Negotiating Objectives for a Free Trade Agreement with India

Earl of Sandwich Excerpts

Tuesday 6th September 2022 Grand Committee

[The Earl of Sandwich (CB)]

My Lords, I join the noble Baroness, Lady Hayter, and the committee in welcoming this FTA, but only as far as it goes. I have lived and worked in India and am well aware of the joint prosperity our two countries have enjoyed since Sir Thomas Roe landed in Surat in 1615 and got a very good deal from the Mughal emperor Jahangir. That is summarising more than four centuries in a sentence.

I am well aware of the subsequent implications of colonialism and slavery, both ancient and modern, but they are not part of this debate, which is about the present intentions of our Government. What is relevant is that our two countries have a long common history, language and culture that have already laid a foundation for a range of trading engagements. India will be a valuable business partner under this new agreement. She is not only overtaking China in terms of population but will soon become the world’s third-largest economy. Under President Modi the economy has grown faster, although GDP growth of 13% in one recent quarter is fiercely disputed by Congress. There are also grave concerns about human rights violations and discrimination against minorities, which I know will be mentioned by my noble and right reverend friend Lord Harries in a moment.

I sense that the Government are right to press ahead with the FTA, provided they do not rush it and risk a bad deal, as the Independent put it. A Diwali deadline would mean sacrificing or avoiding some of the tricky core issues, such as the environment, health, fuller intellectual property protection and dispute resolution. The former Trade Secretary said that she wanted a comprehensive agreement, but the July joint outcome statement mentions the end of October and the signs are that the new Prime Minister, still riding on the wagon of Brexit, was right to get on with it. The Government’s drift eastwards since Brexit is also connected with our application to the CPTPP. The tilt towards Asia and the Pacific has been a well-understood priority of this Government, but how does India fit into that? Like China, she is unlikely to quality for the CPTPP and has no interest in joining it. In general, as the noble Baroness said, the committee believes that the international context of this FTA, and indeed of other recent agreements, has been left out. Will the Minister say what is the background?

What is the Government’s longer-term trade policy? The DIT claims as a strategic aim an increase in our exports to India by up to £16.7 billion by 2035. This seems quite possible if enough time is taken with the agreement, but how exactly will it be achieved? With India still famous for red tape and corruption, it is not an easy business environment, as the noble Baroness mentioned. Internal tax barriers are also a serious problem, notably over whisky earlier this year, yet the Government offer no solutions. Restrictions on foreign investors are formidable, and the DIT recognises that, but the published objectives of this deal are too vague to enable us to pick out the real priorities. The number one priority for goods is the lowering of tariffs. Our report points out that India is still a developing country, technically a lower-middle-income country, and is still enjoying many of the benefits of the GSP. This means that two-thirds of India’s exports to us are tariff-free, while we have to pay duty on all but 3% of our exports to India. However, the picture is changing and there are opportunities. The Government now need to prioritise goods that are not covered by the GSP, such as textiles, vehicles, chemicals, electronics and renewable energy, in which India is becoming a world leader.

Consultation with the devolved Administrations, mentioned by the noble Lord, Lord Frost, has never been one of the Government’s fortes, at least not in the experience of this committee. We heard concerns from the Scottish and Welsh Governments that SPS standards, the environment and possible adverse effects on other developing countries had all been virtually ignored in the agreement. I was sorry that this evidence came late and was not sufficiently reflected in our report. However, we did say that HMG had again failed to consult fully.

I can understand why pharmaceuticals are a sensitive issue and have been played down in the agreement and the UK’s strategic approach. Nevertheless, India’s generic drugs play an essential role in our health service. This must be more openly acknowledged, however contentious. To state it politely, there is a delicate balance between IP provisions and dependence on generics. We have invited the Government to explain how this balance can be achieved. Perhaps the Minister will have a shot at that as well.

Others will be much more qualified than I to speak about the environment, but we hope that HMG will offer India a deal to support its decarbonisation efforts, such as the international Just Energy Transition Partnership agreed with South Africa. With energy prices rising and more dependence on Russian oil, it will become harder for India to forecast the closure of any coal-fired power station. As with the Australia FTA, much more work could be done to calculate deforestation rates in the Himalayas, which are so critical to climate change.

The FTA will increase GHG emissions even before transport is included. What about the boost to green industries promised in January? Is that sufficiently reflected in the agreement? On visas, will the Government further relax the quite successful visa regime in favour of higher education and post-study work visas?

One could cover many other points, but I will leave it there, except to say that India’s long-held reputation as a non-aligned country has again been badly dented by her refusal to condemn the Russian invasion of Ukraine. Although it is not directly relevant to this agreement, it will surely dampen down our enthusiasm for it.