What Impact Will Keir Starmer’s Win Have On India-UK Free Trade Agreement?

Keir Starmer, the leader of the Labour Party, who is expected to become the new Prime Minister of the United Kingdom, has often stated that he desires to keep positive relations with the administration of Narendra Modi.

New Delhi: India and the United Kingdom have been working towards finalizing a contract to boost the 38.1 billion pounds bilateral commercial partnership. However, the negotiations have remained frozen due to the fact that India’s phased general election followed by Britain’s election.

The Free Trade Agreement (FTA) talks, which have been going on for two years, are set to restart now that both elections have been completed.

Keir Starmer, the leader of the Labour Party, is expected to become the new Prime Minister of the United Kingdom. He has consistently stated that he wishes to keep positive relations with the administration of Narendra Modi. This represents a break from the policies that were implemented under Jeremy Corbyn.

Days before the elections, Anneliese Dodds, the chairwoman of the Labour Party, had stated, “We are confident that we have cleansed our ranks of any members with extremist views on India.”

How will the victory of Keir Starmer affect the free trade agreement between India and the United Kingdom?

New Delhi: India and the United Kingdom have been working towards finalizing a contract to boost the 38.1 billion pounds bilateral commercial partnership. However, the negotiations have remained frozen due to the fact that India’s phased general election followed by Britain’s election. The Free Trade Agreement (FTA) talks, which have been going on for two years, are set to restart now that both elections have been completed.

Keir Starmer, the leader of the Labour Party, is expected to become the new Prime Minister of the United Kingdom. He has consistently stated that he wishes to keep positive relations with the administration of Narendra Modi. This represents a break from the policies that were implemented under Jeremy Corbyn.

Days before the elections, Anneliese Dodds, the chairwoman of the Labour Party, had stated, “We are confident that we have cleansed our ranks of any members with extremist views on India.”

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The Free Trade Agreement (FTA) was also highlighted extensively in the party’s election manifesto, which reiterated its “commitment to pursue a new strategic partnership” with India.

The fact that Starmer has committed to establishing a new strategic partnership with India and enhancing bilateral cooperation in areas such as technology, security, education, and climate change exemplifies his commitment to improve relations with one of the countries that is expanding at the quickest rate in the world.

However, the United Kingdom’s insistence on decreasing tariffs, which can reach as high as 150% on important exports such as food and vehicles, continues to be a cause of contention in the negotiations for a trade deal. Additionally, questions involving the immigration regulations of the United Kingdom, particularly those pertaining to workers from the Indian service sector, continue to present difficulties for the negotiators.

Concerns have been made by India in reaction to planned rules in the United Kingdom. These laws include a carbon tax that is comparable to the carbon border adjustment mechanism that the European Union has in place. These regulations have the potential to undermine the tariff concessions that were agreed upon in the Free Trade Agreement (FTA).

Recent virtual talks between officials from India and the United Kingdom in May attempted to recommence discussions, with a particular emphasis on economic assessments and the incorporation of new fields of study into the agreement, including as the environment, labor, gender concerns, and digital commerce.

India is now involved in free trade agreement (FTA) negotiations with a number of foreign nations and unions, including the European Union (EU), Australia, the Eurasian Economic Union (EEU), and Peru. Despite the hurdles provided by the stopped talks with the United Kingdom, India is nevertheless dedicated to furthering its global economic interests.

As both nations negotiate their post-election landscapes, the future of the India-UK free trade agreement (FTA) remains uncertain, subject upon the resolution of major problems.

As the Labour Party, led by Sir Keir Starmer, potentially prepares to take the reins of the UK government, there are significant questions about how this shift in leadership might influence the ongoing negotiations for a free trade agreement (FTA) between India and the UK. The India-UK FTA is seen as a pivotal economic and strategic partnership, and changes in the political landscape could have substantial implications for its progress and final terms.

The relationship between India and the UK has a deep historical context, with economic ties dating back to the colonial era. In recent decades, both nations have sought to redefine this relationship in a modern context, focusing on trade, investment, and strategic cooperation. Post-Brexit, the UK has been keen to establish new trade agreements to replace those it was part of as an EU member, and India, with its rapidly growing economy, is a prime candidate for such a partnership.

Keir Starmer, a former Director of Public Prosecutions, became the leader of the Labour Party in April 2020. Known for his moderate stance within the party, Starmer has been working to reposition Labour as a viable alternative to the Conservative Party, emphasizing pragmatism and centrist policies. His approach to foreign policy and trade is expected to be influenced by principles of fairness, human rights, and mutual economic benefit.

Current State of India-UK FTA Negotiations

As of now, the India-UK FTA negotiations have been progressing with a series of rounds focusing on key sectors such as technology, pharmaceuticals, agriculture, and finance. Both nations aim to eliminate tariffs, increase market access, and protect intellectual property rights. The agreement is expected to enhance bilateral trade, which stood at approximately £24 billion in 2019-2020, and further strengthen investment flows.

1. Trade and Economic Policies

Under Starmer, the Labour Party might adopt a more protectionist approach compared to the Conservative government, focusing on protecting British industries and jobs. This could lead to tougher negotiations on market access and tariff reductions. However, Starmer’s pro-business stance may also drive efforts to create a favorable environment for UK businesses to expand into the Indian market, potentially balancing protectionist tendencies.

2. Human Rights and Ethical Considerations

Starmer has been vocal about human rights and ethical governance. This stance could influence the FTA negotiations, particularly if Labour insists on incorporating clauses that address labor rights, environmental standards, and corporate social responsibility. While these issues are important, they could complicate negotiations, as India may view them as external interference in its domestic policies.

3. Immigration and Mobility

One of the critical aspects of the FTA is the movement of people, particularly skilled professionals. The Conservative government under Boris Johnson and Rishi Sunak has shown some flexibility in this area, recognizing the importance of Indian professionals to the UK economy. Starmer’s Labour Party may continue this trend, given the need to attract talent to drive economic growth, but could also introduce stricter regulations to address domestic concerns about immigration.

4. Strategic and Defense Cooperation

Starmer’s leadership might bring a renewed focus on strategic and defense cooperation with India. The Labour Party has traditionally supported strong international alliances and multilateralism. Enhancing defense ties with India could be a strategic priority, potentially influencing the FTA by including defense-related trade and collaboration agreements.

5. Climate Change and Sustainability

Climate change is a key agenda for the Labour Party. Starmer’s government may push for incorporating environmental sustainability clauses within the FTA. This could include commitments to reduce carbon emissions, promote renewable energy, and adhere to international environmental standards. While this aligns with global sustainability goals, it may add complexity to the negotiations.

• Balancing Protectionism and Liberalization: Starmer’s potential protectionist policies could clash with India’s demands for greater market access, leading to protracted negotiations.
• Incorporating Ethical Clauses: Labour’s emphasis on human rights and environmental standards may face resistance from India, which could see them as barriers to trade.
• Immigration Policies: Striking a balance between attracting skilled professionals and addressing domestic immigration concerns will be crucial.
• Enhanced Strategic Partnership: A focus on defense and strategic cooperation could strengthen bilateral ties beyond trade, providing a comprehensive partnership framework.
• Business Expansion: Starmer’s pro-business approach might facilitate better opportunities for UK companies in the Indian market, promoting mutual economic growth.
• Sustainability Goals: Including climate change and sustainability in the FTA could set a precedent for future trade agreements, aligning economic growth with environmental stewardship.

1. Successful Agreement with Balanced Concessions: If both parties can navigate the complexities and find common ground, a successful FTA could emerge, boosting bilateral trade and investment.
2. Protracted Negotiations: Differences in priorities, such as ethical standards and market access, could lead to extended negotiations, delaying the finalization of the FTA.
3. Partial Agreement or Sectoral Deals: If a comprehensive FTA proves challenging, both nations might opt for sector-specific agreements to address immediate trade opportunities and challenges.