Thursday, December 2, 2021

Brexit, The European Union And Its Impact On India

The 47 years relationship between the UK and the European Union (EU) came to an end on 31 January 2020 after Britain endorsed the 2016 referendum for ‘Brexit’- to leave the Union. It joined the European Economic Community in 1973 and is the first member state to withdraw from the EU under Article 50 of the Lisbon Treaty that sets out how countries can leave.

The implications of Brexit will be felt by both the UK and the EU in different ways. For the supporters of Brexit, it is the strengthening of the country and reclaiming of national power from Brussels that will lead to a ‘global Britain’. However, that journey is going to be far from easy. Britain will have to negotiate new trade agreements and access to markets with all countries. With a large sector of financial services and financial markets, the break with EU will impact the flow of labour, capital and services. In addition, the EU being its largest export  and import market, Brexit has created major trading issues that need a new agreement or else tariffs and quotas would come up that will harm business on both sides.

For the EU, Brexit impacts its own collective strength in multiple ways. Britain was the second largest contributor to the common budget and one of the permanent members of the UNSC and a nuclear weapons country. Thus, not only will the Union’s budget get downsized, but on the level of the Common Foreign and Security Policy, the absence of Britain will be sorely felt. As the Union Jack was removed from all EU institutions, it also means a seat less around all decision making points. In the gloom and doom of the finality of Brexit, French President Macron said, “The channel has never managed to separate our destinies; Brexit will not do so, either.”

Although Brexit has happened, there is a transition period that comes to an end on 31 December 2020. This is to ease out all processes and negotiate the trade and market access issues which are some of the toughest decisions to be made. Britain has already put out that there will be no alignment to EU rules and it will also not accept the jurisdiction of the European Courts to resolve disputes.

Amidst this backdrop, another dimension opens up on the India- UK relations. As Britain seeks to enhance trade relations, it offers a new opportunity for India to negotiate with London on the trade and economic partnership. According to a leading British Businessman of Indian origin, Lord Karan Billimoria, New Delhi should take steps to reducing corporate tax, address data privacy issues and improve the ease of doing business” to capitalise from Brexit. The areas that can see positive growth are technology, financial services and health care which will also benefit from the renewed India-UK partnership. At the political level, British Prime Minister Boris Johnson has already pointed out his eagerness to engage India in a new partnership. For Indian business located in UK, the free access to the rest of the EU is now over and thus imposes additional costs on them of either relocation or else paying export duty. Thus finding converging of priorities for both sides on trade and business will be crucial as many Indian businesses will lose market access to EU, face a shrinking market in the UK and can also face non-tariff barriers.

At a political level, the UK will seek to strengthen relations through other platforms such as the Commonwealth, which could be useful to New Delhi. More importantly, India should seek to find better terms of trade and market access and labour related issues in the services sector. As Britain enters the twilight zone of negotiations with the EU till end of 2020, Indian government and business should take advantage of the situation and be ready with different strategies for resetting the partnership with the UK.

Script: Prof. Ummu Salma Bava,Professor & Jean Monnet Chair

Centre For European Studies, Jawaharlal Nehru University

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