CURRENT AFFAIRS FOR UPSC IAS

The government seems to have fast-tracked its free trade talks with the UK, with the PMO having reviewed the progress recently and a delegation already in the UK to iron out differences.

What is Free Trade Agreement?

• It is a pact between two or more nations to reduce barriersto imports and exports among them.
• Under a free trade policy, goods and services can be bought and sold across international borders with little or no government tariffs, quotas, subsidies, or prohibitionsto inhibit their exchange.
• The concept of free trade is the opposite of trade protectionism or economic isolationism.

What are the challenges?

• Anti-immigrants stance: The political atmosphere in the UK remains heated with an increasing anti-immigrants stance.
• Recession in UK: The UK’s economy dipped into a recession amid high interest rates and spending cutbacks.
• Tariff regime: India’s tariff regime has been a concern for trade partners as India has one of the highest import tax rates in the world.
  • While the average tariff on goods imported from India into the UK is 4.2 per cent, the average tariff in India on goods imported from the UK is 14.6 per cent.

How important is this deal?

• To compensate passed agreements: It is crucial for India to sign the FTA as it has passed on regional trade agreements such as the China led-Regional Comprehensive Economic Partnership (RCEP) and has also not decided to join the US led-Indo-Pacific Economic Framework for Prosperity (IPEF’s) trade pillar.
• To stay ahead of competitors: Indian competitors such as Vietnam and other South Asian countries are inserting themselves in the global supply chain with multiple FTAs and regional trade deals.
• Economic benefits: The India-UK FTA will be the first full-fledged FTA with a developed country which could accrue significant benefits in the service sector and several labour intensive sectors such as textile and leather industry.