Brexit – Everything you need to know about the UK leaving the EU

Recently, the European Union leaders formally agreed to a Brexit agreement at a Brussels summit urging Britain people to support Prime Minister Theresa May’s package, which faces stiff opposition in the British Parliament. Theresa May government is in favour of Britain exiting EU and she triggered the two-year process of leaving the EU on March 29, 2017.

What is EU?

  • European Union is an economic and political partnership comprising of 28 member nations.
  • Politically, a law passed in the European Parliament is applicable and binding on all Member nations directly.
  • Economically, EU is the single market allowing the free movement of goods and people. EU has its own currency, the Euro, which is being used by 28 member countries.
  • The capital of the EU is located in Brussels, Belgium.

What is Brexit?

  • Brexit is the short form of Britain Exiting European Union (EU).
  • In 2016, Brexit was announced in Britain after the referendum for leaving the European Union. (Referendum – A popular vote by the electorate on a political question).
  • After the referendum, the UK and EU provisionally agreed to settle financial, strategic and political issues over a transition period of 21 months.

Why Britain has not been exited till now?

  • The UK has to invoke an agreement named Article 50 of the Lisbon Treaty.
  • The treaty provides 2 years time for EU and UK to agree to the terms of the split.
  • The UK invoked the article in March 2017 and hence it is expected to leave EU in the mid of 2019.

What are the arguments in favour of Britain leaving EU?

Migration

  • Migration of people from both within and outside EU, especially from the West Asia (Syria and ISIS Issue) and East European nations = Fear of losing jobs, social welfare benefits among the Britons.
  • Repeated requests of Germany to share the migrants across Europe and asking the UK to accept a number of them have been disliked by the Britons.

Contributions to EU Budget

  • UK is one of the ten countries which contribute more to the EU Budget.
  • According to some studies, UK’s contribution is not proportionate to the benefits it gets back.

Failure of EU

  • The European Economic Community (EEC) had 6 members, 4 languages and 177 million population when it was founded. But now EU has 28 members, 24 languages and 505 million population.
  • Thus the EU failed on several fronts in creating one community and one identity while solving the differences among its members, including Britain.
  • People feel that jobs, living standards were better offered during the early days of nation-states than now. (Click here to learn about the European states system through mind map).

Sovereignty issue

  • Some of the Britons feel that they are being controlled by the diktats of Brussels bureaucracy rather than making their own decisions.
  • They view the institutions of EU as undemocratic and do not want bureaucrats in Brussels to decide what laws the UK should follow.

Germany’s domination

  • With the coming of Angela Merkel, Germany has started playing an influential and leading role in both global and regional affairs.
  • It has indirectly made Britain feel marginalized both within EU and the region.
  • Considering their imperial past, Britons are in no way ready to tolerate an EU dominated by a German leadership.

Economic model

  • Some Britons are not happy with the way EU central bank responded to the 2008 financial crisis which resulted in an economic recession. (Note: Recession means a widespread decline in the GDP, employment and trade lasting from six months to a year).
  • They were not satisfied with the economic model that is in place for three decades and its failure to serve the interests of various sections of the Britons.
  • Particularly, the youth are concerned about the career opportunities and the affordable homes that were never built by the State.
  • It is estimated that unemployment across Eurozone is more than 10 percent.
  • According to some studies, UK’s economy is losing 600 million euros every week because of the burdensome regulations of EU.

What are the arguments against Britain leaving EU?

Image of UK

  • For the critics of Brexit including former PM David Cameron, the referendum was an utter insult to the entire country as it has reflected the great divide between Britain and EU.
  • They also claim that UK’s image would get damaged by leaving EU.

Immigrants

Majority of the immigrants are young and hence would boost economic growth and will help pay for the public services.

Trade

  • Trade gets a major boost for Britain if it stays with EU. It is because selling products to other EU nations becomes easier with EU membership.
  • Foreign companies may not be willing to invest in the UK if it is not part of EU. Moreover, they may also move their bases out of UK as it will not be a part of the single market since it would face problems with different EU regulations.

Security

According to Brexit critics, leaving EU may affect the ability to fight cross-border crime and terrorism. They believe that Britain would be more secure as part of EU.

What are the implications of Brexit?

For the UK

  • The weakening of pound: The value of pound weakened to a 30 year low after the Brexit referendum. It will negatively impact the country’s imports and exports.
  • Trade agreements: the UK has to separately enter into trade agreements with the rest of the world.
  • The breakup of United Kingdom: Scotland (part of UK) had voted in favour of EU during the referendum campaign. Thus Brexit would boost the demand for independence of Scotland from the United Kingdom.
  • The Irish question:
    • Ireland is an island to the west of Britain and has 2 major regions – North and South, with different demographic features.
    • “Protestant majority Northern Ireland” (a UK territory) and “Catholic majority Irish Republic” (an independent country in the south), have had serious ethnic tensions within and between them.
    • Numerous agreements and EU’s integrated markets system have thus far been a considerable influence in resolving these tense and violent trends.
    • Since UK plans to leave EU, the Irish question has come to haunt all concerned governments since there is a fear that a new era of violence might start.

For EU

  • Britain is an important country of EU. Without Britain, the EU may lose much of its influence as a global power bloc.
  • It may result in a resurgence of the nation-states that once ruled Europe. Because, with Brexit, right-wing political groups in Italy, France, Sweden, Belgium, Poland, Germany, Spain, and Hungary have started demanding the exit of their own nations from EU. (click here to learn about the European states system through mind map)

For India

  • Trade: India-UK trade will get a boost. The stringent regulations of EU which were the biggest obstacle can be done away with. For example, EU had banned Alphonso mangoes from India after it reportedly found fruit flies in the consignments. The weakening of pounds will also be advantageous for Indian imports. It will also benefit tourists and Indian students studying in the UK.
  • Indian Businesses in the UK: may find it hard to access the single market of EU since their products may become uncompetitive if they are asked to pay import duties upon entering EU. Thus Indian businesses will not be able to utilize the UK as the gateway to the European Union. Indian IT firms which have considerable exposure to the European markets, particularly the UK, will be affected since there is a risk of a decrease in growth levels in EU and UK. (click here to learn about economic growth and development through mind map)
  • Tourism: Due to the weakening of pound, there will be a decrease in tourists flow into India from Britain.
  • Immigration: After Brexit, it is expected that there will be more restrictions on immigration in the United Kingdom thus affecting Indian immigrants.
  • FDI: Brexit will affect the flow of Foreign Direct Investment (FDI) in India. It will result in financial instability and a legal regime overhaul in the long-term.
  • Indian students in the UK: will get benefitted since the number of applicants from EU nations to the universities in the UK is likely to decrease after Brexit. Also, the weakening of pound may lower down the total cost of education for Indian students. Furthermore, there may be a decrease in international student fee since the low fee structure for EU students may be withdrawn. It has to be noted that, the EU students were availing fee concessions which are being cross-subsidized by a higher international student fee.

For world

  • Brexit will create Macroeconomic and financial market impacts in the UK and EU and may spread across the globe.
  • The impacts of Brexit will result in financial and political uncertainty = Decline in business and consumer confidence = Lower growth scenario across the world.

What does the draft deal (November 2018) propose?

Transition Period

  • Britain will formally exit the EU on March 29, 2019 = UK will cease to be involved at any level in EU decision-making.
  • However, the UK will remain inside the EU’s single market and subject to EU laws and regulations until the end of December 2020. Meanwhile, the two sides may attempt to sort out a new trade relationship between them.

Irish border

  • Since the Irish Republic (separate country) is an EU member, a porous border with it by the UK would mean a porous border with EU, which is not desirable outcome for the pro-exit group in the UK.
  • Thus it is agreed that there will be no hard border between Northern Ireland and the Irish Republic, at least in the short term.

Customs Union

  • If the transition period extends beyond 2020, the draft deal commits both parties to a single customs territory between the EU and the United Kingdom.
  • The customs union would eliminate all tariffs, checks on roles of origin and quotas and would cover all goods except fishery products.
  • While part of the customs union, the UK will be bound by all international trade agreements = countries outside the EU like the US and China would have access to the UK market under terms provided under the EU’s trade agreements.
  • This provision can be removed only via the agreement of both parties = preventing the UK from effectively leaving the customs union without the approval of the EU.

Financial markets

  • Under the draft deal, entities created in the UK shall be treated as entities located outside the Union by the EU after the deal = London’s vast financial centre can only have a basic level of access to the bloc’s markets after Brexit.

Freedom of Movement

  • The draft agreement gives protections to EU citizens in the UK and similarly UK nationals in EU countries to continue to live, work or study as they currently do.
  • Exit visa, entry visa or equivalent formality shall not be required for holders of a valid document issued for EU and UK nationals when crossing national borders within the bloc.

Commitments to EU programs

  • The UK will honor all current joint commitments to EU programs as outlined in the EU budget until 2020.
  • Under this, Britain agrees to cover contributions to staff pensions and commitments to EU programs the UK made while being a member for the funding period until 2020.