Major Tariff Reductions, New Market Access, and Ongoing Concerns for Indian Liquor Exports
India and the UK have signed a Comprehensive Economic and Trade Agreement (CETA), reducing India's average tariffs for the UK from 15% to 3%. The agreement is expected to make Indian exports more competitive in the UK market by lowering export costs. It aims to strike a balance between the strengths and sensitivities of both parties, offering zero-duty access for Indian exports, such as textiles, leather, pharmaceuticals, and agricultural products, while safeguarding sensitive sectors. The deal includes rules to prevent dumping, improved regulatory ecosystems, and gradual tariff reductions for strategic products. Additionally, the UK has provided significant market access for services and assured mobility regimes, while both countries opened procurement markets with legal guarantees.
India and the United Kingdom have articulated a target to double bilateral trade from the current $56 billion within five years. This objective builds upon the comprehensive strategic partnership established in 2021. Key elements of CETA include substantial tariff reductions, streamlined processes for the movement of professionals between India and Canada, and expanded investment opportunities. The agreement aligns with the India-UK Vision 2035, which outlines collaborative priorities in areas such as defence, technology, education, green energy, and innovation. Successful implementation may serve as a precedent for future trade agreements with the European Union and the United States, contingent upon effective execution.
Key Points
- Tariff reductions benefit goods such as Scotch whisky, machinery, and textiles, with phased cuts over a 10-year period.
- The agreement enhances Indian investment in the UK and allows duty-free access for Indian products.
- CETA could shape future FTAs with the EU and the US, reinforcing India's free trade commitment.
- The India-UK Vision 2035 outlines broader cooperation in areas such as defence, technology, and green energy.
- India-UK trade deal reduces tariffs and balances both countries' strengths and sensitivities.
- Zero-duty access for major Indian exports will enhance their price competitiveness in the UK, while the agreement also safeguards sensitive sectors, such as dairy and cereals, from increased competition.
- Gradual tariff reductions for strategic products under Make in India and PLI initiatives.
- The UK provided comprehensive market access for services and assured mobility regimes.
- Procurement markets opened with legal guarantees for fair treatment.
Indian liquor industry representatives have raised formal concerns regarding discriminatory trade practices in the UK following the India-UK Free Trade Agreement. They state that certain non-tariff barriers, including maturation requirements, hinder fair competition for Indian producers in the UK and EU markets. The Confederation of Indian Alcoholic Beverage Companies (CIABC) has requested government engagement to resolve these issues and secure equitable market access. Specifically, the sector asserts that the application of a three-year maturation standard, accustomed to temperate climates, imposes an undue burden on Indian products, which mature more rapidly due to climatic differences. CIABC also advocates for the introduction of a minimum import price (MIP) on imported spirits to safeguard premium Indian brands from being undermined by lower-cost imports. Achieving the government's $1 billion export target by 2030 will require addressing such trade impediments.
Main issues
- Indian liquor companies cite non-tariff barriers in the UK that block fair access for their products.
- The three-year whisky maturation rule fits cold climates, resulting in losses and branding limits for Indian producers.
- CIABC seeks government action to eliminate trade discrimination and secure equal market access abroad.
- CIABC proposes a minimum import price (MIP) on foreign spirits to shield premium Indian brands from underpricing.
- Unresolved barriers could jeopardise India's $1 billion export goal for liquor by 2030.
In an increasingly fragmented and uncertain global landscape, the Indo-UK Trade Agreement emerges as a powerful testament to the enduring value of international cooperation and open markets. This landmark agreement goes beyond mere trade; it embodies a bold declaration that nations, regardless of their diverse histories and backgrounds, can come together to forge new paths of partnership based on mutual benefit and shared aspirations.
Prime Minister Narendra Modi has underscored the profound significance of this trade agreement for future generations. Indeed, it resonates most with the youth, as this agreement is not merely a trade deal; rather, it is an inheritance of enhanced opportunities, deeper cultural understanding, and a commitment to fostering a more interconnected and prosperous world. This agreement signifies an inflexion point - a pivotal turning of the page - that promises to lead us toward a qualitatively better and brighter shared future.
Moreover, the implications of the Indo-UK Trade Agreement stretch far beyond the immediate economic benefits it may bring. It symbolises a proactive approach to global commerce in an era marked by protectionism and isolationism. By embracing open markets, India and the UK are setting a powerful example for other nations to follow, demonstrating that collaboration and dialogue can pave the way for growth and innovation.
The agreement is expected to generate substantial economic benefits, including increased trade flows, job creation, and investment opportunities. Additionally, it aims to strengthen the ties between the two nations, facilitating cultural exchanges and mutual understanding, which are equally crucial in today’s world.
As we move forward, the Indo-UK Trade Agreement stands as more than just a document; it represents a visionary commitment to a future where countries can work hand in hand, transcending barriers, to achieve shared goals and aspirations for prosperity and peace. In doing so, it creates a legacy of international cooperation that will resonate for generations to come, ensuring that the youth inherit not only opportunities but also a robust and dynamic global community.
