The India-UK trade deal and why it is on the ‘verge of collapse’

The long-awaited trade deal between India and the UK is apparently on the brink of collapse.

British Prime Minister Liz Truss had pledged to finalize the deal after her predecessor Boris Johnson set the deadline, preferably by Diwali, but “certainly by the end of the year.”

Let’s take a closer look at the deal and why it’s in trouble:

The trade agreement and its meaning

Negotiations on the deal began in January 2022 with Truss as International Trade Secretary, laying the groundwork by signing the India-UK Enhanced Trade Partnership (ETP) for the then Boris Johnson-led government in May last year.

From Bloomberg, the deal would be India’s largest and most ambitious free trade agreement.

A free trade agreement is an agreement between two or more countries to reduce or eliminate import-export tariffs between them. Under a free trade agreement, goods and services can be traded between the countries concerned with little or no tariff barriers.

It essentially liberalizes trade and removes protective barriers to industry and production.

In such pacts, two countries scrap or reduce customs duties on the maximum number of goods traded between them, in addition to easing standards for promoting investment and trade in services.

New Delhi also wants to collect half a billion pounds in payments from Indian workers to the British social security system as part of the deal, individuals familiar with the matter told the outlet.

The UK’s offer to restrict the movement of skilled workers would skew the proposed trade deal in Britain’s favor and would not be a win-win for either country, they told the outlet.

From Bloombergthe deal could act as a ‘springboard’ allowing India to negotiate a free trade agreement with the EU, which is a major export destination along with the US.

Bilateral trade rose to $17.5 billion in 2021-22, compared to $13.2 billion in 2020-21. India’s exports were $10.5 billion in 2021-22, while imports were $7 billion.

Why is the deal in trouble?

The deal is in trouble after Home Secretary Suella Braverman, referring to India, made comments about “visa overstayers.”

UK Home Secretary Suella Braverman said she was concerned about having an open-border migration policy with India as this is not what people voted for with Brexit. AP

“I’m concerned about having an open-border migration policy with India because I don’t think that’s what people voted for with Brexit,” Braverman said. The spectator.

Asked about visa flexibility for students and entrepreneurs under a free trade agreement between India and the UK, she said: “But I do have some reservations. Look at the migration in this country – the largest group of people who stay too long are Indian migrants.” “We even reached an agreement with the Indian government last year to encourage and facilitate better cooperation in this area. It has not necessarily worked very well.”

According to British media reports, ministers in New Delhi were “shocked and disappointed” by Braverman’s “disrespectful” comments.

“There is still a lot of goodwill, but if certain individuals are still embedded in the… [UK] government it will cripple talks,” the paper quoted a source as saying.

“Mobility has been India’s main demand and everything else – financial services, banking, education, rules of origin for whiskey, etc. depends on the mobility demand. And Suella has gone and taken the rug out from under that mobility question,” a senior UK government source said. The times.

“They were apoplectic. Mad doesn’t even come close to how angry they are,” said another.

From BloombergIndia responded to Braverman by saying that ‘both sides must respect the agreement regarding mobility’.

India’s High Commission said that “comments on these matters may not be appropriate given that negotiations are underway and any settlement will include issues of concern to both sides”.

It also refuted Braverman’s comments about Indian ‘overstayers’ and said action had been taken.

“As part of our wider Migration and Mobility discussions, the Government of India has committed to working with the Government of the UK to facilitate the return of Indian citizens who have exceeded their visa period here in the UK . According to the data shared with the Ministry of the Interior, action has been taken against all cases referred to the High Commission, as it is today. Furthermore, the UK has also committed to fulfill certain obligations as part of the Migration and Mobility Protocol, on which we await demonstrable progress,” the statement read.

Diwali deadline shrinking, Modi trip likely out

The odds of meeting the Diwali deadline for the pact drafted by former Prime Minister Boris Johnson are now believed to be declining.

Strategic experts on both sides now believe that if the Diwali deadline for the free trade agreement is still met, the result would be a much less comprehensive deal than expected, leaving key sectors open for future negotiations. Trade Secretary Kemi Badenoch appeared to lay the groundwork for this last week, when she said a free trade agreement with India wouldn’t mean “we can’t do more later”.

The IndiaUK trade deal explained and why it is on the brink of collapse

Prime Minister Narendra Modi.

A report in Politics claimed plans of Prime Minister Narendra Modi’s visit to the UK to Diwali to sign a free trade agreement are now also unlikely to go ahead.

A well-known businessman told the outlet that Braverman has “damaged the political atmosphere” of the deal and the public perception of the UK in India, adding that the Home Secretary’s comments “didn’t sit well with India at all”.

The businessman added that there are “many important chapters to be closed” [in the deal] who have not progressed much in the past month.”

Doubts about the deal “are broader” than hanging up on migration, the person added.

The visit is “not going ahead,” said a second businessman familiar with the workings of the Indian government.

The October 24 deadline will be “difficult” to meet, they said, adding: “I’m not sure if the entire [Free Trade Agreement] will be agreed upon by then.”

Headache for Truss?

This can become a huge headache for Truss.

Truss is already under pressure to negotiate trade deals and could be forced to offer India concessions as indicated Bloomberg.

Politics noted “frustration” within 10 Downing Street and the Commerce Department over Braverman’s comments.

“The Indians are notorious negotiators and inherently protectionist,” a trade department official told P.olitics. “So it will be difficult to reach an ambitious deal, but we are absolutely determined to work our way through it.”

Truss was also excited to close the deal.

Coin quoted the Prime Minister as saying: “I want to get this trade deal done, preferably by Diwali, but definitely by the end of the year, and I want to make sure the trade deal is as deep as possible and covers everything from life from science to technology to agriculture.”

Failure will deal another blow to its post-Brexit view that the UK can make new deals in markets previously closed due to its European Union membership, the piece said.

While the perception is that Braverman is on a collision course with Truss, who is eager to close the free trade agreement before the Diwali deadline, the media report indicates that both are aligned on the issue of migration.

Meanwhile, India’s High Commissioner to the United Kingdom, Vikram Doraiswami, met Truss at an event in London on Tuesday evening, after which he tweeted: “Delighted and honored to greet HE PM Liz Truss @10DowningStreet tonight and to seek her guidance to help guide the very special partnership between India and the UK on trade, investment, defense and through the #LivingBridge.”

The Department for International Trade (DIT) reiterated the UK’s position that it would not sacrifice quality for speed.

It said: “We have a close, positive working relationship with India and a thriving trade partnership worth £24 billion in 2021. We continue to look for improvements to our current trade relationship. That is why we are negotiating an ambitious free trade agreement.

“We remain clear that we will not sacrifice quality for speed, and will only sign if we have a deal that represents the interests of both countries.”

With input from agencies

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