India-UK trade talks in limbo as British delegation cancels Delhi visit

British prime minister Rishi Sunak has called elections on 4 July. (AFP)
British prime minister Rishi Sunak has called elections on 4 July. (AFP)

Summary

  • Immigration is a political hot potato in the UK, which is now in election mode.

NEW DELHI : A high-ranking British delegation has cancelled its visit to New Delhi ahead of general election in the UK, two persons aware of the development said, throwing talks on a planned free trade agreement (FTA) into uncertainty.

British prime minister Rishi Sunak has called for an election on 4 July.

The UK team was scheduled to arrive in New Delhi on 28 May to finalize terms on contentious issues such as work visas for Indians, duty relaxations, and imports of British-made electric vehicles, they said.

“The British officials have cancelled their visit without providing a 'specific reason," said one of the persons familiar with the development. “It is assumed that the announcement of elections may have led to the cancellation of their trip."

“The British delegation informed about the cancellation of their scheduled visit in the previous week following the announcement of polls in the UK," said the second person mentioned above.

Queries sent to the secretary and spokesperson of the commerce ministry and the British High Commission remained unanswered.

‘Purdah’ imperils breakthroughs

New Delhi had been hopeful of progress on a trade agreement with the UK, frequently sending out teams of Indian officials to London for talks.

The Indian side had made significant breakthroughs in the FTA talks, inching closer to sealing the deal, with workable solutions having been found on the mobility of persons and electric vehicles, Mint reported recently.

The most recent visit to London was in the second week of May, when the Indian deputy chief negotiator returned with reports of significant progress in negotiations on allowing Indian professionals to work in the UK under certain conditions, and on electric vehicles.

Also read: India-UK FTA tops commerce ministry’s 100-day agenda

“The deal was progressing very positively. We were hopeful of closing some of the remaining chapters which are challenging for both sides," said the person quoted earlier.

The UK side has so far mostly refused to comment on the deal or give updates to reporters.

“It's natural for this to happen given the announcement of early elections in the UK and the scheduled declaration of the Indian general election results next week," said Biswajit Dhar, a retired professor of Jawaharlal Nehru University. 

However, Dhar suggested, just as India continued talks during their election period, the UK could also do so. 

The UK has a long-standing practice of ‘purdah’—the pre-election period when governments hold back from making any announcements that may be seen to be giving them an unfair advantage at the polls.

New Delhi's demand for giving Indian professionals the right to live and work in the UK—as part of a trade agreement—is a controversial subject in Britain, and the government cannot be seen to be negotiating on it in the last months of its term.   

Also read: The fallout of India’s unpredictable farm trade policy

Scotch, EVs and work visas

Mint reported that the UK has agreed in principle to allow Indian professionals to live and work in the UK for a fixed—as yet undecided—period under work visas, with renewal options. Placing this provision under the FTA would protect Indians worker from any changes in the UK's domestic policy.

In return, India may allow the import of a fixed number of premium electric vehicles annually on reduced duties. The number of cars being discussed was in the range of 2,000-2,500 but this cap could be adjusted.

“The FTA with the UK will mark two significant changes in India's FTA journey. Firstly, it shifts India's focus from east to west in terms of preferential trade partnerships," said Ajay Srivastava, founder of Global Trade Research Initiative, a think-tank.

“Secondly, India negotiates many new non-trade areas such as environment, labour, gender, digital trade, data governance, etc under FTAs, reluctantly changing its earlier approach to focus only on traditional market access subjects like merchandise and services trade," Srivastava said.

Merchandise trade between India and the UK has grown from $10.45 billion in FY22 to $11.46 billion in FY23 and it increased further by 13.26% to $12.98 billion in FY24.

Also Read: Free trade has two faces and the one offering harmony must prevail

The UK's main demands include significant tariff cuts for Scotch whisky, which currently attracts a hefty 150% duty, electric vehicles and chocolates.

Regarding the issue of Scotch whisky, India has offered a deal similar the one it has with Australia. Under the India-Australia FTA, the duty on Australian wines has been reduced from 150% to up to 75% over a period of 10 years.

The tariff on Scotch could now be reduced to 100% for bottled Scotch, which could be further reduced to 75% over a 10-year period.

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