Negotiating Objectives for a Free Trade Agreement with India

Lord McNicol of West Kilbride Excerpts

Tuesday 6th September 2022 Grand Committee

[Lord McNicol of West Kilbride (Lab)]

My Lords, it is always a pleasure to follow the noble Lord, Lord Purvis of Tweed. I join others in paying my gratitude and appreciation to my noble friend Lady Hayter of Kentish Town and her committee for producing another balanced and insightful report, which forms the basis of our debate here.

The importance of the free trade agreement with Australia was rightly acknowledged, as it marked our first outing into the post-Brexit world, but negotiations with India will represent opportunities and challenges of a different order of magnitude. Last month, India celebrated 75 years of independence from Britain, which made last week’s announcement that it has overtaken the UK as the world’s fifth-largest economy particularly pertinent. The world’s largest democracy is set to become the third-largest economy by 2031, yet it already has the third-highest greenhouse gas emissions across the planet.

Given this context of importance, it is essential that Parliament is involved, consulted and engaged at all stages, ensuring that we set checks and a balanced framework for future FTAs. As we have heard in this debate, that has not happened. It is difficult to isolate these negotiations, as we heard, from the backdrop of the geopolitical events that shadow them. The Government have prided themselves on their role in leading talks to tackle climate change and global leadership in supporting Ukraine since the Russian invasion. These negotiations must not undermine this reputation; they should be seen as a unique opportunity to influence and enhance our global engagement.

Reading the vague and minimalistic nature of the Government’s negotiating objectives regarding the environment and climate is disappointing in the least. Estimates that an FTA with India would increase greenhouse gas emissions are not surprising; still, it is of concern that there is no mention of mitigating measures and that current projections do not account for transport emissions and carbon leakage. This latter issue is of huge significance as the offshoring of agricultural production to more carbon-intensive countries will devalue ambitions to limit domestic greenhouse gas emissions. Will the Minister therefore ensure that emission projections are recalculated so that they account for carbon leakage and transport emissions, because only then will we see the true figures?

Since the Russian invasion of Ukraine, as we have heard from many speakers, India has failed to support the British-led sanctions. It has seen its trade with Russia increase, abstained on a UN motion condemning the invasion and, last month, participated in a joint military exercise with Russia and China. Given this, can the Minister explain why Ukraine and the situation there is not mentioned at all—not once—in the negotiating objectives?

In a world of rising authoritarianism, disregard for the rule of law and persecution of vulnerable minorities, there are questions over the direction of the current Government in Delhi. Recent reports have suggested a rise in human rights abuses and breaches of academic freedom. In 2021, the International Trade Union Confederation rated India on the second-lowest rank on its global rights index. As stated by Frances O’Grady, the general secretary of the TUC:

“Suppressing trade unions, forced labour, child labour and other workers’ rights abuses are all widespread in India … A UK-India trade deal could encourage companies to outsource more jobs from the UK to India, leading a race to the bottom.”


She continued:

“The UK government should be using its leverage on the global stage to promote decent work”


and decent working conditions.

It is conceivable that climate change, India’s relationship with Russia and these alleged human rights abuses could form a significant part of the negotiations but, despite persistent calls across the Committee here today and from many organisations feeding into the consultations, the Government have yet to produce an overarching trade policy, making it difficult to determine the importance attached to each of these issues in the negotiations. Consequently, can I first reinforce calls for the Government to produce an overarching trade policy? Secondly, I ask the Minister to clarify whether he believes that any of these three issues—India’s commitment to reducing greenhouse gases, its stance on Russia’s invasion of Ukraine and reports around human rights—will be given any priority in future negotiations.

Predictions that an FTA with India could lead to a 0.22% increase in GDP may not meet some of those post-Brexit expectations. A sector with particular potential to benefit is Scottish whisky. Despite the 150% tariff currently applied to imports, India is the second-largest export market for Scottish whisky. Despite this, Scottish whisky constitutes only a 2% share of the Indian whisky market. The Scotch Whisky Association has warned that, as we have heard, many non-tariff barriers to trade, at both national and state level, need to be resolved so that business can flourish.

As yet, the risks to British farmers of a UK-India free trade agreement have not received the media coverage of the equivalent Australia and New Zealand agreements. The lack of regulation and the enigmatic nature of India’s agriculture mean these threats are less transparent, but they are just as real. Without the tightening of Indian law and regulation, British farmers could likely face unfair competition brought about by significantly lower standards and state subsidies. For example, we have heard that carrots grown in India are allowed to contain 500 times the amount of the fungicide captan, which is a known human carcinogen, than is allowed in the UK. Clearly, this raises future questions on the erosion of standards and consumer protections.

Another concern is state subsidies. In December 2021, the WTO ruled that India violated international trade rules concerning unfair subsidies provided to sugar exporters. This was highlighted by the NFU president, Minette Batters, who has reiterated the need to promote fair and equitable trading in the event of a future deal. These comments came after her previous comments on the Australia deal, on which she said:

“In particular, it is disappointing that the UK government has capitulated to Australian demands to time-limit any safeguards for sensitive sectors.”


Current government estimates already concede that a trade deal would see a decline in domestic agricultural output of up to £10 million. Given this, can the Minister say what will be done to help British farmers and the communities they support and what safeguarding measures will be implemented if disputes over subsidies and standards arise?

I think we can all agree on the importance of and the challenges posed by these negotiations. As was dealt with perfectly by the noble Lords, Lord Purvis of Tweed and Lord Kerr, it should follow that engagement with Parliament, the devolved Administrations and other relevant bodies should be extensive. Unfortunately, this is not apparent. The devolved Administrations have raised concerns relating to the Government’s lack of consultation and reluctance to share information.

Government transparency on the content of the negotiations also remains an issue. The update produced following the fifth and latest round of the UK-India negotiations contained a meagre 114 words that were vague and generic. I went back to look at the first, second, third and fourth joint outcome statements—I do not know if other noble Lords have done so—and they are virtually the same. It has been virtually the same statement for the last four sets. The first joint outcome statement is the only one that has a little more detail about some of the areas that were discussed and negotiated. I would like to know why the content of the first one, which had a little more detail, was not continued in future statements. It is still not enough, but at least it would be a step.

Perhaps most alarming is the self-imposed deadline of 24 October that looms over these talks. As discussions began in January, only a little over nine months have been set aside to conclude an agreement. By comparison, the recently signed interim trade deal between India and Australia lasted for nine rounds of negotiation between 2011 and 2015, followed by a further six months of detailed negotiations through 2021 and 2022.

As set out by the International Agreements Committee, India has been a notoriously difficult negotiator and has a history of protectionism and paper-thin deals, not to mention relatively low tariffs for its exports compared to ours. This considered, such a short negotiating window alludes to significant concessions being made, the agreement being limited to an interim agreement or a combination of both. As pointed out by the IAC report, this will likely make a more comprehensive deal much more challenging to achieve in the long term. Anxieties over the disproportionate amount of time allocated to talks are shared by trade unions, the devolved Administrations, businesses and industry leaders who have urged the Government to

“hold out for a commercially meaningful and comprehensive deal, even if doing so means that the self-imposed deadline of Diwali is not met.”

As my noble friend Lady Hayter said in opening, we share the Government’s ambition for trade deals. Given the broad consensus acknowledging the significance of these negotiations, we urge the Government to take a pragmatic approach and not to have any short-term deadlines, ensuring that the UK’s long-term position is not jeopardised.