UPSC Exam   »   Types of Trade Agreements   »   India-UK Free Trade Agreement

India-UK Free Trade Agreement

 

India-UK Free Trade Agreement: Relevance

  • GS 2: Bilateral, regional and global groupings and agreements involving India and/or affecting India’s interests.

 

India-UK Free Trade Agreement: Context

 

India-UK Free Trade Agreement: Key points

  • Both countries have agreed to avoid “sensitive issues” in the negotiations.
  • Through early harvest agreement, India aims to achieve up to 65 per cent of coverage for goods and up to 40 per cent coverage for services.
  • By the time the final agreement is inked, the coverage for goods is expected to go up to “90 plus percentage” of goods.
  • India is also negotiating a similar early harvest agreement with Australia, which is supposed to set the stage for Comprehensive Economic Cooperation Agreement.

 

India-UK Free Trade Agreement_40.1

 

What are early harvest trade agreements?

  • Early harvest agreements are such trade agreements that are used to initiate bilateral trade between two countries on a restricted list of goods and services.
  • It is primarily used as a frontrunner to clinching a more comprehensive FTA.

 

Early harvest trade pacts: Issues

  • Early harvest schemes potentially target the low-hanging fruits, leaving the tougher goods and services for later.
  • This strategy can lead to significant delays in signing up the broad-based FTAs, which could potentially lead to impediments.
  • Example: India had concluded an early harvest agreement with Thailand in 2004. However, we are yet to conclude a comprehensive FTA with the country.
    • Also, India has a trade agreement with Sri Lanka dealing with goods but was not able to conclude an agreement on services and investments.
  • Early harvest agreements that do not transform into full-scale FTAs are exposed to legal challenges from other countries that are members of the World Trade Organisation (WTO).
  • An early harvest deal may reduce the incentive for one side to work towards a full FTA.

 

India-UK Free Trade Agreement_50.1

 

India FTA status

  • India has in place 10 FTAs and six PTAs (preferential trade agreements).
  • Moreover, India is negotiating 16 new and expanding seven existing agreements, including with trading partners such as Canada, the EU, the US, alongside Australia and the UK.

 

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