The UK and India have finalized a trade agreement aimed at reducing barriers to trade and fostering economic growth in both nations. The UK government hails it as their most significant trade deal post-Brexit, anticipating substantial benefits for their economy.
1. What is the primary focus point of this agreement?
The agreement entails reciprocal tariff reductions. The UK will lower taxes on imported Indian goods such as clothing, footwear, certain food products (including frozen prawns), jewelry, gems, and select car models. In return, India will reduce taxes on UK imports like cosmetics, Scotch whisky, gin, soft drinks, higher-value cars, food items (lamb, salmon, chocolate, biscuits), medical devices, aerospace products, and electrical machinery. The deal also opens up opportunities for British firms to secure more service contracts in India.
2. How will it benefit both economies?
While the effects won’t be immediate, the UK government expects the lowered tariffs to eventually lead to lower prices and greater consumer choice. UK industries manufacturing goods with reduced tariffs, like car makers and whisky distillers, stand to gain significantly. The halving of tariffs on whisky and gin imported to India is particularly beneficial, potentially offsetting the impact of U.S. tariffs on these industries. Increased exports and profits for businesses could lead to more hiring, investment, and tax revenue. Indian consumers can anticipate a wider variety of goods, while clothing manufacturers and jewelers gain enhanced access to the UK market.
3. What was the primary reason for this trade deal?
This trade agreement, years in the making, was likely spurred by rising global tariffs. While it’s the UK’s third-largest trade deal after those with Australia and Japan, it’s essential to note that the EU remains the largest trade partner for both the UK and India. Trade between the UK and India totaled £42 billion last year, and this deal is projected to boost that figure by £25.5 billion annually by 2040, adding £4.8 billion to the UK economy. Given India’s projected rise as the world’s third-largest economy, this deal provides access to a vast consumer base and aligns with India’s export growth targets.
4. Immigration policies will stay intact
The agreement does not change immigration policies or policies for Indian students studying in the UK. It does include a three-year exemption on social security payments for Indian employees working in the UK on short-term visas. A limited number of visas will also be available from an existing route for chefs, musicians, and yoga teachers.
5. Long term consequences
Although the agreement was in the works before the U.S. began imposing tariffs, it may now prove to be an effective weapon in the fight against these tariffs, significantly boosting trade in the aforementioned sectors. The agreement is long-term, which, if positive, could lead to further expansion of cooperation in this area and encourage other countries to take similar steps to offset the effects of unfavorable tariff actions by the United States.
This landmark trade agreement offers exciting prospects for businesses in both nations. Curious about how it could shape your business strategies? Connect with a Livingston account representative today. We’re here to guide you through every step.
Source: BBC.com