BREXIT: A Paralytic Attack on Globalisation!

Authors:  Dr. V.S.Adigal and Shraddha Singh
V S Adigal
Abstract Globalization is a social process in which the constraints of geography on social and cultural arrangements recede and in which people are increasingly aware that they are receding. Economic integration is an economic arrangement between different regions, marked by the reduction or elimination of trade barriers and the coordination of monetary and fiscal policies. One good example of these agreements is European Union, where Britain remained a main player. Britain’s exit has affected the scope of sovereignty for national regulation and possibly influences the general business and investment climate in the UK but paralyses completely the concept of globalisation and it clearly undermines the objective for which the globalisation has emerged in early 90’s. The UK would lose the ability to benefit from the free movement of not only the factors of production but also the goods and services in large, if it chose a relatively loose bilateral arrangement with the EU. The researchers focus on the concept of globalisation and economic integration which aims to bring and prove the concept of “Vasudhaiv Kutumbakam” as a Global Village. The researchers’ attempt to find out the impact of Brexit on trade with special reference to India.

About the Authors:
Dr. V. S. Adigal, Principal & Head Department of Business Economics, Manjunatha College of Commerce, Kanchangaon, Khambalpada, Thakurli (East), Dist-Thane-421201.Tel.:0251-2441826 Residential Address: A/304,Mahaveer Dham II, Near Kala Talao, Makbara Road, Kalyan (W.) - 421301. E-mail Id – / Res.0251-2306163.

Prof. Mrs. Shraddha Singh, Department of Business Economics, Manjunatha College of Commerce, Kanchangaon, Khambalpada, Thakurli (East), Dist-Thane-421201.  Tel.:0251-2441826.   Residential Address: 1/601, Regency Sarvam, Titwala (E) 421605. E-mail id: Mobile:9987484355

“Globalisation, which benefits only multi-national companies and takes away all sense of local or national pride and identity, is the biggest threat facing all the member states of the European Union”.                                                                American Basketball Player        -Steve Blake
Globalisation is political, technical and cultural, as well as economic concept.  It is ‘new' and ‘revolutionary' and is mainly due to the ‘massive increase' in financial foreign exchange transactions.  Globalization can be defined as the intensification of worldwide social relations which link distant localities in such a way that local happenings are shaped by events occurring many miles away and vice versa. Globalization is a social process in which the constraints of geography on social and cultural arrangements recede and in which people are increasingly aware that they are receding. Economic integration is an economic arrangement between different regions, marked by the reduction or elimination of trade barriers and the coordination of monetary and fiscal policies. The aim of economic integration is to reduce costs for both consumers and producers, and to increase trade and subsequently reduce the inequalities between the countries by taking part in the agreement. One good example of these agreements is European Union, where Britain remained a main player.

(i)                 To trace the trade relationship between India, EU and Britain.
(ii)              To uncover the impact of Brexit on India and European Union.
(iii)            To analyse how Brexit stands as a contradiction to the concept of globalisation and economic integration.

(i)                 This paper covers the wide areas of trade relations within EU and other developing countries like India.
(ii)              This study focuses on the concept of globalisation and economic integration which aims to bring and prove the concept of “Vasudev Kutumbhakam” as a Global Village.
(iii)            Researcher also tries to spotlight on Brexit which clearly contradicts and paralyses the concept of globalisation.

The information collected in this paper is based on the secondary data by using internet, websites, magazines, books and journals and it gives a qualitative approach towards this research framework.

  • Brexit will enable the Britain economy to have the esteemed democracy in the country.
  • Brexit may help to retain close financial, political and economic integration.
  • Britain moving out of EU will also not require, UK to contribute in EU budget which forms a considerable chunk of government spending.
  • People of Britain felt that they were being hard done by the European Union policies which imposed various sanctions on trade which benefitted other EU members at the expense of Britain.
  • Britain also has concerns about moving to Euro from Pounds as currently it enjoys a comfortable exchange rate scenario.
  • Staying in EU for Britain will mean following norms set for all the members which would restrict the independent decision making process for United Kingdom. Thus they believe going independent will arm them with much more flexibility.

Regional economic integrations are a new and striking idea for the expansion of foreign trade among developing countries. These countries seen to have been hypnotized by the success achieve by the European Economic Community (EEC) as mean of trade expansion in their areas. Particularly in view of their national markets being rather for the successful operation of modern industrialization and implementation of technological innovations, it is conceived as a regional market to enhance modern industrial development and also to achieve economies of scale in the respective member-nations.

Broadly speaking, regional economic integration implies the creation of the most desirable structure of inter-regional economy through the formation of a customs union or of a free trade within the region and deliberately introducing all desirable elements of co-ordination and unification. Generally, such an economic integration would have to pass through three distinct but inter-dependent stage of co-operation, co-ordination and finally, of full integration. In fact economic integration may identify with liberalization of trade as well as factor movements. The harmonization or co-ordination of economic policies as a whole would follow once a common market has been set up.

After the Second World War, along with the trade agreement with WTO and UNCTAD many countries established the trading blocs. This trading bloc adversely affected the trade of non-members and remained useful to member countries. Today, there are many leading trading bloc such as EU (European Union), ASEAN, SAARC etc. for promoting free trade amongst the member countries, the trading blocs are formed. In order to have commercial co-operation amongst the nations, in addition to the trade agreement, trading bloc’s joint commission also established. India has taken keen initiative to form joints commission with many countries.

The term globlisation refers to a historical process of integration of economies throughout the world enabled through movement of capital, labour and technology (knowledge) across integration borders. Globalisation is a wider term and encompasses social, cultural, religious as well as economic aspect. However, it is only ‘economic globalisation’ that is widely referred to unless stated otherwise. Also it is called a historical process as it has evolved over centuries as a direct result of technological progress and human ingenuity. In fact the earliest though there’s no agreed starting point, mention of the whole world as ‘one’ came from an Indian saint who coined the phrase ‘vashudheva kutumbam’ thousand years ago. Moreover, the earliest civilizations including the Roman, Egyptian and Chinese and the Mohenjo-Daro and Harappa resembled the modern day- free trade economist. In fact, they owed most of their prosperity and flourishing trade to free trade. The expansion of European capitalism in 16th century followed by Indian revolution that led to colonization of most parts of the world. To its credit, at the same time, it dispersed the benefits of technological innovations, inventions and discoveries everywhere. It must be noted that the 20th century saw a huge expansion in world trade, investments and economic prosperity. But I world war coupled with the great depression in1930s halted this march briefly. The establishment of International dateline World Time Zones together with the adoption of the Gregorian as the English calendar and most of international standards for weight, distance telegraphy, aviation and shipping are proof enough of this irreversible process.

HISTORICAL PERSPECTIVE (Britain as a main player of EU)
The European Union was formerly called as European common market (ECM). The ECM was formed by signing the treaty of Rome in March 1957 by 6 countries- Frances, Italy, Germany, Belgium, Netherland and Luxembourg. It came into force from 1-1—1995 by the treaty of Rome. It headquarters are at Brussels (Belgium). Between 1973 and 1995, another 9 countries joined ECM- such as Denmark, Ireland, UK, Finland, Austria, Sweden, Graces, Spain and Portugal. In 2004, (1St may, 2004), another 10 countries joined the group. The 10 countries belonged to the former communist bloc-Hungary, Poland, Czech Republic, Slovenia, Slovakia, Lithuania, Latvia, Cyprus, Malta and Estonia. At present, there are 25 member nations of EU. In 2007, 2 more countries joined EU i.e. Bulgaria and Romania.

EU is basically a custom and economic union for bringing rapid economic progress and integration of European Countries. EU is a powerful trading bloc of highly industrialized and rich nation of western European. It is the world’s largest exporter. EU is the most powerful politico- economic as well as progressive and successful trading bloc in the world. The EU countries are now giving attention towards economic specialization. The member countries of the group are closely integrated and interdependent. The countries of EU are offering financial assistance to developing countries. In recent year, EU is exerting the pressure on WTO and other international trade organization for trade policies which will be favorable to them. EU has now snatched the position of being the largest trading bloc and has registered 50% growth in IT till 2008. Eastern European countries have invested hugely in technology infrastructure. Investing in Europe makes lots of sense. Europe feel good factors and figures are impressive. In population terms, EU has emerged as the largest trading bloc to cater the world’s largest single market. It is a historic movement because it ushered in the biggest expansion in 48 years of old EU.

 The UK joined the European bloc in 1973. Britain joined the then European Economic Community in 1973 as ‘the sick man of Europe’. By the late 1960s, France, West Germany and Italy — the three founder members closest in size to the UK — produced more per person than it did and the gap grew larger every year. Between 1958, when the EEC was set up, and Britain’s entry in 1973, gross domestic product per head rose 95 per cent in these three countries compared with only 50 per cent in Britain. The UK joined the European Economic Community in 1973 but it was not the end of an uneven relationship across the Channel. Labour was still opposing membership to the EEC.  After becoming an EEC member, Britain slowly began to catch up. Gross domestic product per person has grown faster than Italy, Germany and France in the more than 40 years.  In 1975 two years after Britain joined, it was already leaning towards the exit. A referendum over EEC membership split Labour government, but the public endorsed the UK's continued membership, with 67% of people voting to stay in.

By 2013, Britain became more prosperous than the average of the three other large European economies for the first time since 1965 which is a clear example of Britain economy becoming a big bull in European Union. During the next 40 years, the UK economy outperformed those two countries by 23 per cent. According to the findings, Britain’s performance also surpassed the vast majority of 1,000 other combinations of countries whose record had previously resembled its own in the 1970s, soon after the UK joined, and after the EU opened its single market in goods in 1992. But, because it is difficult to distinguish from correlation, the UK’s post-1973 rebound does not itself definitively establish that EU membership made the country more productive — the fundamental issue at stake. UK trade with EU partners grew faster after 1973 than it did with the remaining countries in the European Free Trade Association, the grouping to which Britain previously belonged. Britain’s big problem in the 1960s was very weak competition. Trade liberalisation was a major factor in improving competition. It removed weak firms, made management better and improved industrial relations since 1993; the UK has been the bloc’s top recipient of inward foreign direct investment, according to the UN.

Common Agricultural Policy, British contribution to the budget and political integration has been frequent conflicting topics in the relations between the UK and the EU. However, actor’s position has changed. Labour were rather anti-European at the beginning and Tories in favour; it is now the contrary that is true. This historical overview allows understanding the context in which the debate is occurring currently.
Brexit is a commonly used term for the United Kingdom’s withdrawal from the European Union (EU). The British government led by David Cameron held a referendum on the issue in 2016; a majority voted to leave the European Union. On 29 March 2017, Theresa May’s administration invoked Article 50 of the Treaty on the European Union in a letter to the President of the European Council, Donald Tusk. The UK is set to leave by April 2019. The UK remains a full member of the European Union. May said that the UK government would not seek permanent single market membership and promised a Great Repeal Bill that would repeal the European Communities Act and would incorporate existing European Union law into the domestic law of the UK. The departure of the UK is expected to have a major effect on the EU: Germany and her remaining northern EU allies will lose their blocking minority of 35% in the council of the European Union, enabling the other EU countries to enforce specific proposals such as relaxing EU budget discipline or providing EU-wide deposit guarantees within the banking union. Prime Minister has said, Britain would now make its own decisions and its own laws and “take control of the things that matter most to us, and we are going to take this opportunity to build a stronger, fairer Britain, a country that our children and grand children are proud to call home”.

After a decision to leave the EU, the first step is for the UK to notify the European Council of the UK’s intention to withdraw. There is no set timeframe for when it has to do so, or in what form. The Government assumed notification would be done by the Prime Minister under prerogative powers. But arguments that Parliament should – or even would have to – give its consent gained currency after the referendum and became the subject of a legal challenge at the High Court and the Supreme Court in the Miller case. There is no provision for withdrawing the notification, but many analysts believe Article 50 is revocable and that the UK could change its mind about leaving the EU after notification and before actually withdrawing.

India-EU relations date to the early 1960s, with India being amongst the first countries to establish diplomatic relations with the European Economic Community. India is currently the fastest growing economy in the world and a strategic partner for the EU, representing a sizable and dynamic market of 1.25 billion people. For many reasons, the EU and India are committed to further increase their bilateral trade and investment through the Free Trade Agreement negotiations that were launched in 2007. After substantial progress was made through a number of negotiation rounds, discussions are currently focused on key outstanding issues that include improved market access for some goods and services, government procurement, geographical indications, sound investment protection rules, and sustainable development. In political respect, India and the EU can be seen as natural partners because booth share common democratic values and principles of human rights - and already this commonality makes India different to many other nation states of emerging Asia. Despite this political feature India-EU relations, including the economic relationships, are under-developed. This is no real surprise, though, as one need to take into consideration that overall the arena of EU foreign policy is severely underdeveloped, and thus EU-India relations only mirror this sad state. The EU seems to treat India like other countries it negotiates with, and thus the emphasis on intellectual property rights, foreign direct investment issues and the removal of direct and indirect trade barriers should be seen as part of the business as usual. National interest is no exclusive trait of EU foreign policy and of member states of the EU. The same holds for India that has particular strong interests in its immediate regional neighborhood. EU and its member states have quite a good understanding of the social, religious, cultural, political and economic issues at stake in countries like Afghanistan, Pakistan and the like. The same holds for the understanding of religious-driven terrorism, organized crime, and more. In regards to all those cases the EU is a minor player, often outplayed in terms of influence by foreign policies of its member states. Still, India-EU Relations 38 joint initiatives of peace-building missions with India seems to be feasible, and they would actually help nurturing the political relationships. The EU pays tribute to the processes towards a multilateral world. However, it is doing it in rather imbalanced ways. This holds in particular in regards to India and China. It is latter that it is in the political focus of the EU and its member states, and all this despite the fact that China is a authoritarian political regime that opposes basic principles of human rights. Real politics tends to ignore such a difference. It is the economic power of China that reigns. Again, it is not so important that the EU is running a trade deficit with China. The EU approach towards climate change seems to be the most progressive of all countries, and offers actually great opportunities for economies like India. It is political error of India to maintain a position in the climate policy arena that actually will lead India into isolation medium-term. With its combination of rapid growth, complementary trade baskets and relatively high degree of market protection, India is an obvious partner for a free trade agreement (FTA) for the EU. In the meantime, India continues enjoying unilateral trade preferences when accessing the EU market under the EU Generalized Scheme of Preferences.
EU – India: Trade in Goods
Trade in goods: 2014-2016, Euro dollar Sterling
EU- Imports
EU- Exports
Source: European Commission
EU – India: Trade in Services
Trade in services: 2013-2015, Euro dollar Sterling
EU- Imports
EU- Exports

Source: European Commission
Source: European Commission
On the basis of table and graph it is crystal clear that the total volume of EU-imports was 12.6 euro-dollar in 2013 which increased to 13.7 euro dollar in 2015. But on the other side, the exports from EU shows that it was 11.7 euro dollar in 2013 and it rose to 14.4 euro dollar in 2015 which shows the trade balance was 0.8 euro dollar and it was negative in 2013 (0.9)

Trade Composition of European Union with India (% in total imports and exports)

Agricultural products
Fishery Products
Industrial Products
Source: Euro stat Context (Statistical regime 4, 14.4.2016), from Directorate General for Trade May 19, 2016

  • Looking into the composition of trade of EU with India we can draw following conclusions:
  • Our imports always remained greater than exports though we consider agriculture as a backbone of Indian Economy.
  • We did not have any exports between the period 2012-2015, where we could have only imports in case of fishery products.
  • On contrary, in respect of industrial commodity our exports remained greater than imports between the period 2012-2015.
Source: Euro stat Context (Statistical regime 4, 14.4.2016), from Directorate General for Trade May 19, 2016
Source: Euro stat Context (Statistical regime 4, 14.4.2016), from Directorate General for Trade May 19, 2016


Britain has voted to leave the EU. Voters have voted in favor of Brexit. British exit from the European Union. Voters in the UK have decided to leave the European Union by a margin of 52% to 45%. This means that in the coming months, British and European leaders will begin negotiating the terms of Britain’s departure. India is in a position to face the eventuality of Britain’s exit from the European Union. Brexit will disrupt the EU’s internal equilibrium. With Britain out, the bloc’s seven non-euro countries will account for only 15 per cent of EU economic output, as opposed to more than 30 per cent with Britain in. Brexit will increase Germany’s political and economic supremacy in the EU — a prospect neither Berlin nor its partners welcome. Brexit will harm the EU’s cohesion, confidence and international reputation. The biggest consequence of all, therefore, is that Brexit will undermine the liberal political and economic order for which Britain, the EU and their allies and friends around the world stand.

1.      First impact would be visible on currency volatility as there is a possibility of devaluation of the pound and euro. With the pound expected to fall 20 percent in case of a Brexit, Indian companies with sizeable presence in the UK will have to bear the brunt. The Indian government will however have to keep watching currency based volatility, both in the short and the medium term and also look at the impact on overall trade. India will have to rework the proposed free trade agreement with the single-currency bloc in view of Brexit.

2.      UK has always been a gateway for Indian firms to enter into EU. After Brexit, this will cause short-term distress to Indian firms.

3.      Global financial market volatility can be readily expected. Markets across the world will tank. The pound will depreciate against most major economies. India cannot remain immune to this. Sensex and Nifty will tumble in the short-run.

4.      One can expect Britain to try extra hard to woo Indian companies to invest there by providing much bigger incentives in terms of tax breaks, lesser regulation and other financial incentives. India is also the third largest investor in Britain.

5.      Brexit adds significantly to pressures on the rupee. While the rupee has depreciated by a lower extent against the US dollar compared to other emerging market currencies that could well be owing to RBI’s intervention to stem volatility.

6.      Indian IT companies may need to establish separate offices and hire different teams for the UK and the EU after the fallout, putting heavy expenditure burden on IT companies in the near-term.
7.      India has recently allowed 100 per cent FDI in defense. Hence, local companies will not be impacted as the important aspect is not as to who is manufacturing equipment. In the procurement policy, we have specified that indigenously designed, developed and manufactured will get the first preference.
8.      Brexit might impact India-UK trade relations too. The UK is listed 18th among India’s top 25 trading partners. India’s exports to the UK were $5.3 billion in 2014-15 (share of 3% in India’s total exports). After Brexit, India may increase its exports to the UK, as the goods supplied by EU producers and the existing FTA partners of the EU will be subject to the same tariff as applicable to goods imported from India.

9.      However, in the longer run, Brexit could help strengthen India-UK economic relationship as the UK seeks to compensate for loss of preferential access to EU markets.

10.  Pound is falling continuously after Brexit. This continuous fall of pound will immediately shave off the cost of funds as Indian companies will now have to pay less when they are repaying loans.

The EU allows the UK to leverage the world’s biggest single market to secure the UK’s economic interests, to shape policies towards the EU’s Eastern and Southern neighborhoods, to maximize its ability to shape global policies on climate change and to give it more clout vis-à-vis countries such as the United States. Leaving the EU would accelerate and make more permanent the UK’s diminished influence in the global order.” In addition to losing the right to live, work and own property in the other Member States, UK citizens would also lose the ability to vote in local elections in their EU country of residence.” Looking upon at and assessing a variety of reports and analyses, it is clear that a British exit from the EU will carry with it large economic and political costs. It will also reduce the UK’s standing in the world and its ability to influence the international events that affect it the most. It is also evident that none of the alternative relations with the EU presents itself as more advantageous compared to EU membership. For these reasons we conclude that leaving the EU will be a historical mistake of paramount proportions, one whose effects will be felt sharply in the short term and have a lasting impact on the UK for many years to come. It also indicates the act of UK as a anti-globalisation and severely discourages the concept of economic integration which have emerged largely after second world war. This also hampers the trading relations which may paralyze the Britain economy in the long run.

Brexit is a dampener to globalisation. Mergers of nations and institutions should be a way of life in globalised weird world. A small unit cannot be strong enough in a competitive world. Despite the short term uncertainties, Brexit may not pose a crisis situation. A sense of gradualism is being thought of in Britain, the EU and the rest of the world for minimizing its adverse impact. Political and economic leaderships all over the world are agreed to cooperate and coordinate. The economic transactions between the UK and the EU are intense and the Internal Market is of prime importance for the British economy. Therefore, much could be at stake for the UK economy in case of a Brexit, because new trade barriers could be erected depending on the institutional arrangement after a Brexit. While it might appear less likely that tariff rates would increase considerably in merchandise trade, the customs procedures, rules of origin, and limitations of mutual recognition for goods could render trade with the EU more expensive. Gradual implementation of Article 50 through its mechanism over period would provide time for the Brexit forces to harmonies themselves. Brexit highlights once again common man’s sovereign power. Orderly adjustments and near term liquidity are apparently manageable since almost all the national authorities have expressed solidarity in seeing through the transitional challenges. India is one of the well doing economies in the world should try to convert Brexit impact into a growth advantage. A withdrawal from the EU would enable the British Government to restrict immigration as well as cross-border labour mobility. On the one hand, this could lead to a diversion of migration flows within Europe. On the other hand, this would also impact the future allocation of human capital within Europe and could negatively affect the availability of human capital and create a shortage of skilled labour in the UK. In terms of economic integration, a Brexit would affect all four freedoms of the Internal Market: merchandise trade, free movement of services, free movement of capital including FDI, and free movement of persons. A Brexit would also affect the scope of sovereignty for national regulation and possibly influence the general business and investment climate in the UK. The UK would lose the ability to benefit from the free movement of persons if it chose a relatively loose bilateral arrangement with the EU. However, the discussion in the UK does not focus on emigration of British citizens to the EU, but on immigration of people from other EU countries to the UK and their access to the British social system. However, the effects of a Brexit are somewhat ambiguous regarding immigration. On the one hand, the UK could use its regained competences to limit the influx of foreigners or to manage it according to the needs of the UK economy. On the other hand, the UK could provoke political retaliation measures by EU countries in both cases, due to the political sensitivity of this issue. On the positive side, fiscal savings due to the (partial) elimination of EU contributions and lower economic distortions caused by potentially lower external trade barriers and the absence of the CAP after a Brexit may be relevant. On the negative side, apart from the basic losses due to reduced trade integration, future losses from foregone new EU trade agreements and foregone reductions of non-tariff barriers in the Internal Market also play a role. Some Eurosceptics say Britain stands a better chance of growth if it looks beyond the sluggish economies of the EU. But this is a claim about the future, predicated on trading relationships that do not yet exist, rather than an analysis of the past. For almost half a century, Britain has benefited from greater openness to world markets, which has fostered economic dynamism. Economists have demonstrated that the main cause of that change was membership of the EU, which brought with it gains from trade, foreign direct investment, competition and innovation. Therefore the researcher concludes that Britain economy will be clearly left out from enjoying the fruits of globalisation and an act of Brexit clearly indicates a severe paralytic attack to the concept of globalisation and puts the economy into isolation. However, researcher strongly urges to rethinking of Britain economy for rejoining the European Union and promotes globalisation in real sense.
Let us conclude this article with famous quote of President of Russia           -Vladimir Putin
The European Union's enlargement is part of the natural process of integration and globalisation that is underway in the world today”.

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