India seeks post-Brexit clarity from UK and EU

India seeks post-Brexit clarity from UK and EU

India joined nine other global trading powers to try and establish the tariff regime that would be in play after the UK has officially left the EU at the end of the Brexit transition period on December 31.

As the crucial deadline for the UK and the EU to strike a trade agreement before the end of their Brexit transition period on December 31 looms large, the worldwide impact of this major shift in trade balance as a result of Britain's exit from the European economic bloc is also coming to the fore. India and other major trading powers have called on Britain and the European Union (EU) to clarify terms for renegotiating tariff levels after Brexit and for compensating their suppliers for any lost market access, according to trade officials in the know. At a closed-door meeting of the World Trade Organisation (WTO), held just 50 days before the end of the transition period, they also sought details of how EU-UK trade will be treated in the absence of a bilateral agreement.

Besides India, Australia, Canada, China, Indonesia, Mexico, New Zealand, Paraguay, the United States and Uruguay were among delegations to take the floor at the talks, according to an official quoted by Reuters. "The time-clock counting down to the UK′s final departure from the EU Customs Union has been ticking ever more loudly and insistently - with now less than 50 days to go until the end of the UK transition period," New Zealand′s delegation was quoted as saying by the official.

Limited engagement

Prime Minister Narendra Modi at the 15th India-EU (virtual) summit. India and other major trading powers have called on Britain and the EU to clarify terms for renegotiating tariff levels after Brexit and for compensating their suppliers for any lost market access.
Prime Minister Narendra Modi at the 15th India-EU (virtual) summit. India and other major trading powers have called on Britain and the EU to clarify terms for renegotiating tariff levels after Brexit and for compensating their suppliers for any lost market access.

Yet there had been only "limited engagement" by the UK and the EU on addressing fundamental concerns raised by a large number of WTO members regarding their respective proposals to cut back market access opportunities, it said. One of the issues members complained of was a lack of clarity on renegotiations of so-called tariff rate quotas (TRQs) which fix duty levels on imported goods. Since TRQs allow products within certain pre-fixed limits to be imported at lower tariffs into the EU, which includes the UK until the end of this year, its distribution between the two could potentially reduce the flexibility for trading partners to use these quotas. There is understandable concern that the pre-Brexit most favoured nation (MFN) quotas would be impacted post-Brexit.

New rules of the game

The EU said it hoped to move towards the finalisation of discussions with as many WTO members as possible by the end of the year.
The EU said it hoped to move towards the finalisation of discussions with as many WTO members as possible by the end of the year.

The UK, which only gained its own seat at the Geneva-based trade body after leaving the EU in January, said it was looking forward to building on recent negotiations. The EU said it hoped to move towards the finalisation of discussions with as many WTO members as possible by the end of the year. However, there are bound to be several new rules of the game to be navigated. The overwhelming message from both the UK and EU over the last few weeks has been a commitment to ensure they are able to strike a mutually accepted trade arrangement. However, the extremely crunched timeline for any such deal to pass the parliamentary hurdles across all EU member-countries by January 1, 2021, is a cause for some serious concern. The refrain has been that should a post-Brexit pact remain elusive, both sides are committed to trading on WTO terms, which would inevitably mean higher costs that would have a knock-on effect globally. Businesses on both sides have been warning against a no-deal Brexit, which would severely impact their ability to continue to function in a smooth manner after 45 years of close UK-EU alignment.

Preferential regime

Under details of the UK's Generalised Scheme of Preferences (GSP) released earlier this month, India falls under the framework of countries that the World Bank classifies as low-income and lower-middle income countries. Imports from these countries have reduced rates of import duty on certain goods. “From 1 January 2021, eligible developing countries will be able to get trade preferences through the UK Generalised Scheme of Preferences (GSP). The UK GSP will initially provide trade preferences to the same countries as the EU GSP,” the UK had confirmed. The UK GSP has three frameworks:

  • Least Developed Countries Framework

  • General Framework (which includes India)

  • Enhanced Framework

Open but fair

Meanwhile, EU-UK talks resumed again in Brussels this week, with the UK′s chief negotiator saying there had been "progress". "We′re working very hard to get a deal but there′s quite a lot to do," Lord David Frost said. His EU counterpart, Michel Barnier, said he wanted "future cooperation to be open but fair" with the UK. Sticking points between the two sides focus on competition rules and state aid for businesses, as well as fishing rights. At the end of a particularly tumultuous few weeks at 10 Downing Street, which saw his top aide Dominic Cummings' unceremonious exit, UK Prime Minister Boris Johnson issued a statement to say that Britain will not accept any proposals in the negotiations with the EU that undermine its status as a “sovereign, independent country”. With tough talking on both sides, it remains to be seen how this political face-off will shape up as it edges towards its year-end deadline.

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