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regular-article-logo Thursday, 02 May 2024

UK trade mission on ‘last gasp’ mission to clinch free trade deal before Indian elections

Sunak’s Conservatives fear India may hold out until after UK election in hopes of better deal from a Labour government

Paran Balakrishnan Published 06.03.24, 11:45 AM
Representational image.

Representational image. File picture

The British have embarked on a “last-gasp” effort to clinch a free trade deal with India before the looming Indian general elections pull down the curtain on negotiations. But unless the UK is prepared to make big concessions, the delegation that flew to India could be on “Mission Impossible.”

A UK government official told local media ahead of the delegation’s departure Monday that the team led by a senior civil servant was making one “last-gasp attempt to secure an FTA before the Indian election campaign pauses talks”. India’s Model Code of Conduct will go into force in a few weeks once the election dates are published.

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The India-UK FTA pact would be the most deep and wide-ranging trade agreement ever signed by India. Of the 26 chapters, in-principle agreement or broad consensus has been reached on 24 chapters. For Britain, an FTA with India would be the biggest trade prize since Brexit.

But there may be just too many stumbling blocks in the way of a pre-election FTA pact such as India’s demand for more visas for Indian workers, analysts say. India also wants the green light to claw back social security payments Indian workers, mostly in the IT sector, make while working temporarily in the UK.

Easier visa entry for Indians is a big no-no for the far Right of Prime Minister Rishi Sunak’s Conservative party. Sunak is already in hot water with Conservative hardliners over just-published net migration that hit a new high of 745,000 in 2022. And exempting Indians from paying social security would be a blow to the cash-strapped UK treasury which would lose millions of pounds.

Britain also wants India to cut tariffs on goods such as Scotch whisky while India wants lower duties on its textile exports. Other differences have resurfaced during the talks, including Britain’s push for India to open up its protected legal and other professional services to UK citizens.

Complicating matters has been a visit to India last month by opposition Labour shadow business secretary Jonathan Reynolds. The Labour politician met trade minister Piyush Goyal. New Delhi believes it could potentially wrest better terms from a Labour government which polls indicate British voters will elect in an expected autumn election, according to the Guardian newspaper.

While possibly a pressure tactic, “UK negotiators are hearing from India that they will get more out of Labour on visas and social security. That has been the impact of Labour’s trip to India and meeting with trade minister Piyush Goyal,” a British official said.

The hurdles to be addressed in the 14th round of talks that began in 2022 remain sizeable. They include business mobility, Scotch whisky, automobiles, farm products like Stilton and cheddar cheese, pharmaceuticals, rules of origin, and a separate agreement to enhance bilateral investments. Britain wants India to reduce its Scotch whisky tariffs while India wants lower duties on textile exports.

Scotch whisky has always been a stumbling block in India-UK trade talks. India is now the world’s largest Scotch importer by volume and the UK wants a duty reduction that would enable it to sell more. But India also has a strong and politically powerful domestic liquor industry which is keen to ensure that duties on Scotch are not brought down.

Britain also wants India to open up its protected legal and other professional services to UK workers and access to Indian government procurement, areas that India isn’t in accord with.

UK trade minister Kim Badenoch is already saying that an FTA with the Gulf Cooperation Council looks likely to materialise faster than with India. The UK Department of Business and Trade says the government will “only sign a deal (with India) that’s fair, balanced and ultimately in the best interests of the British people.”

Meanwhile, Labour, while denying it has conducted any “shadow” trade discussions with India, says if the UK government fails “to deliver on another one of their promises (of an FTA), they will have only themselves to blame.” Labour says the party’s aim always has been “to deepen the connections between our two great trading nations.”

Commerce Minister Piyush Goyal is indicating India is in no hurry to do anything. He says India “should never rush trade negotiations, they are going to impact the country for years and years to come.” Some trade analysts suggest India should tread carefully on a deal with Britain as any concessions New Delhi makes will likely serve as a template for other FTAs such as with the EU.

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