Interview | Investment protection, sustainability should be discussed in UK-India FTA: UK-India Business Council MD Kevin McCole

The current model bilateral investment treaty agreement that India has circulated says that all domestic arbitration has to be exhausted before international arbitration takes place. I think that will be a point of discussion. It should be. I’ll leave it there. Say, if something is in the interest of all parties to come to a quick resolution on, and if it can be done more quickly through international arbitration, and if both parties agree to it, why not do it?

Has the pandemic changed UKIBC’s expectations of what the FTA should be like or do your broad concerns and hopes still remain the same?

The broad hopes and concerns still remain the same. We have seen over the last year how important it is to have resilient and sustainable economies. Discussion on sustainability issues will be very important. Having an FTA which looks at environmental protection, and creating ethical supply chains for a more sustainable future is important. Collaboration involving not just businesses or governments, but also academia and civil society, to make sure that all stakeholders are working together for the collective greater good will also be needed.

UKIBC had said earlier that for British companies operating in India, having an FTA does not really change the way they do business. Instead, they want policy reform and incremental change in ease of doing business. Does that sentiment still stick?

Yeah, I think the sentiment still sticks. The Enhanced Trade Partnership (ETP) that has been announced keeps a focus on the immediate term such as removing market access barriers and improving the ease of doing business. With an FTA, you typically are in a situation where nothing is agreed until everything is agreed. But if there are talks that can be had, issue by issue… then that’s something I think is going to be good for British and Indian businesses. It was noteworthy when the ETP was announced, some market access barriers were removed at that time as well, like on medical devices.

But over the medium to long term, an FTA is a great thing to have. Already, the UK and India are the fifth- and sixth-biggest economies in the world. Over the next 9-10 years, India will become the third-biggest economy in the world and the third-biggest consumer market in the world. So, while the opportunity is growing in India, the barriers to entering are going to be decreasing. It will be a much easier market to operate in and to trade with, not just selling and export but also importing from India. India’s got lots of expertise that can succeed in the UK. The trade balance is already in India’s favour. With an FTA, both exports from India and UK will grow.

With regard to exports from India to the UK, what are the sectors that have performed well over the past few years? Can they be leveraged in the FTA?

India has got a real strength in digital trade and the ICT sector. One thing I like about the ETP is that it focuses on the immediate and the long term. It will also closely look at services trade in the UK, given that both countries have really strong services sectors. Digital trade, in particular, will be really important. Over the last 12 months, the world has seen a decade’s worth of expansion in virtual activity and digital integration. So, if the ETP and FTA can look at some of the really important issues that will support digital trade, such as intellectual property, data protection, a UK-India data adequacy agreement, it’ll be a great move. It’s really important that this FTA is forward looking, and needs to look at the trade of the future. Services and digital trade will become really dominant as we move through this decade and the rest of this century.

The UK government has pitched the FTA to its constituents as a major opportunity for high-value exports such as British automobiles and alcohol to cut the 150-200% import duties. What are some of the other sectors being eyed by the UK?

A comprehensive FTA will cover a wide range of services. The work that’s been going on in the lead up to the ETP has been around three sectors – food and drink, life science and healthcare, and digital and data services. Scotch whiskey is a key part of the food sector. Commerce and industry minister Piyush Goyal himself said last year publicly that India will be open to reducing the basic customs duty since most of the whiskey that comes into India is imported by Indian drinks companies. Whiskey from Scotland goes into Indian blended whiskies as well. So it’s a big win for the Scottish exporters but also a win for Indian importers of scotch and ultimately, Indian consumers, for whom the price will go down.

How are British businesses viewing the Aatmanirbhar Bharat programme?

With Make in India and Aatmanirbhar Bharat, India wants to become more of a global manufacturing hub and to integrate into the global supply chains. India has got many world-class advanced manufacturing businesses, but to have a broad manufacturing base to become more global and competitive, it needs access to more advanced technologies. The UK has a lot of these advanced, IP-rich technologies. The export of these into India through joint ventures or co-creating technology will provide the real value addition. It will help Indian manufacturing bases, whether in food and drink, packaging, textiles or automotive or even aerospace, to really expand.

Have UKIBC members flagged any issues with regard to taxation policy in India?

There’s one taxation issue. Foreign banks like HSBC and Standard Chartered function through a branch mechanism in India and the rates they pay in taxes are higher than that of Indian banks. This makes international banks less competitive in India.

Both nations have decided to conclude initial talks on FTA by the end of 2021. Would UKIBC continue to advise the Indian government on specific issues such as ICT and data policy or would it wait until the scope of the FTA is known?

We’re doing a number of things. Recently, the UK government launched its consultation to help prepare for the FTA negotiations, so we are working with our members to provide inputs to the UK government. When the government of India initiates its consultation process, we will look to engage the government of India as well, including on digital trade. In 2019, we launched a report looking at digital data in that trade between both countries. Again in 2020, we submitted a joint report with the CII on Indian and British businesses to the commerce and industry ministry.