India-UK FTA Negotiations

India-UK FTA Negotiations

Sub: Economy

Sec: External Sector

Visas Not a Priority

• Indian High Commissioner to the UK, Vikram Doraiswami, stated that visas are not the primary concern for India in the Free Trade Agreement (FTA) with the UK.
• Despite frequent British media reports emphasizing visa issues, India’s main focus lies elsewhere in the FTA discussions.

India’s Priorities

• India seeks ease of movement for highly skilled professionals, particularly in IT and healthcare, to deliver services in the UK.
• There is also a push for tariff reductions on various goods exported to the UK.

UK’s Priorities

• The UK aims for greater access to India’s services sector.
• The UK also seeks reduced duties on goods such as whiskey and cars.

Specifics on Skilled Movement

• India is not aiming to use the FTA primarily to increase migration to the UK.
• The focus is on Mode 4 of the General Agreement on Trade in Services (GATS), which deals with the movement of natural persons delivering services in a trade partner’s territory.
• Doraiswami highlighted the need for easier intra-company transfers, noting the presence of over 970 Indian subsidiaries in the UK.

Student Visas

• Student visas and post-study work visas were not positioned as critical to the FTA by Doraiswami.
• The attractiveness of the UK as a study destination will be judged against other countries like the US, Canada, and Australia, which offer post-degree work opportunities.

Indo-Pacific and Security

• Without directly mentioning China, Doraiswami stressed the importance of a rules-based order and freedom of navigation in the Indo-Pacific for India.
• The UK and European countries share this interest, presenting an area for potential collaboration.

Context of FTA Negotiations

• The India-UK trade agreement negotiations have been ongoing since 2022, with the 14th round concluded before the Indian elections in April 2024.
• The India Global Forum event, where these comments were made, is an annual platform for Indian and British policymakers, industrialists, and others to discuss bilateral issues

This nuanced approach underscores the broader and more strategic elements of the FTA discussions between India and the UK, beyond the often-highlighted visa issues.

General Agreement on Trade in Services (GATS)

GATS: The General Agreement on Trade in Services is a treaty of the World Trade Organization (WTO) that came into effect in January 1995. It aims to create a credible and reliable system of international trade rules, ensure fair and equitable treatment of all participants, stimulate economic activity through guaranteed policy bindings, and promote trade and development through progressive liberalization.

Key Features:

Coverage: GATS covers all service sectors, except those supplied in the exercise of governmental authority.

Principles: Non-discrimination (Most-Favored Nation Treatment and National Treatment), transparency, and the progressive liberalization of services

The 4 Modes of Supply under GATS

Mode 1: Cross-Border Supply

Services are supplied from one country to another, without the movement of either the supplier or the consumer.

Example: A software company in India providing software services to a client in the United States via the internet.

Implication: This mode deals with services that can be delivered digitally or through other means without physical presence, such as online consultancy or data processing.

Mode 2: Consumption Abroad

Consumers or firms use a service in another country.

Example: A tourist from France traveling to India and utilizing services such as hotels, tours, or medical treatments.

Implication: This involves the movement of the consumer to the location where the service is provided. It’s significant in sectors like tourism, education, and healthcare.

Mode 3: Commercial Presence

A service provider establishes a presence in another country to provide services.

Example: A UK-based bank opening a branch in India.

Implication: This mode involves foreign direct investment (FDI) and requires businesses to set up subsidiaries or branches in the host country. It covers sectors like banking, retail, and telecommunications.

Mode 4: Presence of Natural Persons

Individuals travel from their home country to another country to supply services.

Example: An Indian IT consultant working temporarily on a project in Germany.

Implication: This mode involves the temporary movement of workers to provide services in another country. It’s often associated with professional services, IT, and consultancy.