Sahyadri IAS

The Hindu : Page 04

Syllabus : GS 2 : International Relations

Prime Minister Narendra Modi reaffirmed India’s commitment to finalising an FTA with the UK during talks with Foreign Secretary David Lammy.

The discussions focused on enhancing the Comprehensive Strategic Partnership, technology security, and global collaboration, while acknowledging India’s growing global influence and economic significance.

What is a Free Trade Agreement (FTA)?

FTA is an agreement between the countries or regional blocks to reduce or eliminate trade barriers, through mutual negotiations with a view to enhancing trade.
It includes goods, services, investment, intellectual property, competition, government procurement and other areas.
This concept of free trade is the opposite of trade protectionism or economic isolationism.
FTAs can be categorized as Preferential Trade Agreement, Comprehensive Economic Cooperation Agreement (CECA), and Comprehensive Economic Partnership Agreement (CEPA).

Potential significance of India – UK FTA:

Significance: Economic Growth: An FTA could boost bilateral trade, opening up new markets for Indian and UK businesses, thus driving economic growth in both countries.
Job Creation: Enhanced trade opportunities could lead to job creation in sectors such as manufacturing, services, and technology.
Investment Flow: Increased investor confidence and reduced trade barriers could encourage more foreign direct investment (FDI) between the two nations.
Technology Transfer: Collaboration on technological advancements and innovation could be accelerated, benefiting sectors like IT, biotechnology, and clean energy.
Market Access: Indian exporters could gain greater access to the UK market, while UK companies could more easily enter the Indian market.
Regulatory Cooperation: Harmonisation of standards and regulations could simplify trade processes, reducing costs and increasing efficiency.
Strategic Partnership: Strengthening the economic relationship could also enhance geopolitical ties, allowing for greater cooperation on global issues such as climate change and security.
Consumer Benefits: Consumers in both countries could enjoy a wider variety of goods and services at competitive prices.

Challenges:

Regulatory Differences: Divergent standards and regulations between India and the UK could complicate trade negotiations and implementation.
Tariff Barriers: Negotiating mutually acceptable tariff reductions on sensitive goods and services could be challenging.
Non-Tariff Barriers: Addressing non-tariff barriers, such as customs procedures and import quotas, may pose difficulties.
Intellectual Property Rights (IPR): Aligning IPR protections to satisfy both countries’ industries could be contentious.
Labour and Environmental Standards: Reconciling differences in labour laws and environmental regulations could be a point of contention.
Agricultural Sector: Protecting domestic agricultural interests while opening markets could be a sensitive issue for both countries.
Public Opinion: Gaining support from domestic stakeholders, including businesses and labour unions, could be challenging.
Service Sector Concerns: Addressing the movement of professionals and service sector regulations could be complex.
Political Will: Sustaining political commitment amidst changing governments and priorities could impact the negotiation process.