The recently signed Free Trade Agreement (FTA) between India and the United Kingdom has safeguard measures, which allow India to temporarily increase tariffs or suspend existing tariff concessions on certain goods if a significant surge in imports from the UK threatens or causes serious injury to local industries, according to the ministry of Commerce.
This mechanism is a key component of India’s cautious approach to trade liberalisation, ensuring that the opening of markets does not unduly harm domestic producers. It provides a safety net against unforeseen import surges that could destabilize sensitive sectors, says an official.
The trigger for invoking these safeguards is clearly defined in the trade agreement – a rise in the absolute quantities of an originating good from the UK, or an increase relative to domestic production, directly resulting from the FTA’s tariff concessions, and subsequently causing or threatening serious injury to a domestic industry.
Under these measures, India has the authority to either suspend further duty reductions or even increase duties.
However, there are limitations to taking such actions. The increased duty cannot exceed the lesser of the current Most Favoured Nation (MFN) applied rate or the pre-agreement MFN applied rate. This ensures that while protection is provided, it remains within reasonable bounds.
The duration of such safeguard measures is initially set at up to two years. This period can be extended for an additional two years, bringing the total maximum duration to four years, provided a thorough investigation determines that the safeguard remains necessary to prevent or remedy serious injury and to facilitate the domestic industry’s adjustment.
Notably, the right to apply these bilateral safeguard measures extends for a significant “transition period” of 14 years after tariff elimination on the respective goods. This long applicability period offers sustained protection as industries adapt to the new competitive landscape.