Focus now shifting to specifics of boosting UK-India trade
The Hindu Business Line , Apr 14, 2017
The potential for growth in the India-UK trade following Brexit has been an issue that has cropped up frequently in the debate around Britain’s decision to leave the European Union (EU).
With the triggering of Article 50, the focus has shifted to the specifics of what the exit and UK’s trade partnership could entail, including the sectors that can benefit.
Recent sector-specific analysis, conducted by the Commonwealth, provides an initial picture of the move’s impact on trade, estimating that bilateral trade can rise by up to 26 per cent a year under an Free Trade Agreement (FTA) between the two nations. While much of the growth would come from reduction of tariffs by the Indian side (Indian tariffs are higher on average than the other way round - 14.8 per cent versus 8.4 per cent), it estimates that Indian exports to the UK could rise by as much as 12 per cent, with sectors such as the clothing, industrial, and mechanical appliances such as turbo jets and transmission shafts seeing strong growth.
The report also highlighted the opportunity for increasing the exports of services as well as new exports such as non-industrial diamonds, and specific mechanical devices. While the figures are likely to be on the optimistic side (envisaging a zero tariff scenario, and the diversion of trade from regions such as the EU), they provide a snapshot of the beneficial impact an FTA could have on stimulating a trade and investment relationship that has faltered somewhat in recent years.
“There is great potential for future growth in trade between Indian and the UK. This is especially as the most recent UK government figures show India has dropped out of the top 20 export markets for the UK,” says Pratik Dattani, Director of FICCI, Briatin. “The coming months will, no doubt, see a need for continued robust analysis of the impact on trade in different sectors.”
“Bilateral trade research and reports, such as the one by the Commonwealth Secretariat, offer empirical evidence and a pragmatic model for countries to understand the impact free trade can make,” says Sarosh Zaiwalla of Zaiwalla Solicitors. “While India has been negotiating a broad-based trade and investment agreement with the European Union since 2007, it has remained inconclusive…India was also unable to build and expand on its trade ties with the UK, as the country was part of the EU. But with Brexit, Britain offers a fresh start for India to engage on a whole and exciting new level on sectors, which have been largely dormant due to EU regulations.”
Working group audit
While there are concerns about Britain’s ability to simultaneously look at ways of strengthening relations with non-EU nations, at the same time, it is conducting negotiations with the EU. Virendra Sharma, the MP for Ealing Southall who had opposed Brexit, is also optimistic about the potential for growth in sector-specific trade going forward, particularly given the uncertainty around Britain’s negotiations with the EU. “The best option for Britain will be India.”
Britain cannot commence negotiations with India on a trade deal while it remains within the EU, but both nations have been exploring the specifics of their trading relationship.
A joint working group between the two countries, set up last year, will be conducting an audit on the current situation and potential future, says Dinesh Patnaik, Deputy High Commissioner of India to the UK. The audit’s terms of reference are currently being established. “We are looking at where the opportunities lie…it could be a very significant moment for bilateral trade.”