Britain, EU struggle to reach agreement on post-Brexit

Economic, strategic and defence issues to ponder over

Politics

November 16, 2020

/ By / Brussels

Britain, EU struggle to reach agreement on post-Brexit

The economic impact of Brexit on Britain will depend on a number of tough decisions in the UK and Europe

It is barely six weeks to go before Britain exits the European Union, with or without an agreement on the post-Brexit arrangement with the EU. Britain is unlikely to have any of the gains promised by the Leavers during the controversial campaign that had more fake news than real. EU will also find getting used to a future without Britain a challenge.

Much to the dismay and disbelief, the Brexit happened, and the European Union Member States have charted out their future without Britain in the EU. If 9/11 will be remembered as the watershed event of the century which changed people’s lives, global economy, security, social interactions and international relations; Brexit will be remembered as the most important event of Europe since the fall of the Berlin Wall.

This development is going to have far-reaching consequences for peace, security, stability and development of Europe. Brexit has also gone down as one of the defining events in the history of international relations and the first such exit for the EU since its foundation. It was also one of the rarest occasions when a government sought public opinion on a decision that could leave a long-term impact on the EU’s future. In general, although immigration and other social issues were the focus of the Leave campaign for Brexit – it was beyond that – it expressed a general mistrust of transnational arrangements which had imposed a common set of economic, legal and cultural rules.

With Brexit, the end of the British empire has finally come; though late. Brexit is a comedy for those who think the EU will disintegrate without Britain and tragedy for those who feel the pain of separation. This is why this spectacle of, or the curse of, Brexit makes us laugh and cry at the same time.  Brexit is a British “love and hate”; “comedy and tragedy” satire made in Britain, scripted in Britain, filmed in Britain but originated in Brussels, has undoubtedly shaken the basic foundations of the European Union.

It is not out of context to state that Britain’s relationship with Europe has always been ambiguous. Britain joined the postwar club constructed on other countries’ terms late, and never felt quite comfortable inside. It reacted with hostility whenever it felt its judicial, parliamentary or governmental sovereignty was being questioned. In some logical sense, Britain was never a part of the EU in spirit or in the letter as ever since it joined in EU 43 years ago. However, one cannot disagree that three trillion Euro British economy is the fifth-largest economy of the world, is a member of the NATO and a Permanent Member of the UN Security Council. It is a part of Europe and has considerable global influence and plays a major role in international affairs.

Brexit has only changed its trade and economic equations with the EU, but there is no denial of the fact that the UK is one of the most important countries of Europe and plays a global role with larger global ambitions. Britain, along with France and Germany, has been crucial to many of the EU’s efforts to work together on foreign, security and defence policies. Losing Britain will undermine such efforts, potentially further weakening much sought for efforts to strengthen the European side of NATO.

The EU has emerged as the most significant entity in the post-Second World war and the most advanced example of institutional cooperation between countries of Europe. Centred on an understanding of power embodied in its institutions and norms EU is a model never seen before in the history of nations. Its scope should not be underestimated nor should the symbolic power it possesses in a continent whose nations have fought wars for centuries. Preserving unity and flexibility within a diverse system is the secret of the EU’s success and strength so far. It has built a federal system which has brought the Union to an unparalleled and historic level of federalism – the best antidote to the emergence of nationalism.

However, Brexit has exposed the fragile nature of this unity. The tragedy of the European Union is that here policy reforms start with good intentions but as they grind through the political interest of various member states, they lose momentum, purpose and objectives. Many member states of the EU time and again have made the Union the scapegoat for their failure to address the domestic issues. This is the tragedy of a paradise called the European Union and a victim of this tragedy was the unfortunate exit of Britain from the EU.

These are uncertain times for Europe and Eurozone, and major challenges to the future of Europe lie ahead. The second wave of the COVID-19 health pandemic has also exposed the fragility of the EU’s unity. Europe is undergoing a period of instability, and it is far from clear how, or when, or if, it will end. Thus, the risk to the European Union is primarily not in Brussels, but in the domestic political landscape of the member states.

However, in spite of the challenges, prediction about the demise of the European Union is overblown and without strong credentials although the Brexit has definitely pushed the EU into a period of introspection about its most fundamental tenets. Whether they are strengthened or discarded, depends on the ability of the 27 remaining members to redefine the future of Europe should look like. Also, to overcome the ramification of Brexit, the EU will have to introduce a political process to its workings as the majority of EU countries have been demanding changes in the functioning of the institution. Therefore, the EU now has a choice about whether and how to reform its institutions, whether to continue to try to bring in new members and what forms of integration it will pursue among the member states that remain.

The EU remains a unique form of political and economic partnership among sovereign nations and its trade policy is one of the most- developed and integrated evolved along with the principles of the common market. To defeat the fear of disintegration due to Brexit, catalysing further cohesion in the EU through greater economic integration and cooperation is now a necessity.

Britain’s departure from the EU means giving up its alliances, forsaking its position at the negotiating table and abandoning its international responsibilities. While the post-Brexit EU-Britain trade agreement is still being negotiated under a very “unfriendly” environment, it is difficult to predict if the outcome of the negotiation will be amicable. For Britain, it is a challenging time. Britain was hoping a faster trade deal with the US under the Trump administration (which was openly supporting Britain to leave EU) but with the new administration in the White House under Biden Presidency, the dynamics of this has changed. Now Britain will look for more constructive and friendly engagement with the EU.

The economic impact of Brexit on Britain will depend on a number of tough decisions in the UK and Europe. Also, the economic advantages and disadvantages of Brexit will depend to a large extent on the future relative economic dynamism of the EU and how it negotiates its future trade relations with the EU, the deadline is December 31, 2020. By leaving the EU, the UK needs to negotiate trade agreements individually with other countries which will be challenging when creating deals with major nations such as the U.S. that currently have an agreement in place with the 27-nation partnership.

Over the years, Members of the European Parliament representing Britain played a major role in the affairs and functioning of the European Parliament with their colourful debating skills and sometimes directionless mission. India had enjoyed an effective and engaging relationship with British MEPs in particular as they were of great support and strong voice for India in the European Parliament. European Parliament is therefore not the same without British MEPs and India is missing their presence.

The EU remains very much at the centre of European politics, however, Brexit has increasing relevance for India not only as a subject of debate, but also in terms of business and trade relationship with the old continent, and in terms of foreign policy, as the events since the Brexit in 2016 has aptly demonstrated. Europe’s significance for India has remained strong. As a source for investments and technologies, its potential matches that of North America and Japan. The European Union’s influence, in not only the regional but the global security arrangement, is and will become incrementally significant, both in terms of its own collective regional identity and through its strategic relations.

Post-Brexit, the Big 2 which now wield the most influence within the EU – Germany and France – have developed multi-faceted ties with India irrespective of the EU. India has preferred to give weightage to bilateral ties with individual EU states and bigger countries. However, Delhi’s growing economic relationship with the two have underperformed and has not translated into robust trade ties. The under-performing EU-India Strategic Dialogue has been described as high on rhetoric and low on substance. Indian dialogue with institutions of the EU is conditioned through the lenses of bilateral strategic relationships with these Big 2.

In these uncertain times and slow economic recovery due to continuing effect of the health pandemic, Europe needs greater economic and political integration to maintain the four pillars of freedoms, the principles on which the foundation of EU is based – the freedom of movement of people, goods, capital and services. EU and India are well placed to address these emerging challenges provided there are framework conditions in place that encourage these linkages. The EU and India need to demonstrate the political will and maturity to work for common ambitions in the areas that will dictate and determine the challenges they face. To achieve this, India will need to seize the opportunity to reinforce mutual economic synergy and strategic alignments.  Without active Indian efforts in this direction, the India-EU relations may not live up to its full potential for either party. Against this geopolitical and economic backdrop, the business community have a role to play for enduring friendship between EU and India.

Brexit has provided an opportunity to re-kindle UK-India trade relations. European Union loss could be India’s gain given India’s historic relations with Britain. With Britain carving its own identity in Europe away from EU, UK-India relations which have been ‘imprisoned by past’ for too long are set to become more dynamic with big fillip to trade and economic relations. In this new scenario, both nations are set to focus on current shared interests such as global trade and finance, counterterrorism and energy security, rather than harking back to negative legacies of the coloniser and colonised.

As India becomes increasingly powerful on the world stage, the UK will need to position itself carefully to ensure that both countries are partners in progress. Beyond economic and military parameters, residual strengths continue to provide areas of sustained strategic convergence and co-dependence. Core economic values maintain their relevance, particularly in the post-Brexit era. These linkages underpin dialogues on sustainable development and climate change and forging collaborative policies in international negotiations.

Now that Brexit saga is finally over, the entire world will witness the changes happening in the EU and UK. Multinational companies and government regulators have already started taking steps to adjust their business and investment priorities. Brexit will have a profound structural impact on the Indian business in the UK. Brexit is also an opportunity for India to reset the legal terms of its trade with the UK and EU, at the multilateral level, and through free trade agreements. Notwithstanding what happens in the EU-UK free trade negotiations, India should take advantage of this new reality and think more productively its trade relations with its former colonial master.

Sunil Prasad is Secretary-General of Europe India Chamber of Commerce, Brussels. Views expressed in this article don’t necessarily reflect those of Media India Group.

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