Proposed UK-India Free Trade Agreement – progress update

Background

In May 2021¹, the United Kingdom and India announced an enhanced trade partnership as the first stage in negotiating a comprehensive free trade agreement ("FTA"). Following Brexit², the UK has been free to negotiate FTAs with other countries. India is a key trade partner, with UK exports to India totalling £12 billion last year³ and UK-India trade valued at around £34 billion in 2022⁴. The enhanced trade partnership has the aim of increasing this significantly by 2030 and the UK-India FTA negotiations are currently in their eighth round.

Objectives

The UK government views India as an "important partner" and that a trade deal with India provides an opportunity to "deepen economic and strategic ties". India is estimated to be the world's third largest economy by 2050 and a trade agreement could allow UK and Indian businesses to benefit from lower trade costs, boosting economic activity in both countries' areas of competitive strength. A trade deal with India supports the UK government's strategy of "tilting towards the Indo-Pacific and championing free trade"⁵.

The UK's economic links with India are reportedly already significant, amounting to £23.3bn in 2019 and, by the UK government's estimates, an India trade deal could increase UK GDP by "around £3.3bn in 2035"⁶ (in 2019 prices), equivalent to an increase in UK GDP of 0.12% to 0.22% by 2035, depending on the depth of the negotiated outcome⁷. In terms of the impact on different sectors, the largest increases in economic activity could be in the UK transport equipment, manufacture of electrical equipment and motor vehicle sectors⁸, as well as certain agricultural and food sectors and the textile industry. A trade deal would have benefits for India as India is the third-largest exporter of services to the UK, and the FTA could potentially broaden access to the UK market for service firms in India. It could also bolster drugs and pharmaceutical industries of both countries.

Benefits

The UK government believes the key benefits of a trade deal with India include, inter alia:

• reduced barriers to trade in goods;
• increased opportunities for UK services and investment;
• supporting innovation and trade in the digital era;
• more jobs for UK workers; and
• creating opportunities for businesses across the UK, including small- and medium-sized enterprises.

The UK government stated that any deal with India must work for UK consumers, producers, and businesses and it was committed to upholding high environmental, labour, food safety and animal welfare standards. The projected economic benefits are seen by some as potentially greater than those from the trade agreements with Australia, New Zealand, and Japan⁹. However, there has been criticism that the UK government's negotiating objectives may be too general and high level in nature, with calls for a more overarching trade policy¹⁰ showing how trade fits in with the UK government's foreign, defence, environmental and domestic objectives.

From the Indian government's perspective, the FTA could boost its "Make in India" programme and assist in promoting deals in health care, defence, technology and other key sectors. India would also be seeking further opportunities for mobility of its workers.

Foreign lawyers and law firms practising in India

As trade in "services" is a key aspect of the FTA, one key issue for UK negotiators (with the Law Society of England and Wales also involved in discussions¹¹) was getting India to approve the removal of barriers in the Indian legal services sector preventing UK lawyers from practising international and foreign law¹². In March 2023, the Bar Council of India announced new rules liberalising some of the requirements¹³.

As a result of the new rules, foreign lawyers and law firms may practise foreign law, practise transactional and corporate work, M&A, joint-ventures, intellectual property matters, participate in international arbitration matters onshore in India, advise on international legal issues in non-litigious matters in India as well as other related matters, all on the basis of the principle of reciprocity. Foreign lawyers cannot, however, appear before any Indian courts, tribunals, or other statutory or regulatory authorities in India and the breach of this restriction may result in their registration being cancelled.

Latest rounds of the FTA negotiations

On 6 March 2023, the UK government published its joint outcome statement on the seventh round of negotiations of the UK-India FTA¹⁴. There were technical discussions across 11 policy areas over 43 separate sessions and entailed detailed draft treaty text discussions related to those policy areas. So far, 13 of the 26 policy areas have been agreed in relation to topics such as goods, services, investments and intellectual property rights.

The current eighth round of discussions expected at the end of April 2023 will see India and the UK try to discuss and agree the framework in relation to the exchange of offers in goods and services¹⁵. Based on recent reports, officials have stated that there are several areas where the UK and India are yet to reach agreement including in relation to areas of import duties on products such as automobiles, Scotch whiskey, discussions around visa concessions for business travellers.¹⁶

Conclusion

A free trade deal between the two countries makes economic sense for a number of reasons including because both nations are large exporters and importers of goods and services. Through the FTA, the UK intends to acquire a broader reach to the Indian market for its export items and given India is the third-largest services exporter to the UK, a trade agreement will broaden access for India to the UK market.¹⁷ An FTA being mutually beneficial for the aforementioned reasons, once concluded would be a win-win for both countries.