UK aims to start India FTA negotiations this year and hopes to secure interim tariff agreement

Wed 18 Aug 2021
Posted by: William Barns-Graham
Trade News

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UK aims to start India FTA negotiations this year and hopes to secure an interim agreement to slash whisky tariffs

The UK wants to start trade negotiations with India before the end of the year in the hope of quickly striking an interim trade deal that will pave the way to a comprehensive agreement.

The two countries signed an Enhanced Trade Partnership (ETP) earlier this year, representing the first concrete evidence of the UK’s prioritisation of India as a post-Brexit trading partner.

The UK and Indian governments have said they want to double bilateral trade from £29bn in 2019 to £58bn in 2030.

Scoping

Since then, trade officials have been “scoping” the desired outcomes of negotiations for a trade agreement.

A spokesperson for the Department for International Trade (DIT) told Reuters: “We are currently in the pre-negotiation scoping phase of an FTA (free trade agreement), with the aim of starting negotiations by the end of this year.”

Whisky sour

According to City AM, an interim deal could be reached quickly and could lead to tariffs being slashed on products such as Scotch whisky.

Whisky imports into India from the UK currently attract a 150% tariff, meaning it only has 2% of the growing Indian market.

Despite this, Scotch whisky products made up 88% of food and drink exports from the UK to India in 2019, according to Mint.

As well as bottled Scotch, India imports bulk whisky to blend with its own local production, some of which it has started to export.

Case for lower tariffs

Writing in Mint, Dr Arpita Mukherjee, a professor at the Indian Council for Research on International Economic Relations, said there was a case for lowering tariffs.

“Tariff rationalisation can be carried out in a phased manner so that it does not hurt the domestic industry and helps to develop and improve local production, which can in turn then also be exported,” she said.

India’s powerful alcohol producers have fought hard against relaxing tariffs on imports in the past.

Rice, services and visas

Food and drink is a big export sector for Indian producers, who could seek greater access to the UK for produce such as rice under an interim deal.

Legal and financial services provisions, as well as visa arrangements, will also be key in negotiations, but could take longer to iron out.

Indian reluctance

India has been reluctant to sign international trade deals, with the country’s last agreement with Malaysia inked 10 years ago, according to NDTV.

This has previous led to charges that the country has a ‘history for protectionism’.

However, Dr Gareth Price, Asia Pacific expert at the Chatham House think tank, told City AM that “in the past few months there does seem to be a shift within India”.

Consultation nearly finished

In May, Britain launched a 14-week consultation on a future trade deal with India, seeking the views of the public and businesses. The consultation ends on 31 August.

The IOE&IT has sought feedback from its members for a submission to the consultation, focusing on two barriers to trade with India: priorities and bureaucratic barriers.