Ashis Ray looks ahead to Britain’s global trade relationships post-Brexit, observing that some promise to be more cordial than others
It is a matter for debate as to whether it was necessary for David Cameron, during his premiership, to concede to the nationalist right wing of his party a referendum on Britain’s membership of the European Union. What is not in doubt is that it has proved to be a catastrophic decision.
The referendum has divided both the country and its two major political parties, Conservative and Labour. Discipline and unity have been thrown to the winds. In the past two-and-a-half years, cabinet colleagues have routinely clashed with each other in public, whilecertain Secretaries of State have revolted against Cameron’s successor, Prime Minister Theresa May.
Two years after the British people voted in favour of leaving the EU, amid the subsequent quarrelling and wrangling within the cabinet and the ruling Conservative party, May finally thrust down the throats of her ministers Britain’s negotiating position with the EU. It is not the best of documents; indeed, it is a compromise to keep a majority of Conservative MPs happy.
Most importantly, however, the EU, while expressing reservations about some elements of the stance set out, has not wholly rejected the proposal. In other words, it is viewed as a basis for talks.
A ‘no-deal’ Brexit is perceived by most experts as an unenviable scenario for Britain. Nor is it palatable for the EU, since the United Kingdom is one of the union’s biggest economies, and exports to Britain are an engine of growth for many of its member countries. Therefore, one can expect the EU to draw a red line under anything they sense will weaken or rupture it, and to endeavour to reach an agreement with Britain. So, Brussels extending a helping hand to Theresa May cannot be ruled out.
The chaos and uncertainty caused by the outcome of the referendum and the tribalism that has followed have not just alarmed Britons, but also policy-makers worldwide. Britain is the world’s fifth biggest economy, a fact that cannot be ignored. Such a country crashing out of the EU is bound to transmit transcontinental tremors, regardless of the UK coming under World Trade Organisation rules.
Brexiteers have been shouting from rooftops for years about the freedom to trade with nations outside the EU, a freedom that would be enabled by Britain leaving the union. The United States, China, Japan and the Commonwealth in general (India, Australia and Canada in particular) are cited as major partners, even free trade allies. Indeed, the British Secretary of State for International Trade, Liam Fox, speaks as if such trade partnerships are a done deal.
It appears that adhering to the EU ‘rulebook’ would at the very least demand creativity on the part of London to venture into such deals. Donald Trump may generally be quite unreliable, but he wasn’t wrong in saying the UK white paper renders it more challenging to forge a UK-US FTA. In the case of China, the question is: would security suspicions permit an FTA?
Japan, one of the biggest foreign investors in Britain, has openly flagged up its concern about tariffs descending on trade between the UK and the EU, which would affect its major companies – from car-manufacturers to electronic concerns – who manufacture and export in a single market environment. Indeed, a primary reason for such firms to set up shop in the UK was to take advantage of seamless movement of goods and services throughout the EU. However, Japan has just finalised a draft of an FTA with the EU. This could conceivably be a template for a Japan-UK agreement.
Likewise, the Canada-EU FTA framework could, without too many hurdles, facilitate a UK-Canada pact. In any case, with Queen Elizabeth still Canada’s head of state, a special relationship far beyond the Commonwealth camaraderie exists between the two countries. This is also true of ties between Britain and Australia, between whom an FTA looks more likely than not.
India, though, is a different kettle of fish. It is no longer attached to the crown’s apron strings. It is proudly independent and today somewhat hot-headedly nationalist. Unless there is a dramatic change in the atmosphere presently governing relations between the two nations, there is little prospect of an FTA in the near future. In fact, India and the EU have been negotiating an FTA for over a decade, with the finishing line nowhere in sight.
Far from trade between Britain and India flourishing, it has collapsed. The turnover in 2016 stood at £15.4 billion, and it is estimated to have decreased by another billion pounds since. In effect, Cameron’s vision of £20 billion trade by 2015 is not in the vicinity.
As for the overall relationship, it has become fractious. India is dissatisfied about immigration rules imposed on business executives and students, and angered at the safe haven being given to Indians wanted for alleged offences back home. The latter is the jurisdiction of the judiciary, which has historically refused extradition on grounds of unconvincing evidence, poor prison conditions in India, or New Delhi not being a signatory to the United Nations charter on torture.
During their April meeting in London, Narendra Modi retorted to Theresa May that Britain had detained Mahatma Gandhi in the same prisons. On the other side of the coin, Britain is unhappy about India not agreeing to repatriation of illegal Indian immigrants in the UK.
The free run on British soil enjoyed by Kashmiri and Khalistani activists, allegedly sponsored by Pakistan’s espionage agency, Inter-Services Intelligence, is also an issue, while yet another irritant is Britain’s comparative lack of co-operation with India on Pakistan. This is because the UK, sitting on a tinderbox of Pakistani-origin terrorists both within its territory and from Pakistan, wants to maintain a lid on untoward incidents. India feels this is not what a friendly country, keen on expanding economic relations, should be doing.
Ultimately, among a surfeit of differences, there is the glaring one over free movement. India insists this needs to be an integral part of any FTA; but there is no way Britain, which has opted out of the EU to control immigration, can agree to its little island being swamped by Indians.