News: Recently, India and UK formally launched the negotiations for free trade agreement (FTA).
Why India and UK trade deal will be “a new age FTA”?
One, negotiations are aimed at achieving a “fair and balanced” FTA. It covers more than 90% of tariff lines. It will not only cover goods, services and investments, but it will also include intellectual property rights, geographical indications, sustainability, digital technology and anti-corruption.
Two, both countries are respecting sensitive issues of each other. Hence, there can be an interim pact to cover low-hanging fruit, which will be followed by a full-fledged FTA. Since India has a poor record in concluding FTAs, that’s why it can be a good strategy.
Read more: https://forumias.com/blog/ink-india-britain-free-trade-unlock-new-opportunity/
Why concluding FTA with the UK is important for India?
One, since the pandemic has disrupted the supply chains, India cannot afford to lose more time in restructuring. Hence, India is showing new seriousness and negotiating 16 new trade pacts with different countries.
For example, Canada, the United States, the European Union and South Korea. The India-U.K. FTA will be the next in line after FTA with the UAE and Australia.
Two, new trade blocs in the Indo-Pacific such as the Regional Comprehensive Economic Partnership (RCEP) and the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) are gaining significance. Hence, the government is showing flexibility in engaging with its partners to balance trade pacts.
Three, China’s economic power and influence is increasing. Hence, strategic partnerships without strong economic relations have no meaning in the Indo-Pacific.
Read more: https://forumias.com/blog/india-and-uk-launch-free-trade-agreement-negotiations/
Why UK is interested in finalizing trade deal with India?
First, to adopt a more robust Indo-Pacific strategy. Also, the U.S. which is U.K.’s closest ally is focusing more on Indo-Pacific and the U.K. also recognizes the importance of a free and open Indo-Pacific.
For instance, Australia, the United Kingdom, and the United States (AUKUS). It has given UK a greater voice in the region.
Second, trading implications of Brexit and changing approach towards China requires a diversification of trading partners. The U.K. is also trying to find out a direction and purpose to its post-Brexit foreign policy through its Indo-Pacific tilt.
Three, the Integrated Review of British foreign, security, development and defence policy was released in March 2021. It underlined that the UK will deepen its engagement in the Indo-Pacific to establish a greater presence. Hence, a trade deal with India is critical to integrate the U.K. economically to the Indo-Pacific.
Four, trade and investment are a key dimension which has necessitated greater access to non-EU markets. And, Indo-Pacific is now largely the force behind global economic growth.
Five, the U.K. is looking to reap the benefits of its historical connections. It also wants to increase its credibility with respect to efforts made to combat climate change. It will help in establishing the UK as a serious player in the region.
Six, Indian economy is rapidly growing, and the trade deal will help UK to increase its access to new market across numerous industries from food and drink to services and automotive.
Source: This post is based on the article “India calling with quite a lot of trade in mind” published in The Hindu on 5th Feb 2022.
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