While frustrated Remain campaigners continue to speak of economic Armageddon, a very significant move happened yesterday. Business secretary Sajid Javid flew off to Delhi to begin preliminary negotiations for a trade deal between Britain and India. It is significant because this is exactly the sort of deal that we have been forbidden from doing for the past 43 years. As members of the EU we are forbidden from signing our own trade deals with third countries. Instead, we must rely on deals collectively negotiated with the EU.
Trouble is, the EU isn’t very good at negotiating them. It is painfully slow process because the competing demands of 28 different EU economies must be satisfied. What it means in practice is that freeing up markets in services – a strength of the UK economy – tends to take a back seat to freeing the market in Mercedes. The EU started negotiating a trade deal with India in 2007 but still has nothing to show for it. True, it hasn’t stopped trade between India and the EU growing from 28.6 billion Euros in 2003 to £72.5 billion Euros in 2014 – a reminder that life can go on without trade deals. But if it takes more than nine years to agree a mutual deal to drop tariff and other barriers to trade there is something wrong. With India now the world’s fastest-growing economy – at 7.9 per cent last year – the country ought to be a priority.
One of the areas which Javid will want to work on is telecoms. India has already agreed in principle to open its telecoms sector to companies with 100 per cent foreign ownership. Another of particular interest to Britain is insurance, which India has also suggested it will open to up to foreign competition. The outsourcing of call centres by the UK to India has often been depicted as being negative for employment in Britain – even though it has reduced costs and therefore prices for consumers (and it hasn’t stopped UK employment growing inexorably). We should soon see another advantage – insurance and other financial service companies which already have a foothold in India via call centres and other backroom services may soon find very profitable markets there, given India’s rapidly growing middle class.
Whatever people think of Brexit now, attitudes will shift markedly if Britain ends up with a trade deal with India before the EU can manage it. That is, after all, what Switzerland has managed to do with Japan. While the government appears to be preoccupied with a leadership crisis, in dispatching Sajid Javid to India it is showing signs that it knows what it needs to do in order to grab the Brexit bull by the horns.