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India’s FTA negotiations with UK may hit a roadblock

Hindustan Times | 3 October 2023

India’s FTA negotiations with UK may hit a roadblock

By Rajeev Jayaswal, Rezaul H Laskar

New Delhi India’s negotiations with the UK for a trade deal could hit a roadblock as Indian industries are unwilling to offer import duty concessions to British manufacturers without London allowing easier mobility for Indian professionals, people with direct knowledge of the talks said on Monday.

If business mobility – or easier temporary movement of Indian professionals to the UK for business purposes – is taken out of the free trade agreement (FTA) negotiations, there won’t be any significant gain for India as most Indian goods (more than 60% of total merchandise) already have duty-free access to the UK market, and most of the other items attract a low tariff of 5%, the people said, requesting anonymity.

According to an information note of the UK’s Department for International Trade, the simple average tariff on goods imported into Britain from India is 4.2%, compared to 14.6% simple average tariff on the UK’s exports to India. “The majority of product lines (66%) on Indian exports to the UK face no tariffs. In comparison, only 3% of product lines on UK exports to India can enter tariff free,” it said. Besides, India has a very high import duty on automobiles (100%) and whisky (150%).

“While India is willing to reduce duties on automobiles and liquor imported from the UK – a main demand of London – it should be a calibrated reduction and only if Britain agrees to reciprocate in terms of business mobility,” one of the people said on condition of anonymity.

According to a second person, the 13th round of FTA negotiations between India and the UK is currently underway, with 19 out of 26 chapters having been resolved in the past 12 rounds.

“Both sides have taken a hard line on business mobility. New Delhi wants the UK to grant temporary visas to make it easier for Indian businesspersons to work in Britain, but London insists this matter falls within the remit of the home ministry, and hence is not part of trade negotiations,” the second person said.

India has made migration and mobility, especially for professionals and students, a key part of negotiations for new trade deals. It is understood that Britain offered India terms for mobility that are similar to those in the Australia-UK FTA, which came into effect in May 2023.

The FTA with Australia facilitated Australian professionals working in the UK through improved recognition of qualifications, licencing and registration processes. There was also a waiving of labour market testing for businesses wanting to employ an Australian in the UK as well as reduction of red tape.

Indian and British negotiators refused to discuss details of live negotiations. “We are negotiating a best deal which works for both countries and is mutually beneficial and balanced,” an Indian government official said.

A British High Commission spokesperson said: “A modern, forward-looking FTA can put us firmly on the path to our shared ambition of doubling India-UK trade by 2030. A trade deal could help Indian exporters gain access to the UK market, including India’s 48 million small and medium enterprises. The UK seeks a deal that slashes tariffs and red tape, giving Indian consumers and businesses easier access to the UK goods they already enjoy.”

After the two sides missed a deadline to finalise the FTA by Diwali last year, they have been reluctant to set a timeframe for concluding the negotiations. At a meeting on September 9, Prime Minister Narendra Modi and his British counterpart Rishi Sunak expressed hope that the remaining issues would be addressed at the earliest so that a balanced and forward-looking FTA can be concluded soon.

Industry experts said while the easier 19 chapters of the trade deal have been settled, vital issues are pending and need political will from both sides to be resolved.

“The UK is a country with a strong manufacturing base and it is natural for them to skew the trade talks towards products. However, for India, the services sector drives the economy, especially in terms of external trade. Hence, if India is to extract value from the FTA, it has to bring the services sector to the forefront of the dialogue. Services is driven by people and people need easy mobility to execute effectively,” said Vinod Giri, director general of the Confederation of Indian Alcoholic Beverage Companies (CIABC).

The Disposal Company CEO Bhagyashree Bhansali said: “Without a doubt, business mobility should be an integral part of the proposed FTA with the UK, and it’s imperative for the agreement to be truly beneficial for India.

“We must insist on streamlined visa processes, short-term business access and a level playing field. Anything less would not be in India’s best interest,” she added. The businesswoman operates India’s plastic neutrality platform, which is also a Commonwealth-sourced foreign direct investment (FDI) project in West Midlands, England, led by the West Midlands Growth Company.

 Fuente: Hindustan Times