India-UK Steel Quota Dispute
India is negotiating for a steel quota worth nearly $900 million in the UK under a bilateral Free Trade Agreement (FTA) signed in July 2025. This has delayed the implementation of the agreement, although negotiations concluded a year ago.
Issues with UK's Steel Quotas
- The UK announced quotas that India believes will restrict even current levels of steel exports despite the FTA.
- The Indian government aims to secure a quota at least equivalent to the three-year average of Indian steel exports to the UK.
- India threatens to impose restrictions on Scotch whisky if its interests are compromised.
Additional Regulatory Challenges
- The immediate concern is the steel quota, effective from July 1.
- The UK will introduce a Carbon Border Adjustment Mechanism (CBAM) from January 1, 2027, affecting carbon-intensive imports like aluminium and steel.
Impact on Trade
India's export of iron and steel to the UK was valued at $893.4 million in 2025-26, forming a significant part of the $13.4 billion in merchandise exports to the UK.
UK's Measures and Implications
- The UK decreased the tariff-free quota and doubled the tariff above the quota to 50% to address overcapacity.
- These measures are often used to prevent trade diversion from the EU and the US, which have also implemented similar tariffs.
Economic and Political Context in the UK
- The UK steel sector represents only 0.1% of the UK's economic output but supports 37,000 jobs.
- Political challenges arise as Prime Minister Keir Starmer's Labour Party faces significant losses in local elections.
