The high commissioner of India to UK, Vikram Doraiswami, has a tough task at hand. While dealing with the political winds of change in London, he has to ensure that the India-UK free trade agreement (FTA), which missed the Diwali deadline as promised by former UK Prime Minister Boris Johnson, is signed at the earliest.
While a politically stable government under UK Prime Minister Rishi Sunak will be the key to delivering a successful FTA, both countries are yet to reach an agreement over a range of subjects including import tariff, investments, data policies, and duty on cars.
“It will not be an emotional deal from either side. It will be a pure-play business deal,” a top diplomatic source in New Delhi tells ET Prime.
At a media briefing last week, external affairs ministry spokesperson Arindam Bagchi said “both sides are working sincerely on the free trade agreement”. The issue of the FTA had also surfaced in the first telephonic conversation between the prime ministers of the two countries on October 27.
British Indian businessman Karan Bilimoria, a strong advocate of UK-India ties, tells ET Prime, “The UK-India FTA negotiations are progressing extremely well with 16 chapters having been completed. It is serendipity that in the build-up to the conclusion of this FTA, we have, for the first time in history, a prime minister of the UK of Indian origin. It is not only a matter of great pride for the 1.5 million Indian diaspora in the UK, the living bridge between the UK and India, but also for the 30 million Indians around the world and the 1.4 billion Indians in India”.
While that is indeed encouraging, diplomats of both the countries indicate that sewing up a comprehensive deal will take time.
A missed deadline
Under the leadership of Boris Johnson in April, the two sides had set a Diwali deadline for concluding the FTA. But the deal got delayed due to differences over certain matters such as migration mobility. While India took a hard stance on its demand for easier access to skilled Indian workers, Liz Truss stepped down as UK’s prime minister after interior minister Suella Braverman courted controversy by saying that a trade deal with the South Asian nation would increase migration to the UK.
“Diwali time was not met because of Suella’s outburst. But largely, I believe, because of only 10 of the 20 or so sectors for the FTA have actually been finalised to date ready for signature — the tricky ones on tariff, investment, data, cars etc., are still to be finalised, requiring political inputs,” says Rahul Roy-Chaudhury, senior fellow for South Asia, the International Institute for Strategic Studies, London.
According to top diplomats in the UK, India’s data protection bill, which is under works, won’t be a deal breaker for FTA. However, they point out that data localisation will have an impact on businesses. Market access is critical to UK companies to do business in India and hence they would want free flow of data for commercial purposes.
“Visas, however, are likely to be just one of the issues. There are still ongoing negotiations about other issues such as the UK recognising sanitary and phytosanitary rules and India opening legal, financial, and services trade to UK businesses and lowering tariffs on the likes of scotch whisky,” says Matthew Lesh, head of public policy at UK-based think tank, Institute of Economic Affairs (IEA).
With Sunak taking over as the UK prime minister, the FTA is expected to get the much-needed impetus. However, Chaudhury believes Sunak would want the FTA to be ‘thick’ and a more comprehensive one rather than a quick ‘thin’ trade agreement.
For now, no one knows Sunak’s policy direction. However, the fact that Braverman’s presence in the cabinet means that a tough negotiator is back on the table on ‘migration mobility’ issues, say policy experts.
A comprehensive deal
According to political experts, under the Johnson and Truss premierships, the UK needed the FTA more than India, largely for ‘political purposes’ to publicise the UK’s trade deal with a major economy after Brexit.
“But under Sunak’s premiership, my sense is that this is not the case anymore,” points out Chaudhury. The reason for this is that since UK's domestic economic crisis is worsening, foreign policy is a distant priority for the country. According to policy experts, Sunak does not have the ‘stakeholding’ for an FTA like Johnson or Truss. Moreover, Braverman’s return as the home secretary and her focus on bringing down immigration will make the negotiations tougher.
“It is going to be a ‘long haul’ for an early conclusion of a ‘comprehensive and balanced FTA’ — since the UK’s position on the threshold of tariffs is also expected to harden under Sunak. Hence, negotiations will be tougher and will go into the next year,” says Chaudhury.
In August this year, India overtook China as the largest nation being issued sponsored study visas in the UK. In the one-year period ending June 2022, Indian nationals received nearly 103,000 work visas (which includes skilled and seasonal workers) — a 148% jump over the previous year. Indian nationals continue to be the top nationality-granted skilled worker visas, accounting for 46% of all skilled work visas granted globally.
Bilimoria, who as the president of the Confederation of British Industry has been personally involved in the first two FTAs (with Australia and New Zealand) the UK has completed since leaving the European Union, says these are extremely comprehensive agreements covering a wide range of areas. “Although the proposed Diwali date is now behind us, it would take a little longer and have a more comprehensive deal as this year, marking 75 years of India’s independence, is a watershed year of the UK-India relationship where we can take things to another level.”
Read More at https://economictimes.indiatimes.com/prime/economy-and-policy/no-quick-fix-why-the-uk-india-fta-is-likely-to-be-an-elaborate-deal-under-rishi-sunak/primearticleshow/95387041.cms