The UK-India landmark trade deal has now been finally signed, paving the way for preferential trading with India’s top trade and investment partner in Europe. For India this agreement in many ways is departure from the past FTAs as India has entered into an agreement with UK on newer issues such as environment, labour, government procurement market access, IPR with enhanced commitments. Besides, India has also secured collaboration with the UK for infusion of new technologies in areas like agriculture, health, advanced manufacturing, and clean energy.
This FTA would also support the net zero ambition of two countries. Together they would promote green trade and facilitating clean growth, making it easier for trade in products such as renewable energy equipment. The agreement has provisions that will support cooperation and trade in key growth sectors such as clean energy, transport, recycling, and that promote a circular economy. The opening up of government procurement market would also allow UK businesses access to procurements in the green infrastructure and energy sectors in India.
On digital trade, the two countries have agreed to cut red tape for businesses, including SMEs by supporting use of electronic contracts and transactions. The chapter will include some provisions on cross border data flows and data localisation. However, this commitment would not compromise with the data protection, and any transfer of personal data will still be protected.
One of the major strengths of UK is its banking and financial services. On foreign direct investment, UK ownership or investment into Indian insurance or banking firms will be locked in at up to 74% UK owned or invested. This would help Indian businesses.
One of the most controversial market access issues is UK’s demand from India to reduce its import duty on whiskey. Currently, India imposes tariffs of 150% on wines & spirits, which as per the agreement will see duties cut to 75% on day one and staged to 40% from year 10 onwards.
Automobile, another major sector where not only UK but EU too wants India to cut its import duty significantly. After this FTA, the UK car manufacturers will benefit from a quota that reduces tariffs from over 100% to 10%. This starts with internal combustion engine (ICE) cars but transitions to electric vehicles (EVs) and hybrid. Similarly, Indian auto manufacturers to get an access to the UK market for EVs and hybrid. Besides, Indian exporters would get increased access to UK market, with tariffs being eliminated on 99% of Indian goods.
Both UK and India are knowledge driven economy and already there is a deep collaboration between the two nations on innovation and R&D. Under this FTA there will be a provision to establish Innovation Working Group, which will enhance the existing collaboration. Discussions under this cooperative framework may cover a range of areas, including future regulatory approaches, the commercialisation of new technologies and supply chain resilience. This working group will provide an opportunity for industry, academia and civil society to advise government on key challenges surrounding innovation and trade, and to help shape an appropriate response.
Both countries have agreed for a professional services annex where the UK and India will identify and encourage UK and Indian relevant bodies to enter into negotiations on mutual agreements or arrangements for recognition of professional qualifications. This annex will establish a Professional Services Working Group which will create a dedicated forum for government officials to review and monitor the annex’s implementation, appropriately liaise to support relevant bodies in pursuing the annex’s objectives and exchange information. These agreements or arrangements can streamline processes for professionals seeking to have their professional qualifications recognised in each other geography.
The FTA will have a ‘bilateral safeguard’ mechanism, which was lacking in India’s older FTAs. This will allow the UK or India to temporarily increase tariffs or suspend tariff concessions if the tariff liberalisation agreed in the FTA leads to a surge of imports that causes or threatens to cause serious injury to domestic industry. This will provide reassurance to businesses. This temporary measure will allow the industry to adjust to the new market conditions of the FTA. India for many years wanted to have social security agreement with the UK. Alongside the FTA, the UK and India have agreed to negotiate a reciprocal Double Contributions Convention (DCC), a slightly limited version of full social security agreement. The DCC will support business and trade by ensuring that employees moving between the UK and India, and their employers, will only be liable to pay social security contributions in one country at a time. The DCC will also ensure that employees temporarily working in the other country for up to 3 years will continue paying social security contributions in their home country, preventing the fragmentation of their social security record.
Deep Kapuria is the Chairman of The Hi-Tech Group of Companies comprising The Hi-Tech Gears, The Hi-Tech Engineering Systems, The Hi-Tech Robotic Systemz, and Novus Hi-Tech Robotic Systemz. The Group has manufacturing, R&D and engineering facilities in India, Canada and USA. He is also the Past Co-Chair of Digital Economy and Industry 4.0 Task Force of B20, 2018 Argentina and Past Co-Chairman, CII National Committee on International Trade & Trade Policy.
