British Business Secretary Kemi Badenoch.
| Photo Credit: REUTERS

A trade deal being negotiated with India is “possible” to be concluded before a general election in the country but Britain does not want to use that as a deadline, U.K. Secretary of State for Business and Trade Kemi Badenoch has said.

The Minister in charge of signing off on the free trade agreement (FTA), now in its 14th round of negotiations, pointed to India’s “protectionist economy” in comparison with the U.K.’s liberalised regime as one of the factors behind the long-drawn discussions.

Ms. Badenoch, who was speaking during a Global Trade conference at the think tank Chatham House on Thursday, stressed that she wanted to ensure a “commercially meaningful” pact as opposed to just a pre-election picture opportunity.

“India is still very protectionist where we are very, very liberalised,” claimed Ms. Badenoch.

“I am not interested in just taking a picture and moving on. It has to be something that is commercially meaningful. People need to be able to say ‘ah now I can do this’, like we had with our Australia agreement or with Japan for example,” she said, referring to FTAs with the two major economies.

On the timeline for getting to the finishing line with the talks with India, she added: “We can actually sign an agreement before the Indian election. I suspect that that is not necessarily going to be the case because I don’t want to use any election as a deadline.”

“It is possible that that will be done but I am very resistant to deadlines being set on trade negotiations because it runs down the clock. It is very possible that we can sign but I am not using it as a deadline for the work that I am carrying out basically.”

India and the U.K. have been negotiating an FTA since January 2022 to significantly enhance the GBP 36-billion bilateral trading partnership. The 13th round of talks concluded on December 15 last year, with both sides hopeful that the ongoing fourteenth round will end in an agreement.

The U.K. wants India to significantly reduce tariffs on U.K. exports such as food, cars and whisky that can currently be as high as 150%. India in turn is concerned over the fairness of rules applied to Indian workers temporarily transferred to the U.K. on business visas who have to pay national insurance, despite not being eligible for U.K. pensions or social security benefits.

In her keynote address at the trade conference, Ms. Badenoch noted: “I have to strike the right balance between embracing the import of goods from developing countries to help them grow with the need to maintain the high standards on quality and safety which the British people rightly expect. We make choices.”

“Our free trade agreements are helping us make the right choices because they are all about diversification and resilience. That is what the Indo-Pacific tilt is about, but we need to make sure that the facts are out there.”

With both India and the U.K. set for a general election this year, signing off on a trade agreement has taken on particular urgency before leaders on both sides get into campaign mode.

Image used for representative purpose only.
| Photo Credit: K.V.S. Giri

India has the highest tariffs on inputs in electronic segment among competing economies such as Vietnam and Thailand, ICEA said on July 6 citing its latest study as the industry body made a strong pitch for reduction in tariffs.

The high tariffs impact competitiveness, ICEA said, adding that the industry is seeking reduction of tariffs, and glide path to match Vietnam and other competing nations.

Also Read | Electronics industry urges cut in import tariffs

The study revealed that high tariff-induced costs accentuates India’s cost disability vis-à-vis the four competing economies.

India Cellular and Electronics Association (ICEA) said the study is critical to evaluate India’s competitiveness to reach the $300-billion electronics production goal by 2025-26, including $120 billion of exports.

A line-by-line comparison of India’s non-zero tariffs shows that India’s tariffs are higher for up to 98% lines compared to Vietnam (for FTA tariffs) and 90% of the lines compared to Thailand.

The competing economies have nearly double or more zero-tariff lines than India, according to the study released by ICEA at a conference.

ICEA, India’s apex electronics industry association, conducted the five-nation study of input tariffs in electronics sector across India, China, Vietnam, Thailand and Mexico, covering 120 key components.

“…our recommendation is that we should begin decompression exercise starting 2023. Relevant FTAs will take time, targeted tariff reduction is the immediate solution,” Pankaj Mohindroo, Chairman at ICEA, said during a briefing.

ICEA study mentioned that over 80% of Vietnam’s imports for 120 tariff lines are under free trade agreements (FTAs). The average tariff in Vietnam (considering their FTA imports) is much lower — close to 1%.

Also Read | ‘India can make $300-bn electronics by 2026’

The study also claimed that instead of building a domestic ecosystem, high import duties perpetuate imports as it results in uncompetitiveness of the domestic ecosystem.

“Tariffs act in the reverse direction to their intended purpose by adversely impacting costs, growing domestic production and exports. High tariffs only work in an import substitution phase, not when a sector like electronics has entered the phase of export-led growth,” ICEA release said.

India’s mobile phone exports increased nearly 100% to $11.1 billion, and electronics exports by about 56% to $23.6 billion by March 2023.

The study shows that between 2015 and 2021, while India’s electronics tariffs rose, those of the competing economies decreased.

India and Mexico have trade deficits, while China, Thailand and Vietnam have moved to an overall trade surplus.

Despite lower tariffs in 2022 and while tariffs continually decreased during 2015 to 2021, each of the four competing economies performed better than India in exports, trade deficit and surplus for electronics.