Bringing to an end four-and-a-half years of suspense over the terms on which it would sever trade ties with the European Union, the UK has managed a ‘thin’ deal with the now 27-member bloc. A notable feature of the Christmas-eve deal is that it allows for free trade in goods, without tariffs or quotas, provided they are locally produced. But for services, which account for 80 per cent of the UK’s economic output and 43 per cent of the UK’s exports to the EU, it seems a new set of barriers will crop up even as negotiations in this regard are expected to assume final shape later in 2021. British doctors, engineers, architects and other professionals now must register in each EU country where they wish to work. An exception, though, has been made for lawyers and accountants. The movement of finance capital from the City of London to the continent may be impaired in the absence of clear market access provisions. The auto sector, which includes companies like the Tata-owned Jaguar Land Rover, will get tariff-free EU entry as long as 55 per cent of parts are UK- or EU-made. Several UK-based Indian pharma firms will get tariff-free access, though these companies face more paperwork. Other disadvantages for UK citizens include the need for a visa for any stay over 90 days in an EU country. However, Britain appears to have won the right to make its own labour and environmental rules. However, the EU’s reserved the right to restrict market access if UK’s regulations diverge markedly.

The UK is a favoured destination for Indian firms (after the US, India was the second-largest investor in the UK in 2019-20). Indian industrialists spend several months there annually, focussing on the European market strategy. India’s software-services sector has a lot of UK business, but has been busy opening new European offices. British Prime Minister Boris Johnson’s due to be the Republic Day chief guest, and an India-UK trade treaty will top his shopping list. On immigration, Britain’s now introduced a points system, which should make entry easier for Indian professionals. India and the UK may strike a limited accord in 2021 covering sectors like pharma, fintech, petroleum and food. But any treaty will take up at least two years to conclude, and there’ll be familiar sticking points like the UK’s demand for lower Scotch whisky tariffs. The UK’s efforts to push the EU-Canada trade and investment pact as its negotiating framework has not met with much success so far. Its $15-billion trade with India generates a surplus of about $2 billion in India’s favour.

The UK’s outreach to the rest of the world will also be influenced by post-pandemic trade patterns. At $800 billion, the UK’s trade with the EU accounts for about half its total trade (43 per cent of its exports and 52 per cent of its imports in 2019). Now, the UK, EU and world trade are at an inflexion point.