India critical in anchoring the UK economically to the Indo-Pacific

Contact Counsellor

Last Updated05/02/2022

January 2022- the formal launch of negotiations for an India-United Kingdom free trade agreement (FTA) when the Commerce and Industry Minister met U.K. Secretary of State for International Trade during their visit to New Delhi.
A ‘new age’ free trade deal with India remains critical in anchoring the United Kingdom economically to the Indo-Pacific.

These negotiations aimed at achieving a “fair and balanced” FTA and cover more than 90% of tariff lines to reach the bilateral trade target of around $100 billion by 2030.
This pact will be a “new-age FTA” covering more than just goods, services and investments and include areas such as intellectual property rights, geographical indications, sustainability, digital technology and anti-corruption.

A golden opportunity to put UK businesses at the front of the queue as the Indian economy continues to grow rapidly.
An opportunity to unlock a huge new market for British producers and manufacturers across numerous industries from food and drink to services and automotive.

India is hoping to conclude its first FTA in over a decade with the UAE this year and another one with Australia.
The India-UK FTA will be the next in line at a time when India is demonstrating a new seriousness of purpose as it negotiates 16 new and enhancing several other trade pacts with countries like Canada, the United States, the European Union and South Korea.
Just before the launch of FTA talks with the UK, India and South Korea also decided to expedite the upgradation of the existing FTA(Comprehensive Economic Partnership Agreement).
The government is showing a new found flexibility in engaging with its partners on trade as it seeks balanced trade pacts.
Several agreements in the Indo-Pacific such as the Regional Comprehensive Economic Partnership (RCEP) and the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) are gaining traction these days.
Strategic partnerships without strong economic content have no meaning in the Indo-Pacific, where China’s economic clout is growing by the day.

Britain made a trade pact with India one of its post-Brexit priorities as it seeks a greater role in the Indo-Pacific.
India is at the heart of the U.K.’s Indo-Pacific ‘tilt’, which has generated considerable interest around the world.
The Integrated Review (U.K.‘s national security and international policy) released in March 2021 categorically underlined that, “In the decade ahead, the UK will deepen engagement in the Indo-Pacific, establishing a greater and more persistent presence than any other European country”.
U.K. will also be launching trade negotiations this year with Canada, Mexico and the Gulf to underscore its ‘Global Britain” credentials.
A trade deal with India along with its membership in the CPTPP remains critical in anchoring the U.K. economically to the Indo-Pacific.

A range of factors have coalesced to create an impetus for the U.K. to adopt a more robust Indo-Pacific strategy:

The trading implications of Brexit,
The UK’s changing approach towards China - shifting from being a major proponent of China to perhaps the most hawkish in Europe,
The US & UK closest ally and security guarantor, remains firmly focused on the Indo-Pacific.

Like its allies in the region, the U.K. recognises the importance of a free and open Indo-Pacific to global stability and prosperity and made clear its intentions to deploy strategic assets to this end.
UK is also looking to amplify its efforts by entering into the regional security architecture.
The trilateral security partnership between Australia, UK and US (AUKUS), announced in September 2021, enabling Australia to acquire nuclear-powered submarines with assistance from the US and UK, has given London a greater voice in the region.
Trade and investment will be a key dimension of this UK tilt.
Brexit has necessitated greater access to non-EU markets, and UK’s changing relationship with China requires a diversification of trading partners.
This shift in focus is also driven by a recognition that the Indo-Pacific is now largely the force behind global economic growth.

UK is looking to leverage its historical connections, development work, and its credibility when it comes to combating climate change to help establish itself as a serious player in the region.
Through its Indo-Pacific tilt, UK is finally carving out a direction and purpose to its post-Brexit foreign policy.
This prioritization opened up a new window for India and UK to quickly finalize their FTA.
It is a unique “now or never” moment and the two sides seem willing to seize it despite the challenges.