Boris Johnson's India visit to help smoothen trade talks

File photo. PM Modi being greeted by UK counterpart Boris Johnson at the sidelines of G20 summit in Oct, 2021

British Prime Minister Boris Johnson's visit to India on April 21-22 would mark a push to reinvigorate talks on a proposed trade pact between the two countries. After initial progress, both sides have found it difficult to negotiate contentious issues of market access and tariff reduction.

Senior officials of the British trade department will also be visiting and meeting their Indian counterparts, diplomats said. As of date, discussions have concluded on only four of the 26 chapters of trade rules covering areas such as tariffs, investments, intellectual property rights, customs, rules of origin, standards and technical barriers to trade.

As is often the case, one of the main sticking points in the pact continues to be India's hesitation in opening up its market to foreign products and the equally aggressive push by foreign sellers in entering large segments of India's growing market that remain underexplored.

In the case of this pact, this has been true for London's insistence on allowing high-value British goods such as scotch whiskey and automobiles into India at zero or low tariffs.

The UK has been aggressively seeking greater market access for its single malt Scotch and other whiskies in India after the Trump Administration raised barriers for these spirits imported from the European Union with a steep 25 percent higher tariff.

The UK had also reciprocated with an equivalent increase on US-made whiskies and other products. The Biden administration has begun to roll back some of the increase while the UK announced on March 22 that it would completely revert to the pre-2019 levels.

India seized this opportunity to offer the UK lower duties on alcohol, a suggestion that came from Commerce and Industry Minister Piyush Goyal himself, people aware of the developement said.

However, other items on which lower duties are being demanded by the UK may be more difficult to negotiate, the people added.

The recent free trade agreement India signed with Australia reduced the tariff on imported wine with a minimum import price of $5 per 750 ml bottle from 150 percent to 100 percent. Going forward, tariffs are set to be brought down to 50 percent over 10 years.

In the premium wine category, tariffs on wine priced above $15 per 750 ml bottle have been cut to 75 percent, with a target to bring it down further to 25 percent over the next 10 years.

Ambitious pact

The trade pact aims to cover 65 percent of traded goods and up to 40 percent of services. The outcome of meetings of the UK-India Joint Economic Trade Committee (JETCO) in 2019 is seen as a road map to the focus areas.

The three priority sectors agreed by both governments at JETCO in 2019 — food and beverages, life sciences and health care, and digital and data services. New Delhi has also put its weight specifically behind the pharma and healthcare industry that operates in the UK, hoping to leverage the growing demand for Indian pharma exports to Britain and the European Union.

Moneycontrol had earlier reported that India has pushed hard for the removal of tough visa regulations restricting hiring by Indian firms in Britain. It had also asked the UK to instill measures to boost more outward Foreign Direct Investment flows and dismantle practices limiting drug manufacturing by Indian firms based in Britain, according tothe people aware of the development cited earlier.

Bilateral trade came to $16 billion in the first 11 months of the 2021-22 financial year and was expected to cross by the end of the year the previous record of $16.8 billion registered in 2018-19.

Indian exports to the UK in 2021-21 (April-February) stood at upwards of $ 9.43 billion, up from the pre-pandemic figure of $8.7 billion in 2019-20.

For India, imports remained at a comfortably lower level of $6.5 billion, slightly lower than $6.7 billion in 2019-20. Among imports, $1.3 billion was spent on silver imports, followed by $976 million of heavy engineering machinery and tools, $441 million of mineral fuel and $400 million of electrical equipment.

London is hoping that both high-value automobiles and scotch whiskey quickly enter the.

Services trade

Unlike the trade deals struck with the United Arab Emirates and Australia earlier this year, services trade has a much bigger role in any potential pact with the UK.

The Commerce Department has repeatedly emphasized the need to strike a balance between commitments and concessions in goods and services trade, given the UK's reputation as a global hub of professional services such as banking and its large consumer-driven economy.

With information technology and related professional services outpacing all other exports from India to the UK, the government wants to secure concessions in services trade.

Easier movement of Indian services professionals along with a more open visa regime have been strongly pursued by India. Officials say that certain services of mutual interest may be included in the Interim Agreement wherein priority sectors where results are immediately deliverable may be included.

"If necessary, India may also explore signing of few Mutual Recognition Agreements (MRAs) in selective services like nursing and architecture services. These can be followed up by MRAs in fields where it is more challenging to establish such pacts, such as law and chartered accountancy," an official said.

Enhanced trade partnership

At a key bilateral digital summit in May 2021 that saw the participation of Prime Minister Narendra Modi and British PM Boris Johnson, both nations decided to wrap up trade talks by 2021-end. In a bid to galvanise business ties and investment flows, they also launched the Enhanced Trade Partnership, of which the trade pact is a part.

In September 2021, India had planned to launch negotiations on the proposed trade act with the UK by November that year with a tight deadline for March 2022 kept for finalizing the talks and signing a deal.

Negotiations finally began on January 13, 2022 with both sides aiming for an early harvest deal before the year ends, to be followed up with a comprehensive Free Trade Agreement by early 2023.