European lawmakers have approved the final ratification of the post-Brexit trade deal between the European Union and the United Kingdom, nearly five years after Britain decided to leave the bloc.
GS-II: International Relations (Foreign Policies and development affecting India’s Interests)
Dimensions of the Article:
- About the recent developments regarding Brexit
- What is Brexit?
- Reasons of growing relationship between India and EU
- Impact of Brexit
About the recent developments regarding Brexit
- The EU–UK Trade and Cooperation Agreement (TCA) is a free trade agreement signed in December 2020, between the EU, the European Atomic Energy Community (Euratom) and the United Kingdom (UK).
- The deal was ratified nearly five years after Britain decided to leave the European Union. It has already been ratified by the UK Parliament.
About the Trade and Cooperation Agreement (TCA) for Brexit
- This Trade and Cooperation Agreement (TCA) deal was provisionally enacted in January 2020 in order to minimize trade disruptions between the EU and the UK.
- Provisional approval was set to expire on 30th April 2021, so the European Parliament’s ratification ensures that the flow of trade between the EU and the UK will continue uninterrupted.
- It essentially means that in order to trade with the EU’s single market, the UK will have to follow the same rules and regulations to ensure that it does not have an unfair advantage over other EU businesses.
- The agreement gives free access to EU fleets to fish in UK waters, including up to six miles off the shoreline for a five-year transition period. At the end of the transition, everything will return to normal arrangements and the UK will have full control over its waters.
- It also provides for a framework governing law enforcement matters, which will allow UK and EU policing agencies to coordinate in the future.
- Agreement addresses other key aspects of international trade, including intellectual property protections and road transportation provisions.
What is Brexit?
- It is an abbreviation for the term “British exit”, similar to “Grexit” that was used for many years to refer to the possibility of Greece leaving the Eurozone. Brexit refers to the possibility of Britain withdrawing from the European Union (EU).
Understanding the United Kingdom (UK) and the European Union (EU)
- The United Kingdom is an island nation in northwestern Europe.
- It is made up of England, Scotland, Wales and Northern Ireland.
- The United Kingdom borders one European Union member state: Ireland.
- Relations between the EU and the United Kingdom of Great Britain and Northern Ireland (UK) date back to the foundation of the European Communities (EU predecessor) in 1957.
- The UK was a member state of the European Union after joining it in 1973, until it became the first country to voluntarily end its membership on 31st January 2020 after a referendum was held in 2016.
Reasons of growing relationship between India and EU
- Changing Geopolitical developments: As highlighted by EU strategy on India, released in 2018, EU sees EU-India relations in the context of broader geopolitical developments, primarily the rise of China. Impact of China in Europe and Asia (e.g. Belt and Road initiative) has pushed EU to change the nature of its partnerships in the region, particularly with India.
- Convergence of interests in the Indian Ocean as the Indian Ocean is the main conduit for global trade and energy flows. India, EU see each other as partners in securing the Indian Ocean by strengthening institutions, rule of law, and a regional security architecture.
- Retreat of the U.S. from global leadership and uncertainty of US policy under Trump has provided opportunities for EU- India cooperation and trilateral dialogues with countries in the Middle Fast, Central Asia and Africa.
- Strategic rivalry between the US and China: Both EU and India have a common interest in avoiding a bipolarized world and sustaining a rules-based multilateral trading system with the United Nations and the World Trade Organization at its core.
- Green governance: After the US exit from the Paris climate agreement, India and the EU stand to gain from a joint leadership on global governance matters such as climate change, clean energy or circular economy.
- New emerging world order after COVID-19: As EU seeks to move away from a global supply chain that is overly dependent on China, India can emerge as its most natural ally.
Impact of Brexit
- Free Trade Agreement (FTA): India may start talks on free trade deals with Britain, EU after Brexit. EU and India have been negotiating a FTA since 2007. Despite growing trade between the EU and India, talks stalled in 2013, only resuming in 2018. Potential sectors to benefit from an FTA between the UK and Indian include textile, machinery, engineering goods, information technology and banking.
- Demand for Indian Labour: India’s high proportion of skilled working-age population and high growth rate will be of particular interest for the UK.
- Service sector: India which is laying greater emphasis on innovation and high-end works could emerge as a major source of high-tech exports for the UK.
- Easy market access: India is the major Foreign Direct Investment (FDI) source for the UK because many Indian firms have used it as a gateway to Europe. With the UK moving out of EU, it might offer more incentives such as tax breaks, easy regulations and opening up markets to Indian firms to keep them attracted.
- Cheaper imports: The UK’s currency is expected to remain weaker, so it would be less expensive for Indian firms to import from their subsidiaries in the UK.
On World Economy
- Uncertainty: Its global implications are harder to predict and may differ for different regions. It could also lead to a setback for free trade and globalisation.
- Flight to safety: Investors may start selling riskier assets such as stocks and seeking safety in government bonds.
-Source: The Hindu