The Implications of Brexit for India and China

In 2016, the United Kingdom voted in a referendum in favour of leaving the European Union (EU). The decision was viewed as a drastic blow to the EU and raised serious questions regarding the success of this regional organisation. While trying to understand why the majority of the British voted in favour of leaving the regional organisation, a few reasons become quite apparent- Firstly, the British firmly believed that the EU was a dysfunctional, stagnant economic entity which had failed to tackle issues since 2008. The counter argument for continuing as a member of the EU was that the exit would lead to an economic disaster. However remaining in a stagnant organization to solve problems seemed short-sighted and made little sense to opponents as well as to the voters. Secondly, the immigration crisis in Europe was considered as a detrimental phenomenon. Some EU leaders argued that providing for the refugees was a humanitarian obligation. But EU opponents saw immigration as a national issue, as it affected the internal life of the country, this further strengthened the “leave” vote. Thirdly, there was a belief amongst the British that the national sovereignty of Britain was at stake, the EU was perceived as an institution which has outlived its necessity. Therefore, mistrust of losing control over the decision making process triggered the “leave” vote.

There have also been predictions that Brexit may strengthen European regional integration, despite earlier concerns about disintegration, and much of the future success will depend on the relationship between Germany’s Angela Merkel and France’s Emmanuel Macron. Beyond the EU’s borders, there is also scope to consider how the UK’s exit from the EU will affect economics, politics and education in Asia, particularly how the relationships of the two Asian giants, China and India with Great Britain will change.

Economically, the UK’s decision to leave the EU has had positive consequences for India in a number of ways- firstly, with roughly 8% decline of the pound currency relative to the Indian rupee in the long run it would become cheaper for Indians to travel to the UK and pursue education in the UK. Secondly, Brexit has compelled London to seek a potent trade relationship with New Delhi. Britain and India have been so far unable to reach a free trade agreement, with negotiations having become mired in the convoluted financial politics of the 28-nation EU bloc. Now unencumbered by the rest of the EU, the UK will aim to boost trade ties with India and other similarly situated countries. Thirdly, Even though the stock market suffered a serious dip in the immediate aftermath of the exit vote, investments from Britain have been on an increase.  With regard to China, Brexit essentially was bad news because if the UK economy deteriorates due to the uncertainty and loss of access to the EU market following the formal exit of Britain, the value of Chinese investments in UK will be impaired. Even though the UK had $78.5 billion in bilateral trade with China in 2015, it is not among China’s top trading partners, and therefore Brexit could have an outsize impact on China’s future export performance.

Educationally, EU students who are currently eligible to pay EU rates at UK universities, their tuition could become more expensive if they are charged international student rates instead, or if they are not eligible for EU funding and loans. For international students from outside the EU, like Indian and Chinese, who are already required to pay international rates, tuition fees will not be directly affected by Brexit, although there are various factors that could affect the cost of study. If the pound remains weak against students’ home currency, these students ultimately will find themselves better off when they pay their tuition fees. However, if universities suffer financially after Brexit, whether because of a lack of EU funding or because fewer EU citizens decide to study at UK universities, they might decide to increase fees for international students to make up for the deficit. Any funding for Indian or Chinese students linked to the EU, like scholarships, aid and loans might decrease after Brexit, but this is dependent on agreements between the two countries which have to be worked out over the next few years.

India is a former British colony and enjoys particularly close trade and political and cultural ties to the United Kingdom. Some scholars predict that Brexit could lead to changes in UK immigration policies that would favour high-skilled workers from India. Separated from the rest of the Europe, the UK could also, at the same time, face a shortage of high-skilled EU workers if the movement of professionals from the continent is curbed. India could benefit from the possible shortfall. Several agreements have been initiated by the Chinese government to strengthen the political and economic relations between UK and China, following the former’s exit from the European Union. The Bi-Lateral Trade Agreement that was signed by the two countries ensures co-operation in scientific, technological, economic and political spheres in the future.

The European Union has created many jobs and provided for substantive employment over the years with the United Kingdom being the main entry point for countries like India and China.  The UK has been an integral part of the world economy. But due to Britain’s exit from the EU, there has been a serious drop in the number of people moving to the member states of the EU for jobs and higher studies. India, in particular has witnessed a serious drop in the number of students and employees moving to the UK for further career prospects, due to the atmosphere of uncertainty. These conditions have had a negative impact on the British economy. EU member countries like Germany and France have also been affected in areas like trade and business. Free trade areas and agreements have faltered because of Britain’s exit from the EU. Most countries have to now form new agreements and policies in order to export and import goods with the United Kingdom. Thus Brexit has had negative ramifications for many countries around the world but the greatest impact has been in terms of its connotations and consequences with regard to durability and efficacy of regional organizations in an era of globalization.

Dhruvi Shah and Megha Singh

17/03/2018