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LONDON – India is leading a tough bargain as the crisis-hit British government tries to get a coveted trade deal across the line within weeks.
Prime Minister Liz Truss, who The fledgling management It could do with a break amid market turmoil and declining poll ratings, it ordered its commercial director to stick to the October 24 Diwali deadline for the deal set by his predecessors Boris Johnson and India’s Narendra Modi. But, with weeks of talks underway to secure a post-Brexit win, some crucial sectors are dismayed by what is on the table.
“If the deal doesn’t change much,” said one business leader familiar with the content of the talks, “you will be in the area of ‘a bad deal is worse than no deal’.”
This does not mean that British negotiators – in daily conversations with their counterparts – are not winning. The UK is on the cusp of securing India’s steep federal tariff cut of 150 per cent on imports of Scotch whiskey, two people familiar with the matter told Politico.
It would be an early victory for an iconic industry under Commerce Secretary Kimi Badenoch, who addresses the Conservative Party conference in Birmingham on Monday. Its boss Truss – herself a former British chief of trade – has described striking a deal with India as one of her top trade priorities.
However, as always with global trade talks, there is a snag. While India is ready to lower its federal whiskey tariff while the two sides race to the finish, Delhi’s negotiators are using it as leverage to get what they want from Britain.
A UK Department of Commerce spokesperson said it “cannot comment on live negotiations” but “we are clear that we will not sacrifice quality for speed”. She stressed that the UK “will only sign when we have an agreement that meets UK interests”.
In private, a government official admitted that India was “playing dirty” with a public pressure campaign to push Britain into a deal insiders predict would focus on eliminating tariffs on goods.
Even if it does secure a tariff cut on Scotch, the whiskey industry remains concerned that a host of bureaucratic barriers will still need to be removed to make the reduction worthwhile.
Said David Heng, director of UK trade policy at the European Center for International Political Economy (ECIPE) Fikri.
In a new development last week, India threatened to impose $247 million in retaliatory tariffs on Scotch and other industries if Britain did not abandon controversial safeguards it had put in place to protect its domestic steel industry.
While the two issues are ostensibly separate, some trade experts saw them as a tough negotiating tactic from Delhi, with someone close to the deal saying it appeared designed to give India “extra clout” in talks on the FTA.
They noted that “India did this to the US a few years ago, again for steel,” saying the move was “no different” from India’s last-minute pressure tactics at the COP26 climate summit and recent WTO negotiations on a COVID-19 vaccine. being able to.
Hennig said the move showed India was “gathering more leverage to get the narrowly focused trade deal they want from us”. Another trade expert said these pressure tactics are “definitely in the rules of the game in trade negotiations”.
A person close to the Scottish whiskey industry has questioned the idea that the steel’s retaliatory move was linked to broader trade talks, saying Delhi was merely a “reaction” to Britain’s move in June to support the steel industry.
As the debate over whiskey tariffs continues, the British service sector has its own skepticism — and time is running out.
Several business associations – including Britain’s technology, financial services, pharmaceutical and chemical industries – have voiced concerns about the speed of talks and what the deal will offer British companies in August.
“I’ve been saying for some time I’d rather have a more comprehensive deal than rush to get it completed by Diwali,” said Karan Pelimuria, Cobra beer magnate and founding chair of the UK Indian Business Council.
Bilimuria said negotiations would conclude “ideally” by the end of the year, leaving the door open for a deal that benefits Britain’s key growth sectors. But he added: “From what I know, the government is working towards a deal that will be broad and comprehensive and benefit the UK and our companies.”
Britain remains largely a service-based economy: the sector generated 78 per cent of the UK’s total economic output from April to June this year.
Securing the free flow of data between countries and robust protection of intellectual property rights were key “overarching goals” of the deal laid out in the UK’s Strategic Approach to the Talks in January.
However, the data also appears to be a major obstacle to striking a deal with India that would guarantee significant gains for the UK’s services giants.
Catherine Watson, a trade policy expert at consultancy Flint Global, warned that Britain’s deal with India “may fail to deliver meaningful access to UK technology, digital and financial services companies”. She stressed that India is “very protective when it comes to moving data outside its region and is making it increasingly difficult for companies to store data outside its borders and operate in the country without preparing there first.”
Hennig said the deal was “mostly a fairly narrow set of tariff cuts and not anything significant that would change the cost of doing business in India for UK companies”.
Businessmen and experts said the sheer volume of areas missing from the agreement would now require British negotiators to form joint commissions on the deal so outstanding issues can be resolved in the future.
“In light of the fact that not everyone will get everything they want, UK negotiators are alert to the need to put in place structures to which you can return. [the deal] By implementing the agreement, another big businessman said.
British companies “should be skeptical that the structures put in place for the future will pay off significantly and quickly,” Hennig said, referring to any working groups and joint committees set up by the agreement. “But they may be able to make incremental gains, particularly if the focus is on the British side on implementing deals rather than negotiating new ones.”
Truss gave the British negotiators a mandate as broad as possible to secure the deal by the Diwali deadline.
“It appears to be a commodity-based deal that gives Indian companies the right to sell in the UK without having to be in the UK,” said the first major businessman quoted. “Whereas what the UK wanted was to treat services and goods with much better institutional provisions, with at least something to do with digital commerce and intellectual property rights.”
As it stands, they added, there is too little for the services sector in the deal to “make it feel too asymmetric” in India’s favour. “It’s a shame because this is a once in 20-year opportunity that we won’t be able to renegotiate anytime soon.”