India-UK Free Trade Agreement: Balanced Standards to Facilitate Exports and Implement Safeguards

The India-UK Free Trade Agreement (FTA) has introduced a groundbreaking “coequal” rule under its product-specific origin norms, marking a significant shift in trade policy. This innovative provision allows producers to qualify for FTA benefits by meeting any one of several origin criteria, enhancing flexibility while tightening checks against tariff misuse. The agreement, finalized on May 6, is set to provide substantial benefits for both nations, particularly in labor-intensive sectors.

New Coequal Rule Enhances Flexibility

The newly established coequal rule under the India-UK FTA represents a notable evolution in trade agreements. Unlike previous FTAs that adhered to a single origin criterion, this agreement allows producers to meet any one of multiple criteria to qualify for tariff concessions. These criteria include wholly-obtained norms, value-add thresholds, and tariff transformation. This flexibility is designed to accommodate the complexities of global supply chains while ensuring that the benefits of the FTA are not exploited. A source involved in the negotiations emphasized that this approach secures rules of origin, facilitating improved access for both countries. The introduction of coequal rules is expected to bolster trade relations and enhance the competitiveness of Indian products in the UK market.

Robust Compliance Measures

In addition to the coequal rule, the FTA incorporates the digital exchange of certificates of origin on a self-certification basis for the first time in any Indian trade agreement. This digital approach, combined with stringent compliance checks, aims to streamline processes and enhance enforcement. Officials have indicated that if risk parameters identify potential issues with a product, thorough checks will be conducted. These measures are crucial in preventing the circumvention of trade rules and ensuring that low-quality goods do not flood the market. Experts believe that these robust compliance mechanisms will help mitigate any misuse of duty concessions granted by India, thereby protecting domestic industries.

Significant Trade Benefits for Both Nations

The India-UK FTA is poised to deliver substantial trade benefits once ratified by both governments. India has committed to providing zero-duty access for 99% of its exports to the UK, which will significantly boost sectors such as textiles, marine products, leather, toys, and auto parts. On the other hand, the UK has pledged to reduce tariffs on 90% of product lines, with 85% of these becoming fully duty-free over the next decade. This reciprocal arrangement is expected to enhance trade volumes and foster economic growth in both countries, particularly in labor-intensive industries that are vital for job creation.

Implications for Future Trade Agreements

The innovative coequal origin rules established in the India-UK FTA may set a precedent for future trade negotiations, particularly in ongoing discussions with the European Union. The EU has already suggested implementing similar rules specific to textile inputs, such as spun yarn. With the global apparel trade projected to reach $2.37 trillion by 2030, the flexible yet robust rules of origin in the India-UK FTA are anticipated to play a critical role in enhancing India’s competitiveness in international markets. As India’s home textiles and composites markets continue to grow, the FTA is expected to safeguard domestic interests while promoting exports.

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