Brexit: to remain or not to remain is the question

With United Kingdom all set to hold a referendum on June 23^rd to decide whether it should remain in the EU or exit, in other words, “Brexit”, from EU and its implications are now enthusiastically discussed. European countries rummaged by World War II in a bid to resurrect their economies began forging trade arrangements to propel growth engines. Accrediting that globalization with seamless boundaries can be a panacea for extreme nationalism penchant, European nations embarked on a collaborative trading activity. These trading arrangements in turn laid strong foundations for a vibrant European Union (EU). The origins of the resilient European Union comprising of 28 countries covering 7.3% of the global population, generating $ 18.495 trillion accounting for 24% of global GDP can be traced to the European Coal and Steel Community (ECSC), European Economic Community (EEC) and European Atomic Energy Community (EAEC). The founding members, fondly referred as inner six countries- Belgium, France, Italy, Luxemburg, Netherlands and West Germany responding to the call for pooling steel and coal resources created ECSC in 1951. All the arrangements created (EEC, ECSC, EAEC) by them were soon termed as European Communities by 1967. The community grew in size and strength with the joining of the Outer Seven- Austria, Denmark, Norway, Portugal, Sweden, Switzerland and UK. Indeed the archetypal globalization principle imbibed and adopted by these war-torn nations propelled financial growth and steered them towards quintessential economic development.  By 1985, Schengen Agreement was reached paving way for creation of open borders ensuring free movement of goods, men and material without passport between member nations and certain non-members. Finally with the ratification of Maastricht treaty or Treaty on European Union, EU came into force on November 1^st 1993 and Euro was adopted as currency by member nations subsequently. UK is not part of Eurozone and hence it has its own currency (Pound). It is not part of Schengen area, so it has greater sovereignty over its boundaries. UK joined EU in 1973.

EU basically relied on three pillars –European Communities that handled social, economic and environmental policies, Common Foreign and Security Policy (CFSP) and Police & Judicial Cooperation in Criminal Matters (PJCCM) earlier named as Justice and Home Affairs (JHA) till 2009. Under the Treaty of Lisbon, in 2009, pillar system was abolished and replaced with legal personality for the Union. This treaty even conferred upon member countries an explicit legal right to leave EU.

EU steadily progressed and accomplished cherished goals of economic development with collaborative efforts till the early 2000. But the economic recession of 2008 took a great toll on European markets leaving several countries reeling under its impact. Even now Southern European countries are witnessing harrowing phases of stagnant economic growth, plunging markets, burgeoning unemployment rate. These nations have failed to recover completely. Financial meltdown of 2008 shook the faith of these countries in the globalization and open markets. Consequently the burden of the fiscal deficit was steadily felt by other nations of EU as the economically well-to-do nations were obligated to step in and rescue the nations in recession. UK makes contributions to the tune of $9 million to EU which are pumped as aid to assist financially battling nations. Further the recent episodes of financial bail outs of Greece, unabated inflow of migrants from the Middle-East and African countries began to create fissures among the nations. Furious debates regarding rehabilitation of the economic migrants at the port of entry (mostly Southern European Nations) and impending financial burden on the host nations began to emerge as issues of major discontent. UK and Germany the two largest economies which share similar perspectives with regard to functioning of EU starkly differed on the issue of migration. EU which exemplified glory of the varied diversity began to creek under the burden of disastrous financial effects and varied perspectives.

Britain which expressed dissatisfaction over functioning of bloated bureaucracy, prevalence of massive corruption and inflexibility of rules and regulations of EU is now worried about the uncontrolled infiltration of migrants. It began to complain of lack of democracy in functioning of EU and was frustrated by EU’s inability to control immigration issues. Miffed by deliberate disregard for the Dublin Convention, that obligates the first port of entry to provide asylum UK began to rise alarm. It demanded certain concessions from EU. In February 2016, Cameron made hard bargains to levitate towards EU. He extricated commitment of keeping Britain away from the goal of “ever closer union” from EU and ensured that Britain will not fund future Euro bailouts.

Marred by fears of political split within his party and burgeoning Euroskepticism in Britain’s political dispensation, David Cameron promised to conduct referendum if reelected in 2015. Britain was not the founding member of EU. It joined EU in 1973 and remained largely as a transactional member. From the beginning, Labor party had serious reservations about Britain’s accession to EU. In 1975 due to mounting skepticism and to avert serious political crisis, Harold Wilson of Labour party conducted a referendum. The results clearly favored Britain remaining with the European Economic Community (EEC). But by 1980’s Margret Thatcher antipathetic to EEC’s regulations, downsized Britain’s contribution to EEC. Following a surge of Euroskepticism this time from the UK independence party (UKIP) and others, Britain will be voting once again to decide its fate. By and large, it was believed that the old generation was in favor of Brexit as against the younger generation who are worried about the prospects of employment generation once Britain pulls off from EU. The Take Control, Leave Campaign is insisting on full control or supreme sovereignty and pulling all its strings to ensure Brexit. Britain’s claims of supreme sovereignty in eternity is illusionary as they are party to over 700 international treaties that contravene their sovereignty (membership of NATO mandates it to fight for member country in trouble).

With many critics indicating that since EU is incapable of reform the best course of action for UK would lie in parting ways with the alliance. To the question of sustenance of its relations with other nations, Leave campaign suggested that bilateral relations with a country on one to one basis might be more impactful than seeking ties through an alliance of countries. Sadly, this argument holds no ground during bilateral trade as negotiating countries would prefer reaching out to a bigger markets making EU (500 million consumers) a favored choice for trade as compared to miniscule markets of UK (65 million consumers). Thus, uncertainty surrounding trade pacts and bilateral trade negotiations may hit Britain’s economy in case of Brexit. In fact, TTIP (Transatlantic Trade and Investment Partnership, between US and EU) best validates this argument, bigger nations are more inclined to join and trade with a consortium. If Britain leaves EU, to set a precedent, EU might tighten its trade norms for UK. Over 3 million jobs in Britain are linked to trade with EU and Brexit might result in loss of 950,000 jobs.

Meanwhile the leave campaign gained much traction as its anti-immigration perspective was strengthened by the recent Orlando mass killing by American gunman Omar Mateen of Afghan descent. The campaign has been using Brussels attacks too to stoke fears among general public who are inimical to migration. In reply remain campaign, reiterated the remarks of French Economic Affairs minister who warned that in case of Brexit, France might pull out from the Le Touquet bilateral agreement. This agreement allows British border officers to carry out passport checks at the Anglo-French border at French port Calais preventing illegal migration. If this arrangement is annulled, 3,500 refugees living the refugee slum will be deported to UK. Amidst these raging uncertainties and tilting of scales between the leave and remain campaign, stock markets have already plunged crippling domestic financial stability.

Moreover experts cautioned that Brexit may hit GDP by 2-7%. Sterling might be weakened further and inflation might soon ensue. Volatility of Sterling might soon push Europe into recession. Japan will follow the suit and subsequently US economy will slow down. Indian markets too will be affected by fluctuations in global markets. Brexit might hamper flow of investments and funds to India. Moreover volatility of Sterling might create problems in currency exchange. Over 800 Indian-Owned business operating from UK employing about 110,000 might be affected immediately. Britain on the other hand, might lose access to EU markets which make up to 40-45% of its exports. Being a strong country, Britain’s exit will hurt EU economically and politically.

Brexit poll survey of Financial Times indicated that 44% prefer remaining in EU, 47% favor Brexit and 8% are undecided indicating that it is a close call for all. Till now no country withdrew from EU. Conversely, countries in Europe (Switzerland, Iceland and Norway) not part of EU are economically, politically safe and viable. While Brexit may not be catastrophic it will cumulatively slow down the growth. Brexit might embolden other European countries who might soon follow the suit and call for referendum demanding more powers from EU.

Changing global scenarios and paradigms are pushing nations to adopt new alternative doctrines/narratives. Migration which was a non-issue few decades has changed the dynamics of EU and political scenarios in member countries. Angela Merkel of Christian Democratic Union (CDU), a liberal conservative party, feted internationally for her open call to accommodate immigrants is now poised to brace political ouster for her pro-immigration stand. Across the globe, anti-immigration parties are slowly clinching power, protectionist ideologues are gaining more ground. While globalization undoubtedly catapulted the economic progression of nations, incredulous dogmas of intolerance, bigotry and xenophobia are slowly crippling the existing narratives. Moreover, the overwhelming recourse of extreme nationalism which stoked unrest and fear previously is now unduly embraced. This referendum besides being a gamble of a century is set to mirror new apprehensions about the concept of European integration. Unlike the previous referendum, Brexit is not driven by Euroskepticism alone. But steered by collective obligation of finding solutions for socio, economic and political problems (Viz., uncontrolled immigration, stagnant growth, unemployment and subdued democratic choices). Meanwhile, the tragic death of Jo Cox, a pro-EU legislator is believed to tilt scales in favor of remain campaign.

 

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