(First published on Mar 13, 2020)
On January 31, at 11 PM GMT Great Britain formally said goodbye to the European Union (EU). This brought an end to a forty-seven years’ long uneasy marriage. The story, however, is far from over. Britain still must conclude most of its unfinished business before December of this very year. During this transition period, Britain will have no say in the making of the European laws but would still have to follow all its rules. Within these eleven months, London will have to work out details of its future relationship with Brussels. Some of the key issues that need work include trade, security and law enforcement, fishing access, aviation, medicine, and gas and power. This is easier said than done.
In the next few years (most likely by 2022), the United Kingdom will have to pay an exorbitant ‘divorce bill’ to the tune of 30 billion pounds to the European exchequer. Similarly, the alternative to the Irish backstop will see Britain essentially establishing a custom wall between itself and Northern Ireland. Since, majorities of both Northern Ireland and Scotland voted against leaving the EU in 2016, the Brexit deal also poses a threat to the territorial integrity of the UK. Britain’s great ordeal which has already cost it two prime ministers and two elections still continue to cause problem for the Kingdom.
The question that is being asked quite often is if the Kingdom will survive Brexit. Northern Ireland continues to have a difficult relationship with London. And the future of the bond looks dismal when a state has to establish a customs firewall between one of its territories and the rest. Consequently, calls for Irish unification have grown. Similarly, the government of Scotland, whose majority voted to remain in the EU in the Brexit referendum, has already proposed a second referendum to break away from the United Kingdom. If the proposal is accepted, another vote may take place to decide its future by the start of the next year. Fifty-five percent of Scots rejected the notion in 2014. However, the Scottish government believes the outcome is no longer relevant as the voters had not taken the post-Brexit realities to account. While this has caused considerable distress in the British power structure, the truth is that such a separation will not come cheap for neither the Northern Ireland nor Scotland. The reward for breaking away from their historic roots will be a lifelong exposure to the bureaucratic red tapes and parochial statism that the EU has come to stand for most Britons. Regardless of their disagreements staying united still seems the best bet for the territories now part of the UK. Likewise, a disintegrating Kingdom at the behest of the EU is unlikely to strengthen the European brand and may deter the future enrolment. The EU’s best hope lies in a Britain which stays united and after working on its issues eventually decides to return on its own accord. Is that likely to happen? Only time will tell. For now the British leadership seems adamant on never returning to the Union.
While these might be some of the internal challenges that Britain currently faces, one thing is certain. When it joined the European alliance the prime motivation was economic and not political. As generations of independent minded Britons witnessed their autonomy gradually chipping away since 1940s the membership of this elite bloc has been a key destabilizing factor within the country. Three divisive and populist parties namely the Referendum Party, the United Kingdom Independence Party and the Brexit Party were all born because of it. As the country’s sovereignty returns post-Brexit, Boris Johnson currently presides over his country’s strongest government in decades. He has vowed to invest the British wealth to improve the lives of the British people and spend it on better healthcare, services and overall better governance for his people. Granted there are many challenges but this factor alone is enough to restore some of the lost splendour of the nation when contemporary historians were ready to write it off as a mere appendage to the European super state. More control over its resources and its market means that Britain can invigorate its industrial base, improve innovation and kickstart a new age of economic growth without worrying about Brussel’s notorious red tapes. In a worst case scenario, it can also lead the UK down the path of reactionary populism, controlled democracy, protectionism and parochialism. But the progressive or regressive direction may primarily be decided by the nature of the trade agreement the UK has with the EU.
The key challenge with leaving the European single market is that the UK needs to work out a Free Trade Agreement (FTA) with the EU. If it does not, the World Trade Organization (WTO)’s rules may apply on its trade with the rest of Europe. Under the WTO rules, a country has the right to decide what duties to impose on any item’s entry into its territory. However, without an FTA in place, if Britain allows a tariff relief to the EU on any given product it may have to offer the same concession to the rest of the WTO member states. This, instead of making trade more autonomous for Britain, may further compromise its free will. And the fact that because of the promise to keep the border between the Northern Ireland and the Irish republic, it needs to put in place a mechanism for the imposition of duties on the items at risk of entering the European territory on the check points between the rest of its territories and the Northern Ireland, the absence of an FTA with Europe will spell disaster for the country’s internal cohesion. It must also be pointed out that concluding a trade agreement with the EU may prove harder than it sounds because the European leadership also doesn’t seem in a very charitable mood right now.
Where does the UK go from here in terms of trade and commerce? The pro-Brexit leadership has constantly pointed to the country’s long and strategic partnership with the United States. That would essentially mean that the trade partnership between the U.S. and the UK would grow. But as the post-Brexit Britain finds out the world is a different place now. The emergence of China as a major economic player and re-emergence of Russia as a political force seem to complicate the situation. Only recently a controversy surfaced between London and Washington when the latter opposed allowing Huawei access to British 5G industry contending that the Chinese companies should not be allowed to control the future of the internet. America has imposed a ban on Huawei among other companies of Chinese origin. However, the British government decided to go ahead and allow Huawei a role in the infrastructure development.
Then there is the matter of America’s transactional approach to trade policy under President Trump. Recently, the British government decided to impose a digital services tax on big technology giants, a majority of whom is American. Mr. Trump indicated that he may reciprocate by imposing duties on British car exports to the U.S. If this trend persists, to the British it may seem like a deal that swaps one big brother for another, hardly the kind of relationship that it was looking for when it decided for the withdrawal from the EU. It doesn’t mean that things cannot improve. The Trump administration is actively working to conclude a trade deal with Britain. If such a deal can remove the kinks from the system, it may work to allay the British concerns. But for now, the situation does not seem free of troubles.
It has been widely speculated for some time that the UK may find a willing partner in China. For a little while there was also a talk of Britain joining the China-Pakistan Economic Corridor or any other part of the Belt and Road Initiative (BRI). Britain’s stand on Huawei has already lent some credence to such speculation. However, the British desire to have maximum control on its economic destiny may come in the way of forging such a partnership as it significantly deviates from the BRI business model.
For Pakistan, the Brexit realities pose many serious challenges. The EU is among the country’s largest trade partners. It was with the British help that Pakistan managed to get the preferential GSP Plus status. However, if the UK does not get full market access to the European market, Pakistan’s exports may seriously suffer. This matter has constantly surfaced in the list of items flagged by the country’s foreign office. However, for long it has remained absent from the country’s political discourse and the media debates. A dilution of the preferential trade partner status may immediately require two separate agreements with the UK and the EU. There is, however, some good news for the expatriate community in the UK. As the immigration of Eastern European workers is reduced to a trickle, the relatives of the Britons of South Asian origin may find more room to work in the UK.