Thread by @EmporersNewC

1. Why don’t we have a trade deal with India, for example?

That's a good question.

(Thead)

2. Aside from bilateral arrangements with its immediate neighbours, India was pushing the WTO form of liberalisation until 2003, when it began to negotiate a deal with the ASEAN trade bloc.

3. It wasn’t long before the European Union and India held the first round of negotiations on a new bilateral trade and investment agreement.

4. Agreements with South Korea and Japan were completed a year after the completion of the ASEAN deal.

After which attention began to focus on the issues in the EU deal.

5. Food standards were one of the sticking points. For example, India wanting the EU to drop things like their sanitary and phytosanitary standards, their pesticide maximum residue levels, and their accepted contaminant levels.

6. India also wanted Service access for Mode 1 and Mode 4

7. As far as this negotiation goes, the UK was considered the most protectionist on services.

8. Mode 4 service access particularly

9. It came very close to being resolved, with car parts and whisky being two of the major sticking points on goods.

India made an offer on whisky.

10. But the UK would never agree the cut-off price for the tariffs.

11. Things might have been resolved, but domestically things started to happen as a result of their trade deal policy.

India missed their export target.

12. A government review concluded that India had got ‘almost nothing’ from the ASEAN deal.

13. The trade deficit that had emerged since India had begun its liberalisation programme had become large enough to be a political issue.

14. The Import-Export ratio with the countries India had concluded trade deals with was not favourable.

15. While there was an early gain in the ASEAN deal in terms of merchandise, the share of Indian’s exports dropped heavily very shortly afterwards.

16. The reason for this has been put down to a number of problems India has around exporting such as a lack of infrastructure and poor logistics.

17. Not to mention government policy and India's complicated regimes negatively affect exporters.

18. IT System roll out has been a factor too.

19. As has the fact some companies just do not utilise the free trade agreement, deciding to pay the duty rather than deal with the initial complexity.

20. All of this led to considerable pressure to avoid doing any more trade deals in India.

21. Resulting in the government stepping back from doing trade deals and instead seeking to renegotiate investment clauses in all their agreements.

(They continued negotiating the Regional Comprehensive Economic Partnership, but that is a very slow burn agreement)

22. It also introduced ‘Make in India’, an initiative to encourage companies to manufacture in India and increase their investment.

23. Consequently, in 2015, India became the top destination for foreign direct investment, but that doesn’t mean ‘Make in India’ hasn’t come with both successes and failures.

24. To help the Make India scheme, last year, India raised tariffs on about 50 items in more than ten sectors.

25. With India following some of the more protectionist policies over the last 4 years, free trade agreements weren’t really on the table. However, India seems to be thinking about them again.

26. But they aren’t entirely sure what they are going to do about the Trump trade war

27. Even so, they have benefitted in some ways by leveraging the situation to improve exports to China

28. There is still considerable push back on India doing any more trade deals, both in terms of trade benefit and the country’s ability to respond to Donald Trump.

29. It’s also the case that the economic policy is arguably working (in terms of the actual deficit rather than improving exports) to the point where the election this year could result in liberalisation remaining off the Indian government's immediate agenda.

30. In the build up to the election the effectiveness of ‘Make in India’ is being attacked. With Prime Minister Narendra Modi, and his party, being accused of being descended from “collaborators of the British”.

31. (Yes, the way some British politicians talk about British / Indian history does confuse them)

32. This years’ election could also bring in a renewed policy of liberalisation and this could definitely lead to a trade deal with Britain.

33. And there is also political will to resume talks with Europe on the basis that Indian companies have previously invested in the UK to get full access to the Single Market.

34. If India does change its policy, it’s not clear which our of the EU or UK will be done first, or if negotiating with India, while it is following a more protectionist line, is going to yield the best deal in the long term.

35. The thing to remember is the UK can’t “have trade deals with who it wants”, it can only have trade deals with countries that want trade deals and can agree the terms.

Regardless of how much tax payer's money is spent on signs.

36. But that’s not the end of the story, because after Brexit the UK is also expected to have insufficient infrastructure.

37. There are going to be multiple IT roll outs in Customs handling.

38. The UK has quite a few exporters who have never had to utilise a free trade agreement because they have been able to take advantage of being in the Single Market.

39. While it is planning on doing a deal with a major market. One with businesses that have never had the luxury of a single market to export and are actually very good at utilising free trade agreements.

(As their UK-US trade deal submissions prove)

40. And while raising more export barriers on its biggest export market than the trade deal with its second biggest market is ever going to drop.

41. Which some might see as a recipe for a large trade deficit.

Something we all agree is fine if you have foreign investment coming into the country.

Which may be a problem for a while.

42. So, it might not be a matter of “We can do trade deals with who we want.”, but “How long will we need to wait before our country is ready to do a trade deal?”

/End