brexit deal
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This article is written by Mariya Paliwala, Student of VII semester, MLSU, Udaipur (Rajasthan)

Introduction

The word Brexit is basically an abbreviation and combination of two words i.e. “British Exit”. The origin of this word can be traced back to the word “Grexit” which was used when the possibility of Greece leaving Eurosozone. Similarly, the word Brexit refers to the possibility of Britain withdrawing from the European Union (EU). Under the EU 28 member nation agrees to open up their borders to other EU members so as to have a common market and abide by uniform social and political policies.

Historical Reasons: Why did the U.K. Joined the EU?

In January 1973, during the reign of Conservatives in Britain, the then Prime Minister of the U.K. Edward Heath joined what was then called the Common Market. Economic reasons were one of the prominent reasons behind the U.K. to join the EU. Further, this decision proved beneficial for many voters, investors, politicians and business people for about five decades. The specific economic benefits that Britain has availed operating within the EU are:

1.  A barrier-free trade practice

Operating in the EU helped the U.K. exposed to the liberal and free trade practices. And at the same time to maintain relationships with large and important trade giants of the world.

2.  A strong and clear regulatory framework

The legal framework of the EU is very much structured and systematic. Moreover, the EU also represent the latest legal order of International law.1 This feature of the EU persuaded Britain to be part of the EU.

3.  EU funding for industries, science and research

This kind of support proves to be a humongus support in terms of economics, which leads to the all round development of any country. Perhaps, this was also one of the reasons for Britain to operate within the EU.

EU Referendum in the U.K.

There was the referendum held on 23 June, 2016 in order to make take public opinion on the matter of Brexit. The idea of referendum upheld the notion of Parliamentary Democracy. A few questions pertaining to the referendum are as follows:

Why was the referendum in the U.K. held?

The referendum was held in order to address the question of whether the U.K. should remain part of the European Union or not.

Who all were allowed to vote in the referendum?

  1. All the British, Irish, and commonwealth citizens;
  2. Who must be 18 years or above;
  3. Who were the residents of the U.K.; or
  4. Citizens of the U.K. which lived overseas, provided that they are registered as voters at the U.K.’s address from last 15 years.

What was the results of the referendum?

The result of the referendum was announced by David Cameron, the Prime Minister of the U.K. on 24 June, 2016. Further, 33 million people participated in the voting process from various parts including Scotland, England, Northern Ireland, Wales and Gibraltar. The Brtisish people voted to leave the European Union.2

Positive Consequences of Brexit

1.  Economic Consequences

The U.K. being a member of the EU has to send large amount to Brussels, which is the headquarter of the EU. The EU being the welfare union of all the European States think for all the nations and the funds contributed by the U.K. is wholly spent on welfare of the needy European nation and the remaining funds are also not sent back to the U.K.

However, after Brexit the U.K. will no longer have to pay any amount to the European Union because it will cease to be a member of the EU.

2.  Immigration

It a norm that whichever country is a part of the EU will have to allow the member nations of the EU in their territory without visas and any other formality. Similarly, the U.K. being the member nation has to allow people from other member nations of the EU and vice versa.

The result of this norm is that immigration has led to population growth especially in England.

For instance, the chart below describes the migration estimates, from which the increase in the number of migration from overseas has increased.3

Figure 1: Net migration from overseas to U.K. from 1975 to 2018.

https://lawsikho.com/course/diploma-m-a-institutional-finance-investment-laws

Therefore, Brexit will bring staunch rules and regulations in the formalities for the purpose of immigration so that people from overseas cannot easily come and settle in the U.K. which will ultimately stop the immigration.

3.  No need to follow the terms of the Treaty on the EU

After Brexit, the U.K. will no longer have to follow the regulations and norms laid down by the EU. The U.K. can make its own regulation for its development and can become a regional superpower. Moreover, the U.K. has to no longer comply with the libeal immigration policies laid down by the EU.

Negative Consequences of Brexit

1.  Economic Consequences

The United Kingdom has a small open economy, whose trade relies on European Union. For instance, in 2015, the trade openness of the U.K. was measured with the help of the sum of exports and imports relative to GDP which was 0.57 as compared to 0.28 of the U.S.A. and 0.86 of Germany. Further, the EU accounts for 44% of the U.K.’s export and 53% of its import.4

Hence, Brexit will however lead to reduction in economic integration amongst the U.K. and its trading partners i.e. especially the members of the European Union, if Brexit happens.

As per the data of 2019 the EU has about 70 trade agreements and as of March 2019 the United Kingdom has signed an agreement with only a few nations.5 This perhaps is hindering economic growth of the U.K.

Approaches In Order to Estimate the Effect of Brexit

Pertaining to the economic consequences the researchers has formulated 3 approaches in order to predict the effects of Brexit which are:

  1. Case studies with the historical perspective of the economic consequences of the U.K.’s operation in European Union.
  2. Model of Brexit with the help of computational general equilibrium trade models.
  3. Prediction based on estimations on how the EU membership affects trade in international market.

These approaches consists of number of limitations, however an amicable picture of the scenario can be drawn using these approaches and one can derive the economic impact of Brexit on the U.K. and the EU.

2. Foriegn Direct Investment (FDI)

Another adverse consequence of Brexit is likely to decrease in FDI. The concept of Single Market allows foreign investors to utilise the U.K. as an export platform to serve the market of the European Union.

For instance when we look at the automobile industry, which makes use of FDI and trade in order to estimate the increase in trade cost and intra firm coordination cost. However, following Brexit will reduce car production in the U.K.

3. Immigration

As the U.K. cease to be a member of the EU, immigration would be difficult as the immigrants will be burdened with broad formalities of visas and other documents. Hence, if there will be decreased migration from overseas to the U.K.  leading to lower immigration, which indeed will adversely affect the U.K.’s GDP per capita between 0.9 and 2.3% in 2030.

What is No Deal Brexit?

According to Article 50 of the Treaty of the EU any member state can withdraw from the European Union as per its own constitutional norms.6 This Article was invoked by the U.K. government to leave the EU.

No Brexit Deal refers to a potential withdrawal of the U.K. from the EU without any withdrawal agreement. Under Article 50 of the Treaty on the EU, all the treaties of the EU cease to apply as soon as the ratification of the withdrawal  agreement is done.

During 2018 and 2019 the representatives of the U.K. and the EU negotiated the withdrawal agreement, which is indeed a planned withdrawal. However, in the U.K. the House of Commons voted against ratification of withdrawal agreement in the three occasions. Further, the withdrawal agreement comprises of various provisions pertaining to:

  1. Citizen’s rights;
  2. Money liabilities i.e. long term pension agreement or agreed on any contribution for community benefits;
  3. Border arrangements;
  4. Resolution of disputes.

Hence, the U.K. could still withdraw from No Deal Brexit, if the Withdrawal Agreement is not ratified/ approved by 31 January, 2020 or at the end of the transitional period.7

Is Brexit a beginning in the Downfall of the EU?

This is the most significant question after analysing the whole scenario of Brexit. The EU is an organisation which is indeed a strongest Financial union of the world. Most of the research scholars and media personnels are of the view that Brexit is the first and foremost step towards the decline of the EU.

Moreover, the British referendum allowed the citizens of the U.K. an opportunity to vote wherein they voted in favour of leaving the EU. As they are of the view that the EU has imperialist norms and the U.K. being its member has to follow the norms. Instead of following the EU’s policy, the U.K. is eyeing on to become a regional superpower.

Hence, keeping this ideology in mind other member nations of the EU might also demand exit, thereby leading to the downfall of the EU.

Amicable Solutions to Divorce the EU

1.  Mutual Beneficial

Brexit must mutually benefit both the EU and the U.K. and after the U.K. cease to operate within the EU friendly relations must continue to be in existence. Further a formal deal pertaining to mutual benefit and friendly co-existence must be signed by the representatives of the U.K. and the EU.

2.  Sample Design for Future Economic and Security Model

After Brexit, the U.K. requires a well planned Economic and security structure so that its functioning is not hindered by its exit from the EU. Further, this design will help the U.K.’s economic and security system stable.

3.  Contemplation of New Strategic Partnership

A new strategic partnership between the U.K. and the EU would definitely lead to bold and ambitious free trade and customs agreements which will ultimately lead to frictionless and free trade making the U.K. the strong economic power.

4.  Measures must be taken to avoid hostilities

After the ratification of the withdrawal agreement by the U.K. there must be strict rules formulated on the part of both the U.K and the EU so as to curb hostility and to maintain peace and security of the european continent.

Conclusion

Firstly, the way referendum on the matter of the U.K. leaving the European Union was held, it reaffirmed the notion of parliamentary democracy. Instead of bureaucrats or a few government officers deciding on this matter they rather gave this responsibility to the people of the nation to decide and vote for it.

Secondly, after a detailed analysis the fact that after Brexit there might be the chance that the decline of European Union will be on its werge to begin.

Thirdly, the invisible boundaries which were laid down by the EU around the U.K.’s economic development will be in no more existence so the chances of economic prosperity and all round development of the citizens of the U.K. will be at its boost.

Thirdly, Brexit will lay staunch formalities for the migration from overseas, which will help the people of the U.K. to take the breath of satisfaction that their opportunities will no longer be curbed because of the outsiders.

Lastly, the Brexit is the outcome of a peaceful settlement and based on the principles of the Treaty on the European Union.

Wherefore, every disputes and conflicts of this world should be sought in this manner without any violence and war. Moreover, peace and prosperity must prevail instead of hostilities.

Endnotes

  1. Van Gend en Loos vs. Nederlandse Administratie der Belastingen (1963) Case 26/62 https://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=CELEX:61962CJ0026:EN:PDF
  2. EU Referendum Outcome: PM Statement, June 24, 2016; https://www.gov.uk/government/speeches/eu-referendum-outcome-pm-statement-24-june-2016
  3. A summary History of Migration in Britain; https://www.migrationwatchuk.org/briefing-paper/48
  4. Trade data is for 2015 and is from the Office for National Statistics Pink Book (Office for National Statistics 2016a). United Kingdom GDP data is from the Office for National Statistics Blue Book (Office for National Statistics 2016b), and European Union GDP data is from the World Bank (2017).
  5. Article on No Brexit Deal https://www.gov.uk/guidance/uk-trade-agreements-with-non-eu-countries-in-a-no-deal-brexit
  6. Treaty of European Union, Title VI (Final Provisions), Article 50; https://eur-lex.europa.eu/legal-content/EN/TXT/?uri=CELEX%3A12012M050
  7. https://www.gov.uk/brexit

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