Boris Johnson looks to double India trade with FTA
Ever since the UK opted to move out of the EU post BREXIT, it has been looking at ways and means to expand its trade relationships with other countries on an individual basis. During Boris Johnson’s latest visit to India, one of the major items on his agenda was the expansion of Indo-UK trade. Indo-UK trade currently stand at $22 billion but, according to Boris Johnson, there is immense potential to more than double these trade volumes by 2030.
For Boris Johnson, a free trade agreement (FTA) with appropriate give and take would be the big feather on his cap. The setting of the meeting was also quite apt. Ahmedabad represents from the prime minister Modi comes. Gujarat is also home to two of India’s largest industrial groups viz the Reliance group and Adani group.
Interestingly, one of the major pitches that Johnson was making is collaboration on green technologies.
As things stand today, India is a very small partner for the UK. In terms of total volume of British trade, India ranks only 15th on the trade scale. India accounts for just about 1.7% of total UK trade.
However, both India and the UK are hoping that there could be further progress on the free trade agreement. While both the sides are interested in an FTA, neither side has committed on the extent to which they are willing to meet the other half way.
Typically, a free tree agreement (FTA) can take many forms. The most common type of FTA would entail the lifting of most tariffs on goods and services exports between the two countries. Ideally, this FTA should also chart a pathway to harmonising rules and regulations that slows cross-border transactions.
Currently, UK runs negative trade balances for goods and services, while India runs a deficit in merchandise goods but a surplus in services.
The bigger concern for UK is that they have not kept pace with other countries. For instance, between 2010 and 2019, UK’s exports to India dropped by 3%. However, during this period, many other countries made deep inroads into India.
In this period, US expanded its exports to India by 79%, Canada by 62% and even France by 58%. That is the loss of trade growth with India, that UK would first and foremost look to cover at the earliest. In fact, among the G7 nations, the UK was the only country to see a fall in exports to India in that period.
Analysts, even in the UK, are of the view that the UK did not do enough to further trade with India and other commonwealth members. They think the UK government needs to do a lot more including easing visa restrictions to the UK, concessions to students looking to study in the UK etc.
Today, any FTA is eventually a package deal and not just about economies and terms of trade. The UK India Business Council has been pushing for a Digital Services Agreement between India and the UK, which could open huge markets for both countries.
However, trade experts also blame India for the languidness. The view is that it is easier to achieve a memorandum of understanding with India than a full trade deal. India has a history of being protectionist and changing gears at short notice.
Even today, India has an FTA with Switzerland, but not with the US, EU, Australia or New Zealand. Both need to meet more than half way, if a trade deal has to fructify in a mutually beneficial way.
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