As prepares for talks with Prime Minister Modi later
this month as part of the UK’s new “Indo-Pacific tilt,” a new
briefing paper from the Institute of Economic Affairs,
authored by IEA Academic Fellow Shanker Singham, examines
prospects for and barriers to a deeper relationship between the
two nations.
The UK Prime Minister is promising an Enhanced Trade Partnership,
possibly leading to a full Free Trade Agreement – and the UK may
have the just right combination of offensive and defensive
flexibility to be able to do this deal with India. Were it to be
achieved, it could “bolster” the UK’s credentials as a free
trading country.
The contours of a deal are emerging and involve key UK asks such
as financial services and legal services access, as well as
Scotch whisky tariff reduction, and key Indian asks such as the
UK committing not to impose bans on Indian agriculture in
violation of the WTO SPS agreement. Bilateral trade flows are
currently worth $15.7bn in goods and $18.9bn in services, but
there is “significant scope for a substantial increase,” the
author notes.
And the opportunities extend far beyond narrow commercial
objectives: such a deal would have a strong geopolitical
dimension. India could be brought into an alignment of nations
including the CPTPP members as a bulwark against the “negative
impact of China’s market distortions and security policies”.
According to the briefing, obstacles to realising this bright
future include India’s recent actions against the property rights
of foreign investors, rule of law violations, and historic
protectionism. These risk undermining its global reputation and
potential. The author uses case studies, such as Devas vs Antrix,
to illustrate these challenges and reiterate that FTAs are
irrelevant if the rule of law and contracts are flouted, or if
competitive market distortions are the order of the day.
Singham suggests that when the two leaders meet, albeit
virtually, could “make clear” that while the UK welcomes a
deeper relationship with India, this will depend on whether the
latter abides by its commitments under international treaties and
respects international courts and arbitrators.
Shanker Singham, IEA Academic Fellow and author of
Eastern Promise: Assessing the Future of UK-India Trade,
said:
“There are real opportunities for both the UK and India of a
Free Trade Agreement, and these are not limited to commercial
benefits only. There is a crucial geo-political dimension of
aligning a group of countries including the UK, US, India and the
CPTPP nations (especially Australia, New Zealand and Japan) who
believe in competitive markets, property rights protection, and
open trade. But India will have to choose to align itself to
these core values – it is at that vital crossroads now.”
