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UK-India Trade Trip: You Want Our Business But Not Our People?

14/11/2016 13:16

This week's trade mission to India is a barometer. The Prime Minister and the International Trade Secretary were not only there to promote trade with the world's largest democracy representing a consumer market of 1.252 billion. They know that they must set out what trading with the UK will look like after we leave the EU for all those other future trading partners who are watching carefully. The outcomes of these talks and the success of the commercial deals undertaken this week may provide a good indication of our future capacity to conclude trade agreements across the world.

Theresa May is following a succession of ministers who have visited India in recent months to talk up our future relationship and try to smooth the way for a trade deal. She will have been hoping for a warm reception. In fact she has got a vindaloo one! - and not in the way she had hoped.

India has made it clear that they are not happy with her government's approach to migration and her own track record in the Home Office where she abandoned the Post Study Work Visa programme. This has caused serious damage to the relationship. More than this - as one of the UK's strongest foreign direct investors, India has had seen the UK as a safe conduit for Indian countries to enter the European market. Unsurprising then that long before the referendum, Prime Minister Modi had expressed his concern about the problems a Leave vote would cause for Indian companies operating in Britain.

It is no longer possible for UK ministers to appeal to a shared history or common social and cultural institutions and think these can be a substitute for a clear economic offer in a trade deal that represents a win/win for both sides. It is 415 years since the East India Company's Charter was signed in 1601. And British ministers need to realise that it cuts no ice today. In a globalised world the dynamic of future trading relationships will inevitably pivot around the concept of deeper strategic alliances.

The basis for securing preferential future trade terms with India begins in that recognition of essential equality. Indeed it begins in recognising that India is now an emerging global superpower whose primary interests are regional in South East Asia and who needs a deal with the UK less than we need one with her.

The UK has been a leader in global trade punching above our weight for three centuries. Our success has been based not only upon military might; it has sprung from world leading universities and a strong science base, it has been nurtured by embedded legal institutions which guarantee swift and impartial redress in commercial contract disputes, and it has blossomed through a period of manufacturing innovation that gave the world the first industrial revolution. But our exports now are predominantly service based and this changes the dynamic of trade; particularly with countries such as India. India wants access to our educational institutions and it has much to gain from our professional services, but it has a political imperative to protect its agricultural base, and dares not choke off its emerging middle class by opening up its financial services and retail sectors in the way the UK would like.

India was keen to secure a trade and investment agreement with the EU, officially known as the Broad-based Investment and Trade Agreement (BTIA). Negotiations began in June 2007 but, ultimately, collapsed in 2013 following 12 rounds of formal talks. If the UK is to succeed where Europe failed the new Department for International Trade must study carefully why the terms on offer from the EU were insufficient to tempt India into an agreement. It must also swiftly develop a realistic sense of its own importance. The UK is India's 18th largest trading partner. The EU collectively was its 1st. India's largest single trading partner is China and a number of other Middle Eastern and Asian countries make the list ahead of the United Kingdom.

Trade negotiations require compromise. The extent to which the government is willing to consider compromises with respect to any future trade deal with India and, simultaneously, during talks with the EU, will profoundly influence how willing the rest of the world will be to engage in their own talks with us and what role we will play in wider international affairs. India will want to see a substantive offer from the UK that is worth her lowering tariffs and other barriers to her markets. It is clear what India wants. What is not clear is that the UK is prepared to liberalise the movement of people in the way that India would like.

India is, understandably, keen to develop its own market economy and domestic skillsets rather than to rely on knowledge, goods and services imported from overseas. Modi's government want to facilitate Indian citizens moving freely to provide services - particularly in the IT sector building on Mode IV of the WTO's General Agreement on Trade in Services. This agenda has run counter to the UK's own agenda which has seemingly been about reducing migrant numbers and ensuring the preservation of Geographical Indications for key exports like Scotch Whisky.

During the many years of negotiations, some progress was made with respect to areas such as rice, sugar, textiles, and pharmaceuticals and to some extent the wine sector but stumbled over access to India's highly regulated professional services, financial services and government procurement markets. The UK is a service-led economy with professional services and financial services being our biggest export. As former British Ambassador to Korea, Sir Thomas Harris, said at a recent summit in London: "For the life of me, I cannot see why the Indians would be prepared to offer concessions in services in bilateral talks which they were not prepared to offer in return for access to the EU as a whole."

India is the third largest destination in value terms for Foreign Direct Investment from the UK. But the UK is also the third largest destination for FDI from India. The two-way flow of investment and capital is intrinsic to our capacity to augment and progress our trade relationships but we have to be willing to recognise how much of this has been predicated on our capacity to attract and retain talent from India as well as the significant contribution that British Indian entrepreneurs and investors have made to developing our own market and in creating businesses that drive that trade between our two nations. So many British SMEs are owned or managed by people who came to the UK to seek a better life for themselves and their families - many of these will grow to become the international corporations of our future and we recognise the need to ensure that our trade policy nurtures and grows those businesses ensuring that they have maximum support to export and invest here and overseas. We need to let these business owners know that we value their contribution and welcome their growth.

India will also be wary of British Prime Ministers who seek to celebrate the unique relationship between the UK and India whenever they visit, only to pour scorn on aid programmes and development support to India when they are back home. Of course India is one of the world's fastest developing economies. But because of her vast size and population, it is no secret that the benefits of this growth have not yet reached all corners of society. The UK should see overseas aid as an investment in the future potential of a market and shouldn't be used as a stick to bash trading partners and strategic allies with. The value of UK aid spending in India is that it ensures that we are able to work with our partners to develop their markets, business and enterprise, to boost labour standards and rights and, ultimately, to boost the incomes of the poorest which, in the long term, boosts demand for British goods and services.

This is why Labour announced the Just Trading initiative, which will see like-minded politicians from across the globe coming together to develop a progressive trade agenda that seeks to promote such rights and standards, alongside protections for the environment and the rights of governments to legislate in the public interest. We have to look at how we are able to work with our partners towards shared objectives that benefit all our citizens and not a few High Net Worth Individuals or Multi-National Corporations. That is why Labour will promote Small and Medium-Sized Enterprises as the fundamental drivers of future economic growth and international trade.

But we cannot support the growth and expansion of any businesses, small or large, until it is clear who our trading partners will be and under what restrictions such trade might take place. Businesses are currently paralysed with uncertainty and are being prevented from pursuing investment. Business leaders are repeatedly calling for the Government to set out what their priorities are for Britain's future trading agenda. If the UK cannot find the ground upon which to advance a trade agreement with India then the British people may well feel that they have been lied to by those who promised that we would secure a flurry of trade deals in quick succession with Commonwealth partners and key international allies.

It is time for Theresa May and Liam Fox to face reality. So at the end of this week what fanfare still surrounds the Prime Minister's first trade mission in a post-referendum world? The Department of Trade website makes no reference to the India Visit; indeed it has not updated its website from the visit of the President of Colombia. And in India itself the Ministry of Commerce and Industry website seems oblivious that the visit ever took place. The words of the Indian journalist should haunt Theresa May: "You want our business but you do not want our people". The EU is clearly not the only place where this UK perspective is going down rather badly.

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