Brexit: The Imperialist Impasse (June 2016)

rd June 2016, the deciding percentage of votes still seem to be undecided. British PM David Cameron had promised the referendum as part of his 2015 election-winning campaign, but has now taken a somewhat conservative stance to remain in the EU. To further this cause, he has, in early 2016, negotiated more favourable terms with the EU, providing the country “special” status, does it choose to remain post the referendum. Hardliners believe this would achieve nothing significant as most of the promises made by Cameron during campaign time have fallen by the way-side. They believe that the EU imposes rules that are not easy to follow, especially regarding immigration, repatriation of funds, free-movement of citizens and exorbitant membership fees in the billions. With little time remaining in the final decision, and the vote seemingly evenly split at this point, it would be a good time to take a bird’s eye-view of the actual benefits, or pitfalls, of a British exit. In the scenario that Britain decides to exit the EU, Eurosceptics predict a few immediate benefits such as a saving on the £8.5bn annual membership fee by the UK to the EU; they would be in a better position to negotiate more tailor-made deals that would directly benefit the country, instead of having to cater to a wider region; and jobs being taken away by immigrants benefitting from the free-movement treaty would return to British labour. But this comes with the harsh reality that immigration into the UK, which is at an all-time high, helps boost the workforce each year. Immigrants are generally young and hungry for work, aiding the economy. On the trade front, about 50% of the UK’s annual exports are to EU countries, with the movement of goods and money relatively simple within the EU. An exit would make this process unnecessarily burdensome, causing the UK to lose its edge over Asia. Britain would need to re-negotiate over 50 trade deals from scratch with the EU, a lengthy and cumbersome process, which could in turn lead to fall in production and rising unemployment. Also, the EU is a EUR 16 trillion single-market economy, and limiting access to the same could prove highly detrimental to any country. London has for long been seen as the financial capital of the EU. With unfettered access to funds and the one economy model, financial institutions in the UK have enjoyed a fairly booming business. This could possibly dry-up to a certain extent given that the economy that the financial markets cater to would shrink substantially. In today’s shrinking world, it would be fool-hardy to expect that the events unfolding so far away wouldn’t affect us in India. A number of Indian conglomerates have been investing in the UK, perceiving it as the doorway to the rest of the EU, with a common language, robust legal-system, and liquid financial markets. Prime Minister Cameron also stated that Brexit would mean that any EU-related trade deals signed with countries like India would have to wait till the UK re-constructed a new deal with the EU, which would take years. Also, the UK counts on the FDI from Indian companies as a large source of liquidity in its markets, which has slowed for the short-term due to the latent uncertainties regarding the status of the UK. Although investments are expected to rise again in both scenarios, it might be at a much slower pace if the UK decides to walk out of the EU. The EU has also seen interest dissipate in the form of investments, as fears of Grexit and the Swiss Franc peg caused the Euro to depreciate by over 10% against the Rupee in the last year, making it impossible for Indian investors to pull out without facing losses. A confirmation about Brexit would only just strengthen these fears and further weaken the Euro, hurting the EU and India alike. Clearly, the long-term impact of Brexit are difficult to read at this early juncture, but the short-term would definitely see Britain staring down a long, treacherous path with zero chances to make mistakes with future economic and policy decisions. PM Cameron would, I expect, be suffering sleepless nights, faced with the prospect of either adulation or ignominy of being the man at the helm of the future of the country that once ruled half the world.  ]]>

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