DURING the Brexit Referendum those pushing ‘Project Fear’ claimed the UK would suffer in trade deals from leaving the EU’s much larger trade bloc with its superior negotiating power. Well, I worked on an India-EU Free Trade Agreement report, and it has now taken 15 years of negotiation and the EU’s deal remains undone; whilst the UK has now bagged India’s biggest ever trade deal and has done so in just four years.
This is on top of the UK joining a trade bloc larger than the EU – the Comprehensive and Progressive Trans-Pacific Partnership (CPTPP) – the only European country to do so. We have also signed an Australian deal and are close to completing the same with Gulf countries (GCC) and Switzerland.
I watch these developments with interest, having been an MEP with 10 years on the International Trade Committee working on trade deals with Canada, New Zealand, Japan and Vietnam, I was responsible for preparing the European Parliament’s Report on the once-hoped for EU-India Free Trade Agreement. In the process I met Prime Minister Modi a number of times, a man representing potential 1.4 billion customers. Though India has only just overtaken the UK economy in size, it is on track to become the world’s third largest economy within three years.
This was always a trade deal worth having; and a huge Brexit win. In many trade deals, such as UK-Canada, the tariffs levied started comparatively low anyway, but Indian tariffs are astronomical. They have a high ‘luxury goods’ tariff of up to 150% and this hits our main British exports – high quality goods from Jaguar or Rolls Royce cars to exclusive gins and Scotch whiskies, with India already the world’s largest whisky market by volume.
This deal sees a huge cut in car tariffs from 100% to 10%, while exports of optical products, luxury knitwear from John Smedley to quality medical equipment by Smith and Nephew will all benefit. It will increase bilateral trade by £25.5 billion by 2040 and will be worth £4.8 billion a year. The Indian market should purchase £1.4 trillion by 2035. This is real: total trade with India has already boomed from £16.6 billion to £40 billion in a decade.
India has agreed to an immediate cut in half on whisky tariffs – from 150% to 75% then to 40% after 10 years. A British minister told me if whisky tariffs were substantially cut, Scotland would have to double whisky production – what an opportunity and one in the eye for SNP’s dreary anti-Brexit mantra.
The deal also boosts opportunities for professional and financial services, digital and technology, and for Indian government contracts worth £38 billion through 40,000 tenders a year in areas such as transport and energy, with a special status that avoids barriers set under ‘Made in India’ policies.
Trade deals are not just about exports by us, they are about imports for us as consumers too. This deal means cheaper shoes, clothes, some food and jewellery for UK consumers.
This Indian Free Trade deals also extends more into services. Some might joke about Indian call centres, but India has a high graduate count and has great entrepreneurs – 40% of companies in California’s Silicon Valley were established by Indians. This raises the tricky issue of ‘Mode 4’ of the WTO ‘General Agreement on Trade in Services’; referring to the ability of temporary workers ‘entering the territory of another to supply a service’. Mode 4 is controversial because it is misunderstood as a way round Immigration controls, especially when Indians now top visas granted by the UK. But Mode 4 isn’t immigration – it is for a limited duration, such as 6 months – and generally for individuals, not whole families. I see this as strengthening the British economy rather than taking jobs away.
What we see in this deal is not an increase in such visas but an exemption for paying UK NICs whilst working in the UK. This is less controversial but does open many questions on unfair competitive advantage and of hypocrisy just when UK workers are being hit hard by Labour’s increased NICs. Reassurance that the deal is reciprocal to deal with double taxation should answer the critics and will no doubt be confirmed by further ministerial statements when parliament asse4ss the deal.
All in all, a UK-India free trade deal can offer the UK’s exporters and consumers real opportunities and major reductions in damaging barriers, such as those 150% tariffs. The UK trade focus is moving Eastwards into the world’s biggest economic areas – not the EU, but the free acting CPTPP – forecast to account for 9/10ths of the world’s future economic growth. This is a case of ‘Go East Young Person!’
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Photo of whisky toasting by Anastasiia via Adobe Stock
