India and the United Kingdom are embroiled in crucial trade discussions, negotiating the terms of an impending India-UK Free Trade Agreement (FTA). This agreement will not only facilitate better trade between the two nations but also shape India’s future trade agreements, including those with the European Union (EU) and the European Free Trade Association (EFTA) member countries such as Iceland, Liechtenstein, Norway, and Switzerland.
Contentious Issues Encountered in the FTA Discussions
Several issues are proving difficult to resolve in the discussions. These include contentious points relating to Intellectual Property Rights (IPR), Global Value Chains (GVC), digital trade, Rules of Origin (ROO), labour, and environmental commitments. The primary concern for India is to protect its interests without bowing down to unfair demands. For example, concerning IPR issues, India is adamant about ensuring the continued production of life-saving generics.
Background of the India-UK Free Trade Agreement
The process of formal negotiations for the India-UK Free Trade Agreement kicked off in 2022. Until the agreement is sealed, both countries are contemplating an interim free trade area that could reduce tariffs on most items. They agreed to exclude “sensitive issues” from the talks and instead focus on areas where there is greater complementarity.
An Explanation of a Free Trade Agreement
A Free Trade Agreement (FTA) is a pact formed between two or more countries to decrease barriers to imports and exports among them. It enables goods and services to be traded across international borders with minimal government tariffs, quotas, subsidies, or restrictions to hinder their exchange.
The History of India-UK Trade Relations
The trade relationship between India and the UK thrived between 2007 and 2019, with the trade volume more than doubling during that period. As of 2022, India was the UK’s twelfth largest trading partner, contributing 2.0% to the UK’s total trade.
Anticipated Outcomes of the India-UK Free Trade Agreement
This FTA is anticipated to boost India’s exports in sectors such as textiles, leather goods, and footwear. It will also provide certainty, predictability, and transparency in trade relationships. For India, this agreement comes at a crucial time after its decision to opt out of the Regional Comprehensive Economic Partnership deal in November 2019. This has prompted a renewed interest in developing trade deals with key markets such as the US, the European Union, and the UK.
A Strategic Advantage
The UK is a permanent member of the UN Security Council, and this deepening trade relationship could gain India support on global issues, including its claims for a permanent seat on the Security Council. Strengthening bonds with the UK would also be strategically advantageous amidst India’s ongoing standoff with China in the Ladakh sector of the Line of Actual Control (LAC).
The Future of India-UK Trade Relations
The ongoing negotiations for the India-UK Free Trade Agreement hold high importance for India. The cautious approach and measured pace of negotiations reflect India’s commitment to securing a comprehensive deal while protecting its interests. The outcome of these negotiations will shape India’s future trade agreements, thereby making it a matter of careful consideration and strategic decision-making.