Shoosmiths LLP
  February 3, 2022 - Milton Keynes, England

India / UK – Free trade negotiations commence
  by 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:

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.




Read full article at: https://www.shoosmiths.co.uk/insights/articles/india-uk-free-trade-negotiations-commence