12th Report - UK-India Comprehensive Economic and Trade Agreement (CETA)

The most immediate benefits are concentrated in goods sectors facing historically high Indian tariffs, particularly spirits and automotives, where the Agreement delivers commercially significant and predictable market access for the first time. The Agreement also delivers new market access in government procurement, with India opening its central government procurement market for the first time. At the same time, the Agreement preserves the UK’s existing sanitary and phytosanitary protections, does not compromise a closer SPS deal with the EU and ensures that market access gains are not achieved at the expense of domestic standards. (Conclusion, Paragraph 50)

There remain important issues that will require resolution and ongoing monitoring if the full benefits of the Agreement are to be realised. The Committee heard that the key bulk whisky tariff line has not been liberalised to the same extent as the Scotch-specific tariff codes. The automotive sector will also require support to make effective use of tariff rate quotas, and consideration should be given to the introduction of core food production standards. (Conclusion, Paragraph 51)

The Government must ensure that the remaining issues which risk undermining the Agreement’s benefits for key sectors are addressed. Ratification should not be treated as the conclusion of the process. Ministers must be held accountable for ensuring that businesses are able to use the Agreement effectively to drive growth and contribute to the Government’s wider growth mission. The Government should keep the details of the terms under review to make the most of opportunities of mutual benefit. The Government must regularly report to Parliament on rates of business 75 utilisation of the Agreement, particularly in priority sectors, including providing evidence of increased exports and progress in resolving key barriers. (Recommendation, Paragraph 52) Constraints on services access

While the Agreement provides greater certainty and stability for UK services providers, it delivers limited new market access into India. The practical value of the services provisions will therefore depend largely on effective implementation, particularly progress on mutual recognition of professional qualifications. Notwithstanding the Agreement’s commitments and the establishment of frameworks to support further UK–India mutual recognition of professional qualifications dialogue, the Committee is sceptical about the likelihood of how much will be delivered in practice. (Conclusion, Paragraph 58)

The Government should identify sectors where mutual recognition of professional qualifications would benefit both parties and use the Professional Services Working Group to seek progress within twelve months of the Agreement taking effect. It should set out how it intends to progress priority arrangements within the timetable established by the Agreement. (Recommendation, Paragraph 59) Intellectual property protection

The Committee concludes that the Agreement does not introduce significant changes to India’s intellectual property regime that are likely to support growth in UK pharmaceutical exports. At the same time, the Committee recognises India’s role as a major producer of generic medicines and the importance of retaining some flexibility within its IP framework. The Committee welcomes the establishment of the Working Group on Intellectual Property established under the Agreement. (Conclusion, Paragraph 64)

The Government should use the Working Group on Intellectual Property to pursue further progress with India in areas of mutual benefit and UK strategic importance, including in sectors identified in the Industrial Strategy. This should include continued dialogue on issues raised by industry, such as regulatory data protection, patentability and enforcement, while recognising the constraints on legislative change. (Recommendation, Paragraph 65) 76 Business mobility

The Agreement locks in and modestly extends existing arrangements for mobility. The Government maintains that the provisions are limited in scope and will not have a material impact on the UK labour market. (Conclusion, Paragraph 70)

The Government should closely monitor labour market impacts arising from the Agreement and report back to Parliament on its assessment. (Recommendation, Paragraph 71) Sustainability and labour standards

The Committee concludes that the Agreement establishes useful environmental, social and governance (ESG) frameworks. However, while the inclusion of standalone chapters on anti-corruption, labour rights, environment, gender equality and development represent a step forward in India’s trade agreements, their impact is significantly constrained by the absence of enforceable dispute settlement mechanisms. (Conclusion, Paragraph 79)

The Government should ensure that its ongoing Responsible Business Conduct Review results in clear and enforceable expectations on UK businesses, including respect for human rights and labour rights within their supply chains. The Government should report to Parliament on the outcome of the Review. (Recommendation, Paragraph 80) UK-Indian investment

The absence of a concluded bilateral investment treaty means that greater certainty for investors remains an ambition rather than a secured outcome. Ministers should set to the work of creating an ambitious compelling vision for the potential of a BIT to help re-energise these talks. (Conclusion, Paragraph 84) Implementation challenges

The Committee notes evidence that uncertainty during the ratification period risks delaying commercial decisions, particularly in sectors where tariff reductions under the Agreement are commercially significant. Given the absence of provisional application, timely ratification and clear communication on implementation timelines will be critical to minimising disruption for UK businesses. (Conclusion, Paragraph 87) 77

Tariff liberalisation under the Agreement is commercially meaningful for key UK exports. However, long staging periods, complex rules of origin and administrative burdens risk limiting utilisation, particularly among SMEs. The Committee notes that some sectors, including textiles, ceramics and potentially dairy, may face increased competitive pressures as a result of the Agreement. (Conclusion, Paragraph 98)

Concerns about remaining barriers to trade undermining UK exports to India despite the Agreement are well-founded. The Government should publish utilisation data for tariff preferences under the Agreement, consistent with its approach for other UK free trade agreements, and report regularly to Parliament on uptake. In doing so, it should explain where utilisation is lower than expected, including where this reflects the complexity or restrictiveness of rules of origin under this Agreement. (Recommendation, Paragraph 99)

The Government should ensure that UK trade remedies and bilateral safeguard mechanisms are accessible, timely and proportionate for sectors facing increased import competition as a result of the Agreement. This should include clear guidance for businesses, particularly SMEs, on how to raise concerns and trigger investigations, active monitoring of import trends in sensitive sectors, such as textiles and ceramics, once the Agreement is in force, and work to ensure that UK producers are able to compete on a more level playing field. (Recommendation, Paragraph 100)

The Committee notes that UK businesses face significant non-tariff barriers in the Indian market, including regulatory complexity, inconsistent implementation, limited transparency and state-level frictions, as well as specific barriers such as export health certification requirements and India’s expanding use of Quality Control Orders. The Committee would like to see these barriers reduced and this will be most effectively done by using the new mechanisms established. This will require adequate staffing, resourcing and prioritisation by the Foreign, Commonwealth and Development Office and the Department for Business and Trade. (Conclusion, Paragraph 103)

To address non-tariff barriers, the Government should open structured, sector-focused discussions with India to reduce the most trade-distorting barriers identified by industry, using the Sub-Committee on Standards, Technical Regulations and Conformity Assessment. The Government should clearly identify priority issues and set out a timetable for their resolution and protect the appropriate resourcing of Foreign Office and Department for Business and Trade staff for deal implementation. (Recommendation, Paragraph 104)

Implementation of CETA is critical to success of the deal and real benefits for UK businesses and growth in the UK economy. Tariff reductions and legal commitments alone will not translate into increased exports or investment 78 unless they are supported by effective delivery. The Committee sees CETA as a starting point for further barrier reductions. The Agreement should be treated as a floor, not a ceiling. There needs to be sustained political attention, sufficient resourcing, clear accountability within Government, and active regulatory engagement with India to continue to reduce barriers to trade. The Committee will monitor the Government’s implementation of the Agreement on an ongoing basis. (Conclusion, Paragraph 109)

The Government should assign clear Ministerial responsibility for FTA implementation, which should be identified in the portfolio of the Minister for Trade and listed as one of their ministerial responsibilities. The Minister must ensure that implementation of FTAs, including CETA, is supported by appropriate resources and explore the benefits of a trade promotion campaign. (Recommendation, Paragraph 110)

The Government should publish a detailed CETA implementation plan, no later than three months before entry into force, including routes for businesses to raise market access problems; points of contact in the UK and in India; sector-specific guidance (including for SMEs); and how the Joint Committee and sub-committee system, set out in the Agreement, will be used to resolve barriers. This implementation plan should include clear resourcing commitments and a plan for joint work with the nation’s chambers of commerce. The budget for this resourcing should be provided to this Committee. (Recommendation, Paragraph 111) Parliamentary scrutiny

The Committee welcomes the Government’s commitment to make time available in the House of Commons for a debate on the Agreement during the CRaG period. However, we are disappointed that the Government intends to seek only a general debate. Given the limitations of CRaG scrutiny in practice, the Committee recommends that the Government should instead seek to schedule a debate on a substantive motion, in order to enable meaningful parliamentary scrutiny ahead of ratification. (Recommendation, Paragraph 115)

The Government should commit to making time available in the House of Commons to debate all FTAs it agrees with other countries. (Recommendation, Paragraph 118) 79