Syllabus
GS Paper 2 – Bilateral, Regional and Global Groupings and Agreements involving India and/or affecting India’s interests.
Context
India and the UK are in discussions for a Free Trade Agreement (FTA) aimed at minimizing tariffs and non-tariff barriers on goods and services.
Free Trade Agreement (FTA):
- An FTA is an agreement between two or more nations aimed at reducing or removing specific barriers to the exchange of goods, services, and investments.
FTA Objectives:
- The primary goals include streamlining cross-border transactions, enhancing investment opportunities, fostering mutual trade, and advancing overall business efficiency.
India-UK Free Trade Agreement (FTA):
- India-UK Free Trade Agreement (FTA) is a prospective bilateral trade arrangement designed to enhance economic connections between the two nations.
- Encompassing 26 chapters, it addresses various aspects such as goods, services, investment, intellectual property rights, rules of origin, and dispute settlement.
- Part of the UK’s 2021-launched Roadmap 2030 with India, the FTA is an integral component of this initiative.
- The Roadmap 2030 envisions a transformative relationship between India and the UK across trade, defence, security, climate change, health, and education.
Learning from the UK on FTAs: Key Considerations for India:
- Clear Strategic Objectives: The executive should transparently outline strategic objectives for FTA negotiations.
- Stakeholder Consultation: The executive must engage stakeholders, address concerns, and disclose information publicly.
- Scrutiny Committee Formation: India should establish a parliamentary committee, akin to the UK’s International Agreements Committee (IAC), for robust scrutiny.
- Parliamentary Ratification Debate: Before ratification, the executive should present the FTA to Parliament for thorough debate.
Benefits of India-UK FTA:
- For India –
- Blueprint for EU Agreement: Serves as a model for an agreement with the European Union, India’s 2nd largest trade partner.
- Trade Diversification: Aids India in diversifying trade partners, countering China’s regional influence.
- Foreign Investment Hub: India’s inaugural comprehensive deal with an industrialized nation attracts foreign investment and enhances market access.
- Sectoral Advantages: Benefits sectors like textiles, gems, cars, Scotch whisky, and wines by reducing tariffs and expanding market access.
- Addressing Non-Tariff Barriers: Tackles non-tariff barriers related to standards, regulations, and customs procedures that impede trade.
- Global Integration: Complements other trade pacts, facilitating India’s integration into the global value chain alongside agreements with the UAE, Australia, and Israel.
- Strengthened Bilateral Ties: FTA enhances the strategic partnership between India and the UK, based on shared values and interests.
- For the UK –
- Export Boost: Compensates for post-Brexit loss of access to the European Single Market, fostering increased exports to India.
- Market Access and Collaboration: Provides access to India’s expansive consumer market, skilled workforce, and innovation potential.
Challenges with the India-UK FTA:
- Regulatory Hurdles: Sectors like agriculture and manufacturing face stringent standards and technical requirements in the UK market.
- Impact on Least Developed Countries (LDCs): The FTA may adversely affect Least Developed Countries (LDCs), such as Bangladesh, which currently benefit from preferential access to the UK market.
- Geographical Indication (GI) Tag Issues: Differences in GI tag protection levels pose challenges; the UK seeks stricter enforcement, affecting the use of GIs based on product origin.
- Carbon Border Tax Implications: The UK’s potential tax on high-carbon imports, mirroring the EU’s carbon border adjustment mechanism (CBAM), could impact India’s exports.
- Complex Rules of Origin: Rules of origin become intricate due to modern manufacturing’s integration into global supply chains.
- Non-Trade Complexities: Issues like labor, sustainability, climate change, and emissions present formidable challenges for Indian negotiators beyond traditional trade concerns.
Way forward:
- Negotiating Elevated GI Protection: As FTAs thrive on mutual benefits, India should assertively negotiate with the UK for parallel Geographical Indication (GI) protection, ensuring a fair playing field for Indian products.
- Balanced and Reciprocal Trade Relations: To establish a more equitable and reciprocally beneficial trade dynamic, India must strive for a balanced relationship with the UK. This approach has the potential to unlock new markets and elevate the global reputation of Indian products.
Source: Indian Express
Practice Question
In the context of the India-UK Free Trade Agreement negotiations, enumerate the challenges involved in navigating this bilateral trade agreement, considering various dimensions. (Answer in 250 words)