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India and UK officially launch FTA negotiations, eye early-2023 deadline

While both governments remain enthusiastic of clinching an early harvest deal, sources in the know said the issues in question, from market access to tariff reduction, have seen little movement so far.

January 13, 2022 / 04:21 PM IST
Representational Image

Representational Image

India officially began negotiations for a trade deal with the UK on January 13, with both sides aiming for an 'early harvest deal' before the year ends, to be followed up with a comprehensive Free Trade Agreement (FTA) by early-2023.

Commerce and Industry Minister Piyush Goyal and British Secretary of State for International Trade Anne-Marie Trevelyan reiterated this on January 13 when both governments exchanged the terms of reference of the FTA, and officially began the negotiations. Travelyan is currently in India to kick off the talks.

"Nothing is necessarily a dealbreaker. We are optimistic because both sides have decided to focus only on issues on which there isn't significant differences," Goyal told reporters in New Delhi post the launch ceremony.

This 'early harvest' agreement will allow both nations to establish early gains in some select commodities and services. The interim deal will involve early concessions on certain key high-priority products and services with regards to duty tariffs and market access, the Commerce Department has clarified.

The initial deadline for launching negotiations on the trade deal with the UK was November 1, 2021. Back then, the two sides had set March, 2022 as deadline for finalizing an Interim Agreement with a more comprehensive agreement set for a later date. Both Ministers today reiterated that stance.


However, people in the know now say that the deadline looks even more optimistic. "As the more contentious issues have been taken off the table, the trade pact has increasingly come to symbolize a narrow set of demands. But even these are proving to be long drawn discussions," a senior official said.

High stakes game

Expected to be politically significant for Prime Minister Boris Johnson, London hopes to convince British citizens that it will end in the contentious high import duties placed on key British goods when sold in India.

At a key bilateral digital summit last year, both nations had decided to wrap up trade talks by 2021-end. In a bid to galvanise business ties and investment flows, both nations also launched the Enhanced Trade Partnership, of which the trade pact is a part.

Back in 2019, the UK-India Joint Economic Trade Committee (JETCO) had provided a blueprint for such an agreement. The three priority sectors agreed by both governments — food and drink, lifesciences and health care, and digital and data services — are an important starting point for such action. This enhanced trade partnership is rightly focusing on market access issues and the ease of doing business.

Goyal said that the proposed FTA is expected to increase India's exports in Leather, Textile, Jewellery and processed Agri products. He added that India is also expected to register a quantum jump in the export of marine products through the recognition of 56 marine units of India.

Issues galore

India wants an easier visa regime for Indians, cross-border movement of services professionals and a possible bilateral social security agreement later on, as part of its negotiations with the United Kingdom on a proposed trade pact.

The UK has earlier said that it aims to make it easier for services firms to operate in the Indian market, boosting the UK’s status as an international services hub. However, British Prime Minister Boris Johnson last week dismissed the notion that visa norms are set to be relaxed for Indian citizens in the proposed FTA, answering a question in the British Parliament.

On the tariff front, India has suggested that both sides soon exchange a list of 40-50 items on which they are willing to remove duties. Initial reactions from the British side show that London wants lower duties for its marquee products such as scotch whiskey, automobiles, medical equipment and engineering products.

The UK has batted hard for its alcohol products given that the US imposed a steep 25 per cent higher tariff on single malt Scotch and other whiskies from the EU, which included the UK, since October, 2019. In August, earlier this year, Washington DC extended the hike. While the UK government is now negotiating a hard bargain with the Donald Trump administration in the post-Brexit phase, talks have hit a wall.

At this juncture, India has seized this opportunity to offer the UK lower duties on alcohol, a suggestion which had come from Goyal himself, sources said. However, other items on which lower duties are being demanded by the UK may be more difficult to negotiate, they added.

Tariff discussions on the same categories of items had been major points of contention in India's existing negotiations with the European Union on the proposed Broad-based Trade and Investment Agreement (BTIA). Being discussed since 2007, the BTIA has seen 16 formal rounds of talks till now, but has hit a wall over import duties.

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Subhayan Chakraborty has been regularly reporting on international trade, diplomacy and foreign policy, for the past 6 years. He has also extensively covered evolving industry and government issues. He was earlier with Business Standard newspaper.
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