Commerce and Industry Minister Piyush Goyal has said that he is hopeful of India and the UK concluding a trade deal by the end of the year. Goyal and his counterpart from the UK, Trade Secretary Anne-Marie Trevelyan, formally launched negotiations for a Free Trade Agreement on Thursday.
Trevelyan travelled to India to hold talks with Goyal and said they are aiming at a future-facing deal that will accelerate the business the two sides do together.
The first round of negotiations will begin on January 17. Future rounds of negotiations will take place approximately every five weeks. The Indian negotiating team will be led by Nidhi Mani Tripathi, Joint Secretary, Department of Commerce, and the UK negotiating team will be led by Harjinder Kang, Director for India Negotiations at the Department for International Trade.
The two sides are aiming at diversifying and strengthening supply chains under a comprehensive FTA. They are hopeful that it can unlock economic benefits for both India and UK across a range of sectors, including our research partnership which is already worth 400 million pounds. The example of the partnership between Serum Institute of India and AstraZeneca in producing Covid-19 vaccines in record time is being cited as a template for the partnership in R&D.
Since the exit of the United Kingdom from the European Union, both sides have already agreed to double the bilateral trade by 2030. This was part of the Roadmap 2030 announced by Prime Minister Narendra Modi and Prime Minister Boris Johnson in May 2021.
UK-India economic relationship is already strong and bilateral trade totalled over £23 billion in 2019, supporting nearly half-a-million jobs in each other’s economies, as per the British High Commission.
The British High Commission also mentions that the deal would “position India as a trusted trade partner in the region. India is at the heart of the Indo-Pacific, a region where half the world’s people live and 50% of global economic growth is produced. A new economic partnership with India, alongside UK membership of the massive Asia-Pacific trading bloc, CPTPP, will create a pillar in the region supporting free and fair trade.”
The mention of free and fair trade in the Indo-Pacific also points to the critical China factor as countries in the region try to reduce their dependence on China for manufacturing. A lesson that the pandemic has taught all those who were heavily invested in China.
The vulnerabilities in supply chains have been exposed during the Covid-19 pandemic. An analysis by Deloitte says it is especially true for “those who have a high dependence on China to fulfil their need for raw materials or finished products”.
Here’s where another crucial trade deal could come into play for India.
In September, Australian Foreign Minister Marise Payne has indicated an “early harvest” in a trade deal between India and Australia. She had said, “Now we see ourselves in a structured and regular discussion on how to progress towards Comprehensive Economic Cooperation Agreement (CECA). An early harvest towards the end of this year.”
At the inaugural 2+2 dialogue between the two Indo-Pacific countries, External Affairs Minister S Jaishankar said, “We also underlined our commitments to creating secure and resilient global supply chains. We welcomed the renewed vigour with which both sides are now engaging on trade issues to fully expedite the complementarities between us.”
China used it trade partnership with Australia to punish it for raising the issue of the origin of the novel coronavirus at the World Health Organisation.
China was Australia’s largest trading partner but as per the Australian Department of Foreign Affairs and Trade, the two-way trade declined 3% in 2020 and “a series of trade restrictive measures by China has also impacted Australian goods exports to China, which were around 7% lower in the second half of 2020, compared to the second half of 2019.”
Economic diplomacy is playing an increasingly important role and influencing foreign policy. The Ministry of External Affairs on its website (dated August, 2003) said that while India may have been wary of opening up its markets under pressure of WTO but has been “willing to loosen control over its economic space through a variety of bilateral free trade arrangements.”
It adds, “New Delhi hopes that bilateral free trade arrangements will let this happen in a controlled manner and give Indian industry time and space to compete in markets around the world in the coming years.”
However, US has been accusing India of very high tariffs and an impediment in increasing bilateral trade. India rejected these accusations by the former US President Donald Trump who took on India publicly on Twitter over the issue. India says its tariffs are well within WTO rules.
As a result of this disagreement the much touted India-US trade deal went cold two years ago during the Trump tenure and has not been kick-started by the Joe Biden administration either.
Former head of the US-India Business Council, Nisha Desai Biswal said in an interview to News18.com in September that India and US “suffered from mismatched expectations on what we wanted to prioritise in a trade agreement.”
She also explained why she believes moving forward on trade issues was important. She said, “For India to meet its strategic ambitions and aspirations, which the US shares and supports, it needs to be a global economic power. And to be a global economic power, it needs to be a part of the global economic system. For the US, we need to overcome the hesitation on trade that has played in prior administration and perhaps in the current administration as well.”
This again is important in the context of countering China in the region. China is not just an economic competitor with India but has also been displaying territorial aggression in eastern Ladakh for over 20 months.
Hence, many analysts believe that apart from countering China in the military realm, it was important for India to start imposing economic costs as well, much of which can only be achieved by diversification of supply chains where India can play a crucial role.
So, as they say it’s important now than ever for India to put its money where its mouth is.