The UK-India free trade agreement – what we know so far

What we know so far

Tariff reduction on UK goods exports

India has agreed to remove or reduce tariffs on 90% of tariff lines. This would amount to tariff reductions on 92% of the UK’s goods exports to India in 2022. 

Once the deal comes into force, 64% of tariff lines (equaling £1.9bn of current UK exports to India) will be eligible for tariff-free imports into India. This will increase to 85% of tariff lines over the following 10 years.

Some headline tariff reductions include:

• Day one removal of tariffs on aircraft parts and scientific and technical measuring instruments.
• Removal of tariffs on agri food (including fresh and frozen salmon and cod, and lamb).
• Reduction in tariffs on whisky and gin from 150% to 75% (to reduce to 40% after 10 years).
• Reduction in tariffs on automobiles from over 100% to 10% (subject to a quota). This will begin with combustion engine cars but transition to EVs and hybrids. 
• Reduction in or removal of tariffs on certain cosmetics and toiletries.
• Improved market access for advanced manufacturing and medical technology companies within the wider life sciences sector, and for clean energy.

Indian media reports suggest that India will not provide tariff reductions in sensitive agri-products such as dairy products, apples, cheese, oats, animals and vegetable oils, as well as sensitive industrial goods such as plastics, diamonds, silver, base stations, smartphones, television camera tubes, optical fibres, optical fibre bundles and cables.²

Tariff reduction on Indian goods exports

UK tariffs on 99% of Indian goods will be removed. Products benefiting from reduced or removed tariffs include clothing, footwear and food products. This excludes certain sectors such as sugar, milled rice, pork, chicken, and eggs.

Indian exports of low- and mid-range EVs will benefit from reduced tariffs within a set a quota, to be phased in over time.

Indian media reports state that upon entry into force of the FTA, Indian exporters of industrial and labour-intensive goods will benefit from removed tariffs, including   leather, footwear, textiles and clothing, gems and jewelry, base metals, furniture, sports goods, transport/auto components, chemicals, wood/paper, mechanical/electrical machinery and minerals.³

Specified rules of origin criteria for goods

According to the UK Government’s summary of conclusions, the FTA will include rules of origin criteria ensuring market access for UK products which source ingredients and materials from other countries: “for example, whisky distilled in Northern Ireland can use barley or neutral grain spirit from the Republic of Ireland and can be bottled in transit, on the way to India.”

General provisions and exceptions

As with other trade agreements signed by the UK (such as the UK-Japan Agreement for a Comprehensive Economic Partnership)⁴, the FTA will incorporate the General Exceptions found within the WTO’s General Agreement on Tariffs and Trade (GATT) and General Agreement on Trade in Services (GATS). These will allow both the UK and India to take measures not otherwise conforming with the FTA. These include, for example, actions necessary to protect public morals, actions necessary to protect human, animal or plant life or health, or actions imposed for the protection of national treasures of artistic, historic or archaeological value.

In addition, the FTA will also include a dedicated provision allowing the UK and India to take actions not otherwise conforming with the FTA when done so for national security reasons. This is also a common provision in trade agreements – for example it is included in the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (to which the UK is a signatory).⁵ The final text of this exception in particular will be important to monitor, given that countries are increasingly relying on national security exceptions under global trading rules.⁶

Improved access to Indian procurement contracts 

UK businesses will gain bidding access (with improved bidding terms) for certain Indian Government and state-owned enterprise procurement contracts.

UK businesses which manufacture or produce in India will gain preferential treatment (the same as applies to Indian firms) for Indian federal government procurement, if at least 20% of their product or service is from the UK.

Reduced barriers for exports of UK services

According to the UK Government’s summary of conclusions, UK services exports to India within certain “covered sectors” will benefit from the same treatment granted to Indian businesses by the Indian government.

UK businesses will not need to set up a company in India or be a resident in India to supply services in covered sectors. These sectors include telecommunications services, environmental services and construction services.

Limited initial direct impact on professional business services

The FTA will include an annex in which the UK and India agree to identify and encourage UK and Indian relevant professional service regulators to enter into negotiations on mutual agreements or arrangements for recognition of professional qualifications. This annex will also establish a Professional Services Working Group of government officials to support such mutual recognition of professional qualifications.

Whilst this presents the potential for increased trade in regulated services between the UK and India in the long term, any improvements in professional mobility between the UK and India will be dependent on negotiations between their respective professional regulatory bodies. It is notable that the FTA appears not to include any explicit provisions opening up market access for legal services – a complaint raised by the Law Society.⁷ 

Reinforced IP protection for UK exporters

The FTA will grant the UK the ability to apply for increased protection for all UK geographical indication trademarks – currently only available to wines and spirits.

Improved protections ensure that UK exports protected by copyright will continue to be protected within India for at least 60 years.

Reduced trade barriers for UK telecoms suppliers

The FTA will guarantee UK telecoms suppliers access to facilities and services on a “transparent and non-discriminatory basis”, and that UK telecoms suppliers will benefit from “open and objective” access to critical resources such as spectrum and radio frequencies.

Reduced barriers to trade in digital services

The FTA will reduce barriers to digital trade, such as through provisions which support the use of electronic contracts and transactions , as well as electronic authentication.

The UK Government has stated that the FTA will include provisions on cross-border data flows, but that any transfer of personal data will still be protected under the UK’s data protection law.

Trade remedies will be enshrined in the FTA

The FTA will include a provision allowing the UK or India to temporarily increase tariffs or suspend tariff concessions if the tariff liberalisation agreed in the FTA leads to a surge of imports that “causes or threatens to cause serious injury to domestic industry.”

Expediated customs procedures

The FTA will include commitments to provide improved customs procedures. Certain “eligible traders” will benefit from simplified customs procedures and timeframes for the release of goods. Eligible traders will also be able to defer payment of customs duties until after the release of imported goods.

Both the UK and India will commit to release goods as rapidly as possible after arrival at customs, specifically within 48 hours, if all requirements have been met and where no physical examination is necessary. 

Double Contributions Convention (“DCC”)

The UK and India have agreed to negotiate a DCC whereby employees of Indian companies working temporarily in the UK for up to three years will pay social security contributions in India rather than the UK. Similar provisions will be available to UK businesses seconding employees to India.

The FTA appears not to include any major changes to the UK’s visa regime allowing for much higher business visa quotas, as had previously been reported.

The UK-India FTA is an example of the UK Government’s priority to demonstrate its capability to strike trade deals post-Brexit. In recent days, the UK Government has also agreed the outlines of a trade deal with the US, and has signaled its intention to strike a free trade agreement with Turkey.  

Authored by Aline Doussin, Kate Poppitt, and Chris James.