India-UK ties hinge on a Free Trade Agreement in 2023

India and the UK have had a Strategic Partnership since 2004; but this is yet to realise its full potential. Meanwhile, the ties presently hinge on a Free Trade Agreement (FTA). This was supposed to be announced before Diwali, but will now probably happen in 2023.

David Cameron as Britain’s Prime Minister between 2010 and 2016 greatly desired enhancing relations with India to a “special relationship” – a term applied by London only to the deep understanding with the United States since the Second World War.

Even before he became head of government, Cameron, as leader of opposition, while visiting India wrote in The Guardian on September 5, 2006: “India has established beyond argument, through its economic and political success, its right to a seat at the top table.”

One of his first trips abroad as Prime Minister was to India, wherein he and his Indian counterpart Manmohan Singh agreed in principle to upgrade the relations; but this was not implemented in practice, mainly because India had different priorities.

When Narendra Modi came to power in 2014, there was renewed expectation on Cameron’s part that the economic reforms that the former had promised in his election campaign would be a springboard to fulfilling his vision, especially because the Gujarati Hindu community in the UK wanted closer bonds, too.

Once more, though, hopes were belied, indeed Modi’s interactions with Cameron’s successor Theresa May turned out to be quite prickly, with the latter unbending on her long-standing demand for deportation to India of illegal Indian over-stayers in Britain.

Also, to Modi’s dismay, she pleaded her inability to interfere in matters like the extradition of Vijay Mallya, since these were being adjudicated by courts or tribunals.

However, the devastation caused to both the UK and India by Covid — with both countries’ economies plunging to below minus-20 per cent at one stage — triggered their need to boost exports to recharge their respective GDPs. Thus, the Modi-Boris Johnson accord in January to turbo-charge the economic interface to an FTA.

Six rounds of talks have taken place – the most recent occurring between the British Secretary of Trade for International Trade Kemi Badenoch and Commerce Minister Piyush Goyal in Delhi in December.

However, contrary to Johnson’s objective, the UK government under Prime Minister Rishi Sunak is no longer chasing a deadline. India, an insider stated, was keen on a conclusion by March 2023. Whitehall, on the other hand, wants “to get it right”.

Sources close to the ongoing dialogue indicated that issues like intellectual property, patents, financial services (including fintech and insurance), legal services and work visas for Indians are among the sticking points.

British Home Secretary Suella Braverman is opposed to easing immigration for Indians. Besides, a British official said the UK will only sign off on text that is “equitable and reciprocal”.

Reduction or removal of customs duties by both sides on selected goods would be included in a final draft. In Britain’s wish list are automobiles and scotch whiskies. India’s focus is on garments, textiles, and food items.

Purists think it would probably be an exaggeration to define the outcome of the current Indo-British efforts as an FTA. It would, according to them, at best be a limited Free Trade Agreement, not a comprehensive one — which generally takes years to devise.

There would of course be scope to add items on the tariff free or lower tariff list by mutual consent in future and thereby, expand the agreement.

The failure to meet the Diwali time limit was partly caused by the political turmoil in Britain over the summer and autumn, with Johnson and then Liz Truss losing their Prime Ministerships and then Sunak having to give priority to steadying the ship at home, before exploring opportunities afield.

An FTA, though, is not a panacea of ills. The UK-Japan FTA — Britain’s first after leaving the European Union — was initialled in 2020. It was expected to provide a 15 billion pounds boost to the UK’s exports. But figures compiled by the British Department of International Trade last month show exports fell from 12.3 billion pounds to 11.9 billion pounds in the year to June 2022.

20221224-175006

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