“It is in your moments of decision that your destiny is shaped.” — Tony Robbins. Ever since the UK announced parting ways with European Union there have been a lot of apprehensions about EU’s and UK’s destiny in the post-Brexit world and its repercussions on other countries. Today, there is a lot of encouragement and motivation for India to get into a trade agreement with UK. But how fruitful this agreement would turn out is too soon to comment upon.
EU, a 27-member group, has been exemplary of economic and political union. No doubts its presence brought lasting stability to the region ever since the devastation caused by world wars. The regional rivalry was brought to an end and peace and stability were promoted through regional integration. The steppingstone was the ratifying of the Treaty of Rome in 1957 by the Western European countries that led to the establishment of EU’s custom union for economic activity, as per which for few countries trading bloc was created. The membership was expanded to other countries once the cold war’s rivalry receded. For better regional integration and connectivity common policies were brought forth. In 1985, the Schengen zone was established that abolished border control and immigration, i.e., free movement of people across some countries. With Soviet Union’s collapse, the cold war ended, and the Maastricht Treaty was signed in 1992 replacing the Rome treaty. The Maastricht Treaty became the successor of the European Economic Community, under this EU was established as a common political and economic union and common policies establishing a single market, common customs union and a common currency were framed. As a result of these efforts Euro was introduced in 1999 and Euro zone was established by 19 members adopting Euro as their national currency. In Early 2000s integration increased to cover several sectors and domains, and Maastricht Treaty was replaced by the Lisbon Treaty in 2007. These two treaties focused on regional integration and established many principal organizations such as the European Council, European Parliament, Council of Europe, European Court of Justice and European Bank. Under the framework the members of EU have come up with common policies that stretches across foreign policy, security, immigration, border control, telecommunication, fisheries, protection of environment, etc., through this true regional integration was achieved. Free movement led to rapid economic growth, without any tariffs or quota mechanism free movement of goods and services through single market and customs union was made possible. This led to the removal of border screening of goods. Shared mutual benefits led to lasting prosperity and helped maintain peace and stability in the continent.
But the price was to contribute economically and share resources, compromise on common polices, abide by rules and laws, that might affect a nation’s political and economic sovereignty. And when failing to do so getting subjected to the jurisdiction of European court of justice and penalized for violation. This compromise was resisted by some politicians and individuals of Britain known as Eurosceptics. They doubted the extent of shared mutual benefits as compared to the financial contribution that Britain made. Hence, unwilling to share the country’s resources and not willing to compromise on the nation’s political and economic sovereignty the movement of Brexit was born. In 2016, Britain held the Brexit referendum in which 52% voted to leave, while 48% voted to stay. As per the Lisbon treaty, if member countries are leaving the organizations then on such countries Article 50 of the Lisbon treaty is applicable. As per the Article, a two-year transition period is to be carried out where a withdrawal agreement and a post-exit deal must be worked out. This has to be approved and ratified by European council and European Parliament and national parliament of the country quitting EU. The deal was delayed due to confusion and lack of clarity surrounding EU and Britain. British society and politics became polarized with regards to terms and conditions of the agreement of future relationship with Britain and EU. Many British governments saw a fall during this period. The withdrawal agreement was signed in 2019. And after the approval, Britain formerly exited EU in January 2020. Thus, entering into a 11-months transition period during which it continued to be part of the customs union and single market until 30th Dec 2020.
After this deadline, a future relationship in key areas such as foreign policy, immigration, right to free movement, border control, restriction, tariff control on goods and services and the jurisdiction that the court of justice will enjoy when it comes to Britain and EU has to be worked upon. Britain was never a part of Eurozone, it never accepted Euro as its currency and always enjoyed the autonomy in monetary policy. But Eurosceptics believed Britain compromised on the political and economic autonomy by being a part of a single market and customs union and foreign policy, immigration, etc. The idea about Brexit has always been about Britain’s autonomy in several key areas of governance. Since the announcement of exit, British society, politicians, and parliament were polarized with regards to withdrawal agreement and post-exit deal. For global and EU economy a deal had to be worked out for post exit.
A no deal Brexit would have catastrophic effect on EU’s and Britain’s economy, as it will affect free movement of people, goods and services, and the so far relaxed norms would be severely disrupted. It will lead to a cost of 6% GDP for UK alone. An FTA deal has been finalized under which there will be zero tariffs and zero quota for goods. But one can expect more restrictions on movement of goods enhanced border screening and checks and paperwork. UK is dependent on EU countries for food, it is this that has helped to introduce this provision in the deal. Right to free movement will be VISA-free like before, but enhanced border security and checks can be tough.
It should be noted that trade and services are not covered, as Britain is resistant to include services, and London is the hub of financial and legal services in Europe and no wonder UK wants to retain this edge over others. Individual companies and countries are left with the decision to ensure ad-hoc measures for a smooth workflow in trade and services. Another major concern of EU countries is Fisheries, as per the EU rules member countries have to give access to their EEZ to other member countries too. Fisheries although a small subject in Europe has gained widespread attention owing to its emotive strain and excessive politicization on the grounds of food securities and national sovereignty. There was widespread opposition in providing access to water, but UK conceded in providing access for 5 ½ years following which a review will be taken up. Another major concern was the border control between Northern Ireland and the Country of Republic of Ireland. Northern Ireland has witnessed some insurgent movements for integration with Republic of Ireland and liberating it from the UK. Although such attempts were ended in the last few decade. Presently, there is the use of soft border mechanism between them. The fear was after Brexit, Britain will bring harsh border control mechanisms and disrupt cultural and economic relations between the two. Many EU members were also concerned that Britain with its new autonomy will come up with several competitive laws such as disrupting industries and environmental laws that will threaten the level-playing field of other European countries with regard to business, friendliness and environment. Labor laws will be relaxed, and environment standards compromised to attract more investments in the country. Although, Britain has agreed to continue with level-playing field without reducing competitive laws and environmental standards. All the provisions have to be approved by the British Parliament, which again will be a smooth process as it is currently dominated by the Conservatives and is also supported by the opposition, i.e., the Labor party. The same provisions have to be approved and ratified by the EU council and EU Parliament. Approval by all these institutions will take some time. Meanwhile, a provisional deal may come in place once the transition period gets over. These provisions will be subjected to further review in the coming years. Now priority is to ensure that minimal or no disruption is made to the movement of goods and people due to reemergence of former border controls. Britain must ensure that Bureaucratic red-tapism shouldn’t hinder the supply chain. India should seek FTA separately with EU and Britain. It is too premature to evaluate the new deal on India’s economic interest. But economic experts believe that the new deal will not help Indian goods much but can be beneficial for India’s services. India should accelerate the ongoing FTA talks with EU known as the bilateral trade investment agreement. To protect India’s financial independence and economic interest, a new FTA should be signed between India and UK.