Context:

The British government’s demand to renegotiate parts of the Northern Ireland Protocol of the Brexit agreement with the EU has set the stage for another round of clashes between London and Brussels.

Relevance:

GS-II: International Relations (Foreign Policies and Agreements affecting India’s Interests, Important Political developments). GS-I: World History

Dimensions of the Article:

  1. Understanding the United Kingdom (UK) and the European Union (EU)
  2. What is Brexit?
  3. Withdrawal Agreement Between European Union and the United Kingdom
  1. About the Trade and Cooperation Agreement (TCA) for Brexit
  2. Why Scotland Voted in Favour of Staying
  3. Good Friday agreement (Belfast agreement)
  4. Northern Ireland protocol
  5. Impact of Brexit

Understanding the United Kingdom (UK) and the European Union (EU)

  • The United Kingdom is an island nation in north western 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.

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 process of Britain withdrawing from the European Union (EU).

Some of the reasons for Britain to seek BREXIT are

  1. Sovereignty- Although the British Government influences some form in selecting the members to the European Commission, the members are neither under the influence nor accountable to the British Parliament and some of the policy decisions such as competition policy, agriculture, copyright, and patent law go against the interests of Britain (these laws override the domestic laws)
  2. Regulations are becoming a Burden- Some of the regulations such as –limits on the power of vacuum cleaners, non-recycling of tea bags, etc have often been seen as a burden on some of the conservatives in Britain. As per Michel Gove, these regulations have cost Britain to the tune of £3 billion per year.
  3. Issues with Euro as Currency- although the Euro is the common currency for the EU, Britain still uses the pound as its currency. Now if the euro had to be successful then it would have required greater fiscal and monetary integration and this cannot be achieved unless all the member states have the same currency. The problem with the euro as a common currency has also been exposed wherein on one side countries such as Greece and Spain are suffering from high debt, high unemployment, whereas other countries such as Germany are enjoying higher growth. Now in this situation, the ECB (European Central Bank) is in a dilemma whether to go for fiscal stimulus or prudence.
  4. Immigration- Britain is not a signatory of the Schengen Border free zone (allows easy travel across Europe), over the last ten years there has been a quite an opposition towards migration into the country from within the EU and its effects on wages and public services especially post 2008 recession wherein the workers from Lithuania, Poland, Italy, Romania, etc have moved to Britain

Withdrawal Agreement Between European Union and the United Kingdom

  • Under this, a transition period of 11 months was finalized until December 2020. However, it might get delayed until 2022 or 2023.
  • The transition period makes sure that there is not a sudden shock but a degree of continuity and allows both parties to secure an orderly Brexit, minimizing disruption for the citizens, businesses, public administrations, as well as for international partners.
  • During the transition period, the U.K. will continue to participate in the EU’s Customs Union and in the Single Market.
  • The United Kingdom will apply European Union law even if it is no longer a Member State and will also continue to abide by the international agreements of the EU.

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.

Why Scotland Voted in Favour of Staying

  • As per the numbers, it was found that 62% of the voters in Scotland chose to remain within the EU. The reasons for their decision are given below.
  • EU is a common market which not only allows the movement of four freedoms (finance, goods, services, and labour) but also provides a huge market for Scotland to export
  • With Scotland being a part of the EU, the trade barriers will be eliminated to a great extent (both for exports from and imports into Scotland)
  • Scotland has been attracting foreign investments as a result of which there has been employment creation, contribution to growth, etc (in 2013, 40% of the companies in Scotland were foreign-owned which employed more than 3 lakh workers)
  • When the EU negotiates a deal with other countries (has trade deals with more than 50 countries), it is automatically applicable to Scotland but with BREXIT, Scotland may be forced to sign all the deals again with the trade partners (the advantages may be lost)
  • As a member of the EU, it will get access to various development funds (Regional Social Funding, Rural Development Programme, etc)
  • With BREXIT, the citizens of Scotland may lose the freedom of movement i.e., to move freely in Europe
  • In a nutshell, Scotland is much safer than remaining within rather than moving out of the EU. (On moving out it will face security/terrorist threats, climate change, trade barriers, etc., all alone).

Good Friday agreement (Belfast agreement)

  • Great Britain had ruled Ireland for hundreds of years, but it split off from British rule – leaving Northern Ireland as part of the UK, and the Republic of Ireland as a separate country.
  • When this happened, the population of Northern Ireland was divided in two:
    • Unionists (who were happy to remain part of the UK)
    • Nationalists (who wanted Northern Ireland to be independent from the UK and join the Republic of Ireland)
  • Both unionists and Nationalists engaged in violent clashes regularly till the end of 1990s. In 1998 – after nearly after 30 years of conflict – The Good Friday Agreement (or Belfast Agreement) was signed which helped to bring to an end a period of conflict in Northern Ireland.
  • As a compromise between both the parties- Though Northern Ireland was retained with in the UK (with a greater autonomy) the agreement ensured soft borders between northern Ireland and Republic of Ireland.

What happened after BREXIT?

  • BREXIT involves exit of UK (England, Scotland, Wales and Northern Ireland) from EU. This would create hard borders between Northern Ireland(part of UK) and Republic of Ireland(part of EU). This would be against the spirit of Good Friday agreement and may revive violent tendencies in the region again. To avoid that, a compromise was made between UK and EU in the form of “Northern Ireland protocol”.

Northern Ireland protocol

  • Though Northern Ireland is no longer legally in the EU Customs Union, there will be no customs check points along the border between Northern Ireland and Republic of Ireland.
  • Instead, there will be a customs border between Northern Ireland and Britain (along the Irish sea). (This meant, in order to avoid an economic barrier between the two Irelands, Britain effectively set up one between the British mainland and the Island of Ireland).

What happened now?

  • Though the above plan avoided a situation of hard border between the two Irelands. It resulted in more checks on goods entering Northern Ireland from mainland Britain, effectively creating a border down the Irish Sea and dividing the UK. Faced with all the new bureaucracy, some British companies have stopped supplying stores in Northern Ireland, saying they simply can’t handle the added paperwork now needed.
  • So, Prime Minister Boris Johnson is arguing to renegotiate the protocol. His government wants all customs checks on goods entering Northern Ireland to be removed.
  • If Britain withdraws from the protocol, it will delay the BREXIT further.

Impact of Brexit

On India:

  • 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

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