UK-India: Comprehensive Economic and Trade Agreement

Lord Sikka Excerpts

Wednesday 4th March 2026 Grand Committee

[Lord Sikka (Lab)]

My Lords, I thank the International Agreements Committee for its thorough and insightful report. I welcome the UK-India trade treaty and congratulate the Government on securing this agreement in a very short time. Inevitably when sovereign states negotiate, there is give and take and compromises, and this treaty is no exception. Some may scoff at the possible 0.13% increase in UK GDP but, in a world marked by Trumpian trade wars and tariffs, nations need to diversify trade as a buffer against emerging imperialism.

The trade deal is not comprehensive, as has been pointed out, but I support the Government’s step-by-step approach, which will be more productive in the long run. Inevitably, at the moment, both India and the UK want to protect certain segments of their economies and I hope that in time the scope of this treaty will expand. A huge positive for UK-based companies is that they can now have better access to Indian public procurement and government contracts, especially as India is expanding its infrastructure investment and its Government are heavily investing in semiconductors, rare earth minerals and other supply chains.

However, I have a number of questions for the Minister, whom I thank for the briefing earlier in the week. I have searched the various chapters of the treaty but could not find anything about the currency in which the trade between the two countries is to be settled. Will it be in the local currencies or in US dollars? The answer matters. If the trade is financed in local currencies, there is a potential for saving considerable transaction costs and greater potential for expansion of trade, as BRICS countries have already shown.

Since the Second World War, the US dollar has functioned as international currency, which skews world trade because countries undertaking international trade, even though they are not dealing with the US, have to spend money on currency hedging, so countries incur hedging costs and US financial institutions profit from every single trade. Is it free trade? Forget it: it is free money for US financial institutions. The dollarisation of world trade allows the US Government to impose arbitrary financial sanctions on trade that they do not approve. We have seen President Trump exercise that power. Is the UK-India trade agreement unintentionally increasing risks to countries such as India, which has already been bullied for buying Russian oil? Can the Minister shed some light on the discussions about the new financial risks that might be created as a result of this treaty and how much profit will be made by US financial institutions as a result of this trade treaty?

Questions have already been raised about the sanctity of intellectual property rights, and I hope the Minister will explain how the treaty will protect the intellectual property rights of pharmaceutical, technology and other businesses.

There are always issues about non-tariff barriers, which any sovereign state can create at any time, in the form of licensing, various bureaucratic rules and other practical procedures.

International trade also raises questions about transfer pricing, tax structuring and the implications of indirect taxes and customs duties. Again, I struggle to find anything about that in the treaty or in the committee’s report. The OECD convention on transfer pricing has become dysfunctional, and the BRICS countries have developed their own pragmatic rules. In other words, the rules applied across the globe are not consistent; they cannot be consistent because of the way the international economy is constructed. Can the Minister explain how difficulties arising from different transfer pricing regimes will be resolved? I hope the Minister will not say that some kind of obscure panel will look into it, because those kinds of panels do not carry any weight in these disputes.

Fair trade and competition also rest upon labour rights. As a founding member of the International Labour Organization, India has ratified the core conventions, including six of the eight fundamental conventions covering forced labour, child labour and non-discrimination, but it has not ratified Convention No. 87, which relates to freedom of association and the protection of the right to organise, or Convention No. 98, which relates to the right to organise and collective bargaining. Can the Minister explain what discussions have taken place between the two Governments about this and what their impact is on this treaty?

Several speakers have highlighted the absence of legal, accountancy and other services from the agreement. I am a bit more relaxed about this because, over the years, we have come across all kinds of evidence—literally running to hundreds and thousands of transactions—of sleaze relating to law and accountancy firms. These revelations have been made via the Panama papers, the Bahama leaks, the Paradise papers, the Pandora papers, the Swiss/HSBC leaks and any leaks you can think of. They show that UK-based and Crown dependency-based law and accounting firms are absolutely central to global sleaze, and I do not think that any emerging economy needs to import more sleaze via trade treaties. They have plenty of their own homegrown sleaze.

Will the Minister say what steps the Government are taking to cleanse these sectors so that they can be considered worthy candidates for expanded international trade? At the moment, the Government are deregulating. They expect regulators to promote the growth of law firms, accounting firms and the related sectors, which means there will be even less effective oversight. I hope the Minister can answer my question about what the Government are going to do to cleanse these sectors. We cannot be exporting corruption under the guise of trade treaties. Finally, I hope that this agreement between two countries with a shared history is a forerunner of something big in the not-too-distant future.