After 43 years of cohabitation, the British electorate has on a historic referendum decided to end civil partnership and leave the European Union by a narrow margin of about 4 percent. Although the pundits gauging the mood of the electorate were predicting a close fight, the over whelming opinion was that the ‘remaining‘ side would extract a win at the end. The fear of uncertainty of exit was played to the maximum on the hope that the people will choose a known devil than an unknown ‘benefactor‘. The very fact that the famous ‘bookies‘ of London were putting their bets on the ‘remaining‘ side by a hefty margin was the proof of the belief that Briton would still stay in the EU.
The British relationship with their European kith and kins in the continent has always been a checkered one. The main rivals of Britain, throughout her history, have been her European neighbours; Germany in the two world wars, Russia during the cold war and France throughout most of modern history. Being an island nation and a maritime power, the British traded with lands far and wide and expanded their empire in Asia and Africa and not in Europe. Great Britain declined an invitation to sign the Treaty of Rome in 1957 which led to the formation of the EEC (also often called the ‘Common Market‘) and later the EU. Moreover, she was instrumental in creating a rival trading block called the European Free Trade Area. In the 60s, while the members of the European Common Market were economically growing from strength to strength, the British Economy was stagnating and Britain lost her glory in the form of the British Empire. The British were knocking at the door of EEC, desperately trying to enter. But the then French President Charles De Gaulle came in-between, declaring “l‘Angliterre, ce n‘est plus grand choseâ€ (“England is not much anymoreâ€). It is believed that he used to view the British as America‘s Trojan horse. It was only in 1973, when De Gaulle had already left office that Britain under the conservative Prime Minister Edward Heath was allowed to enter the EEC. At that time, the conservatives were in favour of joining the EEC while the opposition, the labour party, had reservations. When Labour came to power, they put the EEC membership to a referendum in 1975, a first in British history. The labour Prime Minister of that time, Harold Wilson had himself turned into a supporter and the British voters voted to remain in the EU by a two third majority.
Since then, the British have always played the role of a reluctant integrator trying to slow the process of integration leading ultimately to the political union. The Brits did not give up their Sterling Pounds when other members of the union joined to create the Euro, the single European currency. Similarly they retained their border controls and separate visa regimes for non-EU persons by remaining outside the Schengen Agreement. The British played an instrumental role in expanding the union by bringing in new members, the poorer countries of Eastern and Southern Europe. It was often alleged at the time that the enthusiastic support of the British to expand the EU was made with the vested interest of slowing, if not altogether stopping, the process of integration and formation of a single political union in Europe. Back in the 70s, when Britain joined the EEC, she had a stagnant economy, high unemployment and frequent strikes. She was no more an industrial powerhouse. Neither was she the glorious maritime power of the colonial days. She was largely seen as playing second fiddle to the Americans in the world Arena.
Now after 43 years, when she is ending her civil partnership with continental Europe, she has the most successful economy in Europe. London as a centre of international finance has left the likes of Paris, Milan and Frankfurt far behind. Britain is the preferred destination of the rich and famous not only from her former colonies, but also from around the globe: from the Russian oligarchs to Arab sheikhs and the Chinese billionaires, whenever they face problems in their own country. Unemployment rates are pretty low. Although Britain is no more known for her manufacturing excellence, but in services and knowledge based operations, she has been extremely successful in recent decades. The success of Britain‘s soft power can be gauged by the phenomenal performance of the English Premier League, which has turned to be the most watched football league in the world today, even though the English national team itself is nowhere near the best in the world.
What does the Brexit mean for the world and Nepal is a big question to which nobody seems to have a definite answer. There is no doubt that it is a big jolt for regional integration and international migration. It is a victory of right wing nationalistic forces who have been campaigning against the influx of migrants from the poorer regions of the continent, as well as those who have made it to the union from the poorer regions and conflict ridden areas of the world. The global business fraternity took the decision unfavourably. Stock markets plunged everywhere. The global financial analysts characterised the movement with words like carnage or tectonic shift. The British pound got a severe beating, declining to the levels seen in the 80s. The moneyed class of the globe flocked to the American dollar, the Swish frank, gold and other precious metals considered to be safer bets at the time of volatility. The hope of acceleration of the global economy faded taking the commodity prices including that of the crude oil down.
The biggest impact would most probably be on Britain, herself. The country looks divided like never before. The fissure seems to be going deep in the British society, along the lines of class, region, age and ethnicity. The Scots are already preparing to have another referendum on whether to remain in UK or leave it, as it voted overwhelmingly to stay in the EU. The Brits have not done their independent trade negotiations for more than two decades. Now they will have to start negotiating with their trading partners on the terms and conditions of their economic links with the outside world. The most important work that needs to be carried out, in the near future, will be the negotiation of the terms and conditions of exit (including the terms and conditions of their relationship with the European Union). The leaders in continental Europe are for having a quick negotiation and agreement on exit. There will be tremendous pressure not to ‘prize‘ Britain for its decision to exit in order to deter Euro skeptics in other members of the EU to follow suit.
The main plank of British promotion in the world, “Come to Britain, you will have access to a market of more than half a billion EU Residents,â€ will no longer be valid. The international companies which centered their pan European operations in Britain will be the biggest losers. Economies outside Europe which used to have closer ties with Britain in the past may gain as Britain would not be bound by the overarching EU rules and regulations and may choose to pursue closer ties with them.
Britain is quite important for Nepal, historically and economically. She was the first country to have diplomatic relationship with us and we have borrowed the modern concepts of democracy, separation of power from the Brits. English has been the only international language for us and the proficiency in it is taken as a safe and certain ticket to success in this country. During recent years, the British have become the largest donors for Nepal, supporting us in all sorts of development sectors; from energy to agriculture, from policy making to health. However, in terms of trade and investment, we have no significant ties. There is little trade between us, and the British investment in Nepal is minuscule. There are no Nepali companies operating in Britain. Nepal‘s British connection is also associated with continued presence of Gurkha soldiers (although their number is dwindling over the years) in the British defense forces and a sizeable Nepali diaspora living in the UK.
The Brexit enthusiasts may say that a country like Nepal with closer ties in the past will gain as Britain will not carry the baggage of Europe. They may also say, the Brexit will free more resources as Britain will not be subsidising the less efficient producers in Europe, since Britain has consistently been a net contributor to Europe, giving more money to EU than receiving from it. They may also say that it would be easier for us to obtain a visa and land a job in Britain, as she would not be obliged to give preference to the Eastern Europeans. But the issue is not as straight as is projected by the euro skeptics. In the near future, Britain is going to be very busy formulating her own laws and regulations, replacing the European ones and as such her involvement outside may decline. On the economic front, even the most adherent enthusiasts of Brexit do admit that the economy of Britain will suffer in the short run. So the UK-Aid funds are not going to grow any time soon. As the value of the Sterling Pound and the business volumes declines, Nepal is set to see a decline in the remittances from Britain (although it is already insignificant low as a lot of the Gurkha soldiers and their families have already migrated to the UK). Xenophobia played a significant role in the decision. Anti immigration rhetoric was the main rattle of the ‘leave‘ campaigners. The white population of the Northern England enthusiastically voted for exit, where as the more cosmopolitan population of the larger cities voted against it. The British vote is the latest phenomenon of the rise of jingoism in Europe. So when it comes to immigration there is no guarantee that the British will prefer the brown and yellow Asians at the cost of their white brethren from East Europe. So the hope of an easier access to the labour market of Great Britain is most probably a misplaced one.
The consequence of Brexit in economy, in politics and in international affairs is still unknown. The only certain thing is the armada of the world economy has sailed to unsettled waters. Nepal‘s economy may be a small and insignificant boat but it is part and parcel of that armada. It may need more hard efforts, skills, courage, and plain luck to get out unscathed, and if possible stronger and wiser. The question is do we have it in us?
Dr Hemant Dabadi is a Senior Fellow at Samriddhi, The Prosperity Foundation, is a well-known expert writing and researching on economic aspects of federalism in Nepal.