UK-India ties must be on track despite Brexit pains

UK-India ties must be on track despite Brexit pains

As the latest round of negotiations between the UK and EU to thrash out a post-Brexit trade agreement faces some hurdles, it is crucial for Britain not to take its foot off the pedal with other important trading partners - including India.

Crunch Brexit talks to thrash out a trade agreement between the UK and European Union (EU) got underway this week amid a brewing row over the so-called divorce deal struck earlier this year, ahead of Britain's formal exit from the economic bloc on January 31.

The current Brexit transition period ends at the end of December before which both sides must agree the terms of their future relationship or end up with a no-deal Brexit. The EU's Chief Brexit negotiator, Michel Barnier, arrived in London to kick-start what is expected to be a crucial round of talks to strike an agreement with Britain's negotiator, David Frost.

UK Prime Minister Boris Johnson has set an October 15 timeframe to reach a mutually agreed plan for the future of UK-EU relations. However, the talks have been overshadowed by a brewing row over Johnson's plan to override parts of the Withdrawal Agreement signed on January 24.

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Unintended consequences

The UK government wants to give UK ministers unilateral legal powers to oversee elements of the Northern Ireland Protocol, the UK territory which shares a border with the EU member-state of Ireland. Amid anger from Brussels and Dublin, Downing Street insists that the measures are “limited and reasonable” and would remain compliant with the Northern Ireland Protocol.

On the Brussels side, Barnier has said that honouring the existing agreement was a "precondition" for progress to be made in trade deal negotiations this week.

But Downing Street has indicated that Johnson did not believe the Withdrawal Agreement - originally negotiated by his predecessor, Theresa May - made sense, as the UK internal market and the peace process would be "compromised by unintended consequences" if it was not amended. Johnson had renegotiated the terms of the Northern Ireland Protocol, removing the so-called Irish "backstop", before signing off on the terms of Britain′s exit from the EU in October last year.

Legal Default

The current legal default position, without a new trade deal, is that after December 31 all goods passing from mainland Britain to Northern Ireland would be subject to customs checks and tariffs, that businesses in Northern Ireland would have to fill in customs declarations for goods being sold to the mainland.

The current legal default position, without a new trade deal, is that after December 31 all goods passing from mainland Britain to Northern Ireland would be subject to customs checks and tariffs, that businesses in Northern Ireland would have to fill in customs declarations for goods being sold to the mainland, and that EU rules on state aid could be applied to mainland companies selling goods in Northern Ireland. But it is feared that parts of the protocol may be contradictory in favour of the EU single market, which the UK wants to exit completely.

"We have now been talking for six months and can no longer afford to go over well-trodden ground. We need to see more realism from the EU about our status as an independent country,” said Frost, in reference to the latest round of talks.

“We have repeatedly made clear that key elements of our position derive from the fundamentals of being a sovereign state, and it′s time for the EU to fully recognise this reality. If they can′t do that in the very limited time, we have left then we will be trading on terms like those the EU has with Australia, and we are ramping up our preparations for the end of the year," he said.

Sticking points

The negotiators have struggled with some fundamental issues, including the so-called level playing field aspect which means measures to ensure businesses on one side don′t have an unfair advantage over their competitors on the other. The EU wants closer alignment to its rules, but the UK is averse to that as it would amount to a filtered-down version of Brexit.

A second sticking point has been fishing, with the UK wanting full access to the EU market to sell its fish, but in return the EU wants full access for its boats to fish in UK waters. Another area of disagreement is the governance of any future agreement and the role of the European Court of Justice.

An EU summit in mid-October is seen as an unofficial deadline for completing the broad contours of a deal, which would then need to be turned into legal text and translated into all EU languages before ratification by parliaments on both sides. However, that deadline is looking increasingly in doubt with the possibility of further deadlock.

Eye on the ball

Now freed from the so-called shackles of the EU's trading criteria, it has been widely expected that any deal with a country like India would prove lucrative for both sides.

The high drama surrounding the UK's negotiations with the EU, which accounted for 43 per cent of British exports last year and 51 per cent of UK imports, is understandable. However, it is equally important to not lose sight of the wider market out there up for grabs. Now freed from the so-called shackles of the EU's trading criteria, it has been widely expected that any deal with a country like India would prove lucrative for both sides.

The Opposition Labour Party's Shadow Minister for Trade and a vocal India-supporter, Gareth Thomas, brought the issue into the limelight in Parliament last week. Citing figures from the House of Commons Library, Thomas highlighted that the UK is falling behind other G7 nations in securing trade in goods with India. Though the UK has increased trade in services with India by 10 per cent in the past five years it has only managed a five per cent increase in trade in goods during the same period. Meanwhile, other developed nations of the G7 have seen their trade in goods with India increase between 15 per cent and 42 per cent.

Secretary of International Trade, UK, Lizz Truss stressed the importance UK placed on a trade deal with India, during her address at India Global Week 2020.
Secretary of International Trade, UK, Lizz Truss stressed the importance UK placed on a trade deal with India, during her address at India Global Week 2020.

Thomas said: “It's extraordinary that ministers are so complacent about British trade with one of the biggest emerging markets in the world. Other G7 countries are prioritising helping their businesses win contracts in India and have seen huge leaps in levels of trade.

“Ministerial inaction is holding Britain back and they should prioritise trade with the Indian subcontinent.”

Another set of crunch UK-India trade talks is scheduled in the coming weeks in Delhi after Indian Minister of Commerce and Industry Piyush Goyal and his UK counterpart, Liz Truss, narrowed down five key areas of focus for some Early Harvest agreements.

And, the urgency seems to have been grasped on both sides, as reflected in Truss' address during India Global Week 2020 back in July: “On the trade side, we are not letting the grass grow under our feet and the UK and India are carrying on negotiations virtually given the current crisis.”

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