THE BREXIT DEBATE

THIS ARTICLE WAS WRITTEN BY AMRIT SUBHADARSI A STUDENT OF NATIONAL LAW UNIVERSITY, ORISSA.  

The United Kingdom (UK) joined the EU in 1973, though it retained its independent currency, the pound sterling. The 28 member regional grouping was established in 1951 as the European Coal and Steel Community of duty free trading. In 1957, the Treaty of Rome created the European Economic Community (EEC). During the 1980s itself, a section in the Conservative Party had clamored to leave the EU. David Cameron, who belongs to the same party had made the referendum a part of his election promise to tackle the growing ideological divisions within the party to leave the EU. What made the referendum crucial was that even if UK does not have written constitution, the Referendum Act, 1975 permitted holding of such exercise in light of unquestionable parliamentary sovereignty.

Recently, there has been lot of discussion on the mainstream media over causes of this historical event. One section argues that the rise of British competitiveness, a post Thatcher phenomenon rewarded successful professionals and moneybags but it also drove the less adept to the margins.[1] In other words, globalization took care of the well to do, but the poorer sections were left out from the growth story in Britain. This sentiment has been observed in the voting patterns during the referendum, with the ‘Leave’ campaigners comprising of older and poorer sections of Britain’s citizenry. More than 600,000 residents of Britain’s second city, Greater Manchester, are reports a study, “experiencing the effects of extreme poverty” and 1.6 million are slipping into penury.[2]

Another significant cause has been the alleged surge in immigration from other European countries and also from the Middle East. It is significant to note that immigration from other European nations and Middle East have given rise to anti foreigner sentiments, as it has been acknowledged that the refugees are taking up most jobs in UK. However, if statistics are anything to go by, the largest numbers of refugees have taken shelter in Turkey, which has accommodated them as part of the country’s entrepreneur culture. Many such refugees can be seen working in the city’s real estate sector. From a humanitarian perspective, these refugees being victims of terrorism have nowhere to turn to, and have thus flooded the European continent. Most refugees have been greeted warmly by countries like Hungary. The argument against immigrants can be said to be a flawed one because facts do not support the claim that a quarter million people migrate to Britain from the EU annually.[3] This coupled with the UK Independence Party (UKIP) leader Nigel Farage’s controversial poster of him standing in front of refugees raises doubts as to the authenticity of the claims made by the ‘Leave’ campaigners.

A third reason adding fuel to the ‘Leave’ campaign has been the tussle between EU and Britain over Britain’s sovereignty. There have been reports that there were differences between David Cameron and the EU leadership over immigration policies, a common defense force and foreign policy and matters of criminal justice. Leading Brexit campaigner, Boris Johnson, former London mayor, has been vocal in his argument that almost sixty per cent of the legislation made in UK has to seek obeisance from the EU. Even though the veracity of such claims is yet to be verified, the fallout of Brexit is there for the whole world to perceive as a catastrophe.

THE FALLOUT

Britain’s exit from the European Union came as a shock to all the financial markets. Leading stock exchanges like Japan’s Nikkei, National Stock Exchange (NSE) and the Bombay Stock Exchange (BSE) saw the tumbling of values of most of the stocks listed. Although such volatility is only short term, it highlights the importance of UK leaving the EU. The biggest loser was the British pound whose value touched a 31 year low. Clarity is needed as to how long such volatility would continue, but many economists and experts have opined that Britain has bitten off more than it can chew. In its annual report the International Monetary Fund (IMF) warned that if the UK decides to leave the EU, living standards would fall, inflation would rise and could wipe out up to 5.5% of the GDP.[4] Even worrying is the fact that the UK would lose advantages of being part of the EU single market and exports to other EU nations can be affected.

So far as education and tourism potential is concerned, Brexit can prove to be a blessing in disguise for countries like India, as education expenses will drastically come down and also the tourism sector is likely to get a boost although value of the pound sterling has been on the decline.

 Brexit might have a domino effect on nations like France, Germany, among others who would all want to seek holding of a referendum to determine greater leeway in their decision making abilities. Whether this actually happens or not, only time will tell. So far as trade relationship with India is concerned, there would be limited impact on Indian businesses in the UK. The relationship with India is crucial, as it is the third largest investor in the UK. Due to this, the Indian response has been a cautious one. According to Standard Chartered Bank (StanChart), given that India’s trade with the UK is small, any near-term negative impact is likely to be limited. Bigger risks arise from uncertainty around the EU’s future, as it is a more important trade partner for goods and services together than the UK.[5] Experts have also opined that India can be in a better position to negotiate on a Free Trade Agreement with the UK.

[1] Reasons for Brexit, The Times of India, June 25, 2016

[2] John Pilger, Why the British said no to Europe, THE HINDU (KOLKATA), June 28, 2016 at 10

[3] Vijay Rana, ‘Scaremongering’, ‘racism’ and murder: UK at breaking point before Jun 23 vote, THE INDIAN EXPRESS, June 20, 2016 available at www. readwhere.com/ read/ c/ 11118196, (last visited on June 27, 2016)

[4] Id.,

[5] http://www.moneylife.in/article/brexit-impact-on-india-would-be-limited-to-financial-markets-a-few-sectors/4709.html, (last visited on June 27, 2016)