Negotiating Objectives for a Free Trade Agreement with India

Lord Hannan of Kingsclere Excerpts

Tuesday 6th September 2022 Grand Committee

[Lord Hannan of Kingsclere (Con)]

My Lords, I begin by declaring an interest as an adviser to the board of JCB. I mention it because it has really become, in practical terms, an Anglo-Indian company. Since my noble friend Lord Bamford made at that time a rather countercyclical decision in the 1970s to invest heavily in India, JCB has become an immense employer there, to the point that many Indians think of it as an Indian company or, at the very least, in the same sense that they think of cricket—it may technically happen to have been invented in the United Kingdom but it is essentially, in all practical senses, a largely Indian institution. That company seems to me a symbol of what I would like to talk about: the opportunities for both our countries and why we need to seize the moment.

The noble Baroness, Lady Hayter, asked whether we are getting the timing right. I put it to the Committee that we are getting the timing right both directly and in a more macro sense. For a long time, India was very slow to open its markets at all. Protectionism cast a very long shadow there. Think of the Indian flag, with the blue wheel—the chakra—in its middle. That was a stylised form, as you see very clearly in the flag of the old Congress Party, of the handloom. It is the kind that Gandhi used to carry around with him because, in his mind, independence and self-sufficiency were aspects of the same concept—swaraj. Because of the moral stature of Gandhi, protectionist and mercantilist thinking lasted in India for decades longer than it would otherwise have done, greatly to the detriment of Indian citizens, particularly those on low incomes.

It was really only in this century that India began properly to open its markets and join the global economy, starting in its own region and then signing deals with ASEAN and, more recently, with Japan. As a result, our share of Indian trade has fallen as those other countries have taken our place. In the years since the turn of the century, as a share of the Indian total our goods exports have fallen from 6% to 1.3% and our services exports from 11% to 2.1%.

This is a remediable problem; there are institutional solutions to it. Indeed, I would argue that there is no country, certainly no western country, better placed than ours to have a comprehensive and mutually beneficial trade deal with India. It has become commonplace in politics, almost a cliché, to talk about every group of migrants as enterprising, but in this case it is difficult to think of any migrant group anywhere in history that has been more enterprising, more business focused, and has added more to the economy of the welcoming country than the 1.5 million Brits of Indian origin, dominating, as they do, our lists of successful entrepreneurs.

There are also plenty of reverse JCBs; British brands have been extremely popular, from Jaguar to Tetley, as targets for Indian investors. That two-way investment rests on the most obvious congruities of language and law, habit and history, culture and kinship. What has not yet followed is the trade, because we have artificial government-imposed barriers to what would otherwise be a very natural commercial flow. If he was still alive, Gandhi would be astonished to discover that on the question of textiles it is now the other way around; it is not Lancashire dominating the handloom industries of India but now Britain imposing tariffs against Indian textiles, or having at least inherited those tariffs from the EU, including a 9.3% tariff on men’s shirts.

There are, of course, tariffs the other way around, as the noble Earl, Lord Sandwich, reminded us, including on whisky, on which there is an extraordinary 150% tariff. We should always remember that tariffs do the most damage to the country that applies them. Yes, they do some incidental damage to the exporters of the other country, but the cost is paid by the citizens whose Government impose them.

Removing these tariffs is an easy and demonstrable game, but that is not where the biggest opportunities lie. We have to think like a 21st-century economy, not a 19th-century economy. The big gains are in tech, engineering and coding, and in the mutual recognition of credentials and professional qualifications, which will mean changes to our visa regime. I cannot believe that there is no deal to be done there. What has tended to slow it up is that Britain has been pushing for more flexibility from the Indian Government on taking back failed, or illegal, entrants into this country, while India has been pressing for more work permits, more tier 3 visas. Surely there is a landing zone there. It must be possible to hammer out a deal whereby it is easier for Indians to come here legally but not so easy for them to come here illegally. Both Governments could easily trumpet that as a victory.

As for doing it by Diwali and whether we are being too hasty, the best answer I heard was from my Board of Trade colleague Tony Abbott, the former Australian Prime Minister. He was Prime Minister of that country fairly briefly—for 18 months or so—yet in those 18 months he managed to sign fairly ambitious trade deals with China, South Korea and Japan. When I asked him the secret, he said that it was imposing an iron deadline because otherwise the trade negotiators on both sides would string it out indefinitely; they like process and being part of the process, and there is no incentive on them. As my noble friend Lord Frost adds, there is then a constant open door to domestic lobbies to push for further additions or accretions to the deal. It is extremely important to have a deadline, even if it is a deadline by which to have concluded the bulk of the talks rather than one for ratification, which of course is a different question.

Finally, a number of noble Lords have raised the wider geopolitical orientation of India and the disappointing refusal of the Indian Government to take sides on the Russia-Ukraine conflict. I share that disappointment—by the way, it is a policy common to every south Asian Government; I think that they have all taken exactly the same position on the Russia-Ukraine war—but it is especially disappointing from a state that tends to self-define as a democracy. Indians take justified pride in the fact that, unlike some of their neighbours, they have remained a law-based democracy since independence. Elections happen without anyone being exiled or shot; the army does not step in and take power. It is therefore somewhat disappointing that India did not take a stronger line on the Ukraine war—not as a favour to the West, but in accordance with its own values. But whereas some noble Lords seem to see that as a reason to hang back or hesitate, I see it as the opposite. The orientation of India is perhaps the key geopolitical question of this century. If India sees itself primarily as an English-speaking democracy rather than just as an Asian superpower, then the world is an altogether brighter and warmer place.

We have been through a great deal together. The two largest volunteer armies in the history of the human race were the Indian armies in the First and Second World Wars, respectively 1.5 million and 2.5 million volunteers. There was no conscription on either occasion. We have a living link made of the extraordinary enterprise brought here and the extraordinary contributions across our national life made by British people of Indian origin. I am certain that, coming together as free and sovereign equals, we can restore what should be the natural traffic in commerce between two countries bound by what my friend, Professor Madhav Das Nalapat, calls the blood of the mind—a shared habit, a shared way of looking at property and at commerce. I am sure that, in that spirit, the best is to come.