A Special Relationship: U.K. and U.S. Trade Deal on the Horizon?

Financial Services & E-Commerce and International & National Security Law Practice Groups Teleforum

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The revolutionary "Brexit" vote heard round the world happened almost four years ago, and it will likely take even longer before the full global ramifications are realized on an international level. One of the key aspects to these ramifications has been the concept of a new trade deal between the United States and the United Kingdom. Just recently, trade negotiations have begun in full between the long-time allies, and many are hoping that a new trade deal could greatly aid the economies of both countries, especially with the economic fallout of COVID-19 still unclear. 

Joining us for a discussion on this topic, we welcome former U.S. Senator Phill Gramm. 


The Hon. William Phillip Gramm, Former United States Senator for the state of Texas 

Matthew Heiman, Senior Fellow and Associate Director for Global Security, National Security Institute

Moderator: Wayne Abernathy, Chair of the Financial Services & E-Commerce Practice Group, and Former Executive Vice-President for the American Bankers Association  


Event Transcript



Dean Reuter:  Welcome to Teleforum, a podcast of The Federalist Society's practice groups. I’m Dean Reuter, Vice President, General Counsel, and Director of Practice Groups at The Federalist Society. For exclusive access to live recordings of practice group teleforum calls, become a Federalist Society member today at fedsoc.org.



Micah Wallen:  Welcome to The Federalist Society’s Teleforum conference call. This afternoon’s topic is titled “A Special Relationship: U.K. and U.S. Trade Deal on the Horizon.” My name is Micah Wallen, and I’m the Assistant Director of Practice Groups at The Federalist Society.


As always, please note that all expressions of opinion are those of the experts on today’s call.


And, today, we are fortunate to have with us, our moderator, Wayne Abernathy, who is the Chair of the Financial Services & E-commerce Federalist Society Practice Group, as well as the former Executive Vice-president for the American Bankers Association. After our panel has their opening remarks, we will then open up the floor for a live audience Q&A. Thank you for sharing with us today. Wayne, the floor is yours.


Wayne Abernathy:  Great. Thank you very much, Micah, and thank you to everybody who is listening in to our teleforum today. Something close to 30 years ago, as the leading trade advocate in the United States, U.S. Senator Phil Gramm called for a free trade agreement between the United States and the United Kingdom. U.K. opposition leader, invoking the European Union’s handcuffs that the U.K. wore at the time, which prevented the U.K. from negotiating its own trade agreements, called the idea “barmy.”


I had to look up in a dictionary of British slang just what that term means. In Britain, I think it means crazy.


Now, after Brexit, the EU handcuffs are off, and the idea does not seem so barmy after all. Today to discuss the U.S./U.K. trade, we are privileged to have Senator Phil Gramm. Senator Gramm retired from the Senate at the end of 2002, but he did not retire from advocating sound policy. He remains as much a pro-trade advocate as ever.


I worked for Senator Gramm for a number of years on trade as well as financial services issues, and I remember he more than once told us “If you want to take on the tough issues, you don’t need to worry about stepping on people’s toes. They will step aside and push you to the front.” Earlier this month, The Wall Street Journal published an op-ed piece co-authored by Senator Gramm, together with U.S. Senator from Pennsylvania, Pat Toomey, entitled “U.S. and U.K. Can Set a Standard for Trade.”


Discussing the idea with Senator Gramm today, we have Matthew Heiman, Senior Fellow and Associate Director for Global Security at the National Security Institute at George Mason University’s Antonin Scalia Law School. At The Federalist Society, Matthew chairs the Executive Committee of the Society’s International and National Security Law Practice Group. Senator Gramm will offer his views on U.S./U.K. trade. Matthew will then make some comments, and then after a bit of discussion between the two, we will open up the floor for questions from our audience. Senator Gramm, the floor is yours.


Hon. William Phillip Gramm:  Well, thank you, Wayne. Well, first of all, let me say that it was my great privilege to work with Wayne Abernathy. He ran the banking committee when I was chairman, and he did much good work that made me look good. I had a great staff, and as a result, it made me a good senator and an executive chairman, and I’m very grateful. And I would say The Federalist Society are very fortunate to have Wayne Abernathy because I don’t know anybody who knows more about banking and about central banking than Wayne Abernathy.


Let me turn now to the special relationship and to a free trade agreement with the U.K. First of all, I guess a good place to start on the special relationship is Bismarck. Bismarck recognized that there was something to this special relationship between the United States and the United Kingdom, and, in fact, he predicted what became the future when he said the most significant event of the 20th century will be the fact that North Americans speak English. But I think the special relationship is more than a common language.


I was once speaking at Margaret Thatcher’s think tank in London, and she introduced me, and, in her introduction, she brought up the special relationship. So I tried to give my take on the special relationship as follows: my people came to America from Prussia. My wife’s people came from Korea. But in our heritage and in our hearts, we’re British because it was Britain that told us to love law and liberty, and that love is the tie that binds.


And, unfortunately, when I said that, I looked down and tears were streaming down Margaret Thatcher’s face, and so I teared up. And so she stood up and looked at me and looked at the audience, and then everybody stood and applauded, and it was wild cheering, and, finally, I got recomposed. But, obviously, I believe in this special relationship.


Now, you would think, given our special relationship, that we would’ve long ago had a free trade agreement, and while we don’t have a free trade agreement, we trade at a very high level together. In goods and services, I think, at the last measure, we were that Britain was our fifth largest export market and our seventh largest import market. We have a massive trade and services, but our most significant relationship is in capital transfers.


Britain is the number two source for all American investment going abroad, and Britain is the number one source of all private investment coming into America. They’ve held that position remarkably enough since the first settler stepped on American soil at Jamestown, Virginia, in 1607. In fact, it’s fair to say that before World War I, capital from Britain and workers from all over the world came to the United States, met, fell in love, and begot the most prosperous nation the world has ever known.


And so for all these reasons, and more, as I will outline very briefly, I think a free trade agreement makes sense, and also I think we have an opportunity to have a real honest-to-God free trade agreement and set a standard that’s seldom been equal since the fall of Rome.


Now, why do I think that it might be easier to negotiate a free trade agreement with Britain than it is to negotiate a free trade agreement with anybody else? Well, first of all, we already trade a lot, and most of our trade is in services. And I would have to say, in my years as a senator, that I have often seen people virtually break into tears arguing that I needed to protect them from foreign competition, but I never had anybody come to my office—and Wayne can testify to this—I’ve never had anybody come in my office and ask me to protect bankers, lawyers, or accountants from foreign competition. They’re sort of viewed in the world as consenting adults, and so we already have virtually a free-trade area worldwide, except for licensing, in the case of lawyers, which is in many cases an outrage.


But the point I’m making is that most of our trade is an area where there’s not a huge political constituency trying to stop it. Also, we don’t trade many of the goods that are sensitive politically with Great Britain. And, now that they left the EU, we’re in a position to negotiate an agreement, and one of the hardest parts of the trade agreement is the part having to do with the rights of the investor, the protection of those rights, agreements resolution, and a process whereby the foreign investor can get access to real justice.


Well, in the case of Britain, our legal system is largely modeled after theirs. We have the two best legal systems in the world. Our property rights are very similar and very strong, and so we have an opportunity to get out of the way an issue that normally makes it difficult to negotiate trade agreements, and that is we can just simply say, “If you’re an American investor, and you invest in Britain, you come under British law. If you’re a British investor, and you invest in America, you come under American law. We just guarantee equal justice.”


That eliminates a lot of areas where protectionists find loopholes that let them argue for protection. Also, in national security, national security is often the refuge of protectionists, but it’s hard to argue that we have any national security issues that put us in conflict with Great Britain. So all those can be swept aside. When you cut down to the bottom line, where is the problem going to come from? Well, fortunately, we don’t trade very much in agriculture. Two percent. If you look at our service-trade balance, that our trade in agricultural products is two percent of our trade in services, tining.  


And Britain imports most of its agricultural products from Europe, and so with the opening of the U.S./U.K. free trade agreement, agricultural products would be more plentiful, cheaper, and British consumers and American producers of agricultural products would probably be the greatest beneficiaries. But there is one area where there’s going to be a problem, and that is in meat products, animal products, because Britain is a significant producer of animal products.


In fact, it already is using as an excuse for protection, as all of Europe does, the bleaching of chicken and the use of growth hormones in beef and other animals. And it seems, to me, that the solution to this problem is to simply rely on the thing that we share in common: law and liberty, and let freedom choose, but let people choose. And the way I would deal with that problem is to simply say, “You put the product up for sale. You label it, and then you let the consumer decide.” It’s amazing that consumers are capable of deciding, and when you let them decide, they tend to choose what is in their best interest.


So to sum up, I think that a free trade agreement with Britain makes sense. I think it can set a new standard to the world. I think how the negotiations end will be determined by where they begin, and if they begin with a bunch of little disputes and committees to deal with that issue, we’ll end up with a crappy agreement that will be unworthy of either nation. But if we begin with the presumption that we should have a total free trade agreement—


Wayne Abernathy:  Hey, Senator Graham?


Hon. William Phillip Gramm:  Yeah?


Wayne Abernathy:   Yeah. We lost you there for just a moment, Senator, so you were just talking about what happened. Yeah. Go ahead.


Hon. William Phillip Gramm:  Okay. I can’t believe you lost that wisdom I was giving. Where was I?


Wayne Abernathy:  I know. It was the best part of the speech.


Hon. William Phillip Gramm:  Where was I, Wayne?


Wayne Abernathy:  You were just talking about the crappy agreement that we end up with if we’re not careful.


Hon. William Phillip Gramm:  Yeah. If we’re not careful. So, in any case, we need to begin with the presumption that we’re going to have no quotas, no tariffs, no set-asides, no subsidies, and develop the agreement from there. In fact, President Trump has said that he’s for free trade if you have real free trade. Well, this is an opportunity to have real free trade, and so I’m very much for it.


I hope we don’t miss this opportunity, and I think the wellbeing of our two countries and the world will be enhanced if we negotiate a true free trade agreement. So that’s sort of my thinking on the subject. So Wayne, let me pass it back to you, and we can begin the discussion and questions when you’re ready.


Wayne Abernathy:  Great. Thank you very much, Senator Gramm. Let’s turn to Matthew Heiman. Matthew, comments and observations that you have.


Matthew Heiman:  Sure. Thanks, Wayne, and thanks to Senator Gramm for his comments and the op-ed in The Wall Street Journal. This is not going to be a debate. I’m very much in favor of Senator Gramm’s proposal. I think it makes eminent sense. And I just wanted to point out some of the benefits that could flow from the agreement and maybe extend some of the comments that Senator Gramm made.


I look at these things -- I tend to look at these things from a more of the national security perspective, and so when I think about that, Great Britain is the United States’ closest strategic ally in the world, and it has been that since really the end of World War I, and it remains so today. And like any long-term relationship, whether it’s with a spouse or with an ally country, there are highs and lows, and there are bumps in the road, and we can point to those. But it’s been the most durable and consistent relationship since the end of that war, and there’s a variety of reasons for that.


As Senator Gramm has already pointed out, number one, we share a very similar world view. It’s not identical, but it is extremely similar. We share a very similar view of what major threats to our respective countries are and how they materialize. We share a very similar point of view on issues of law and liberty, as the Senator pointed out, but we also share similar points of view on strategy and how we defend our nations.


And, in particular, if you look at the tables of spending for the United States or Great Britain compared to most every other nation in the world, we spend significant amounts of money, and rightfully so, on our military and intelligence apparatus because we believe those things are critical to our respective national security.


And so, I think, when there is an ally like this that in which we share this common cultural heritage—as Bismarck pointed out and the Senator noted, we share a language, and we share this long-term trusting relationship, and a similar view of the world, the threats, the adversaries that we’re going up against—it only makes sense to find opportunities to draw the nations closer together. And I think this free-trade vehicle could be a vehicle to do that in the sense that it should, if it’s done the right way, benefit both economies, and with strong economies, then you can have strong national security.


And so I’m looking forward to a little bit more discussion, but, in sum, I’m very much in favor of it. I’m very interested to hear the Senator’s thoughts around prospects for such an agreement, perhaps, potholes that might be out there on this side of the Atlantic or the other side, and if he’s got thoughts on how we could constructively move forward on this proposal. So thanks.


Hon. William Phillip Gramm:  Thank you, Matthew. Obviously, I agree with every word you said. I think the danger in the agreement is that there are always strong protectionist elements in American government, in American society. Protectionism has been sort of the recessive gene in the American character. And it asserts itself every once in a while that I would say we’re in a period today when it has asserted itself very strongly, and I would say that while most people around the President are pro-trade, that many of the people that are involved in trade policy in the Executive Branch are less committed to trade than most of the other senior people in government.


I think it’s an issue where the President is somewhat conflicted in his thinking, and I think in his mind, since you can’t have a real, honest-to-goodness free trade agreement, then you got your interests to promote, and it’s hard to define a country’s interest. Is it in its producers? Is it in its consumers? Very, very difficult to do. And, again, as I said in the article, and I’m happy to repeat now, I think if we begin with the presumption that this can be the sort of holy grail of free trade agreements, and that we ought to go for it for a totally open free trade agreement, I think that could happen.


I think it will be difficult in Britain. I think it will be difficult here. It will take some political courage on both sides of the Atlantic. I think agriculture, even though it’s only two percent of our trade, will be a big issue. I think freedom is the answer to it. Just let the consumer decide. But those are the threats I see.


Trade is one of those issues that is counterintuitive. Many people see the world in sort of a single-entry bookkeeping perspective. If I sold something, I gained. If I bought something, I lost. Or did you buy as much from me as I bought from you? Well, Walmart’s never bought anything from me, but yet I thank God every day when I go to Walmart. It’s a Walmart. They benefit me by selling me things not by buying things from me.


And I’ve always had a view on trade which is not the normal view, and I admit it. I think it’s the right view, but it’s not the normal view. And that is my view is I’m a free man. What gives government the right to say that I can’t buy a legal product that is being produced and sold in the world or that I’ve got to not buy and buy one made by somebody in the United States because they benefit? That’s an abridgement of my freedom.


In my mind, there’s only one abridgement of free trade that is justifiable, and that’s national security. And that is an easy one to distort, believe me. But there are national security elements involved. I think the standard’s got to be set very high, and don’t get me wrong, my dad was a sergeant in the army. I was born at Fort Benning. I believe in a strong defense. I was on the Armed Services Committee when I started in the Senate, and I’m from the South, and we lost a war. The right side won the war, but, nevertheless, the South was occupied.


So defense is important to me, but I do think that the argument is abused. So, anyway, that’s sort of my take on the thing. I’m hopeful, but I know it’s going to be hard. And I’m very grateful for Pat Toomey. He’s the most strong -- he is the strongest proponent of trade in Congress today now that I’m gone, and he’s very courageous on the subject.


Wayne Abernathy:  Matthew, any comments on any of that?


Matthew Heiman:  No. Other than to just -- I feel like I’m sort of echoing or preaching to the choir here. I very much agree with the Senator. I just think it’s critical -- again, I kind of view it more from the national security side than maybe even the economic side, but I think as we think about the increasing tensions and competition that we’re in with China, as we think about sort of lower-tier threats like Russia and Iran to the extent that we can draw our allies closer to us, to the extent that we can enhance our economy, that gives us greater strength in dealing with those threats.


As the Senator points out, it also shows the world that -- there are two ways that you can operate in the world as a nation state, and one is as a paranoid tyrannical regime that operates in an almost mercantilist fashion or there’s the other side of the fence which, happily, the United States and the United Kingdom are on, which is more or less free trading nations that believe in the rule of law and liberty. And there are many other western allies that align with that point of view.


And so I think it stands to benefit those countries to try and work together in an enhanced way because the competition with China is not going to go away anytime soon. And so to the extent that we can find new innovative ways to work together to collectively strengthen economies, that’s only going to benefit the citizens of the U.S., the citizens of the U.K. And if everything align, perhaps the citizens of other countries that would see this as a great example for enhancing the respective economies.


If we could get a deal struck with the U.K., you could imagine that as a next tier, you could look to other countries that are part of the anglosphere, whether it’s Australia, or Canada, or others that have similar cultural alignments, and then go from there. And that only benefits them, as well, in competition with China.


Hon. William Phillip Gramm:  Well, the source of power, political, and economic, and military, is the capacity to produce goods and services, and nobody can argue that trade is not critical for economic development. In fact, the development of the world, since World War II, has been produced primarily by trade, and we won the Cold War because of our ability to open up world markets and the superiority of our economic system as compared to the Soviet system. So I think, Matthew, this is really a golden opportunity. I hope it’s not missed, and I think it’s important that we speak out for it.


Matthew Heiman:  I agree.


Wayne Abernathy:  Matthew, I think that raised a very interesting point. Senator Matthew, maybe, you want to comment on this some more. You were talking about the impact of the U.S./U.K. trade agreement. To the extent that is a successful effort, which I suspect it would be, what impact would that have on our trade relations with the EU? Would they see that as an incentive for them to improve their trade relations, both with the U.S. and with the U.K.?


Hon. William Phillip Gramm:  Well, I think—


Matthew Heiman:  Well, I’ll let the Senator take that.


Hon. William Phillip Gramm:  Oh, I don't know. You go ahead. No, you go, Matthew, then I’ll go.


Matthew Heiman:  All right. Well, I’d certainly like to think so. I’m a little skeptical of the EU immediately signing up for this kind of model because I don’t think, culturally, that’s where they are. I think it’s a more diverse group of countries, obviously, than doing a singular deal with the U.K., and that’s why I said I thought there might be other countries that would be in line after the U.K. before the EU. Australia might be one of those. Canada could be one.


Because when I think about the most effective alliance relationships we have—and, again, I’m coming to it from the national security side—the most effective alliance relationship we have in the national security sphere is referred to as the Five Eyes agreement, or the Five Eyes. Well, the Five Eyes, not surprisingly, are all Anglo-speaking countries. It’s the U.S., the U.K., Canada, Australia, and New Zealand.


And the reason that alliance is so effective is we share a fairly similar view of the world. We share a tremendous amount of intelligence with each other about how to combat the risks we face, and we also share a common cultural heritage, which as the Senator rightly noted, it all stems back to England, and the rule of law, and how we think about liberty, and the role of the individual versus the state.


So it’s no surprise that this alliance -- which is fairly low on bureaucracy, there are no standing secretaries that operate the alliance. There are no specific meetings, but it’s a very effective alliance. It wouldn’t surprise me if those countries might be more interested in signing up to something like this than the EU would be. But, obviously, if the EU is interested in trading on these terms, I think we should seriously consider it. But I’ll hand it back over to the Senator.


Hon. William Phillip Gramm:  Well, look, it’s obvious, Matthew, that we think alike—how wise we are, I guess, you could debate, but I think almost certainly that if the agreement were reached, and if it were a big success—and I would see it being—I think the next place would be Australia, New Zealand. And then I think the demonstration effect is very powerful economically, so you never know when some country will decide “I need to get in this thing.”


So I think Europe will be hard. And, again, because of – for many reasons, but agriculture being high on the list, especially, in places like France where agriculture there, except in specialty areas, would be very non-competitive as compared to us. But, again, they would benefit. Living standards would go up and not down, so you got to ask yourself and does it make sense to – well, I’ll give you an example. I had a milk producer coop in the U.S. come see me with this wonderful idea that we strengthen their monopoly power and that we raise the price of milk.


And so I raised the obvious question “Now, there’s something wrong with this picture. The average person in the dairy industry has assets of $1.6 million”—that’s what it was like when I left the Senate. It’s probably higher now—“Why in the world would I want to raise the price of the product you produce and force hungry school children to pay it? Why would I ever want to do that?”


Well, unfortunately, people justify it, but I think that would be the problem. But I agree with Matt. I think other countries would want to join, and there would be aspirational people somewhere maybe in some little country, nothing country, that just all of a sudden produces a visionary leader who says, “Why don’t we do this?” Well, it’d be hard for them to qualify, but if they did, God bless them. So it is important. It’s not just for us. It’s for the whole world we’re talking about. I believe that.


Wayne Abernathy:  Well, thank you, gentleman. We should we open up the floor now to questions from our listeners?


Micah Wallen:  Absolutely, Wayne. We’ll now go to our first question.


Tom Littlest:  Well, good evening, actually.


Wayne Abernathy:  Okay. Go ahead.


Tom Lillis (sp):  Yes. My name’s Tom Lillis. I’m in Rotterdam, the Netherlands. I follow British politics rather closely, so I know where the opposition is in Britain. Could you briefly describe who would be opposed to this free trade deal in the U.S.?


Hon. William Phillip Gramm:  Well, again, one of the reasons I think it’s possible is that there are not many natural constituents for opposition to it. We are massive competitors in financial services, and legal services, and business services, and that would be when you would look first. But, again, those products are relatively free traded except for interchangeability of licensing, which I think should be done in the case of an agreement like this.


And, again, they’re not people that politicians are going to be sensitive to. A banker coming saying “I don’t want to compete with a bank in Britain,” they’ll likely be laughed at. And I also think that “Look, if we can’t compete with Great Britain.” We’ve got so many advantages. But, again, it’s not about just producing and selling. It’s about benefitting. I don’t see from our side as much opposition as I do from the British side. I think on our side, it all depends on how the question is put. I think if the administration said let’s go for a full-blown free trade agreement and not even waste our time on all these other issues, you accept the British legal system when you operate in Britain. You accept the American system in America, and on products that there’s a dispute about, that are legal, label them. I think if that approach was taken, the opposition here would be relatively small.


But let me say, Tom, that you have to look at these things with a microscope to find opposition, but there will be opposition because there’s somebody out there that will say that they could benefit by stopping it. And even though 1000s of others benefitted, they will oppose it, and if we’re not careful, it’ll be successful. And I’ll just give you a worldwide example. Sugar. We pay twice the world price for sugar as -- we pay twice the world price in the United States, and there are 88,000 consumers for every one producer in America.


Now, you ask yourselves, how in the name of God did that happen and how is it perpetuated? And the answer is small groups that care immensely about an issue, when nobody else is paying attention, can exert tremendous influence, so that’s why we don’t want to get down in the damn weeds, here. We want to stay on the basic principles and just plow over that. But there will be opposition. I can assure you.


Britain doesn’t produce sugar, fortunately, which is why even from the Middle Ages, they dominated the baking industry because everybody else in Europe produced sugar, and they subsidized it, and Britain could buy it cheap, and so they sold everybody crackers and cookies.


Wayne Abernathy:  Matthew, any comments on that question?


Matthew Heiman:  No, although, I would ask Senator Gramm, understanding that you are a former U.S. politician—but, obviously, you have a lot of experience sizing up politicians—what’s your assessment of perhaps Prime Minister Johnson’s appetite for something like this? Do you think he would be interested?


Hon. William Phillip Gramm:  Yeah, I think he would be interested. Now, let me make it clear. I really don’t know, Wayne. First of all, he has a first-rate mind. I heard him debate once. A debate of the virtues of Greece and Rome. And so in terms of his highest aspirations, I don’t see how he could not be a free trader.


Now, where your heart is is very important, but things happen that put your faith to the test. I’d been in the Senate about three months, and there was a proposal to impose a protective tariff on oils, and I was from the biggest -- well, maybe, Alaska was bigger, but, hell, we don’t count Alaska. I’ll go ahead and say it’s the biggest oil-producing state in the country.


Now, that’s where your values get put to the test, so I did a quick gut check on it and decided I didn’t want to have to explain to my grandchildren how grandpa was a protectionist, so I led the opposition and killed the protective tariff for oil. And people in Houston call me the third senator from Massachusetts, but I survived it. You got to be willing to go out and explain to people that Texas consumes more oil than it produces. We’re the largest consumer of petrochemical of any state in the union. At one time, half of the world’s petrochemicals were produced [inaudible 40:00] from Corpus Christi to Beaumont. But it was a hard sell and there was hard feelings about it.


Now, whether the Prime Minister will stand up to the animal products industry, I don’t know. It’ll be a hard choice. But, look, he’s got a solid majority. He’s in office for five years, and someone who thinks the Greeks were better than the Romans, something right with him, so I’m hopeful.


And, in terms of President Trump, it’s hard to know. I just don’t know. I think if the pitch were made early and right—“Let’s do it the right way and see if it could be done”—it might work. It might work. It would certainly be a chance to show that, in a real honest-to-God free trade agreement, he’s not a protectionist, but I hope he takes the opportunity.


Wayne Abernathy:  Micah, we do have other callers wishing to ask questions?


Micah Wallen:  Yes, we do. We’ll go ahead and move to our next caller.


Steve Dewey:  Yes. Good afternoon. My name is Steve Dewey, and I’m in Arlington, Virginia. And, first of all, I’d like to thank FedSoc for sponsoring this, and, Wayne, thanks for moderating. My question to Senator Gramm and to Matthew, whenever Brexit finally gets done, do you think that that may trigger an exodus of other countries leaving the EU, and if so—and I guess related to that, you mentioned the Five Eye countries—do you think there’s maybe two or three other countries that would also be candidates to want to pursue a free trade agreement with the United States?


Hon. William Phillip Gramm:  Well, let me say that I think Europe’s fear when Britain left was that other countries would follow. I don’t think that’s the case. Britain never adopted the Euro, and most European countries benefit from the European bureaucracy because their own governments are worse. But Britain didn’t. So I don’t know that other countries will follow. My guess is they won’t, at least, initially.


Now, there obviously is a big debate going on in Europe right now about whether or not to issue bonds that are the debt of the EU to bailout, especially some of the southern European countries. And now that’s another issue and that could be explosive. And if I were in Germany, I sure wouldn’t be for it, so I don’t think the EU breaks up, and let me stop. I’ve talked too long on the last one. Go ahead, Matthew.


Matthew Heiman:  Well, I tend to agree. I don’t think the EU is going to break up anytime near term, but I am mindful of the fact that when it comes to asking individual citizens of these countries, the popularity of the EU is not nearly what it is amongst the political, bureaucratic ruling class of Europe. And so examples of that are several years ago when France had to vote on the -- revised the EU Treaty, it was a close vote, and when countries have had the opportunity to vote on things related to enhancing the EU’s power, the citizens look at it much more skeptically than European politicians do.


And also, in some areas, particularly in the national security space, culturally, individual European government leadership tends to take a different view on national security questions than does the EU bureaucracy. For example, President Macron of France has a very consistent view of France’s role in the world, in particular in Africa and being highly engaged and being very active in counterterrorism in a way that I don’t think the EU bureaucracy is. And I think he takes a more hawkish view on a number of issues.


So there is always this underlying friction between individual citizens of these countries and the EU bureaucracy, and there’s also sort of a layer of friction between country leadership and the EU bureaucracy when it comes to national security questions. So I think I wind up where the senator does, which is I don’t anticipate it breaking up anytime soon, but there are those fissures that could crack wider at any given time, particularly, in moments of crisis.


Wayne Abernathy:  Micah, I think we’re ready for the next question.


Micah Wallen:  Well, we’ve actually exhausted the questions for now, Wayne, so I’ll offer instructions again. If anyone has a question, you can jump right to the front of the queue if you press star and then pound. Then, in the meantime, Wayne, I’ll toss it back over to you for anything else you wanted to discuss.


Wayne Abernathy:  Great. Thank you. Yeah, I do have a question that’s been sort of burning in my mind here, frankly, in preparation for this teleforum, and I’d love to have the Senator’s and Matthew’s view on it, and is this: in the 1930s, is an age when as a nation we doubled and tripled down on bad economic policies. We followed a policy to reduce trade. How significant can removing barriers to U.S./U.K. trade be for the U.S. in this current economic condition? Can the very initiation of trade expansion negotiations with the U.K. help to stimulate economic activity? That’s my question.


Hon. William Phillip Gramm:  Yeah. I think it can. I don’t think it’s a miracle cure. It is very difficult to measure because the benefits will come preferably to consumers in terms of ability to buy products cheaper, and it’s hard to aggregate all that stuff. But I think it would be a very important step now, especially, in a world that is becoming more protectionist.


And one of the things that’s scary to me is that protectionists’ arguments are present in both political parties, and there are not many people who are willing to stand up on the issue. And there’s nothing more dangerous than a just cause that has no valid spokesman.


So I think that it would be important, Wayne, in the value it brings, but in the symbolism it brings, in the midst of a world where people are talking about protectionism. Two great nations—the world’s two greatest trading nations have reached a total free trade agreement. I think the demonstration of that to that would be extraordinarily positive, especially, when people started to see in coming years the benefits from it.


Wayne Abernathy:  Matthew, any comments on that?


Matthew Heiman:  No. Other than I agree with the Senator’s point of view on that, and I also think related to demonstrating U.S. engagement in trade, in a similar vein, there are members of both parties that are advocating for a lessened role for the United States and the world on the national security front. And I certainly don’t believe that the U.S. is able to solve all the world’s ills, nor should it try to do so.


But I do believe that when the U.S. is engaged in the world, security is better for the U.S. and security is better for the world because the U.S. helps to operate a framework of interactions amongst nations that is rules-based, and that is generally a good thing for the world. And so to the extent that the U.S. can further engage with like-minded countries on trade and on national security, I think the world’s citizens benefit from that, and we should look to do more of that, not less.


Hon. William Phillip Gramm:  Wayne, let me add to that. It didn’t take me long when I got into Congress and into Senate to figure out the power was not what it was crocked up to be, that it is a burden, and that we extend treasure and blood all over the world and very seldom is it appreciated. But in the end, you have to ask yourself, if we’re not going to lead the world, who are you willing to turn it over to?


And while I certainly did not want to undertake many of these burdens, where a good conscience—as President Kennedy said, “If you only show a reward—” I never could figure out who I was willing to let do it other than us, and so as a result, I always supported doing it. But I wasn’t happy about it.


So I do think it’s something we have to keep in mind. If the world would go away, if there were no challenges, no threats, we could as proponents of domestic spending say, “We can spend this money on housing for poor people somewhere, or we could -- that we’re spending on defense.” But the problem is if we don’t protect freedom, who’s going to.


Wayne Abernathy:  Very good. Micah, any further questions?


Micah Wallen:  No other questions still, Wayne, so you still have the floor.


Wayne Abernathy:  Well, I have one more I’d like to put to the Senator and to Matthew and then give each of you some time to sum up, and the question’s this: I have been disturbed by efforts in recent years to take good trade promotion agreements and burden them with efforts to impose labor and environmental agendas, which can actually disrupt trade and weaken improvements in labor and environmental conditions. To what extent is that a risk in these negotiations?


Hon. William Phillip Gramm:  Well, I think we can prevent it from being a risk by just -- there’s no reason, in dealing with Britain, that labor issues should exist, or environmental issues should exist. Because, again, they share the same concerns and the same values, which is one reason I think that it would be easier to negotiate a free trade agreement. And one of the fears that I’ve always had and have today, as I watch this process of these issues becoming more prominent, is that they will become a vehicle for imposing restrictions on your country.


Look, I don’t mind saying that the renegotiation with Mexico has some rotten provisions requiring them to pay wages that will make their manufacturing noncompetitive, strengthening unions in Mexico, and denying American businesses dispute resolution in Mexico so they won’t invest there as if we are indifferent about the wellbeing of our neighbor. We’re the only rich country in the world with a poor neighbor. Poor neighbors hurt your property value.


So I think your concern is very real, and, again, I think this is an agreement that wouldn’t need those issues and shouldn’t have them, but I’m very concerned that we’re going to have, and I think there’s a real effort underway to do it. The right trade agreements that require standards that we’re not meeting in our own country and then impose them on ourselves through a trade agreement.


Wayne Abernathy:  Well, thank you, Senator. This has been an excellent, excellent discussion. Just a couple of final words, then, for each of you. Matthew, let’s turn to you for a few concluding remarks, and then we’ll turn to the Senator for his concluding remarks, and then I think we will be at the top of the hour, so go ahead, Matthew.


Matthew Heiman:  Well, I want to thank you, Wayne, for moderating, and I certainly want to thank Senator Gramm for agreeing to share some time with us to talk about this proposal. As the listeners understand at this point, I’m very much in favor of it. I hope there are constituencies within the Trump administration that are giving serious thought to this.


Because I think as I’ve said before, it would obviously be good for our economy. It would be good for our national security, and it could be an excellent exemplar to the rest of the world as to how you can interact with each other in a mutually beneficial way. So with that, I’ll hand it over to the Senator.


Hon. William Phillip Gramm:  Well, let me just conclude by thanking The Federalist Society. Our Constitution was written by people who knew the English language better than we do. I think if you’re going to have a real Constitution, you’ve got to take the context in which they said it, and what they actually said, and take it seriously. And this idea that we can impose values that sort of well up through court decisions is alien to the constitutional system and to what the Founders believed.


And I very much appreciate what The Federalist Society has done in terms of promotion of the Constitution as it is written. If want to change it, there’s a process for changing it, and it needs changing in some areas. I’d like to have a balanced budget amendment to the Constitution, but it’s not up to a court to make that decision.


Finally, I used to say to judges that I recommended to the president, “Look, don’t get caught up in this deal about not wanting to infringe your legislative power. If the Constitution says something as bright as the morning sun, pick up the sword and use it.” Amen. Thank you, Wayne.


Wayne Abernathy:  Thank you very much, Senator. I think this has been a wonderful discussion, and I’m looking forward to many people listening to it, who weren’t listening to it now, on the podcast. Micah, the floor is back to you.


Micah Wallen:  All right. Thank you, Wayne, and on behalf of The Federalist Society, I’d like to thank all of our experts for the benefit of their valuable time and expertise today. We welcome listener feedback by email at info@fedsoc.org. Thank you all for joining us. We are adjourned.




Dean Reuter:  Thank you for listening to this episode of Teleforum, a podcast of The Federalist Society’s practice groups. For more information about The Federalist Society, the practice groups, and to become a Federalist Society member, please visit our website at fedsoc.org.