India, UK working to resolve issues for trade pact implementation

Negotiations between India and the United Kingdom are actively progressing to resolve implementation-level issues in the Comprehensive Economic and Trade Agr...

What Happened

Negotiations between India and the United Kingdom are actively progressing to resolve implementation-level issues in the Comprehensive Economic and Trade Agreement (CETA), which was signed on July 24, 2025.
Two specific sticking points have emerged: the UK's steel safeguard measure (which limits tariff-free steel imports from July 1, 2026) and the UK Carbon Border Adjustment Mechanism (CBAM), set to take full effect from January 1, 2027.
On one of the three contentious issues, a resolution has been reached; the UK has submitted proposals on the remaining two, to which India has responded with counter-questions.
Separately, India is engaged with the European Union over proposed sanctions on certain Indian entities, adding complexity to India's broader trade diplomacy with European partners.

Static Topic Bridges

India-UK Comprehensive Economic and Trade Agreement (CETA)

The India-UK CETA, signed on July 24, 2025, during the Indian Prime Minister's visit to London, is the culmination of 14 rounds of negotiations initiated in January 2022. It is India's most comprehensive trade agreement with a G7 nation. The agreement provides for tariff elimination on 90–99% of goods traded between the two countries, with the goal of doubling bilateral trade to $120 billion by 2030. Key provisions include: the UK eliminating duties on 100% of its tariff lines (covering 99.6% of Indian exports by value) over seven years; India providing tariff elimination or reduction on more than 80% of UK tariff lines over ten years. Specific concessions include India reducing whisky tariffs from 150% to 75% over three years (further to 30% under a 2 million litre quota), and UK auto tariffs on Indian-origin vehicles falling substantially.

Signed: July 24, 2025
Negotiations: 14 rounds from January 2022
UK eliminates duties: 100% of tariff lines; covers 99.6% of Indian exports by value; 7-year schedule
India reduces duties: >80% of UK tariff lines over 10 years
Bilateral trade target: $120 billion by 2030
Scotch whisky tariff: 150% → 75% (3 years) → 30% under 2 million litre quota
UK auto tariffs reduced; India auto tariffs: 100% → 50% for up to 10,000 UK units annually
Rules of origin: minimum 40–45% Regional Value Content (RVC)

Connection to this news: The agreement is signed but not yet ratified or in force — the steel safeguard and CBAM disputes are creating friction in the implementation roadmap before the treaty formally takes effect.

UK Steel Safeguard Measure

A safeguard measure is a temporary trade restriction allowed under WTO rules (Article XIX of GATT 1994 and the WTO Agreement on Safeguards) when a surge in imports threatens to cause serious injury to domestic industry. The UK has maintained a steel safeguard inherited from EU-era measures, which limits the volume of tariff-free steel imports across specified product categories. From July 1, 2026, the UK is reducing the overall quota volumes for tariff-free steel imports by 60% compared to the previous safeguard level. For India, which is a significant steel exporter to the UK, this restriction threatens to offset some of the tariff gains negotiated under CETA, because Indian steel shipments above the quota face additional duties even after CETA's preferential rates apply.

Legal basis: WTO Agreement on Safeguards (Article XIX GATT 1994)
UK action: From July 1, 2026, quota volumes for tariff-free steel reduced by ~60%
Impact: Indian steel exporters face quota limits that constrain CETA tariff benefits
India's position: seeks exclusion or enhanced country-specific quota under CETA provisions

Connection to this news: The safeguard measure creates a direct contradiction between the UK's FTA commitment to open trade with India and its domestic steel protection policy — a tension that India-UK negotiators must resolve before CETA's implementation can proceed smoothly.

Carbon Border Adjustment Mechanism (CBAM) — UK and EU

The Carbon Border Adjustment Mechanism (CBAM) is a trade policy instrument that imposes a carbon price on imports of goods from countries with less stringent carbon pricing rules. It is designed to prevent "carbon leakage" — the phenomenon whereby domestic industries relocate production to countries with lower environmental standards to avoid carbon costs. The EU's CBAM entered its definitive (compliance) phase on January 1, 2026, covering six sectors: cement, iron and steel, aluminium, fertilisers, electricity, and hydrogen. Importers must be authorised CBAM declarants by March 31, 2026, and certificate obligations begin February 1, 2027. The UK is implementing its own CBAM from January 1, 2027, covering the same core sectors. India's exports worth approximately $775 million to the UK may be impacted, primarily in iron and steel, aluminium, fertilisers, and cement.

EU CBAM definitive phase: January 1, 2026; sectors: cement, iron & steel, aluminium, fertilisers, electricity, hydrogen
UK CBAM: effective January 1, 2027; same six core sectors
India's exposure: ~$775 million in exports to UK in covered sectors
EU CBAM De Minimis: 50 tonnes per calendar year threshold
EU CBAM expansion: legislative proposal for 180 additional downstream aluminium/steel products from January 2028
India's concern: CBAM imposes additional carbon-linked costs even when CETA provides duty-free access

Connection to this news: The UK CBAM will impose a carbon price on Indian steel and aluminium starting January 2027, even as CETA grants those goods duty-free access — effectively re-erecting a cost barrier through environmental policy rather than tariffs. India has not secured an exemption from this mechanism, making it a central implementation dispute.

EU Sanctions and India's Trade Diplomacy with Europe

The European Union has the legal authority to impose sanctions (restrictive measures) on entities and individuals it determines to be involved in activities contrary to EU interests or international law — including circumventing sanctions on third countries. In the context of India-EU relations, a subset of Indian entities has been proposed for sanctions related to alleged supply of dual-use goods or facilitation of transactions that may assist sanctioned parties. India disputes these designations and is engaged diplomatically with the EU to resolve the issue, which also has implications for the ongoing India-EU Free Trade Agreement (FTA) negotiations.

India-EU FTA negotiations: ongoing since June 2022 (formal re-launch)
EU sanctions framework: governed by Council Decisions and Regulations under Article 29 TEU
India's position: disputes basis for proposed entity sanctions; engaged in diplomatic dialogue
Relevance for CETA: EU sanctions on Indian entities could complicate supply-chain compliance under both CETA (UK) and the India-EU FTA

Connection to this news: India's simultaneous engagement with both the UK (on CETA) and the EU (on sanctions and FTA) reflects the complex, multi-front nature of its trade diplomacy with European partners, where economic and geopolitical considerations are increasingly intertwined.

Key Facts & Data

India-UK CETA signed: July 24, 2025; 14 rounds of negotiations since January 2022
Bilateral trade target: $120 billion by 2030
UK eliminates duties: 100% tariff lines, 7-year schedule
India reduces duties: >80% UK tariff lines, 10-year schedule
UK steel safeguard from July 1, 2026: quota volumes cut ~60%
UK CBAM: effective January 1, 2027; sectors include steel, aluminium, cement, fertilisers
India's CBAM-exposed exports to UK: ~$775 million
EU CBAM definitive phase: January 1, 2026; same sectors
EU CBAM De Minimis threshold: 50 tonnes/year
India-EU FTA negotiations: re-launched June 2022; ongoing