India and UK to Resume Talks on Proposed Trade Agreement in July

In a significant development, senior officials from India and the United Kingdom will meet this month to continue negotiations on a proposed free trade agreement (FTA), aiming to resolve pending issues and bring the talks to a close. The India-U.K. FTA talks began in January 2022, but the 14th round stalled due to the general election cycles in both countries.

According to an official, the two sides are in constant communication, and the next round of talks is scheduled to take place this month. The newly-elected British Prime Minister, Keir Starmer, has expressed his willingness to conclude an FTA that benefits both nations. Starmer spoke with Indian Prime Minister Narendra Modi over the weekend, and they agreed to work towards an early conclusion of the mutually beneficial agreement.

The negotiations are ongoing in both the goods and services sectors. The Indian industry is seeking greater access for its skilled professionals in sectors like IT and healthcare in the UK market, as well as market access for various goods at zero customs duty. On the other hand, the UK is looking to reduce import duties on goods such as scotch whiskey, electric vehicles, lamb meat, chocolates, and certain confectionery items.

The UK is also seeking more opportunities for its services in Indian markets, particularly in telecommunications, legal, and financial services (banking and insurance). Additionally, the two countries are negotiating a bilateral investment treaty (BIT).

The proposed agreement comprises 26 chapters, covering goods, services, investments, and intellectual property rights. The bilateral trade between India and the UK has increased significantly, reaching $21.34 billion in 2023-24 from $20.36 billion in 2022-23.

The Labour Party’s election manifesto had committed to finalizing the deal, and the new Foreign Secretary, David Lammy, has expressed his intention to complete the job on the FTA. Lammy plans to visit India within the first month of taking office.

A report by the think tank GTRI (Global Trade Research Initiative) suggests that the agreement is nearly finalized, pending minor adjustments, such as curtailing the number of visas for Indian professionals. The report recommends that India focus on two key issues: the Carbon Border Adjustment Measure (CBAM) and non-traditional subjects like labor, environment, gender, and intellectual property rights.

Historically, India has been resistant to incorporating these topics into FTAs, as they often require domestic policy changes. The GTRI report warns that even if the UK agrees to eliminate tariffs on sectors like textiles, Indian exports might still need to meet stringent UK sustainability requirements, which could negatively impact Indian exports, particularly in labor-intensive sectors.

Historical Context:

The India-UK free trade agreement (FTA) talks began in January 2022, but the 14th round stalled due to the general election cycles in both countries. The Labour Party’s election manifesto had committed to finalizing the deal, and the new Foreign Secretary, David Lammy, has expressed his intention to complete the job on the FTA. This development is significant as it marks a new chapter in the bilateral trade relations between India and the UK, with the two countries aiming to conclude an agreement that benefits both nations.

Summary in Bullet Points:

• Senior officials from India and the UK will meet this month to continue negotiations on a proposed free trade agreement (FTA). • The talks aim to resolve pending issues and bring the negotiations to a close. • The India-U.K. FTA talks began in January 2022 but stalled due to general election cycles in both countries. • The UK is seeking greater market access for its services in Indian markets, particularly in telecommunications, legal, and financial services (banking and insurance). • India is seeking greater access for its skilled professionals in sectors like IT and healthcare in the UK market, as well as market access for various goods at zero customs duty. • The proposed agreement comprises 26 chapters, covering goods, services, investments, and intellectual property rights. • The bilateral trade between India and the UK has increased significantly, reaching $21.34 billion in 2023-24 from $20.36 billion in 2022-23. • A report by the think tank GTRI suggests that the agreement is nearly finalized, pending minor adjustments, such as curtailing the number of visas for Indian professionals. • The report recommends that India focus on two key issues: the Carbon Border Adjustment Measure (CBAM) and non-traditional subjects like labor, environment, gender, and intellectual property rights. • Historically, India has been resistant to incorporating these topics into FTAs, as they often require domestic policy changes. • The GTRI report warns that even if the UK agrees to eliminate tariffs on sectors like textiles, Indian exports might still need to meet stringent UK sustainability requirements, which could negatively impact Indian exports, particularly in labor-intensive sectors.