India and UK Negotiate to Resolve Hurdles in Free Trade Agreement

India and the United Kingdom are intensifying diplomatic and commercial efforts to resolve critical sticking points delaying the implementation of their Comprehensive Economic and Trade Agreement (CETA). While the pact was signed in July 2025, new regulatory challenges have emerged that require urgent high-level intervention to operationalise the deal.

The Core Sticking Points: Steel Safeguards and Carbon Taxes

The primary obstacles preventing the smooth rollout of the trade pact revolve around the UK's protectionist measures and new environmental regulations. Commerce Secretary Rajesh Agrawal confirmed that an Indian delegation is currently in London to address these concerns following high-level discussions between UK Business Secretary Peter Kyle and India's Commerce and Industry Minister Piyush Goyal.

A significant hurdle is the UK’s upcoming steel safeguard regime. Starting July 1, 2026, the UK plans to drastically restrict tariff-free steel imports by slashing existing quota volumes by 60%. Any steel imports exceeding these new, tighter quotas will be hit with a heavy 50% tariff. This measure specifically targets steel products that can be manufactured domestically within the UK, posing a direct threat to Indian exporters.

The Impact of the UK’s Carbon Border Adjustment Mechanism (CBAM)

Beyond steel quotas, the UK’s decision to implement an import carbon pricing mechanism—similar to the European Union's CBAM—is a major point of contention. Scheduled for implementation in 2027, this mechanism will impose a carbon tax on several key sectors, including iron, steel, aluminium, fertiliser, hydrogen, ceramics, glass, and cement.

The financial implications for Indian industry are substantial. Once the free allowances under the UK’s Emission Trading System (ETS) are fully phased out, the carbon tax could range between 14% and 24% of the total import value. According to the Global Trade Research Initiative (GTRI), India’s exports worth approximately $775 million could be adversely affected by this green tax. Specifically, India’s exports of iron, steel, and related products to the UK reached $893.4 million in the 2025-26 period, making this sector highly vulnerable.

Mbali na mivutano ya nchi mbili kati ya Uingereza na India, India pia inashughulikia changamoto zinazohusiana na vikwazo vya Umoja wa Ulaya. EU imependekeza kifurushi cha 21 cha vikwazo dhidi ya Urusi, ambacho kinaweza kujumuisha vizuizi vya udhibiti wa mauzo kwa mashirika fulani ya Kihindi.

Akizungumzia suala hili, Katibu wa Biashara Agrawal alibainisha kuwa India inashiriki kikamilifu katika mazungumzo na EU. Alisisitiza msimamo wa India wa kutambua kwa ujumla vikwazo vinavyoongozwa na Umoja wa Mataifa huku akifanya kazi kulinda maslahi ya makampuni ya Kihindi ambayo yanaweza kujikuta yakinaswa katika mivutano ya mabadiliko ya amri za kijiopolitika.

Mambo Muhimu ya Kuzingatia

  • Ulinzi wa Sekta ya Chuma: Mpango wa Uingereza wa kupunguza kiasi cha chuma kinachoingizwa nchini kwa 60% na kuweka ushuru wa 50% kwa uagizaji wa ziada ni kikwazo kikubwa kwa utekelezaji wa CETA.
  • Hatari za Ushuru wa Kaboni: Utaratibu mpya wa Uingereza wa kupanga bei ya kaboni (CBAM) unaweza kuweka ushuru wa 14% hadi 24% kwenye bidhaa zinazouzwa nje kutoka India kama vile chuma na alumini kuanzia mwaka 2027.
  • Diplomasia ya Ngazi ya Juu: Timu ya Kihindi kwa sasa ipo London ili kutatua masuala haya mahususi ya kikanuni ili kuhakikisha mkataba wa kibiashara unaanza kufanya kazi.