 "Explained: The India-UK trade deal and why it is on the ‘verge of collapse’")
The much-anticipated India-UK trade deal is apparently on the verge of collapse. UK prime minister Liz Truss had committed to getting the deal done after her predecessor Boris Johnson had set the deadline preferably by Diwali but ‘definitely by the end of the year’. Let’s take a closer look at the deal and why it is in trouble: The trade deal and its significance Negotiations for the deal began in January 2022 with Truss as International Trade Secretary laying the groundwork by signing off on the India-UK Enhanced Trade Partnership (ETP) for the then Boris Johnson-led government last May.
As per Bloomberg, the deal would be India’s biggest and most ambitious free trade agreement.
A Free Trade Agreement is a deal between two or more nations to reduce or eliminate import-export tariffs among them. Under a FTA, goods and services can be traded between the concerned countries with little or no tariff barriers. It essentially liberalises trade and removes protective barriers on industry and manufacturing. In such pacts, two countries either eliminate or significantly reduce customs duties on the maximum number of goods traded between them besides easing norms for promoting investments and services trade. New Delhi is also seeking to collect half a billion pounds in payments made by Indian workers toward Britain’s social security system as part of the deal, persons familiar with the matter told the outlet. UK’s offer to restrict movement of skilled workers would skew the proposed trade deal in favour of Britain and wouldn’t be a win-win for both nations, they told the outlet. As per Bloomberg, the deal could act as a ‘springboard’ that allows India to seek an FTA with the EU, which along with the US, is a major export destination. Bilateral trade increased to $17.5 billion in 2021-22 compared to $13.2 billion in 2020-21. India’s exports stood at $10.5 billion in 2021-22, while imports $7 billion. Why is the deal in trouble? The deal is in trouble after home secretary Suella Braverman, referring to India, made comments about ‘visa overstayers’. [caption id=“attachment_11404501” align=“alignnone” width=“640”] UK home secretary Suella Braverman said that she had concerns about having an open borders migration policy with India because it’s not what people voted for with Brexit. AP[/caption] “I have concerns about having an open borders migration policy with India because I don’t think that’s what people voted for with Brexit,” Braverman told The Spectator. Asked about visa flexibility for students and entrepreneurs under an India-UK FTA, she said: “But I do have some reservations. Look at migration in this country – the largest group of people who overstay are Indian migrants.” “We even reached an agreement with the Indian government last year to encourage and facilitate better cooperation in this regard. It has not necessarily worked very well.”
UK media reports said ministers in New Delhi were ‘shocked and disappointed’ by the ‘disrespectful’ remarks made by Braverman.
“There’s still a lot of goodwill but if certain individuals are still embedded in the [UK] government it will paralyse the talks,” the newspaper quoted a source as saying. “Mobility has been the key Indian ask and everything else – financial services, banking, education, rules of origin on whisky, etc, hinges on the mobility ask. And Suella has gone and pulled the rug from under that mobility ask,” a senior UK government source told The Times. “They were apoplectic. Mad doesn’t even come close to describing how angry they are,” said another. As per Bloomberg, India responded to Braverman by saying ‘both sides should honour’ the understanding with regards to mobility. The Indian High Commission said “comments on these matters may not be appropriate given that the negotiations are underway, and that any arrangement will include issues of interest to both sides”.
It also countered Braverman’s comments on Indian ‘overstayers’ and said that action had been taken.
“As part of our wider discussions under Migration and Mobility, the government of India is committed to work with the government of UK to facilitate the return of Indian citizens who have overstayed their visa period here in the UK. As per data shared with the Home Office, as on date, action has been initiated on all of the cases referred to the High Commission. Further, UK has also undertaken to fulfil certain commitments as part of the Migration and Mobility Protocol, on which we await demonstrable progress,” the statement read. Diwali deadline diminishing, Modi trip likely off The likelihood of meeting the Diwali deadline for the pact, set by former Prime Minister Boris Johnson, is now believed to be diminishing. Strategic experts on both sides are now of the view that if the Diwali deadline for the FTA is still met, the result would be a much less comprehensive deal than was expected, leaving key sectors open for future negotiations. Trade secretary Kemi Badenoch seemed to lay the groundwork for this last week, when she said that an FTA with India would not mean that “we can’t do even more later”. [caption id=“attachment_11405911” align=“alignnone” width=“640”] Prime Minister Narendra Modi.[/caption] A report in Politico claimed that any plans of a UK visit by Prime Minister Narendra Modi for Diwali to sign off on an FTA is also now not likely to go ahead. A businessperson in the know told the outlet Braverman has “damaged the political atmospherics” of the deal and public perception of the UK in India, adding that the home secretary’s comments “didn’t go down well at all in India.”
The businessperson added there are “still lots of important chapters to close [in the deal] which haven’t progressed much in the last month.”
Doubts over the deal “are broader” than hang-ups on migration, the person added. The visit is “not happening,” a second businessperson familiar with the workings of the Indian government said. The October 24 deadline will be “tough” to meet, they said, adding: “I’m not sure if the entire [Free Trade Agreement] will be agreed by then.” Headache for Truss? This could become a huge headache for Truss. Already under pressure to strike trade deals, Truss may be forced to offer India concessions, as per Bloomberg.
Politico noted ‘frustration’ within 10 Downing Street and the trade department about Braverman’s comments.
Impact Shorts
More Shorts“The Indians are notorious negotiators and inherently protectionist,” a trade department official told P_olitico._ “So reaching an ambitious agreement is going to be difficult, but we are absolutely committed to finding a way through.” Truss has also been enthusiastic about getting the deal done. Mint quoted the prime minister as saying as saying “I want to get this trade deal done, preferably by Diwali, but definitely by the end of the year, and I want to make sure that the trade deal is as deep as possible covering everything from life sciences to technology to agriculture.” Failure will provide another blow to her post-Brexit vision that the UK can clinch new deals in markets that were previous closed off due to its membership in the European Union, the piece noted. However, while the perception is that Braverman is on a collision course with Truss, who is keen to clinch the FTA by the Diwali deadline, the media report indicates that both are aligned on the issue of migration. Meanwhile, the Indian High Commissioner to the UK, Vikram Doraiswami, met Truss at an event in London on Tuesday evening after which he tweeted: “Delighted and honoured to greet HE PM Liz Truss @10DowningStreet this evening and to seek her guidance to build the very special India-UK partnership in trade, investment, defence and through the #LivingBridge.” The Department for International Trade (DIT) reiterated the UK stance that it would not sacrifice quality for speed. It said: “We have a close, positive working relationship with India and a thriving trade partnership worth £24 billion in 2021. We continue to seek improvements to our current trading relationship. This is why we are negotiating a high-ambition free trade agreement. “We remain clear we won’t sacrifice quality for speed, and will only sign when we have a deal that meets both countries’ interests.” With inputs from agencies Read all the Latest News , Trending News , Cricket News , Bollywood News , India News and Entertainment News here. Follow us on Facebook, Twitter and Instagram.
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