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India and Britain make breakthrough in free trade agreement on personal mobility and electric vehicles

New Delhi: India and Britain are moving closer to concluding a free trade agreement (FTA) after negotiations underway since January 2022 finally produced some breakthroughs. Although disagreements still exist, two points of disagreement are about to be resolved.

New Delhi: India and Britain are moving closer to concluding a free trade agreement (FTA) after negotiations underway since January 2022 finally produced some breakthroughs. While some disagreements remain, two points of disagreement are about to be resolved.

Two people aware of the development said that if the proposed conditions are formalized, Britain could allow Indian professionals to work there under certain conditions. In return, India can allow the import of premium category electric vehicles, with a fixed ceiling.

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Two people aware of the development said that if the proposed conditions are formalized, Britain could allow Indian professionals to work there under certain conditions. In return, India can allow the import of premium category electric vehicles, with a fixed ceiling.

According to the first person, the Union Commerce Ministry has placed the finalization of the FTA at the top of its 100-day post-election agenda.

“Thirteen rounds of negotiations have been held so far. The ongoing discussions, which started on January 10, mark the 14th round of negotiations,” the second person mentioned above said on condition of anonymity. ‘The textual negotiations per chapter are almost completed and the schedules for goods and services are at an advanced stage. Mobility is part of the discussions at service level.”

The intensity of the negotiations has increased in recent months, with the British team visiting New Delhi in March, followed by the Indian delegation’s visit to London in April and May. More visits are planned in the coming months.

If negotiations go smoothly, the free trade deal is expected to be signed before next January’s British elections.

Questions emailed to Commerce Minister Sunil Barthwal and Commerce Ministry spokesperson on Friday remained unanswered as of press time.

Meanwhile, the spokesperson for the UK Department of Business and Trade said in response to an emailed query: “We have always been clear that we will only sign a deal that is fair, balanced and ultimately in the best interests of the British people and the economy. .”

“The UK and India continue to work towards an ambitious trade deal that works for both countries,” the spokesperson said.

The fixed clauses

According to the people quoted above, Britain has agreed in principle to allow work visas for Indian professionals to stay for a certain period (which remains undecided), with the possibility of extension subject to meeting mutual agreed conditions. However, the provision for accompanying spouses should not be included in the agreement.

The work visas being negotiated would benefit all professionals visiting Britain for work under the agreed terms of the FTA, as opposed to, for example, employees of IT services companies who obtain a visa for a certain period only to work on a particular project to work.

In return, India can allow the import of a fixed number of premium electric vehicles per year at reduced duties, provided conditions agreed to by both countries are met. The limit may be adjusted based on compliance with these terms. The numbers being discussed are currently between 2,000 and 2,500 electric vehicles.

Britain is demanding significant cuts in Indian tariffs on products such as Scotch whisky, which currently carries a heavy 150% tax, as well as electric vehicles and chocolate. On the Scotch whiskey issue, India has offered an agreement similar to the one with Australia. Under the India-Australia Free Trade Agreement, the duty on Australian wines has been reduced from 150% to a maximum of 75% over a period of ten years.

Currently, import duties on Scotch whiskey from Great Britain – both bottled and in bulk – are 150% above the minimum import price (MIP). It could now be reduced to 100% for bottled whiskey, which could be further reduced to 75% over a decade, the people cited above said.

Subsequently, India’s request for exemption from the proposed carbon tax remains unresolved. Britain has proposed introducing a levy on imported goods with a lower or no carbon price by 2027 to support the move towards a low-carbon economy. This tax would be in line with the European Union’s proposed Carbon Border Adjustment Mechanism (CBAM).

At this point, Britain is unwilling to give India a free pass on this tax, which is part of broader efforts to fight climate change by imposing costs on carbon emissions, the people briefed on the matter said. are of the issue.

The trade situation

Goods trade between India and Britain has grown from $10.45 billion in FY22 to $11.46 billion in FY23 and further increased by 13.26% to $12.98 billion in FY24.

“A free trade agreement between the two countries is expected to increase trade volumes in both goods and services,” said Ajay Sahai, DG, FIEO (Federation of Indian Export Organizations). “As India exports IT and business services to the UK, the FTA will facilitate the seamless movement of skilled professionals, further strengthening bilateral trade ties.”

However, the general feeling is that an India-UK FTA would benefit India more from a services point of view than from a goods point of view.

“The FTA with the UK is expected to have minimal impact on goods export growth as more than half of Indian products already enter the UK with low or no tariffs,” said Ajay Srivastava, the founder of the Global Trade Research Initiative (GTRI). “The average tariff on goods imported into Britain from India is 4.2%.”

“Reducing import duties on $6 billion worth of Indian products will not provide any additional benefit as these already enter the UK duty-free even without the FTA. These products include petroleum products, medicines, diamonds, machine parts, aircraft and wooden furniture,” said Srivastava.

On the other hand, there are potential benefits to be gained from reducing import duties on Indian exports worth $5 billion, including textiles, apparel (shirts, trousers, women’s dresses, bed linen), shoes, carpets, automobiles, marine products, grapes and mangoes. he said.

An Indian team led by Chief Negotiator L. Satya Srinivas, Additional Secretary of the Commerce Ministry, visited Britain on April 16. During the four-day visit, various topics were discussed in detail, including the proposed carbon tax, India’s demand for business mobility, duty-free access for certain goods, etc.

Thereafter, another team led by Deputy Chief Negotiator Darpan Jain, joint secretary of the Commerce Ministry, visited London in May to resolve the differences. The team returned on May 15 and are “confident” they can solve most of the tough problems by offering a workable solution that suits both countries, the first of the two people mentioned above said.

The FTA’s journey has been fraught with delays, now more than a year after the original mid-2024 deadline, largely due to issues such as professional visas, duties on various goods and migration issues – a sensitive subject in Britain since the Brexit.

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