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India-UK FTA: Dynamics set to change after Starmer-led Labour Party's election victory?.


Date: 05-07-2024
Subject: India-UK FTA: Dynamics set to change after Starmer-led Labour Party's election victory?
Ending 14 years of Conservative Party rule, Labour Party’s Keir Starmer is set to become the next Prime Minister of the United Kingdom. The change in government is likely to have a minor impact on India-UK ties, especially on the FTA (Free Trade Agreement).


Starmer’s manifesto included a commitment to pursue a "new strategic partnership" with India, emphasising the FTA and marking a significant shift from the party's stance under former leader Jeremy Corbyn, who had a perceived anti-India stance, particularly regarding Jammu & Kashmir.

The Labour Party has maintained its commitment to finalise the FTA, although the specific timelines will remain unclear for the foreseeable future.

With the arrival of the Labour Party at the helm of affairs in the UK there is a possible potential shift in the dynamics of the FTA negotiations, says Dr Amit Singh, Associate Professor, Special Centre for National Security Studies, JNU, adding that the Labour Party may like to change some terms and conditions of the FTA considering their previous orientation with regard to India.

However, “India's orientation as well as their reputation has also changed drastically in positive direction ..

Since Brexit, the UK has been facing economic hardships and the conservatives also failed to address this issue, he adds.


“Therefore, clinching an FTA with India is going to benefit the UK immensely as compared to India.”


If concluded, the trade deal — which has been under discussion for more than two years — would be India’s most ambitious yet, underscoring the country’s growing appeal as an alternative for investors looking for supply-chain diversification and less reliance on China. It would also act as a springboard for a free trade deal that India is currently negotiating with the European Union.

The now-concluded snap election has diminished the prospects of the India-UK FTA being finalised by the current Tory government led by Rishi Sunak. The negotiations, which began in January 2022, were originally aimed at completing the deal by Diwali 2022.

However, the election has "skewered any prospect of the finalisation of the long-awaited and much-anticipated FTA with India by a Conservative government," according to Rahul Roy-Chaudhury of the International Institute for Strategic Stu ..

The Labour Party has maintained steadfast support for the FTA, subject to examining the "fine print" once in office.

The immigration issue:
Immigration remains a contentious issue for the Labour party which could be a sticking point for India as New Delhi seeks temporary visas for its service industry workers, hoping to benefit significantly from the FTA.

The integration could particularly boost India's service sectors, given the UK's strong presence in banking and IT services?. Despite this, Labour is expected to push for favorable visa terms in the negotiations, considering the current political landscape in the UK.

The political stability necessary for a trade agreement with India, potentially involving high tariff levels, has been elusive in London since the unexpected Brexit referendum. However, a decisive victory for Labour is likely ..

“The proposed agreement may lead to some visa benefits to the Indians as the Indian Diaspora is also having its significance in UK politics,” says Dr Singh.

Key points from India UK FTA:
The UK's push for lower import duties on goods like Scotch whisky and electric vehicles is another sticking point in the deal.
There are residual issues over investment protection, social security agreements and market access for British apples and cheese among others.< ..

There are residual issues over investment protection, social security agreements and market access for British apples and cheese among others.
Labour Party had criticised the Conservatives for "over-promising and under-delivering" on the UK-India FTA and declared it is "ready to go" on finalising the deal if elected.
Shadow foreign secretary David Lammy said the FTA should be "a floor not a ceiling" for the partnership and aims to have it done by the end of 2024 if Labour win ..

India and the UK have completed 13 rounds of FTA negotiations to enhance their estimated £38.1 billion annual trading relationship.
Total bilateral trade between India and the UK increased to $20.36 billion in 2022-23 from $17.5 billion in 2021-22.
So far, new FTAs have only been agreed with Australia and New Zealand, and those deals have riled British farmers. Talks with Canada were “paused” earlier this year, with the two sides unable to reach an agreement on issues around  ..

 Source Name : Economic Times

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