the South China Sea, that will be very important for the United States going forward. So it’s seeing Europe as a close partner that — and if you’re going to look upon Europe as an entity, while NATO is a key point of it, the European Union with its economic and political dimensions is absolutely fundamental. And the fragmentation that people are now facing today in different areas is very dangerous.

MR. ROHAC: Which I think is a nice segue to my next question. When I was writing this book, I was — as a Euroskeptic, I was second-guessing myself. Have I sold out? You know, I haven’t fallen in love with Brussels in any way, and yet, I was writing a conservative defense of the EU. And I suppose one explanation that I’ve come up with for that was that it wasn’t so much my views that have changed, but rather the world that has changed. And so I no longer believe that the emergence of a European super-state is a credible threat to freedom and prosperity on the continent. Rather it is this fragmentation and the sort of disintegration reverse of something like we know from the 1920s and 1930s that is a real risk in Europe. What do you think are the biggest dangers facing Europe and the Western order more generally?

MR. ZOELLICK: Well, the one that starts out from these sort of implied by your point is Russian revanchism. You know, we’ve seen, you know, violate post–Cold War norms by taking pieces of territory of its neighbors. We see the threat it creates in . If I were in the Baltics, I would be worried that if Putin perceived that the West, including the EU and NATO could be overrun in this, would he take advantage of this situation? Yes, he would. And people ought to be well aware that the Russians are spending money in different areas to try to undermine some of the less developed democratic systems in Eastern Europe. So that’s one.

Number two is in a sense an effect of another one, which is the refugee flow. I mean, I think as I try to understand the rise of a broader populism, whether you see it in the United States or Europe, the massive flows of people are clearly very disturbing to lots of communities — how they assimilate them, the sense of the differentness that it creates.

And I think dealing with the refugee flow or, another way of saying it is having Europe be able to secure its borders would be fundamental. That’s obviously related to the broader turmoil in the Middle East and the fact that almost every country is now either a battleground or a belligerent, I think Petraeus had said about it, that leads of course to the relation of the issue of terrorism, whether it’s internal or external.

And then, on top of that, you have the question, since we focused on economic growth, the combination of macroeconomic policies, structural policies, which is why I put a lot of emphasis and which I think your work does as well. And also kind of the general sense of direction for innovation in Europe, where those will lead for Europe’s ability to contribute to global growth in a more open system.

And then, what it’s also creating — and you alluded to this — is political fragmentation, so it’s not only the danger of national groups and fragmentation as we’re talking about with the EU and Great Britain or whether Scotland hives off or Catalonia or others, but it’s also the question that traditional centrist parties, whether the left of right that maintained a kind of a sense of general direction, whether that will persist. There’s an interesting piece in the FT by Ganesh, who I find often does very thoughtful pieces about kind of how you might have some political shift and transformation in the British context, from sort of looking at that.

So those are all core issues. And if you think about the US interest that I just talked about — economic, security, politics, democratic partner — those all go to the core of them. And frankly, it’s one of those aspects where, you know, how the United States would support and work with European partners today is different than 1946, ’47, 1989, ’90s, but it’s just as important. And there are ways in which I think the United States could be more supportive, recognizing European decision-making than it is today.

MR. ROHAC: So I think we can all agree that Europe is not in a good state, and I’m sure there are thousands of Europeans watching us live right now, all hungry for answers on how the various European problems can be fixed. Do you have a silver-bullet solution to Europe’s problems?

MR. ZOELLICK: No. There is no silver bullet. I mean, your work — given your work in political philosophy and economic draws back some of this. Look, on the structural side, you know, whether it’s Edmund Burke or you revive on Hayek’s work on some of the political economy issues, a lot of this is going to be of a sort of incremental nature. That’s the way that political systems often adjust.

I do think that what — if I could reflect the frustration that I’ve had with the European decision-makers, they sometimes will spend endless amounts of time on the process and the structure as opposed to trying to solve the problem. And I think in most polities, if you had people — however it’s done, and I can think of different ways — secure Europe’s borders, that would be a very big plus. There are ways in which the national governments as well as the European governments could take steps to help with Europeans’ sort of economic growth and recovery. And you touch on a little bit of this, kind of the combination of kind of the right stimulus policies, but frankly monetary policy only buys time. You have to understand kind of what the structural reforms will try to be made.

So my sense is that, again, from a US perspective, the practical sense is you work with the institutions, whether it’s the ECB, the EC, or the European Investment Bank, but you also work with the countries. And one of the key aspects of diplomacy, because we can rant as much as we want about Europeans, you know, and maybe that serves certain interests but it doesn’t actually get something done.

And so let’s Germany as a case. So many economists would believe that Germany should have more stimulus policies. Well, frankly, going, as this administration has done, to the Germans and saying, you should spend more, is like spitting in the wind. It just goes against every aspect of the political culture. Going to the Germans and saying, look, if you look at the investment numbers, public investment and also private investment, it’s actually been not as strong as it should be and could you take policies that we’ve seen in other countries with investment tax credits, depreciation, others to encourage private investment? I’m not sure the Germans are going to buy into that, but there’s a better chance.

And so part of the challenge — and this is where your book is also I think very helpful in this — is if you’re going to be effective as an American in trying to influence European behavior, it’s helpful to know how Europeans have thought about this. And it’s interesting to know their fears, their anxieties, the values and, frankly, try to work the system to best effect for the US and them.

MR. ROHAC: Well, there of course is a project of economic integration on this side of the Atlantic as well, the NAFTA, which seems like a much lighter touch form of economic and political integration. Do you think there are any lessons that the Europeans could learn from what’s happening here and vice versa? Is there anything that the Americans should pay particular attention to, maybe Europe?

MR. ZOELLICK: This also is where I think in each situation you have to look at the history and political culture experience. For reasons of history, the three countries of North America — the United States, Mexico and Canada — are highly sensitive to their independence and sovereignty. In the case of Mexico, we took a third or half of the country in the Mexico war.

In the case of Canada, their position was always, again — I mean, the creation of the confederation of Canada in 1867 was partly because London was worried after the Civil War that the United States would take the rest, and British Columbia, that Seward almost acquired after Alaska, decided to stay with the new British Confederation because they created a trans-continental railway. So these are things most Americans are probably unaware of — or the Fenian invasion, the Irish — we had this brilliant idea — these were former Union soldiers that said, hey, let’s capture Canada and trade it for . But, you know, these are part of the Canadian cultural tradition.

So if you’re trying to deepen integration to deal with challenges, and frankly strengthen your overall continental zone, you have to be aware of those. So in a sense the North American effort really coming out of the NAFTA but building on different forums is how do you deepen integration with three countries that have a stronger sense of sovereignty and independence? And, frankly, we’re having a mixed record, too. We’ve got politicians out there trying to destroy NAFTA when, you know, it was fundamental not only for the economic performance of all three countries, but the political and democratic modernization of Mexico and the future of Mexico.

And if you go to Mexico today, people are fearful about the fact that what some people are saying could lead to the end of NAFTA and will affect their investments and others. I’ve had in the past two months senior ministers of both Mexico and Canada ask me, say Bob, what’s the chance that the United States will really leave NAFTA? Now, we may all think that’s crazy, but this is the sort of danger that you’re now having out there.

So coming back to the European context, Europe has chosen a path. Europe has a different history. It has a history of warfare. It has a history of political conflict. My own piece, and this is where with your book I suppose where you come up with some interesting ideas about sort of transparency and political participation. Those are interesting and debatable concepts. I sometimes wonder whether opening the to the public is going to lead to better decisions, but I generally favor transparency as a process. Your suggestions on the regulatory side I think are excellent on this.

But I guess if I were a US policymaker today, I would probably be focusing on some of the key countries. In other words, I think that Germany can’t do this alone — that Germany is key to moving forward, and Germany in some ways, its historical problem is, on the one hand, it’s dominant but it doesn’t want to be seen as dominating. So in some ways the United States could actually offset that, as it did historically. I think on security topics, I think has gone way beyond the Gaullist era and is a very strong potential partner on different issues. We’ll have to see what happens with Britain. We’ll have to see what happens with the politics of Poland.

But my strategy in some ways — in the old Cold War period there was a meeting of the Quad, which was the US, Britain, Germany, France. And that was a key guiding device. It doesn’t mean we agreed on everything. And frankly, informal arrangements like that I think sort of need to be revived and more activated and not only focused on some of the narrow issues that an assistant secretary of state would use, but those that might be of sort of a global level.

So I think that in the case of NAFTA there’s things that frankly the US could do of an instrumental variety of infrastructure, border crossings, things like that that we don’t do because it isn’t a crisis issue. It isn’t the issue in the newspaper. I personally think if you had 500 million people and three democracies sort of energy self-sufficiency and ability to export, you know, common labor force, recognizing that doesn’t mean everybody is going to become citizens, but you have the ability to move labor more effectively — that that would be a very powerful global player with the challenges that we face.

In the case of Europe, it will be a different path. I guess what — if there’s a lesson that I would learn is the sensitivities of sovereignty are obviously affecting European polities. So however you proceed with the construction, you have to recognize that probably the notion of ever-closer union for all parties will move to — I mean, as you and others have talked about, you know, whether there’s different paths and mix and match of different sort of arrangements, you have to have greater flexibility to deal with, I think, the concerns of sovereignty and public interest in participation — what Europeans, as you know, call to a degree, based on the Catholic tradition.

MR. ROHAC: Well, although I don’t think we’ve solved all of Europe’s problems in this conversation, to the extent to which we are still confused I would guess that we are confused at a much higher level than half an hour ago. (Laughter.) So with that I think we are going to now transition towards our panel discussion, so if you could allow us for just a couple of minutes to reset the state, but before then —

MR. ZOELLICK: But I just also want to thank you. Before we go, I want to thank you for coming to the United States, writing this book. I’m certain in some circles it would be provocative. It’s great that AEI is having this forum because I’m sure it’s a debatable topic at AEI, but I hope that this — that your book, that people will read it and — because one thing we can be pretty sure is that your sense of timing is excellent. (Laughter.) Given what’s going on in the world, you picked the right moment for this book.

MR. ROHAC: Well, I fear that I’m coming way too late to change the —

MR. ZOELLICK: There’ll be another chance.

MR. ROHAC: But I thank you so much. It’s been great having you with us. And please, everybody, give a round of applause. (Applause.)

(Break.)

KIRSTEN MADISON: OK, ladies and gentlemen, thank you very much for sticking with us and for being here today for what I think is a very interesting and important conversation as we steam towards the referendum in the UK. And I want to begin just by briefly introducing our distinguished panelists and to tell you just a bit about them. I think you have their bios. You can see that they are all academic overachievers of a profound sort.

Let me begin at the end of our line here with Nile Gardiner, who is currently the director of the Center for Freedom at , which is a wonderful title if you can get it. He has been in Washington as part of our policy community for more than a decade and is a leading expert on the US-UK relationship and on the US relationship with Europe. And before coming to the Heritage Foundation, he was in fact an aide to Prime Minister Margaret Thatcher, so quite an extraordinary career.

I will turn to our other guest, Michael Leigh — thank you for joining us — who is a senior fellow, a consultant, and a senior advisor to the German Marshall Fund. He focuses on actually many things. You have a broad portfolio. The European Neighborhood policy, Eastern Europe, the Mediterranean, the future of the EU, and he runs a specific program related to energy discoveries in the Eastern Mediterranean, which is a topic worthy of its own discussion, I think.

I think importantly that our colleague Michael Leigh spent 30 years as a practitioner in a European context, and served in the cabinets of commissioners in the EU and was also part of the accession negotiations process, so he comes to us with a depth of knowledge and an understanding of actually how difficult the process of building and constructing and governing is when you’re talking about something like the EU, so we very much appreciate your presence.

And of course my colleague, Dalibor Rohac, who has introduced himself, but I will say — will underscore that he is a self-described recovering Euroskeptic and as part of his recovery process has written a book, which he has shared with you. And he is an important part of our team and I appreciate you sparking this conversation because I think it’s a critical one.

So, to begin, from my perspective — and it was wonderful to hear Ambassador Zoellick. I think he’s quite wise and he gave us some perspective on how the US should be thinking about things. And I think I was looking this morning and last night at some of the polling, and if you look at the polling it’s pretty clear that there’s a sort of strong push on the leave side of the Brexit conversation at this point and that the leave side is quite effectively using the migration issue and other things to kind of make their case in the run-up to the referendum.

But I think we should maybe step back a little bit and I want to ask you guys a baseline question, which really is, you know, how we should understand what’s going on in Europe more broadly, what the context is for the UK conversation, whether or not the Brits are in fact on the leading edge of some larger systemic crisis for the Europeans, and then whether or not this is sort of a genuine crisis or just a difficult, recoverable moment. So I don’t know who would like to begin.

MICHAEL LEIGH: Well, thank you very much for the invitation. Congratulations on the book publication — looking forward very much to reading it and happy to be here with you this morning.

I do think the Brexit and the campaign related to it in a way is part of a broader wave of populism. This one has specifically British characteristics, a particular history to it, various motivating forces that are deeply embedded in the British psyche and the British political system. However, when you look more broadly whether at the United States or across Europe in particular, I think one can see that quite significant segments of the public feel that governments have not been able to deliver to them what they have a right to expect; in particular, employment, personal security, and the benefits that come with a welfare state, a modern economic system.

In the , as in the United States, median incomes have not risen — in the UK for almost two decades. In the US perhaps for longer than that. The UK does have full employment, almost — around 5 percent unemployment — but like the United States there are many people in low-paid jobs with precarious conditions of employment. So I think there is a general sense of discontent that we see in populist movements throughout Europe and also in the United States. That said, there is a specific history to Britain’s relations with the EU. There are particular reasons and features of this that I’m sure we’ll come to a bit later in the conversation.

MS. MADISON: Any thoughts from you two?

DALIBOR ROHAC: I suppose I do agree with the notion that the Brexit debate is part of a bigger backlash against globalization, if you will. That’s pervasive to the West. And to me it’s also a source of significant fears because since it’s joining of what was then the European Economic Community, the UK has been a force for the good.

The single market would not have been completed without the leadership of Margaret Thatcher and Arthur Cockfield, the EU’s competition policy would not have been able to play that role of dismantling local monopolies and national champions without the British at the table. The common agriculture policy would probably have wasted way more money if it weren’t for the British pressure to reform. And my fear as a Central-Eastern European is that without the UK at the table, the EU will become a much less hospitable, much less economically open place.

Now, you will say I’m asking the UK to sacrifice itself for the greater good. That’s actually not what I’m saying. What I’m trying to articulate in the book and at this event as well is that even for the UK there really is no alternative to some form of political engagement in Europe. The UK can leave the EU, but it can’t really check out of Europe, and it will still be affected by what’s happening on the continent. I think it is in the British national interest, to the extent to which I can make an educated guess about what the British national interest is, to be in a neighborhood that’s peaceful, democratic, economically open and prosperous. And I think for all the flaws of the EU and for all the justified complaints that the Euroskeptics have about the European Union, the prospects for such a Europe are much greater with a British voice at the table.

MS. MADISON: Nile, do you have any thoughts on the —

NILE GARDINER: Yes, and firstly I’d like to congratulate Dalibor on his book and I think it is a very timely book. I don’t agree with the central thesis of the book, but I think it’s a very important book for Euroskeptics to read. It has a lot of very interesting information and detail in the book. I highly recommend it, but I’ve got to disagree with Dalibor on a number of fronts, including the point he made just now about the Brexit campaign being a sort of reaction to globalization.

I would argue, actually, having worked for many years with a lot of the leadership of the Brexit side in the UK and many of the cabinet ministers who are — who are fighting and — members of parliament who are fighting for Britain to leave the European Union, that the Brexit side actually is looking globally towards a more global oriented Britain. And I think the growing sense among many conservatives in the UK is that the European Union is inward looking, it’s a failing entity deeply out of touch with populations across Europe.

And those who are fighting for Britain to leave the European Union are not little Englanders. I mean, they are looking for Britain to play a bigger role on the world stage. They’re also very pro-American and I think that, without a doubt, one of the first measures that a post-Brexit administration would take in the UK would be to look to the United States to sign a US-UK free trade agreement.

And even though President Obama sees fit to go over to Britain and tell the British people how to vote in their own referendum, warning them that they would be at the back of the queue if they dared vote to leave the European Union, the vast majority of British people want a US-UK free trade deal. I am in no doubt I think the next US administration, regardless of who wins this election, will support an agreement with America’s most important bilateral partner on the international stage. There’s a huge amount of US money at stake, after all. There’s about $5-trillion worth of US investment in the United Kingdom. That’s 22 percent of America’s overall foreign investment. It’s a huge economic partnership.

And I think that a Britain outside of the European Union will be a more confident global power. I think you’ll see a resurgent Britain. And what you’re seeing in Britain — the rise of Euroskepticism, which has been deeply embedded for many, many decades I might say, is also now being increasingly shared across the European Union itself. And one only has to look at the latest Pew Research survey, which I highly recommend, which demonstrates rising skepticism with regard to the European Union across the EU, even in countries such as Germany, for example. At the very heart of the European project, nearly half of Germans have an unfavorable view of the European Union. In France it’s a clear majority of French men and women who do not approve of the European Union.

And so what you’re seeing in Britain is just — this is just the beginning of a process, I think, of fundamental change in Europe, and Brexit will lead, in my view, to very positive changes across Europe towards greater sovereignty and self-determination.

MS. MADISON: So let me ask a follow-up on something that you’ve said, which is that the first thing the Brits would seek to do is actually negotiate a free trade agreement with the United States, but isn’t the first economic relationship they have to sort their relationship with Europe?

MR. GARDINER: Certainly.

MS. MADISON: Right. So they’re the undisputed financial capital of Europe. The sort of organic connections between the financial markets in the UK and Europe are quite profound, but I guess one of the questions I would have for you is, first of all, isn’t that an essential relationship to sort, one — the economic relationship with a post-Brexit EU? And, two, what kind of leverage do the British actually have in that process? I know it’s sort of envisioned as a two-year process, but what’s their leverage to actually maintain, you know, market access and the other things that are actually of value to them today?

MR. GARDINER: Yeah, those are very important questions at the very heart of the Brexit debate. And I think it’s in the interests of the United Kingdom and the rest of Europe to be able to negotiate some kind of agreement that enables both sides to continue, I think, to share in prosperity.

And if you look at the relationship between — the economic relationship between Britain and the European Union, frankly the EU gets far more out of it than the other way around. And, I mean, this is an interesting figure: 80 percent of EU capital markets business is in London, actually. I mean, London is the undisputed financial capital of Europe by a mile. There is no comparison. Frankfurt, Milan, Paris cannot compare with the amount of business that’s conducted in London. That’s not going to change once Britain leaves the European Union.

Also, of course, there’s a huge amount of trade between continental Europe and the United Kingdom and I think that European businesses will want to continue doing that business with the United Kingdom. Britain is the world’s fifth largest economy. It is projected, according to some forecasts, to become the fourth largest economy, overtaking Germany by 2030. Britain’s economy is doing, frankly, a lot better than the vast majority of continental European economies. And I think that a Britain that is freed from the shackles of EU regulation — there’s an awful amount of EU regulation. In the financial sector alone there are no less than 420 additional pieces of EU financial regulation which may hit the city of London in the coming years if, indeed, Britain stays within the EU.

But you’re absolutely right that Britain does have to negotiate a new deal with the European Union. How that deal exact — the exact shape of that deal is to be determined, but I’m in no doubt that the vast majority of European countries will want to have a good, sustainable agreement with the United Kingdom that is in the interests of both sides here. There’s too much at stake in terms of economic trade and investment.

MS. MADISON: I can see by the body language that you might not agree with that assessment, so what’s your view?

MR. LEIGH: That’s true, but allow me to ask whether you wish to use our hour here to reproduce the arguments for and against, as we’re hearing them in the UK, or whether we wish to take a more analytical — I don’t really wish to give you the pitch of the — we’ve heard the pitch of the leave campaign, but frankly I haven’t come here today to give a pitch for remain.

MS. MADISON: OK, fair enough.

MR. LEIGH: I thought we were going to have a reasonable, objective discussion of the issues. I’d be very happy to enter into that, but I’m not here to campaign.

MS. MADISON: No, but of course, and I recognize that and — I mean, I get it. There still is a substantive question there of what that process looks like and what the leverage that the British will have to do that. But I agree with you, we don’t want to have that debate.

MR. LEIGH: The best guess, simply, as to the process would be that — I mean, first of all I think one should realize that if there is a vote to leave, there will be an immediate reaction on the currency markets. The political situation in the United Kingdom will be thrown into confusion. The prime minister is likely to be under enormous pressure to leave if he doesn’t decide to leave himself. There will then have to be an election within the party that will take several months. There will be vying for leadership.

During this period when the conservative party sorts itself out, it will not yet be possible to begin the process foreseen by article 50 of the treaty. At some point, whoever is the future prime minister will be obliged under article 50 to notify the EU authorities of the UK’s intention to leave. There is then a two-year period, which can be extended by agreement of all the parties, in order to negotiate the conditions for Britain’s withdrawal.

All the leading figures in the European Union have indicated clearly that this two- year period would not be sufficient. Nor, I might add, would there be the political will during that period to engage in negotiations concerning Britain’s future relationship with the European Union. This would be about the technicalities of withdrawal: what happens to British law and what happens to Britain’s role in the institutions, what are the arrangements for British staff? What are arrangements for British citizens living in other EU countries and vice versa?

There will be an extremely technical and difficult negotiation about the conditions for withdrawal. And, I might say, this will not take place in a very constructive atmosphere because the other member states have had just about enough, really, of special pleading on the side of the United Kingdom. They will also be very concerned about a possible domino effect elsewhere, and they’re not going to want to make life easy for Britain, having decided to leave.

So there would be this two-year period which would begin at some point and end two years after that, which would then lead to Britain’s withdrawal. Britain will then be a third country vis-à-vis the EU with no with the EU. Its trade with the EU will be governed by the World Trade Organization provisions. And at that point it might be possible for the UK to get the agreement of the residual EU to negotiate a new arrangement.

Now, what that arrangement would be is anybody’s guess. Different parts of the leave campaign have said we’re perfectly satisfied with WTO status. Others have said the model, model, Canada model. And then the Norwegians themselves have come in and said, don’t do what we did. The European affairs minister of Norway pointed out that Norway has no say over EU regulations, but is obliged to implement them — that Norway’s per capita contributions, even as a non-member — the entry ticket to the single market is approximately two-thirds of what the UK is paying now. And free movement of workers is a condition for having access to the internal market. I can’t see why that would change in the future.

And, therefore, what would be the point of going to all the trouble and all the instability and all the uncertainty which will discourage and generally shake up the business climate, only then to negotiate an agreement where you have to accept EU rules and so on? So some leave people have said, no, we don’t want that. We want to be a third country. Others have said, we want to be like Canada, but then Canada’s agreement doesn’t cover agriculture, doesn’t cover financial services which, as we’ve heard, are so crucial to the EU.

Therefore, the notion that everything will settle down and that the economic necessity on the part of other member states will oblige them to enter into an agreement that, in the end, will be favorable to the UK and that this will be done relatively smoothly is a total illusion and extremely misleading.

MS. MADISON: Right, so the complex — no, let’s kind of move on from this because we haven’t a lot of time and I think we don’t want to —

MR. GARDINER: Could I just respond to some of the points? I mean, it’s not misleading. I mean, that’s — you know.

MS. MADISON: Right.

MR. GARDINER: That’s your perspective on it, but I’m not — it’s not misleading.

MS. MADISON: So —

MR. LEIGH: I’ll bet you a crate of whatever — pale ale or whatever you’d like to bet that —

MS. MADISON: So there you go. So let me sort of move on to something else because I actually think that one of the — maybe you won’t agree, but one of the interesting questions is actually sort of what if the British don’t vote to leave? Really, the campaign for the remain side has been focused on the UK in a reformed Europe and, you know, you have sort of — Prime Minister Cameron has negotiated a certain agreement with the EU that covers a range of issues. I’m not sure whether that actually is the reform agenda that they have in mind, but the question of if the Brits remain sort of what are the implications going forward within the EU and how does that change the dynamic? And is there — you know, I was — in some of the reading I did before we did this, I saw former President Sarkozy of France said, you know, the European experiment needs to be deeply relaunched. The Brits aren’t actually wrong about everything, but that there’s this process that has to happen of improving and maturing the institutions and fixing some of these issues.

So if the Brits vote to remain, isn’t there still an undone effort, or are the Brits alone in thinking that? And kind of what does that forward agenda look like for shoring up the relationship within the EU among the partner countries.

I don’t know if, Dalibor, you’d like to start?

MR. ROHAC: I suppose one important part of the answer to that question has to do with how strong the remain vote will be. So if the Brits vote for remain and the result is very narrow, it’s likely that some of the political turbulence that we expect in the case of a leave vote would still take place anyway. Mr. Cameron’s position as prime minister could be put in question even then.

But putting that aside, I think a remain vote would be an opportunity for a rethink of what the EU should be doing, what it shouldn’t be doing, what sort of political arrangements should be in place. And, in fact, the renegotiation that was concluded, for all the criticisms that were directed at it from the Euroskeptic camp I think is a good conversation opener for a revision of the European project.

So actually one of the slightly underrated elements of the renegotiation had to do with the opt-out from further political integration given to the UK. And when you actually read the wording of what was agreed on, the wording actually does not reference the UK explicitly. What is says is the reference to ever-closer union among the peoples are compatible with different parts of integration being available for different member states. It did not compel all member states to aim for a common destination. The way it’s worded actually opens a path for other countries that are not currently part of the eurozone or Schengen to actually opt-out — countries such as , , the Czech Republic, or Poland. And therefore I think this agreement could open a way towards a Europe that’s not just multispeed, but actually multitrack, allowing for different arrangements — a different menu of options for different members.

And I don’t think there is an alternative right now to a Europe that provides something like that — that provides access to the single market without compelling everybody to follow the path towards deeper political union.

MR. LEIGH: I would agree with that. I mean, I think the way the European Union is developing, it’s evolving very much away from the model of the early years, the Cold War period when to some extent the EU and its predecessors were seen as the economic or the civilian glue for NATO and where people really believed that they were building a kind of .

As Nile has said, with these recent polls we can see that the commitment to building a political federation in Europe is quite weak in other member states, too. It’s not something unique to the United Kingdom. So I think we’re going to see the EU evolving towards a structure which is more intergovernmental in nature. We’ve already seen that. The European Council, where the heads of government meet very frequently, has really become the top decision maker in the European Union.

I think the , which in the early days was more of a political institution driving forward further integration, is becoming much more of a regulator. It’s in charge of antitrust policy, for example, and other areas. I think that would be built up more strongly and then part of the package that Cameron negotiated is very much in line with the agenda that had already built up in Brussels known in the jargon as better regulation, which really means reviewing all of EU legislation and only deciding to keep regulation of economic matters which are better dealt with at the EU level, where issues are more effectively dealt with at the national level, regional level, local level. I think there’s going to be an increasing trend to devolve decisions to that level.

So the EU is in a state of transition, a state of evolution. It’s facing various crises or disorders, as we know. The eurozone is an unfinished project. The migration issue hasn’t been resolved yet. We still have the Ukraine-Russia issues and the Mediterranean issues and North Africa and the Middle East, which pose considerable challenges to Europe.

So there’s a very full agenda that the EU and the United Kingdom will need to address in the event of a remain vote. And my hope is that with this behind us — and as Dalibor said, much depends on the vote. If there’s a very narrow majority, then we’re going to see a continued political turbulence, as Dalibor says. If there is a decisive outcome, I think the situation will be a little different. But the UK has been very hesitant to engage with the referendum pending, even on straightforward foreign policy issues which don’t involve European integration, like the Normandy process dealing with the Ukraine problem — the UK notably absent even though foreign policy was one of the main reasons for the UK to join the European Union.

So the hope would be that the UK would reengage on its agenda, which would include the foreign policy issues, the completion of the single market, the development of the digital market, better regulation, strengthening competition policy, making the EU more competitive. I think these are the more encouraging directions that one hopes Britain would reengage with following a possible remain vote.

MS. MADISON: Nile, do you have anything you want to add?

MR. GARDINER: Yeah, all very interesting points. I would say, first, just on the UK side in the event of a remain vote what would happen, I think you already have basically de facto a state of civil war inside the conservative party. You have a situation where 70 percent of conservative activists want to leave the European Union. The prime minister is dead set against that.

David Cameron already announced last year that he will step down ahead of the next 2020 general election, so he will probably step down in 2018 or 2019. And it’s very hard to see how someone who doesn’t support British exit from the European Union becoming the next leader of the party because the way the conservative party does a leadership contest is there’s a vote among MPs, then there’s a vote among the party membership.

And so I would expect that a figure like, for example, Michael Gove (ph) or Boris Johnson would be the next leader of the conservative party rather than, say, George Osborn (sp), who has supported Britain staying inside the European Union because the next leader of the party will have to, I think, fit the mood of the party. And so the issue of a British exit from the European Union doesn’t go away just following this referendum. It will resurface.

More broadly with regard to Europe as a whole, I think there is a huge democratic deficit within Europe. The EU has, you know, five presidents. I would wager that the vast majority of Europeans have no idea who the five presidents are in total. And I think that this is an unsustainable situation and so the British vote is just the beginning. I think you’ll see tremendous pressure across Europe for referenda in many countries.

If a referendum was held in France, for example, there’s a good chance France would leave the European Union. And so I think you’re going to see a period of tremendous upheaval and change in the coming years, and the Brexit is just the beginning. You also have to throw in the and the short-term deal with , which I don’t think is going to last. You are going to see waves upon waves of refugees making their way to Europe this year and the next few years. It’s not going to end. And you’re also going to see, I think, tremendous turmoil in the eurozone continuing — an unsustainable situation with . And you’re going to see, I think, rising disillusionment in Germany with the idea of bailing out Southern European countries.

You’re also going to see, I think, a bit of a shift of balance of power within Europe — a decline of German power inside the European Union. I think we’re going to see the rise of some of the Eastern and Central European nations as powerful forces in Europe. Poland, Hungary, for example, resisting German domination, and you’re seeing that debate unfolding now over the refugee issue where the Poles and the Hungarians, for example, stood up to Berlin and said they would not accept large numbers of refugees or economic migrants being allocated by the European Union.

And so I think you’re going to see a range of conflicts across the EU on a wide variety of issues. I do think the European project is unsustainable and you cannot suppress sovereignty and self-determination. Those are incredibly powerful forces. And the European project is based upon supranationalism, upon big government controlled by EU elites, and I think very clearly, as opinion polling is now showing across Europe, European publics are increasingly rejecting the status quo that has been in place for many, many decades. And you cannot suppress the drive for freedom and the drive for self-determination.

MR. ROHAC: Could I —

MS. MADISON: Yes, of course.

MR. ROHAC: — react to that very quickly? I think Nile and I to a large extent agree on the nature of the problem that’s facing Europe — the economic crisis in the eurozone, the refugee crisis, the divisions that exist between different member states. Where I think we part ways is in what we think the appropriate answer to these different crises should be.

I don’t think that it’s reasonable to be a cheerleader for a process that might result in a disintegration of Europe compromising some of the real achievements that have been made over the past 70 years in Europe in terms of the single market, in terms of Europe being democratic and at peace, in terms of bringing 100 million people from Eastern Europe into the Western liberal political order. And those are the things that are really at risk if the EU starts unraveling.

I think the alternative to that is to have a deep rethink of what the EU is for, how it should be structured, how the democratic deficit could be reduced. And those conversations are much easier and are likely to be much more productive with the UK being at the table. You could say, you know, UK has tried to push for reform and has always been defeated. Actually, I don’t buy that. The UK is the third most influential country in the European Council. It has 12.7 percent of the vote. And actually it’s been an engine of reforms. If you look at the outcomes of votes in the European Council, I mean, the UK has been on the winning side 87 percent of the time over the past six years. And furthermore, the UK has been very successful in opening conversations, in getting the rest of the EU vote on its proposals.

So there’s a researcher at the London School of Economics, Simon Higgs who did the number crunching. So he looked at the link between what different countries want in the EU and what they are getting done. And the UK turns out to be the fourth most successful country in the EU in terms of getting its agenda heard.

And I would venture to argue, also, that the UK has not even been trying that hard. Much of the EU discussion in the country has been largely inward looking and the EU is still seen as sort of an outside imposition rather than something that should be engaged with and worked with and shaped.

The final point I’ll make before I’ll let Kirsten reassert herself — (laughter) — is that —

MS. MADISON: We’re here to hear you, not me, so —

MR. ROHAC: As classical liberals or Burkean conservatives or Hayekians, we like to typically take a somber view of human nature, yet what I very often hear from my Euroskeptic friends is a very optimistic vision of a post-Brexit Britain. You know, there’s the sort of best-case view of both the leave campaign as being this globally minded, cohesive group. There’s also a very optimistic view of what the reaction in other EU member states would be to the UK’s departure.

And I think we need to sort of step back and really try to think in terms of what would be the outcomes not under the best-case scenario, but under far more pessimistic assumptions about knowledge and incentives facing different actors. You know, the leave campaign has some globally minded proponents of free market and open society in its ranks, such as Nile and Dan Hannon (ph) and many others who I think have been friends of AEI over the years, but it has other less savory characters. I mean, I feel personally very disconcerted by seeing Nigel Ferash (ph) take a picture with George Galloway (ph). I feel worried that much of the rhetoric of the leave campaign has been around the issue of immigration, of all things, which has been undoubtedly overall beneficial for the UK. I feel worried that one of the big debates earlier this spring has been over state aid to the steel industry in the UK and how the EU rules are preventing UK government to step in and save the steel industry against Chinese competition.

And also on the European side I don’t think that it’s enough to sort of assert that it’s in everybody’s interest to reach some sort of friendly settlement. I mean, the likely political dynamics are going to be shaped by other forces as well. I mean, already we’ve heard from Jean Claude Junker (sp) that actually there is a strong motive to — not to negotiate a friendly, amicable divorce if only because that would encourage others to follow the UK’s path. So that might be — I mean, actually UK could be facing a very vindictive Europe, and we know how the referendum in the went only a few weeks ago over a very trivial matter of an association agreement with the Ukraine. And I think we need to brace ourselves for a situation in which Mr. Putin and nationalistic — (inaudible) — will do everything to make sure that the disintegration of the EU, if it happens, is as painful and as messy as is possible.

MS. MADISON: So now I think we’ll be fairly quick on this because we want to get to questions.

MR. GARDINER: Yeah, I just want to respond to some of the points Dalibor made and, you know, Dalibor and I would agree on a lot of issues except on the issue of the future of the EU. On the point you made about Putin just now, for example, which it’s a point that I’ve heard actually made by a lot of foreign policy analysts and the argument goes that Putin would dearly love to see the collapse of the European Union, Putin backs Brexit, the reality is actually — and I’ve looked at this very closely — Vladimir Putin has never made a statement supporting Brexit, nor has the Kremlin or his government.

I should point out, though, that one of the think tanks closest to the Kremlin put out a report I think a couple of months ago which talked about Brexit and what it means to Russia, and this think tank actually warned that Brexit had very negative consequences for Russia. Actually, I do recommend this report to anyone that’s interested in this issue. And the report actually warned against what it described as a new Anglo-Saxon power standing up to Russian power. And the view of this Putin-associated think tank was that Britain would be much closer to the United States. That is not in Russia’s interest.

And I would say that Putin doesn’t lose any sleep over the thought of some sort of European Union army emerging to fight him in the Baltic States. He is wary, though, of NATO power in Europe. He is wary of the power of the United States and American leadership. He is wary of the Anglo-American special relationship. These are the forces that hold Putin at bay. The European Union doesn’t do anything to hold Putin at bay. We saw that with Ukraine. Where was the European Union when Russian tanks were pouring into Russian — you know, special forces pouring into the Crimea? The EU was nowhere to be seen. And the EU basically is a paper tiger. NATO is reality. And Great Britain is a fundamentally important part of NATO. British participation in NATO will only be enhanced, and increased actually, outside of the European Union. And I think that the only thing that the Putin —

MS. MADISON: I think —

MR. GARDINER: You know, the Putin-backed Brexit — that’s really a completely false narrative.

MS. MADISON: I think a lot of people would sort of disagree with that assessment. It seems more intuitive in many ways that it serves the Russians just fine to have Europe sort of getting soft around the edges and — but I think that alone could be its own event. I don’t know.

I think we need to move to questions. Is there anything any of you gentlemen would like to add just as a final point before we turn it over to the audience? No? OK. So we have interns who will come around with a microphone.

Let’s start with you. I think you had your hand up.

Q: (Inaudible) — ambassador. Well, I feel tempted to at least try to on behalf of one member state correct some of those — Nile’s arguments. If I may, very briefly, first —

MS. MADISON: Actually, could you — I think a question is what we’re looking for.

Q: I know, I know. Question is what you are looking for and I will of course turn it into a question. Do you really think that you can talk about big government in respect with Brussels that it actually uses 1 percent of GDP of European Union? I think that using that term is little exaggeration and in American context it seems like European Union is a big government. It is the opposite of this that we are facing that we are not able to actually defend our borders because we do not have that capability.

And the question is, what do you think is wrong about the leave campaign in terms of migration, because I think that it’s using totally false argument that UK is a victim of European migration crisis, because it is not.

MS. MADISON: Sort of a question, but not really.

MR. GARDINER: I’d be happy to respond, especially the point about immigration that you made just now and it’s a very good question that you raise. And I believe in constructive immigration policies drawing in the best talent available from across the world. And I think that — I mean, those who are supporting the leave campaign are saying exactly that, actually. And they’re proposing a system whereby Britain controls who comes into the country. The British people decide. At the moment, the European Union decides who comes into Britain.

So, for example, , Brussels, has become a sort of hornet’s nest of Islamist terrorism. Belgian individuals are — Belgian citizens are able to travel freely to the United Kingdom. They can live and reside in the United Kingdom. Britain doesn’t have a say over that. And I believe it should be the right of the British people to decide who comes into their country. And I think it’s very important, then, for Great Britain to draw in highly qualified, skilled talent from across the world as countries like and Canada do, for example. I think that that’s a far more sensible policy. It’s not anti- immigration. It is an issue of controlling who comes into the country. And at the moment, from the European Union 284,000 people a year on average come into Great Britain from the EU. Those are last year’s figures. Net migration is 184,000. A lot of those coming into Great Britain are not skilled labor, actually, and so this is the issue. It’s an issue about controlling your own borders.

MR. ROHAC: May I?

MS. MADISON: Yes, by all means.

MR. ROHAC: I think we’re all entitled to our own opinions, but not to our own facts. The reality is that the UK is in full control of its immigration from third countries. That’s not a matter of EU policy. The UK can put in place any sort of immigration system that rewards Australians or Indians or people with higher degrees or et cetera, et cetera. I mean, that is fully within the UK’s purview.

The UK, unlike EU states that are part of the , has control of its own border. Indeed, since 2010 the UK sent away 6,000 EU citizens on public health or national security grounds and turned them away at its borders. The UK is not part of Schengen, but actually has some of the benefits of being sort of associated with Schengen. So it has access, for example, to the Schengen information system — a database of a quarter million people who are either wanted for various sort of suspicions of crimes or missing. I just don’t see what’s to be gained by Brexit on this immigration front.

MS. MADISON: So can I — if I could just — so sort of one of the important points at the beginning of this question really was the point about sort of the capacity of the EU to actually control its borders. I think it’s a huge issue for the EU. I don’t think we should try and resolve the question of who is right about British migration policy — immigration policy. But the reality is that that issue as a European project, as an EU project, is actually really critical. It seems to be one of the ones that has eroded public confidence in probably one of the most significant ways, right? So that point at the beginning I think is also quite important that it not be lost.

I don’t know if you have anything you want to add or your —

MR. LEIGH: I would just point out that there are nearly 2 million Brits living in other member states, including myself. And any restrictive measures — Australian point system or whatever — applied by the United Kingdom in the future to citizens of EU member states, you can be absolutely certain would be reciprocal and that you would find the same pattern then applied by — and, you know, what’s going to happen to the million Brits living in and the others living in France and so on?

And we live in a world of mutual responsibilities and obligations. One country can’t simply put up the barriers and expect the rest of the world to accept it as if nothing had occurred.

MS. MADISON: This gentleman right here.

Q: My question is about the effect on the economy. I’d like to hear from all three of you if, A, the UK does leave, some people have said it can within five years lose as much as 5 percent of its economy. Do each of you agree with that? And particularly for Mr. Gardiner, if it does associate with the North American Free Trade Area, does that compensate?

MR. GARDINER: Very interesting question. And clearly you’ve been listening to the project fear scare-mongering, which is all over the airwaves in the United Kingdom and the British government has been putting out all sorts of frankly outlandish facts and figures speculating on the state of the British economy five or 10, 15, 20 years from now.

What I do know is that Great Britain has for centuries been a great free-trading nation, a tremendous economic power, one that has always looked out to the world. And I have faith in the ability of the British people to be able to thrive and prosper in any circumstances, and I believe they are far better able to do so outside of the European Union.

A lot of the same scare-mongering was put out actually ahead of the decision on Britain joining the European single currency, and a lot of the big international financial institutions, a lot of the political and business elites were saying the city of London would be completely marginalized if Britain didn’t join the European single currency. Well, look at the city of London today. It has absolutely thrived and prospered outside of the . In fact, capital has been flooding into Britain from the eurozone, fleeing the eurozone because they know it’s safer, actually, in London.

I think you’re going to see the same effect, actually, post-Brexit.

MR. ROHAC: Indeed, the city of London has prospered in part by being part of the single market in financial services and some financial institutions — HSBC — already said that they would be moving the wholesale banking division to Paris should the UK leave the single market in financial services.

But I don’t think it’s controversial at all to say — it’s not project fear to say that there would be economic dislocations for the UK’s economy, for the European economy if the UK decides to leave. I mean, there already is turmoil on the financial markets, volatility of the pound has increased. FTSE100 has been in a freefall since this new polls have come out. And there’s no fear-mongering in that. It’s understandable that as long as there is uncertainty over the future path of public policy, businesses will delay their decisions, will be more careful. And there have been now a range of studies on this which I think are striking in their unanimity, so it’s not just the UK government putting out ridiculous projections 20 years forward, but it’s the IMF, it’s the LSE Center for Economic Performance, it’s PriceWaterhouseCoopers, it’s OECD, et cetera, et cetera.

You would struggle to find one single, credible study that would contradict those, perhaps with the exception of Patrick Minforth’s (ph) vintage 1970s trade model. I think the unanimity is really striking. And even many of the economists on the leave side — Andres Liliko (ph) for example, admits that there would be economic costs in the short run. He says that the departure would cost the UK perhaps 2 percent of its GDP. So that’s an economist working for the leave side.

The question is whether that would be offset in any meaningful way by long-term benefits of leaving, and in all honesty I can’t see those benefits.

MS. MADISON: Do you have anything to add?

MR. LEIGH: No, I would agree entirely with Dalibor, and on those features as far as the alternative vision of Britain as a world trader instead of a trader to a considerable extent with the European Union that takes 40 percent-plus of British exports today, I think one does actually have to listen to what some of these putative trading partners actually have to say. One can belittle President Obama if one wishes; however, the president of the United States has a certain credibility.

And if he states that it would not be a priority for the United States to negotiate a free trade agreement with the United Kingdom if it left the EU, one can dismiss it, but one can also listen to it. And at the same time, friends — and I think the leave campaigners would agree the United States and the United Kingdom are friends — one of the characteristics of friendship is to share your views with your friend and to give advice if requested, and on this occasion it was requested. And I think President Obama was entirely entitled to express to his friends in the United Kingdom what his views were on this issue.

And the broad vision that somehow or other the larger defunct BRICs, each of which are going through very serious crises of their own, if you look at Brazil in a state of deep recession, high inflation, collapse of commodity prices, collapse of purchasing power. China is going through various convolutions. Russia has not diversified its economy beyond oil and gas, essentially. Well, certainly oligarchs will continue to buy Rolls Royces and there’ll be some trade going on, but as an alternative to the European Union, come on, let’s give us another one.

So this — and beyond all of that, the European Union is in no way an obstacle to member states from trading very successfully with the rest of the world. Germany leads the way. In what way has Germany been held back in its global trade as an export-based economy? Maybe they should take another look at their economic model. In no way inhibited by membership in the European Union. So the vision that Britain, with all its well known qualities, freed from the shackles of the European Union would suddenly be able to greatly increase its trade with the rest of the world is something that I leave to your appreciation.

MS. MADISON: So we have faithfully promised to let you escape by 11:30, and I apologize to anyone who had questions who didn’t get to ask them, but I think we need to stick with that. And obviously, a lot of differences of opinions on these issues, but they’re huge and important issues and hopefully it has given everyone some food for thought to take away.

Thank you, gentlemen. (Applause.)

(END)