Commerce and Industry Minister Piyush Goyal on Saturday said the India-UK trade deal can serve as a gold standard for India’s trade negotiations with other partners, as it opens India’s doors for business while protecting sensitive sectors. He added that India will retaliate if the UK’s carbon tax, set to come into effect on January 1, 2027, harms India’s interests.

“Our effort is that the Indian industry gets preferential access over our competition, and I think this [UK FTA] can become a gold standard to ensure that India protects its sensitive sectors and opens the doors, particularly in highly labour-intensive sectors, and allows high-quality goods, technology and other products to come to India,” the minister said at a press briefing here.

Goyal said most of India’s free trade agreements (FTAs) are with countries that do not compete with India on anything, and that under the deal, the UK will be sending products which are in short supply in India. “In every respect, this is an agreement which opens far greater opportunities for India than any other agreement,” the minister said.

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UK carbon tax

On concerns that the UK’s Carbon Border Adjustment Mechanism (CBAM) could negate the tariff concessions India has received under the trade deal, Goyal said: “Currently there is no CBAM in effect. So it cannot be addressed in the FTA. But India is a sovereign country, and if our export interests are hurt, we will react and retaliate, or ‘rebalance’. I can assure everyone that no unilateral measure will go away without a proportionate response,” he said.

“There is a lot of opposition to CBAM in the EU as well, as the EU’s cost of manufacturing and housing will become costlier, and so the sufferer will be the industry in the EU,” Goyal reiterated.

A government official had said that India and the UK have arrived at a diplomatic understanding on CBAM, and that India will “rebalance” the negative effect of CBAM by taking countermeasures. It has communicated its concern over CBAM in a “note verbale”. However, the rebalancing measure is not part of the legal text, which has raised concerns over India’s ability to address the CBAM issue legally.

The Indian Express had reported on May 6 that CBAM was a major point of contention between the two countries and had been holding up the agreement. India had proposed a “rebalancing mechanism” provision within the deal which would require the UK to compensate Indian industry for losses incurred due to the regulation.

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The paper reported that the ‘rebalancing mechanism’ article had been inserted into the ‘general exceptions’ chapter of the negotiating text between the two countries. This would have enabled India to claim compensation for its losses and ensure the UK does not raise a dispute against India at the World Trade Organisation (WTO). However, the UK likely did not agree to the same.

Critical minerals

Goyal said India and the UK plan to address the issue of critical minerals together, stating that “concentration of certain supply chains in certain geographies” is a common problem, and both countries plan to work jointly on this.

The India-UK Vision 2035, a document outlining the broader collaborative goals of the free trade agreement between the two, stated that both countries will work together to develop cutting-edge technology and research, building on the Technology Security Initiative. This will focus on future telecoms, artificial intelligence and critical minerals, laying the ground for future collaboration on semiconductors, quantum, biotechnology and advanced materials.

To further cooperation in critical minerals, the two countries will also establish a UK-India Critical Minerals Guild to “transform financing standards and innovation”, according to a joint statement by the two.

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On sensitive sectors

India has protected all sensitive sectors, including dairy, rice and sugar, in the free trade agreement with the UK, Commerce and Industry Minister Piyush Goyal said on Saturday.

The pact will help boost exports of labour-intensive products like footwear, textiles, and gems and jewellery, he added.

“We have protected all the sensitive sectors of India… we have not opened those areas for the UK… Zero compromise and extensive benefits make it a phenomenal free trade agreement (FTA),” Goyal said.