Relevance: GS-2: India and its neighborhood- relations. Bilateral, regional and global groupings and agreements involving India and/or affecting India's interests

Key Phrases: Free trade agreement, Early harvest scheme, Intellectual property rights, Interim pact, Sensitive issues, Supply chains, Indo­Pacific, Balanced trade pacts, BREXIT, Global Britain, AUKUS.

Why in News?

• January this year saw the formal launch of negotiations for an India-­United Kingdom Free Trade Agreement (FTA) when Commerce and Industry Minister Piyush Goyal met U.K. Secretary of State for International Trade Anne­Marie Trevelyan during her visit to New Delhi

India-­United Kingdom Free Trade Agreement (FTA)

• Aimed at achieving a “fair and balanced” FTA and cover more than 90% of tariff lines so as to reach the bilateral trade target of around $100 billion by 2030.
• Both countries agreed to an early harvest scheme or a limited trade agreement to lower tariffs on a small set of goods apart from easing rules for select services.

Why is such a trade pact needed?

• Providing continuity by focusing on interim pact: Given India’s abysmal reputation in concluding FTAs this may not be a bad strategy in keeping interlocutors engaged in the process.
• Post pandemic quick recovery of trade: As the global economy undergoes a fundamental transformation in the aftermath of COVID­19 and supply chains get restructured, India cannot lose any more time in setting its house in order.

How has India's trade approach shifted?

• New Delhi is demonstrating a new seriousness of purpose: India negotiates 16 new and enhancing several other trade pacts with nations as diverse as Canada, the United States, the European Union and South Korea.
  • In fact, just before the launch of FTA talks with the U.K., India and South Korea also decided to expedite the upgradation of the existing FTA, formally called the Comprehensive Economic Partnership Agreement.
• India showing new flexibility and balancing acts: India is engaging with its partners on trade as it seeks balanced trade pacts at a time when new trade blocs in the Indo­Pacific such as the Regional Comprehensive Economic Partnership (RCEP) and the Comprehensive and Progressive Agreement for Trans­Pacific Partnership (CPTPP) are gaining traction.
• Countering China via trade: Strategic partnerships without strong economic content would have no meaning in the Indo­Pacific, where China’s economic clout is growing by the day.
• India has chalked out an aggressive Atmanirbhar Bharat plan which aims to make it an export powerhouse with $1 trillion exports by 2030.

Committed to trade multilateralism with the World Trade Organisation (WTO) at its center, India has renewed its efforts to strike bilateral trade deals with key countries for access to the export market with an extensive set of preferential trade agreements. More FTAs will give Indian products more access to global markets and the opportunity that India missed by staying out from the RCEP

Why U.K. is showing interest in India:

• A golden opportunity for the British: Ms. Trevelyan viewed this deal as “a golden opportunity to put UK businesses at the front of the queue as the Indian economy continues to grow rapidly”, that will “unlock this huge new market for our great British producers and manufacturers across numerous industries from food and drink to services and automotive”
• Post BREXIT ambitions of Britain: Britain has made a trade pact with India one of its post­Brexit priorities as it seeks a greater role in the Indo­Pacific.
  • India is at the heart of the U.K.’s Indo­Pacific ‘tilt’, which has generated considerable interest around the world
• To make Birtain, ‘Global Britain”: British Prime Minister Boris Johnson came to office promising one of the deepest and broadest British foreign, security, development.
  • To underscore its ‘Global Britain” credentials, a trade deal with India becomes critical in anchoring the U.K. economically to the Indo­Pacific.
• U.K.’s changing approach towards China: shifting from being a major proponent of China to perhaps the most hawkish in Europe. Being an ally of U.S., it has also become firmly focused on the Indo­Pacific.
• Becoming regional security architecture and ensuring global security: Like its allies in the region, the U.K. recognises the importance of a free and open Indo­Pacific to global stability and prosperity.
  • The trilateral security partnership between Australia, the United Kingdom, and the United States (AUKUS), announced in September 2021, enabling Australia to acquire nuclear powered submarines with assistance from the U.S. and U.K.

The U.K. is looking to leverage its historical connections, development work, and its credibility when it comes to combating climate change (particularly relevant to these low­lying states vulnerable to sea­level rise) to help establish itself as a serious player in the region.

Sources: The Hindu

Mains Question:

Q. India is at the heart of the U.K.’s Indo­Pacific ‘tilt’. Explain the reasons behind increasing focus of the U.K. in Indo-Pacific region and how India is playing a crucial role in that. [250 words]