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What are the challenges in navigating the India-UK Free Trade Agreement negotiations?

The Hindu BusinessLine | 19 July 2023

What are the challenges in navigating the India-UK Free Trade Agreement negotiations?

In this State of the Economy podcast, we delve into the intricacies of the proposed Free Trade Agreement (FTA) between India and the UK, shedding light on the current state of negotiations and the critical issues at play. With both the Indian and UK governments committed to concluding the FTA talks by year-end.

Biswajit Dhar, Trade expert and former professor at JNU, offers valuable insights into the objectives driving both nations in their pursuit of the FTA.

Despite momentum, several contentious areas demand resolution, including standard production for Scotch whisky and automobiles, rules on intellectual property rights, financial services, mutual recognition agreements, and services.

Highlighting the decline in trade relations over the years, with the UK slipping from India’s third-largest trading partner to 14th place, Dr. Dhar emphasises the substantial market access both countries aim to achieve through the FTA.

For the UK, seeking to establish itself as a major trading power after leaving the European Union, the FTA with India presents a pivotal opportunity to secure significant market access.

However, as negotiations proceed, certain issues emerge as major hurdles. Tariff reductions, particularly in the automobile and alcoholic beverages sectors, prove to be sticking points.

The disparity in tariffs between the two countries necessitates delicate negotiations. Another area of contention revolves around rules of origin, where India’s stringent Customs Administration of Rules of Origin (CAROTAR) raises concerns among trade partners, challenging concessions made in other areas.

In the realm of services, digital regulations surface as a challenge, considering the increasing digitalisation of economies. Addressing issues like free and trusted cross-border data flows, data localization, and transfer requirements for source codes and algorithms becomes crucial for both nations. India’s insistence on maintaining red lines in these areas reflects the significance of these regulations in the country’s framework.

The podcast underscores the vital role of government procurement in India, specifically in protecting the interests of MSMEs (Micro, Small, and Medium Enterprises). The pandemic’s impact on MSMEs amplifies the need to safeguard their interests during negotiations.

Furthermore, India’s support for promoting generic medicines through intellectual property rights flexibility stands as a lifeline for the nation.

India’s new model for bilateral investment treaties, placing the onus on foreign investors to exhaust local remedies before resorting to international arbitration, is met with resistance from developed countries.

Discrepancies exist in the exclusion of specific areas from investment protection agreements, particularly in cases concerning patents and compulsory licenses.

While efforts are made to focus on areas with common ground, some of the more challenging issues, such as rules of origin and dairy product tariffs, necessitate meticulous negotiations. As the talks continue, India’s red lines on digital regulations and intellectual property rights for generic medicines remain steadfast.

With Commerce and Industry Minister Piyush Goyal’s recent talks showing considerable progress on certain difficult issues, the endgame of the negotiations may come into focus by year-end. As negotiators persist in finalizing the India-UK FTA, the stakes remain high, and both nations are poised to navigate this crucial crossroads in their economic relationship. Tune in to stay informed on the latest developments in these significant negotiations.

 source: The Hindu BusinessLine