That this House has considered the UK-India Free Trade Agreement.
I will start by saying why this deal is so important. That may seem obvious, I suppose. We did £47.2 billion-worth of trade with India last year. That was up 15% year on year, and India is now our 10th-largest trading partner, but it is the future potential that stands out. India has the highest growth rate in the G20. It is likely to become the third-largest economy in the world by 2029. By 2050, India will be home to more than a quarter of a billion high-income consumers. Demand for imports is due to grow as well, reaching £2.8 trillion by 2050. Assuming global foreign direct investment into India continues on its recent trajectory, it could grow to £1 trillion by 2033.
Despite all that, India’s markets have been behind some of the highest barriers in the world. It has some of the highest tariff rates in the G20, with gin and whisky at 150%, cars at 110% and cosmetics at 22%. Soft drinks, lamb, fish, chocolate and biscuits—I know that is an odd combination—are at 33%. In 2024, India was ranked as the eighth most restrictive services market by the OECD. That inevitably either prices many UK products out of the market or makes them a premium product beyond the reach of many in India.
Some 42% of UK businesses surveyed by Grant Thornton in 2024 said that they would want to build a presence in India, and 72% said that a free trade agreement would encourage them to explore the Indian market. The agreement that this Government secured was a momentous achievement. Others had been trying to get a deal like it for years and failed, but this Prime Minister, along with the then Secretary of State for Business and Trade, my right hon. Friend the Member for Stalybridge and Hyde (Jonathan Reynolds), and my predecessor, my right hon. Friend the Member for Lothian East (Mr Alexander)—I pay tribute to them—brought home the goods.
The UK is the single largest importer of Indian ceramics. The trade deal removes some of the tariffs that we apply to Indian imports. The removal of those tariffs, along with industrial energy pricing in India, means that those imports become incredibly competitive in comparison to our domestic market. In some cases, those imports are well below our own market production point. Bricks are also affected. We are the single largest importer of Indian bricks, yet our own brick kilns stand at two-thirds capacity. Can the Minister set out the protections in this trade deal to ensure that while we get the new markets for our exports, we do not undercut our domestic market with cheaper imports?
I thought my hon. Friend might be about to talk about ceramics. He regularly speaks up—privately to me and publicly in the House and elsewhere—on behalf of his constituents, and he is right to do so. As he knows, I visited some of the businesses in his constituency, and I am keen to ensure that we do everything in our power within the Department to support, protect and enhance the British ceramics industry, which is an important part of our work. I just say to my hon. Friend that the overall impact of this agreement on the ceramics industry will be limited, because 543 out of 577 lines—steel lines, for instance—were already at 0%. The remaining 34, which we brought to 0% as part of the deal, all currently have tariffs of just 2% or 3%, and India is not a prominent source of imports for those sectors.
I accept that there are broad issues for the ceramics industry, and I have seen everything that Mr Flello, a former denizen of this place, has produced. I do not think that this agreement is the problem. There are other issues that we need to address, not least the issues that my hon. Friend raises in relation to energy costs, which are very specific to the ceramics industry.
The evidence that we took in the Business and Trade Committee did raise concerns about the impact of the deal on both the brick industry and the ceramics industry in the UK. The Minister knows that the Trade Remedies Authority is not really equipped with the tools that it needs to defend us in this new world; nor has the Competition and Markets Authority yet seen fit to finalise its foreign subsidy control regime, despite two years of consultation. Will the Minister at least assure the House that he will keep a very close eye on this matter, and will not hesitate to bring forward protections or trade remedies if the need arises?
Yes, of course. I read the report from my right hon. Friend’s Committee over the weekend, and it is a very fine report; indeed, some of what I have already said was lifted directly from it. Broadly speaking, I have the impression that the House might be content to proceed with the agreement, and the Committee was certainly content to proceed with it. As my right hon. Friend will of course know, I guaranteed to him that we would have a debate during the Constitutional Reform and Governance Act 2010 period, and we are now having a debate in the House during that CRaG period.
My right hon. Friend made a good point about trade remedies. In a whole series of sectors, we need to keep our review alert to that. He may wish to make some points later about labour in brick industry that are made in his report, but let me point out again that nearly 90% of ceramics imports from India already come into the UK tariff-free, so I am not sure that the agreement will lead to the particular problem that some in the sector expect.
The agreement goes well beyond India’s precedent in opening the door for UK businesses. As the Select Committee said in its report,
“The UK-India Comprehensive Economic and Trade Agreement (CETA) is the UK’s most economically significant bilateral free trade agreement since leaving the European Union.”
It boosts UK GDP by £4.8 billion, which is 0.13% of GDP. It boosts wages by £2.2 billion, and it boosts bilateral trade by £25.5 billion every year in the long run, by 2040. India will drop tariffs on 90% of lines, covering 92% of current UK exports, giving the UK tariff savings of £400 million a year immediately on entry into force, rising to £900 million after 10 years, even if there is no increase in trade. India’s average tariff will fall from 15% to 3%.
I thank the Minister very much for his enthusiasm and energy in doing this job. I think that we welcome the tariffs.
The agreement was projected to give Northern Ireland’s economy a boost of some £50 million. Three distilleries in my constituency— Echlinville, Hinch and Rademon—will take advantage of the reduction in the whisky tariff. The opening of markets for manufacturing and engineering has also been referred to. Let me say with great respect, however, that six months after the agreement, Northern Ireland has not yet seen much happen. I know that the Minister is keen to make it happen, but may I ask him, please, when it will happen?
Sometimes! Perhaps a tee-slightly-er or a tee-occasionally-er, but not total. [Interruption.] Yes, only in the early morning. Well, I got that completely wrong.
Anyway, I think all Members will want to celebrate the fact that we are managing to get the whisky tariff down from 150% to 75%, and then down to 40%. That will be transformational. Incidentally, this is not just about whisky itself; the other day I was with one of the founding members of Fever-Tree, who pointed out that it is also about soft drinks, including the soft drinks that go with the whisky, ginger ale being a classic instance. If we can get Fever-Tree ginger ale out to India at the same time, or for that matter—who knows?—perhaps even Indian tonic water, that will be a significant benefit for us.
The hon. Gentleman made a perfectly legitimate point about timing. Plenty of companies are asking me, “When is it all going to start?” We have to go through a ratification process, and what we are doing now is part of that. India has its own process, which is largely in the hands of Mr Modi directly, but I am very confident that that can happen fairly swiftly, and I hope very much that in the next few weeks and months we will be able to declare a date for entry into force.
There is always a slight moment between concluding the negotiations, the signature, the ratification and then entry into force. We cannot ever be precise about the date of entry into force until ratification has proceeded, but we are working as fast as we can. There is one other element that we always said we wanted to happen simultaneously: the double contributions agreement, which His Majesty’s Revenue and Customs is negotiating with India. As soon as all that is completed, I hope we will be able to get to entry into force. I will come on to the implementation.
I should just say that I slightly confused all my tariff lines earlier between steel and ceramics. We will tidy that up a little later, if that is all right with you, Madam Deputy Speaker.
According to the Government’s figures, this trade deal will add only 0.14% to our national GDP. What are we giving up in return for that measly amount of benefit, and is it really worth sacrificing our commitment to human rights to sign these kinds of trade deals with countries and leaders who are reported to have breached human rights?
I will talk about human rights in a moment, but if the hon. Gentleman can come up with a better way of finding a 0.14% increase in GDP, I would be very happy to hear it. Frankly, the idea that we would just turn our backs on one of the biggest economies and largest democracies in the world, and not say yes to a trade deal, is for the birds.
There is a whole series of human rights issues that we always want to raise with our trade partners, and we do so. When we are negotiating a free trade agreement, they are not necessarily a central part of it, but in this deal, for the first time ever, we have clauses on a whole range of human rights-related issues. The hon. Gentleman could easily point out that these are not legally enforceable, but they are an opportunity—both at the first review, which will come at entry into force, and on future occasions, which are laid out in the free trade agreement—for us to talk through these issues. Human rights issues are primarily the responsibility of the Foreign, Commonwealth and Development Office, through which we raise issues relating to Kashmir, particular individuals, labour laws and so on.
I am aware that non-tariff barriers are being removed through improved customs processes, reductions in technical barriers to trade, increased facilitation of digital trade, supportive intellectual property commitments and greater collaboration on new technologies. This will all help to make trade quicker, cheaper and easier.
On services, which are obviously very important for us as a services superpower, market access is locked in, including ensuring that UK companies are treated on an equal footing with Indian companies. The deal includes India’s first ever financial services and telecoms chapters. The free trade agreement is expected to boost services exports by £1.6 billion. On procurement, which again is very important for the UK, brand-new access to India’s federal procurement market will be locked in, guaranteeing access to approximately 40,000 tenders per year, worth at least £38 billion per annum, and exclusive treatment for UK companies. For the first time, UK companies will have access to India’s procurement portal.
I am delighted to see not just the excellent Minister for Trade, but the Secretary of State. [Interruption.] I did; just bank the win. I read that the Secretary of State is being earmarked as a caretaker Prime Minister, so we are pleased that he has the time to spend with us—I think we have 10 minutes before Labour colleagues have to run upstairs.
Richard Cobden said:
“I believe that Free Trade will do more to civilise the world than all the treaties of peace that have ever been signed.”
He was the former Member of Parliament for Stockport, but he was a resident in my own West Sussex constituency, near Midhurst. His advocacy of free trade, including in this House, was always about its benefits for ordinary people: cheaper food, higher wages and fewer incentives for people to wage destructive wars that had a huge impact on ordinary people.
We Conservatives agree. Those on the Conservative Benches will always be the party of free trade, where it benefits our country. That is why it was a Conservative Government who signed new landmark trade agreements with the EU, Japan, Australia and New Zealand, and negotiated the entry of the UK to the comprehensive and progressive agreement for trans-Pacific partnership. It is why it was the Conservative Government who laid the foundations for this free trade agreement with India. And let us be absolutely clear: this agreement is a tangible benefit of the decision the British people made in 2016 to leave the political institution of Europe; the fruit of the independent trade policy we regained, allowing the United Kingdom to negotiate once again as a sovereign state, just like Canada, Australia and Switzerland —Britain first, not Britain hoping against experience that its interests would float to the top of a soup of 27 other conflicting flavours.
Will my hon. Friend reflect on the view, which I hear a good deal in a constituency, which contains very many entrepreneurs both of Indian heritage and with connections to business in India, that this deal shows a Government who are not listening to the voice of business that has that level of experience, because they are missing out, as he is describing, on so many of the opportunities that those existing business links contain.
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Every region and nation will benefit from the agreement, including a £210 million boost for the north-west, driven by aerospace and automotive wins; a £190 million boost for Scotland, supported by cuts to whisky and satellite tariffs, and by financial services access; and a £190 million boost for the east of England, generated through tariff cuts and improved rules for medical devices and clean energy products. There are some big winners, and I have already talked about whisky. We estimate that whisky exports will increase by £230 million—an 88% increase. The tariffs on autos will fall from over 100% to 10% under quota, which will phase from combustion engines to electric vehicles. Auto parts and car engine exports are expected to increase by £189 million—a 148% increase.
The tariffs on cosmetics will fall from 20% to as low as 0%, which will boost exports by £400 million—a 364% increase. I talked to Charlotte Tilbury about this the other day, and she was absolutely—[Interruption.] The Whip is very keen on Charlotte Tilbury, so I will pass on her request for further information. I think you are putting in a request as well, Madam Deputy Speaker. The important point is that we need to make sure that businesses know that there is this new opportunity out there in India, and we need to maximise the exploitation of the new tariffs.
I hope the colleagues will agree that CETA is a good deal for the UK, but I want to respond to a couple of points made in the Business and Trade Committee’s report. First, the deal will only be of any use if it is actually used by UK companies. We know that it will not always be plain sailing, thanks to varying rules in different states and provinces—that point was made in evidence to the Committee—the staging of tariff liberalisation will need explaining, and non-tariff barriers can be just as important as tariff barriers.
As the first Minister for trade policy and for exports, I am keen to ensure that businesses have all the support they need to exploit this deal. That is why we are protecting the Department for Business and Trade team in India, and why we have already engaged with more than 5,000 UK businesses on how to exploit CETA, through guidance, events and roadshows. As I said earlier, this is not just about Scotch whisky; it is also about Fever-Tree ginger ale to go with it and its Indian tonic water. We have also provided specific support to the UK cosmetics industry to exploit the cut in cosmetics tariffs, which will benefit companies such as Charlotte Tilbury and Dr.PAWPAW. As the Committee suggests, once we get to entry into force, we will monitor the operation of CETA’s provisions, including through the regular reviews built into the agreement.
This is also not the full stop in our developing relationship with India. Vision 2035, agreed with India alongside the free trade agreement, sets out a shared framework for deeper co-operation across technology, defence, climate and strategic exports, reinforcing the long-term direction of the bilateral partnership. We will also try to resolve other market access issues not solved in the free trade agreement—for example, legal services, recognition of qualifications and other specific state-level barriers. The UK is open to continuing negotiations for a bilateral investment treaty, as long as it works for UK businesses.
As I have said, this is a trade agreement, but I want to assure Members that it also promotes British values. We have secured India’s first ever chapters on anti-corruption, consumer protections, labour rights, the environment, gender and development, and the agreement includes the strongest environmental commitments that India has ever made in an FTA. Our key commitments and red lines have been maintained throughout, including protecting the NHS; ensuring that our immigration system is not affected; carving out defence and protecting our export controls; excluding sensitive agricultural sectors, including pork, chicken, eggs and milled rice; maintaining our food standards and animal welfare levels; and keeping the carbon border adjustment mechanism out of the deal.
Plagiarism is the sincerest form of flattery, so I am glad that the European Union has now reached political agreement on its own FTA with India, for which it seems the UK deal was used as a baseline, but the UK retains first mover advantage. I am hopeful that we will get to entry into force before the end of the summer, so that UK businesses can start exploiting the reduced tariffs this year, while the EU will still take some time to achieve ratification, and only the UK has secured access to India’s £38 billion federal procurement market.
Let me make one final point. The UK is a trading nation: we rely on free and fair trade, and we believe that global trade needs a set of rules. The World Trade Organisation will meet in Cameroon in the next few weeks. We believe that it needs upholding and reforming so that it can tackle the challenges of today, including electronic commerce, unfair subsidies, dumping and secure supply chains with agility and dependability. However, we also believe that trade agreements such as these, along with our membership of the comprehensive and progressive agreement for trans-Pacific partnership, help to secure our prosperity and enhance our international standing. We are still pursuing new or enhanced deals with the Gulf Co-operation Council, Türkiye, Switzerland and Greenland, and we are completing the text of our economic prosperity deal with the United States of America and our deal with the European Union. I commend this deal to the House, and I congratulate the former Ministers who secured it.
Since July 2024, the Indian economy has grown by 11%. For context, the European Union has grown by 1.9% in the same period. Under this Government, the British economy has grown by just 1.6%. Exports matter, so this deal has the potential to be a key part of a growth plan for our economy. However, as any business leader will tell us, the devil is not just in the detail of such deals, but in what is not in them. I welcome the excellent report by the Business and Trade Committee, which is very thorough and an important part of the scrutiny process of this House.
We are a nation for which services represent nearly half of our global exports. I am afraid it appears that the Government have accepted a deal that is disappointingly thin on the sectors where Britain leads the world. The inclusion of services in this deal was the No. 1 priority of the previous Government’s negotiations. Instead, this deal settles for locking in existing levels of liberalisation—all good—rather than breaking new ground on services. There is an absence of provisions for mobility to allow our service industries to really integrate in India, restricting our consultants, engineers and architects from practising on the ground.