Implications Of The Last Minute Rescue Of A No-Deal Brexit

The last minute reprieve to a no-deal Brexit has prevented  the worst of a hard landing. The agreement that has come is the best one can have under the hard negotiating circumstances, with economic challenges facing both the EU and Britain.

It is most interesting that Protestant Northern Ireland, a part of the UK, will stay in the EU, while the rest of Britain leaves. It could therefore conceivably reunite with EIRE, very much in the EU, and leave the UK in due course. Already, there is an increased level of cooperation between Catholic Republic of Ireland and Protestant Northern Ireland.

Scotland may not like to stay in post Brexit Britain either. It voted 62% in favour of staying in the EU at the infamous 2016 referendum, but for the moment, it seems to have been contained. However, the Scottish Nationalist Party (SNP) is without an absolute majority in the Scottish Parliament at present. Should the SNP gain a majority in elections due in May 2021, there could well be a shift towards independence.

As for the joint administration of EU and British waters for fishing by both sides, it will remain to be seen how the catches are distributed. There is a formula agreed on for five years, after which British waters will become exclusive to Britain and likewise for EU waters for the Europeans.

It is a complex parting of ways, not only in matters of trade, taxation, movements, and commerce, but the untangling of the non-applicability of EU laws concerning anything in Britain and vice versa. Taxation is being largely kept neutral at present but of course this could change in future.

London, till now a major financial capital of Europe, will not be able to offer financial services into the EU henceforth without setting up on the Continent according to their laws. British qualifications may have to be overlaid with EU ones. Brexit has already seen quite a few international players relocating almost entirely across the Channel.

British manufacturing that imports parts from the EU has to stockpile rather than work on zero inventory or last-minute provisioning. Many will lose their competitive edge on the continent as a consequence.

The good news is that the UK can now go forth and enter into trade deals on its own bat with other countries, such as India. Bilateral trade is currently at a modest $15.5 billion in 2019-20.

Britain may be keen on a free trade agreement (FTA) with India which has a lucrative domestic market. This especially because an FTA with America may not fructify quite so easily or quickly. American goods could swamp the UK. Being part of the EU, it was the strain of more EU imports vis a vis British exports that  hastened the split. India on its part will be looking at high technology from Britain, joint ventures to improve our self-reliance, professional training in various fields and cooperation in the higher reaches of the Services Sector.

With Boris Johnson set to grace the occasion on our forthcoming Republic Day shortly, there may be a boost to the process.

India counts Britain as its sixth largest source of foreign direct investment (FDI). With $30 billion incoming over the last 20 years, it accounts for 6% of total FDI into India presently.

The UK will need to reorient its diplomatic relationship with India, as the UAE and Saudi Arabia have done. It will have to jettison some, if not all of its adversarial positions vis a vis Pakistani interests and those of China.

It must stop commenting on India’s internal matters, its politics, its leadership, certainly at any official level. This is necessary to clear the decks between the two countries. India is not interested in hectoring from its former colonial master, or partisan support given to a defeated Opposition.

The Leftist portions of British media and the Labour Party display a consistent hostility towards the Modi government. Calling an elected government all sorts of names is not endearing the British to the Indian establishment. Casting slurs on the majority Hindu community is also unacceptable.

India’s relative leverage to get sweeter terms as well as less interference in its internal affairs is now considerably enhanced. The various anti-India groups and lobbies that seem to operate freely in London and elsewhere in Britain will have to be reigned in.

If bold initiatives to reassure Indian sensitivities are undertaken by Britain, it will be first of all to its own benefit. Presently, India does have several alternatives such as France, Russia, the United States and Israel, for ongoing high technology cooperation, particularly in joint venture defence manufacturing.

Countries and companies relocating some of their manufacturing from China post the Covid-19 pandemic is also creating new possibilities and strategic depth.

Cooperation on the high seas, particularly in the Indian Ocean and the Asia-Pacific with the QUAD nations of the US, Australia, India, Japan is attracting other regional players such as Vietnam and Singapore as well.

France, Britain and Germany, Russia have also begun to contribute naval power to the region as well. All these countries are developing a common strategy to keep the international shipping lanes in the region open and unhindered by Chinese hegemony. Britain’s commitment towards this changing world order will be of particular interest to India.

While Britain as we know it now may be truncated in the years ahead, it has much to contribute by way of expertise in multiple areas to a developing India.

It will be a new relationship, based not on the erstwhile Raj or the near pointless Commonwealth, but on 21^st century realities. This as the world begins the third decade of this century. And India enters its 75^th year as an independent democratic republic.

(956 words)

For: Sirfnews

December 29^th, 2020

Gautam Mukherjee