European Union:

European Union is the world’s most integrated organization of modern states. It is economically,
politically and socially integrated. It is an international organization comprising 28 European
countries; 19 of its 28 members have adopted Euro as their official currency, while the rest of the
countries use their own currency for trading purposes. The EU was created by the Maastricht
Treaty, which entered into force on November 1, 1993. The EU was awarded the Nobel Prize for
Peace in 2012, in recognition of the organization’s efforts to promote peace and democracy in
Europe. The EU grew out of a desire to form a single European political and economic block to
end the centuries of warfare among European countries that culminated with World War II
and decimated much of the continent. The idea was that economic interdependence and political
integration would prevent European countries from wanting to go to war with each other. It was
established to ensure the so-called four freedoms: the movement of goods, services, people, and
money.

Economic integration:
Every member nation is bound to make financial contributions to EU. In 2017, Germany was the
largest contributor to the EU, accounting for 21.11% of the EU budget. France contributed
16.44%, Italy contributed 13.64% and the United Kingdom contributed 13.05% while Spain
contributed 8.51% to the EU budget. The larger the country's economy, the more it pays and vice
versa. Every country contributes as per the quota allotted to it and to spend this amount is the
prerogative of the finance minister of EU. The money paid into the EU budget by member
countries helps fund programs and projects in all EU countries like building roads, subsidizing
researchers, helping troubled economies and protecting the environment.
The EU is divided into two zones – Euro zone and non-Euro zone, based on whether they use
euro as their official currency or not. Out of the 28 member countries, 19 use Euro and thus lie in
the Euro zone whereas 9 use non-Euro currencies and thus lie in the non-Euro zone. The Euro is
the second largest reserve currency as well as the second most traded currency in the world after
the United States dollar.
The European Central Bank (ECB) has immense monetary powers. The printing of Euro is
primarily decided and overseen by the ECB. The national central banks of all European countries
are bound to follow the instructions and conditions of the ECB.
Another example of economic union is the common bailout package and loans with low interest
rates. The job of bailing out troubled economies of EU is done by the European Financial
Stability Facility (EFSF) which is a branch of ECB. In 2011, the EFSF gave a bailout package of
190 billion Euros to Greece. In 2017, it gave loans worth 86 billion Euros to Greece and in 2018,
it approved another 7 billion Euros for Greece to help its weak economy. Similarly, it also
provided rescue funds to Portugal, Ireland, Italy, Cyprus and Spain (PIICS).
Likewise, another important feature of EU’s economic integration is common job market. Every
member nation is bound to provide jobs to EU nationals in its national job quota. The free
movement of workers is a fundamental right guaranteed by the EU. Therefore, EU citizens are
entitled to look for a job in another EU country and enjoy equal employment opportunities as
well as other social and tax advantages. In 2018, there were an estimated 2.27 million EU
nationals working in the UK and an estimated 29.10 million UK nationals working in other EU
countries.
Europe is commonly called borderless Europe in two contexts: free trade and free mobility. The
EU allows free movement of goods between member states without any extra costs or
quantitative restrictions. The EU has taken many measures to make it easier for countries to trade
with each other such as removal of trade barriers, reduction of business costs, harmonizing
standards and reduced bureaucracy and paperwork. In addition, there is zero percent tariff on
many goods traded within the Euro zone while the maximum tariff on goods traded within non-
Euro zone is 4%.
The European Commission also proposed the integration of the Euro zone’s 6,000 financial
institutions into a single banking union, with oversight provided by the ECB. The system would
allow a centralized supervision of banks’ capital reserves, as well as the restructuring of
imperiled banks without any regard to national boundaries.

Political integration:
The EU is similar to a confederation, where many policy areas are federalized; however the EU
does not, unlike most states, control foreign policy, defense policy and taxation policies. These
areas are primarily under the control of the EU's member states. The primary institutions of the
European Union are the European Commission, the European Council, the Council of the
European Union and the European Parliament.
European Commission:
The European Commission is responsible for proposing legislation, implementing decisions,
upholding the EU treaties and managing the day-to-day business of the EU. The European
Commission is composed of twenty-eight members, one from each state, but is designed to be
independent of national interests. The Commission is led by a President who is nominated by the
Council of the European Union and approved by the Parliament. The remaining twenty-seven
Commissioners are nominated by member-states, in consultation with the President.
European Council:
The European Council comprises the heads of state or government of the EU member states. It
has no legislative powers, it is a strategic and crisis-solving body that provides the EU with
general political directions and priorities. It was formalized as an institution in 2009 after the
Treaty of Lisbon came into force.
Council of the European Union:
The council of the European Union together with the European Parliament serve to amend,
approve or disapprove the proposals of the European Commission, which has the sole power to
propose laws. Its presidency rotates between the states every six months. The Council is
composed of twenty-eight national ministers, one from each state. The Council meets in various
forms depending upon the topic. For example, if agriculture is being discussed, the Council will
be composed of each national minister for agriculture. Its attendees express and represent the
position of their governments and are accountable to them.
European Parliament:
The European Parliament is the only institution of the EU that is directly elected by EU citizens
aged 18 or older. The Parliament is composed of 751 members who are elected every five years
by universal suffrage. Although the European Parliament has legislative powers, it does not have
the power to initiate legislation which is the sole prerogative of the European Commission.
Therefore, while the Parliament can amend and reject legislation, it needs the Commission to
draft a bill before anything can become law.

Social and legal integration:

Europe is borderless. The citizens of any European country can freely move across Europe
without any visa. EU legislation is binding for EU member states. The governments of member
states must incorporate EU laws into their national legislation.

BREXIT:
Brexit is the withdrawal of United Kingdom from European Union. If a country decides to exit
the EU, it wouldn’t be decided by the government through an executive order, rather the
government would announce a referendum and public will decide through a referendum whether
or not they want to exit the EU. Article 50 of the Treaty of Lisbon outlines a plan for any country
that wishes to exit the EU. The then Prime Minister of UK, David Cameron, invoked Article 50
of the Treaty of Lisbon and held a referendum on 23 June 2016 to ascertain public opinion
regarding Brexit. 51.9 % of UK citizens supported Brexit. Once a country conducts referendum,
it makes a case with EU. It takes two years to completely withdraw from EU. During this time,
negotiations are held between EU officials and the representatives of the country opting for exit.
UK registered a case with EU on March 29, 2017, starting a two-year process which was due to
conclude on March 29, 2019. However, due to fierce opposition from majority of the members of
the House of Commons, UK Prime Minister Theresa May failed thrice to pass the Brexit deal bill
from the House of Commons. Subsequently, the deadline was extended to October 31, 2019. The
Brexit crisis has plunged UK into the biggest political crisis since World War II. The future of
UK’s relationship with EU falls into three categories: exiting the EU with a negotiated deal (Soft
Brexit), exiting the EU without a deal (Hard Brexit) and remaining in the EU with no Brexit at
all.
What does soft Brexit mean?
A soft Brexit would leave the UK closely aligned with the EU. The objective is to minimize the
disruption to trade, supply chains and to business in general that would be created by diverging
from the EU’s regulations and standards, thereby reducing the cost of Brexit. A soft Brexit
means staying within both the EU’s single market like Norway and its customs union like
Turkey. A soft Brexit will bound UK by EU rules and tariffs even though Britain will lose any
say in making them. However, the EU has demanded that access to the single market can only be
granted if all its principles, including the free movement of people, are respected. On the other
hand, many UK politicians aren’t willing to compromise on immigration, claiming that such a
deal would betray the wishes of the British public.
What does hard Brexit mean?
A hard Brexit rejects the whole idea of close alignment with the EU. The goal is to escape all EU
regulations and tariffs, so as to be able to draw up trade rules and customs arrangements of
Britain’s own choosing. A hard Brexit would take the UK completely out of all EU agreements
including leaving both the EU’s single market and the customs union. The problem is that
drawing up its own independent trade agreements will take a lot of time so in the meanwhile, UK
will have no option but to conduct its trade under the less favorable rules of World Trade
Organization.

Reasons for withdrawal from European Union:

1) Net budgetary contribution:
The UK pays more into the EU budget than it gets back. In 2017, UK paid £13 billion to
the EU budget, but EU spending on the UK was forecast to be £4 billion. So the UK paid £9
billion more than it got back from EU. The reason behind this is that the EU budget doesn't aim
to redistribute wealth, but rather focuses on the needs of all European countries as a whole.
Exponents of Brexit argue that while the UK pays billions of pounds every year to stay a
member of EU, its own National Health and Social Care system is in crisis and the money paid
to EU could be spent on taking the system out of crisis.
2) Immigration:
Mass migration from other European countries into the UK was a key element of the Brexit
campaign. Migration rose from 48,000 to 268,000 per annum between 1997 and 2004 and
continued to rise, reaching an all-time high of 300,000 in the years immediately before the
referendum. The Labour Party defended immigration as economically and socially beneficial
while the Conservative Party promised voters that it would reduce net migration from the
hundreds of thousands to the tens of thousands. This was against EU treaty rights which
guaranteed the free movement of EU nationals, therefore a tight immigration policy was simply
impossible so long as the UK remained in the EU. The advocates of British withdrawal from the
EU said that one of the main reason for wanting to leave the European Union was that it offered
the best chance for UK to regain control over immigration and its own borders. The share of
voters naming immigration as one of the nation’s most important issues increased from under 3%
at the start of 1997 to around 30% in 2004 and then to over 40% toward the end of 2007.
Anxieties about the perceived effects of migration on public services, welfare and national
identity were further cultivated by the press and the UK Independence Party or UKIP.
3) Encroachment on legal sovereignty of UK:
The argument that Britain has lost its legal sovereignty by being in the EU is at the heart of the
case for Brexit. The EU's powers to make and enforce laws have a bearing on the UK's legal
sovereignty. The legal sovereignty of UK is the power of the parliament to enact laws.
Supporters of Brexit argue that if the parliament is sovereign, then why UK follow the laws of
EU and not those of its own parliament. They believe that too much decision making powers
have been taken away from the UK government and the EU has infiltrated just about every area
of public policy in the UK, ranging from agriculture to transport and from health care to defense.
49% of the voters who supported Brexit in the referendum said that decisions concerning the UK
should be taken in the UK not in the EU.
4) Age of voters:
Senior citizens played a key role in the withdrawal of UK from the EU. The results of the June
23 referendum revealed that 64% of eligible voters aged 18–24 voted whereas 90% of eligible
individuals over 65 voted. A higher turnout of older people and a lower turnout of younger
people affected the overall result of the referendum as the older generation was more in favour of
'leave' than 'remain'.
5) Lack of awareness on the part of voters:
Lack of awareness on the part of voters played a big role in the referendum output. Millions of
UK nationals were unaware of the pros and cons of being a member of the EU and didn’t know
how Brexit would affect the country’s economy. According to a report, 68% of voters with
a university degree voted 'remain', whereas 70% of voters with a low education level voted
'leave'. According to Google, more than 10 million Britons searched “What is European Union?”
on the day of referendum and searches for "what happens if we leave the EU" had more than
tripled.
6) Strong ‘Leave’ campaign and weak ‘Remain’ campaign:
The ‘Leave’ side cashed in on the sentiments of the public regarding immigration and the issue
of sovereignty and made good tactical decisions during the campaign, but part of its success
came from the failure of the ‘Remain’ campaign to provide convincing counter arguments. The
‘Remain’ side built their campaign around the notion that Brexit would weaken Britain but
offered little explanation as to how the UK would economically benefit from EU’s membership.
The ‘Leave’ side phrased alluring slogans such as ‘Take back control’ and used it relentlessly
while the ‘Remain’ side never coined an effective slogan. Such slogans proved instrumental in
shaping the public's opinion before the referendum.
Effects of BREXIT:
1) Border with Republic of Ireland issue:
Britain’s only land border with the EU is the border between Northern Ireland, which is part of
the UK, and Republic of Ireland, a member state of EU. As part of the EU, the borders of UK
have been open but the withdrawal of UK from EU will make the border between Northern
Ireland and Republic of Ireland a hard border with customs, barbed wires and passport checks.
Following Brexit, the border between Northern Ireland and the Republic of Ireland will become
a hard border that will definitely affect the Good Friday Agreement of 1998 that brought peace to
Northern Ireland.
2) Increased support for Scotland referendum:
Brexit would weaken the cohesion of the UK. After the June 23 referendum on leaving the
EU, the Scottish Parliament approved an independence referendum to secede from the UK
in order to join the EU after England and Wales voted to leave the EU. A similar referendum
on Scottish independence from the UK took place in 2014 but it failed because of the economic
benefits associated with remaining in the UK. However, Brexit would affect the UK’s economic
trajectory and result in a prolonged recession so if a new referendum on Scottish independence
from the UK takes place, there is a high probability that Scotland would opt for independence as
the economic benefits of remaining in the UK would lose its force.
3) Brexit would weaken European Union cohesion:
Other EU countries that, like the UK, have refused to adopt the Euro currency would feel
less comfortable about remaining in the EU if the UK were out of it. Countries like
Denmark, which has benefited from the UK’s past insistence that Euro zone members
should not impose their priorities on non-Euro countries, would feel particularly vulnerable.
Moreover, populist anti-EU movements across the continent would draw energy from the
example of the UK’s departure. One such example is Grexit, the withdrawal of Greece from
the EU. Although, previously Grexit didn’t receive a popular mandate but the withdrawal of
UK from the EU would legitimize the opinion of those in favour of Grexit.
4) Impact on European Union:
i) Effect on EU budget:
The withdrawal of the UK from the EU will leave a gap of about of €10 to €11 billion per year in
the EU budget. To help fill the gap, the EU has looked at reductions in regional spending of up to
30%, which will negatively affect some of the poorer member states who rely heavily on the
regional funds for support.
ii) Agencies located in UK to be relocated:
In 2017, UK was hosting the European Medicines Agency and the European Banking Authority.
Following Brexit, any EU agency cannot be located in UK and must be relocated somewhere
outside the EU. By November 2017, it was agreed that they would be relocated to Amsterdam
and Paris respectively.
 iii) European Parliament seats:
The UK is allotted 73 seats in the 751 seat European Parliament, which will become vacant
before the 2024 elections. The Parliament has proposed that 23 seats would be redistributed
between the remaining members according to a standard formula while the remaining 50 would
be reserved either for new members or additional MEPs would be elected across the EU on these
seats.
5) Academic implications for UK:
Brexit will have a negative impact on higher education in UK. It poses the following threats to
higher education: loss of research funding from EU sources, loss of students from other EU
member states, the impact on the ability of the sector to hire academic staff from EU member
states and the impact on the ability of UK students to study abroad.
6) Effect on immigration:
Brexit would give the UK more control over immigration. So long as it remains in the EU,
UK has no power to limit migration from other EU member states. Over the past decade the
UK’s population has grown dramatically as immigration from other EU countries has
continued at a very high rate. Migration rose from 48,000 to 268,000 per annum between 1997
and 2004 and continued to rise, reaching an all-time high of 300,000 in the years immediately
before the referendum. Housing, education and health service have all been put
under enormous pressure. UK is struggling to accommodate immigrants and seeks to
sharply reduce immigration from hundreds of thousands to just a few thousands.
7) Effect on trade:
A hard Brexit without a trade agreement would eliminate Britain's tariff-free trade status with the
other EU members. Tariffs would raise the cost of exports which would hurt British exporters as
their goods will become expensive in Europe and lose their competitive edge. More
importantly, outside the EU, UK would be able to drop tariffs on imports from the rest of
the world, which it is currently obliged to impose under the EU’s customs union.
8) London’s financial preeminence would be effected:
Brexit could have profound implications for the city of London. London has long served as
the financial springboard into the rest of Europe, largely because EU membership allows
banks and other financial institutions based in London to sell their services across the
continent without needing multiple regulatory approvals in each country. The fragmentation
of financial markets with banks and other financial institutions moving their operations out
of London into other countries in order to be closer to markets that they wish to serve,
would increase the cost of banking in both the UK and the rest of Europe. The UK will
remain an attractive center for finance even in the event of a Brexit, but it will lose its
dominant role in Europe – that’s for sure.
9) Security problems:
Concerns have been raised that Brexit might create security problems for the UK, particularly in
law enforcement and counterterrorism where the UK could use the EU’s databases on
individuals crossing the British border. The EU's information-sharing databases could be
instrumental in helping to foil terrorist plots. Under a hard Brexit scenario, the UK would lose
access to those information-sharing databases. Hence, the security of UK will not be as strong
and formidable compared to when it was a member of the EU before Brexit.
10) Disturbance in the job market:
The UK has to some degree acted as an employment shock absorber for the Euro zone and has
soaked up workers from other European countries. If the UK restricts the right to work on its
territory and no longer provides employment to EU nationals, then those workers will be looking
across the rest of the Union instead for work. However, if UK forces out EU nationals from its
job market then UK nationals who have acquired jobs across Europe will become jobless as well
and return home.

Backstop: A term referring to the UK government's proposal to keep Northern Ireland in some
aspects of the European Union Customs Union and of the European Single Market to prevent
a hard border with the Republic of Ireland, so as not to compromise the Good Friday Agreement
of 1998.

Divorce bill: As part of its withdrawal process, the EU has demanded that Britain pay £39
billion as the UK's share of commitments to the pensions of its workers and ongoing projects that
the UK had already committed to, but the UK has turned down the request and stated that it
would pay a significantly lower amount and not pay the amount demanded.

The impact of Brexit on Pakistan / What does Brexit mean for Pakistan?
Empirical studies suggest that Brexit will cause backdrop in economic growth both in the
medium and long-term, for the United Kingdom. The sterling pound lost 14% of its value
immediately following the Brexit referendum and according to a report published by the Bank of
England, UK’s economy could shrink by 8% after Brexit is implemented in 2020.
Pakistan, other than trade is also dependent on UK for the foreign direct investment it brings to
the country and funding the programs that it implements. A weakening UK facing an uncertain
future could mean a serious cut in the inflow of funds to Pakistan. Additionally, the health of the
European economy as well as the monetary value of the Euro and sterling pound are of crucial
importance to Pakistani exporters as well. A depreciated Euro and sterling pound means that
Pakistan’s exports will become expensive and thus less attractive in the UK, leading to a decline
in demand.
Pakistan needs to ensure that post-Brexit, it continues to have market access to the UK along the
lines of the current GSP+ which will probably not apply to the UK after Brexit. Exporters are
therefore worried if Pakistan will receive the same benefits after the UK’s vote to exit the EU.
The UK is the source of almost 20 percent of total remittances into Pakistan, while the rest of EU
accounts for 3 percent of total worker remittances. A depreciated pound means bad news for
migrants working abroad as well as for the Pakistani economy which heavily relies on foreign
remittances.
UK’s revival will be based on the individual Free Trade Agreements that it will sign with
countries outside the EU. Pakistan must take advantage of this and strike trade deals with the UK
which will allow it to increase its exports and maintain a positive trade balance.
Pakistan’s trade negotiations with the UK must involve opening up their markets and tying a
preferential visa regime because this type of access will benefit both countries. For Britain,
it will reduce the large generation gap which is a burden on their social services and
productivity. For Pakistan, such cooperation will increase the number of skilled expatriate
workers who would, in turn, increase its foreign exchange remittances.
So far, both countries enjoy favorable bilateral relations and there is a good chance that Pakistan
will be able to secure a promising trade agreement with a post-EU UK.
A few Facts:
The European Union is Pakistan’s largest export destination, with total exports worth $6.92
billion in 2017. Pakistan’s trade with the EU has been growing by 15-20% since the introduction
of the GSP+ status in 2014. Under the GSP+ scheme, Pakistan can export a great deal of goods
to the EU without tariffs. Yet, Pakistan is the forty-second largest trading partner of the EU,
being responsible for only 0.3% of EU exports and 0.4% of EU imports. Pakistan’s main trading
partner in the EU is the UK. In 2017, 23% of all the exports to EU were to the UK, worth $1.7
billion. In the aftermath of the UK’s decision to leave the EU, Pakistan’s stock market fell by
over 1400 points.

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UK refused to adopt Euro and maintained that it will use pound sterling as its national currency
because it has its own monetary policy defined by the Bank of England. Similarly, the UK
originally did not sign the EU Charter of Fundamental Rights due to its incompatibility with the
British labour law. It only signed the Charter after a special protocol was annexed stating that
the European Court of Justice cannot deem British laws inconsistent with the fundamental rights
specified in the Charter.