On November 6, Prime Minister Theresa May of the United Kingdom begins her visit to India. This is her first bilateral visit to a non-European country since she took office earlier this summer, following the Brexit referendum. Of course, May did travel to China for the G-20 summit in September and that trip included a bilateral meeting with President Xi Jinping. She was effusive in her conversation with her host and spoke of a “golden era” for Chinese-British relations and a “global strategic partnership”.
Separately, May is waiting for the United States to conclude its interminable election season. This has delayed the British prime minister’s travel to Washington, DC, to reaffirm the Atlantic alliance. That alliance is a keystone of British foreign policy and global identity, especially after the exit from the European Union.
India would be a third major power that May would want to engage as a political and economic partner. She has already spoken of the possibility of a free trade agreement (FTA) between India and the UK, as indeed have many in New Delhi. In theory, a marriage of British technology – in areas such as defence, precision engineering and even pharmaceuticals and biotech products – and Indian manufacturing, as part of the Narendra Modi government’s quest to “Make in India”, is workable.
India has been negotiating an FTA with the EU for years now. There are several reasons why that FTA has not been finalised and both parties must share blame. As the Canadians have found recently, negotiating with a multiple-stakeholder and multiple-sovereignty institution such as the EU is troublesome. Also, in the past few years, EU trade negotiators have been happy to blame India publicly while actually prioritising talks on the proposed Transatlantic Trade and Investment Partnership, the trade and investment agreement between the EU and the US.
All this has given rise to irrational exuberance about how swiftly an FTA between India and the UK could be achieved. After all India has found dealing with individual European countries easier than dealing with the EU as an entity, and in any case the UK is looking for the proverbial “quick wins” to establish it is not without friends in a post-Brexit world. This explains why May and before her a series of British ministers have flown to New Delhi.
However, a few caveats need to be entered here. The legal position is the UK cannot conclude an FTA with another country till it has completely withdrawn from the EU. The formal process for this will begin in March 2017, when Prime Minister May has committed to invoking Article 50 of the EU Lisbon Treaty. It will take a further two years for the UK to leave the EU.
No serious negotiations on an India-UK FTA can happen till then, if for no other reason because the status of economic engagement between a post-Brexit UK and the EU it would have left behind will not be clear. Without that baseline, India would not quite know what sort of UK economy it is negotiating with. As such, only informal talks and speculation about an FTA are likely in the near future.
What could the EU and UK relationship be like following Brexit? In theory, there are three options:
- The UK walks out of the EU’s political arrangement but maintains a relationship that allows it access to the common market and facilitates a free movement of peoples. This is unlikely, because the influx of European workers was one of the factors that motivated Brexit
- The EU allows the UK to cherry-pick, to have access to the common market but place restrictions on free movement of workers. For the moment, the EU is opposed to this
- There is a “hard Brexit”. The UK has no access to the European common market and free movement of workers to and fro the EU also ends
As is apparent, all three will have different implications for Indian trade negotiators. Indian companies, exporters and service providers will have different expectations from an India-UK FTA depending on which of the preceding possibilities actualises.
There are other sticking points as well. EU-India FTA negotiations ran into several obstacles – from market access for German automobile companies to lower tariffs on French wines. Among the problems at the Indian end was the EU’s reluctance to provide easier passage to Indian skilled labour – doctors, financial services professionals, technology workers and so on.
This final obstacle remains to be addressed even in FTA negotiations with the UK alone. After all, Indian skilled workers have been seeking access not so much to the rest of the EU as to the UK, where for reasons of language, cultural familiarity and a booming services sector they have sensed opportunities for professional advance.
Given this, even while discouraging migration across the board, can Prime Minister May carve out a special quota for Indian skilled workers and students who want to stay on after graduating from British universities? Is such a “carve out” politically feasible?
On her part, May will be pressing her Indian counterpart for greater market access for British service providers such as legal firms. To be fair, this is a reasonable demand. British legal firms in London or Singapore or elsewhere hire Indian law graduates and advise Indian corporate clients. However, they cannot set up offices in India as the local legal community is politically influential, turf conscious and unduly protectionist.
A compromise, whereby British legal services firms offer consultation in India but British lawyers don’t actually practise in Indian courts, is eminently realisable. India will have to make concessions of this nature if it wants the British government to be able to domestically sell the idea of a special relationship with Indian guest workers.
The confusion has not been helped by a variety of voices from within the British establishment – and government – throwing up a variety of possibilities for a post-Brexit UK. There are some who make the case that this is not a shunning of global economic currents but only a call for accommodation of genuine British voter concerns. They envisage greater de-regulation, in the financial markets in particular, in the medium term and speak of London emerging as a European Singapore: a shining city, free of the EU but still the financial capital of the world.
There are others who contend this is nonsense and offer a different approach. At a conference in Greece a few weeks after the Brexit vote, this writer heard an elderly British politician extol the decision to leave the EU and said it was time “to get the factories of northern England humming again”. That was obviously a case of hope and nostalgia overrunning economic logic, rationalism and reality.
Yet, nostalgia is a powerful force. In the aftermath of a summer of high emotion, British politicians are finding it difficult to just walk away from it. Nostalgia shaped the terms of the referendum. In a sense, the Brexit vote was not a rejection of globalisation – but a debate on the terms and models of globalisation. Globalisation is always acceptable if it leaves you and your country better off.
When the Brexit referendum took place, one million citizens of Commonwealth countries who are residents of the UK voted. This group, which included many Indians, is not to be confused with British citizens of Commonwealth origin. It has the right to vote in British elections under anachronistic rules going back to an imperial age.
On the other hand, three million citizens of other EU countries who were also resident in Britain where not allowed to vote. As such, more than de-globalisation, the Brexit referendum was a contest between older and newer templates of globalisation, the older template being forged by memory and nostalgia.
Similar imperatives are influencing the UK’s search for post-Brexit clubs, collectives and friends. In its quest for groups outside the EU within which it can locate its economic anxieties and ambitions, the British government is looking to the Commonwealth. With its global reach, the Commonwealth certainly has potential, much of it unrealised and not sufficiently imagined. Even so, it is important for the UK not to place India within its Commonwealth outreach but view it independently.
True, India is the paramount 21
st century economic power within the Commonwealth, but India would want that paramountcy acknowledged, recognised and addressed as a standalone. In short, the UK should not approach India through the Commonwealth but approach the Commonwealth through and in partnership with India. For the moment, it is important to address India’s own economic needs and see where these are compatible with the post-Brexit space available to British policy makers. Inevitably neither side will get the entirety of what it wants.
Sections of the UK’s foreign and trade policy establishment, and its big business corporations, are aware of these limiting factors and of the stepping back from maximalist positions, largely on skilled workers, this would necessitate from the British government. What is unclear is the political capital Prime Minister May has and is willing to risk in such an endeavour. In the coming week, her Indian interlocutors will be reading the signals.
The views expressed above belong to the author(s). ORF research and analyses now available on Telegram! Click here to access our curated content — blogs, longforms and interviews.
PREV
