The UK-India free trade deal poses a risk to British rice millers Tilda & Veetee

As Britain and India near a long-awaited trade agreement, a £1 billion ($1.2billion) segment of the UK’s economy fears for its future.

British rice millers like Tilda Ltd., Veetee Rice and others have prospered for decades importing brown rice with low tariffs from countries such as India and Pakistan. They then “polish” the grains to produce the popular white rice that UK consumers love.

India is pressing for the lowering of tariffs on white-rice, but British officials have not responded. Concerns are growing for an industry which employs over 3,000 people in 16 mills and plants located from Kent, in southern England, to Yorkshire, in northern England.

Alex Waugh said, “It’s crucial to maintain existing tariffs on white (milled) rice,” at a House of Commons private event attended by leaders of the rice industry and government officials, last month. If access to milled (white) rice is granted, the basis for operations will be undermined. Future investment in the UK and jobs will disappear.

A spokesperson for UK Department for Business and Trade stated that officials were working toward an “ambitious” trade deal.

The spokesperson stated: “We’ve always been clear that we won’t sign any deal unless it is fair, balanced, and ultimately in the interests of both the British people and economy.”

The UK-India trade deal was supposed to be the prize of Brexit. The argument was that, freed from the European Union’s constraints, Britain could leverage a shared language and history to create a landmark agreement with the largest nation on earth and the fastest-growing large economy.

In reality, the negotiations started by Boris Johnson last January have been marred by ambiguity. This has affected everything from visas to Indian students and workers to the market access of UK whisky makers and premium cars.

The hopes that his successor Rishi, a practicing Hindu and son of Indian immigrants who is also the son-in law of Infosys founder Narayana Murthy, could make a difference were not realized.

Both sides are hopeful that an agreement will be reached this year, as the UK and India are currently in their 13th round trade negotiations. The fate of British rice-millers is still unclear. Firms have complained of a lack information from British officials.

India and UK likely to push trade deal talks into next month

A person familiar with the UK dialogue said that the issue of rice tariffs was still not fully resolved. They added that it was an important topic and that both sides had a long way to go before they could iron out the “difficult details” of a deal.

Separate sources familiar with the Indian negotiation team confirmed the sensitive nature of the issue of rice tariffs and the fact that no agreement has yet been reached.

The UK’s struggle to reach an agreement highlights the challenges it may face in negotiating trade agreements with other countries after Brexit.

British farmers are already angry about the agreement with Australia. Minette Batters of the National Farmers Union said that she was “increasingly worried about the cumulative effect of the government’s FTA programme” on UK industry.

The UK imports large quantities of brown rice. Around 150,000 metric tonnes, or about a quarter, of the total imports of rice, come from India. Tariffs on imports make it cost-effective. The tax on brown basmati, which is £25 per ton or zero if included in a special variety list, is £25. This is a much lower levy than the one on white basmati at £121 per ton.

Industry leaders say that reducing the tariff on white grain would make UK mills redundant. It would also bring negligible benefits to consumers and threaten supply security.

Waugh argues that India would not benefit much from lower UK tariffs. He said that Indian farmers get a higher price for brown rice from UK mills compared to domestic players, as these buyers are more concerned with pesticide compliance.

The quantities of milled rice that Indian millers would export to the UK is likely to be insufficient to make a significant impact on their profit.

Waugh said that the UK’s downsides go beyond lost production and jobs. India is well-known for restricting exports when domestic rice supplies are low. White rice is often the first to be restricted. The South Asian nation currently has restrictions in place on all varieties of rice that are shipped overseas. UK millers have a large stock of rice to help smooth out the volatility. This supply is now at risk.