India and Southeast Asia: Free Trade Agreements
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Baroness Anelay of St Johns
To ask His Majesty’s Government what progress they have made in securing free trade agreements with India and countries in Southeast Asia.
Baroness Anelay of St Johns (Con)
My Lords, trade is the bedrock on which successful economies are built. The UK’s withdrawal from the EU has given us the opportunity to pursue an independent trade policy, ratifying and implementing new trade agreements with other countries.
Last week, the Business Secretary said:
“Securing a trade deal with what is soon-to-be the third biggest economy in the world is a no-brainer, and a top priority for me and this Government”.
I welcome the Labour Government’s decision to resuscitate the free trade talks with India, which were initially launched four years ago by Boris Johnson and Narendra Modi—but we are not alone in the race to get a deal. The EU is also knocking on India’s door. Last month, Ursula von der Leyen visited Delhi and said that the EU and India were pushing to get a free trade agreement this year. Is that timeframe the same for the UK Government?
In a time of increasing global disruption, it is more important than ever to maximise our opportunities for international trade. There are both challenges and opportunities when negotiating trade agreements—of course, there always are. The trade talks begun by Boris Johnson were not concluded by the time of the general election last year. The BBC and newspaper reports suggested then that the sticking points included high tariffs in India on Scotch whiskey and relaxing fees and visa rules for Indian students and professionals coming to the UK. India was also reported as requesting an exemption from the UK’s planned carbon border adjustment mechanism. Do the Government plan to make concessions on all those issues? Do they have any red lines? If so, would they include the protection of sanitary and phytosanitary standards?
An FTA with India could indeed offer the UK both economic and geopolitical advantages, and give us better positioning in one of the most economically dynamic regions of the world. The wider geopolitical considerations could bring greater collaboration on issues such as security and climate change—matters that are in our minds every day in this House.
If tariffs and trade barriers were reduced, or indeed eliminated, UK companies could reach Indian consumers at more competitive prices, particularly perhaps in sectors such as technology, machinery, pharmaceuticals and financial services. The UK has a strong tech industry, about which we have just heard in the previous debate, and India has a large and growing demand for technology, engineering and digital services.
India’s expanding middle class creates more demand for a variety of products and services. The UK could tap into this growth, especially in consumer goods, education and healthcare sectors. India is a significant player in global supply chains, especially for sectors such as IT, textiles and pharmaceuticals. An FTA could improve collaboration between UK and Indian companies, creating far more efficient supply chains, and of course reducing costs thereby.
However, there are obstacles, stemming from economic and political challenges, which require careful consideration. For example, how do the Government plan to overcome the complexity and risks in resolving the difference in regulatory standards, particularly in industries such as pharmaceuticals, food safety and digital services? I am sure we all recall that India’s approach to intellectual property protection, particularly in the fields of pharmaceuticals and software, is far less stringent than in the UK. Seeking improved access for UK agricultural exports could meet resistance from domestic producers and stakeholders in India, who are currently heavily subsidised.
There is also the significant matter of human rights standards in India. We have heard much of that earlier today, and quite right too, because in two days’ time it is International Women’s Day. The FCDO’s most recent annual report on human rights refers several times to the human rights abuses in India, particularly of women, marginalised groups and religious minorities. Can the Minister give a commitment that, when the Government negotiate with the Indian Government for a trade agreement, it will include discussions on human rights? In particular, will they raise the importance of protecting women’s sexual and reproductive health and rights?
I would like to refer briefly to Indonesia. It has become one of the world’s major emerging economies. Members of this House and another place used their February Recess to go on a British Group Inter-Parliamentary Union visit to Indonesia to learn more about its governance and economy, and the impact of UK soft power. They were impressed by the establishment there of the Deakin University Lancaster University Indonesia, which provides high-quality business and tech education. It means that Indonesian students can gain degrees there which are not only accredited by a UK university—Lancaster—but accepted by the Indonesian Government as being equal to a sarjana degree from a local Indonesian university. It is the very first international joint campus of its kind. Does the Minister agree that innovative work, such as that by Lancaster University, is to be welcomed and enhances the UK’s soft power?
In conclusion, I certainly hope that a trade agreement with India could be highly advantageous to the UK. It could increase market access, trade diversification and services expansion, and strengthen our geopolitical relationships. That would, I hope, contribute to long-term economic growth and strategic influence. I hope that closer involvement in soft power ventures in Indonesia could raise the profile and expertise of the UK there.
Both India and Indonesia, together with China, are members of the BRICS intergovernmental organisation. In trade, we know that the economic heft of China casts a shadow over all negotiations. Securing FTAs and other trade agreements in India and south-east Asia is not an easy task; I recognise that. I look forward to hearing from the Minister, now and in the future, on what progress the Government are able to make.
Lord Sahota (Lab)
My Lords, I thank the noble Baroness, Lady Anelay of St Johns, for securing this very important debate. I wish it was longer than one hour, but we are where we are.
The buzzword these days is trade. If noble Lords do not believe me, ask President Trump. It is trade that makes the world go round. These days, when it comes to a healthy relationship with another country, it is a healthy trade agreement that counts the most. Everything else comes after—mostly everything, and not always.
The UK and India have long historic and cultural links, going back hundreds of years. Every year, thousands of students come to the UK to study. Some of the Indian Prime Ministers have studied in UK universities. Dr Manmohan Singh was one; he is credited with opening up the Indian economy to the world—some even say that he is the saviour of the Indian economy. Then there is a large Indian diaspora, contributing not only to the UK’s economy but to academia and, dare I say, politics.
India is on the move. Its GDP is now the fourth-largest or fifth-largest in the world, ahead of the UK, and is on track to surpass Germany and Japan in the next decade. It is growing at over 70% annually, a pace that most developed countries can only dream of. Its ambition is clear: India wants to become a developed economy by 2047, when it marks the 100th anniversary of its independence. That means massive investment in infrastructure, technology, manufacturing and so on. It means a growing middle class of some 800 million people, hungry for British goods and services.
Where are we, then, on securing a free trade deal with India? I understand that negotiations have been ongoing for more than two years, and that they are not getting anywhere. It is my understanding that it is India that is dragging its feet. In today’s world, trade is not just about goods and services: it is about relationships, influence and shaping the future of our economy. Can the Minister tell us what the current timeline is for concluding a UK-India free trade agreement? What concrete progress has been made on resolving key sticking points? Trade is about growth, jobs and opportunity. If we get this right, we can shape the UK’s economic future for decades to come, but, if we get it wrong—or worse, do nothing—others will fill the gap. I urge the Government to move swiftly, be bold, and ensure that Britain is at the heart of the fastest-growing region in the world. I look forward to the Minister’s response.
Lord Bilimoria (CB)
My Lords, the India I was brought up in as a child was an inward-looking, insular, protective economy with a low level of growth. Since 1991, India has emerged as the fastest-growing major economy in the world, an emerging global economic superpower, and the fifth-largest economy in the world, soon to be the third-largest economy in the world. I predict that, by 2060, it will be the largest economy in the world.
I have been privileged to be at the forefront of UK-India relations for 22 years as co-chair of the India-British partnership, a member of the UK-India roundtable, the founding chair of the UK India Business Council and, currently, co-chair of the India All-Party Parliamentary Group. I thank the noble Baroness, Lady Anelay, for leading this debate at this very important time.
India is only the UK’s 11th-largest trading partner, and yet it supports 600,000 jobs between both nations. The goal, of course, is that we get this to increase to over $100 billion of trade by 2030. We have been negotiating this free trade agreement since 2022, when I was president of the Confederation of British Industry, the CBI. Three years have gone by. The benefits of an FTA are lower trade costs for businesses, greater consumer choice, lower prices and the maintenance of standards.
There was a pause in negotiations because of the elections last year in both countries. There are sticking points. We all know about India and Scotch whisky. We know about the greater mobility that India would like for professionals and students—I am the co-chair of the All-Party Parliamentary Group for International Students. Why, I ask the Minister, can we not take international students out of the net migration figures? That would help so much. Of course, India wants faster visa processing and concessions on national insurance for temporary workers. Are the Government considering this seriously?
From the UK’s point of view, we would like access, including for cars, where the duties are very high in India, and for Scotch whisky, where the duty is 150%. It has been reduced from 150% to 100% for bourbon, and we would like Scotch whisky duty reduced to 30%, if that is possible. Then, of course, there are financial services. The total trade in goods and services between our countries grew by 10%, and is now at £42 billion.
The diaspora is the living bridge; its members include people like me. I am proud to be part of the largest ethnic-minority community in the UK—and the most successful by far, reaching the very top in every field, whether it is politics, business or any other area.
We have talked about trade, but there is also investment. If we look at the Grant Thornton India Meets India Tracker report, we see that there are almost 1,000 Indian companies in the UK, turning over £50 billion and employing over 100,000 people. There are 635 British companies in India, with a revenue of £51 billion and employing almost 700,000 people. The amount of, and potential for, collaboration on technology and innovation is huge. Security and defence are important in this uncertain world in which we live, yet, over the last decade, only 3% of India’s defence acquisitions came from the UK. As India seeks to advance its defence industry and diversify away from Russia, the British defence sector could emerge as a key collaborator on technology transfers and support India’s “Make in India” efforts.
Then there is India’s membership of the Quad. I have said for a long time that the UK can join the Quad; does the Minister agree that we could have Quad Plus? Of course, we are already members of AUKUS. The Indian Minister of External Affairs, Dr Jaishankar, is in the UK as I speak. At Chatham House yesterday, he said that he was “cautiously optimistic” about the UK-India free trade agreement negotiations and that he hoped that
“it doesn’t take that long”.
I say to the Minister: three Diwalis have gone by since we started these negotiations, so please let us set a deadline, let us not have the best being the enemy of the good and let us conclude this free trade agreement. Let us get it done.
Lord Vaizey of Didcot (Con)
My Lords, it is a great pleasure to follow my noble friend Lord Bilimoria and his focus on India, reflecting the huge amount of work that he does promoting UK-Indian relations. I also congratulate my noble friend Lady Anelay on securing this debate—she obviously has a distinguished record, having served as a Minister in the Foreign Office covering south-east Asia, and knows of what she speaks.
I speak as the chair of the UK-ASEAN Business Council, a post I have been proud to hold for the last two years, having also been the trade envoy to Vietnam under the premiership of Theresa May. It is a region that I have got to know very well, and it remains a huge source of opportunity for the UK. Trade between ASEAN and the UK stands at around £50 billion a year. The UK is slightly ahead on exports against imports. On goods and services, there is roughly a 50-50 split in what we export.
If we go through the members of the UK-ASEAN Business Council, it will give a flavour of where those opportunities lie, with professional service companies, financial services companies, universities and education companies. We recently had the Premier League join us, which reflects, as it were, the new economy and the new businesses, especially the tech businesses, that can make huge inroads in this area.
Noble Lords do not need reminding that we have fantastic ties in the region. Malaysia and Singapore are both Commonwealth nations, with very visible investment in the UK—you have only to look across the river to see the incredible regeneration of Battersea Power Station. Thailand, the Philippines, Indonesia and Vietnam are also huge and growing economies where we do a lot of business. There is prominent investment from Thailand. My noble friend Lady Anelay mentioned her visit to Indonesia. I was lucky to sit down with the President of Indonesia when he visited the UK recently as well as the Prime Minister of Malaysia, who was also in the country recently. We are constantly visited by high-level politicians from all those countries, all of whom want to engage with us.
We are very lucky to have some first-class officials based in the region, not least Martin Kent, our trade commissioner, and Sarah Tiffin, our ASEAN ambassador. There is everything to play for. We have a free trade deal with Singapore, as well as a digital economy agreement. We have a free trade deal with Vietnam; we piggybacked on the EU deal. Minister Alexander negotiated an enhanced trade partnership with Thailand, which we signed in September. We have an economic growth partnership with Indonesia. They are not very sexy names, but they are important agreements.
We are the first dialogue partner with ASEAN for 25 years. Of course, we are members of the CPTPP, which includes four ASEAN members, with three more knocking on the door. The CPTPP is already delivering significant benefits—we can now of course export chocolate to Malaysia without paying any tariffs. The CPTPP has given us, in effect, a free trade agreement with Malaysia by the back door.
I conclude simply with two to-do points for the Minister. First, Malaysia is currently the chair of ASEAN. I cannot emphasise enough how engaged Malaysia is with the digital agenda and how much it seeks to engage with the UK on digital, not least on artificial intelligence. Many new institutions have been established in Malaysia which quite openly mimic ours, with imitation being the sincerest form of flattery. They look to us for guidance—not in a patronising sense—on how they should develop their tech policy and tech infrastructure. Secondly, I was flattered to be asked to the Indonesian embassy to meet the Minister for Eurasian affairs, who simply put his cards on the table and said: “We are very keen to have a free trade agreement with the UK”. It is sitting on the table. I do not know if it is quite oven ready, but we have an enthusiastic partner in Indonesia. We recognise that the Government have priorities in terms of their free trade deals, not least with India, but Indonesia is a very willing partner.
Baroness Bennett of Manor Castle (GP)
My Lords, I thank the noble Baroness, Lady Anelay of St Johns, for securing this debate, which is extremely timely. As many noble Lords have noted, the attempt for a UK-India free trade agreement started in January 2022 and restarted just last month.
I am concerned chiefly with one issue of transparency. The Government have apparently inherited the negotiating objectives from their predecessor Government, but they have given no indications that they plan to seek any alteration or to reopen any concluded chapters. I hope that this is a different Government from the Johnson Government, so we might expect a different approach. One of my chief areas of concern is ISDS, investor-state dispute settlement. The position of both this Government and their predecessor on ISDS has often been ambiguous. It was exempted from the UK’s first, from- scratch, post-Brexit free trade agreements with Australia and New Zealand, but, in other contexts, Ministers have publicly defended the continued use of ISDS. In December 2023, the then Investment Minister, the noble Lord, Lord Johnson of Lainston, was asked during a session of the International Agreements Committee whether the UK would press for ISDS in the India negotiations, to which he responded that he did not know. This Government have yet to set out their position. My chief question to the Minister today is what the Government’s stance is on ISDS in the India deal and the south-east Asian deals?
Why am I so concerned about ISDS? Coincidentally, the Guardian is running a large series of articles that set this out very clearly. One of those highlights the case of Greenland, where the world’s largest financial litigation company, Burford Capital, is backing a case against it—population less than 60,000. It is demanding that, despite the population democratically agreeing that they did not want uranium mining in Greenland, either uranium mining is agreed or £11.5 billion is paid to the company that was going to mine it, and of course, that litigation funder. Litigation finance used to be focused on claims about car accidents and similar, but the Guardian highlights that more than 1,400 cases have been launched against Governments and they have become far more common and lucrative. Far more than £120 billion of public money was awarded to firms through ISDS courts, including at least $84 billion to fossil fuel companies and £7.8 billion to mining companies. These have become an increasingly popular investment class for hedge funds and other investors. We have the democratic decisions of Governments, for which the peoples are being forced to pay by what are essentially financial gamblers. It is therefore obvious why we should not have ISDS in the India trade agreement.
Very briefly, I have a couple of other points to raise, about the labour and environmental chapters in the India deal. A leak in September 2023 reported that trade negotiations had already led to the conclusion of the climate and labour chapters. That will not include legally enforceable commitments on labour rights or environmental standards. Can the Minister say whether the Government are truly happy and are proceeding on that basis of no legal commitments?
Finally, I note the lack of democracy in the situation we are now in compared to when we were a member of the European Union. All this is incredibly opaque and non-transparent. Surely the Government want to turn over a new leaf and start doing this in a democratic and open way when we are talking about free trade deals.
Baroness Verma (Con)
My Lords, I thank my noble friend Lady Anelay for this debate, which is incredibly timely and important. I have been involved with business-to-business with India for over three decades. I was a non-executive of the Leicester Asian Business Association as my first dip into business-to-business.
A fast-moving geopolitical movement is going on around us, so it is critical that we secure deals with India, the country with the largest population on the planet: 1.4 billion people. Both countries are well-respected convenors for many other nations, as we have seen—India in its own region, in the south-east Asia region, and the UK with its convening powers across Europe, as recently seen by Prime Minister Starmer, and with our allies such as America and others. At this critical moment, we know that by securing this FTA we will start to leave some of the extra dependency that we have had on a very few countries and engage with a much wider region. Therefore, we really need to encourage this deal to be done as quickly as possible.
I want to address the strengths of why the UK is best placed to be with India on this deal. First, as the noble Lord, Lord Sahota, said, the relationship goes back many years. It is now also a relationship that is coming together because we have a diaspora here that is incredibly important to both India and the UK. I do not think the diaspora of nearly 2 million people that we have in this country is fully utilised for its soft power strength. I urge the Government to look at how they can further engage with the diaspora links to get some of those nuances, which sometimes become stalling blocks, to unlock.
I am president and founder of the India APPG. It has been one of the most popular APPGs in Parliament, because India recognises the importance of our parliamentarians as we recognise the importance of engaging with India. There are so many areas where I think we can strengthen our relationship outside the FTA. Some of those are the defence sector, tech, research, developments in space, higher education and, of course, sustainable green technologies.
We have so many envoys in other countries; it is beyond my understanding why we do not have dedicated envoys for a country as big as India from the UK. I know that Ministers have a big job, and our high commissioner and deputy high commissioners are brilliant, but they are tasked with a lot to do in a large country. Trade envoys are therefore critical. I am sure my noble friend Lord Vaizey will say that it is the soft power that you take with the trade envoy role that helps to continue cementing this partnership—this relationship. I said it over and over again when my party was in government; I do not know why it did not happen. I now ask this Government to see whether they can take a leap and a jump and please encourage trade envoys there. We are a country at the front line of convening; let us utilise our strengths.
Lord Loomba (CB)
My Lords, I welcome this debate and thank the noble Baroness, Lady Anelay, for bringing this important issue before the House. I approach it as someone with many decades of experience at the heart of UK-India trade relations. Indeed, I had the privilege of playing a central role in the twinning of London and Delhi in the early part of this century. Through this, I have seen at first hand how trade has strengthened the relationship between our two nations, reinforcing our bonds as equal partners with deep ties.
At a time of increasing global uncertainty, such ties matter more than ever. A well-structured free trade agreement between the UK and India will create jobs, open new markets for British businesses and enhance investment flows between our economies.
The much-anticipated free trade agreement between India and the United Kingdom stalled for over two years in the midst of political shifts and economic uncertainties. It was brought back into focus with the British Business and Trade Secretary, Jonathan Reynolds, meeting his Indian counterpart, Piyush Goyal, in New Delhi on 24 February and kick-starting two-day discussions. I hope it progresses fast and for the good of the two countries.
The latest round of talks has been marked by a renewed sense of urgency and ambition, as both nations work to iron out the differences and finalise a mutually beneficial agreement. We are aware that there are many complexities, and one impediment to reaching such an agreement has been the UK Government’s reluctance to reform visa rules for overseas students, including from India. It is clearly in both our countries’ interests to encourage academic exchanges, which in turn foster innovation, business partnerships and cross-cultural understanding. It is therefore counterproductive to count overseas students, who bring substantial revenue to our universities and economy, within the immigration statistics unless they seek to remain beyond a reasonable period, such as two years after graduation. Can the Minister confirm that the Government will adopt a pragmatic approach to student visas, recognising their mutual benefit, and ensure that this issue does not impede progress towards a free trade agreement?
Lord Purvis of Tweed (LD)
My Lords, I am very grateful to the noble Baroness for bringing this debate to us and the very sensible way in which she opened it. It is a regrettable fact, notwithstanding the excellent work of the noble Lords and noble Baronesses who have contributed to UK-India and wider regional trade, that we are punching below our weight when it comes to seizing the opportunities for trade in this area. It is just three years since the boosterism of what had been claimed would be a five-star agreement by Diwali in 2022. The reality of trade policy is such that there are difficult trade-offs—literally—and hard choices to be made.
In that regard, I wish the Government well in the talks that are under way. I believe there is now a sense of reality, not of boosterism. Even under the previous Administration, the anticipated 15-year gains to UK GDP of an FTA with India were forecast to be between 0.00% and 0.08%. Nevertheless, in the very sectors that the noble Baroness, Lady Anelay, mentioned, we can see sector-by-sector growth.
One aspect that has not been mentioned in the debate so far, which I raised in the debate we had in 2022, is trade diversion. We have to be very mindful that if we have an FTA with India, which I would support, then even on the previous Government’s figures almost all of the potential gain in extra trade with India would be off-set by reduced trade with other countries in the ASEAN region through trade diversion. Any tariff benefits for one nation could well be at the cost of others, especially for Bangladesh. I hope that the Minister can say that trade diversion is a key part of the discussions that we are having with India.
It has also been raised that there are areas of complexity in our relationship with India, whether it is India in BRICS, the war-games with Russia that they have been carrying out over the last year or the rupee-rouble swap, where certain sectors of the Indian economy have profited from sanction circumvention on Ukraine. There are also the barriers that many noble Lords in this House have worked hard to reduce over many years, especially within the financial sector, FDI, lack of consensus on greenhouse gas emissions, nuclear energy, farming subsidies and policies, et cetera. I hope all these areas can be addressed in the talks.
Finally, regarding the wider area, just before the February recess I and other parliamentary colleagues visited Singapore and Malaysia through the Commonwealth Parliamentary Association. The Minister is held in very high regard. At every meeting we had, people asked us to pass on our regards to him. That leads to one of our observations, which the noble Baroness, Lady Verma, touched on. We are not sending a sufficient number of Ministers, high-level officials and delegations to this region. Human-to-human discussion is very important when it comes to facilitating trade and soft power, and we should be doing more of it. I am very pleased that Minister West will be in the region; I wish her luck for the visit. It was also very clear to us that Malaysia’s presidency of ASEAN and its green vision for renewable energy and green technology are an enormous opportunity for the UK.
I close with an appeal to the Minister. I suspect that he will not be able to respond to me today. There is an economic integration programme that the UK Government fund, looking at how we promote trade within ASEAN. That is scored as official development assistance because it is technical assistance. I very much hope that with the decisions to cut official development assistance by more than half, those areas of technical support—for trade promotion, for the very growth that we wish to see—will be protected and not cut.
Lord Sharpe of Epsom (Con)
My Lords, it is a pleasure to follow the noble Lord, Lord Purvis, and I am very grateful to my noble friend Lady Anelay of St Johns for tabling this short debate, which I am sure all noble Lords would agree has been most fascinating.
As she said regarding the progress of His Majesty’s Government in securing free trade agreements with India and countries in south-east Asia, this is the bedrock. It is a matter of enormous significance. After leaving the European Union, the previous Conservative Government pursued an ambitious and outward-looking trade policy. They secured agreements that unlocked new opportunities for British businesses and consumers, and our commitment to the Indo-Pacific region was steadfast, as I am sure all noble Lords would acknowledge. We recognised its growing economic dynamism and strategic importance. I gently say to the noble Lord, Lord Purvis, that this is not boosterism but common sense.
In May 2021, Prime Minister Boris Johnson and Prime Minister Modi agreed to deepen trade co-operation between the UK and India via the enhanced trade partnership. The noble Lords, Lord Sahota and Lord Bilimoria, made compelling observations about India’s spectacular growth, which makes the case for this deal and obviously a future FTA extremely attractive. The strategic approach under that agreement outlined the following benefits of such a deal: a potential increase in UK exports to India of between £8.8 billion and £16.7 billion by 2035 and a boost to UK GDP of potentially up to £6.2 billion by 2035, depending on the final terms. The Government’s strategic case is surely unarguable. It is to develop the UK’s status as an independent trading nation that seeks trade and investment opportunities and champions free trade. Surely that is even more pertinent in a world where such principles are currently under threat.
The noble Lord, Lord Purvis, asked a very interesting question on trade diversion. I look forward to the Minister’s answer on that.
I appreciate that any agreement reached must be beneficial for both countries, and that can take time. That being said, British exporters in financial services, technology, life sciences and manufacturing have much to gain. Will the Minister give us an update on progress for the benefit of our ambitious British businesses seeking more certainty for their exporting future, particularly in light of the competition from other areas and countries that were pointed out by my noble friend Lady Anelay and the noble Lord, Lord Sahota? Perhaps the Minister might also comment on the comments of my noble friend Lady Verma and the noble Lord, Lord Bilimoria, about the wonderful advantage we have because of our diaspora population in this country.
Our trade relationships with ASEAN nations, which is a region representing the world’s fifth-largest economy —I do not need to tell the Minister anything about that—are in danger of stagnation. The majority of the work behind the UK’s accession to the CPTPP was done under the previous Government and we of course welcome the current Government’s accession, but we must now capitalise on this advantage. The previous Government’s agreements with Singapore and Vietnam set a strong foundation. Can the Minister tell the House what steps the Government are taking to advance new partnerships with Indonesia, which is a fabulous opportunity, as my noble friend pointed out, and with Thailand and the Philippines? What is the Government’s strategy for this region, which is so ripe with potential benefits for this country?
As my noble friend Lord Vaizey so articulately explained, the trade benefits are substantial. Given his position as chair of the UK-ASEAN Business Council, I think the Government should seriously consider enlisting his services in that part of the world.
Free trade has long been a driver of prosperity, innovation and economic growth. The Conservative vision was one of openness, dynamism and ambition, but, under this Government, we are concerned that we are seeing signs of drift. Can the Minister reassure me that the Government are still steadfastly aligned with the previous Government’s strategic vision, as outlined under the previous Indian deal?
Negotiations of this scale require leadership, vision and determination. Businesses and consumers need certainty, and our global partners need confidence in Britain’s commitment to free trade. So, finally, what specific steps are the Government taking to accelerate trade talks with India? How do they intend to build on the CPTPP and partnerships in south-east Asia. Perhaps most importantly, do the Government still believe in the previous Government’s strategic vision?
Lord in Waiting/Government Whip (Lord Leong) (Lab)
My Lords, I am pleased to respond to this QSD. I congratulate the noble Baroness, Lady Anelay, on securing this debate and thank all noble Lords who have contributed this afternoon. I will aim to respond to as many points raised as I can and, if I do not, I promise to write to noble Lords on their unanswered questions.
First, I want to briefly touch on the close relationship between the UK and India. The UK and India have a deep and vibrant relationship, building on the living bridge between our two countries. Some 1.7 million people with Indian heritage call the UK their home, including many of our colleagues in this House and my wife. Our two countries are deeply interwoven through our shared values as democracies committed to the rules-based international order, our cultural ties and—it would be remiss of me not to mention—our shared love of curry and cricket. Our relationship also includes the millions in India who follow the Premier League and the huge market for Bollywood movies in the UK, which I and my wife enjoy most weekends and whose music we occasionally dance to.
Of course, these ties are also visible in our mutual championing of trade—free and fair trade, and investment —which is what we are here to discuss today. This Government’s core mission is to deliver economic growth. Boosting trade abroad is essential to delivering growth at home. That is why this Government are committed to negotiating a comprehensive free trade agreement and bilateral investment treaty with India—one of the fastest-growing economies in the world.
Securing a deal with India is a top priority for this Government and it is easy to see why. India is expected to be the third-largest economy in 2028, with 60 million middle-class consumers by 2030. But UK exporters currently face substantial tariffs, including a 150% tariff on whisky, as one noble Lord mentioned earlier.
Our trading relationship with India was worth £41 billion last year. Our investment relationship already supports close to 600,000 jobs across both economies, with Indian FDI projects in the UK creating more than 7,500 jobs in 2023-24. But there is more that we can do. That is why, on 24 February, my right honourable friend the Business and Trade Secretary, Jonathan Reynolds, travelled to India to relaunch negotiations towards a free trade agreement. The bilateral investment treaty that liberalises the trade of goods and services between our countries upholds the UK’s high food safety and environmental standards and protections, and facilitates easier temporary movement of businesspeople to provide their expertise. I am pleased to say that good progress was made and negotiations continue to move forward at pace towards a deal that delivers on our mutual ambitions of economic growth.
I will touch on a couple of points raised by noble Lords before I move on to the issue of trade with south-east Asia. We are aware of India’s ongoing talks with the EU and their stated ambition on a timeline. Although our focus is on delivering a quality agreement rather than any agreement that may be achieved at pace, securing a deal is a top priority for this Government, as it is for India, so we are pleased that progress was achieved in the Secretary of State’s recent visit towards our shared commitment to progress these negotiations at pace.
I hope Members of this House will appreciate that, in order to secure the best deal, I cannot compromise the UK’s negotiating position by getting into the specifics of a live negotiation. In any trade agreement, one of the main ambitions is to reduce the tariffs that UK exporters face. This is particularly important when Indian tariffs can exceed 100% on goods such as whisky, as I mentioned.
On visas, which several noble Lords mentioned, our negotiations consider only business mobility, so they cover only relevant business visas, which are, by their nature, limited, temporary and for specific purposes. This is also beneficial to UK exporters delivering services abroad. Student visas are not part of the trade deals.
The Government have made clear that we are willing to negotiate at pace towards a deal in the best interests of the UK. Although I recognise and agree that we would all like this deal to be speedily signed, the Government can sign only once we have secured the right deal for the UK, so we will prioritise the quality of the deal rather than the haste with which we can secure it.
The noble Baroness, Lady Anelay, asked whether there are any red lines and, if so, what they are. To achieve the best possible deal for the UK, we need to protect our negotiating positions. That is why we cannot go into details of live negotiations. What I can say is that this Government will seek a deal that drives economic growth for the UK as a whole while respecting key UK sensitivities, such as those in the NHS, our food, and health and safety agreements, which will not change under this or any UK free trade agreement. Any free trade agreement will not undermine the UK’s high sanitary standards, which are not and will not be decided in any trade agreements. The Government are firmly committed to upholding these high standards.
On post-study work visas, which the noble Baroness, Lady Anelay, and the noble Lords, Lord Bilimoria and Lord Loomba, mentioned, I remind all noble Lords that this Government’s position on net migration has not changed, and I make a plea for them to wait for the government White Paper on migration. I am not going to be drawn on this at this stage.
We remain committed to the protection of universal human rights. When we have concerns, they are raised directly with partner Governments, including at ministerial level. This engagement is undertaken separately from negotiations of any free trade agreements, although they are part of building on open and trusting relationships with important partners.
On the issue of CBAM, we will not compromise our high food standards, as I said earlier. We will also not undermine the effectiveness of our CBAM when we are implementing any trade deals.
The noble Baroness, Lady Verma, asked about trade envoys to India. The UK-India trade relationship is a top priority, as I mentioned. The Government will consider the noble Lord’s suggestion. I put on record that we currently have an excellent UK trade commissioner to India, and he is doing a fantastic job.
The noble Baroness, Lady Bennett, asked about ISDS. The Government consider ISDS on a case-by-case basis, and I am not going to pre-empt the outcome of any further negotiations. The noble Baroness also asked about the environment and labour. We cannot use an FTA to change a partner’s domestic legislation, but an FTA builds on a closer relationship to have honest conversations. On intellectual property, I will have to write to the noble Baroness, as that touches on some very complex areas.
I turn to the issue of trade with south-east Asia. I was born and grew up in Malaysia, in the ASEAN region, which has 10 member states with something close to 670 million people and a combined GDP of some £3.6 trillion, and is growing at a rate of 5% annually. It is a big market and we should consider it. The UK recognises the importance of south-east Asian markets to UK businesses and to the global economy. The noble Lord, Lord Purvis, is right: more Ministers should visit the region, and I encourage my ministerial colleagues at the Department for Business and Trade to consider visiting Malaysia, Singapore and the wider region. I am really pleased that the Minister, Catherine West, is visiting Malaysia this week.
Total trade between the UK and south-east Asian markets is worth about £50 billion, as mentioned by the noble Lord, Lord Vaizey. I want to place on record my thanks for all the work he has done as chair of the UK-ASEAN Business Council. He has done a fantastic job.
South-east Asia can be a valuable source of investment and growth for the UK. As we have seen recently, the Malaysian company YTL announced £4 billion-worth of investment in the UK over the next five years, including transforming the Greater Bristol area and delivering something like 30,000 jobs across the UK. The UK has secured bilateral free trade agreements with Singapore and Vietnam through the CPTPP, as mentioned, and it secured an agreement with Brunei and Malaysia for the first time. In February 2022, the UK and Singapore signed a digital economy agreement.
Outside of the formal free trade agreements, the UK has strong trading relationships with south-east Asian countries. The Department for Business and Trade has regular trade and economic dialogues with Singapore, Vietnam, Thailand, Indonesia, the Philippines and Malaysia. The UK and Thailand recently signed a UK-Thailand enhanced trade partnership. The UK engages regularly with ASEAN as a dialogue partner, and I think we are the first European dialogue partner to ASEAN. The UK and Indonesia will work towards a new Indonesian-UK economic growth partnership, which is normally the precursor to any formal conversations on a free trade agreement.
The noble Lord, Lord Purvis, asked about trade diversion. The Government carefully consider the impact on the wider region when negotiating a free trade agreement, and will do so as part of any deal.
The noble Baroness, Lady Anelay, asked about Indonesia and the potential for economic growth. Recognising the importance of Indonesia to the global economy, the Prime Minister and President Prabowo agreed to work towards a new Indonesian-UK economic growth partnership, as I mentioned earlier. The UK values projects such as those that the noble Baroness mentioned, and transnational education is one of the fastest growing sectors for this country.
The noble Lords, Lord Vaizey and Lord Sharpe, asked about future trade agreements. While we cannot currently commit to seeking new FTAs with partners in south-east Asia, it is important that we find ways to enhance our bilateral co-operation and economic ties, and to maintain our trade relationships into the future. That is what we have been doing with enhanced partnerships.
In conclusion, the Indo-Pacific region remains a key and ongoing area of interest for the UK. Its dynamic and developing economies represent opportunities for the UK. I am pleased to see strong progress in our discussions with key partners in this region, ensuring that our future relationships remain mutually beneficial, forward-looking, and supportive of prosperity and economic security.