A swift post-Brexit UK-India trade deal unlikely | Asia| An in-depth look at news from across the continent | DW | 29.03.2017
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A swift post-Brexit UK-India trade deal unlikely

As London launches Brexit proceedings, the UK's position as a trading power will depend on the kind of pacts it will strike with nations worldwide. But a deal with India is complex and looks unlikely in the near future.

The UK's decision to divorce from the European Union was not a move towards isolationism but rather an opportunity to become "even more global and internationalist in action and spirit, too," in the words of Prime Minister Theresa May.

Since the Brexit referendum, it's been quite common for leading British politicians to suggest that they have been engaged in trade talks with an array of countries and would be in a strong position to ink pacts with them not long after the UK's exit from the European bloc.

Among these nations is India, a fast-growing emerging economy with over a billion people that shares historic and linguistic ties with the UK. Both nations are also members of the Commonwealth and share broad mutual interests.

A vigorous relationship

On the economic front, both sides maintain a robust bilateral trade and investment partnership. India is the third biggest investor and second largest international job creator in the UK, whereas Britain is the largest G20 investor in the South Asian nation.

A free trade deal between the two nations is likely to solidify and intensify this already strong relationship.

London's strong desire for an accord with New Delhi is evident from May's decision to pick India for her first foreign visit outside Europe after taking over as prime minister.

"This is a partnership about our shared security and shared prosperity," she said ahead of the visit, adding that she wanted to reboot the relationship and harness its potential.

Both sides made serious efforts to bolster technology intensive trade between them and signed agreements worth over GBP 1.2 billion (1.4 billion euros) across a range of sectors from airlines, consumers durables and IT to healthcare, manufacturing and pharmaceuticals.

But that trip was widely viewed as underwhelming, with PM May seemingly unable to make any headway on eliminating trade barriers during her talks with her Indian counterpart, Prime Minister Narendra Modi.

Moreover, trade deals are always complicated and take years to agree on. India's talks for a free trade agreement with the EU are a case in point. Brussels and New Delhi launched the negotiations in 2007 and they have yet to conclude them, signaling the hard and tedious work British trade negotiators would face in the future.

Major stumbling block

Some say progress on the EU-India deal has been hampered by none other than the UK, owing largely to disagreements over immigration. A key demand of New Delhi in any free trade negotiations is liberalized visa norms for Indian professionals – a wish that London hasn't been willing to grant thus far.

PM May's track record on the issue hasn't won her any friends in India either. As home secretary, she introduced an array of measures to curb immigration, including scrapping the post-study work visa that allowed foreign students a two-year work permit in the UK upon completion of their studies.

The steps have slashed the number of Indian students enrolling in British universities by a half.

"Against this backdrop, we remain less sanguine about a post-Brexit UK and India free trade deal, unless the issue of mobility is addressed," Sumedh Deorukhkar, Asia economist at BBVA Research, told DW.

"With both economies being predominantly services oriented, freedom of movement of people lies at the core of striking a free trade deal on services," he added.

The British government is unlikely to yield to Indian pressure on labor mobility, given that concerns over immigration played no small a part in motivating the Brits to vote to leave the EU. And without settling this issue satisfactorily, the Indian side is unlikely to relent on greater access for British firms to sectors such as the financial services.

Post-Brexit arrangement

Another factor that determines the attractiveness for India of a free trade deal with the UK is the nature of Britain's post-Brexit partnership with the EU.

That's because almost 800 Indian companies with operations focused across Europe, have their bases in the UK. They would face negative ramifications should London fail to sign a deal with Brussels that would ensure continuity and preclude trade disruption, experts pointed out.

"Such Indian companies would be directly affected by disruptions in goods trade with Europe, loss of passporting rights, weaker economic growth for the UK and new cross-border tax policies," said Deorukhkar.

In this context, the analyst noted, while Brexit allows the UK to be more flexible and independent in setting the contours of its trade deals, "we remain cautious about UK-India trade prospects" in the near future.