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August 5, 2016

Will Brexit impact Pakistan?


August 5, 2016

The British exit (Brexit) from European Union has profound implications for Pakistan due to the importance of Great Britain for Pakistan’s economy, trade and commerce as well as for Pakistani expatriates, diaspora in UK. Britain is the third largest home to Pakistani diaspora in the world after Saudi Arabia and UAE. Around 1.7 million people of Pakistani descent live in United Kingdom which is more than the combined population of Pakistani diaspora in rest of the Europe. Pakistani community in UK is relatively affluent and entrepreneurial having strong economic linkages with Pakistan; they send around $2.7 billion annually in remittances to Pakistan and are important source of FDI inflows into Pakistan.

We need to be fully concisions of the historical fact as to how the idea of European Union was conceived and translated into reality to put an end to frequent and bloody wars amongst European neighbours, which decimated their populace in the Second World War and earlier.

Originally, what the political framers of EU soon after WW2 had in mind was to unite the European Coal and Steel Community to rebuild the entire Europe leading to prosperity and peace amongst EU nations. Then six founding countries Belgium, France, Germany, Italy, Luxembourg and the Netherlands decided to socially and politically unite to build their human resource, economy and infrastructure. During 1950s most of east European countries were dominated by a cold war between east and west. Protests in Hungary against the Communist regime were put down by Soviet tanks in 1956. In 1957, the Treaty of Rome created the European Economic Community (EEC) or a ‘Common Market for those who foresaw economic prosperity and peace amongst the nations.

Denmark, Ireland and the United Kingdom joined EU on 1 January 1973, raising the number of member states to nine. The short, yet brutal, Arab-Israeli war of October 1973 resulted in an energy crisis and economic problems in Europe. The last right-wing dictatorships in Europe came to an end with the overthrow of the Salazar regime in Portugal in 1974 and the death of General Franco of Spain in 1975. The EU regional policy started to transfer huge sums of money to create jobs and infrastructure in poorer areas. The European Parliament increased its influence in EU affairs and in 1979 all citizens were given, for the first time, right to elect their members directly. With the social awakening for fight against pollution during 1970s, the EU adopted laws to protect the environment, introducing the notion of ‘the polluter pays’ for the first time.

With the adoption of a unified currency regime within the EU, the euro became a symbol of unified economy that opened up trade and commerce by expanding the EU industry through sharing of the outcome of science and technology. EU leadership introduced the concept of soft borders amongst the member’s countries that enabled exchange of skilled human resource to the benefit of entire continent.

EU countries began to work much more closely together to fight crime and the political divisions between east and west Europe were finally declared healed when no fewer than 10 new countries joined the EU in 2004, followed by Bulgaria and Romania in 2007. As the financial crisis hit the global economy in September 2008, the Treaty of Lisbon was ratified by all EU countries before entering into force in 2009. It provided the EU with modern institutions and more efficient working methods.

For the UK to leave the EU it has to invoke an agreement called Article 50 of the Lisbon Treaty. Newly elected British Prime Minister Theresa May needs to decide when to invoke this legal instrument that will then set in motion the formal legal process of withdrawing from the EU, and give the UK two years to negotiate its withdrawal. The article has only been in force since late 2009 and it hasn't been tested yet, so no one really knows how the Brexit process will work, according to BBC legal correspondent Clive Coleman. EU law still stands in the UK until it ceases being a member - and that process could take some time. The UK will continue to abide by EU treaties and laws, but not take part in any decision-making, as it negotiates a withdrawal agreement and the terms of its relationship with the now 27 nation bloc. A lot depends on the kind of deal the UK agrees with the EU after exit. If it remains within the single market, it would almost certainly retain free movement rights, allowing UK citizens to work in the EU and vice versa. If the government opted to impose work permit restrictions, as UKIP wants, then other countries could reciprocate, meaning Britons would have to apply for visas to work.

BBC Europe editor Katya Adler says the UK would have to start from scratch with no rebate, and enter accession talks with the EU. Every member state would have to agree to the UK re-joining. But she says with elections looming elsewhere in Europe, other leaders might not be generous towards any UK demands. New members are required to adopt the euro as their currency, once they meet the relevant criteria, although the UK could try to negotiate an opt-out. The UK Independence Party, which won the last European elections, and received nearly four million votes - 13% of those cast - in May's general election, campaigned for Britain's exit from the EU. About half of Conservative MPs, including five cabinet ministers, several Labour MPs and the DUP were also in favour of leaving. They said Britain was being held back by the EU, which they said imposed too many rules on business and charged billions of pounds a year in membership fees for little in return. They also wanted Britain to take back full control of its borders and reduce the number of people coming here to live and/or work.

The former Prime Minister David Cameron wanted Britain to stay in the EU. He sought an agreement with other European Union leaders to change the terms of Britain's membership. He said the deal would give Britain "special" status and help sort out some of the things British people said they didn't like about the EU, like high levels of immigration - but critics said the deal would make little difference.

Impact on PAKISTAN:

In European Union, UK is Pakistan’s largest trading partner. Nearly a quarter of Pakistan's exports to EU (textiles, garments, leather goods, sports goods and food items) land in UK; besides consumption in UK, a significant portion is further supplied to Continental Europe.

Brexit might not have a profound impact on bilateral Pak-UK political relations but would have significant import based implications for Pakistan at multilateral fora. In the words of Senator Pervaiz Rashid, Minster of Information and Broadcasting: “at the EU institutions where Pakistan has been traditionally reliant on British support, Pakistani diplomacy would be challenged to proactively befriend non-British influential member states where Pakistani diaspora has insignificant electoral influence over MPs”. He genuinely considers that Pakistan will have to refashion its public diplomacy to woo other EU countries for exploring better economic markets and political opportunities to influence decision making process in the big EU countries.

It is believed that a UK, free from the EU, will be keen to improve its trade relationships with Commonwealth partners. IMF forecasts that by 2019, Commonwealth will overtake the EU in world's economic output. At Commonwealth, Pakistan will be outweighed by India due to the latter's large market size and economic importance. This political factor alone will need to be addressed by Pakistan’s foreign office in its revised policy making decisions while strategising Pakistan’s public diplomacy overtures towards Britain and the EU separately.

Pakistan's GSP Plus status could face multiple challenges. Pakistan would lose its strongest advocate at EU institutions to keep the GSP Plus status intact during periodic reviews. A fresh lobbying effort would be required to secure such unilateral concessions from the divorced UK, which may or may not be forthcoming. Once out of EU, UK will have to negotiate market access afresh with all countries of the world. Pakistan might not feature high on UK's priority list to commit its negotiating resources during the coming years.

To conclude, the world is cognizant of the enormity of challenges which the Brexit is going to generate. Pakistan cannot afford to apathetically sleep-walk into the crisis. A proactive approach is required to identify the nature of challenges and develop a dynamic response mechanism.

The writer holds higher studies degree in Project Studies. [email protected]

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