India-UK Free Trade Agreement

India-UK Free Trade Agreement: Relevance

• GS 2: Bilateral, regional and global groupings and agreements involving India and/or affecting India’s interests.

India-UK Free Trade Agreement: Context

• Recently, India and the United Kingdom have launched formal Free Trade Agreement (FTA) negotiations to conclude an early harvest trade agreement over the next few months.
• Read about Broad-Based Trade and Investment Agreement 

India-UK Free Trade Agreement: Key points

• Both countries have agreed to avoid “sensitive issues” in the negotiations.
• Through early harvest agreement, India aims to achieve up to 65 per cent of coverage for goods and up to 40 per cent coverage for services.
• By the time the final agreement is inked, the coverage for goods is expected to go up to “90 plus percentage” of goods.
• India is also negotiating a similar early harvest agreement with Australia, which is supposed to set the stage for Comprehensive Economic Cooperation Agreement.

What are early harvest trade agreements?

• Early harvest agreements are such trade agreements that are used to initiate bilateral trade between two countries on a restricted list of goods and services.
• It is primarily used as a frontrunner to clinching a more comprehensive FTA.

Early harvest trade pacts: Issues

• Early harvest schemes potentially target the low-hanging fruits, leaving the tougher goods and services for later.
• This strategy can lead to significant delays in signing up the broad-based FTAs, which could potentially lead to impediments.
• Example: India had concluded an early harvest agreement with Thailand in 2004. However, we are yet to conclude a comprehensive FTA with the country.
  • Also, India has a trade agreement with Sri Lanka dealing with goods but was not able to conclude an agreement on services and investments.
• Early harvest agreements that do not transform into full-scale FTAs are exposed to legal challenges from other countries that are members of the World Trade Organisation (WTO).
• An early harvest deal may reduce the incentive for one side to work towards a full FTA.

India FTA status

• India has in place 10 FTAs and six PTAs (preferential trade agreements).
• Moreover, India is negotiating 16 new and expanding seven existing agreements, including with trading partners such as Canada, the EU, the US, alongside Australia and the UK.

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