The European Union has begun to crumble. The Syrian civil war and the unfortunate consequences of intervening in Libya led to one of the world’s largest forced migrations. This led to an unprecedented xenophobia and a renewal of nationalism, putting strains on the political union. Within western Europe and the UK, the migration of large numbers from “new” European nations like Romania led to a racial backlash: we see the consequences of this in the UK referendum.
While 76 per cent Britons between 18 and 24 voted to remain in Europe, as did 56 per cent of those in the 25-49 group, more conservative older people overwhelmingly voted to exit. The racist overtones of the political and social discourse in Germany, France, Italy and elsewhere is apparent. Without seamless internal travel, a basic EU building block is taken away. This process has begun.
The EU’s historical roots go back to the end of World War II when many in the war-ravaged continent yearned for a future free from conflict. But no sooner WWII ended Europe again found itself on the abyss of war. The Cold War divided Europe in a bitter contest between two adversarial systems. As Winston Churchill put it: “From Stettin in the Baltic to Trieste in the Adriatic, an iron curtain has descended across the Continent”. Instead of the peace it sought, nuclear Armageddon threatened it.
However, the swift post-war economic revival of three big western European powers — Britain, France and Germany — and the realisation that they faced a new challenge to the democratic order due to the sudden expansion of the Communist universe united Western Europe in action and deed. The dangerous geopolitical faultline only spurred the efforts to unite Europe as one nation so that competing nationalisms and ambitions did not engulf it in war again.
In 1957 the European Economic Community was formed. Britain’s efforts to join were rebuffed several times by Charles de Gaulle, who saw it as little more than an American Trojan horse. In 1970, his successor Georges Pompidou relented and the UK was allowed in. Britain’s entry paved the way towards the grand unification envisaged by French economist and diplomat Jean Monnet, and the European Union was formalised by the Single Europe Act of 1987. It’s not without irony that it is the UK which has now struck a major blow against the European Union.
The rejection of Communism in eastern Europe followed by German reunification in October 1990, and the Soviet Union’s dismemberment in 1991 seemed to herald the reinstatement of Europe as a world leader, which it was in the 1800s till the rise of the United States in the 1900s. The 1999 Amsterdam Treaty meant a common citizenship and charter of individual rights and was an attempt to build a continental and democratic nation with a common Parliament, a common vision of freedom, security and justice, and a common foreign and security policy. Europe was to be a seamless union of many great economic and political aspirations. This union of “old” and “new” Europe was consummated with the arrival of euro notes and coins on January 1, 2002.
In numbers, the EU looked impressive indeed. Its GDP was bigger than America’s in 2002. But it had begun to slow due to the absence of centralised financial regulation. Europe’s GDP in 2016 was $18.5 trillion, against the US’ $19.96 trillion. Britain’s exit takes away $3.15 trillion, as the EU was beginning to further slow down due to rapid ageing. Britain was growing at about 2.4 per cent, faster than other powers like Germany ($4.06 trillion, growing at 1.8 per cent) and France ($3.02 trillion, growing at 1.55 per cent).
More than that, London is the dynamic world financial centre, more so than New York. It is also at the centre of a English-speaking worldwide web of tax evasion and concealment stretching from the Bahamas, British Virgin Islands, Cayman Islands, to Jersey, Guernsey and the Isle of Wight. Panama and Switzerland have notoriety, but it is London that “chunnels” money of developing nations’ elites into Europe’s economy. It’s not without reason that Indian businessmen refer to fiscally-lax London as their gateway to Europe.
Indians naturally invest more in the UK than elsewhere in Europe, emerging as the UK’s third-largest FDI investor. Access to European markets is the key driver for Indian companies investing in the UK. This might now perforce be increasingly diverted to Europe.
This apart, the MEA country brief says Britain is also the third-largest investor in India, after Mauritius and Singapore, with a cumulative inward flow of $22.56 billion between April 2000 and September 2015. A good portion is round-tripping money. Thus, it seems Britain is also the gateway to India. This may not change.
There are over 800 Indian companies in the UK, more than the combined number in the rest of Europe. The CII’s India Tracker 2016 said that Indian companies generate 110,000 jobs in the UK, while a major part of their business is in Europe. There is no reason why this business should suffer given the WTO regime in place. But it’s the free flow of money to Europe that might be impeded Will the residual EU be as tolerant to whitewashed money flows
The total turnover of the fastest-growing Indian firms in the UK, specially in fast growth-sectors like technology, telecom, pharma and financial services, rose 18 per cent in 2016, from £22 billion in 2015 to £26 billion this year, according to the Tracker. Telecom and tech companies Bharti Airtel and HCL Technologies top the list of Indian companies seeing a phenomenal growth of 886 per cent and 728 per cent. But in turnover, the Tata Group still dominates. Despite the downturn in the auto industry, Jaguar Land Rover’s business is still a success story.
Britain ranks 12th in India’s bilateral trade with individual countries. It’s also among seven of 25 top countries with which India has a trade surplus. Commerce ministry data shows India’s bilateral trade with UK was worth $14.02 billion in 2015-16, of which $8.83 billion was in exports and $5.19 in imports. The trade balance was thus a positive $3,64 billion. If Britain’s economy slows after Brexit, as many expect, this trade surplus may also vanish. Nevertheless, to most Indians, more so the well-heeled, there will always be a Britain.
The writer, a policy analyst studying economic and security issues, held senior positions in government and industry. He also specialises in the Chinese economy.
