India-UK Trade Negotiations

Mark Garnier Excerpts

Tuesday 22nd February 2022 Westminster Hall

[Bob Blackman]

I thank my right hon. Friend for her intervention. India has a young population, full of entrepreneurs and people who want to succeed, and with a growing and establishing middle class and, indeed, upper class. The potential for a wide range of exports gives us many opportunities to draw on for the overall benefit of this country.

UK consumers, producers and businesses will all gain from a free trade agreement. We must maintain our high environmental standards on labour, food safety and animal welfare in any free trade agreement, not just with India but across all our different agreements. It is also important to protect the NHS when we negotiate, as we do not want it to be compromised in any shape or form. We want to secure the best possible agreement, and the potential interim agreement could deliver early benefits. I look forward to the Minister alluding to that agreement, as well as to the strategic opportunities I have mentioned.

We share a common set of values. India is the world’s largest democracy and has long maintained its support for international co-operation and democratic Government. As my right hon. Friend the Member for Chipping Barnet (Theresa Villiers) said, there have been huge advances over the past few years in the economy of India, the rights of Indians to work, and for villages across India to gain benefits from its trading position.

We work together in various multilateral fora, including the United Nations, the World Trade Organisation and the Commonwealth. In May 2021 we committed to an enhanced trade partnership, which could double trade by 2030, strengthening our relationship and invigorating our respective economies. That is part of a 2030 road map that covers the full spectrum of our relationship with India.

We have strong cultural links. Some 1.5 million British nationals are of Indian origin. I see one or two here in the Chamber, which demonstrates the role that the British Indian population plays. We support over half a million jobs in each other’s economies, so an agreement would further develop that deep-seated relationship. It would also help put global Britain at the heart of the Indo-Pacific region—one of our key strategies—which now represents 40% of global GDP and has most of the world’s fastest growing economies. As they expand, it is key that we have access to their markets.

An agreement with India would complement our other commitments, such as those to Australia and New Zealand, and the ongoing negotiations with the other 11 members of the CPTPP. Tilting towards the Indo-Pacific would diversify UK trade, make our supply chains more resilient and make us less vulnerable—particularly on a day like today—to political and economic shocks around the globe. It would also cement our position as a world leader in free trade and strengthen democracies around the world, which can only be a gain for India and for us.

I will not go through the many benefits of free trade agreements, as I know a number of hon. Members want to contribute to the debate. But let us be clear: reducing barriers will make trade easier and cheaper for UK exporters, as well as improve choice for UK consumers.

In 2019, India imported £5.35 billion-worth of goods from the UK, of which £5.24 billion was in lines subject to tariffs. That gives a feel for how much opportunity exists. Removing those tariffs would enable us to double our exports to India. India’s middle class, which I mentioned earlier, is expected to double from 30 million people in 2019 to 60 million by 2030, reaching nearly 250 million in 2050. If that is not an opportunity, I do not know what is.

We will have huge opportunities to sell high-quality iconic brands and products. Removing tariffs and giving greater clarity on legal certainty would support our UK businesses, such as those in the automotive, agrifood, machinery and pharmaceutical industries, to name but a few. That would also mean our manufacturers saving costs by getting cheaper parts for products, while our consumers in the UK would benefit from the variety and affordability of different products.

The opportunities for UK services and investment are huge. At the moment, they amount to £3.2 billion. The fact that the expanding services sector in India is expected to reach 54% of its economy demonstrates the opportunity for us as a trusted partnership.

[Mark Garnier (Wyre Forest) (Con)]

My hon. Friend is making a strong point about how reducing barriers to entry will increase trading opportunities with India. Does he agree, however, that it is the job of the Department for International Trade to do not only trade policy but trade promotion? The Tradeshow Access Programme and other good innovations are required to support British businesses that are seeking to take advantage of opportunities. I look forward to the Minister’s explanation of what goes on in his closing speech.

[Bob Blackman]

My hon. Friend is a former Trade Minister who knows such things all too well. Those go hand in hand—it is no good having a free trade agreement if we do nothing with it. Indeed, before we get to the free trade agreement, we have to use the opportunities we have in the diaspora here and all the other opportunities for trade.

There is also a great opportunity in the digital sector. The Government of India aim to have a $1 trillion online economy by 2025. We expect internet penetration in India to hit 50%—or 622 million users—so the free trade agreement represents a huge opportunity for businesses in the UK, such as those in tech, artificial intelligence and cyber-security.

A trade agreement will not only build on our relationship but give young Indians the opportunity to come to this country to study—to get their degrees, master’s degrees and PhDs—and to return to India to use the knowledge that they have gained in friendship with the UK and to expand India’s economy even more. We already have excellent educational co-operation, in particular with our higher education facilities, but I want to see us do better. I want us to get back to the position where the UK is where India chooses to send its young people to for study. We have slipped behind in recent years, and myths have developed about caps on numbers. Those are problems to resolve—we know that—but nevertheless we want to return to the position whereby we are the place of choice.

Indian-owned businesses in the UK employ more than 95,000 people. Some 29,200 are employed in the west midlands alone—at least one west midlands MP, the right hon. Member for Walsall South (Valerie Vaz), is present—with 20,700 in London and 10,700 in Wales. Indian investment alone created 15,000 new jobs in the past three years. That demonstrates our opportunities to expand. Furthermore, India’s import requirements are set to be worth £1.38 trillion in 2035, which gives us an opportunity—if we can reduce the high tariff barriers—to utilise our capability to provide a high level of services and good-quality goods.

The tariffs paid on exports to India total £49 million a year. The tariffs for automotive manufacturers stand at 125%, so a trade agreement would obviously benefit them. In 2019, 9,900 UK businesses exported goods to India, 98% of which were small or medium-sized enterprises. That demonstrates that it is not only big companies but small companies that could gain.

We are a global leader on climate action, and the Government are obviously maintaining our high standards of environmental protection within trade agreements. An agreement with India could represent a huge opportunity for our world-leading renewable energy industry. The Government of India recognise the need to transition towards renewable gas and plan to install 175 GW of renewable energy capacity by the end of this year. Our expertise can help them to achieve that and to remove their dependence on coal and other fossil fuels. Although we already have a productive trading relationship, it would also help us to bounce back from the pandemic and to invigorate trade and investment services.

The reality is that our negotiation stance needs to be clear and above board, and we need to be clear that India was the UK’s 15th largest trading partner in 2020. As I have said, trade was worth £23.3 billion and our exports worth £8.5 billion in 2019. That makes India the 10th largest export destination for the UK. Outside of the EU, that clearly provides us with a huge opportunity. Imports were worth £14.8 billion in 2019, which was 2.1% of our imports, making India the UK’s fifth single largest import supplier. India is now the fifth largest economy in the world and the third biggest investor in the UK. We have slipped down the list on investment in India, and we need to put that right as we go forward. We were the third biggest investor in India, but I think we are now fifth or perhaps even sixth. India is the second most populous country in the world, with 1.38 billion people back in 2020, which amounts to 18% of the world’s population. I am throwing out a lot of stats, because we need to understand the huge benefit that can result from having a free trade agreement with India.

Obviously, under covid, both our economy and India’s economy contracted, but as they expand we will have an opportunity to get involved in further investment in India. At the moment, India is projected to overtake Germany and become the world’s fourth largest economy by 2030, and it could leapfrog Japan to become the third largest by 2050. The opportunity there is huge, and India has obviously been the engine of global growth over recent years, with its economy growing by 7% a year. If we could grow our economy by 7%,- wouldn’t we bite people’s hands off to achieve it? Clearly, that is going to be the position. I have mentioned India’s middle-class market, which is growing fast and which is a huge opportunity for us overall.

With a free trade agreement with India, we can obviously support jobs across the UK. If our exports to India grow, we can grow our businesses, and SMEs will grow as a direct result. In 2019, something like 1,000 Indian-owned local business units were operating in the UK, so clearly the opportunities are there and the demand for imported goods and services will grow as we use the living bridge between the United Kingdom and India.

Obviously, the success of exports to India will depend on how well the world economy goes and how our relationship grows with it. As I understand it, the second round of negotiations is due to take place between 7 March and 18 March, with a shared ambition to conclude negotiations by the end of this year. I wish those negotiations well, and I hope the Minister will be able to update us on the position when he responds to the debate.

Looking at the various parts of our economy, there are huge benefits right across the UK to having a trade agreement with India. One of our hugest exports is Scotch whisky. That has a huge impact. Those of our Scottish friends who are present—the hon. Members for Inverness, Nairn, Badenoch and Strathspey (Drew Hendry), for Glasgow East (David Linden) and for West Dunbartonshire (Martin Docherty-Hughes)—know that they will gain as a result of a global Britain free trade agreement. If they were to engage in foolish behaviour and leave the United Kingdom, they would lose that free trade agreement and once again face tariffs of 150%. Indeed, the export of Irish whiskey is a vital part of the Irish economy and will clearly be—