May triggers Brexit: why India has reasons to be concerned
Many Indian firms use the UK as a base for operations in Europe. A “hard Brexit” would mean many of them would reduce their presence in Britaineditorials Updated: Apr 03, 2017 21:46 IST
Britain has formally begun its divorce from the European Union – and it looks like it will be a difficult and messy one. The British Prime Minister, Theresa May, last week formally invoked Article 50 of EU’s Lisbon Treaty and began the two-year negotiation period to separate the United Kingdom from the EU. May, in her opening statements, had already indicated that London foresees a Brexit in which her country will no longer accept the free movement of people from Europe and no longer accept the jurisdiction of the European Court of Justice. The EU’s response has rightly been that in that case it does not see itself required to allow the free flow of goods and services to and fro across the English Channel. The opening salvoes would all point to an extremely difficult and disruptive separating of ways.
India has reasons to be concerned. The weakening of an already crisis-prone EU is an unfortunate additional source of instability at a time when the international order is under enough stress thanks to a whimsical Washington and a belligerent Beijing. An economically damaged UK poses its own problems. India is the third largest foreign investor in the UK, surpassed only by the US and France. In 2015 cumulative Indian investment reached 26 billion pounds – more than all the Indian investment in the rest of Europe put together. The Tata group alone is among the largest industrial firms in the UK. While the Brexit confabulation has reduced the price of British assets and led to some firms expanding their investments, it is also true many Indian firms use the UK as a base for operations in Europe. A “hard Brexit” would mean many of them would reduce their presence in Britain. For example, if British-made goods ended up facing World Trade Organisation-level tariffs – the default rate if the UK-EU talks go badly – then they would land on the Continent 10% more costly than before. That alone would be enough to drive them to move factories out of Britain.
Prime Minister May has so far shown less than exemplary leadership during the process. She continues to underplay the damage the UK will suffer because of Brexit. Though she herself supported EU membership, she has decided to accept the entire agenda of the pro-Brexit campaign though much of this is extreme and unreasonable. Her visits to India, China and the US are an attempt to show that Britain has other economic alternatives. But they have not been marked by success. New Delhi, for example, is largely keen on opening the door for greater immigration and Mode 4 service trade, neither of which her government can concede given their generally anti-migrant stance. However, given London’s weakened straits there is no reason why India should not continue to persevere with this demand. May’s only real accomplishment has been to put an end to the uncertainty over whether the UK was actually going to walk away.
First Published: Apr 03, 2017 18:00 IST