The bittersweet realities of the India-UK FTA, Pg12

Key Highlights:

• The India-UK Free Trade Agreement (FTA) became effective on July 15.
• India secured an 85% exemption for its baseline steel exports to the UK.
• The UK implemented new steel trade measures on July 1, significantly altering global tariff-free import caps.
• The European Union (EU) also introduced new compressed steel import limits and increased out-of-quota duties from July 1.
• India achieved immediate zero-duty market access across 99% of its tariff lines under the FTA.

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Detailed Insights:

• The UK's new measures cut global tariff-free import caps by 51% and doubled the over-quota penalty to a 50% tariff.
• Eleven specific commodity codes, including semi-finished slabs and specialty alloy wires, were removed from the UK's safeguard scope.
• The remaining 15% of India's steel exports, covering 188 tariff lines, are subject to a Country-Specific Quota (CSQ) of 33,456 tonnes per year.
• Exporters exceeding their CSQ must compete in a global reserve pool before a 50% penalty tariff applies.
• The EU's new regulation limits total global steel imports to 18.3 million tonnes, with a 50% out-of-quota customs duty.
• The EU also reduced India's country-specific quota for Hot Rolled Coil (Category 1) steel exports by 33%.
• This dual impact means the India-UK FTA may not serve as a safe haven for Indian steel exports rerouted from the EU.
• Modern Free Trade Agreements (FTAs) are increasingly transactional and limited in scope, rather than providing comprehensive market access.

Key Concepts Involved:

• Free Trade Agreement (FTA): A pact between two or more countries to reduce barriers to imports and exports among them.
• Tariff Lines: Specific categories of goods in a country's tariff schedule, each with an assigned duty rate.
• Country-Specific Quota (CSQ): A quantitative restriction on the import of certain goods from a particular country.
• Safeguard Measures: Emergency actions to protect a domestic industry from serious injury caused by a surge in imports.