That this House has considered India and UK trade negotiations.
It is a pleasure to serve under your chairmanship, Mr Davies, I think for the first time. I thank the Backbench Business Committee, on which I sit, and Madam Deputy Speaker for allowing us to have this very important debate. I declare my interest as co-chairman of the Indo-British all-party parliamentary group—the other co-chairman, the hon. Member for Ealing, Southall (Mr Sharma), is also present. This is an important time: trade talks between the UK and India have already begun. There is a tremendous opportunity, which I will go into in some detail.
Of course, we have the opportunity to negotiate a trade deal with India—our friends—because we have left the European Union; we now trade and negotiate as a free trading nation. We must embrace the opportunities that that gives us. Colleagues from across the House will, no doubt, also go into the detail of those opportunities, including in services, particularly for the City of London, legal services—India, after all, has the same basic legal system as we have—manufacturing, and Scotch whiskies and Irish whiskeys, which face huge tariff barriers in India at the moment. Those must form part of our successful negotiations.
We have this opportunity because we have a long-term friendship with India. The European Union has been trying to do a deal with India since 1997, but without success. The United States of America has been trying to do a deal with India, but without success. We should therefore not underestimate the difficulties that we may face. Over the weekend we had the good news that our potential membership of the comprehensive and progressive agreement for trans-Pacific partnership, which is worth trillions of pounds, is moving forward. The trade opportunities with India are enormous, and clearly a free trade agreement will support the Government’s strategy of developing the status of the United Kingdom—global Britain—as an independent trading nation.
Does my hon. Friend agree that one of the significant benefits of a free trade agreement between India and the United Kingdom is access to a market that is increasingly prosperous? Over recent years, millions of people in India have been lifted out of poverty because of economic growth and prosperity. That is fantastic news for India, and it also creates a great opportunity for businesses based in the UK to increase their trading with India.
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.
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.
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.
I am grateful to the hon. Gentleman for giving way. I think he has given me this opportunity before gets himself into a bit of a hole. First, he had a pop at independence, only to then turn it into saying how successful Ireland is. I am grateful to him for that, but I thought I would give him the opportunity at least to try a glass of water, if not some whisky.
I take issue with one or two of the points that the hon. Gentleman has made. He spoke cleverly about what the UK can do for India, when the reality is clearly the reverse: we have imported fantastic, highly educated doctors, nurses and IT people.
He talked about whisky; I hope he does not intend for India to become a land of alcoholics. I would like to share an example from my youth of India’s innovation: instead of importing Coca-Cola, it made its own version, Thums Up. It is a very innovative country. I would like to correct the record slightly: our parents and grandparents would not forgive us if we did not say that they were also highly educated and innovative.
I thank the right hon. Lady for that intervention. Clearly, the living bridge, as I have described it, of citizens of Indian origin in the UK is not only highly educated, but has the opportunity to build that relationship still further. Equally, there is a potential opportunity for people of UK origin to study at universities and other educational institutions in India. I look forward to those important exchanges taking place.
There is clearly a huge opportunity for us to go forward. The opportunities that arise from a potential free trade agreement are legion. To come back to whisky and the huge 150% tariff, with respect to the right hon. Lady, India manufactures its own whisky, which is a good product but clearly no substitute for that from global Britain. Negotiating that tariff down will be a prize and a huge advantage for our exports to India. It is a premium product that is well respected by the middle classes across the piece, and very welcome.
I will not trouble colleagues further because I know others want to contribute. The opportunities are huge, and it is up to us to grasp that nettle. I look forward to the Minister’s reply to the debate, including the opportunities, our negotiating position, how negotiations are going and how much progress we have made. If we bring off this free trade agreement, it will be a feather in the Government’s cap. More importantly, it will be a huge opportunity for the United Kingdom and India to cement our long-term relationship.
There are five Members seeking to catch my eye. I do not intend to introduce a formal time limit, but I think everyone can do the maths. I want to get to the Front Benches no later than 10.30 am. If we look at around seven minutes each, everyone will get a fair lick of the sauce bottle.
9:54 am
Mr Virendra Sharma (Ealing, Southall) (Lab)
It is a pleasure to serve under your chairmanship, Mr Davies, although not for the first time. Thank you for calling me to speak on this very important matter. I would also like to thank the hon. Member for Harrow East (Bob Blackman) for securing this debate, which I know is of great interest to his constituents as well as my own. I feel a little sorry for myself that I missed the opportunity to lead the debate; however, he made a good opening.
Trade with India has long been a British obsession and I am delighted that now, 421 years on from the founding of the East India Company, it is a little less one-sided. As the chair of the Indo-British all-party parliamentary group, I should declare an interest in this debate. However, my connection is even deeper, as I am not only a British citizen but also a son of India. It is one of my most fervent beliefs that India and the UK are natural friends and allies, with shared values and complementary skills and strengths. A deep and strong alliance is both possible and desirable.
Prime Minister Modi has made it very clear that he views Britain as India’s natural ally. India is bursting with opportunity from which both the UK and India can benefit. There is a massive and growing middle class, a highly educated workforce and demand for services. The future can have so much more to offer than the past. There are nearly twice as many English speakers in India as in Britain, and that number is expected to increase over the coming decade. It could double—triple; numbers are high.
In India there is a connection to Britain that extends beyond the similar legal system, parliamentary democracy and cricket—it is deeper. We may have chosen to stifle trade with Europe and thumb our noses at our nearer neighbours, ending the opportunities that India had to invest in the UK as a jumping-off point into Europe, but that is not all that we have to offer. We must offer something different, but perhaps we should try to avoid further reducing our competitiveness. A free trade agreement may be this Government’s stated aim, but I urge them to seek wins that build into an FTA, not look for a hole-in-one. Education and legal services are ripe for a sector-specific deal. Defence and security would not just be a boost to British design and manufacturing, but have the opportunity to support an Indo-Pacific “tilt” strategy. The Australia submarine deal shows that we have a sector brimming with talent, in demand around the world. Let us compete in space, cyber and aviation. The UK built the first jet airliner. Let us again sell them around the world, and fill Airbus planes with Indian students coming to British universities for a world-class education.
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We are seeking trade and investment opportunities. We champion free trade—I am sure that my hon. Friend the Minister will allude to that particular issue in his speech. We have already negotiated a long-term arrangement with India—co-operation has been taking place over the last year—but now, free trade is the key to our success.
India is a dynamic, fast-growing economy at the heart of the Indo-Pacific region. Our bilateral trading relationship is already quite significant, and we should not underestimate that—£23.3 billion in 2019. A free trade agreement could strengthen that, and could potentially increase exports by £16.7 billion by 2035. That is a goal that we must secure. We can also enhance the already existing trading relationships, which are considerable, and give the UK access to a market with long and short-term benefits. A free trade agreement has to work not only for the United Kingdom but, obviously, for India.
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.
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—
As we heard, in the past we have missed some opportunities. Britain did not stay on top of competing with other countries. Still, British universities and the British education system are popular among Indian students. We should look seriously at how we can further engage that relationship. On that point, I want to commend the excellent work of British universities in attracting Indian students despite the hard work of our Prime Minister’s predecessors to dissuade as many students as possible from coming to the UK. We must accept that it was our failure, not a lack of interest among students back in India. It should not be seen as a criticism, but as a policy matter we must look at how we can improve those relations further to bring those students into the country.
The new post-study visa is a good step, and the numbers from UCAS last week show that it is having the right impact. There is no doubt, then, of the value of an FTA for the UK and India, but experts I have spoken to think it will not be possible to secure one in the next decade or more. Instead, we should seek to nail down the wins that we can now, and work towards an FTA. That should not be for an election stunt but for the long-term success of the British economy.
I also urge the Government to take international promises seriously. This Government have been blamed, time and time again, for interesting interpretations of trade regulations and agreements with the EU. We risk further serious international reputational damage if we are seen to renege on trade deals that we have written and agreed. We can show how serious we are by respecting and taking full advantage of deals already in existence and in the pipeline. I look forward to seeing the sector deal for fruit ripen and the medical technology deal birthed in good health. Two countries, both alike in dignity, can put aside ancient grudge and break new ground with an ambitious deal for civil hands in both nations.