Amid Trump's Tariff Threats, India Refocuses On Trade Talks With UK And European Union—Here's What's In The Pipeline

As US President Donald Trump disrupts the global trade system with tariff threats against both allies and adversaries, New Delhi resumed discussions on Monday (24 February) for two significant, previously stalled trade agreements with the newly formed Labour Party administration in Britain.

This comes just days before the European Commission President, Ursula von der Leyen, is due to visit India for trade discussions, Indian Express reported.

Trade discussions for a free trade agreement (FTA), a bilateral investment treaty, and a separate social security pact between New Delhi and London are set to resume following an eight-month hiatus caused by general elections in India, the UK, and European parliamentary elections. The plans were announced during the visit of UK Trade Secretary Jonathan Reynolds, which commenced on Monday.

The commencement of trade deal negotiations with the UK in 2022 holds substantial importance, as it represents India's inaugural comprehensive agreement with a Western nation. This arrangement paves the way for more profound economic assimilation with a leading figure in the global services sector.

This is also deemed vital as it could potentially act as a blueprint for trade agreements with more substantial Western trading partners like the European Union.

Amid escalating strain in the trans-Atlantic ties between the US and Europe, the EU College of Commissioners is scheduled to convene with Prime Minister Narendra Modi on Thursday. The aim of this meeting is to bolster bilateral relations, grounded on the "growing convergences".

Anticipations are high for India and the EU to hold bilateral ministerial meetings and participate in a trade and technology council. This council was established to address contentious issues such as the Carbon Border Adjustment Mechanism (CBAM).

Given the varying growth trends in both nations, the business prospects differed significantly. As a result, India had approached the UK for consideration of a social security agreement.

Indian businesses functioning in Britain have long been advocating for a reduction in the extra expenses involved with temporarily bringing in skilled professionals from India.

It's important to note that skilled Indian professionals in the UK on temporary visas are mandated to contribute to the National Insurance (NI), which adds an extra financial load of approximately 500 British pounds per employee annually. This is over and above all other taxes and the health surcharge paid to the National Health Service (NHS), according to 2021 data.

Countries such as Belgium, Germany, Switzerland, France, Denmark, Korea, and the Netherlands have Social Security Agreements (SSAs) with India.

"Trade ministers from both countries will kick-start negotiations on a modern economic deal with two days of focused discussions — the first time both negotiating teams have formally gathered under this government," the British High Commission's statement was quoted by IE.

Trade specialists have expressed that discussions with Western trade allies may gain new energy due to the instability introduced into the global trade system by the US. In addition to close trade associates like Canada and Mexico, Trump has also issued tariff threats towards the EU.