The Hindu: Published on 1st March 2025:
Why in News?
India and the European Union (EU) are pushing to finalize their long-delayed Free Trade Agreement (FTA) by the end of 2025. This was announced after Prime Minister Narendra Modi met with European Commission President Ursula von der Leyen in Delhi. The FTA, first initiated in 2007, has faced multiple hurdles, particularly in tariff negotiations. Additionally, India and the EU are discussing a new strategic security and defence partnership, which will replace the current Strategic Roadmap 2020-2025.
Key Issues in the Trade Deal-
What Does the FTA Include?
- A bilateral Free Trade Agreement covering trade in goods and services.
- An Investment Protection Agreement to promote investment flows between India and the EU.
- A Geographical Indications (GI) Agreement to protect region-specific products (such as Champagne from France or Darjeeling Tea from India).
- The FTA is expected to be the largest trade agreement globally, covering India’s $100+ billion trade with the EU.
Challenges in Concluding the FTA-
The FTA talks have been stalled over tariff issues, with the EU demanding significant reductions on:
- European Cars – The EU wants lower tariffs on automobile exports to India, while India aims to protect its domestic auto industry.
- Alcohol Imports – The EU seeks lower tariffs on European wines and spirits, a demand resisted by India due to its impact on local liquor manufacturers.
- Market Access & Labor Mobility – India wants better access for its IT professionals and services sector, but the EU has concerns over labor regulations.
- Intellectual Property Rights (IPR) & Data Protection – The EU insists on stricter IP laws and data privacy regulations, while India seeks a balanced approach.
- The year-end deadline set by leaders is aimed at providing a “political push” to overcome these long-standing hurdles.
Geopolitical Context of the Trade Talks-
The renewed urgency for an India – EU trade deal is driven by shifting global geopolitical dynamics:
U.S. Tariff Uncertainty – Former U.S. President Donald Trump has threatened tariffs on Europe and "tariff violators" like India, making the EU keen on diversifying trade partners.
RU Russia-Ukraine Conflict – The EU is looking for alternative trade alliances as it reduces dependency on Russia.
CN Reducing Dependence on China – Europe’s ‘de-risking’ strategy aims to cut trade reliance on China, making India an attractive partner for supply chains.
Security & Defense Cooperation –
- The next India-EU Summit is expected to finalize a Strategic Security & Defense Partnership, covering:
- Joint cooperation on cybersecurity and counterterrorism.
- Defense technology collaboration.
- Enhanced maritime security, especially in the Indo-Pacific region.
- Ms. von der Leyen emphasized that India-EU relations "have the potential to be one of the defining partnerships of this century", signaling a strong geopolitical and economic alignment.
Past Trade Negotiation Delays-
- India has sped up trade negotiations in recent years but has faced missed deadlines for FTAs, including:
- India-UK FTA – Missed its 2022 deadline due to differences in mobility and labor laws.
- India-Australia FTA – Delayed over agriculture and service sector access.
- India-Canada FTA – Halted due to political tensions.
- With the EU being India's second-largest trade partner, both sides are now prioritizing the FTA.
What Happens Next?
- Next round of negotiations in Brussels (March 10-14, 2025).
- Technical teams from both sides will work on bridging tariff gaps.
- The India-EU Summit (later this year) will serve as a key milestone.
- If successful, the India-EU FTA could unlock billions in new trade opportunities, strengthening economic and strategic ties between both regions.
Key Takeaways:
- India and the EU aim to finalize their FTA by the end of 2025, but tariff disputes remain a major hurdle.
- The EU wants lower tariffs on cars and alcohol, while India seeks better access for its services sector.
- Global geopolitical shifts (U.S. tariff threats, Russia-Ukraine war, and China de-risking) are accelerating India-EU trade cooperation.
- A new Strategic Security & Defense Partnership is also being discussed, signaling closer India-EU ties beyond trade.
- The upcoming India-EU Summit will be a crucial moment to finalize agreements.