UK could get ‘first mover’ advantage with India trade deal | International exchange


Gains from a UK-India trade deal could be comparable to those from a deal with the US, but risk exposing the economy to tougher competition, a report says.

The Resolution Foundation think tank said successful talks between London and New Delhi had the potential to gain “first mover” advantage in India and replicate the success of German manufacturing exporters to China.

But the report noted there was a risk that Britain’s business services firms – one of the economy’s strongest sectors – could be undermined by lower-cost Indian rivals in a repeat of the hollowing out. of American manufacturing by Chinese competition.

India has traditionally been one of the toughest markets to break into, but is set to become the world’s largest importer by 2050. International Trade Secretary Anne-Marie Trevelyan has started talks with India’s Minister of trade and industry, Piyush Goyal, earlier this month. month.

The move is part of a pivot to trade with Asia following Britain’s departure from the EU and slow progress in talks with Washington. The UK is seeking to become a member of the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) – a group of 11 countries including Japan, Chile, Australia, Canada and Singapore.

Sophie Hale, Senior Economist at the Resolution Foundation, said: “While much of the attention has been focused on becoming the first European country to join the huge CPTPP region, the gains and Far greater potential economic risks lie in further trade with India’s huge, rapidly growing, but still relatively closed economy.

“Trade liberalization with India should boost UK manufacturing in the short term, but could also benefit business services, where UK businesses already enjoy a competitive advantage and demand is expected to soar.”

Hale’s report indicates that UK companies exporting to India currently face far higher tariffs (19%, on average) than in the US (2%), providing a lot more opportunity trade liberalization. Achieving a free trade deal with India could also give UK businesses a prime competitive advantage over exporting businesses in the US and EU, which do not have preferential access. to the Indian economy.

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India is set to become the world’s third-largest import market by 2050, while its demand for business services, telecommunications and IT – sectors where UK exporting firms are already successful – is expected to triple over the 2020s .

“But India is changing and growing, so any trade deal means accepting uncertainty about the competition that UK businesses will face, such as the price of access to a rapidly expanding market,” Hale said.

The report noted that India has a comparative advantage in exporting business services – particularly the high-end business services sector clustered in London and the South East.


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