What Washington Can Learn From The India-UK Free Trade Agreement

Memri

6 days ago

India's recent achievement in concluding a Free Trade Agreement (FTA) with the United Kingdom stands in stark contrast to the tense and protracted negotiations that continue to mark its trade dialogue with the United States.[1] The India-UK FTA, signed in July 2025, is not merely a trade pact, it reflects mutual understanding, strategic alignment, and a shared vision for inclusive growth. It was forged through three years of fractured but ultimately fruitful negotiations between two mature economies that chose pragmatism over posturing. The UK, navigating its post-Brexit economic identity, saw in India not just a market but a partner whose economic ascent could complement its own industrial ambitions. Britain's modern industrial strategy, with its focus on advanced manufacturing, clean energy, and digital technologies, found resonance with India's reform-driven growth trajectory and its aspiration to become a $5 trillion economy by 2027.
"US President Donald Trump has signed an executive order for new tariffs on almost 70 countries which is set to go into effect in 7 days. The list includes India which will have to pay a 25% tariff effective 7 days from now. Earlier Trump had announced that India's tariff rate would be effective August 1, but the Executive order signed for 69 countries - with India on the list - says the new tariff rates will be applicable from August 7. He has imposed a 25% tariff on India with an additional unspecified penalty for India's trade with Russia for defense equipment and crude oil…" (Source: Times of India, August 1, 2025)
The Indo-U.S. Trade Negotiations Remain Mired In Structural Disagreements
The India-UK agreement was not confined to tariff reductions. It offered zero-duty access to 99 percent of Indian exports, streamlined mobility for professionals, and addressed social security contributions through the Double Contribution Convention. It was, in essence, a pact of mutual respect and forward-looking trust. The UK acknowledged India's developmental priorities, its Micro, Small, and Medium Enterprises (MSME)-driven economy, and its strategic ambitions. It approached the deal not as a zero-sum game, but as a collaborative opportunity to harness complementary strengths. The result is a framework that promises to double bilateral trade to USD 120 billion by 2030, catalyzing investment, job creation, and industrial competitiveness.
In contrast, the Indo-U.S. trade negotiations remain mired in structural disagreements and ideological friction. The disagreements, whether on agricultural subsidies, digital trade, or Special and Differential Treatment at the WTO, are not new. But what exacerbates them is the persistent perception gap. The U.S. views India's insistence on Managed Service Provider (MSP)-based procurement and its digital sovereignty measures as protectionist, while India sees them as essential instruments of social equity and economic resilience. The Equalisation Levy,[2] often dubbed the "Google Tax," a tax introduced in India to tax the digital economy, is emblematic of this clash: a measure born of India's attempt to ensure fair taxation in the digital age, but interpreted by Washington as a targeted affront to American tech giants.
Underlying these tensions is a fundamental misreading of India's developmental context. Despite its macroeconomic strength and global ambitions, India remains a country where MSMEs form the backbone of employment, where agriculture is still vulnerable to price shocks, and where per capita consumption lags far behind developed economies. The U.S. administration, in its pursuit of reciprocal concessions, often overlooks these structural realities. It perceives India's rise as a zero-sum game, every gain for India, it fears, comes at the expense of American manufacturing. This mindset not only stifles progress but risks alienating a partner whose strategic alignment with the U.S. is otherwise robust.
India's principled stance at the WTO, whether in defending Special and Differential Treatment or opposing plurilateral deals, has often been misunderstood by the U.S. as obstructionism. Yet these positions are rooted in India's historical commitment to the solidarity of developing economies. India's refusal to join the Government Procurement Agreement, for instance, stems from its belief that public procurement is a vital tool for social development. Its opposition to the WTO Moratorium on Customs Duties on Electronic Transmissions is not a rejection of digital trade, but a call for equitable taxation in a rapidly evolving digital landscape.
The Divergence In Perception Between The U.S. And India Has Created A Negotiation Environment Fraught With Suspicion And Rigidity
The agricultural sector remains a particularly thorny issue. While both countries provide domestic subsidies under WTO-approved provisions, the U.S. argues that India's MSP-based procurement distorts global markets. India, however, sees it as a lifeline for farmers and a bulwark against inflation. The Food Corporation of India's procurement mechanism is not a trade tool, it is a social safety net. The U.S. must recognize that in a country where agriculture employs nearly half the workforce, such mechanisms are not negotiable luxuries but developmental necessities.
The digital economy, too, has become a battleground of perceptions. The U.S. views India's Digital Public Infrastructure and initiatives like Atmanirbhar Bharat ("Self-reliant India")[3] as inward-looking, while India sees them as enablers of inclusive growth. Ironically, both countries are global tech hubs with deep investment linkages. Yet instead of building on this synergy, the negotiations have been marred by mistrust and misinterpretation.
The root of these differences lies not in the specifics of trade policy but in the broader lens through which each country views the other. India sees itself as a developing economy with legitimate needs for policy space and protective measures. The US, by contrast, sees India's economic rise as a signal that it should relinquish such privileges. This divergence in perception has created a negotiation environment fraught with suspicion and rigidity.
The U.S. Has An Opportunity To Reframe Its Engagement With India, Not As A Competitor, But As A Strategic Partner
The lesson, then, lies in the UK's approach. Britain did not dilute its interests; it simply chose to engage with India on equal terms, acknowledging its sensitivities and aspirations. The result was a comprehensive, high-quality agreement that promises to unlock significant opportunities for both sides. The US, if it wishes to conclude a meaningful FTA with India, must shed its transactional lens and adopt a more nuanced, empathetic posture.
It must recognize that India's insistence on developmental safeguards is not obstructionism, it is a principled stand rooted in lived realities.
Trade, at its best, is not a contest of concessions but a choreography of shared growth. The India-UK FTA exemplifies this spirit. The India-U.S. negotiations, if they are to succeed, must rediscover it. The current U.S. administration has an opportunity to reframe its engagement with India, not as a competitor, but as a strategic partner whose growth can amplify shared prosperity. It must move beyond the arithmetic of tariffs and embrace the algebra of trust. Only then can the Indo-U.S. trade deal transcend its impasse and become a beacon of 21st-century economic diplomacy.