Written evidence - Professor Ingo Borchert (UIA0037)

This evidence submission covers Questions 7, 10, 11, and 13 of the Inquiry’s Terms of Reference.

7. To what extent do you think the Agreement provides UK services firms with new market access? What has been left out, and what are the implications? Are there other benefits?

The scope of the UK-India agreement (CETA) with regard to new market access opportunities for UK services firms is limited, in part because specific commitments in services are taken using a positive list approach. This excludes some services sectors such as legal services altogether and provides for very little incremental market access in sectors that are covered.

At the same time, I wish to highlight two aspects of the agreement that are likely to confer benefits to UK services exporters: one relates to predictability and the other to the demand linkages from goods exports to services inputs.

Regarding the predictability and certainty of market access conditions, it is in fact not uncommon that services trade agreements have in the past typically bound applied regimes preferentially amongst signatories, rather than providing genuinely new liberalisation. For instance, a 2021 OECD study finds that on average, services trade agreements have eliminated between 40-70% of the ‘binding overhang, i.e. the discrepancy between market access and national treatment commitments in GATS schedules and actually applied

service trade policies. There is evidence in academic research that shows that merely closing that ‘binding overhang’ has itself a positive impact on services exports, even in the absence of new market access, because it removes uncertainty and instead provides businesses with predictability.

The responsiveness of services trade to reductions in uncertainty is quite high. For sectors such as telecom, financial, and professional services, OECD (2018) has found bilateral trade to be 8-12% higher when commitments were tighter (namely, comparing average GATS commitments versus average preferential commitments). Ciuriak et al. (2020) find 5% higher services trade, which appears as a smaller trade effect but is estimated as being in addition to the effect of actually lowering restrictions to services trade.

In summary, the removal of discretionary policy space, by removing the binding overhang, is associated with tangible gains in terms of additional services trade, even if the market access/national treatment conditions on the ground have not changed.

Secondly, positive effects for UK service providers do not exclusively emanate from the services chapters of the agreement narrowly conceived, i.e. CETA chapters 8-12. That is because most export products, manufactures in particular, contain a range of embodied services inputs that UK service sector firms would provide to UK manufacturing firms, whose products might in turn be exported to India. Specifically, as part of the agreement, India has opened its market for UK goods from advanced manufacturing sectors such as automotives, electrical circuits, high-end optical products, and medical devices. These sectors are closely integrated with advanced services and global value chains. Thus, there is derived demand for services from these export opportunities that will benefit service sector jobs.

10. What is your view of the business mobility provisions and Double Contributions Convention

(DCC)? What is the value of these provisions for UK firms and workers?

There is straightforward value in business mobility provisions made both by India and the UK, benefitting outbound UK workers as, for instance, intra-corporate transferees, but also facilitating the imports of Indian services to the UK, which provide valuable inputs into UK manufacturing and exports.

A less obvious benefit to UK firms is that the avoidance of double contributions, insofar as covered by the DCC in its current form, will benefit the UK customers that solicit the associated services. Whilst there is evidently some foregone revenue for the UK Treasury associated with the DCC, it is likely that the savings will to some extent be passed on to UK firms that solicit the services of Indian professionals. These savings will likely manifest in lower prices for UK client firms.

11. What is your assessment of the digital trade and data provisions in the FTA?

The UK-India agreement mainly offers a set of provisions around digital trade facilitation and some provisions on consumer protection. With the notable exception of the prohibition on source code disclosure (Art. 12.15(1)), the UK-India agreement does not contain binding disciplines on a range of other issues that have emerged as ‘standard’ provisions in digital trade chapters or digital economy agreements, including such aspects as free data flow obligations, a prohibition on data localisation; the codification of the WTO moratorium on customs duties on electronic transmissions, or the non-discriminatory treatment of digital products, respectively.

There is, however, one aspect worth highlighting in which CETA goes beyond most other agreements in that it does feature a provision on Open Government Data (Art. 12.12), which echoes a similar provision in the UK-EU Trade and Cooperation Agreement. There could potentially be considerable value in such data. In the case of India, this could encompass such diverse data as weather and harvesting patterns, electricity grid usage, or aspects of financial participation. Making such information publicly accessible could potentially be of considerable value.

Recommendation: specifically in regard to data provisions, the recent UK-Singapore DEA includes a data-related provision, albeit in a non-binding way, that nonetheless is visionary and potentially something to be emulated as and when the UK-India agreement can be taken further. Against the backdrop of enormous amounts on personal and behavioural data being amassed inside private sector firms, the UK-Singapore DEA is commendable in mentioning alternative and innovative solutions such as data trusts (sharing policy approaches to data trusts; policies for consumer data portability Art. 8.61-I.2(b-c) that could offer more balanced and equitable solutions to the holding of personal data in the future.

11.a. Do you think that the data provisions are sufficient to allow smooth flow of goods and

services?

The agreement does not include disciplines regarding the prohibition of data localisation; as such, the possibility of future requirements to store data locally in India creates uncertainty and, if such requirements were to materialise, would be cost-increasing. To the extent that local data storage may have a fixed cost component, it might be easier to fulfil for larger, multinational companies that can spread the associated costs over large amounts of revenue.

Yet the concern for UK businesses is not only about the absence of a commitment to prohibit localisation but generally about rules for cross-border data flows.

Recommendation: It is important that the UK develops a consistent position in regard of data flow governance and digital trade. This is a complex area because the United States, the EU, and China, each of them being an important trading partner for the UK, pursue their own approaches to data flow governance, and it is not clear yet how the UK could negotiate these divergent digital realms. Potentially conflicting promises in agreements with different partners, including in CPTPP which the UK has just acceded to, should be avoided.

13. The bilateral investment treaty promised alongside the FTA has not yet been concluded. Do you consider it desirable to pursue an agreement containing Investor State Dispute Settlement, and if so, what model should be adopted?

Recommendation: Aside from Investor-State Dispute Settlement, progress on a bilateral investment treaty would be desirable for at least two reasons. First, regarding outward FDI to India, service trade through the establishment of commercial presence abroad (also called ‘Mode 3’), is in general the most prevalent mode of service supply by a wide margin. Roughly two-thirds of the total value of services exports are transacted via Mode 3 according to experimental statistics. Thus not only is this an important economic channel for services trade in its own right but there are complementary linkages such that a commercial presence will typically facilitate further cross-border trade in services amongst the signatories.

Second, the desirability of attracting inward FDI should be seen against the backdrop of the UK’s stated objective to attract investment, and the fact that too little investment is widely regarded as a major reason for the UK’s perennial underperformance in productivity growth.

References:

Benz, Sebastian and Inese Rozensteine (2021), “Services Trade Restrictiveness Index (STRI): Measuring Services Liberalisation and Commitments in the GATS and RTAs”, OECD Trade Policy Paper No. 250, Paris: OECD, June 2021.

Ciuriak, Dan, Ali Dadkhah and Dmitry Lysenko (2020), “The Effect o fBinding Commitments on

Services Trade”, World Trade Review 19, pp. 365-378.

Lamprecht, Philipp and Sebastien Miroudot (2018), “The value of market access and national treatment commitments in services trade agreements”, OECD Trade Policy Paper No. 213, Paris: OECD.

19 November 2025