Brexit: Development hitherto

Reading time: 6-8 minutes.

The term Brexit is the short form for the term ‘Britain Exit’ which means that the Britain’s exit from the European Union. It refers to the referendum that was passed by UK in 23 June, 2016. Nearly 52% of the people voted for Britain to leave European Union while 48% were against leaving.

Ever since, there has been controversy spinning around the territory. The then Prime Minister, David Cameron from the conservative party resigned the post in lieu of controversy.

Later, Theresa May invoked Article 50 which states the procedures for officially leaving EU which resulted in vain. Owing to severe pressure May resigned. It was Boris Johnson who put an end to all the speculation with respect to Brexit. He, being a strong supporter of Brexit, has made sure that the Britain is set to leave European Union by January 31, 2020.

History of Brexit:

One has to understand the reason why European Union was formed in order to understand the recent controversial issue of Brexit which has been in news for a very long time. The history of European Union dates back to the formation of European Economic Community (EEC) which is the predecessor to the European Union.

The EEC was formed by signing of Treaty of Rome in the year 1915 by countries like France, Belgium, West Germany, Italy, Luxembourg and Netherlands. The main aim of the EEC was to foster economic cooperation among these countries in order to overcome the losses faced by these countries in the First World War.

Britain later joined EEC in 1973 but they left in 1975 over the conflicting opinion that the Britain will always extend their support to the Americans. Later on, the Maastricht Treaty which took effect in 1993 resulted in the establishment of the European Union (EU).

The main aim of the EU was to integrate the European countries both economically and politically. It also guarantees common citizenship, united foreign policy and common currency of Euro for most of the nation countries which does not include UK.

Current developments:

While Theresa May and David Cameron failed in bringing a proper Brexit deal, Boris Johnson the present Prime Minister has made stern statement that Brexit will be carried out on January 31,2020 and the process will not be delayed any further.

The present brexit deal effectively creates the customs and regulatory border in between North Ireland and Britain which means that the goods are subjected to the EU import taxes. This deal was not made by Theresa May which was one of the main factors for her resignation. The renegotiated deal of Theresa May also allows UK to sign and implement its own trade agreement with other trading nations across the world.

The new withdrawal agreement bill was passed in the parliament on December 20 2019, and with a thumping majority of 124 MP’s (358 to 234). When the European parliament also nods for the bill, the UK will leave EU on January 20, 2020. After this, the UK will enter into a transition period during which free trade agreements will be entered in between UK and EU.

The negotiations regarding law enforcement, security and data sharing will be discussed in between the nations. After achieving a proper consensus, UK leaves EU. Boris Johnson has made a statement regarding the transition period stating that there will not any extension regarding the transition period. This leaves UK with whole lot of pressure that requires all the aspects of trade and security must be sorted out within the said time.

What is it for India?

Advantages- Once the Brexit deal is signed, the UK would have to develop trade relations with different emerging trade markets around the world. With a large domestic market and a better economic foundation, India would be a profitable trader.

The IT industry is flourishing in India as it adopted the policy of Foreign Direct Investment in the wake of LPG (Liberalisation, Privatisation and Globalisation.  In the event of UK leaving the European Union, UK has to be dependent on the Indian investment. It will offer India more incentives by relaxing the regulations, tax break and other such offers which may favour in opening of the market.

Disadvantages- However, there may be certain disadvantages as well. As UK accounts only for 3% of the global market out of 17% shared by the European Union, the IT industry will suffer certain distress. With the divorce of UK from Brexit, the import prices of commodities may also increase which affects in Indian companies.

It may also result in currency volatility as there may be devolution of Pound and Euro with the separation of UK from the European Union. Indian companies have to setup separate operating companies within the European Union to recalibrate European operations. Large numbers of students are studying in UK for undergraduate as well as postgraduate courses. The visa procedures will get difficult with this Brexit deal.

Probable future for brexit:

The future of Brexit depends on the decisions that are arrived in between the UK and European Union during the transition period. The free movement of people between UK and EU will remain unaffected during this period. During the transition period the EU laws will remain enforceable in UK.

Trade relations between world nations will suffer a great blow after Brexit. Britain has to formulate proper and legit trade agreements to prevent other countries from incurring losses. Some scholars are of opinion that the deal may lead to political and economic instabilities. The deal is also considered as a threat to the concept of globalisation as the climate change agreements will have a great effect on UK leaving EU.

Conclusion:

The Brexit deal is one of the most significant political and economic incidents of world history. The leaders of the UK are under a greater responsibility to endure safe withdrawal from EU. Considering how big UK is and how their decision affects the world economy must be taken into account during the negotiations that are to be made during the transition period.

Author: J.Shuruthi from SASTRA Deemed to be University-School of Law, Thanjavur .

Editor: Tamanna Gupta from RGNUL, Patiala.

Brexit: Boris Johnson’s negotiation offer

Reading time: 6-8 minutes.

Brexit is an abbreviation that is used to denote the term “British exit” from the European Union (EU). The EU includes 28 European countries which are in an economic and political union due to which the residents get the opportunity to live or work in any of those countries they want.

Brexit resulted from a public vote or also called as referendum which was held on 23rd June, 2016 to decide whether Britain should leave or remain in EU.

It was done with the intention to settle this big question once and for all and also as the then Prime Minister David Cameron promised such a National Referendum. He himself was campaigning for continuing the membership and was convinced that people would want to remain in the EU. The number of people voting was around 30 million.

Leave was supported by 52% and opposed by 48%. The voting results came as a big shock and created a huge disturbance in the global markets.Cameron announced his resignation the following day.

Though the UK government announced the country’s withdrawal in March 2017, it started a two year long process which was to be concluded on 29 March, 2019 completing the withdrawal.

But the UK parliament has voted against the withdrawal agreement thrice, causing the deadline to be extended twice; from 29th March to 9th October 2019. The latest deadline is 19th October 2019 and if the UK Parliament does not reach any agreement on that day then the withdrawal deadline will experience another extension.

PM Johnson’s Negotiations

Boris Johnson, current Prime Minister of Britain has offered a final Brexit offer to the European Union. In the latest Negotiation the following were covered:-

  1. Brexit new Offer: The PM made new offers on which he insisted on ditching the “Irish Backstop”, which is an insurance policy that is designed to ensure that there are no customs or any other type of infrastructure on the Irish border.
  2. Checks the business area: Johnson admitted that after Brexit some custom checks will be required in Ireland. He suggested that it could be done on “decentralized basis”. There are plans that would keep the Northern Ireland to stay in a regulatory zone with the EU single market for goods, removing the need for checks.
  3. “Get it done”: In the Tory conference the statement “Let’s Get Brexit done” was a repeated statement. Johnson’s office billed the proposals as a final offer. He reaffirmed that they have no intention of getting another extension. In his speech Johnson also said that no-deal is an outcome that the government isn’t seeking but it’s an outcome for which they are ready.

Timeline of Brexit

  1. 23rd June, 2016: Most commentators were in the belief that the Brits would decide to remain in the EU but the ‘Leave’ campaign won by 51.9% to 48.1% with a gap of 13 million votes. David Cameron resigned the next day.
  2. 13th July, 2016: Theresa May was appointed as the Prime Minister.
  3. 17 January, 2017: Through her speeches and setting out the government’s “Plan for Britain” May showed her intentions for a “hard brexit”.
  4. 29th March, 2017: May triggered article 50 which started the two year negotiation process that leads to UK exiting the EU.
  5. 8th December,2017: Amidst of the negotiations between UK and EU, they agreed over a deal covering both UK and EU citizens’ rights and the Northern Irish “backstop”.
  6. 6th July 2018: May took her cabinet to Chequers for signing a collective position for further negotiations with the EU but Brexit secretary David Davis and Boris Johnson opted out of it naming it as a suicide vest.
  7. 15th Jan & 12th March, 2019: With the fear of losing her votes, May made an attempt to get her deal ratified but due to various other concerns it wasn’t possible and hence she suffered a heavy defeat.
  8. 24th June, 2019: Due to the failure to get the withdrawal agreement ratified, May resigned.
  9. 24th July & 4th Sept, 2019: Boris Johnson had an easy win with 66% of the votes. MPs backed up a bill which blocked No-Deal Brexit on the 31st October. This would require Johnson to get extension the Brexit deadline, if he fails to strike a deal with EU.
  10. 3rd October, 2019: Johnson made a few negotiation proposals with a mind to get this brexit with or without a deal.

Recent Developments

On 28th August, Boris Johnson confirmed that the Parliament will be suspended for four weeks from mid- September. Recently, in this regard, the Supreme Court of UK declared that the PM acted unlawfully when he announced such suspension in a desperate attempt to muzzle Parliament for as much time as to in the run-up to the Brexit date of 31st October.

Just three weeks before the deadline of Brexit there are hopes that the agreement might be concluded between UK and EU after a meeting between the UK Prime minister and his Irish counterpart.

Despite the introduction of Johnson’s new Brexit plan, the huge differences remained in their respective positions. The new proposal seeks to strip out the Irish Border “backstop”- it seems to be a main issue.

The UK would no longer remain in custom with the EU and Northern Ireland would leave the EU’s customs union along with UK. However, it could remain partially aligned with EU’s single market as subjected to Approval of Belfast in every four years.

Johnson’s assurance over customs checks failed to convince EU leaders. The single market and consent proposal also caused alarm in Northern Ireland’s farming and business communities.

Implications of Brexit

In the situation of No-Deal

No-deal would imply that UK is not a part of EU and removal of its tariff free status with the rest of the members without an agreement. Increase in tariff would cause trouble for exporters as export cost will be increased.

Trade and travel in Ireland would become complicated in a no-deal brexit situation. UK would have to pay $51 billion outstanding EU bills and also guarantee EU citizens’ rights those living in UK.

In the situation of a Hard Brexit

It is almost same as a no-deal brexit but with a trade agreement. London’s reputation as being the bastion for business will be damaged. It would have a huge effect on young workers as there will be no jobs readily available for UL’s workers after Brexit. Hard Brexit could lead to UK losing Scotland.

Effect on US

US dollar increased in value when the pound fell. This is not good for foreign shareholders. High rate of dollar means exports from US becomes expensive which in-turn affects the farming and manufacturing sector of US.

UK would lose its titles like “world’s second largest economy”, third largest populated country and being the “financial capital of the world”.

Conclusion

Now, as the EU is almost there at the deadline for getting the much awaited brexit there might still be a question in the minds of people that is it worth it? Keeping in mind all the adverse effect that Brexit will bring for the EU, still those in favour of Brexit are looking at the bright side.

The economic fallout since the issue of the referendum has been improved and will be taken care of in the future. As the PM is determined for getting the Brexit done by the end of October and the voters are also in a bit of assurance that separation form the EU would actually provide them beneficial outcome, with the passage of time.

Deal or no-deal, pro- Brexit people are ready to go separate ways and bear the load upon them. Though, it is still required to have a system of proper laws that would be needed for the functioning of the post Brexit UK.

-This article is brought to you in collaboration with Rajni Negi from Bansathali Vidyapith, Newai, Rajasthan.

Decoding Brexit: What’s in it for India?

Reading time: 5-6 minutes.

Boris Johnson, the UK’s new Prime Minister will be dealing with a lot of issues left over by his predecessor, Theresa May. May was forced to resign after the UK’s lawmakers rejected to ratify the Brexit deal that she secured with the EU three times and also failed to agree on any alternative outcome.

At a glance, Johnson’s Brexit plan is simpler than May’s: Get a new agreement with the EU or crash out on October 31 with no deal. Given that the EU has said numerous times that May’s deal, formally known at the Withdrawal Agreement, is not open for negotiation, no deal seems on the cards.

When Parliament returns from its summer holiday on September 3, Johnson could well face a motion of no confidence in his government. It’s a vote that Johnson and his team can’t expect to win. He currently has a parliamentary majority of just one and some of his own Conservative lawmakers have implied they will put blocking no deal ahead of party loyalty.

But why is Britain willing to leave EU in the first place?

Brexit is the abbreviation of the term “Brtiish Exit” from the European Union. It mirrors the term Grexit, a term which was coined and used to refer to the possible exit of Greece from the EU. Britain decided to leave the EU after the result of the referendum which stated that 51.9% of the voters favoured exit of Britain.

A referendum denotes voting in which everyone of voting age can take part, normally giving a ‘yes’ or ‘no; answer to a question. After growing calls from many MPs of the Conservative Party and the UK Independence Party (UKIP), the referendum was finally held on June 23, 2016. A similar referendum was held in 1975 in which 67% of the voters voted to stay in the EU.

While there is no specific reason why Britain took this decision, people who voted for leaving the EU argued that it was necessary to protect the country’s identity, its culture, independence and its place in the world. They essentially were opposed to immigration of people into Britain for work related purpose. The Eurozone crisis added to their resentment.

Which international law is involved in Brexit?

Article 50 is a clause in the European Union’s Lisbon Treaty that outlines the steps to be taken by a country seeking to leave the Union voluntarily. Invoking Article 50 kick-starts the formal exit process and serves as a way for countries to officially declare their intention to leave the EU.

The procedure applies to each of the 28 nations of the EU; “in accordance with its own constitutional requirements’. The first step along the road to departure is for the departing Member State to notify the European Council of its intention to do so. The UK did this on 29th March 2017, after the assent of 498 MPs in the House of Commons. The next step was for the EU to negotiate and conclude a Withdrawal Agreement with the departing state, setting out the arrangements for its withdrawal.

What can be Brexit’s repercussions on Indian economy?

Brexit was one of the biggest global macroeconomic events in June 2016. The decision of Britain shook markets worldwide and had a major economic impact. This was clearly reflected in rebound the Indian stock markets showed post referendum results.

The UK has been an attractive centre of business and international finance due to its strong legal system and contract enforcement practice. India is one of the top investors with UK on account of UK being part of the European Union. With its strong investment climate and relationship with EU, it was considered the gateway to do business in Europe.

Many Indian companies like Rolta, Tata Steel, Bharti Airtel Ltd (UK) have set up operations in the UK and derive revenue from European operations. A no-deal Brexit is likely to cause some disruption in the operations and may also cost a few jobs. Jaguar Land Rover plc, owned by Tata Motors ltd. plans to eliminate 4,500 jobs in response to sales slowdown caused by Brexit and slowing Chinese demand.

Indian companies would need to recalibrate European operations, like setting up an additional operating company within European Union. This means short term disruptions will have a financial impact, as also take up management time. Similarly, Indian companies who have used London as their base to raise capital abroad may face issues and may need to work harder on the process.

Given that this risk has been around for a while, Indian investments in 2017 were at the highest level since 2008. This is partly driven by the depreciation of GBP (British pound sterling) against the rupee post the Brexit vote. Indian companies will need to focus on their merger and acquisition deal efforts across Europe while tackling the British market.

India would also need to negotiate a free trade deal with the UK as it proposes to retain the same goods and services schedules post Brexit. The concessions agreed upon by WTO members’ prior to Brexit may not hold the same value once Brexit happens.

All the additional costs and tariffs agreed upon may need to be rescheduled. India exports around USD 9.6 billion worth of goods and services to the UK. Though there may be other factors looming, Brexit may be another reason why the trade surplus of USD 4.6 billion in 2017 almost dropped by half to USD 2.5 billion in 2018.

The road ahead…

India sees the British exit as an opportunity to expand its trade and economic relations with the UK. British and Indian officials have been signalling that Brexit will make the conclusion of a bilateral free trade pact much easier. This is because Brexit provides a fresh opportunity to India to strengthen its economic relationship with the UK through an India-UK trade and investment agreement.

On the other side, a no deal Brexit and the uncertainty it produces would have many adverse impacts on the Indian economy in general and Indian businesses in the UK in particular. For instance, at present, roughly 800 Indian companies operate in the UK. The UK serves as an entry point for many Indian companies to the European market. A disorderly British exit would shut the direct access of these companies to the EU market. That may force some of the companies to relocate or shut down their businesses.

Finally, the doubt of a no deal scenario and risk aversion tendencies across markets can further depreciate the already fragile rupee. Economists note that the US Dollar would be the only currency that benefits from a hard Brexit and the subsequent uncertainty in global markets. Such an outcome will not only affect the pound sterling but the currencies of emerging markets as well, including the Indian rupee.

A no deal scenario will, therefore, have an adverse impact in the short term. However, in the longer run, Brexit is expected to provide an opportunity to India to reset its trade and economic relations with the UK and the EU.

-This article is brought to you in collaboration with Shivaang Maheshwari from Gujarat National Law University, Gandhinagar.