UK-India Free Trade Agreement

In News

• Recently, India and the UK concluded the fifth round of talks for the India-UK Free Trade Agreement (FTA).

About

• For this round of negotiations, technical experts from both sides came together for detailed draft treaty text discussions in 85 separate sessions covering 15 policy areas. 
• Indian and UK officials will continue to work intensively throughout the summer towards the target to conclude the majority of talks on a comprehensive and balanced Free Trade Agreement by the end of October 2022.

Image Courtesy: India Global 

Free Trade Agreement

• A free trade agreement is a pact between two or more nations to reduce barriers to imports and exports among them. 
• Under a free trade policy, goods and services can be bought and sold across international borders with little or no government tariffs, quotas, subsidies, or prohibitions to inhibit their exchange.
• The concept of free trade is the opposite of trade protectionism or economic isolationism.
• How a Free Trade Agreement Works?
  • Free-trade policy may simply be the absence of any trade restrictions.
  • A government doesn’t need to take specific action to promote free trade. This hands-off stance is referred to as “laissez-faire trade” or trade liberalization.
  • Governments with free-trade policies or agreements in place do not necessarily abandon all control of imports and exports or eliminate all protectionist policies. 
  • In modern international trade, few free trade agreements (FTAs) result in completely free trade.
  • In the U.S. and the EU, Free trade agreements do not come without regulations and oversight.

India-UK Relations

• Political:
  • UK-India relationship is rooted in India’s colonial history with the British. 
  • The bilateral relationship was upgraded to a strategic partnership in 2004.
  • The UK supports India’s proposal for permanent membership of the UNSC and is also an important interlocutor for India on global platforms. 
• Economic Engagements:
  • Trade: 
    • UK is among India’s major trading partners and as per trade statistics of MoC&I, India’s trade with the UK in 2017-2018 was US $14.497 billion.
  • Investment: 
    • UK is the 4th largest inward investor in India, after Mauritius, Singapore and Japan with a cumulative equity investment of US $26.09 billion (April 2000-June 2018), accounting for around 7% of all foreign direct investment into India. 
    • India continued to be the third largest investor in the UK and emerged as the second largest international job creator with Indian companies having created over 110,000 jobs in the UK. 
• Defence:
  • In 2015, the two countries agreed to elevate their Defence relationship by establishing capability partnerships in strategic areas. 
  • The institutionalised dialogue to discuss defence cooperation viz. Defence Consultative Group Meeting, is held annually at Defence Secretary level. 
  • Ajeya Warrior (army-to-army biennial exercise), the Konakan (joint navy-to-navy annual exercise) and the Indradhanush (joint air-to-air exercise) happen between India and UK.
• Education:
  • Over the last 10 years, the relationship has grown substantially with the introduction of bilateral mechanisms such as the India-UK Education Forum, UK-India Education and Research Initiative (UKIERI), Joint Working Group on Education, Newton-Bhabha Fund and Scholarship schemes. 
• Science and Technology:
  • Joint investment in UK-India research has grown from less than £1 million in 2008 to over £200 million. 
  • A India-UK Clean Energy R&D Centre with a focus on solar energy storage and a collaborative R&D programme in energy efficient building materials were announced. 
  • New research partnerships worth £80 million including a new Joint Strategic group on Antimicrobial Resistance (AMR) with a joint investment of up to £13 million have also been established. 
• Cultural Linkages: 
  • Cultural linkages between India and UK are deep and extensive, arising out of shared history between the two countries. 
  • There has been a gradual mainstreaming of Indian culture and absorption of Indian cuisine, cinema, languages, religion, philosophy, performing arts, etc. 
  • 2017 was celebrated as the India-UK year of Culture to mark the 70th anniversary of Indian independence. 
• Indian Diaspora:
  • The Indian Diaspora in the UK is one of the largest ethnic minority communities in the country.
  • As per the 2011 census, approximately 1.5 million people of Indian origin live in the UK equating to almost 1.8 percent of the population and contribute 6% of the country’s GDP. 
• Roadmap 2030:
  • The “Roadmap 2030” for India-UK future relations was launched during India-UK Virtual Summit for-
    • revitalized and dynamic connections between people; 
    • re-energised trade, investment and technological collaboration that improves the lives and livelihoods of the citizens; 
    • enhanced defence and security cooperation that brings a more secure Indian Ocean Region and Indo-Pacific and 
    • India-UK leadership in climate, clean energy and health that acts as a global force for good.

Importance of India-UK Relation

• Regional balance: 
  • Britain is tilting to the Indo-Pacific, where India is a natural ally. India, which is looking at a neighbourhood that has been transformed by the rise of China, needs as wide a coalition as possible to restore regional balance.
• Trade, Investment & Jobs: 
  • India-UK trade was worth £23 billion in 2019, and both countries want to double the figure by 2030. Almost half a million jobs are supported across India and the UK through investments in each other’s economies.
• Market for British goods: 
  • A free trade deal of the UK with India – the world’s largest democracy, fifth biggest economy, a nation of 1.4 billion people will create a huge market for British goods like whisky, cars and services.
• Benefits for Businesses:
  •  A trade deal with India will break down barriers and make it easier for British businesses to secure more investments, higher wages and lower prices in Britain.
• Better productivity:
  • The FTA with the UK is expected to provide certainty, predictability and transparency and will create a more liberal, facilitative and competitive services regime.
• Export:
  • FTA negotiations with the UK are expected to increase our exports in Leather, Textile, Jewellery and processed Agri products. 
  • India is also expected to register a quantum jump in the export of Marine Products through the recognition of 56 marine units of India.
• Skilled Labour Access: 
  • India will be looking for concessions on Indian skilled labour accessing UK markets.
• Defence Strengths: 
  • Britain could also contribute to the strengthening of India’s domestic defence industrial base. The two sides could also expand India’s regional reach through sharing of logistical facilities.
• Democracy and diaspora:
  • Both India and the UK are vibrant democracies, with a partnership built on shared history and rich culture. 
  • The diverse Indian diaspora in the UK, who act as a “Living Bridge”, adds further dynamism to the relations between the two countries.

Concerns

• Bitter Past: 
  • The bitter legacies of the Partition, anti-colonial resentment and Britain’s prejudices and its perceived tilt to Pakistan have long complicated the engagement between India and the UK.
• Political Negativity: 
  • While there is no way of fully separating South Asian and British domestic politics, India’s problems have been accentuated by the British Labour Party’s growing political negativity towards India.
• WTO related issues: 
  • Interim FTA that do not convert into full FTAs can also face challenges from other countries at the World Trade Organisation(WTO) because the latter only permits for the preferential treatment between countries which have bilateral agreements between them.
• Domestic Politics: 
  • The large South Asian diaspora in the UK transmits the internal and intra-regional conflicts in the subcontinent into Britain’s domestic politics.
• Engagement with EU: 
  • The UK needs to sort out its own internal deliberations on the future of its trajectory with the EU. 

Way Ahead

• India and the U.K. should consider concluding the FTA at the earliest.
• The negotiations should reflect the shared ambition to secure a comprehensive deal to boost trade between both nations.

Source: PIB