Jaishankar Hopes India And The U.K. Will Find Mutually Beneficial ‘Landing Point’ For Trade Deal

Relevance: GS2- Bilateral, regional and global groupings and agreements involving India and/or affecting India’s interests, GS3- Liberalization

(Source: The Hindu, 11/15/2023)

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Why in the news?

• Recently, Indian External Affairs Minister S. Jaishankar expressed hope that India and the U.K. could find a mutually beneficial landing point for the Free Trade Agreement (FTA) being negotiated between the two countries.
• India and the U.K. have been attempting to reframe their relationship on the basis of the ‘Roadmap to 2023’ plan announced in 2021.

What has the External Affairs Minister said?

• Mutual landing point: The External Affairs Minister was hopeful that Indian and the UK negotiating teams could find a mutually beneficial agreement for the Free Trade Agreement between the two countries.
• Agenda 2030: India and the UK were trying to reframe their relationship based on the ‘Roadmap to 2023’.
• The Roadmap to 2023 was announced by Prime Minister Narendra Modi and then U.K. Prime Minister Boris Johnson in May 2021.
• It aims to elevate the India-UK partnership across multiple domains such as connectivity, defense, health, trade, and climate action.
• Need for cooperation: The Minister observed that India and Britain share similar interests across issues and expressed interest in greater collaboration between the two countries.
  • He also credited the U.K. for helping India with the successful conduct of the G-20 Summit hosted by India in 2023.
  • He also cited the example of India and the U.K.’s collaboration in their work on vaccines during the COVID-19 pandemic.

India and UK FTA

• India and the U.K. launched the talks for a free-trade agreement (FTA) in January 2022, with the aim of concluding talks by Deepavali (October 24, 2022).
  • However, the deadline failed as a result of the political developments in the U.K..
  • There are 26 chapters in the agreement covering goods, services, investments, and intellectual property rights.
  • Virtual sessions of negotiations between India and the UK are progressing with the countries looking to conduct negotiations for proposed free trade agreements to settle differences on issues such as automobiles, medical devices, and the movement of professionals.
• Expectations from the FTA:
  • India has demanded greater access for its skilled professionals from sectors like IT, and healthcare in the UK market, as well as market access for several goods with zero customs duties.
  • The U.K. has sought a significant reduction in import duties imposed by India on goods such as scotch whiskey, automobiles, lamb meat, chocolates, and some confectionary items.
  • The U.K. also wants more opportunities for U.K. services in Indian markets such as telecommunications, and legal and financial services.
• Points of contention:
• Issues that need resolution include rules of origin; intellectual property rights (IPRs); social security agreements; duty concessions on electric vehicles, scotch whiskey, lamb meat, chocolates and certain confectionary items; and liberalisation of norms in services sectors like banking and insurance.
• India has expressed concerns over any attempts to compromise on the production of generic medicines, which are a significant life-saving intervention.
• Bilateral investment treaty: The proposed bilateral investment treaty (BIT) is being negotiated as a separate agreement between India and the U.K.
• The treaty could help promote and protect investments in both countries although both countries have yet to resolve their differences over the mechanism for dispute settlement.
• India has proposed to first utilize all local judicial remedies for the settlement of disputes before initiating an international arbitration.
• The FTA is significant for India as it could serve as a template for its discussions with the EU and EFTA countries.

Why is the India-UK FTA important for India?

• Increasing Exports: A successful FTA between India and the UK will help boost bilateral trade.
  • This will encourage exports in sectors such as textiles, leather goods, footwear, etc.
  • Moreover, these sectors are employment-intensive which will further benefit the economy and the workforce.
• Facilitate trade in services: India and the U.K. believe that the FTA will enable certainty, predictability, and transparency in bilateral trade.
  • This will lead to the creation of a mutually beneficial, liberal, competitive, and facilitative services regime across sectors like IT/ITES, healthcare, education, etc.
• Focus on the West: India has increasingly focused on completing trade deals with its Western partners - the U.S.A., the U.K., and the EU - since opting out of the Regional Comprehensive Economic Partnership in 2019.
• Strategic Advantage: India believes that stronger bonds between India and the U.K., which is also a permanent member of the UNSC, can be developed through trade.
  • This will help the country seek the U.K.’s support on global issues such as reform of multilateral institutions, dispute settlement, etc.

Conclusion

• The ongoing negotiations between India and the U.K. for a Free Trade Agreement hold strategic significance and carry economic, diplomatic, and geopolitical implications. It will provide opportunities for enhanced bilateral trade, cooperation in various sectors, and reinforce India's focus on global partnerships for sustained growth and influence.

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FAQs

MCQs

Question: The emerging trading blocs in the world, such as NAFTA, ASEAN, and the like, are expected to : (UPSC CSE 1996)

(a) act as constrictions in free trade across the world

(b) promote free trade on the lines laid down by the WTO

(c) permit transfer of technology between member countries

(d) promote trade in agricultural commodities between countries of the North and South

Question: Consider the following statements:

1. FTA members shall not erect higher or more restrictive tariffs on trade with non-members than prior to the formation of the FTA.
2. It encourages trade protectionism.

Which of the above statements is/are correct?

(a) 1 only

(b) 2 only

(c) Both 1 and 2

(d) None of the above