UK negotiating strategy risks bad Brexit trade deal with India, committee warns

The government’s rushed negotiating strategy for getting a Brexit free trade agreement (FTA) with India risks a bad deal, a parliamentary committee has warned.

The House of Lords International Agreements Committee said an “arbitrary” deadline to reach an agreement by the Hindu festival of Diwali made the approach seem “overly ambitious or unrealistic”.

The Department for International Trade (DIT) said it was making “good progress” on its bid to finish talks by the deadline.

Ministers are desperate to sign new free trade agreements with countries around the world to make up for the damage done to UK trade by Brexit.

The Office for Budget Responsibility’s latest assessment shows that in the fourth quarter of 2021, goods imports from the EU to the UK were down 18 per cent on 2019 levels, with goods exports from the UK to the EU down the 9 per cent.

UK service exports to the EU are meanwhile down by over 30 per cent, while exports to the rest of the world around 5 and 10 per cent below 2019 levels.

Yet trade policy experts are sceptical that the UK can make up for the damage done by Brexit by signing agreements abroad. One analysis by the University of Sussex Trade Policy Observatory based on government figures and published last year found that the reduction in economic benefit was likely to be 178 times bigger than the gains of the likely trade deals on the table.

The Commons international trade committee has meanwhile warned that there are still questions about whether the FTAs will deliver significant economic benefits, while DIT has also been warned not to oversell its agreements, such as a recent one with Australia.

In the case of India, the Lords international agreements committee warns that “India’s historically protectionist policies, different regulatory approaches and business practices, mean that overcoming barriers would require, in many areas, changes to India’s domestic legislation”.

This would “likely be difficult to secure and be a lengthy process to implement”, meaning the committee “therefore questions the arbitrary Diwali deadline set for the conclusion of the negotiations, cautioning that the Government could risk giving up a good deal for a fast one by setting a time ambition over and above content”.

Baroness Hayter, chair of the International Agreements Committee said: “A growing economy, as well as a growing middle class and consumer market, make India an attractive trading partner for the UK. The UK Government, however, must not accept a poor agreement simply to meet a deadline.

“We have noted that the aspirations in the Negotiating Objectives are particularly challenging because some would require changes to India’s own cultural and legal approach, which are unlikely to be achieved, or would take a long time.”

She said the committee still wanted the government to publish a trade policy “showing how trade links into broader foreign policy, security, defence and other domestic objectives, as well as labour, women’s and human rights, and the environment”.

A DIT spokesperson said: “We are making good progress toward our shared commitment to conclude the majority of talks on a comprehensive deal by Diwali, having already closed 12 chapters. We remain clear that we won’t sacrifice quality for speed and will only sign a deal which delivers for the UK.

“India is projected to become the world’s third-largest economy by 2050 and a free trade deal could open huge opportunities for UK businesses to trade with India’s £2.2 trillion economy.”

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