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.
The commerce ministry has further clarified that a provision addressing potential retaliatory actions is also included. If a bilateral safeguard measure is applied for a period of up to two years, neither party has the right to retaliate. However, should the measure be extended beyond two years, up to the four-year maximum, then both parties gain the right to take proportionate retaliatory action.
Once a bilateral safeguard measure expires, the customs duty on the affected good automatically reverts to the rate that would have applied under the agreement’s tariff schedule, as if the safeguard had never been imposed. This ensures a return to the agreed-upon trade terms post-protection.
Furthermore, in critical or emergency situations, India can implement provisional safeguard measures to prevent irreparable harm to domestic industries. These provisional measures can be imposed for up to 200 days based on preliminary evidence, but they must be followed by a full investigation to validate their necessity.
To prevent over-protection and maintain a balanced trade environment, the FTA explicitly states that a bilateral safeguard measure under this agreement and a safeguard under Article XIX of GATT 1994 (and its related agreement) cannot be applied simultaneously to the same good. This prevents any single product from receiving "double protection" under different safeguard mechanisms.
These detailed provisions underscore India's commitment to leveraging the FTA for economic growth while prudently guarding its domestic industrial interests against potential market disruptions.
