BREXIT AND ITS IMPACT ON EUROPE

Published by: JYOTI PANIGRAHI

What Is Brexit?

Brexit is a term for "British exit," referring to the possibility of Britain withdrawing from the European Union (EU). In the June 23, 2016 referendum, 52 percent of British voters backed separation while 48 percent cast their vote to stay in the alliance. Former Prime Minister David Cameron, who called the referendum, resigned quickly thereafter.[1] The term has been broadly utilized since the time of a referendum on the UK leaving the trading bloc was advanced.

What is the European Union?

The European Union (EU) is a gathering of 28 nations that trade and permit their residents to move freely between nations to work and live. It is an economic and political partnership that was based on the remains of World War II to end centuries to integrate economic power. The UK originally applied to join what was then the European Economic Community in 1961 lastly turned into a part in 1973. However, the United Kingdom withdrew from the European Union on 31 January 2020.

Brexit Background

The UK's set of experiences with the EU has been viewed as questionable since the beginning of the EU venture. In any case, the UK always had maintained a distance from the EU. Fearing a loss of national sovereignty and impact, the UK stood aside during the 1950s when the six establishing nations launched the first steps of European integration. The UK joined the pioneer of the modern-day EU in 1973, to a great extent to infer the economic benefits of membership but also to have a political voice within as incorporation as integration took shape.

Nevertheless, numerous British chiefs and residents (perhaps most notably including former Prime Minister Margaret Thatcher) remained skeptical about the EU. The UK “opted out” of several major elements of European integration which was evident from the fact that it has its own currency - the pound sterling and refrained from joining the Schengen agreement, which removes internal border controls within the EU.

The political fraternity in Britain restricted the possibility of the EU as it tends to emphasis too much on internal treaties instead of boosting economic competitiveness and promoting European defense abilities.

In 2012, Former Prime Minister David Cameron promised to hold a choice on whether the UK ought to stay in the EU or leave it. He kept his promise and a national referendum was held in June 2016, where 52% of UK electors supported leaving the EU.

Reasons for UK’s exit from EU

· British sovereignty was threatened by the EU.

· Issue of migratory labour and too many immigrants allowed by the EU.

· Low economic growth along with an increase in terrorism.

· EU driven and forced refugee crisis.

· Loss of Employment and Employment opportunities.

The Brexit Negotiating Period

In March 2017, the UK authoritatively notified the EU of its intention to leave the coalition, and the UK and the EU started negotiations on the standing of the UK's withdrawal.

Brexit was initially due to happen on March 29, 2019, two years after then Prime Minister Theresa May set off Article 50 - the formal process to leave. Yet, she needed to push the deadline twice after UK Parliament couldn't concede to a path forward because of divisions over what kind of Brexit the UK should seek after and challenges related to the eventual fate of the border between Northern Ireland (part of the UK) and the Republic of Ireland (an EU member state). The lack of an apparent way out to the Irish border question led Theresa May’s government to agree to a backstop provision in the withdrawal agreement.

On Nov. 25, 2018, Britain and the EU concurred on a Withdrawal Agreement, a Brexit deal, addressing issues like citizen's rights, the divorce bill, and the Irish border.[2] Members of Parliament voted 432-202 to reject the agreement, the biggest defeat for a government in the House of Commons in late history which brought about May’s resignation.[3]

The deadlines continued to be extended even after Boris Johnson became the prime minister. Both Theresa May and Johnson have till now failed to win the consent of lawmakers for their Brexit deals, leading to extensions in deadlines. This is fundamental due to differences among the MPs. Some lawmakers favoured "hard" Brexit where the UK pulls out from the EU customs union and single market that permits member states to act as a trading bloc, to pursue its own trade deals with other countries. "Soft" Brexiters want to keep up some trade ties with the EU. Some lawmakers are constant 'remainers' and some believe the country should hold a second referendum.

Transition Period (UK Leaves the EU)

On January 31, 2020, the UK’s 47-year EU membership and its participation concluded. The UK-EU withdrawal arrangement sets out the provisions of the UK's take-off from the EU. It addresses several key issues, including UK and EU citizens’ rights and financial commitments.

A key hindrance in the withdrawal negotiations related to arrangements for the border between Northern Ireland (part of the UK) and the Republic of Ireland (a member of the EU). The withdrawal agreement basically builds up a customs border in the Irish Sea, with Northern Ireland maintaining regulatory alignment with the EU to save an open border and protect the Northern Ireland peace process. The withdrawal agreement incorporates a transition period, presently planned to last through the end of 2020, during which the UK is expected to continue following EU rules while it endeavors to negotiate with the EU on a free trade agreement and a range of different issues. After the transition period, the UK, including Northern Ireland, is relied upon to leave the EU customs union, allowing the UK to pursue an independent national trade policy.

Impact on the U.K. and the EU

· By leaving the EU, the U.K. naturally, precisely, lawfully, leaves hundreds of international agreements concluded by or on behalf of the to the advantage of its Member States, on subjects as varied as trade, aviation, fisheries or civil nuclear cooperation.

· However, with just 11 months to negotiate, there are only probabilities of very simple and minimal deals including trade, fisheries, and security. In that case, at the end of 2020, differing objectives for the trade talks may raise the possibility of a new no-deal scenario.

· In the absence of a deal, the earlier accord on citizens’ rights, money, and the Irish border will remain intact.

· Both of them should be prepared for the economic shift in trading on World Trade Organization (WTO) terms.

· The primary goal is the economic agreement to guarantee the tariff and quota-free flow of goods between the EU and the U.K. · However, the EU will possibly consent to zero tariffs and zero quotas if the U.K. pledges zero dumping – that is, not settling for less social and environmental standards to outcompete the EU.

· Negotiations will conflict over the EU's refusal to bring services into the trade deal.

· The EU seeks to link goods trade to keep up business as usual on admittance to British waters which is viewed as a matter of worry for the U.K., so it may offer ascent to conflicts.

· Even the non-trade subjects will be full of political troubles because the EU Member States will have to change their approaches as per the new arrangements and the guidelines.

Impact on India

§ India has had strong historical bonds with the U.K. and as of now, it is one of India's most significant trading partners. Over the most recent four years alone, the quantity of Indian organizations putting resources into the U.K. has quadrupled.

§ Similarly, the U.K. is one of the largest investors in India, among the G20 countries. Thus, it is imperative to perceive how India and the U.K. can move through Brexit and go into a new economic alliance that is commonly valuable to the two economies.

§ Brexit will directly affect the Indian stock market as well as the worldwide market in entirety, including the emerging markets in the world. This is a result of the high unpredictability of the pound.

§ Both the U.K. and EU account for 23.7% of the Rupee’s effective exchange rate. With Brexit, unfamiliar portfolio ventures will outpour and will prompt the debilitating of the rupee.

§ India’s businesses based in the U.K. will be troubled as till now they had border-free access to the rest of Europe. The investors are worried as India invests more in the United Kingdom than the rest of Europe combined.

Conclusion

A referendum on Brexit is now assured. While the outcome is far from an inevitable end product, a vote in favor of Britain to leave the EU is entirely conceivable.

The impact of Brexit on British business, the UK economy, and the wider British interests would be serious and felt across various channels both the path and the endpoint, as far as the new connection between the UK and the rest of the EU, would be questionable, intensifying the expense to the UK.

The immediate effect of the rest of the EU would also be major. The export, supply chain, venture, and policy interest of countless big corporates would be adversely affected, however, may be the single greatest effect will be on the cost of raising finance in Europe which is likely to increase.

Brexit would likewise have a more extensive political effect on the EU, both by disrupting internal political dynamics and due to the risk of political contagion if the 'proof of concept' of leaving the EU and courageous disintegrative powers in other member states. Europe would also lose regard and impact around the world.

Member states would be influenced in various manners and to different extents. This will undoubtedly impact ways in which states are willing to engage and accommodate the UK during the pre-referendum negotiation. All member states would, in any case, feel the effect of Brexit, both strategically and economically.

References

· AMADEO, KIMBERLY. n.d. "Brexit Consequences for the U.K., the EU, and the United States." The balance. https://www.thebalance.com/brexit-consequences-4062999.

· 2019. "Brexit basics: What is Brexit and why does it matter?" Reuters. https://in.reuters.com/article/us-britain-eu-basics-explainer/brexit-basics-what-is-brexit-and-why-does-it-matter-idUSKBN1WX1WI.

· Commission, The Electoral. n.d. "Results and Turnout at the EU Referendum." https://www.electoralcommission.org.uk/who-we-are-and-what-we-do/elections-and-referendums/past-elections-and-referendums/eu-referendum/results-and-turnout-eu-referendum.

· Edgington, Tom. n.d. "Brexit: What is the transition period." BBC. https://www.bbc.com/news/uk-politics-32810887.

· KENTON, WILL. n.d. "Brexit." Investopedia. https://www.investopedia.com/term.

· Mix, Derek E. n.d. The United Kingdom: Background, Brexit, and Relations with the United States. Congressional Research Service. https://fas.org/sgp/crs/row/RL33105.pdf.

· Ribakov, Vladimir. n.d. "Brexit: All you need to know about the UK leaving the EU – Summary." https://vladimirribakov.com/brexit-uk-leaving-eu-summary-part-1/.

Footnotes: [1]European Union. "United Kingdom." Accessed Nov. 15, 2020. [2]Gov.UK. "Withdrawal Agreement and Political Declaration." Accessed Oct. 16, 2020. [3] UK Parliament. "Government loses 'meaningful vote' in the Commons." Accessed Oct. 4, 2020.

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