Article:
India and the United Kingdom (UK) recently reaffirmed their mutual commitment to a Free Trade Agreement (FTA) at the 14th virtual Joint Economic and Trade Committee (JETCO) meeting. The forthcoming meeting is expected to take place around September 2020 in New Delhi to continue the discussions.
Key Points from the JETCO Meeting
The 14th virtual JETCO meeting was conducted with an aim to rejuvenate and bolster the long-standing trade and economic ties between India and the UK. Both countries agreed to an early harvest scheme or a limited trade agreement, which involved lowering tariffs on a select group of goods and relaxing rules for specific services. Cooperation in the health sector, especially in light of the COVID-19 pandemic, was also discussed. In the past, India and the UK had explored a preferential trading arrangement as part of a proposed India-European Union FTA. Generally, in an FTA, two trading partners drastically slash or eliminate import duties on the majority of goods they trade with each other.
Trade Relations Between India and the UK
India’s historical relations with the UK have been strong. Currently, the UK is among India’s most crucial trading partners and a key partner as an FDI investor behind Mauritius and Singapore. The UK also stands as one of the biggest investors in India among the G20 countries. Bilateral trade between India and the UK amounted to 15.5 billion USD in 2019-20, compared to 16.87 billion USD in 2018-19. Sectors of engagement between India and the UK include pharma, textiles, leather, industrial machinery, furniture, and toys. Additionally, India is relying on the UK for support with technology-based products like high-quality cameras, medical devices, and automobiles.
Significance of the Agreement
Following its decision to leave the European Union (EU) in June 2016, culminating in its exit in January 2020, the UK has been lobbying India for a bilateral trading arrangement. However, India resisted until the Brexit process concluded, keen to grasp the extent of the UK’s “special and preferential” access to the extensive European market outside of the EU’s single-market dynamics. The ongoing talks are expected to enhance the UK’s beneficial role as a trading partner for India.
Strategic Partnership and Trade Reviews
The UK is a permanent member of the UN Security Council and a strategic partner for India. Strengthening trade ties could help secure the UK’s support regarding global issues such as the standoff with China in the Ladakh sector of the Line of Actual Control (LAC) and India’s claim for a permanent seat at the UNSC. Furthermore, India could seek to reassess trade agreements, renegotiating tariffs on certain items and strengthening provisions governing country-of-origin certification.
The Role of the Joint Economic Trade Committee (JETCO)
JETCO provides a platform for UK companies to boost their links and establish new partnerships with Indian businesses and decision-makers. Government-to-government negotiations aimed at market liberalization and market access are facilitated through the JETCO process. The UK India Business Council plays a crucial part in incorporating the views of the UK business community into the JETCO process to facilitate favorable outcomes for UK companies. JETCO also aims to uncover opportunities for the UK’s leading institutional investors to invest in India.
Future Prospects
Being one of the fastest-growing large economies globally, an FTA with the UK has contributed significantly to increasing India’s trade volume. However, policymakers have observed that previously signed FTAs with the UK have not yielded the expected concrete benefits. Instead, they have negatively impacted India’s manufacturing sector due to lenient rules of origin. Hence, a comprehensive assessment of FTAs in terms of goods, services, and investment flows by all stakeholders is necessary.
Last Modified: February 8, 2024