India and UK Collaborate to Address Trade Pact Implementation Challenges, Official Reports
India and the UK are actively addressing issues that have stalled the implementation of their free trade agreement, which was signed in July 2023. Commerce Secretary Rajesh Agrawal confirmed that an Indian delegation is currently in London to facilitate discussions aimed at operationalizing the pact. He stated that several issues have arisen since the agreement was signed, but they are being resolved.
Agrawal noted that UK Secretary of State for Business and Trade Peter Kyle recently met with Commerce and Industry Minister Piyush Goyal to discuss these matters. He expressed optimism about reaching a resolution, stating, “We are very close on all these issues, and we hope there will be a resolution.”
Key Issues in the Agreement
The primary sticking points include the UK’s steel safeguard measures and its proposed Carbon Border Adjustment Mechanism (CBAM). Starting July 1, 2026, the UK plans to limit tariff-free steel imports by reducing overall quota volumes by 60% compared to the current regime. Any imports exceeding this quota will incur a 50% tariff. This measure will specifically target steel products that can also be produced domestically in the UK.
In December 2023, the UK announced it would implement its Carbon Border Adjustment Mechanism from 2027. According to the Global Trade Research Initiative (GTRI), India’s exports worth $775 million to the UK could be impacted by this carbon tax, which will apply to products such as iron, steel, aluminium, fertiliser, and cement. The UK will become the second major economy, after the European Union, to adopt a CBAM-type mechanism.
Potential Impact on Indian Exports
The carbon tax could range from 14% to 24% of the import value once free allowances under the Emission Trading System (ETS) are fully phased out. In the fiscal year 2025-26, India’s exports of iron and steel and related products to the UK amounted to $893.4 million.
Additionally, Agrawal addressed the European Commission’s proposed sanctions package against Russia, which includes certain Indian entities. He stated that India is in discussions with the EU regarding this matter, emphasizing that India typically recognizes UN sanctions. Reports indicate that some Indian firms may be among 50 companies facing potential EU export-control restrictions under the bloc’s latest sanctions package against Russia.
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