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Post-Brexit UK’s trade pact with India could run into hurdles

Trade talks between India and the UK cannot begin till Brexit is formalised — by March 29, 2019, if all goes according to plan.

world Updated: Mar 30, 2017 18:52 IST
Prasun Sonwalkar
Prasun Sonwalkar
Hindustan Times, London
Brexit,trade pact,India
British Prime Minister Theresa May and Prime Minister Narendra Modi in New Delhi in November 2016.(Reuters File)

Leading lights of the Theresa May government have shown much enthusiasm for a free trade deal with India after Brexit, but there are indications that negotiations will not be easy, even if New Delhi seems to have moved beyond harping on the visa issue.

The United Kingdom began the procedure to exit the European Union on Wednesday, and the discourse has moved to the next stage of incorporating EU laws in British law or repealing them. However, actual trade talks with India cannot begin till Brexit is formalised — by March 29, 2019, if all goes according to plan.

For some time, India’s main focus has been on visa hurdles for business and the ability to transfer employees from India to offices in the UK. The thinking is that for other categories such as student visa, Indians have other choices and it is the UK’s loss if they go elsewhere.

The current understanding in New Delhi was articulated by minister of state for commerce and industry Nirmala Sitharaman in a recent BBC interview, where she said the visa issue “sounds like non-tariff barriers in the services sector” and noted that “we are not being treated as old friends any longer”.

“It’s a tight professional engagement, while we are also looking at India’s strengths and demanding our due place in the trade deal…Hope there will be necessary course correction during formal talks on a trade deal after Britain leaves the EU,” she said.

London believes that unlike the yet-to-be-reached free trade agreement between India and the EU, it will be easier to forge such an agreement with the UK when it is free from the bureaucracy of Brussels.

However, Vince Cable, who was business secretary in the David Cameron government, is not so sure though May hinted during her November visit to New Delhi at new visa facilities for frequent Indian business travellers.

Sitharaman and Cable during their meet in London in January 2015. ( High Commission of India, London )

Cable told Hindustan Times: “Britain’s current crop of ministers seem not to have taken on board that the attempted EU-India agreement foundered not because of the rest of the EU but, in substantial part, because Britain rejected it.

“Attempts to open the UK to more Indian IT specialists and other professionals (the so-called Mode 4) foundered on the objections of Theresa May. The main irritant in UK-India relations is visas. In the absence of creative ideas on freeing up immigration and visiting rights from India, ministers will continue to get a flea in their ear in Delhi.

“There is no sign of rethinking on the visa issue. I don’t think it (UK-India free trade pact) will happen. Sitharaman valued good relations, but there was quite a serious obstacle on the mobility issue in the trade talks,” he said.

Indian high commissioner YK Sinha said: “When talks begin after Brexit, both sides will have their wish lists. I don’t want to prejudge but our side will be keen on free movement of people, particularly professionals.

“Issues have been flagged, both sides are aware. But no issue can be called a deal-breaker,” he added.

Senior solicitor Sarosh Zaiwalla said: “This action (triggering Article 50) will have stark implications on both the EU, the UK and also on Indian businesses that do business with the European Union. Until now, most Indian businesses have established their European headquarters in London and have been using London as the springboard to do business in EU countries.

“Once the UK is out of the EU, different rules will prevail for trade between UK and EU and this could well require Indian businesses, who have established offices in the UK for the purpose of trading with businesses in the EU, to also establish separate offices in the EU.”

According to Zaiwalla, the “greatest risk” Indian businesses should bear in mind is the possibility of Scotland becoming independent, and “England could well become little England with a smaller population”.

He added: “The present mood in the British establishment is that UK and India would be in a better position to increase its trade by direct relations as it would not be hindered by EU’s bureaucratic rules. One hopes this will come true.”

FICCI’s UK director, Pratik Dattani, emphasised the visa issue in trade talks: “Now that Article 50 has been formally triggered, we expect to see the pace of discussion within government in terms of engagement with countries like India increase.

“We have seen some clarity over the last few months, and it remains important to note that the free movement of goods and services, and bilateral investment cannot be decoupled from mobility. Britain is still one of the largest economies in the world and will continue to remain a valuable partner for India.”

First Published: Mar 30, 2017 15:52 IST