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Climate and Corruption Concerns over ‘Rushed’ UK-India Trade Deal

Peers have expressed alarm about the Government’s approach to one of its flagship post-Brexit trade deals, reports David Hencke

Photo: PA Images/Alamy

Climate and Corruption Concerns Over ‘Rushed’ UK-India Trade Deal

Peers have expressed alarm about the Government’s approach to one of its flagship post-Brexit trade deals, reports David Hencke

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The Government has been warned by an influential House of Lords committee today not to rush through a trade deal with India in time for the Diwali celebrations on 24 October, but rather to wait to negotiate a more comprehensive deal.

“It risks giving up a good trade deal for a fast one,” say the peers on the House of Lords International Agreements Committee.

Ministers have set a Diwali date for sealing the deal, but peers say this is “overly ambitious” and there are huge impediments – including the need to change Indian domestic legislation – to signing a comprehensive trade agreement with the country.

“India has a notoriously difficult business environment – corruption levels are high, business permits are difficult to obtain, tax and customs processes are complex, levels of contract enforcement are low, and IP [intellectual property] protections are limited. The negotiations will need to focus on addressing these issues, while acknowledging that in some cases this may require changes to India’s domestic laws, which may be unrealistic to achieve or take a very long time,” say the peers.

Yet peers have found that the Government is playing down or ignoring these problems altogether in a rush to secure an agreement – which could land firms in trouble, including breaking British laws to trade with India.

One example is the so called ‘facilitation payments’ required to trade across India, which would be considered to be bribes in the UK.

“It is widely said that the payment of ‘facilitation fees’ at all levels is part and parcel of conducting business in India. Yet such practices are unlawful under the UK Bribery Act 2010 and businesses operating in the UK could be prosecuted for engaging in them, either directly or via a subsidiary. The Government’s Negotiating Objectives are too general and vague on this issue,” say the peers.

There is also a marked imbalance in tariffs between the UK and India, which would need to be resolved during the trade talks. The latter has some of the highest bound tariff rates among World Trade Organisation (WTO) members and the average tariff on UK goods exported to India in 2021 was 18.7% – a 5% increase from 13.4% in 2016.

Goods imported from India to the UK attract an average 4.2% tariff and 66% of goods are tariff free. Only 3% of British goods exported to India are tariff free.

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A trade deal with India could see more British exports of transport equipment, chemicals, vehicles, and Scotch whisky, while India could get reductions in tariffs on textiles, clothes and agricultural produce. This would cut the cost of living but increase competition on British farmers and clothing companies. India also has lower welfare standards for farm animals than the UK.

The peers have also discovered that the Government has covered up the environmental impacts of the deal – that could increase global warming, due to a rise in transporting goods across continents. India has no detailed plan to cut emissions and 70% of its economy is powered by coal. This has not been factored into the figures used to describe the trade deal.

Peers found it difficult to extract details of the current trade negotiations and the demands from India. One demand is that some Indian workers should be exempt from paying national insurance contributions in the UK – but the Government has declined to say whether the workers will receive free NHS treatment or be eligible for UK social security benefits even though they will potentially not be paying into the NI fund.

“We reiterate our recommendation that the Government should publish a trade policy, showing how trade links into broader foreign policy, security, defence and other domestic objectives, as well as labour, women’s and human rights, and the environment. This will enable trade policy to be understood in relation to other priorities and enable us to assess the impacts and trade-offs,” said Labour peer Baroness Dianne Hayter, who chairs the committee.

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