Brexit – Implications for Pakistan

European Union (EU)

The European Union (EU) was set up with the aim of ending the frequent and bloody wars between neighbors, which culminated in the Second World War. As of 1950, the European Coal and Steel Community begins to unite European countries economically and politically in order to secure lasting peace. The six founding countries are Belgium, France, Germany, Italy, Luxembourg and the Netherlands. In 1957, the Treaty of Rome creates the European Economic Community (EEC), or ‘Common Market’. Denmark, Ireland and the United Kingdom join the European Union on January 1, 1973 raising the number of member states to nine. The European Parliament increases its influence in EU affairs and in 1979 all citizens can, for the first time, elect their members directly.

Member Countries of EU

The European Union has 28 member countries:

Austria (1995), Belgium (1958), Bulgaria (2007), Croatia (2013), Cyprus (2004), Czech Republic (2004), Denmark (1973), Estonia (2004), Finland (1995), France (1958), Germany (1958), Greece (1981), Hungary (2004), Ireland (1973), Italy (1958), Latvia (2004), Lithuania (2004), Luxembourg (1958), Malta (2004), Netherlands (1958), Poland (2004), Portugal (1986), Romania (2007), Slovakia (2004), Slovenia (2004), Spain (1986), Sweden (1995), and United Kingdom (1973).

The Issue of UK’s Membership to EU in 2016

The United Kingdom’s European Union membership referendum took place on June 23, 2016. The result was ‘Brexit’ or Britain to exit EU. This was a political defeat for both the leading political parties of UK — the Conservative Party as well as the Labor party. This is also a vote against the globalization process and for a revival of nationalism or a nation state against a multicultural,multiethnic world.

Tabulation of the votes indicated 51.9% in support of leaving the European Union and 48.1% in favor of remaining in the EU. Voter turnout was high, 72.2%. Most of votes from Scotland, Ireland, Wales and London were in favor of remaining in EU, while the majority of votes in favor of leaving EU came from rest of England. Age was also the factor. Most of the older generation in England voted for leaving the EU while most of the younger generation voted for remaining in EU. Those that mattered the most (young people under the age of 16) who will bear the impact of this decision were not allowed to vote because they did not constitute registered voters as being under age.

According to a poll released on May 18, 2016 issues identified by voters as being very important to those that wanted UK to leave EU in deciding which way to vote were headed by the impact on Britain’s economy (33%), the number of immigrants coming to Britain (28%), and Britain’s ability to make its own laws (15%).

Issues that had been identified as important by voters who were likely to vote to remain in EU included the impact on Britain’s economy (40%), the number of immigrants coming into Britain (15%), Britain’s ability to trade with countries in the European Union (12%), the impact on British jobs (11%), the impact on the rights of British workers (10%), Britain’s relationship with other countries (7%), the impact on British national security (7%), the ability to travel in the European Union (7%), the ability of British citizens to live and work in other European countries (6%), and Britain’s status in the world (6%).

Process of Exit

Technically the process of UK’s exit from EU should take 2 years. David Cameron, the current Prime Minister of UK who resigned immediately after the exit vote would step down in October and the new pro-exit government would be installed that would apply to the EU parliament for an exit. The EU parliament would then vote for UK to exit. In the meantime negotiations would happen between all stakeholders for an amicable UK exit. The foreign ministers of the founder countries of EU on the other hand have in their collective meeting and press conference afterwards have asked UK to expedite the process of exit so that there are less ‘divorce’ pains to both sides. Also about 3 million people in UK have signed a petition to their parliament for a re-vote on the issue. Their petition would be taken up on Tuesday (June 28, 2016) by the UK parliament.

Also Scotland and Ireland have asked EU to consider these two units of UK to stay in EU as they have voted in favor of staying. Nationalists in Scotland also want another vote to exit UK and remain in EU. Nationalists in British Ireland want to go out of UK and join the Republic of Ireland.

Impact on Currency and Stock Markets

Britain’s exit from the European Union shocked global markets. The pound plunged to its lowest level since 1985 and investors fled risky assets and turned to the dollar and the yen. Britain’s vote to leave Europe sent global markets on a wild descentbut short-term fears would be overcome and UK’s exit from the EU would not hurt the stock markets significantly. However, what might hurt the global economies is the fear of recession in the USA and UK economies.

Impact of Brexit on Pakistan

The total Pakistan exports to Europe in 2016 were Rs. 341.0 billion of which Rs. 96.1 billion is for UK and the rest Rs. 245.0 is for other 6 leading nations of EU. While the exports of Pakistan for these 6 EU nations declined by an overall 13.6% in 2016, the exports of Pakistan for UK increased by 0.4%. There is also a large Pakistani community living in UK many of them are quite affluent and have political influence with the main UK political parties. All of which makes England a good and secure trading partner of Pakistan. A number of Pakistani students also study in UK universities.


What is important, if the process of England (and UK) leaving EU is completed, UK would want to revive the Commonwealth of Nations as an organization where she has a significant and traditional influence. Pakistan is also a member of the Commonwealth. In this case Pakistan’s opportunities for better trade and other economic relations become wider and better, provided Pakistan and its business community gets its house in order and start producing quality, value-added products that could be sold in the UK market.