Trio of trade deals marks UK’s return to the world stage
The accord with India is more detailed and economically significant than the one with the US, say analysts
[LONDON] The UK earlier this month announced free trade agreements (FTAs) with two of its biggest partners – the United States and India – as British Prime Minister Keir Starmer seeks to create new business opportunities and jobs in the world’s sixth-largest economy.
And just last week, the UK and the European Union agreed to reset their relations – nine years after the controversial Brexit vote. The deal includes agreements on defence, travel, migration and work, among others.
In a speech on Monday (May 19), Starmer said: “These release us from the tired arguments of the past and, as an independent sovereign nation, allow us to seize the opportunities of the future. A clear message sent across the globe that Britain is back on the world stage.”
He described Britain as a “global champion” of free trade that’s able to play a role in European security and, above all, make deals that put money in the pockets of working people.
He added that the deals as a whole will protect thousands of jobs and enable businesses to save hundreds of millions of pounds in the years to come.
On May 6, the UK and India agreed on a bilateral trade deal after more than three years of negotiations, with the pact set to add £4.8 billion (S$8.3 billion) to the UK economy by 2040.
BT in your inbox
Start and end each day with the latest news stories and analyses delivered straight to your inbox.
Two days later, the UK and the US reached a historic trade deal – the first for US President Donald Trump and his administration since Washington announced sweeping tariffs in April. The final details of this limited agreement – known as an “Economic Prosperity Deal” – are still being worked out by both sides.
On paper, analysts said that the UK-India deal has created a far better impression than the accord with the US.
While the US remains the UK’s largest trading partner and India is just 12th on the list, businesses and economists are more optimistic about the UK-India FTA, given the unpredictable nature of the Trump administration.
“The razzmatazz of the ‘special relationship’ that led to the US-UK deal resulted in countless headlines,” said Liam Halligan, an independent British economist. “But it’s the UK-India agreement that will have a far bigger impact on Britain’s economy.”
Observers noted that even with the UK-US FTA in place, there are still provisions for Trump to impose a 10 per cent tariff on numerous products that enter the US. On the flip side, the deal will cut British tariffs on US goods from 5.1 per cent to 1.8 per cent.
“In contrast with the US deal, the UK’s trade accord with India is more detailed, broad and economically significant,” said Halligan. “India will leap from being the world’s fifth-largest economy to the third biggest over the next five years, overtaking Japan and Germany.”
Keshav Murugesh, chairman of the Confederation of Indian Industry’s UK Business Forum, said the deal was “particularly important in a world where trade tensions are on the rise”, adding that it would help shield the Indian and British economies from external shocks.
The Confederation of British Industry described the UK-India agreement as a “beacon of hope amid the spectre of protectionism”.
India’s tariffs on British whisky and gin will be halved from 150 per cent to 75 per cent, before falling to 40 per cent by 2035. Auto tariffs will decline from roughly 110 per cent today to just 10 per cent, with quotas set on the number of British cars that can be exported to India and vice versa.
Mark Kent, the chief executive of the Scotch Whisky Association in Scotland, said the UK-India FTA is a “once-in-a-generation deal” and paves the way for more Scotch whisky to be exported to India, which is the world’s largest whisky market.
He added that Scotch whisky exports should rise by £1 billion over the next five years, create jobs across the UK and provide more choice for Indian consumers. India currently accounts for nearly half of global whisky consumption.
Some economists pointed out other positives, such as the fact that British banking, law and insurance companies will soon enjoy greater access to India’s massive services market.
There were some concerns expressed in certain quarters, though. Senior executives from the UK’s pharmaceutical industry said they were worried that the UK-India deal did not address intellectual property protection for life science innovators.
Leaders from the UK tech industry also pointed out that the deal does not cover potential data losses, while companies in the UK’s textile industry said they feared increased competition from cheap Indian imports.
Opposition politicians in the UK have claimed that companies that employ new workers from India will be at an advantage because the deal excludes them from having to pay national insurance contributions.
Secretary for Business and Trade Jonathan Reynolds quickly sought to clarify these assumptions, especially on any increased migration to the UK.
“We have 17 of these agreements with the EU, South Korea, the US and a whole range of partners. What it’s about is making sure that when people are inter-company transfers between the UK and India, they don’t simultaneously pay into both social security systems,” he said.
Copyright SPH Media. All rights reserved.
