UK hopes FTA with India will address peak tariffs on Scotch, vehicles, pharma

Amiti Sen 10206 | | Updated on: Jan 18, 2022
Annual duties on UK exports to India were estimated be around £810 million based on 2019 trade data 

Annual duties on UK exports to India were estimated be around £810 million based on 2019 trade data  | Photo Credit: TOBY MELVILLE

Reducing tariffs on intermediates like Indian textiles, vehicle parts could help British industry, according to report on UK’s strategic approach to FTA

The UK is hopeful that its FTA with India will help bring down tariff peaks applied on items such as Scotch whisky, vehicles and chemicals & pharmaceuticals. These goods together accounted for almost a third of overall import duties imposed by India on British goods in 2019.

“A new FTA with India could reduce these tariff barriers and increase the competitiveness of UK exports in the Indian market, further enhancing trade,” according to a report on ‘UK’s Strategic Approach to the India-UK FTA’ compiled by the UK Department for International Trade.

In an observation favouring Indian exporters, the study also pointed out that it could be beneficial for the UK industry if it removes tariffs on Indian imports of items such as textiles and textiles articles and vehicles as most of these imports were used as intermediate products in the UK.

Bilateral FTA

India and the UK launched negotiations for a bilateral free trade agreement (FTA) last week covering a multitude of areas including goods, services, and investments, and have set a year-end deadline for concluding the pact. The two sides seek to double bilateral trade in goods and services from existing $50 billion to $100 billion by 2030.

Annual duties on UK exports to India were estimated be around £810 million based on 2019 trade data of which £164 million was on account of whisky attracting tariffs of 150 per cent, £49 million on account of vehicles and parts (not railway-related) attracting tariffs averaged at 59 per cent and £43 million on account of chemicals and pharmaceuticals attracting peak tariff of 100 per cent. Annual duties of £184 million were also imposed on precious stones and metals in 2019.

Also read: India, UK launch negotiations for free trade pact

“Removing tariffs through an FTA would benefit UK businesses by increasing competitiveness, especially when compared to competitors exporting to India from countries without an FTA,” the report stated.

India is projected to become the world’s fourth largest economy by 2030 and is one of the UK’s most economically and strategically important trade and investment partners, the report said stressing on the importance of an FTA with India. 

“India is one of the dynamic, fast-growing economies at the heart of the Indo-Pacific and while our bilateral trading relationship is already significant, amounting to £23.3 billion in 2019, an FTA could strengthen it further as UK exports could increase by up to £16.7 billion by 2035,” it pointed out.

Middle-class market

The Indian middle-class market is growing fast –estimated to encompass 60 million consumers by 2030 – and is expected to increase the country’s demand for healthcare, education, and premium products. India’s overall demand for imports is projected to reach £1.38 trillion per year by 2035, it added.

“An FTA with India could support jobs across the UK. Experimental analysis shows that exports to India were estimated to support (directly and indirectly) around 63,000 UK jobs in 2016,” it said.

Published on January 18, 2022
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