BREXIT: The NEW Reality

Cover Story By Lord Dolar Popat

In economic terms, the most desirable arrangement would be to retain access to the single market. Yet a large driver behind the referendum result has been Britain’s immigration system; being part of the EU has meant restricting access to skilled immigrants from outside of Europe – including India – whilst having no control over which Europeans can move to Britain. For many, including many British Indians, this system has become unsustainable.

Shockwaves rippled through Britain in the early hours of 24th June, 2016. It will be a day few will forget. Despite all of the polls showing the opposite; despite the arguments of the Prime Minister, the Chancellor of the Exchequer, pretty much every leading world organisation and world leader, the British public voted for Britain to leave the European Union.

It will, for better or worse, be one of this century’s defining moments. As an avid supporter of the ‘Remain’ campaign, I’m hugely disappointed by the result of the referendum on whether we should leave the European Union. As a nation, we have decided to vote to leave, with 52 percent of those who voted supporting Brexit (British Exit).

I’m even more disappointed that the ‘leave’ vote has brought about the loss of David Cameron, a close friend and one of Britain’s finest Prime Ministers. His leadership and political instincts will be sorely missed. He has led our country in extremely difficult times, and been a great friend to India; he will leave big shoes for his successor to fill.

A Great Prime Minister

David Cameron has been one of India’s strongest allies on the world stage. Since being elected as the leader of the opposition in 2005, Cameron has prioritised building stronger diplomatic and trade links with the world’s largest democracy. It has been a great privilege to work alongside him on so many of these issues; to serve as one of his Ministers and to count David Cameron as a friend.

He has visited India five times since assuming office in 2010, including taking the two largest trade delegations to accompany a British Prime Minister on a foreign visit. It was my pleasure to accompany him on one of those visits in 2013. I saw first-hand how much emphasis David Cameron placed on creating stronger ties with one of the fastest-growing economies in the world.

Last year, PM Modi visited Britain for one of the most spectacular trips by a foreign leader in modern history. The culmination of which was David Cameron introducing Narendra Modi to a crowd of 60,000 people at Wembley Stadium.

It was a diplomatic victory for David Cameron, who has invested considerable time and energy into building stronger links with both the British Indian community at home and India on the global stage.

Under Cameron’s leadership, Britain has consistently championed a greater role for India in global affairs, including a permanent seat on the UN Security Council. India is also now the third-largest foreign investor in Britain, with household names such as Tata and Jaguar Land Rover at the forefront.

And domestically, Cameron has engaged with the British Indian community like no Conservative leader before him. He hosts annual Diwali and Vaisakhi receptions in Downing Street, regularly visits Temples, Gurdwaras and community centres, and even visits to two of Morari Bapu’s Katha’s; Leicester in 2005 and London in 2010, both with crowds 10,000 strong. He asked me to form the Conservative Friends of India in 2012, an organisation that was to build stronger links between our Party, the British Indian community and India. The launch was attended by over 1,200 people.

Article 50

What happens next was set out by David Cameron on the steps of Downing Street as he announced his resignation. There will be a new leadership campaign within the Conservative Party; whoever becomes the next leader will begin Britain’s negotiations to leave the European Union. It is a process that will take months and years, rather than days.

The British public is having to learn constitutional intricacies now. The key part of the process is triggering what is known as ‘Article 50’, a clear statement by the British Government to Brussels that they intend to leave the EU. Crucially, the timing of this act is left to the British, and David Cameron has announced he will leave this act to his successor.

The Trade Off

Once Article 50 is triggered, it gives the EU and the British two years to negotiate a settlement. It is unclear at this stage what sort of deal will be negotiated; will we follow the Norway/EEA model – being in the single market and bound by EU rules including the free movement of Labour – or will we opt for a more distant relationship. Whoever is Prime Minister will have to make that call.

In economic terms, the most desirable arrangement would be to retain access to the single market. Yet a large driver behind the referendum result has been Britain’s immigration system; being part of the EU has meant restricting access to skilled immigrants from outside of Europe – including India – whilst having no control over which Europeans can move to Britain. For many, including many British Indians, this system has become unsustainable.

The Next Steps

Once a new Prime Minister triggers Article 50, Britain will need to try and negotiate the strongest possible deal. Currently, the public statements from those in Brussels are defiant; Britain will not be getting a good deal and can’t cherry pick the good bits (access to the single market) without accepting the bad bits (uncontrolled immigration).

The emphatic statements are understandable. The public in a number of European countries have fallen out of love with the European project; polling shows that the people of Italy, Sweden and even France would all like their own referendum. The British have gone first, and Brussels is determined not to encourage others to follow them.

Yet, behind the united front in Brussels, there are many forces at play. The level of migration to Europe in recent years has placed a tremendous strain on people’s tolerance, and Europe has been unable to find a suitable response. Similarly, the economic crisis of a couple of years ago continues to ripple throughout Europe; Greece is on the brink of needing another bailout; the Italian banking sector is close to collapse. Youth unemployment in many Eurozone countries is over 40 percent.

There are elections on the horizon in both France and Greece, where Europe’s migration and economic policies are likely to be questioned again. The Italian Government has been trying to face down the rise of new political movements, but the future of Prime Minister Renzi looks far from secure. The Spanish have just had another election and failed to create a political consensus; there is an anti-establishment streak running through Europe’s politics.

The instincts of many in Brussels are to give the same answer, irrespective of the question: more integration. One Europe; one currency; no nation states, no borders. Britain has generally been a great thorn in the side of this project; we like free trade, we don’t like the idea of a super-state. The loss of Britain’s diplomatic cynicism will undoubtedly hurt those leaders unwilling to further integrate.

Similarly, Britain’s free trade instincts will be missed as a counter-weight to the more protectionist voices across Europe. Britain has always been seen as a key ally to those countries wanted to negotiate more free trade deals and to open up markets to competition; with us gone, other countries who share our instincts may also consider their role. There are even rumours going around Brussels that, with Britain’s departure now confirmed, the United States no longer wishes to conclude a free trade agreement (TTIP) with the EU.

But perhaps Britain’s strongest card when it comes to negotiating is that, as soon as our exit is confirmed, we automatically become Europe’s largest export market. A number of European business leaders have already suggested they want to maintain strong links with Britain, and it would be a strange act of economic sabotage to harm your own economy in order to prove a point.

Allies

The other way Britain’s hand is strengthened in these negotiations comes through international connections. Britain is a member of NATO, and Europe’s leading military power. Few European countries have a military of note, and with the levels of concern about Vladimir Putin’s Russia continuing to rise, it is likely that the Eastern European members of NATO and the United States will be keen to ensure Britain remains in a position where it can afford its military commitments.

Many of those who led the leave campaign made an internationalist argument; that our membership of Europe is preventing us from building stronger diplomatic and trade links with our more natural allies in the Commonwealth, India and elsewhere. For many of the leave voters that I’ve spoken to in London, this was a persuasive argument.

Whether it materialises is very much in the hands of others. Undoubtedly, Britain will be looking to negotiate free trade deals with key allies and major economies, including India and the US. Arguably, given that Britain is the world’s fifth-largest economy, it is in the interests of those other nations to try and strengthen Britain’s hand against the Europeans by speeding up the process. After all, if Brussels is allowed to isolate Britain, the economic shockwaves will be felt by all those nations with significant FDI here.

The Calm Before the Storm

Given the front pages that Britain has garnered in the past week globally, it is perhaps hard to conceive how little has changed. In a strange way, until Article 50 happens, the practical effects of Brexit won’t kick in.

Certainly, there have been lots of activity relating to the leadership of both the Conservative and Labour parties, and there have been summits and statements from EU leaders, each sounding more serious than the last. But, even the loss of David Cameron has been tempered by the fact that he’ll still be in office until his successor is elected.

Britain is in a strange position; aware that it has just made a monumental decision, uncertain about how the future will play out, but almost exactly the same as it was last week. The reality is that when it comes to Brexit, we’re at the end of the beginning, but far from the beginning of the end.

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Diplomatist Magazine was launched in October of 1996 as the signature magazine of L.B. Associates (Pvt) Ltd, a contract publishing house based in Noida, a satellite town of New Delhi, India, the National Capital.

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