Negotiating Objectives for a Free Trade Agreement with India

Lord Lansley Excerpts

Tuesday 6th September 2022 Grand Committee

[Lord Lansley (Con)]

I am very glad to have the opportunity to follow my fellow member of the International Agreements Committee, the noble Lord, Lord Kerr. On the issue which he quite rightly raises, but which our report does not take a position on—the question of conditionality of trade relations with India given the Russian aggression in Ukraine—where I personally stand is that, if we can maximise, as my noble friend Lord Hannan said, the economic partnership between ourselves and India, we can also maximise its adherence to democratic values. It does not always happen—it did not happen in China because of a one-party state—but in a democratic country, which India is and has been successfully, we can look for the economic interrelationships themselves to give rise to a strong feeling within India of who its allies really are. I think that will have an impact. For that reason, I am very much in favour of us trying to have not only a free trade agreement with India but one which is the starting point of a wider economic partnership. That is the point I really want to make.

There is a risk that we focus on what is to be published or not published by Diwali. The Indian Commerce Secretary, Secretary Subrahmanyam, was reported in Mint today as saying that 19 out of 26 chapters have been closed, that there are a couple of areas where we are negotiating, and that the Diwali deadline is not going to be missed. But what does that mean? I think it means a statement of heads of agreement, as it were, between the two Governments. From our point of view, we have a right to expect a free trade agreement which substantially covers all trade and which makes substantial reductions in tariffs, not least on UK goods going to India; but also that the heads of agreement in these chapters initiate a substantial series of relationships between ourselves and India on a range of economic issues, which will be developed over time. Indeed, the statements that might be made this year need to be expanded on and developed.

From my point of view, the issue in relation to our report is that I wish we could have had this debate six months ago, at the start of the negotiations, rather than two-thirds or three-quarters of the way through—as I think we all agree. However, I think we can still at this point ask, “What is it we are looking for?”, because the Government have not told us what constitutes a successful outcome to these negotiations. To that extent, with no disrespect to the Government, I think people might understandably look at our report and say that it is a good basis for judging whether there has been a good outcome.

Let me give a few examples of where we focused on some of the detail and added to what the Government said in their rather Panglossian way, which would be a good basis for thinking about what constitutes success. The Government talk about the importance of investment protection, but they did not say how or what they are looking for to protect UK investors in India. The committee discussed this a number of times, not least with my noble friend Lord Grimstone, who no doubt will bring a lot of further expertise to the committee. The point he often made was that we have been successful investors abroad, and where dispute settlement and investor protection are concerned the UK has a terrific record; nobody has pursued a successful ISDS case against the United Kingdom. However, we have often needed our investors to have the equivalent protection in other countries, and they have sometimes not had it.

We lost the bilateral investment treaty with India in 2016. The Government are not telling us what the nature of future investment protection should be. In our view, they should be prepared to pursue investor-state dispute settlement agreements, and ideally, in this and other contexts, try to bring India into an internationally agreed system for that purpose, such as through the development of UNCITRAL, not the EU system. As my noble friend Lord Frost accurately said, although the EU is still negotiating with India, it will complete the second round only next June. The EU will demand too many things of its negotiating partners, rather than seek some kind of international consensus. That is where our negotiators might have a valuable flexibility in getting us to an agreement that the European Union might otherwise not achieve. ISDS may be one of these places; it will be very valuable for there to be international agreement and for us to secure it with India.

I will briefly mention one or two other points. We cannot put it all in the agreement now, but it is important to have a process moving towards standard setting in India that meets international compliance. More than 80% of UK standards are ISO-compliant; less than a third are in India. We need India to move. For things such as mutual recognition agreements, which are important for goods, India relies enormously on us getting this kind of process under way. Likewise, our agricultural exports to India are often in premium goods, so we need geographical indications. We have heard the Government tell us that geographical indications are important, but they have not yet secured them through the Australia agreement or in Japanese domestic legislation. We do not even know whether they will seek a commitment to geographical indications in the India agreement, but they should, particularly because the Indian middle-class consumer is a large potential international market for many of these premium goods.

The last question I particularly want to mention, which is really important, is that of an innovation chapter. We have had innovation chapters, for example in the Australia agreement, and I cannot think of a potential free trade agreement for which the process of working and co-operating together on innovation could be more important than between us and India. It will clearly be looking for lots of services mobility and the ability for workers to come here. Much of that will be not only valuable to us, as I know well in relation to the National Health Service, but important to a wide range of innovative businesses—not only in health, but in life sciences, IT, fintech and beyond. We need that co-operation and innovation. The innovation chapter in this agreement might be the most effective one that we use in the future, but we will not see the detail of it in October. What we need, as with many of these free trade agreements, is something that meets the criteria now, but is the substantial starting point of an economic partnership that grows in the months and years ahead.