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More than just whisky: Trade body explains why India-UK FTA should address trade barriers

New Delhi: The proposed free trade agreement (FTA) between India and the UK will seek to address bilateral issues between the two countries to create a more robust framework for trade and investment, and not so much to help Indian businesses access the European market, Richard Heald, Executive Chair of the UK-India Business Council (UKIBC) a trade body has said.

In an interview with ThePrint, Heald said the FTA, the negotiations for which are expected to be concluded by Diwali, will look at addressing issues such as obtaining permissions, licences to set up operations in each other’s jurisdictions, and create a conducive business environment. It will also address areas of concern for India, such as high import duties on alcohol, he said.

“When you are looking at an FTA, you are not necessarily looking at a snapshot in time. You are looking at how a relationship between two parties will evolve … When you are looking at an FTA, you’re looking into the future for the next 30 years,” Heald added.

Although discussions are under way between the two countries on specific areas of concern, such as high tariffs on alcohol, it is not “purely about a bottle of whisky coming to India”, Heald said. “It’s about encouraging trade between the two parties.”

An FTA on a bilateral basis — that particularly focuses on issues such as technical barriers to trade, and not necessarily purely on tariffs — “will act as a catalyst, not only to those Indian companies who are already invested in the UK but those who have aspirations to come to the UK”, he said.

“So, I would strongly urge the focus of the FTA to be bilateral, and let the EU and India make their multilateral arrangements afterwards on the back of it.”

India and the EU have been discussing a similar trade pact since 2007 but negotiations were suspended in 2013. Both sides relaunched the negotiations in Brussels earlier this week with the target of concluding it by 2023.

India and the UK have had four rounds of negotiations since the FTA talks were launched between both sides in January 2022.

However, these talks are now going to be accelerated. Commerce and Industry Minister Piyush Goyal said earlier this week that both sides are sticking to the Diwali deadline set by prime ministers Narendra Modi and Boris Johnson.

Heald hinted that India and the UK could conclude the entire agreement in one go instead of opting for an interim deal, also known as an early harvest deal.

India signed an early harvest deal with Australia in April this year.

“Businesses are supportive of early harvest agreements. But that doesn’t seem to have developed in the rounds of negotiations that we have had so far,” he said.

He added that he did not see the purpose of an early harvest agreement when “the target for signing the FTA is relatively in proximity”.

 “The Diwali date isn’t too far away,” he said.

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Reducing trade barriers

According to Heald, discussions are going on between both sides with a particular focus on diminishing technical barriers to trade. Ease of doing business, he said, “underpins not only trade itself but also the investments that India makes to the UK and the UK makes to India”.

“So, we are looking at important areas such as rules of origin — how much do particular goods have to be made in one jurisdiction versus another — and harmonisation of standards, intellectual property, giving comfort to investors and also ensuring investor protection,” he said.

On high alcohol tariffs, he said India imports whisky from the UK in bulk.

“Bulk whisky is used in stimulating domestic alcohol production as well. So, a certain amount of scotch whisky that is imported is added to domestically created whisky and alcohol and therefore it would facilitate the development of domestic industry,” he said.

If the tariffs are lowered on imported alcoholic beverages, it would “encourage intellectual property processes, [the] technology around packaging, [the] technology around bottling which improves domestic industry”, he added.

By addressing the larger issue of non-tariff barriers, he said, there will be “streamlining of permissions, licences, and the ability to do business in India will actually receive a boost”.

On the issue of the retrospective tax disputes concerning Cairn Energy and Vodafone, Heald said the Indian government’s decision to settle them was seen as “pragmatic” by UK businesses.

The disputes involved a provision of retrospective tax introduced by the United Progressive Alliance (UPA) government in 2012 under which, among others, British companies Vodafone and Cairn Energy were issued notice to pay their tax lability. Both the cases involve the acquisition of shares in Indian companies. 

The disputes finally headed towards resolution last year — on 5 August 2021, the Indian government said it would withdraw all tax demands under the retrospective law on companies and will refund the money collected if the firms dropped litigation proceedings launched in this respect.

(Edited by Uttara Ramaswamy)

Also Read: How tension with Russia & China is pushing Europe to do more business with India

Source: The Print

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