Comment: India, Asia and the EU referendum

Dr Paul James Cardwell, of the University's School of Law, comments on the impact Brexit could have on India and Asia.

India, Asia and the EU referendum

by Dr Paul James Cardwell, 22.6.16, in the Financial Chronicle

Rarely it seems do referenda gather as much international interest as the UK’s upcoming vote on whether the country should remain or leave the European Union. On the table is a question about whether the UK should continue its membership, since 1973, of a Community – and then a Union – of states which stretch from the Arctic circle to the Mediterranean.

But this is not merely a question of national economic well-being, or even identity. It is a vote which has global implications.

Interventions in national debates by leaders overseas are generally rare. In this referendum, leaders of EU countries have been united in calling for the UK to remain – the Hungarian Prime Minister even placed an advertisement in one of the UK’s most read newspapers on Monday – but leaders outside Europe have been vocal too.

President Obama’s words in April 2016 in London, "The UK is at its best when it's helping to lead a strong European Union" have resonated with other world leaders. But even before his intervention in the debate, Indian PM Narendra Modi spoke in November 2015 of the UK as the “entry point for us to the European Union”. This was widely interpreted as a sign that India, with its special links with the UK and rising economic power, cares about what the UK public decides to vote for. The leaders of China and Japan have made similar comments, as well as Asian firms who invest or produce goods in the UK.

What would be the impact of an exit from the European Union for the UK’s trade with India? Unfortunately, this falls within the set of questions to which no-one knows the answer to. The campaign has thus far been marked by numerous claims and counter-claims, though most economists and international institutions (including the IMF) believe that the economic impact on the UK and the global economy would be a negative one.

A vote to leave would not immediately cease the UK’s EU membership, since the procedure laid down in the Treaty on European Union would require at least a two-year period (and possibly even longer) whilst the details of a new agreement are hammered out.

But the impact on the EU itself, as India and China’s largest trade partner, is also up the air with predictions that ‘Brexit’ would cause a downturn to the still-fragile Europe-wide economy. Such repercussions for India and China, and countries across Asia, cannot and should not be ignored. The volatility of international markets and capital flights from the UK has appeared to increased as the opinion polls shifted towards a Leave vote last week, but have since stabilized.

International trade and the UK’s global economic role have played a large part in the debates, though often (and understandably) with reference to what domestic impact this would have. Only immigration – both from within the EU and outside of it – has played a more prominent role. On the Leave side, the view is that a United Kingdom which is not bound by the EU’s Common Commercial Policy – which negotiates trade deals on behalf of the 28 member states as a bloc – would be free to engage in new partnerships, particularly in Asia. For the Remain side, this would be a dangerous venture into the unknown –cutting the UK off from the EU’s lucrative single market (which covers goods, services, capital and workers) with merely a hope that India and other countries in Asia and around the world would be prepared to negotiate new deals. The Remain campaign have played on the status quo as the safer choice for the UK.

Whilst trade between the UK and countries including India does not necessarily require a trade deal, the future relationship between the UK and the rest of the EU in case of a vote to leave is a pertinent one. If the UK has a relationship akin to that of Norway, which is not an EU member but pays to be part of the single market with very little influence over EU law, then the UK could find itself to be bound by the EU-India deal which has been under negotiation for several years. But this would come at a price, since the UK would have very limited scope to exercise any influence of its contents – which is significant for the UK economy and its reliance on services.

At the beginning of the final few days of campaigning, the likely outcome is still unknown. Much less known is what the implications would be in the short, medium and long term – both for the UK, the rest of the EU and the wider world. But the interconnectedness of our world means that the views of those outside the UK should play a part in this incredibly important decision.

Views posted in comment articles are those of the author(s) and do not necessarily reflect the opinion of the University of Sheffield.