Commerce Secretary Rajesh Agrawal said that even though India and the United Kingdom are close to operationalising their long-pending free trade agreement (FTA), London's fresh safeguard measures on steel imports have emerged as a key sticking point.
“The UK has come ahead with a steel measure recently, which was not factored in while negotiating the FTA,” Agrawal told reporters.
He said both sides are working on a 'unique creative solution' to address concerns over the new steel restrictions so that the agreement can be implemented at the earliest.
The UK announced a sharp cut in tariff-free steel import quotas beginning July 1, 2026.
According to a recent study by the Global Trade Research Initiative (GTRI), the UK’s decision to reduce tariff-free steel quotas by 60 per cent could undermine the commercial gains expected from the FTA for Indian exporters.
From 1 July 2026, the UK will limit tariff-free steel imports, and this will reduce overall quota volumes by 60 per cent compared to the steel safeguard measure. Any imports above these levels will then face a 50 per cent tariff.
Like the European Union, the UK is increasingly adopting a protectionist approach by combining safeguard duties with carbon-linked trade measures.
“The UK is now moving in the same direction through tighter quotas, safeguard measures and its own CBAM-style framework,” GTRI said.
The Carbon Border Adjustment Mechanism (CBAM), already being implemented by the EU, imposes carbon-linked costs on imports of carbon-intensive goods such as steel and aluminium.
Analysts say similar policies by the UK could dilute the benefits of tariff reductions under the FTA.
GTRI further cautioned that such measures significantly reduce the real commercial value of free trade agreements and added that the UK may also push India to extend concessions similar to those negotiated under the India-EU trade discussions.
India and the UK concluded negotiations for the FTA earlier this year after multiple rounds of talks aimed at boosting bilateral trade and investment.
