India / UK – Free trade negotiations commence 

February, 2022 - Shoosmiths LLP

On 13 January 2022 UK and India launched negotiations for a free trade agreement. Intended to provide net benefits to businesses, not all will benefit from the agreement. This article identifies some topics that business may wish to raise with government.


Examples of potential negatives are:


  1. Some businesses may be worse-off because competing products (or services) would be imported and sell at a lower price due to reduced customs duty and easier access to the UK market, and
  2. In the cut and thrust of negotiations, some business/sectors may not get as good a deal as hoped.

During 2020 and 2021 the UK government held consultations with stakeholders including businesses. As details rather than concepts are now to be negotiated, this is the last chance for businesses to make known their views to the UK government.


This article describes key aspects of the proposed agreement and an indication of the topics businesses may wish to voice their views about. To begin, it is useful to set the economic context.


Economic context

Annual UK exports to India total £7.3 billion, while imports from India total £12.5 billion. This means India was the 15th largest trading partner accounting for 1.6% of total UK trade. At the same time, investment in both directions is material, with UK to India investment of £15.3 billion and India to UK investment was £9.5 billion.1 Noting that a trade agreement may unleash untapped demand, most of the early benefits are likely to come in relation to goods that are already imported and exported.


The top five exports to and imports from India are:


Products


Exports


Imports


Metal ores & scrap


Non-ferrous metals


General industrial machinery


Scientific instruments


Mechanical power generators


Clothing


Medicinal & pharmaceutical products


Textile fabrics


Non-ferrous metals


Miscellaneous metal manufacturers


Services


Exports


Imports


Other business services


Travel


Transportation


Telecommunications, computer, and information services


Financial


Other business services


Telecommunications, computer, and information services


Transportation


Travel


Financial



In terms of geographical distribution of business, London, East England and South East England are the three regions with the largest value of export of goods to India, while those same regions are the largest importers of goods from India.


Proposed agreement

The proposed agreement would address most aspects of trade in goods and services. It would also address technical barriers to trade, including standards related to agricultural produce. In addition, it would seek to address telecommunications, financial services, digital trade, investment, IP, innovation, government procurement, the environment and competition issues.


According to its government, UK exports to India faced an average 18.7% tariff in 2021. Reduction or removal of this level of tariffs, which has generally risen over the past five years is a major goal for the UK government. If this and other measures can be agreed, the government expects that for UK exporters most benefits would be seen in transport equipment, the manufacture of electrical equipment and the automotive sectors. A deeper agreement could see benefits across machinery and equipment, beverages and tobacco sectors.


Some topics that businesses may wish to consider:


  • Tariffs – What tariffs will apply to my imported and exported goods and services?
  • Rules of origin – What rules will apply to my goods? Will they be the same or different to the rules in other trade agreements and if different, why?
  • Customs processes – How will customs processes be amended to facilitate trade in my goods?
  • Services – What rules will apply to enable me to sell my services more easily?
  • Telecommunications – How will market access rules change to facilitate business and will obtaining licences become easier?
  • Regulatory standards – What standards would apply and how would they relate to other standards in other trade agreements?
  • Competition and subsidies – Will I be able to protect my business against imports from businesses that are benefitting from state subsidies?
  • Government procurement – Will I still need to have local presence and local sourcing to win procurement orders?
  • IP – What improvements to protect my IP will be put in place?
  • Labour – What new visa rules would apply? Will there be a facilitation for bringing in temporary workers?

What next?

The UK government is committed to engage in open consultations, obtain stakeholder insight, and engage in outreach events. Nevertheless, businesses may wish to ensure their interests are promoted (defended) by making direct contact with government and making their views known.


1 UK Department for International Trade, Trade & Investment Factsheets, India, 24.12.2021, see here.


 



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