India-UK FTA: 85% of Indian Steel Exports Shielded from British Safeguards

The long-standing deadlock regarding steel trade in the India-UK Free Trade Agreement (FTA) has finally been resolved, paving the way for the pact's operationalisation. Through strategic negotiations, India has secured a significant exemption for the vast majority of its steel shipments, ensuring minimal disruption to its export revenues.

A Landmark Consensus on Steel Trade

As India and the United Kingdom prepare to operationalise their Comprehensive Economic and Trade Agreement (CETA) on July 15, the resolution of the steel safeguard issue marks a critical milestone. Previously, the UK's proposed restrictive measures on steel imports stood as one of the primary obstacles to finalizing the trade pact signed on July 24, 2025.

According to an official statement, India has successfully negotiated a framework that keeps 85% of its steel exports outside the scope of Britain's upcoming restrictive measures. To achieve this, India utilized a sophisticated mix of trade mechanisms, including Country-Specific Quotas (CSQ), residual quotas, and access under the Authorised Use Scheme (AUS). This consensus, reached following high-level discussions between Commerce and Industry Minister Piyush Goyal and UK Secretary of State Peter Kyle, aims to protect commercial interests while maintaining a balanced trading environment.

Understanding the New British Safeguard Regime

The resolution comes at a time when the UK is tightening its import regulations. Under the new British regime, which is set to take effect from July 1, 2026, tariff-free steel imports will be capped. Notably, the overall quota volumes will be reduced by 60% compared to the existing safeguard mechanism.

Any steel imports that exceed these predefined quotas will face a heavy 50% tariff. These measures are specifically designed to apply to steel products that are also manufactured within the UK. For Indian exporters, who recorded iron and steel exports to the UK worth USD 893.4 million in 2025-26, this protection is vital to maintaining market access despite the shrinking global quota volumes.

The Looming Challenge: Carbon Border Taxes

Meskipun hambatan kuota baja telah teratasi, industri India menghadapi tantangan sekunder berupa Mekanisme Penetapan Harga Karbon Impor Inggris, yang serupa dengan Carbon Border Adjustment Mechanism (CBAM) milik Uni Eropa. Dijadwalkan mulai berlaku pada tahun 2027, pajak karbon ini dapat berdampak signifikan terhadap perdagangan India.

Lembaga pemikir ekonomi GTRI memperkirakan bahwa ekspor India senilai sekitar USD 775 juta dapat terdampak oleh mekanisme ini. Pajak tersebut awalnya akan menyasar sektor-sektor emisi tinggi, termasuk besi, baja, aluminium, pupuk, semen, hidrogen, dan kaca. Setelah alokasi gratis di bawah Emissions Trading Scheme (ETS) dihapuskan secara bertahap, pajak tersebut dapat berkisar antara 14% hingga 24% dari nilai impor, yang menimbulkan hambatan fiskal baru bagi produsen India.

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