Free trade agreements with India and Southeast Asian nations

Approximate read time: 15 minutes

On 6 March 2025, the House of Lords is scheduled to debate the following motion:

Baroness Anelay of St Johns (Conservative) to ask His Majesty’s Government what progress they have made in securing free trade agreements with India and countries in Southeast Asia.

1. Trade with India

1.1 Previous government action

The UK’s withdrawal from the EU has meant that it now has an independent trade policy and can ratify and implement new trade agreements with other countries. Under the previous Conservative government, the UK and India began negotiations towards a free trade agreement. In May 2021, the then prime minister, Boris Johnson, and the prime minister of India, Narendra Modi, announced an “enhanced trade partnership” as the first stage in negotiating a comprehensive free trade agreement.^[1] The then government said that 6,500 new jobs would be created around the UK as a result of £1bn of new UK-India trade and investment agreed in the new partnership. The move also formed part of the ‘2030 roadmap for India-UK future relations’, which aimed to guide cooperation between the UK and India for the next 10 years.^[2] Further information about the roadmap is set out in the House of Lords Library’s briefing ‘UK-India relations: 2030 roadmap and future trade partnership’ (3 April 2024).

Following this initial step, between May and August 2021, the then government ran a public consultation on its approach to negotiating a free trade deal with India.^[3] In January 2022, it published its negotiating objectives and negotiations commenced that same month.^[4]

The House of Lords International Agreements Committee scrutinised these objectives.^[5] The committee welcomed the commencement of the talks but was critical of the negotiating objectives for being “very general, high level” and at times “overly ambitious”. It said they provided “no clue as to the government’s negotiating priorities” or, in most cases, its “red lines”. Further information about these objectives and the committee’s report on them is available in the House of Lords Library’s briefing ‘UK-India trade agreement: Scrutiny of the government’s negotiating objectives’ (17 August 2022).

In June 2022, the then government said that it aimed to conclude the majority of the talks with India by the end of October that year.^[6] However, despite more than a dozen rounds of negotiations, no agreement was reached prior to the 2024 UK general election. Press reports suggested that “sticking points” included high tariffs in India on Scotch whiskey and relaxing fees and visa rules for Indian students and professionals going to the UK.^[7] India’s government has also reportedly requested an exemption from the UK’s planned carbon border adjustment mechanism, a proposed tax on the import of carbon intensive goods.^[8]

1.2 Recent developments

In its 2024 general election manifesto, the Labour Party said it would seek a new strategic partnership with India, including a free trade agreement as well as “deepening co-operation in areas like security, education, technology and climate change”.^[9]

On 24 February 2025, the UK government published a joint statement announcing the resumption of negotiations towards a trade deal with India.^[10] It said the move was the result of a meeting between prime ministers Sir Keir Starmer and Narendra Modi at the sidelines of the G20 summit in Rio de Janeiro in November 2024. At this meeting, the leaders were said to have underlined the importance of resuming such negotiations at an early date.

The joint statement stressed there was an existing “close partnership” between the countries which it said was built through collaboration in a number of areas.^[11] It said that at the centre of the relationship was a “collective aspiration to deliver economic growth and sustainable development”. Looking forward, the countries said that:

Both sides have agreed to resume negotiations towards a balanced, mutually beneficial and a forward-looking deal that delivers mutual growth and builds on the strengths of the two complementary economies. The strengthening of the trading relationship between our two countries has the potential to unlock opportunities for business and consumers across both our nations and build further on our already deep ties.^[12]

The joint statement also noted that Mr Starmer and Mr Modi had directed the negotiators to work together to “resolve the outstanding issues in the agreement to ensure a fair and equitable trade deal for shared success”.^[13]

1.3 External commentary

While many stakeholders have welcomed the prospect of a free trade deal with India, some concerns have been raised. For example, the National Farmers’ Union (NFU) has said there are opportunities to export products including beef, pork, lamb and dairy as well as fruit and vegetables.^[14] However, it has also said that there are a “wide range of challenges”. It highlighted specific issues for sugar and eggs referring to a 2021 World Trade Organisation (WTO) ruling that the Indian sugar regime breached rules on agricultural support, export subsidies and notification of subsidies to the WTO. Previously, the NFU said that the UK’s trade policy should respect “our high domestic production standards” and that doing otherwise would “risk compromising our high animal welfare and environmental standards” and “undermine British farmers”.^[15]

The Pesticide Action Network UK has also warned that a trade deal with India “threatens to increase the amount of pesticides in food sold on UK shelves”.^[16] A 2022 report by the network argued:

Indian agribusiness is able to operate more cheaply using pesticides that are banned in the UK to protect human health or the environment. This gives them a competitive advantage over UK producers.^[17]

In addition, the report raised concerns about the UK’s capacity to undertake border controls on foodstuffs entering the country.^[18] It cited a lack of investment or increase in staff capacity in the UK’s pesticide testing regime since Brexit.

In 2022, 11 trade bodies from the automotive, chemical, legal, pharma and tech sectors wrote an open letter which urged the government to “hold out for a commercially meaningful and comprehensive deal”.^[19] It argued that the content of the deal was more important than any deadlines.

The House of Commons International Trade Committee published questions and analysis on the UK’s trade negotiations with India in April 2023.^[20] The committee was dissolved before it could complete a full inquiry or take oral evidence on the subject. However, it published questions for the government and its successor committee along with the analysis underpinning them. Areas covered by the report include tariffs and rules of origin, sanitary and phytosanitary standards, technical barriers to trade, service market access, mobility of persons, mutual recognition of professional qualifications, digital and data, intellectual property, investment, government procurement, human rights, labour standards and gender equality, environment and climate and animal welfare. The then Conservative government’s response is available on the UK Parliament’s website.^[21]

1.4 UK trade and investment with India

The Department for Business and Trade publishes factsheets which provide information on trade and investment between the UK and various countries. The department’s factsheet on the UK’s trading relationship with India showed that it was the UK’s 11th largest trading partner in the four quarters to the end of Q3 2024 and accounted for 2.4% of total UK trade.^[22]

The department also reported that trade in goods and services (exports plus imports) between the UK and India was £40.9bn in the four quarters to the end of Q3 2024, an increase of 8.6% or £3.2bn in current prices from the same period the previous year.^[23] Of this £40.9bn:

• Total UK exports to India amounted to £17.5bn in the four quarters to the end of Q3 2024, an increase of 16.1% or £2.4bn in current prices, compared to the four quarters to the end of Q3 2023. Of all UK exports to India in the four quarters to the end of Q3 2024, £7.6bn (43.6%) were goods and £9.8bn (56.4%) were services. UK exports of goods to India increased by 38.9% or £2.1bn in current prices in this period compared to the same four quarters the previous year. Exports of services increased by 3.1% or £297mn.
• Total UK imports from India amounted to £23.4bn in the four quarters to the end of Q3 2024, an increase of 3.6% or £812mn in current prices compared to the four quarters to the end of Q3 2023. Of all UK imports from India in the four quarters to the end of Q3 2024, £10.1bn (43%) were goods and £13.3bn (57%) were services. In the same period, UK imports of goods from India decreased by 0.4% or £38mn in current prices compared to the four quarters to the end of Q3 2023. UK imports of services from India increased by 6.8% or £850mn in current prices compared to the same period the previous year.^[24]

These figures demonstrate that the UK reported a total trade deficit of £6.0bn with India, compared to a trade deficit of £7.6bn in the four quarters to the end of Q3 2023.^[25] The trade in goods deficit was £2.5bn in the four quarters to the end of Q3 2024, compared with £4.6bn in the same period the previous year and the trade in services deficit was £3.5bn compared with £2.9bn.

The trends in UK-India trade since 2014 are set out in figure 1 below. It shows that both imports and exports have grown in recent years, but that the UK has consistently imported more from India than it has exported to the country.

Figure 1. UK trade with India, 2014 to 2023

In addition, it was reported that in 2023, the outward stock of foreign direct investment (FDI) from the UK in India was £17.4bn and accounted for 0.9% of the total UK outward FDI stock.^[26] In the same year, the inward stock of FDI in the UK from India was £13.1bn and accounted for 0.6% of the total UK inward FDI stock.

2. Trade with Southeast Asian countries

2.1 ASEAN

The Association of Southeast Asian Nations (ASEAN) consists of 10 members, Brunei Darussalam, Cambodia, Indonesia, Lao PDR, Malaysia, Myanmar, the Philippines, Singapore, Thailand and Vietnam.^[27] Timor-Leste, the remaining country in Southeast Asia, has applied to become ASEAN’s 11th member state.

The ASEAN community has three pillars covering political-security, economic and socio-cultural issues. Its 10 member states have a combined GDP of $3.6tn and average GDP growth of over 5%.^[28] As a bloc, ASEAN is the world’s 5th largest economy and is on track to be 4th by 2030.

2.2 UK-ASEAN relationship

The UK has had a relationship with ASEAN since 2012 when the UK acceded to the Treaty of Amity and Cooperation (TAC), a peace treaty between ASEAN’s founding members.^[29] This relationship has continued to develop over time with the following milestones highlighted by the UK government:^[30]

• In November 2019, the UK opened a mission to ASEAN and appointed the first UK ambassador to the bloc. Separately, the UK has embassies or high commissions in all 10 ASEAN member states.
• In August 2021, the UK became an ASEAN dialogue partner, the first new dialogue partner to the bloc in 25 years.
• In September 2021, the UK attended the first ASEAN economic ministers-UK consultation. At this meeting, the ASEAN-UK Joint Ministerial Declaration on Future Economic Cooperation was agreed. Subsequent meetings between ASEAN-UK senior officials and ministers have taken place in 2022, 2023 and 2024 to “welcome progress on economic cooperation”.
• In August 2022, the first five-year Plan of Action to Implement the ASEAN-UK Dialogue Partnership was agreed, which outlined cooperation between the parties across political, security, economic and socio-cultural issues.
• In November 2023, the secretary-general of ASEAN, Dr Kao Kim Hourn, visited the UK, his first trip outside of Asia in this role.
• In March 2024, the UK hosted the third UK-ASEAN senior officials meeting in London.
• In July 2024, UK Foreign Secretary David Lammy visited Laos to join the ASEAN foreign ministers’ meeting to discuss the progress of ASEAN-UK cooperation on growth, security and shared global challenges, including climate change.

2.3 UK-ASEAN trade and investment

The total trade in goods and services between the UK and ASEAN member states was £47.2bn in the four quarters to the end of Q4 2023.^[31] UK exports to ASEAN member states in the same period amounted to £25.1bn (49.1% goods and 50.9% services). UK imports totalled £22.1bn (64.5% goods and 35.5% services) over the same period. This meant there was a trade surplus of £3bn compared with a trade deficit of £576mn in the four quarters to the end of Q4 2022.

2.4 Recent government action

Since being elected in July 2024, Labour government ministers have made several trips to ASEAN member states. As stated above, in July 2024 the foreign secretary, David Lammy, visited Laos to attend the ASEAN foreign ministers’ meeting.^[32] As part of the visit the UK government announced a £25mn UK-ASEAN partnership to “tackle the world’s most pressing global health challenges”. It said this would help to detect and prevent future diseases and boost health security “within the region and also at home”.

The UK also reaffirmed its “position as a climate leader” with a new UK-ASEAN green transition fund worth up to £40mn.^[33] It said this would help boost green growth and leverage UK expertise to support countries at the forefront of the climate crisis. It also argued that the funding would “unlock green growth” for ASEAN business and in turn provide opportunities for green investments from the UK. In addition, the UK government announced a new Chevening ASEAN scholarship programme to further strengthen education ties by “bringing some of ASEAN’s best minds to the UK”.

The government also said that in the margins of the meeting, Mr Lammy would hold bilateral meetings with his counterparts from ASEAN member states as well as other countries in the region, such as Japan and New Zealand.^[34] It was said that he would use these opportunities to underline the UK’s commitment to working with them on a broad spectrum of issues including security, the economy, the climate crisis and education.

In September 2024, Douglas Alexander, minister for trade policy and economic security, visited Thailand and signed an ‘Enhanced Trade Partnership’ with the country.^[35] The government said that this partnership was designed to help grow the economy and committed both sides to identifying opportunities that could be delivered through a potential future free trade agreement.

As part of his trip, Mr Alexander also visited Laos to attend the 56th ASEAN economic ministers’ meeting.^[36] The government said he would use the visit to speak to partners about the government’s plans for trade and how this would support its mission to drive growth.

In September 2024, the fourth ASEAN economic ministers and UK consultation was held, with Timor-Leste attending as an observer.^[37] A variety of topics were discussed, including trade statistics, regional and global economic challenges, UK support to the ASEAN economic community, economic cooperation, a recent WTO ministerial conference, climate change and Timor-Leste’s possible accession to ASEAN.

The UK government’s factsheet on ASEAN also highlighted the following measures in relation to trade and investment with the bloc:^[38]

• The UK’s Intellectual Property Office attachés in Southeast Asia support ASEAN governments, the ASEAN secretariat, international development partners and industries to build a rules-based intellectual property system.
• The British Standards Institute is supporting ASEAN with recommendations on how to adopt and implement international standards across the bloc. The government said that international standards can create a common language for trading partners and increase access to the global market.
• The UK Competition and Markets Authority has regular policy exchanges with the ASEAN experts group on competition to share best practices on how to strengthen the bloc’s competition regulations in new areas such as digital markets and sustainability.
• ASEAN-UK supply chains cooperation is centred on deepening trade links between the UK and ASEAN to improve economic resilience and grow ASEAN’s economy.
• The UK has shared ideas with the ASEAN secretariat on opportunities for future sectoral initiatives including developing a framework for industrial projects and strengthening the ASEAN MedTech sector.

In addition, in April 2024, under the previous Conservative government, the UK Mission to ASEAN and the ASEAN secretariat announced a £25mn economic integration programme in Jakarta.^[39] They said that the four-year initiative aimed to foster economic growth across the region by tackling development barriers within ASEAN member states and the broader ASEAN economic community.

3. Read more

• Business Today, ‘India, UK joint press conference: Resume FTA talks after eight months, focus on trade and investment’, 24 February 2025 (video hosted by YouTube)
• Department for Business and Trade, ‘Talks relaunch on India trade deal to boost UK’s growth agenda’, 23 February 2025
• Sophie Inge and Caroline Hug, ‘The three big roadblocks on the way to a UK-India trade deal’, Politico, 20 February 2025
• Council on Foreign Relations, ‘What is ASEAN?’, updated 15 January 2025
• Dr Chietigj Bajpaee, ‘The UK needs an India strategy that goes beyond the trade deal’, Chatham House, 24 July 2024

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Cover image from Freepik.