India and UK to finalise early harvest trade deals by 2021, before comprehensive FTA
Post-Brexit, India and UK may finalise trade agreements in areas like pharmaceuticals, fintech, chemicals, defence manufacturing, petroleum and food products by 2021, because the two countries are keen on early harvest deals while continuing negotiations for a comprehensive trade agreement (FTA), two officials said.
India and UK have a shared commitment towards a trade agreement, but such negotiations are complex and will take longer. Meanwhile, the first harvest proposition will help the 2 partners grab the low-hanging fruits within the framework of a comprehensive trade agreement, they said requesting anonymity.
“The two sides are performing on the finer details concerning about five-six sectors as some announcements are expected during UK Prime Minister Boris Johnson’s India visit in January 2021,” one among the officials said.
Johnson is that the chief guest at India’s Republic Day celebration on January 26, which may be a significant development in terms of strategic relations between the 2 countries especially after Brexit, he said.
“Prime Minister Narendra Modi spoke to Prime Minister Johnson on November 27, where the 2 leaders hoped for a quantum jump in overall India-UK partnership post-Brexit as they saw huge potential for enhancing collaborations in areas of trade, investment, research project , energy, defence, security and global climate change ,” a second official said.
The officials mentioned above said that while some key trade deals are expected by 2021, a comprehensive trade deal between India and UK is predicted in two-three years.
“India is extremely cautious while signing any FTA due to its past experience. Various FTAs signed in hurry by the previous governments, particularly with the Asean, are under review as these deals are heavily tilted against Indian interests,” the second official said.
Co-chairing the 17th Asean-India Economic Ministers Consultations on August 29, commerce minister Piyush Goyal had said that FTAs had to be “mutually beneficial”. He had asked for an early review of the Asean-India trade Goods Agreement (AITIGA) because the trade pact was hurting India’s interest, as HT reported on August 30.
According to officials, trade negotiations with UK are supported the principle of mutual benefit and arriving at an agreement is comparatively easy due to the bilateral nature of negotiations. Negotiations of multilateral trade deals are cumbersome and time-consuming, they said.
Abhishek A Rastogi, partner at firm Khaitan & Co, said India should take care of larger and long-term implications of FTAs. “The agreements [with UK] should clearly mention the aspects associated with the country of origin of the products and therefore the percentage useful addition as these issues are material of debate,” he said.
“At the very inception, both the countries should have clear understanding with reference to bilateral investment treaty, which allows for an alternate dispute resolution outside the host state jurisdiction. The relevant clauses shouldn’t be legally open ended… [to encourage] investments in both jurisdictions,” he said.
Sanjay Aggarwal, president at the PHD Chamber of Commerce and Industry, said this is often the “right time” to maneuver forward with an early harvest deal between India and UK. “India is usually keen to maneuver from a bilateral trade agreement to FTA… I believe, post Brexit, the complementarities between the 2 dynamic economies will rise exponentially,” he said.
“The areas like drugs and pharma, fintech, chemicals, defence manufacturing, food and beverages, petroleum products and gas are the foremost growth promising areas of Indian economy and have strategic competitive advantages within the international marketplace for trade and attracting investments,” he added.
The trade relations between the 2 countries have severely stagnated during the last decade, he said. “The bilateral merchandise trade between India and UK increased only from $11 billion during 2009-10 to around $16 billion during 2019-20. we’ve to proportion the quantity to a trajectory with the exploration of untapped potential,” he said.
India’s main exports to the united kingdom are articles of apparel and clothing accessories, power generating machinery and equipment, petroleum, petroleum products and related materials, miscellaneous manufactured articles, textile yarn, fabrics, made up articles, footwear, medicinal and pharmaceutical products, road vehicles and other transport equipment.
The main imports from the united kingdom to India are power generating machinery and equipment, non-ferrous metals, ferrous ores and metal scrap, general industrial machinery and equipment and machine, transport equipment, beverages, electrical machinery and appliances and electrical parts, professional, scientific and controlling instruments and appliances, chemicals.