Hindu Editorial Analysis : 18-November-2023
India and the United Kingdom are on the verge of finalizing a Free Trade Agreement (FTA), a pivotal pact aimed at fostering economic cooperation and enhancing bilateral trade.
Understanding Free Trade Agreement (FTA):
- FTA is a formal agreement between countries to reduce barriers to imports and exports.
- It promotes the exchange of goods and services by eliminating tariffs, quotas, subsidies, and prohibitions.
- FTAs encourage economic cooperation and oppose trade protectionism.
India-UK FTA Overview:
- Once signed, it will be India’s most comprehensive deal with any developed country.
- Bilateral trade has increased to $20.36 billion in 2022-23.
- India seeks greater access for skilled professionals, while the UK aims for reduced import duties on specific goods.
Significance of the FTA:
- Shift from the ‘Look East’ policy to focus on economic integration with Western and African nations.
- Adoption of a ‘China-plus one’ policy due to supply chain disruptions during the pandemic.
- The FTA will serve as a template for future agreements, including with the European Union.
Advantages for India:
- Protection of domestic industry while aspiring to become a larger exporter to the UK.
- Boost for labor-intensive sectors, like apparel and gems, facing declining market share.
- Potential revival of textile exports by aligning with competitors like Bangladesh.
Advantages for the UK:
- Access to newer markets post-Brexit.
- Opportunities for British goods with tariff reductions in the Indian market.
Issues & Challenges:
- Existing tariff differentials; British exports facing higher tariffs in India.
- Possible imposition of a carbon tax, affecting Indian exports.
- Resolution needed for rules of origin, intellectual property rights, social security, and concessions on specific goods.
Why In News
India and the UK are close to concluding the free trade agreement (FTA) that has been in the works since January 2021, marking a significant milestone in their bilateral economic relations and paving the way for enhanced trade cooperation between the two nations.
MCQs about India-UK FTA – Opportunities, Challenges, and Strategic Significance
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What is the primary objective of a Free Trade Agreement (FTA)?
A. Increase government tariffs
B. Promote economic cooperation
C. Introduce trade protectionism
D. Impose subsidies on imports
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Why is the India-UK Free Trade Agreement considered significant for India’s trade strategy?
A. Reinforcing the ‘Look East’ policy
B. Strengthening ties with China
C. Shifting focus to Western and African nations
D. Prioritizing trade deals with ASEAN countries
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What is a key demand from the UK in the India-UK FTA negotiations?
A. Greater access for Indian healthcare professionals
B. Reduced import duties on scotch whiskey
C. Market access for Indian textiles at zero customs duties
D. Exclusion of financial services from the agreement
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What potential challenge could arise for India’s exports to the UK despite tariff removal in the FTA?
A. Currency exchange rate fluctuations
B. Imposition of a carbon tax based on carbon emissions
C. Stringent rules of origin requirements
D. Intellectual property rights disputes
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