NEW DELHI: It is good to have a deadline while negotiating a free trade agreement (FTA) but the Diwali target set by former British Prime Minister Boris Johnson for FTA with India does not seem to have been cast in stone, according to strategic and industry experts here.
While there is consensus that there is unlikely to be any significant shift in foreign policy stance towards India under new UK Prime Minister Liz Truss, she is facing pitfalls that may prove to be a dampener in bilateral trade relations. A few days back, British Home Secretary Suella Braverman was speaking for, and to, the ‘nativist’ faction of British politics when she said an India-UK FTA can’t happen if it means more Indians in Britain. While India countered her claim that a Migration and Mobility Partnership (MMP) between the two countries had not “worked very well” in tackling visa overstayers, strategic experts suggest that the wrangles may well end up in a diluted trade pact. The prospects of Prime Minister Narendra Modi’s UK visit towards the end of the month to sign on an FTA draft also seem to be dim at this stage.
Right-wing populist politics targets immigrants everywhere. While many want to stop ‘illegals’, they forget how immensely British and American economies, in particular, have benefited from migration.
Data localisation and UK companies being allowed to bid for Indian Government contracts are among the issues causing a possible deadlock in the final stages of the India-UK free trade agreement. It now appears that the Liz Truss Government will not be as substantive or as comprehensive as envisaged by the previous Boris Johnson Government, as negotiations on key issues of mobility/migration and tariffs can be expected to continue towards a non-time bound second-phase of the agreement.
According to a report by UK’s Office of National Statistics, in April-June, the UK unemployment was at a near historic low of 3.8 per cent. But during the same quarter the number of job vacancies rose to a record high of almost 1.3 million. That anaemic growth, high inflation and tight labour market coexist is thanks to supply shortfalls across skill ranges, a structural weakness exacerbated by Brexit’s boo to foreign workers.
The skills shortage will lead to the wage-price spiral – wages go up because labour is scarce, so costs go up, so businesses raise prices – the last thing Britain needs as it battles soaring inflation. Getting Indians with different skillsets into this market is a win for Britain because it keeps wages down.
Reports suggest that a ‘thin’ India-UK FTA will be signed before Diwali, and the bigger deal will come later. But whether in a thin deal or a thick one, if the UK insists on restrictive policies on migration, India should walk away. Britain’s market by itself is not a big deal for Indian products. And India needs to draw a line on the labour question for future negotiations with big economic powers
