Politics

Brexit coup as India trade deal could dwarf axed US pact – economy to outpace £9TN bloc

UK and India launch free trade agreement talks

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The UK’s move towards tightening relations with the Indo-Pacific region, and particularly its trade deal with India, could deliver “big economic benefits eventually comparable in scale to the now defunct US trade deal”, according to new research by the Resolution Foundation. Sophie Hale, Principal Economist at the UK-based think tank, said if a deal with India can be struck “there are big gains available for UK exporters as trade costs tumble”.

She said: “Business services – a key UK sector – is particularly well placed to benefit from what is expected to be India’s meteoric rise to the world’s third-largest import market (behind the US and China).”

The principal economist added Government analysis could in fact undervalue the potential opportunities for UK business service exporters, as India’s import demand for business services is expected to triple by 2030.

This is dependent on the trade deal “helping to correct underperforming of UK business services in India – accounting for just 1.7 percent of India’s imports compared to four percent for Malaysia and Singapore”.

The report noted India’s economy is growing much faster than the CPTPP bloc, whose imports are actually expected to grow at below the world average in the years ahead.

The CPTPP is a free-trade agreement among Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, and Vietnam, valued at a massive £9trillion.

The report adds: “While CPTPP is larger in terms of total imports, the potential gains may be smaller than a deal with India as 95 percent of trade to this group is already covered by existing agreements.

A trade deal with India would likely generate significant export gains, especially for manufacturing sectors.

But the report also warned: “A deal with India exposes UK business to much greater future uncertainty, compared to a US deal, as India’s export specialisms are changing at a far faster rate.

“In the past 10 years eight sectors have emerged as new comparative advantage compared to just one in the US.

“Any deal will increase the exposure of UK firms to unpredictable future competition from India.”

The move to tighten relation in the Indo-Pacific region would mean joining the CPTPP and striking a bilateral trade deal with India.

Last February, then-International Trade Secretary Liz Truss spoke with ministers in Japan and New Zealand to request to join the CPTPP, with formal negotiations set to begin this year.

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The Department for International Trade said at the time joining this £9trillion pact would “deepen the UK’s access to fast-growing markets and major economies, including Mexico, Malaysia and Vietnam, for the benefit of UK business”.

It would also “cut tariffs for UK industries including food and drink, and cars, while also creating new opportunities for modern industries like tech and services, ultimately supporting and creating high-value jobs across the UK.

“Unlike EU membership, joining does not require the UK to cede control over our laws, borders, or money.

In 2019, UK trade with the group was worth a huge £11billion – up by eight percent since 2016.

Prime Minister Boris Johnson said at the time: “One year after our departure from the EU we are forging new partnerships that will bring enormous economic benefits for the people of Britain.

“Applying to be the first new country to join the CPTPP demonstrates our ambition to do business on the best terms with our friends and partners all over the world and be an enthusiastic champion of global free trade.”

Ms Truss had said: “Joining CPTPP will create enormous opportunities for UK businesses that simply weren’t there as part of the EU and deepen our ties with some of the fastest-growing markets in the world.

“It will mean lower tariffs for car manufacturers and whisky producers, and better access for our brilliant services providers, delivering quality jobs and greater prosperity for people here at home.

“We’re at the front of the queue and look forward to starting formal negotiations in the coming months.”

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