India-UK FTA: Major Breakthrough as 85% of Steel Exports Escape British Curbs

The long-standing deadlock regarding steel trade under the India-UK Free Trade Agreement has finally been resolved, marking a significant diplomatic victory for Indian exporters. Through a strategic consensus, India has ensured that the vast majority of its steel shipments will remain protected from the UK's upcoming restrictive safeguard measures.

A Strategic Win for Indian Steel Exporters

The implementation of the Comprehensive Economic and Trade Agreement (CETA) is set to begin on July 15, following a breakthrough in negotiations regarding the UK’s steel safeguard regime. This issue had previously emerged as one of the most significant hurdles in finalizing the trade pact signed on July 24, 2025.

According to an official statement, India has successfully negotiated a framework that shields 85% of its steel exports from Britain's new curbs. To achieve this, India secured a sophisticated combination of protections, including Country-Specific Quotas (CSQ), residual quotas, and access under the Authorised Use Scheme (AUS). This arrangement ensures that Indian manufacturers can maintain market presence despite the tightening regulatory environment in the United Kingdom.

Understanding the UK’s New Steel Safeguard Regime

The new British regime, scheduled to take effect on July 1, 2026, represents a significant tightening of trade limits. Under these rules, tariff-free steel imports will be subject to strict caps, with overall quota volumes being slashed by 60% compared to the existing safeguard mechanism.

Any imports that exceed these established quotas will face a heavy 50% tariff. The measures are specifically designed to protect steel products that can be manufactured domestically within the UK. For India, which recorded iron and steel exports to the UK worth USD 893.4 million in the 2025-26 period, this protection is vital to preventing massive market disruptions and safeguarding commercial interests.

The Looming Challenge of Carbon Border Taxes

While the steel quota issue has been resolved, a new economic challenge is on the horizon: the UK's Import Carbon Pricing Mechanism (the British equivalent of the EU's CBAM). Scheduled to come into force in 2027, this carbon tax targets carbon-intensive sectors including iron, steel, aluminium, fertiliser, cement, and hydrogen.

Economic think tank GTRI estimates that Indian exports worth approximately USD 775 million could be impacted by this mechanism. Once the free allowances under the UK's Emissions Trading Scheme (ETS) are fully phased out, the carbon tax could range between 14% and 24% of the total import value. This remains a critical area of negotiation for Indian policymakers as they seek to minimize the impact on heavy industries.

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