India-UK FTA

India and the UK are negotiating a Free Trade Agreement (FTA) that will reduce tariffs and non-tariff barriers on goods and services.

What is a Free Trade Agreement?

• It is a pact between two or more countries that reduces or eliminates certain barriers to trade in goods and services, as well as investment.

• Goal- To facilitate cross-border transactions, increase investment prospects, promote mutual trade, and improve the ease of business.
• Bilateral FTAs- India has bilateral FTAs with Sri Lanka, Afghanistan, Bhutan, Japan, Thailand, Singapore, Nepal, Korea, Malaysia, etc.
• Regional FTAs-
  • South Asian Free Trade Agreement (SAFTA)- 2004
  • India-ASEAN Agreement- 2010

What are the benefits of India-UK FTA?

For India

• Future collaboration- It will serve as a template for an agreement with European Union, India’s 2^nd largest trade partner.
• Diversify trade- It will help India to diversify its trade partners and counter China’s influence in the region.
• Investment destination- It will be India's 1^st comprehensive deal with an industrialized nation, and will help India attract foreign investment and enhance its market access.
• Potential sectors- It will benefit sectors such as textiles, gems and jewellery, cars, Scotch whisky and wines by lowering tariffs and increasing market access.
• Address non-tariff barriers- FTA deals with standards, regulations and custom procedures that often hamper trade flows.
• Global trade- FTA will complement India's other trade agreements, such as the ones with the UAE, Australia, and Israel, and will help India integrate with the global value chain.
• Bilateral ties- FTA will strengthen the strategic partnership between the two countries, which share common values and interests.

For UK

• Boost exports- UK wants to compensate for the loss of access to the European Single Market after Brexit and boost its exports to India.
• Access to India’s market- It will gain access to India's large and growing consumer market, as well as its skilled workforce and innovation potential.

What are the challenges with the India-UK FTA?

• Strict regulations- Sectors such as agriculture, manufacturing face strict standards and technical requirements in UK market.
• Affect LDCs- The FTA will affect the Least Developed Countries (LDCs) such as Bangladesh, which currently enjoy preferential access to the UK market.
• Issues with GI tag- India normally provides general protection for violation of Geographical Indication rules, but the UK is seeking a higher level of protection.
• The enhanced protection prohibits the use of a GI if the product does not genuinely originate from the designated area, regardless of whether the public is misled or the true origin is specified.
• Carbon border tax- UK’s possible tax on imports of high-carbon goods like steel as it mimics the European Union's carbon border adjustment mechanism (CBAM) would affect India’s exports.
• Rules of origin- It is getting increasingly difficult as the present-day manufacturing is progressively integrated with global supply chains in a much more complex manner than ever before.
• Non trade issues- Issues such as labour, sustainability, climate change, emission etc., are indeed complex and offers formidable challenges for Indian negotiators to agree with.

What lies ahead?

• As FTAs are based on mutual benefits, India should negotiate firmly for the UK to offer similar elevated GI protection to Indian products.
• There need to be a more balanced and reciprocal trade relationship, potentially opening new markets and enhancing the global standing of Indian products.