India-UK Free Trade Agreement Negotiations

• 21 Jul 2023

For Prelims: India-UK Free Trade Agreement Negotiations, India-UK Free Trade Agreement (FTA), European Free Trade Association (EFTA), Intellectual Property Rights (IPR).

For Mains: India-UK Free Trade Agreement Negotiations.

Source: IE

Why in the News?

India and the UK are currently engaged in negotiations to resolve contentious issues in the ongoing talks for the India-UK Free Trade Agreement (FTA).

• This comprehensive trade deal holds significant importance for India as it will serve as a template for upcoming trade pacts, including those with the EU (European Union) and the European Free Trade Association (EFTA) countries (viz., Iceland, Liechtenstein, Norway and Switzerland).

What are the Contentious Issues under the Negotiations?

• Intellectual Property Rights: In Intellectual Property Rights (IPR), India does not want to compromise on the production of life-saving generics.
• Global Value Chains (GVC): Discussions are underway to address the complexities associated with global value chains and ensure favorable outcomes for India.
• Digital Trade: In the area of digital trade and data protection, India is yet to firm up its own domestic laws and hence doesn’t want to take on commitments.
• Rules of Origin (ROO): ROO, which determines the national source of a product, has been a contentious issue in the FTA talks.
  • These are important in trade negotiations since countries levy duties or impose restrictions on products based on the source of imports.
    • India wants to have strict rules of origin in place to ensure that third countries do not take unfair advantage of the FTA.
• Labour and Environment: Labour and environmental commitments are being taken for the first time and they have to be done in a manner which is not unfavorable to India.
  • India has unilaterally made tremendous progress and does not want additional conditions.
  • The UK, on the other hand, wants more stringent IPRs, free cross-border data flow and rules against data localisation, liberal ROOs and commitments in the areas of labour and environment,

What is the Background of India-UK Free Trade Agreement?

• In 2022, India and the UK had launched the formal Free Trade Agreement (FTA) negotiations. Until then, both countries are contemplating an interim free trade area, which will result in reducing tariffs on most of the items.
• Both countries agreed to an early harvest scheme or a limited trade agreement to lower tariffs on a small set of goods apart from easing rules for select services.
• Further, they agreed to avoid “sensitive issues” and focus on areas where there is more complementarity.
• The agriculture and dairy sectors are considered sensitive sectors for India in trade talks.
• Also, a target of doubling the trade between India and the United Kingdom (UK) by 2030 was also set.

What is a Free Trade Agreement?

• It is a pact between two or more nations to reduce barriers to imports and exports among them.
• Under a free trade policy, goods and services can be bought and sold across international borders with little or no government tariffs, quotas, subsidies, or prohibitions to inhibit their exchange.
• The concept of free trade is the opposite of trade protectionism or economic isolationism.
• FTAs can be categorized as Preferential Trade Agreement, Comprehensive Economic Cooperation Agreement, Comprehensive Economic Partnership Agreement (CEPA).

How has Been India-UK Trade Relations?

• The trade between India and the UK had “more than doubled” between 2007 and 2019.
• By the end of 2022, India was the UK’s twelfth largest trading partner. This accounted for 2.0% of the UK’s total trade.
• For goods, India was the UK’s thirteenth largest trading partner and for services it was the tenth largest.
• In 2022-23, India-UK bilateral trade had increased 16% to USD 20.36 billion

What can be the Significance of FTA between India & the UK?

• Increasing Exports of Goods: Trade deals with the UK can boost exports for large job-creating sectors such as textiles, leather goods, and footwear.
  • India is also expected to register a quantum jump in the export of Marine Products through the recognition of 56 marine units of India.
• Clarity on Services Trade: The FTA is expected to provide certainty, predictability and transparency and will create a more liberal, facilitative and competitive services regime.
  • There is also great potential for increasing exports in service sectors like IT/ITES, Nursing, education, healthcare, including AYUSH and audio-visual services.
• Exit from RCEP: India opted out of the Regional Comprehensive Economic Partnership deal in November 2019.
  • Therefore, there is a renewed focus on trade deals with the US, the European Union and the UK, which are key markets for Indian exporters and are keen to diversify their sourcing.
• Strategic Advantage: The UK is a permanent member of the UN Security Council, and one of the strategic partners of India.
  • Strengthening bonds with the trade would seek UKs support at global issues like standoff with China in the Ladakh sector of the Line of Actual Control (LAC) and claim for permanent seat at UNSC.

Way Forward

• The ongoing negotiations for the India-UK Free Trade Agreement hold significant importance for India's trade relations.
• The focus is on addressing contentious issues such as intellectual property rights, global value chains, digital trade, and rules of origin.
• The cautious approach and slow pace of negotiations reflect India's commitment to securing a comprehensive deal while protecting its interests.
• The outcome of these negotiations will shape India's future trade agreements, making it a matter of careful consideration and strategic decision-making.

UPSC Civil Services Examination Previous Year’s Question (PYQs)

Prelims

Q. Consider the following countries: (2018)

1. Australia
2. Canada
3. China
4. India
5. Japan
6. USA

Which of the above are among the ‘free-trade partners’ of ASEAN?

(a) 1, 2, 4 and 5
(b) 3, 4, 5 and 6
(c) 1, 3, 4 and 5
(d) 2, 3, 4 and 6

Ans: (c)