What has happened?
A referendum – a vote in which everyone of voting age can take part was held to decide whether the UK should leave or remain in the European Union and Leave won. <what is the difference b/s referendum and plebiscite?>
What is this UK, Britain, Ireland, Republic? What’s going on? Is Scotland a separate country?
Without going into the history-
- Full name is United Kingdom of Great Britain and Northern Ireland i.e Great Britain plus N.I.
- Great Britain – It contains 3 somewhat autonomous regions – England, Wales and Scotland
- Republic of Ireland separated from northern Ireland and UK in 1920s and is a separate country now <Belfast is capital of which Ireland and what is the capital of Wales and Scotland?>
But why this referendum
Conservative govt led by David Cameron had promised this referendum if they won the general election and as they won this referendum was held
What is European Union?
- It is an economic and political partnership involving 28 European countries <latest country to join EU?>
- It is a single market (common market) allowing goods and people to move around, basically as if the member states were one country. So basically any French citizen can travel to Germany and work there without visa.
- You can visit whole of EU with a single visa <no internal borders>
I had to take a separate visa to travel to London. How about that?
- So this common visa thing is applicable only to countries that are party to Schengen area <where is Schengen btw?>
- There are 26 Schengen countries (22 EU + 4 Non EU)
- 4 Non EU – Iceland, Norway, Switzerland, Liechtenstein <btw Liechtenstein is a double land locked country. Look in the map and find out which other country is doubly landlocked, There’s only one other>
- 6 EU not party – Bulgaria, Croatia, Cyprus, Ireland, Romania and the UK.
So as UK is not party to Schengen, you had to take Visa.
What about euro? I had to use pound in UK. Isn’t the Euro currency of EU?
- Euro currency is used by Eurozone countries. Eurozone is subset of EU. Only 19 EU countries are part of it. Obviously UK is not party to it.
- Euro is also used by 4 other European countries – Vatican, Andorra, San Marino, Monaco
Any history ? How did EU begin?
- It grew out of a desire for peace in a war-torn and divided continent. It started in 1951 with European Coal and steel community of 6 countries by treaty of Paris <France, Germany, Italy, the Netherlands, Belgium and Luxembourg>
- 1957 – European Economic Community (EEC) or common market was formed by treaty of Rome,
- 1973 – Britain, Denmark and Ireland joins the EEC <total 9 countries now>
- 1992 – Maastricht treaty was signed and comes into force in 1993. Formal beginning of EU
- 2002 – Euro replaces national currency in eurozone
What does EU do?
- Eu oversees co-operation among its members in diverse areas, including trade, the environment, transport and employment
- Common security and foreign policy
- coordinates policy on asylum, immigration, drugs and terrorism <that’s why so much concern over migration fro middles east and north Africa>
- EU policies on workers’ rights and other social issues <UK not part of this social chapter either>
- Promotes human rights, give aid to agriculture, fisheries etc
Okay, sounds great but how does it all work?
EU works through 4 main institutions
- European Commission – All powerful bureaucracy of member states <each country, one representative>, propose laws, implement laws, job is to promote European interest, not the interest of member countries, HQ in Brussels <where is Brussels>
- European Council – It’s a political body, leaders meet here
- European Parliament – Directly elected MPs <MEPs> vote on almost all the issues now days. It sits in Strasbourg <where is Strasbourg?>
- European court of rights – name explains everything <where is its headquarters?
Why do Brits want to leave EU?
- Sovereignty – that Britain ceded its sovereignty, right to pass its own laws to bureaucrats sitting in Brussels <Doesn’t India lose its sovereignty by being member of UN?>
- Regulations – That Brussels imposed too many regulations that hurt British business interest
- Money – Billions of pounds of entry fee with very little to show in return <Britain don’t have many farmers to get agriculture subsidies>
- Open borders/ migration – even though Britain is not part Schengen, workers from rest of the EU can come their freely and work there. Large numbers from eastern europe came just to claim British benefits, social security and all <so called welfare tourism>
- Ever Closer Union – detested the idea of United states of Europe <closer political union, confederation sort of thing>
Why did Cameron want UK to stay in EU?
- Single market – much easier to sell things while being member of single market
- Britain’s status in the world is enhanced as part of EU
How is single market different from free trade area?
- In FTA there are no tariffs except on some negotiated goods and services but in single market, even labour mobility is free
- In Single market, you impose common tariffs on all imports, it;s like a single country for the purpose of trade and commerce
- There are common standards etc. <environment, labour, quality etc.>
What is European free trade association (EFTA)?
- It is FTA of 4 European countries -Iceland, Norway, Switzerland, Liechtenstein <do you recall they are all part of Schengen>
- All of them have signed FTA with EU. Britain can sign similar FTA with EU now
What happens now?
- Britain would negotiate its exit <under Lisbon treaty>, But the fear is of contagion. Eurosceptic parties of other countries would also press for similar referendums.
- Plus as Scotland has voted overwhelmingly in favour of stay (68%), there would be fresh demand for referendum on Scottish independence. Similarly is the case with northern Ireland.
Impact on India
- No direct impact but expect turbulence in stock and forex market. Panicky investors may withdraw their hot money out of India
- On positive side, India can sign FTA with Britain