However, with no progress on a free trade agreement with the United States and none expected shortly, the formal start of discussions with India, announced in New Delhi on Thursday, is the most significant negotiation the UK government will undertake this year.
India is on track to become the world’s third-largest economy by 2050, and the government expects UK-India commerce to quadruple in the next decade.
The prospect of a free trade agreement with India is described by Trade Secretary Anne-Marie Trevelyan as a “great chance,” and there are undoubtedly significant commercial benefits at stake.
George Riddell, EY’s director of trade strategy, calls the decision to launch negotiations a “positive step” that is already generating “genuine enthusiasm” in the business sector.
India, on the other hand, has always been hesitant to liberalize because it has so many vested and vulnerable interests to defend.
The EU has been attempting to establish a genuine agreement with India for years but has had little luck. For a decade, Australia has been working on a deal as well.
Particularly problematic areas include government procurement policies and service trade.
Mr. Riddell points out that “the current rules under which service providers trade between the UK and India originate from 1995 and do not take into account any of the technological changes that have occurred over the last twenty-five years.”
And India is usually adamant about getting visas for Indian professionals and students who want to work or study in other countries.
Both parties are now eager to complete a UK-India agreement, according to British officials, and they hope to do so before the end of the year. However, it is a lengthy timeline.
So, why try to reach an agreement with India when history indicates it will be difficult? It’s partly due to the country’s size and population, and partly because, well, where else?
China has been declared off-limits. The United States has said no. Other large growing economies, such as Brazil, are extremely tough to deal with. And a deal with the EU has already been reached, albeit on worse trading terms than the UK enjoyed before leaving the EU.
Smaller agreements such as those already reached with Australia and another in principle with New Zealand in 2021, are possible. Those, according to the administration, are key milestones toward membership in the CPTPP, the world’s most dynamic trade agreement.
However, the unsettling reality is that, following its exit from the EU, the UK is attempting to create its trade policy from the ground up at a time when, roughly speaking, many governments are focused on domestic economics.