I recently found myself watching The Best Exotic Marigold Hotel. It’s a pretty decent film starring the Best of British and is perfect Sunday evening viewing. The premise is that some UK pensioners move to India and all sorts of cliched hijinks ensue. Anyway, it got me thinking about the UK and one of my favourite countries, India.
Negotiations for a free trade deal with India have been stalled due to various government ministers raising concerns over the fact that this would increase immigration. I was very sad to leave the Department for International Trade (RIP) before negotiations were launched. As I’ve written before, a trade deal with India has the potential to be very significant. Despite the economy liberalising over the decades, it is still quite closed in many ways. Tariffs on Scotch, for example, are at a whopping 150 per cent while tariffs on British cars is 125 per cent. There are also a lot of rules around custom procedures and Rules of Origin which create trade frictions.
As such, any step towards trade liberalisation, even if relatively modest, would be good for the UK and also for India. However, the potential gains do not stop there. Not only is India a relatively closed economy (many developing nations are), it is also MASSIVE. It is now the world’s most populous country, having overtaken China. India is still on its development journey but if it follows China’s trajectory then it really does have the potential to become an economic giant, perhaps even eclipsing China. The implications of this should be obvious. A new major player on the international scene which can act as a ballast against the aggression of China should be welcome, but it will be important for the UK to build a strong relationship with it.
Moreover, as Noah Smith pointed out as part of his excellent series on development issues, the question of whether or not India can industrialise is the most important one in the economic development world. India has a lot of people and because it is still relatively underdeveloped, it has more poor people than any other country on the planet. Therefore, anything which helps to bring wealth and prosperity to India has the potential to benefit countless people. Given that free trade has lifted people out of poverty on an unprecedented – and difficult to even fathom – scale, then clearly a free trade deal between the UK and India is obviously important. If I was the type of person who spent their life posting on the Effective Altruism Forum then I’d say this is a cause worth exploring (crypto bros should feel free to contact me about funding…)
Getting a meaningful deal should be one of the main priorities for the new Department for Business and Trade. The way we get there will be for the UK to liberalise its immigration system by paving the way towards freedom of movement between the UK and India.
As discussed above, a trade deal with India really does have the potential to be very significant. Tariffs slashed and other barriers to trade removed making it easier for UK businesses to reach the almost 1.5 billion people in India would increase profits, wages, and jobs. This would bring benefits to every area of the UK and Scotland in particular would be set to benefit. Scotch is one of the UK’s biggest exports and so the businesses and distilleries would look set to experience a boost once the sky high tariff is removed. If I was in Number 10 and wanting to make the case for the Union – especially in light of today’s news about Nicola Sturgeon resigning – this could be a good place to start.
Free trade would also be good for Indians as well. It would give their excellent service businesses more access to the UK market, allowing them to employ more people and pay them more. Liberalisation in agriculture would also create more opportunities for Indian farmers.
However, allowing for freedom of movement would bring benefits to both countries even if there was no trade deal. For example, it would give UK firms access to a huge pool of talent. The people of India are hard working and entrepreneurial and it has a fantastic track record of producing incredibly successful people (including the Prime Minister’s father-in-law). As Jason Sockin and Sam Dumitriu pointed out for The Entrepreneurs Network, graduates of India’s best universities are among the most productive in the world.
It’s not all about high skilled immigration though. As I’ve written before, the UK economy is crying out for much more low skilled immigration. Businesses are facing staff shortage and the vacancy rate is at a record high. Opening our borders to India would help to plug the labour gap and in turn boost productivity and help to boost economic growth.
It’s not all about economics though. As discussed above, a deal with India is important for the UK given the increasing importance of India as a global power. Increasing immigration will help to forge even stronger links between our two countries. What is more, it will help to give a cultural boost to the UK. Indian culture is fascinating and the food is the best in the world, having much more of it in the UK would surely be a good thing.
There will no doubt be objections to such a proposal with concerns about assimilation and the pressure it would place on things such as housing, infrastructure, and public services. These objections are unfounded.
People from India have a very good track record of settling in well to the UK. They speak English, work hard, embrace and take part in British life, and often start their own businesses.
The majority of Indians coming to the UK would be young people, who are here to work or start a business. They would actually be a net positive to the public finances given they’re unlikely to use public services and will be paying tax.
On housing and infrastructure. Good point. Guess we’ll need to liberalise the planning system so that we can build millions of new homes and invest in transport infrastructure. Just so happens that this is what we should be doing anyway.
India is a great country with so much potential. Opening our borders to India will bring huge benefits to both the UK and India. Let’s do it!