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

Hoewel de hindernis van de staalquota is weggenomen, worden Indiase industrieën geconfronteerd met een secundaire uitdaging in de vorm van het Britse Import Carbon Pricing Mechanism, vergelijkbaar met het Carbon Border Adjustment Mechanism (CBAM) van de EU. Deze koolstofbelasting, die gepland staat om in 2027 in werking te treden, zou een aanzienlijke impact kunnen hebben op de Indiase handel.

De economische denktank GTRI schat dat Indiase export ter waarde van ongeveer 775 miljoen USD door dit mechanisme getroffen kan worden. De belasting zal zich aanvankelijk richten op sectoren met een hoge uitstoot, waaronder ijzer, staal, aluminium, kunstmest, cement, waterstof en glas. Zodra de gratis emissierechten onder het Emissions Trading Scheme (ETS) worden uitgefaseerd, kan de belasting variëren tussen de 14% en 24% van de importwaarde, wat een nieuwe fiscale hindernis vormt voor Indiase fabrikanten.

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