The ongoing negotiations for the proposed Free Trade Agreement (FTA) between India and the UK have reached a crucial stage as they enter the 14th round, with the issue of social security emerging as a significant point of contention. The discussions, which started in January 2022, aim to strengthen the economic ties between the two countries and cover a wide range of topics including trade dynamics, regional cooperation, and a parallel Bilateral Investment Treaty (BIT).
One of the critical issues that have prolonged the negotiations is India’s insistence on including a social security agreement in the FTA. India seeks an arrangement that would allow temporary Indian workers in the UK to claim social security benefits from contributions made during their stay. Currently, these workers, especially those on short-term visits, have to make social security contributions without being able to derive any benefits from them. The proposed social security pact could include an ‘export of benefits’ clause, allowing UK authorities to remit any state pension entitlement accrued in the UK directly to India once the employee returns. However, the UK has been resistant to this idea due to the lower number of British nationals working in India compared to Indians in the UK.
From the UK’s perspective, they are seeking preferential duties for their automobile industry, whiskey, certain dairy items, meat, and national treatment for its services industry in India. This means UK companies in sectors like financial services and telecom would be subject to the same laws and regulations as local Indian companies. India, on the other hand, is pushing for lower duties on its labor-intensive exports such as textiles and garments, along with relaxed visa rules for its services professionals. The visa issue is particularly sensitive, given the UK’s concerns about migration, a significant factor in Brexit.
The scope of the India-UK FTA talks is extensive, covering 26 chapters or policy areas, with most sectors either close to conclusion or in advanced stages. Other key issues under negotiation include rules of origin and intellectual property rights (IPRs), highlighting the broad and multifaceted nature of this proposed trade agreement.
Both countries are facing internal pressures and deadlines. The UK is due to have elections in late 2024, and India is preparing for big federal elections in 2024, along with hosting the G20 summit in September. These political events are adding urgency to the negotiations, with the possibility of an interim agreement being reached this year, followed by a more comprehensive agreement after the elections.
Overall, the negotiations reflect the complexity and depth of the economic relationship between India and the UK, and the outcome of these talks will likely have significant implications for both countries.