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India-UK free trade: an unfinished business

The Geopolitics - 27 January 2023

India-UK free trade: an unfinished business
By Azhar Shaik

UKs need for FTA and India’s Consistent bargain further delayed the deal, amid political turmoil in UK.

ishi Sunak, the first non-white child of immigrants, a non-Christian, with an Indian wife has become Prime Minister of the United Kingdom. Apart from being seen as a leader who emerged from the Tories’ internal struggles, his job is limited mainly to resolving the UK’s current economic crisis. It all started with Brexit; since June 2016, Sunak became the fifth Prime Minister to hold office.

After the Complete Withdrawal from the EU in 2020, the economy became fragile, one after other hurdles started to hit the economy, one of them being COVID-19 which hit every country’s economy one way or another; consequently, UK national health system also bungled and secondly Ukraine’s war came in to picture, led to the West imposing energy sanctions which impacted directly on UK citizens leading to inflation, supply chains, and trucking routes became much more complicated with these sanctions, and lastly the political turmoil with plummeting pound and crashing markets has further detreated UK economy.

According to the Center for European reforms, in the final quarter of 2021, UK GDP was 5.2 Percent smaller, investment was 13.7 percent lower, and goods trade was 13.6 percent lower than what they would have been if the UK remained in European Union.

Rishi Sunka’s most significant challenge would be to defend his government as previous prime ministers in his party have grown weaker with a lot of opposition within the party; at the same time to keep his promise to lift Britain Back Up. His biggest challenge is to complete the Free Trade Agreement (FTA) with India while remaining true to Brexit’s promise of curbing immigration and increasing jobs within the UK; even while defending Suella Braverman from the opposition Mr Sunak criticised his opposition parties for allowing unlimited immigration, which makes clear to his policy of Brexit.

On Oct. 27, in a phone call with the Prime Minister of India, Shri Narendra Modi, discussions related to trade and fast-tracking of FTA came up, as both sides have missed the Diwali deadline set up by previous PM Boris Johnson with Modi set to be travel UK once the deal is expected to be finished.

India’s commerce ministry has set a new deadline to close the trade deal by March 2023, as UK Trade Minister Greg Hans also told his parliament the ambitious deal would take more rounds of talks, with the majority of the chapters concluded, leaving eight chapters in the discussion, with the recently at Bali Summit, when asked about FTA, Sunak reaffirmed that he is committed to FTA at the same time he insisted not to compromise quality over speed.

As the relationship was considered, both nations have agreed with the road map 2030, upgrading the relationship to a comprehensive strategic partnership connecting people through politics, defence, security, climate, health and trade. The other framework is the UK Indo-Pacific tilt articulated in the UK’s integrated review of its foreign development and security policies in early 2021.

India sticks through the moment of professionals into the UK to deliver services such as in the information technology field. Migration and mobility have become important issues for India in this FTA. The relations became unfavoured when Suvella Braveman blamed India for not taking undocumented Indians, causing a spur between the two nations before Sunak came into power, with Sunak giving nod for 3000 visas to young professionals from India to work in the UK, making a way ahead for a trade deal, still the movement of Indian students into the UK for studies and post-study visas is a sticking point in the deal.

For the UK, they want a reduction of 150 percent of tariffs on Scotch Whisky, alcohol and beverages exports to India and a reduction on tires for automobiles which is between 60 to 100 percent of tariffs. UK stressed Indian government contracts for UK companies, demanding higher labour standards and reduction on the rules of origin. It is also seeking greater protection for its investors in India through greater access to government tenders in India.

The UK has been addressing data localization in the FTA, and India considers it a big issue, as officials in the Indian government stated it is difficult to make future commitments regards to data localization as the policy itself is still under construction. India is hesitant with this jargon, the past FTA with ASEAN countries where minimal benefits are gained, causing trade deals a total flux.

As former Ambassador Jithendra Nath Misra states, Indian companies have not gained much with past trade deals, and India needs to revisit the political and strategic parameters of the agreement. Britain, with Brexit, is looking towards new partners; India and China are preponderant in the region, politically, economically and militarily. UK strategically is looking for new partnerships, with two sides making a comfortable FTA for their own reason, either economical or geopolitical. The British tilt towards Indo-Pacific also plays a moving factor.

With recent developments, it was expected that the trade deal between the two countries would be closed by March 2023, while three to four chapters are still unfinished, which include intellectual property rights and goods that are yet to be discussed. It is interesting to note that there is a separate chapter on financial services, which is on the verge of completion. According to sources, the UK insisted on the chapter on financial services, which the counterparts agreed on.

Though the target is fixed, the Indian Ministry affirmed their aim to protect Indian interests. For both countries entering into FTA, they need to benefit as it should be fair and balanced. Though both countries’ have sticking points from immigration to data localization, it will be interesting to see how the Sunak government winds up the trade deal by balancing his affirmation to Brexit and immigrant laws while protecting his government from the internal debacle.

 source: The Geopolitics