UK-India: Comprehensive Economic and Trade Agreement

Lord Fox Excerpts

Wednesday 4th March 2026 Grand Committee

[Lord Fox (LD)]

My Lords, it is a pleasure to participate in this debate and to follow some excellent contributions. This report was the last one I worked on before rotating off the International Agreements Committee; I am missing it already. I congratulate the chair, my fellow committee members and the excellent secretariat, who prepared this report.

There was a sense, I detected, of government triumphalism when this FTA was announced. That was somewhat justified. India has been famously protectionist and discussions had been long in process, so this agreement was an achievement. The IAC report acknowledges this, and the negotiating team who delivered the agreement should be congratulated. In a world where rules-based multilateralism has been shoved aside by a new zero-sum game philosophy, as has been noted, we should salute that the deal is compliant with Article XXIV of GATT.

However, the arrival of the EU deal hard on the heels of the UK deal took some of the gloss off the potential competitive advantage for the UK that could have been delivered. I have previously asked the Minister in the Chamber for some analysis of the two trade deals. It would be good if he could put on the record the department’s current analysis of their relative values and the disparities between them, as well as how his department will act where the EU has a more beneficial term than we find in our deal. After 14 rounds of negotiation, it may have been the charisma of this Government that finally helped the deal across the line. However, I note that the presence of Trump’s tariffs must have loomed large in the minds of the Indians and assisted the EU, the UK and others in getting their deals across the line.

Not unlike when we signed the CPTPP, there is talk of strategic realignment for the UK following this deal. Personally, I would be a bit cautious about the rate or significance of change that we might see as a result. However, the Government and our report speak about making this a starting point; a “living bridge” is the language used. It offers an important framework for future bilateral co-operation, which is how we should view it.

As has been noted, as things stand, the UK has a trade deficit of around £9.7 billion with India, including a services deficit of £5.1 billion; those figures are based on Q2 2025 numbers. As was set out by the noble Lord, Lord Anderson, the scale of the potential deal is dwarfed by any future realignment or new alignment with the EU, but it is, as has been said, a significant possibility. I was surprised at the scale of the services deficit between our two countries.

I highlight that because, as many of your Lordships have said, the services part of our economy has not been included in much measure. It is largely absent, with limited or no agreements on liberalisation. Legal services are left out; there is small movement on financial services; and there is no mutual recognition of professional qualifications, no commitment to cross-border data flows and no bilateral investment treaty, as the noble Lord, Lord Kerr, mentioned.

The Law Society has bemoaned the failure to include legal services in the FTA, dubbing it a “missed opportunity” for the UK economy. For reference, India is one of the last large jurisdictions in the world in which the establishment of foreign lawyers is not possible, meaning that a lot of India-related legal work currently takes place outside India. The negotiators tried, I think, to gain access for our hugely successful professional services exports, so I am sure that the Minister would like to set out for your Lordships some detail as to why the final FTA failed to reflect any meaningful progress in this area.

More generally, given the Government’s stated ambition to promote high-value services trade, how will the Government pursue a side agreement with India to liberalise its professional services markets? In the meantime, what steps is the Minister’s department taking to support UK professional services businesses that face restrictions in accessing the Indian market? How will the Government help them trade?

As we have heard, it is a different story for goods. There are benefits for UK exporters, but a lot of them will not accrue for some time. India will reduce trade barriers gradually over 15 years, while Indian exporters will generally gain immediate access to the UK market. When it comes to our farmers, they often seem to be the sector that misses out—or, worse, is sacrificed for other potential gains. The previous Conservative Government undermined British farmers and our rural economy by agreeing to detrimental deals with Australia and New Zealand; those who disagree should look up what George Eustice, who helped negotiate the deals, had to say about them.

One way to limit the scale of these sell-outs would be to involve the House of Commons in a vote on deals. I agree with the comments that we have heard about changing the way in which trade deals are monitored and approved by Parliament. With or without votes, the Liberal Democrats will continue to hold the Government to account to make sure that farmers are not undercut and that any imported foods meet the UK’s regulations on environmental protection and animal welfare.

The committee’s report contains specific concerns about the food and drink sector, for which access is described as “cautious and phased”. For food and other goods, the expanding Indian middle class may create long-term demand for high-quality, value-added UK products, but, for many products, the agreement holds long-term promise rather than providing immediate commercial gains. Some UK food products are excluded entirely, and others will benefit gradually. As I said, in most cases, tariff reductions or eliminations are staged over five to 10 years. As the son of a man who milked cows, I say with due to respect to the noble Lord, Lord Johnson, that our dairy industry is particularly likely to face increased competition from India without reciprocal access to that market.

Can the Minister outline what the Government are planning to do to address barriers such as the export health certificate for lamb, which currently makes exports of that product very difficult or impossible? More generally, will the Minister undertake to work with Defra and the devolved Governments to deliver a comprehensive review of the cumulative effect of successive trade agreements on UK agriculture? Further, as the noble and learned Lord, Lord Goldsmith, set out, there is scope for the Indian Government to introduce new so-called quality control orders. They hold the prospect of erecting new bespoke barriers for our exports, so can the Minister explain how the Government will monitor and police these orders? Also, how they will address their arrival with the Indian Government, if and when that happens?

The UK automotive industry also benefits largely from what I would call the “jam tomorrow” clause. Currently, India is closed to UK vehicles, so any access is a win, but access will come “progressively”, which is another word for “slowly”. Tariffs may fall, but quotas will remain. If all goes well, it could eventually be a big market for the UK, but that depends on the survival of the British car industry over the next decade and more; in the meantime, Indian manufacturers will have much better access from day one. There will be more Indian vehicles on British roads than the other way round for some time to come.

For this to be positive for our GDP, UK business has to be equipped with the knowledge of how to use this new access and navigate the not inconsiderable non-tariff barriers that will remain. Rules of origin are particularly complex and there needs to be an explicit effort from government to support businesses, especially SMEs, to fully utilise this agreement. This should include sector-specific guidance from the department and from the high commission in India. Following the excellent point from the noble Baroness, Lady Gill, how will we use the considerable links via the diaspora as a springboard into markets for us to take the benefit of this treaty?

There is also a likelihood of trade displacement and impacts on developing countries. In other words, goods perhaps previously sold by Bangladesh will be eased out in favour of goods being sold by India. I ask the Minister to undertake to monitor, in particular, the cumulative impacts of trade agreements on developing nations.

With apologies to the upbeat noble Lord, Lord Bates, I may have seemed a little gloomy in this speech, but its tone has been balanced by other speakers in this debate. In general, there is a danger of conferring too many hopes on this FTA, but it would be equally wrong to disparage it. It is a very good start.

--- Later in debate ---

[The Minister of State, Department for Business and Trade and HM Treasury (Lord Stockwood) (Lab)]

My Lords, I am pleased to respond for the Government. I am grateful to my noble and learned friend Lord Goldsmith and the International Agreements Committee for securing the debate today. I am pleased to echo the comments made about my noble and learned friend’s exemplary work as chair of the IAC. I also acknowledge the important work that went into the considered, robust recommendations of this report and the many comments that have encouraged the quality of that work by the team here today.

I begin my remarks by advising noble Lords, having spoken with the officials who negotiated this agreement, that now that they are leading its entry into force the focus has decisively shifted from signing to delivery, and that work is progressing apace. With that in mind, I should like to talk about why the deal discussed today is so important, and, more broadly, why the UK-India economic and trade relationship is so valuable, as many noble Lords have mentioned.

The UK did £47.2 billion in trade with India in the past year. That was up 15%, year on year, and India is now our 11th-largest trading partner. However, as many noble Lords mentioned, it is India’s future potential as an economic partner that stands out. India has the highest growth rate in the G20. It is likely to become the third-largest economy in the world by 2029 and, by 2050, it will be home to more than a quarter of a billion high-income consumers.

Demand for imports is due to grow as well, reaching £2.8 trillion by 2050. Assuming global FDI into India continues on its recent trajectory, it could grow to be worth £1 trillion by 2033. Noble Lords will understand why this has a particular resonance for me as the Minister for Investment. I thank the noble Lord, Lord Kerr, for referencing investment, and express my delight that investment sentiment has already increased since the deal was signed. However, the opportunity runs far deeper than statistics.

The United Kingdom and India share a unique historic relationship that many noble Lords have referenced—one built not only on institutions and commerce but on people, ideas and innovation. The Indian diaspora, as my noble friend Lady Gill mentioned, is one of the UK’s greatest strengths. It is a true living bridge that shapes our economy, public services and universities, and the character of modern Britain. Despite the strength of that relationship India’s market, as my noble and learned friend Lord Goldsmith rightly noted in his opening remarks, is also behind some of the highest barriers to trade in the world. In 2024, India was ranked by the OECD as the eighth most restricted service market and it has some of the highest tariff rates in the G20. Gin and whisky tariffs are at 150%, cars 110%, cosmetics 22%, and soft drinks, lamb, fish, chocolate and biscuits are all at 33%. That sounds like a menu in the Stockwood household, but I wanted to quote some of those tariffs.

It is worth noting that India’s protectionism is not just a matter of policy; it runs deep in its national story. At independence, the burning of foreign cloth became a symbol of economic self-determination. So, when India agrees a deal of this depth, it is not just a small adjustment; it is a significant shift marking progress in the relationship between our two countries. It is in this context that the agreement secured by this Government should be viewed as a momentous achievement. Others had been trying to get a deal like this one for years and failed, but this Prime Minister, along with the then Business Secretary and Trade Minister, has literally brought home the goods.

The agreement goes well beyond India’s precedent, opening the door for UK businesses. The Commons Business and Trade Select Committee said in its report that this deal

“is the UK’s most economically significant bilateral free trade agreement since leaving the European Union”.

It will boost UK GDP by £4.8 billion—approximately 0.13%—and wages by £2.2 billion and is predicted to boost bilateral trade by £25.5 billion by 2040. For those who says that 0.13% sounds modest, I simply ask: what other single, practical step on the table today could bring the same level of economic development?

I ask noble Lords to bear with me for a second as I have lost my place; as a technology entrepreneur trying to use technology, the irony here is not lost on me.

India will drop tariffs on 90% of its lines, covering 92% of current UK exports, giving the UK tariff savings of £400 million per year immediately on entry into force. This will rise to £900 million per year 10 years from now, even if there is no increase in trade. India’s average tariff will fall from 15% to 3%. Further, I emphasise that every region and nation will benefit from this deal, including a £210 million boost for the north-west, driven by aerospace and automotive wins, a £190 million boost for Scotland, supported by cuts on whisky and satellite tariffs, as well as financial services access, a £190 million boost for the east of England, generated through tariff cuts and improved rules for medical devices and clean energy products and a £50 million boost for Northern Ireland, supported by a reduction in the tariffs on industrial products for aerospace, medical technologies and electronics.

Of course, the deal will deliver these benefits only if it is used by UK businesses. This point was made by many noble Lords. We know that it will not always be plain sailing, thanks to varying rules in different states and provinces. The staging of tariff liberalisation will need some explaining, and non-tariff barriers can be just as important. This was alluded to by my noble friend Lord Sikka. That is why we are matching the agreement with practical export support, including stepped-up advice in market and the full range of UK Export Finance backing, so that firms—especially SMEs, which were mentioned—can turn preferential access into signed contracts.

I saw this at first hand during the trade visit with the Prime Minister in October, when we took a number of businesses—120 CEOs—to India. Two deals that had not been made previously were struck in negotiations during that week. A noble Lord committed on the impact on climate. One of those deals was on accessing technologies in the UK that could accelerate the climate transition for India.

Our department is committed to ensuring that businesses have all the support they need, which is why we have protected the DBT team in India. It is also why we have already engaged with more than 5,000 UK businesses through guidance, events and roadshows on how to exploit the CETA. Once we get to entry into force, we will monitor the operation of the CETA’s provisions, including through the regular reviews and the Joint Economic and Trade Committee—the JETCO —that are built into the agreement.

We will also try to resolve other market access barriers that are not covered in this FTA—many of them have been mentioned today—including legal services, recognition of qualifications and specific state-level barriers. The UK is clearly open to continuing negotiations on a bilateral investment treaty, as long as it works for UK businesses. As many noble Lords have said, this is the floor, not the ceiling. We will keep improving how the agreement works based on real feedback from UK firms.

This negotiation has never been about just the economic uplift that it delivers, substantial and important though that is. At a time when our global norms are under pressure, the UK is choosing to lead and to stand for open, fair and rules-based international trade. Agreements such as this are how we build resilience and prosperity for not just ourselves but our partners. This is how we build trusted economic relationships in a world that is changing fast, as evidenced by the past week’s circumstances.

The world is not the same as it was a decade ago—in fact, it is not the same as it was last week. In this new global order, strong bilateral partnerships that are rooted in shared interests and delivered through serious, detailed agreements are how we secure our long-term position. This is a proper, thorough, detailed, old-fashioned treaty. It has hundreds of pages—as we saw on the desk of the noble Lord, Lord Hunt, earlier today—with commitments negotiated line by line. It is real, serious work that shows that the UK is a credible partner on the world stage. It reflects this Labour Government’s approach more broadly: being committed to the hard graft needed to get these deals done.

As previously mentioned, this deal is more about shaping the standards of the future, building trusted economic relationships and ensuring that countries that believe in openness and fair competition can work together. We have secured India’s first ever chapters on anti-corruption, consumer protections, labour rights, gender and development. The agreement also includes the strongest environmental commitments that India has ever made in an FTA. As the noble Baroness, Lady Bennett, referenced in her remarks, this is the start of a conversation, and we need to go further. I also take this opportunity to flag that the deal was negotiated by two formidable female chief negotiators, Kate Thornley and Nidhi Tripathi, showing both side’s commitment to putting women at the top table.

In response to my noble friend Lord Sikka’s points on corruption, the deal includes an anti-corruption chapter that has obligations to maintain measures on the criminalisation of bribery and prohibiting fraudulent book-keeping practices; the prohibition of facilitation payments; the criminalisation of embezzlement and money laundering; and whistleblowing protections—all things that we take incredibly seriously. In drawing attention to these crucial social chapters, I am keen to emphasise the importance of these agreements in strengthening real partnerships between nations and facilitating important, frank conversation in matters beyond the economic things set out in an agreement.

Turning to the European Union, we understand that it has now reached a political agreement on its own FTA with India, as many noble Lords have mentioned, where it seems that the UK deal was used as a baseline. We should in fact take this as a massive compliment, and we will be going through that agreement line by line to check the mark-ups later on.

Crucially, the UK retains a first-mover advantage. I am hopeful that the deal will enter into force before the end of spring so that UK businesses can start exploiting these reduced tariffs this year, while the EU will take some time to achieve ratification. Only the UK has secured access to India’s £38 billion federal procurement market, as the noble Lord, Lord Frost, rightly acknowledged. I repeat that for impact: we are the only country in the world to secure that access. This is undeniably significant and a huge opportunity to a market that is growing at the rate India is growing.

[Lord Fox (LD)]

I really welcome the fact that the noble Lord’s department is doing that analysis. Can he undertake to publish it so that we can see what the comparisons are?

[Lord Stockwood (Lab)]

I thank the noble Lord; I was going to come on to that, but we can agree to that.

My noble and learned friend Lord Goldsmith, my noble friend Lord Anderson and the noble Lords, Lord Hunt and Lord Frost, all made reference to the EU-India deal. As champions of free trade, we welcome this agreement. In answer to the contention of the noble Lord, Lord Frost, that the EU secured a better deal—as well as the interest of the noble Lord, Lord Fox, in that question, as he just noted—I will push back and note that we struck the deal that was designed to be in the best interests of the UK, built on UK business priorities. However, we will come back and comment on the comparison between the deals as well.

As well as its unique procurement process and access, the UK secured proportionally better access to the cars market as compared to production levels. We also kept CBAM out of the deal, while the EU made a £500 million commitment on climate financing over the next two years. Further, the deal also has a mechanism to help us keep pace if India gives more to other partners.

I hope that noble Lords will agree that the CETA is a good deal for the UK. I am grateful for the contributions made in today’s debate. Before closing, I shall take the opportunity to respond to the outstanding points and questions that I have not mentioned already. I will be pleased to follow up with noble Lords after the debate on the specific questions asked and any areas that I miss.

My noble and learned friend Lord Goldsmith, the noble Lords, Lord Hunt, Lord Hannay and Lord Howell, and my noble friends Lord Anderson and Lady Gill rightly noted that the deal is a long-term strategic investment—a start, not an end. The Government strongly agree with this view and the need to energetically pursue the opportunities the deal presents. As I mentioned, we have already engaged nearly 6,000 businesses on the deal and are putting out guidance to SMEs, and we are already preparing for our first Joint Economic and Trade Committee and the multiple technical working groups that sit underneath it.

On the points raised about services, modelling estimates that, in the long term, services exports should increase by over £1.6 billion every year because of this deal. The deal binds in access to over 43 sectors, and key UK services firms such as EY and PwC have come out in support of the FTA.

The noble Lord, Lord Ahmad, asked about professional qualifications. I can tell him that the regulators will be supported by a professional services working group that will support engagement between the UK and Indian bodies. That work is already under way.

On specific sectors, the noble Lords, Lord Howell and Lord Kerr, and my noble friend Lord Anderson noted the importance of legal services. As already mentioned, it is worth recognising that the UK treats the law as a noble profession, making access incredibly difficult. Through the negotiations, we have strengthened our ties with India’s legal system, and we will continue to support British lawyers and law firms seeking to operate in the Indian market. As the deal progresses, we hope to enter into further negotiations about access, particularly around legal services, but we recognise that this is the start of the deal rather than the conclusion.

My noble friend Lady Gill and the noble Lord, Lord Johnson, rightly mentioned the importance of using this deal as a platform for innovation. We have set up an innovation working group, which will bring together government, business, research institutions and academia to ensure that this framework of trade is fit for the future and supports the commercialisation of new technologies, which India excels at, as well as our own reputation globally. This will cover numerous sectors, including AI, quantum, advanced manufacturing and many others as we develop and progress. Indeed, on my trip in October, I found the energy and innovation sectors incredibly impressive. Where India is leading in many of these sectors, we need to be a partner.

The noble Baroness, Lady Prashar, the noble Earl, Lord Dundee, and my noble friend Lord Stevenson raised India’s non-tariff barriers. We have addressed non-tariff barriers in the agreements, from frameworks for mutual recognition of conformity assessments right down to the practical benefits, such as streamlined labelling requirements and the use of stickers—something that businesses regularly raised. Again, this will be a work in progress, and we recognise that there is some way to go.

As mentioned by my noble and learned friend Lord Goldsmith and the noble Lord, Lord Fox, India has recently rescinded on a large number of quality control orders in the industrial space. We are keen to build on the momentum and are actively encouraging India to review its trade-restrictive barriers on other products, both bilaterally and through work at the WTO. As the noble Lord, Lord Fox, suggested, we will continue to work to reduce these barriers, at both federal and state level, within and outwith the FTA.

Turning to goods, the noble Lord, Lord, Fox, raised dairy. All our current food standard protections remain in place. India does not have an approved veterinary residue plan for dairy, so any dairy products originating in India cannot be imported. I thank the noble Lord for his points on agriculture across the FTAs more widely. I commit to taking them to my colleagues in Defra and will write to him on some of the specifics that he raised.

On protecting the goods industry more generally, this deal includes a bilateral safeguard mechanism that allows us to temporarily suspend or increase tariff concessions if an industry is suffering or facing the threat of serious injury because of reduced duties in the CETA.

The noble Lords, Lord Ahmad and Lord Fox, asked whether we could have secured a quicker and more balanced trade liberalisation. As I noted earlier, the UK maintains a significant first-mover advantage, and we have secured a greater share of tariffs eliminated on day one of our agreement than the EU—64% compared with 49.6% of tariff lines, as we currently understand it. We expect the deal to increase UK exports to nearly 60%, with imports expected to increase by only 25%.

I will address the points made about human rights by the noble Earl, Lord Dundee. The UK is clearly a leading advocate for human rights around the world and, as I mentioned earlier, having secure and growing trading relationships benefits the UK’s ability to influence our partners and helps us to have open and frank conversations on a range of issues, including human rights. We are hopeful that the trade deal we have set out here allows us to encourage those conversations.

With reference to the DCC and the IAC’s request for an impact assessment, I again thank the noble Lord, Lord Johnson, for advance sight of this question. Foremost, the net impact on the Exchequer and the British economy of this agreement is significantly positive. The Office for Budget Responsibility will certify the impact of the CETA, including the DCC, in the usual way at the next fiscal event, once the deals have been finalised and ratified. We believe this is sufficient in reviewing the economic impacts of this convention.

The noble and learned Lord, Lord Goldsmith, asked about the impact on developing countries. I draw his attention to the trade and development co-operation chapter, which includes a commitment to monitoring the effects of trade agreements on developing countries, allowing risks to be identified and opportunities for development to be supported. Long-term analysis set out by the UK Department for Business and Trade’s Global Trade Outlook still shows that we expect growth in countries across south Asia and the region.

The noble Lord, Lord Howell, asked about climate and emissions. I answer by saying that UK businesses have a lot to offer through trade, innovation and procurement, and the access secured in the FTA, to assist in the transition to a greener economy. I saw this first-hand, as I mentioned, in a couple of innovative businesses that we took out to India, generating contracts that can significantly impact the transmission profile of India itself.

I come now to the parliamentary scrutiny process of FTAs, raised by the noble Lord, Lord Hannay, and others. I note that, alongside updates to the House after negotiating rounds, DBT regularly updated both committees privately to ensure that they were fully appraised of the sensitive negotiations. We take the feedback on the robustness of that process seriously and will debate some of the considerations further in the coming weeks. I note that the FTA and its impact assessment were published in full and laid in the House on the day of its signature in July last year. We also provided extensive evidence to the BTC and IAC to inform their committee reports and we published our Section 42 report in November.

Furthermore, we proactively sought a debate in both Houses on this deal to recognise the relevant committees’ respective inquiries and our commitment to transparency. As one of the Ministers accountable, I can firmly commit to taking the feedback and enhancing that process as we go further as well.

I want to respond on the geopolitical points raised by several noble Lords this afternoon, which are particularly salient considering the events of the last few days. We continue to see unprecedented turbulence and challenges to economic growth, alongside wider systemic issues, both domestically and internationally. We need to go back to growth and, to do so, businesses need certainty and stability. As part of this Government’s commitment to growth, we published our trade, industrial and small businesses strategies last year. We set out a broader vision and need to keep strengthening our trade partnerships and ensure the agreements that we have signed deliver clear economic benefits. That is one of the reasons I came into government: signing the India deal is only the start. We now need to make sure that it delivers.

In conclusion, this is a historic agreement that marks a major milestone in the UK-India relationship economically, strategically and geopolitically. It demonstrates that, when the UK engages with its partners, we engage seriously with credibility, detail and respect. It builds on the unique historic relationship between our two countries, showing how we can move forward together rapidly in an ever-changing world.

I am particularly grateful to the noble Lord, Lord Bates, for his contribution about the story of Dr Mahalanabis —my apologies if I got that name wrong. In closing, I make the point that I agree wholeheartedly that the dominant human trait that drives our species is indeed optimism. While there is much work to do in making this deal work for the UK, there is much reason to be optimistic about it in its current form. I look forward to continuing constructive engagement as we move forward towards entry in force, hopefully in the spring.