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RSTV: THE BIG PICTURE- INDIA-UK MIGRATION PACT

RSTV

 

 

India-UK Trade:

  • India has had strong historical ties with the U.K. and currently, it is one of India’s most important trading partners.
  • It is a significant partner of India as an FDI investor after Mauritius and Singapore which ranked second and first respectively.
  • Similarly, the U.K. is one of the largest investors in India, among the G20 countries.
  • The bilateral trade between the two countries stood at 15.5 billion USD in 2019-20 as against 16.87 USD billion in 2018-19.
  • India has engagement with the UK in sectors like pharma, textiles, leather, industrial machinery, furniture, and toys.
  • India is also looking to the UK to support it with technology-based products such as high-quality cameras, medical devices, and automobiles.

Virtual Summit highlights and analysis:

  • Prime Ministers of both held a Virtual Summit recently.
  • India and the UK enjoy long standing friendly ties and share a Strategic Partnership underpinned by mutual commitment to democracy, fundamental freedoms and the rule of law, strong complementarities and growing convergences.
  • An ambitious ‘Roadmap 2030’ was adopted at the Summit to elevate bilateral ties to a ‘Comprehensive Strategic Partnership’.
  • The Roadmap will pave the way for a deeper and stronger engagement over the next ten years in the key areas of people to people contacts, trade and economy, defence and security, climate action and health.
  • The two leaders discussed the Covid19 situation and ongoing cooperation in the fight against the pandemic, including the successful partnership on vaccines.
  • Prime Minister Modi thanked Prime Minister Johnson for the prompt medical assistance provided by the UK in the wake of the severe second wave of Covid19 in India. Prime Minister Johnson appreciated India’s role in extending assistance to the UK and other countries over the last year, including by way of supply of pharmaceuticals and vaccines.
  • The two Prime Ministers launched an ‘Enhanced Trade Partnership’ (ETP) to unleash the trade potential between the 5th and 6th largest economies of the world and by setting an ambitious target of more than doubling bilateral trade by 2030.
  • As part of the ETP, India and the UK agreed on a roadmap to negotiate a comprehensive and balanced FTA, including consideration of an Interim Trade Agreement for delivering early gains. The enhanced trade partnership between India and UK will generate several thousands of direct and indirect jobs in both the countries.
  • The UK is India’s second largest partner in research and innovation collaborations. A new India-UK ‘Global Innovation Partnership’ was announced at the Virtual Summit that aims to support the transfer of inclusive Indian innovations to select developing countries, starting with Africa.
  • Both sides agreed to enhance cooperation on new and emerging technologies, including Digital and ICT products, and work on supply chain resilience.
  • They also agreed to strengthen defence and security ties, including in the maritime, counter-terrorism and cyberspace domains.
  • Views were exchanged on regional and global issues of mutual interest, including cooperation in the Indo-Pacific, and G7. They reiterated commitment to climate action to achieve the goals of the Paris Agreement and agreed to closely engage in the run up to CoP26 hosted by the UK later this year.
  • India and the UK launched a comprehensive partnership on migration and mobility that will facilitate greater opportunities for the mobility of students and professionals between the two countries.

Significance:

  • Brexit: The UK has been pushing India for a bilateral trading arrangement ever since it voted to leave the European Union (EU) in June 2016 and left finally in January 2020.
  • However, India had been resisting these efforts as it decided that the Brexit process should complete first.
  • India has been keen to understand how much of a “special and preferential” access the UK will get in the vast European market when it is out of the EU’s single-market dynamics.
  • Strategic Partner: The UK is a permanent member of the UN Security Council, and one of the strategic partners of India.
  • Strengthening bonds with the trade would seek UKs support at global issues like standoff with China in the Ladakh sector of the Line of Actual Control (LAC) and claim for permanent seat at UNSC.
  • Review of Trades: India could seek a review of trading agreements including renegotiating tariffs on some items along with the tightening of provisions governing country-of-origin certification.
  • UK is a populist nation advocating ‘make my country great again’ and ‘my country first’. Their brand of democratic politics is self-centered and impervious to criticism.
  • Britain has now delivered one that is tariff- and quota-free and allegedly “takes back control over our money, borders, laws, trade, and our fishing waters,” but has potential for friction both with the EU and domestically.
  • Modi visited the U.K. in 2015 when six major agreements were concluded.
  • It is unlikely that any assessment has been made of the implementation of those accords, but in contemporary diplomacy, it is common for a raft of new treaties to be superimposed on existing ones even where there is insufficient progress.
  • India has been fruitlessly negotiating a trade agreement with the EU since 2007, during which Britain was considered the main deal-breaker.
  • The EU wanted duty reductions on autos, wines and spirits and wanted India to open financial sectors such as banking and insurance, postal, legal, accountancy, maritime and security and retail. India, as always, sought free movement for service professionals.
  • The same obstacles with post-Brexit Britain will arise, because the export profile of both countries is predominantly services-oriented.
  • In response to free movement for professionals, Britain will refer to its new points-based system for immigrants, while after withdrawing from the Regional Comprehensive Economic Partnership, India is cautious about negotiating any new trade agreement, and will place greater stress on aspects related to country of origin and percentage of value addition in exports.
  • Therefore, when the time comes for a discrete agreement with Britain, the two countries may settle for a limited one perhaps covering pharmaceuticals, financial technology, chemicals, defence production, petroleum and food products.

Way Forward:

  • India is one of the fastest growing large economies of the world and FTA with the UK has played a significant role in enhancing the trade volume of the country.
  • However, according to policymakers, FTAs signed by India with the UK have not brought the expected tangible benefits and, on the contrary, have hurt the country’s manufacturing sector due to liberal rules of origin.
  • Therefore, there is a need for a detailed assessment of FTAs in terms of goods, services and investment flows by all the stakeholders involved.