For a couple of weeks now, news across the globe has been focussed on Brexit, the exit of Britain from the European Union (EU). This was not widely expected. Large sections, especially policymakers in Britain, favoured remaining as a member of the EU. And thus, the result came as a big jolt to the British government. Prime Minister Cameron has promptly offered his resignation from November 2016. The Conservative Party is busy trying to find a new leader who would safely navigate the government through turbulent times.
The EU was a wonderful creation of post-war Europe. Countries which have been fighting each other for centuries, viz. Britain- France, France- Germany, Germany-Britain and Britain-Italy, have found the futility of approaching issues from the political point of view. Six countries of Europe, Germany, France, Italy, Netherlands, Belgium and Luxembourg, formed a union of European countries agreeing to work on common policies for major economic issues like nuclear power, steel, coal... These agreed on tough, disciplined economic parameters that would address issues relating to production capacities that would be optimised on the basis of economics and viability. This, in fact, resulted in large scale phasing out of production capacities in the member countries, considered non-viable (eg. steel) in the interests of the common weal. This experiment worked well. Bu initially Britain decided to keep out of this.
The benefits of such a common market among European countries were visible in quick time. I have had occasion to look at the aircraft industry dominated by Boeing at Seattle in USA and by Airbus Industrie at Toulouse, France. Until the late 1960s, the entire long distance aircraft business was pocketed by the three large American aircraft manufacturers, Boeing, McDonnell Douglas and Lockheed. These, among them, had almost 100 per cent share of the global aircraft business. The countries in western Europe, devastated by the World War II, were not equal to the US in terms of their size, population or economic strengths. These countries, liberally aided by the US through the Marshall Plan, have been busy re-constructing their war-torn cities, factories and other infrastructure.
By the 1970s one could witness the European countries booming with world-class production facilities in several sectors. Germany and France took the lead in forming the Airbus Industrie to manufacture medium range aircraft to start with. These divided the manufacturing operations among themselves. They included Italy, Spain.. to supply components and parts. In quick time Airbus Industrie evolved as a significant manufacturer of aircraft that came in handy to meet the demand from the large number of European airline companies that were booming. In quick succession, Air France, Lufthansa, Swiss Air, Alitalia and later British Airways found merit in opting for the wide bodied, large capacity aircraft produced by Airbus Industrie. Its competitive pricing also attracted custom from dozens of other countries, including India. In quick time the booming airlines of Europe gave such large custom and market for Airbus, that the company which was formed as a unique entity as a grouping of economic interests of these European countries with liberal government support, emerged as a stiff competitor to Boeing and the other two American aircraft manufacturers.
It was just a question of time before the two smaller American manufacturers, Lockheed and McDonnell Douglas, turned sick and only Boeing could survive this competition. In fact, over the years, Airbus emerged as a comprehensive manufacturer of a vast range of aircraft that would meet the demand for long distance, medium distance and high capacity aircraft. In fact, A380 perfected by Airbus, has out-smarted the popular and safe large capacity Boeing 747 that dominated the field for decades.
The success of the six original promoters of EU goaded several other European nations to opt for membership which grew to 29 in course of time. These included Britain which remained outside the EU for long. Various parameters set forth by EU like the common currency, limits to fiscal deficit and other fiscal discipline ensured that all the member countries could adhere to fiscal discipline to protect the economy of the common market. Travel among member countries was seamless. A single Schengen visa enabled other nationals to travel to several EU countries. There was also free movement of goods and services with no tariff barriers among the member countries.
After a few visits to Europe, notably Germany, France and Britain, I was able to admire the benefits that flow out of such an approach of building a common market focusing on economic interests. In fact, IE has been suggesting this model for the SAARC countries for close to three decades. We have been pointing to the futility of approaching problem solving among the SAARC countries which have had a common history for centuries, through political measures. We suggested, more than 30 years ago, dividing the manufacture of goods in great demand by these countries among themselves: to start with, the manufacture of electrical equipment after noting the huge, rising demand for power equipment by all the developing countries. We suggested distributing the various aspects of manufacture of power equipment like turbines and generators, high pressure boilers, switch gear, transformers and dozens of smaller equipment for transmission and distribution among the SAARC countries. This would enable movement of technicians, engineers and other workmen from one SAARC country to another. The common economic interests of these and camaraderie built through inter-country travel would foster friendly relation among these, we reasoned. In course of time, we felt, such an arrangement could extend to other heavy and light industries.
We felt confident that these border disputes and several other irritants among SAARC countries could have found a solution by approaching the common market route. Sadly, this did not materialise. Unfortunately, Delhi and Rawalpindi continued to focus on political solutions which were hard to come by with the distrust built over decades.
Britain was sitting on the wall for long before opting to become a member of the EU in January 1973. But the country was never comfortable as being a member. It did not agree, for instance, to a common currency or for a Schengen-type visa. The distrust of sections of the British thwarted attempts at unification. There were also several problems encountered by several members, notably Turkey, Ireland, Italy and Spain due to their weak financial management. The working class, in particular of Britain, was not appreciative of the larger benefits that flowed out of EU. The voting against Britain’s membership of the EU was largely the result of this section and the disgruntled youth of Britain. But the voting margin was thin.
There was also the factor of large sections of the UK solidly voting to remain with the EU. These included Northern Ireland, the London Business District and Scotland. There is the prospect of Northern Ireland and Scotland opting to move out of UK and to remain with EU. The voting can thus act as a trigger for cession.
It is bound to take quite some time for Britain and the EU to adjust to the exit of Britain. There is also the fear that some of the other European countries may follow the British decision to move out of the EU. But the leaders - Germany, France and Netherlands – have been appreciative of the enormous benefits that have accrued to EU as a powerful economic entity to face competition from the US and Japan in the initial stages and now with China.
For Britain, in the coming months there will be a process of re-negotiating its relations with EU. But there is the prospect of Britain losing much of the strengths it had by remaining a member of the EU. There is also the fear of good section of commerce and financial business shifting from London to other European cities.