Balancing Act: India and UK make strategic trade-offs to seal landmark FTA

The conclusion of the India-UK free trade agreement is marked by give and take on several issues as the two countries worked to conclude the deal against the backdrop of the protectionist policies of the US.
 
A key component of this is the issue around the carbon border adjustment mechanism, where India has reserved the right to retaliate or rebalance concessions in case it impacts its exports in the future.
 
“This has been done as there is uncertainty and no legislation in place for implementation of the CBAM as of now,” explained an official source. The UK government is expected to implement the carbon tax in 2027 as of now.
 
Similarly, it was decided that the FTA would not address issues such as short-term work visas for Indian students and the UK wishlist for India to open legal services.
 
“We agreed to drop our ask on Post Study Work Visa in lieu of UK dropping its’ ask on Legal Services,” explained an official source.
 
Similarly, sensitive sectors and goods have been excluded from the FTA. These include agri products such as dairy products, apples, cheese, oats, animals, and vegetable oils where no duty benefits will be provided by India to the UK. Sensitive industrial goods like plastics, diamonds, silver, base stations, smartphones, television camera tubes, optical fibres, optical fibres bundles, and cables are also excluded, and no duty benefits are provided by India to the UK.
 
India and UK on May 6 announced that they have concluded talks on the FTA and the Double Contributions Convention (DCC). A bilateral investment treaty is still under negotiation and will be signed later.
 
As per the UK Department for Business and Trade, India and the UK will now work together to finalise the legal text of the FTA and produce a usable and legally binding treaty. We will end this process by signing the completed treaty text. “The DCC will enter into force alongside the trade agreement,” it said.
 
The FTA aims to double bilateral trade from $60 billion now to $120 billion by 2030.