FTA between India and the UK unlikely until March as Rishi Sunak settles in

  • Nov. 5, 2022, 11:53 a.m.

The India-UK free trade agreement may be delayed until at least March next year—well past the original Diwali deadline—with contentious issues now set to be tackled by the new government under Prime Minister Rishi Sunak.

Pressure is mounting on both sides. Sunak is under pressure to ensure that the pact brings tangible benefits to the floundering British economy.

Meanwhile, in India, too, a new commerce secretary, Sunil Barthwal, is at the helm, having taken charge last month. As a result, analysts said there could be efforts by the Indian industry to seek changes on several items, especially in the alcoholic beverage and auto industries.

The two sides were earlier trying to wrap up the pact by Diwali. But, having missed it due to political instability in the UK, they are understood not to be working to a deadline now.

The delay also comes against the backdrop of a leaked intellectual property chapter from the draft agreement, which prompted international civil society to urge India to reject IP-related clauses.

Their fear is that the deal may restrict the availability of cheap drugs—a lifeline for many poor countries—and their production by Indian generic drug manufacturers. However, an Indian commerce department official clarified to Mint on Friday that the leaked IP chapter is "distorted and edited maliciously" to create confusion so as to delay the FTA.

"The UK has recently announced a cabinet, and it may want to do fresh consultation with the industry. "Now that we have a new commerce secretary, the industry would want the new secretary to relook at certain terms of the deal, especially in the auto and liquor industries, which have expressed concerns over opening up the sectors," said a commerce department official.

"In addition, there are Christmas holidays around the corner for the UK. Most importantly, we will have the Union budget in February, so it may take time. "Signing a deal would happen after it has been cleared by the bureaucracy," added the official.

One contentious area is Scotch whisky, on which India levies a 150% duty.

New Delhi is learnt to have offered to bring down the tariff on Scotch whisky from the current 150% to 100% in the first year and 50% in 10 years, following consultation with the Indian industry.

However, the UK is seeking a reduction to 75% when the pact comes into effect and then down to 30% over a three-year period. Indian industry is seeking greater access to the UK market for its goods, including bulk Indian-made whisky.

India’s passenger car makers have also raised concerns about any sharp reduction in customs duty on imported vehicles under the pact.

Another controversial issue is India’s demand for more visas for skilled Indian workers to allow them to live and work in the UK.

On the bright side, the two sides have provisionally closed as many as 16 out of the pact’s 26 chapters so far.

Another commerce department official said that while there are no fixed timelines now, the negotiations are on.

On the IP chapter leak, he said, "There are these documents at the early stages where countries give out their own positions... It is one of those documents, but that, too, has been distorted and edited maliciously to create confusion and delay the FTA.

As far as the pharma sector is concerned, he added, India expects good outcomes in terms of market access to the UK: "India is the top pharma exporter to the US and seventh to the UK." Through these negotiations, Indian pharmaceutical companies will get better access there.

A UK government spokesperson said, "The UK and India are negotiating an ambitious free trade agreement that will boost our current trading relationship, already worth more than £24 billion (₹2.23 trillion) lastyear.".

"We won’t comment on alleged leaks and will only sign when we have a deal that is fair, reciprocal, and ultimately in the best interests of the British people and the economy."

Pradeep S. Mehta, secretary-general of CUTS (Consumer Unity and Trust Society) International, said that the deal has linkages to the EU-India FTA deal because the European Union expects the same things offered to India and more.

"And they are unlikely to settle for anything less." So India is being cautious about what it will offer the UK in the deal. "For us, the dilemma is that both the EU and the UK are important," said Mehta.

Arpita Mukherjee, a professor at ICRIER, said that India has export interests in many products, from agriculture commodities to apparel.

Author : Rajdhani Delhi Representative

Rajdhani delhi representative

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