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India may begin formal negotiations for free trade agreements (FTAs) with the United Kingdom (UK) and European Union (EU) by end of 2021 after completing ongoing preparatory work, commerce secretary Anup Wadhawan said.

“With EU, there is a clear agreement at the highest level on resumption of negotiations and the tracks on which the negotiation will happen. With the UK also, there was summit level discussion and clear announcement was made on starting negotiations for a comprehensive trade agreement, even an early harvest as a part of it. Talks with UK and EU can start before end of the year, with EU possibly even before that. Some preparatory work has to happen with EU because there was a long disruption in the negotiations. With UK, we are initiating talks and the preparatory work has to be done after which formal negotiations will begin," Wadhawan said speaking to reporters on Thursday.

In the India-EU leaders’ meeting last month, the two sides agreed to resume talks separately on trade, investment and geographical indications (GIs), which were earlier part of a comprehensive bilateral trade and investment agreement (BTIA) before talks collapsed in 2013 after six years of negotiations.

India and the UK also announced their intention to begin talks on an enhanced trade partnership after a virtual summit between Prime minister Narendra Modi and his UK counterpart Boris Johnson last month.

Asked why India agreed to recast the stalled trade negotiations into three separate deals with EU, Wadhawan indicated that this was done keeping EU’s policy position in mind. “We have many bilateral investment treaties which are standalone. EU has certain policy position also which has evolved globally for them. Keeping that policy position in mind and our own practices in mind, this is what was agreed to. All the negotiations are going to happen in parallel and outcome will be targeted simultaneously. It does not really matter whether they are standalone or combined," he added.

Wadhawan said India is also focusing on resuming FTA negotiations with key trade partners such as Canada and Australia, taking forward negotiations with new countries including Peru and Isreal and upgrading the existing preferential trade agreements with Chile and Mercosur. “Very wide-ranging efforts are underway. Also, efforts are on to review our existing FTAs such as Asean, South Korea or Japan and upgrade them to achieve their potential in a better manner," he added.

After India exited China dominated Regional Comprehensive Economic Partnership (RCEP) deal at the last minute in 2019, it has shifted focus to the West in search of more favourable trade deals. While India has better complementarity with EU and UK for trade deals, their focus on labour and environmental standards and India’s high tariff regime may pose challenge in concluding such negotiations. India has hiked tariffs on one-third of its tradable goods in the last five years in order to protect domestic industry and to reduce import dependence. India’s average tariff increased to 14.3% in FY21 from 13% in FY15, with policymakers frequently using trade policy measures to encourage domestic production and curb inflation.

On the US decision on Wednesday to keep in abeyance retaliatory tariffs on India’s digital services tax for six months, Wadhawan said this is because of a broader effort to reach global understanding on taxation in the face of recent growth in ecommerce. “All this is moving forward in a conducive manner. I am sure the world will reach some understanding on this issue," he added.

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