No entry, no deal: Without more visas, UK FTA makes little sense for India

UK international trade secretary, Kemi Badenoch, has pointed out that the country left the EU precisely because it does not believe in the free movement of people. Consequently, visa liberalisation under the proposed India-UK FTA is not up for negotiation. But in that case, there’s not much left to negotiate. To begin with, in the ongoing FTA talks, the potential of enhanced trade through an India-UK deal is underwhelming.

The two-way trade between India-UK in 2021-22 was $17.5 billion, lower than India’s trade with Germany or with Belgium. As a proportion of India’s overall merchandise trade, it was less than 2%. In such a scenario, the likelihood of freer movement of skilled labour and students between India and the UK could have provided an incentive to quicken the pace of negotiations. But given the UK’s domestic politics, visa liberalisation appears to be dead in the water.

FTAs require tradeoffs. Some domestic interests have to be set aside in the pursuit of larger gains from lowering barriers to trade. Clearly, the UK government is reluctant to spend political capital on visa liberalisation, even if it makes economic sense. This makes tradeoffs harder to justify for India too. Even the UK’s own assessment doesn’t show eye-catching returns if this FTA is concluded. The UK government’s paper on FTA locates it within a larger strategy of strengthening trade ties in the Indo-Pacific region. Access to India’s huge market appears to be the UK’s primary incentive. An FTA which lowers tariffs for British exporters helps the UK. But with UK tariffs already low, what’s the potential big gain for India when freer movement of people is not on the cards?

It’s not as if India hopes to get unique concessions. The UK and Australia already have a regime of unfettered movement for young people, including job seekers. Against this backdrop, GoI should double down on other potential FTAs like the ones with the EU and US. Likely gains from deepening trade ties with them are far greater than anything on offer by the UK.