India-UK Free Trade Agreement

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India-UK Free Trade Agreement: Relevance

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

Recently, India and the United Kingdom have launched formal Free Trade Agreement (FTA) negotiations to conclude an early harvest trade agreement over the next few months.
Read about Broad-Based Trade and Investment Agreement

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.

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 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 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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