Speaking on BBC News Channel regarding India UK Trade Deal this Thursday, 21st April, Lesley Batchelor OBE, international trade expert, explains:
Great excitement as the Prime Minister is in India to emphasise the importance of Free Trade Agreements and of India in particular as a great producer of goods and services. With a population of 1.325 billion it is fair to say they have a huge internal market of their own. The UK with a mere 67 million population would appear to make this what is known as an asymmetric trade deal. These deals take a long time to facilitate, and agree, in terms of both parties’ benefits for as many industry sectors as possible. (We have seen how industries can be left out with the Fishing industry.) The draft agreement on the table at the moment contains 26 chapters of which only 4 have been agreed to date although it is quite common to have an ‘interim pact’, if certain elements are clearly agreed. The Australians have just negotiated an interim pact for their wines reducing the tariff from 150% to 0%.
Focus for the trip
On this trip the UK is looking at strategic deals. These will focus on defence, cybersecurity, Research and Development, and healthcare from for the UK while India has a great deal to offer in terms of manufacturing, and potentially, offering an alternative to the Chinese Factory of the World for our beleaguered supply-chains.
Flood Gates
The Times of India reports that this visit is to talk about three issues defence, security, and education. It’s worth noting that two-way trade between India and UK is currently $50bn – 35 in services and 15 in goods. Despite these high numbers UK to India is only 13th for exports and 16th for imports just below Switzerland. However, Aljazeera quotes; TP Sreenivasan, India’s former permanent representative to the UN, who says, ‘what we don’t want is to lower tariffs too much because you can get flooded by their goods and that hurts domestic industry.’ Wise words as UK manufacturers are trying to assess the damage of Brexit, Covid, and now the lockdown of the Shanghai region, the Factory of the World, in terms of component parts and future prices of raw materials. Reshoring and reducing reliance on China, and now Russia, are long term propositions and cannot be achieved overnight.
ASEAN but not RCEP
Just as the UK, India has a growing trade imbalance too, net imports up from $137billion in 2015 to $161billion in 2020. Most of the imports to India stem from China. India’s previous policy of not engaging in FTAs has not necessarily created a more competitive manufacturing industry. Signing the ASEAN agreement was a great step forward in terms of recognising and collaborating in globalisation of trade. When the ASEAN countries signed up to the Regional Comprehensive Economic Partnership it was a cautious India that walked out of the negotiations as they were aware that this was a back door to wider access for China to the Indian market.
What next?
With UK cars being subjected to up to 100% tariff duties in India and Scottish Whiskey duties at 150% it is little wonder the PM wants to negotiate but could this be a flood gate that we can’t close?
