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

The long-standing deadlock regarding steel trade in the India-UK Free Trade Agreement has finally been resolved, paving the way for smoother bilateral commerce. Through strategic negotiations, India has successfully shielded the vast majority of its steel shipments from stringent new British safeguard measures.

Resolving the Steel Safeguard Sticking Point

The UK's proposed steel safeguard regime was one of the most significant hurdles in finalizing the Comprehensive Economic and Trade Agreement (CETA), which is set to be operationalized on July 15. The new British regime, scheduled to take effect from July 1, 2026, aims to tighten import limits by reducing overall quota volumes by 60% compared to existing mechanisms. Under these rules, any steel imports exceeding the designated quota would be hit with a heavy 50% tariff.

However, following high-level discussions between India's Commerce and Industry Minister Piyush Goyal and UK Secretary of State for Business and Trade Peter Kyle, a landmark consensus was reached. India has secured protection for 85% of its outbound steel exports, ensuring that the bulk of its shipments remain outside the restrictive British curbs.

A Strategic Mix of Quotas and Protections

To protect Indian commercial interests and minimize market disruptions, the agreement employs a sophisticated multi-layered approach. India’s interests are being guarded through a combination of Country-Specific Quotas (CSQ), residual quotas, and access under the Authorised Use Scheme (AUS). This strategic framework ensures a balanced trading environment, allowing Indian exporters to maintain their market presence despite the UK's tightening domestic manufacturing protections.

This resolution is particularly vital given the scale of trade; India’s exports of iron, steel, and related products to the UK reached a significant USD 893.4 million in the 2025-26 period.

The Looming Challenge of Carbon Taxes (CBAM)

While the steel safeguard issue has been settled, a new economic challenge is on the horizon: the UK's Import Carbon Pricing Mechanism, similar to the EU's Carbon Border Adjustment Mechanism (CBAM). Scheduled to come into force in 2027, this framework will impose a carbon tax on various sectors, including iron, steel, aluminium, fertiliser, and cement.

According to the Global Trade Research Initiative (GTRI), Indian exports worth approximately USD 775 million could be impacted by this mechanism. Once free allowances under the Emissions Trading Scheme (ETS) are phased out, the tax could range between 14% and 24% of the import value. As the UK prepares to become the second major economy after the EU to implement such a tax, Indian industries will need to accelerate decarbonization efforts to remain competitive in the British market.

Key Takeaways