The India-UK economic pact gives our digital trade the enablers it needed

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2 days ago

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Arpita Mukherjee The CETA's chapter on digital trade signals our ambitions in rule-setting for the 21st century. Its provisions are expected to give paperless electronic trade a big fillip and brighten the prospects of technology exporters. The recently signed Comprehensive Economic and Trade Agreement has attempted to remove many hurdles faced by the technology companies of both countries and enable them to work collaboratively. Gift this article
With a strong mutual interest in supporting technology companies and enhancing cross-border dealings, the Digital Trade chapter of the India-UK Comprehensive Economic and Trade Agreement (CETA) is the most comprehensive one on the subject that India has signed in any trade agreement till date.
With a strong mutual interest in supporting technology companies and enhancing cross-border dealings, the Digital Trade chapter of the India-UK Comprehensive Economic and Trade Agreement (CETA) is the most comprehensive one on the subject that India has signed in any trade agreement till date.
Unlike the India-UAE digital trade chapter, India moved away from soft commitments (reflected in its use of language such as 'shall endeavour to do") to undertaking firm commitments (shall do) in order to maintain a legal framework consistent with international best practices, like those under the UNCITRAL Model Law of Ecommerce (1996).
The chapter covers firm commitments in other areas as well. For example, it provides a legal framework for contracts to be concluded electronically, ensuring the legal validity of e-contracts. It would make trade administration documents available to the public in digital format and let administrative trade paperwork be submitted digitally as a legal equivalent of hard copies. These provisions are aligned with New Delhi's objective of Digital India and commitments to cross-border paperless trade.
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All this can also lead to significant cost reduction for micro, small and medium enterprises (MSMEs). A study by the International Chamber of Commerce for UK and Coriolis in 2021 had estimated that digitizing transferable documents could boost MSME trade by 25% and lead to a 35% improvement in their business efficiency.
Commitments in the digital trade chapter vis-a-vis India's position at the WTO: India refrained from joining the Joint Statement Initiative (JSI) under the World Trade Organization (WTO) framework, under which 80 member countries—with Australia, Singapore and Japan acting as co-conveners—reached a stabilized text.
But many of the JSI's principles are part of the India-UK CETA's chapter on digital trade. For example, its provisions on paperless trade and its related aspects—such as e-invoicing, e-signatures and authentication and e-payments—have been covered by the CETA. This indicates that India is willing to commit to digital trade liberalization bilaterally with like-minded trade partners.
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Controversial issues, such as the WTO moratorium on customs duty on digital imports and the associated revenue loss for developing countries have been smartly kept outside the CETA. The moratorium issue is a matter of multilateral discussion under the WTO Work Programme on E-commerce (WPEC), a forum in which WTO members including India agreed to not impose custom duties on electronic transmissions.
This moratorium is renewed from time to time. It is currently applicable until the 14th WTO Ministerial Conference scheduled in March 2026, after which it is set to expire along with the WPEC. In all probability, customs duty will be held in abeyance, which will benefit Indian software exporters.
The government's right to regulate and the private sector's demands: To secure the government's right to regulate the evolving digital sector, the India-UK agreement does not have any binding commitment to let data flow freely across borders, nor does it prohibit data-localization requirements. At the same time, it provides explicit protections for source codes and algorithms, a long-standing demand of the technology industry.
One key contribution of this chapter is its support for the cross-border paperless trade framework led by the United Nations Economic and Social Commission for Asia and the Pacific (UNESCAP), aimed at reducing trade costs. According to the UNESCAP-ADB Asia-Pacific Trade Facilitation Report 2024, full implementation of those digital trade facilitation measures, over and above the commitments in the WTO's Trade Facilitation Agreement (TFA) to which India is a party, can reduce trade cost by about 11% in the region.
This is important for enhancing the competitiveness of Indian firms in a world of geopolitical tension, tariff threats and supply chain challenges. India has already adopted several measures of the TFA to reduce delays and increase transparency by leveraging technology.
Exporters have for a long time been asking for paperless trade. In the CETA, India has shown that it is ready to move towards a framework for it. This also enhances the scope for cross-border regulatory cooperation and mutual recognition.
Recognizing the value of digital inclusion, the chapter lays appropriate emphasis on addressing digital trade barriers through cooperation. Laying out an inclusive framework for SMEs and women-led enterprises, it expects the two trade partners to cooperate in areas such as digital skills and access to digital tools. It attempts to ensure consumer and business trust in digital trade through various provisions, such as those on online consumer protection, unsolicited commercial e-messages and cybersecurity.
Also Read: India-UK trade pact: A new paradigm for the digital economy
It has some gaps but is a good chapter overall: While the chapter on digital trade in the India-UK CETA has some misses, such as its exclusion of a binding mechanism for dispute settlement, which would reduce its enforceability, it is a good attempt overall on India's part to showcase itself as a technology leader that is ready to drive cross-border digital trade policies.
Along with some provisions in other chapters, the chapter aims for competitive market access in the domains of software development and network infrastructure, facilitate the cross-border mobility of professionals and reduce tariffs on technology goods, even as it upholds and supports existing partnerships between the two partners, such as the July 2024 India-UK Technology and Security Initiative.
In all, the recently signed Comprehensive Economic and Trade Agreement has attempted to remove many hurdles faced by the technology companies of both countries and enable them to work collaboratively.
The author is a professor, Indian Council for Research on International Economic Relations (Icrier). Topics You May Be Interested In Catch all the Business News, Market News, Breaking News Events and Latest News Updates on Live Mint. Download The Mint News App to get Daily Market Updates.