India-UK Trade Pact: $140M Exports on Day 1, Zero Duty

New Delhi, July 15 (PTI) India has exported goods worth USD 140 million to the UK at zero duty under the comprehensive economic and trade agreement (CETA), which became operational on Wednesday, Commerce Secretary Rajesh Agrawal said.

He said that the agreement is a pact between two major and complementary economies.

Terming the CETA as one of the "most aspirational" trade agreements by India to date, Agarwal said that over 800 technical sessions were held over 14 formal rounds of negotiations to conclude the pact.

"It is a win-win agreement between the two countries which will have a shadow across economic relations," Agrawal said while addressing industry and exporters on the day of operationalisation of the pact.

The Department of Commerce, he said, will work with export promotion councils to help industrial clusters understand the benefits of the agreement. The agreement grants duty-free access to nearly 99 per cent of Indian exports from sectors such as leather, footwear, textiles, mechanical and electrical machinery, plastic, base metals, marine products and gems and jewellery.

These sectors were earlier facing import duty in the UK market in the range of 2-16 per cent.



GOVERNMENT PROCUREMENT (GP)

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The pact includes a chapter on government procurement, which provides Indian suppliers legal access to the UK government procurement market worth around GBP 90 billion (USD 122 billion).

India offers reciprocal opportunities of around USD 114 billion to the British market.

UK suppliers receive treaty-backed access to covered central government procurement in India, and firms meeting a 20 pc UK-content threshold may qualify as Class 2 Local Suppliers.

Explaining the issue, Additional Secretary in the Department of Commerce Darpan Jain said that a number of safeguards are in the pact to protect the interests of domestic MSMEs.

"India reserves the right to grant preferential treatment to its MSMEs as per its policy. So that is not affected," he said, adding that the GP commitments are not applicable at the state level.

Even at the central government level, he said, it is not applicable across all departments, PSUs and entities.

"There are selected entities to which it is applicable," Jain said, adding that in strategic sectors, the UK firms will not be allowed.

The fourth safeguard is that there is a minimum threshold under which UK firms can participate in government procurement contracts valued at more than Rs 5.5 crore.

For activities like construction contracts, the threshold is over Rs 60 crore.



INTELLECTUAL PROPERTY RIGHTS (IPRs)

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On concerns with regard to IPRs by certain quarters, Jain said there is nothing in the agreement which says that the Indian government can not use compulsory licensing (CL).

As per the WTO (World Trade Organization) agreement, a CL can be invoked by a national government, allowing someone else to produce a patented product or process without the consent of the patent owner in the public interest.

Only one CL has been issued by India so far for the cancer drug Nexavar (2012), and that too under exceptional public health circumstances.



CARBON BORDER ADJUSTMENT MECHANISM (CBAM)

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India and the UK are engaged in discussions on this issue.

In December 2023, the UK government announced that it would implement its Carbon Border Adjustment Mechanism (CBAM) starting in 2027.

According to economic think tank GTRI, India's exports worth USD 775 million to the UK may be impacted due to Britain's decision to introduce a carbon tax on products, like iron and steel, aluminium, fertiliser and cement, from 2027.

An official said that this regulation is contested by some people in the UK also.

"They also have people who are saying it is required, some people saying it is not required. So, they are still deliberating upon this. They have not yet taken a final view on it," the official said.

"But we have made it very clear. Whenever you (UK) take a final view, if it affects our exports, then we would definitely seek an adjustment. And we are engaged with them on the issue," the official added.

The pact provides that if the UK imposes a carbon tax in the future and it adversely affects India's exports, New Delhi may withdraw certain concessions.



CHAPTERS ON GENDER, SME, ENVIRONMENT, LABOUR

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When asked if the inclusion of these chapters in the pact affects the policy space of India, Jain said there is no dispute settlement in these chapters.

"So, the UK cannot take us to dispute that you are not doing this, you are in violation of this," he said, adding "all our laws, whether in gender or labour or in environment, all our laws are actually aligned to whatever international treaties we are agreeing to".

The official said there is nothing to worry about as India is doing much more than other countries on these matters.

"Our policies are more progressive," the official added.