In a global trade environment still grappling with tariff-centric discussions, the India-UK Comprehensive Economic and Trade Agreement (CETA) stands out as a forward-looking deal.
While tariffs form a part of the agreement, CETA’s true significance lies in its comprehensive coverage of new-generation trade issues.
Experts say the deal sets a precedent for how trade pacts between major economies should be shaped in the 21st century, by shifting focus from traditional tariff barriers to modern priorities like digital trade, services, investment, and labour standards.
Reclaiming the Global Trade Discourse from Tariff Obsession
Global trade liberalisation once pivoted away from tariffs, especially after the Most-Favoured Nation (MFN) principle became foundational in WTO rules. Bilateral and regional FTAs further lowered tariffs, gradually rendering them less central to trade negotiations.
However, US President Donald Trump’s emphasis on tariffs disrupted this evolution, reigniting tariff-based protectionism and diverting attention from more crucial issues like services, competition policy, digital trade, and sustainability.
By incorporating progressive non-tariff elements, the India-UK CETA successfully redirects attention to future-centric trade policies, defying the retrograde focus on tariff schedules that had largely faded from importance.
The CETA is particularly significant because it unites India (the world’s 4th largest economy) and the UK (6th largest) in a trade pact covering a combined market of $8 trillion GDP and nearly 2 billion people.
It also marks India’s first FTA with a major G7 economy, showcasing unprecedented synergies between a leading Global South nation and a mature Global North industrial power.
According to the WTO’s 2024 classification, both countries qualify as ‘middle powers’ in global trade, nations with a 1–4% share in global trade.
Collectively, they account for 4.5% of global goods trade and 11.4% of global commercial services trade. When excluding intra-EU trade, those shares increase to 6% and 14%, respectively, highlighting their global significance.
Mutual Market Access Across Key Sectors
The FTA introduces a host of market access benefits for both countries. India gains easier access for labour-intensive exports, including textiles, leather, footwear, toys, processed foods, and organic chemicals.
In return, the UK secures access for exports like medical devices, alcoholic beverages, aircraft parts, electrical machinery, and various food products.
The UK has also agreed to exempt Indian temporary workers from social security contributions, aligning India’s treatment with that of other global partners.
Both nations have agreed to enhanced professional mobility, allowing broader access for service professionals in each other’s domestic markets.
India has taken a proactive stance in the CETA, making several bold commitments that signal a transformative shift in its FTA strategy. These include:
- Lowering automobile tariffs to 10% in phases
- Providing effective remuneration to IP holders under compulsory licensing
- Opening professional services markets, including previously restricted sectors like auditing and accounting
- Allowing UK access to government procurement markets
- Committing to digital trade rules, including cross-border data flows and cybersecurity
- Adopting international labour and environmental standards
Despite these bold moves, India has maintained red lines in sensitive areas such as the dairy sector, legal services, defence procurement, and investment protection provisions.
Preparing for Future Trade Alignments Like CPTPP
The India-UK deal signals India’s preparedness to join modern trade blocs, notably the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP).
With CETA already reflecting several CPTPP-aligned standards, India is inching closer to meeting the high benchmarks required by such 21st-century FTAs.
India’s ongoing bilateral FTAs with several CPTPP members—including Australia, Japan, Singapore, Chile, New Zealand, Canada, Peru, and now the UK—strengthen its positioning further.
India Enters the League of Modern Trade Powers
The India-UK FTA does more than enhance bilateral trade; it marks India’s formal entry into the elite league of countries shaping the next era of global commerce.
By embracing digital trade, labour standards, sustainability, and market access reforms, India is making a decisive statement: it is ready to lead and not just participate in the evolving architecture of global trade.
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