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

India and the United Kingdom have successfully navigated a critical deadlock regarding steel trade as they prepare to operationalize their Comprehensive Economic and Trade Agreement (CETA) on July 15. This landmark consensus ensures that the vast majority of Indian steel shipments remain shielded from restrictive British safeguard measures, providing much-needed certainty to exporters.

Resolving the Steel Safeguard Deadlock

The proposed UK steel safeguard regime had emerged as a significant obstacle in the implementation of the trade pact signed on July 24, 2025. Under the new British regime, which is set to take effect from July 1, 2026, tariff-free steel imports will be capped, with overall quota volumes reduced by 60% compared to existing mechanisms. Any imports exceeding these quotas would attract a steep 50% tariff.

However, following high-level discussions between Commerce and Industry Minister Piyush Goyal and UK Secretary of State for Business and Trade Peter Kyle, a strategic compromise was reached. India has successfully secured protection for 85% of its outbound steel shipments. This protection is achieved through a sophisticated combination of Country-Specific Quotas (CSQ), residual quotas, and access under the Authorised Use Scheme (AUS), ensuring that Indian commercial interests are preserved despite the tightening UK limits.

The Looming Challenge of Carbon Taxes

While the steel quota issue has seen a breakthrough, Indian exporters face a secondary hurdle: the UK’s upcoming Import Carbon Pricing Mechanism. Scheduled to come into force in 2027, this framework mirrors the European Union's Carbon Border Adjustment Mechanism (CBAM).

According to the Global Trade Research Initiative (GTRI), Indian exports worth approximately USD 775 million are at risk from this planned carbon tax. The mechanism will initially target energy-intensive sectors, including iron, steel, aluminium, fertilisers, hydrogen, ceramics, glass, and cement. As free allowances under the UK's Emissions Trading Scheme (ETS) are phased out, the tax could impact import values by as much as 14% to 24%.

Economic Implications for Indian Exporters

Çelik kotası sorununun çözülmesi, Hindistan'ın Birleşik Krallık ile olan ticaret dengesi için hayati önem taşımaktadır. 2025-26 mali yılında, Hindistan'ın Birleşik Krallık'a yaptığı demir, çelik ve ilgili ürün ihracatı 893,4 milyon ABD dolarına ulaştı. CETA, bu ihracatın %85'i için muafiyetler sağlayarak, Hintli üreticilerin Birleşik Krallık pazarında yol alabilmeleri için istikrarlı bir ortam sunmaktadır.

Birleşik Krallık, AB'den sonra karbonla ilgili ticaret engellerini uygulayan ikinci büyük ekonomi haline gelirken, Hintli endüstrilerin rekabetçi kalabilmek ve gelecekteki karbon fiyatlandırmasının finansal etkisini hafifletmek için yeşil dönüşümlerini hızlandırmaları gerekecektir.

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