UK and India clinch trade deal after three years of talks

LONDON — After three years of tough negotiations, the U.K. and India finally have a trade deal they can agree on. Selling it to wary voters in the U.K. could be even harder.

Prime Ministers Keir Starmer and Narendra Modi agreed the deal in a call Tuesday, with Starmer heralding a "new era for trade and the economy" and Modi saying it would "catalyze trade, investment, growth, job creation, and innovation in both our economies."

Yet the deal — agreed as both countries weather the storm of Donald Trump's flurry of trade tariffs on trading partners — lands straight into a domestic row in the U.K. over the thorny issue of Indian access to Britain's labor market.

Starmer's political opponents are leaping after the Indian side talked up an "unprecedented" win on its workers being exempt from employee tax contributions in Britain.

The fight comes just days after a party with a hard line on migration, Nigel Farage's populist Reform UK, gave Labour a kicking in regional elections.

Around the clock

In the House of Commons, Trade Minister Douglas Alexander gave the headline stats on the deal the hard sell, describing it as the best set of terms ever agreed by India.

The pact is the most valuable post-Brexit trade deal the U.K. has struck since leaving the European Union. An economic forecast by the British government suggests the deal will increase the U.K.’s GDP by £4.8 billion by 2040.

Negotiators have been working around the clock on the deal since Reynolds traveled to Delhi in February to relaunch the deal with Indian Commerce Minister Piyush Goyal following elections in both countries last year.

Goyal and Reynolds were nearly able push the deal over the line when India’s trade chief returned to London Friday following visits to Oslo and Brussels. The two put the finishing touches to the pact over the weekend.

Negotiators, however, were unable to secure a Bilateral Investment Treaty being sought in parallel with talks for the trade agreement. Negotiations to secure an investment treaty continue.

Slashing tariffs

As it stands, the deal will cut through high tariffs on U.K. goods in India with 85 percent becoming tariff-free within a decade. The effect will be equivalent to slashing £1 billion in tariffs after 10 years. 

Measures include lowering India’s 150 percent tariff on Scotch whisky by half immediately, before it is cut to 40 percent after ten years. Duties on the auto sector will drop from 100 percent to 10 percent with quotas on both sides for the sensitive sector.

Indian duties will also be lowered on cosmetics, aerospace, medical devices, electrical machinery and agriculture and food. Britain will lower tariffs on textiles, footwear, frozen prawns and other food products.

Talks stalled under the previous Conservative government over concerns about migration, better access for services firms and a host of other issues.

Business Secretary Jonathan Reynolds told reporters Tuesday afternoon that the concession on employee taxes applies only to company transfers between the two nations for up to three years, and said the deal will have “no impact on the immigration system."

He said an existing visa route for some temporary workers that's not currently available to India — and capped at 1,800 people — will now be open to Indian employees.

That list of professions includes musicians, yoga teachers and chefs. Indian applicants will still need to meet the usual visa requirements on salary and skills.

Conservative Leader Kemi Badenoch claimed that she had refused to sign an Indian deal on similar terms back when she was trade secretary and charged: “When Labour negotiates Britain loses."

Britain's nascent tax on high-carbon emissions imports is of significant concern for India. Yet this won't be dealt with in the trade deal and is part of ongoing bilateral discussions.

Months of legal scrubbing of the text comes next, but the hope in London and New Delhi is that Starmer and Modi will be able to finalize the pact at some point later this year.

Modi is racing to transform India into a developed nation by 2047. Its economy overtook Japan’s as the world’s fourth largest globally this year and is projected to take the third spot by 2028.

This developing story has been updated. Sam Blewett contributed to this report.