India-UK Trade Pact Negotiations Face Delays Due to Key Issues
The ongoing negotiations for a free trade agreement (FTA) between India and the UK, along with two other significant pacts, are expected to take longer than anticipated. Sources indicate that unresolved issues remain, prompting both nations to continue discussions. The agreements under consideration include a bilateral investment treaty (BIT) and a social security agreement, officially known as the Double Contribution Convention Agreement. Despite progress, key sticking points have delayed the conclusion of these talks.
Unresolved Issues in Negotiations
The negotiations for the FTA, BIT, and social security agreement have encountered several critical issues that need resolution. Among these are the inclusion of a sunset clause in the investment treaty, the UK’s newly introduced carbon tax, and India’s demand for data localization requirements. Sources familiar with the discussions have confirmed that while substantial progress has been made, further meetings will be necessary to address these sticking points. The initial plan was to announce the conclusion of these negotiations during Commerce and Industry Minister Piyush Goyal’s visit to London on April 29. However, last-minute differences led to a postponement of the announcement.
During his two-day visit, Goyal engaged in multiple rounds of discussions with UK Secretary of State for Business and Trade, Jonathan Reynolds. After his engagements in London, Goyal traveled to Oslo and Brussels before returning to London on May 2. He is expected to arrive back in New Delhi on Sunday. The ongoing negotiations have resumed after an eight-month hiatus, with 14 rounds of talks completed since their launch on January 13, 2022.
Trade Benefits and Market Access
The proposed FTA aims to reduce or eliminate customs duties on a wide range of traded goods while easing rules for services trade and investment. India is particularly focused on gaining greater market access for its skilled professionals in sectors such as IT and healthcare. Additionally, India seeks duty-free access for various goods. Conversely, the UK is advocating for lower tariffs on its exports, including scotch whisky, electric vehicles, lamb meat, chocolates, and confectionery. The UK is also interested in expanding access to India’s services sector, covering areas like telecommunications, legal, financial services, banking, and insurance.
The agreement currently under negotiation consists of 26 chapters that encompass goods, services, investment, and intellectual property rights. The bilateral trade between India and the UK has shown significant growth, reaching USD 21.34 billion in 2023-24, up from USD 20.36 billion the previous year. The average duty on Indian goods imported into the UK currently stands at 4.2 percent.
Potential Gains for Indian Products
According to the Global Trade Research Initiative (GTRI), several Indian products could benefit from the proposed trade pact due to relatively low-to-moderate UK tariffs. Items such as textiles, apparel, footwear, carpets, marine goods, grapes, and mangoes are expected to gain from the agreement. The FTA is seen as a crucial step towards enhancing trade relations between the two nations, with both sides expressing optimism about the potential outcomes.
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