British Exit from EU – The U.K. sealed a historic trade deal with the European Union, avoiding a bitter breakup and preparing the ground for a new relationship with its biggest commercial partner. Britain had formally left the EU in January 2020 (BREXIT). Since then, it has focused on negotiating new trade deals with countries around the world.
What is Brexit?
Brexit is an abbreviation for the term “British exit”. Brexit refers to the possibility of the United Kingdom withdrawing from the European Union (EU). The United Kingdom decided to hold a referendum (a general vote by the electorate on a single political question which has been referred to them for a direct decision) in order to decide whether they should part their ways from the European Union or not. The British Leave won by 51.9% to 48.1%. The voting turnout was 71.8%, with more than 30 million people voting. Finally, in December 2020, UK managed to secure the deal.
this new Partnership Agreement between the EU and the UK started regulating its ties from January 1 on everything possible from trade to transport, energy links, and fishing. The agreement fully overhauls the market culture on both sides of the Bridge, as well as liberating the British Parliament of so many of the limitations imposed by EU membership. After December 31, it will allow tariff-free and quota-free trade in goods, but this will not extend to services or financial services. Hence, the U.K. financial services firms will be deprived of the passport that allows them to offer their services across the bloc. Meanwhile, best firms from JPMorgan Chase & Co. to Goldman Sachs Group Inc. are among the companies that have already shifted about 7,500 employees and $1.6 trillion of assets out of the U.K. because of Brexit. That loss is especially painful for Britain, which ran a surplus of 18 billion pounds, or $24 billion, on trade in financial and other services with the European Union in 2019, but a deficit of 97 billion pounds, or $129 billion, on trade in goods.
The European Union stated that every country has to take a fixed number of refugees within their country in the proportion of their population. This upset a lot of people. Thereafter, feelings of not staying a part of the European Union began to take root in some people so that they would be empowered to make the decisions for their country on their own. The citizens were not in favor of taking refugees or immigrants within their country.
This was especially seen in Britain where the Right-Wing Party took advantage of this and told the people that they want to break out of the European Union and the pressure was mounted on the Citizens. However, there were two factions even within the Right-Wing Party itself, one wanted to break away from the European Union and the other one did not want to break away from the European Union, but the fraction that wanted Brexit-that is to opt-out of the European Union mounted pressure and got a referendum constructed regarding this.
Benefits of Brexit
Through the Brexit scheme, the United Kingdom will be able to achieve more freedom to create its own trade deals and regulations. A hard Brexit is a scenario in which the UK gives up access to the single market as well as to customs unions. Regaining sovereignty will be seen as win-win situation even by those whose citizens opted to stay in the EU.
For example, under EU law, a citizen of another EU nation can decide to move to and live in the UK with no such restrictions. This has led to a large increase in immigration into Britain and created difficulties fulfilling housing and service needs. Through a hard Brexit, the UK will exercise full control over its borders.
The New Partnership Agreement would lay the groundwork for universal principles in aviation, company subsidies, labor rights, environmental protection, and law enforcement.
Effects of Brexit
The effects of Brexit will be seen on large scale in the coming years but some things can be predicted now itself. For example, upon the separation from the European Union, tariffs will now be imposed on the imports and exports between the European Union and the United Kingdom.
Trade will become more complex and difficult which is very bad news for the people living in the United Kingdom because 1/3rd of the imports of the UK came from the European Union, now tariffs would be imposed on them and they will become much costlier. Hence all the goods imported by the UK will become costlier for the people living in the UK.
In general, the companies of UK would have to bear a huge loss because they cannot participate in bidding for the public contracts in the rest of the EU countries neither can they access the rest of the EU markets nor they can employ workers from the rest of EU in their companies as a result of a lot of UK companies shifted to European Union or Ireland.
Even from the perspective of jobs, there is a huge loss for the citizens of the UK, because when it was a part of the EU, then any citizen of the UK could look for or take up a job in any country in Europe because there were no borders and free moment for the people was allowed. Hence, the agreement did little to reassure European migrants, some of whom fled Britain during the pandemic, and are now unsure if they need to return to secure a right to live in the country before the separation is finalized on Dec. 31. As a result, Brexit differed from the majority of other trade deals. It was about erecting walls, not tearing them down, within an unusually well-connected European economy.
Final Brexit deal
After months of negotiations and delays due to the coronavirus pandemic, the European Union and the United Kingdom finally reached a final agreement to specify the terms and conditions of the Brexit. Although the separation became official on January 31, it was however decided that the rest of the year would be a transition period to refine details about their future relationship, especially in relation to commercial matters.
Property prices in areas that voted Remain in the EU Referendum averaged £302,688 when the vote took place in 2016. Since then, they have increased by 8.1 percent to an average of £327,316. However, in areas to have voted Leave, house prices have increased by 14.1 percent to an average of £232,976 today.
Jobs Demand from other EU countries constitutes around 12% of the final demand for UK goods and services and this translates into around 3.3 million jobs in 2021.
HERE IS A COMPLETE SUMMARY OF THE KEY POINTS IN THE POST BREXIT DEAL THAT WAS JANUARY:
There will be no additional charges on goods (tariffs) or limits on the amount that can be traded between the UK and the EU from 1 January 2021 onwards.
There will be additional controls at the borders, such as security checks and customs declarations as a result of which companies that depend on transporting goods to and from the EU will now need to be prepared for security checkups.
The United Kingdom has now become an independent coastal state and can decide on access to its waters and fishing grounds.
However, EU vessels will be permitted to fish in British waters for at least a couple of years.25% of the value of your current catch will now be available to UK fishing vessels along with that transition period of five and a half years for that is to be phased in.
After the transition period, the United Kingdom and the European Union will periodically negotiate access to each other’s waters.
UK citizens will require a valid visa for stays of more than 90 days in the EU in a 180 day period and there will be additional border controls for British travelers.
European Union pet passports will no longer be permitted.
British travelers will still be able to take free access to emergency medical care services in the EU. European Health Insurance Cards (TSE) will remain valid until they expire/lapse. According to the United Kingdom government, they will need to be replaced by a ‘UK Global Health Insurance Card’.
In terms of mobile telephony, both agreed to operate with “fair and transparent rates for international roaming.”
The UK will no longer be allowed to participate in the EU Erasmus exchange program, which helps students to pursue part of their academic training in other countries. In its place will be a new program named after mathematician Alan Turing.
There will no longer be automatic recognition of certificates for professionals such as doctors, nurses, and architects.
The UK will no longer be permitted to have automatic access to key databases but will be able to access them upon receiving any request.
United States will no longer be a member of Europol i.e. the EU police body but will continue to have the power of its presence at its headquarters.
EUROPEAN COURT OF JUSTICE
The UK will no longer be bound by any rulings that will be issued by the European Court of Justice, Prime Minister Boris Johnson said.
IMPACTS OF THE BREXIT REFERENDUM ON INDIA
- There are many who think that the weakening of the British currency might be a good piece of news.
- India being more of an importing country rather than an exporting nation, the overall effect may turn out positive for India.
- With lower pound value, Indian companies may be able to acquire many hi-tech assets.
- Brexit might give a boost to trade ties in between India and the UK.
- Britain will now be free to discuss the bilateral trade pact with India
- Due to the fall in the value of the Pound sterling, those who import from the UK will gain. Indian export companies operating in the UK may also gain.
- More Indian tourists can afford to visit Britain in the coming days as the currency value has fallen.
- More Indian students can afford to study in Britain (for higher education) as the fees may seem cheaper now due to Brexit.
- Britain will need a steady inflow of talented labor, and India fits the bill perfectly due to its proficient English-speaking population.
- The fall in the prices of commodities like crude, which will help India save a lot on its import bill while importing crude oil.
- However, India can explore opportunities in service sectors like IT, architecture, research and development, and engineering in both the markets as the EU-UK pact does not cover services.
- For example, in the IT sector, India’s competitor in the EU, particularly in the lower segment of services, is Poland. Now, because Poland will have restrictions on the free movement of professionals, that may be to the advantage of India.
- Indian companies who have based their headquarters either in the UK or the EU to serve both the markets may face some challenges due to restrictions on the movement of professionals.
- India should now aggressively pursue free trade agreements (FTAs) separately with both regions. India had a lot of contentious issues while negotiating FTA with the EU.
- However, there is a possibility of doing a favorable free trade pact with the UK as the UK could have a different stand on these issues.
PM Modi’s invitation to his UK counterpart Boris Johnson as the chief guest for the Republic Day could have been the perfect occasion for both sides to start some preliminary discussions for a trade deal but now the UK Prime Minister Boris Johnson will visit India at the end of April in what will be his first major International Trip after Britain’s exit from the European Union as part of efforts to boost UK opportunities in the region.
India – UK Bilateral Trade
The bilateral trade between India and the UK dipped to USD 15.5 billion in 2019-20 from USD 16.9 billion in 2018-19.
Post-Brexit, India, and UK may finalize trade agreements in areas like pharmaceuticals, fintech, chemicals, defence manufacturing, petroleum, and food products by 2021.
The UK is India’s 14th largest trade partner and India has a $2 billion trade surplus with the UK.
A study carried out by the Commonwealth Secretariat found a well-negotiated bilateral trade deal between the UK and India has the potential to increase bilateral trade by 26%.
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