Brussels: The EU and India have announced a historic free trade agreement, termed as 'the mother of all deals', amidst escalating tensions in their economic relations with the United States.
According to Anadolu Agency, this notable agreement was reached against a backdrop of tariff disputes and trade frictions, compounded by the unpredictable trade policies of US President Donald Trump. The deal signifies a shift towards deeper economic and strategic cooperation between Brussels and New Delhi after nearly two decades of stalled negotiations.
The comprehensive agreement entails significant tariff reductions on goods such as automobiles, wines, textiles, and footwear. Moreover, it includes a new security and defense partnership, as well as a pact to establish a comprehensive mobility framework.
Describing the agreement, Heribert Dieter, a senior fellow at the German Institute for International and Security Affairs, referred to it as a 'shotgun marriage' driven by Trump's policies. Analysts suggest that Trump's aggressive trade stance hastened the deal, compelling both parties to reach a compromise amidst fears of growing protectionism from Washington.
Negotiations for an EU-India free trade agreement began in 2007 but were halted in 2013 due to disputes over market access, regulatory standards, and labor and environmental provisions. Talks were revived in 2022 under mounting geopolitical and economic pressures. Dieter remarked that the EU had previously negotiated with a 'superiority complex', expecting India to conform to European norms, a stance resisted by New Delhi as it emerged as a global power.
Amitendu Palit, a senior research fellow at the Institute of South Asian Studies, noted that Trump's unilateral 50% tariffs on Indian goods and the EU's experiences with US trade policies fueled the need for this agreement. The deal marks a broader shift, demonstrating that countries with historically divergent trade positions can still establish mutually acceptable global trade rules.
Beyond trade, the agreement is expected to bolster infrastructure cooperation, particularly the proposed India-Middle East-Europe Economic Corridor. The corridor aims to enhance trade routes between Europe and India via the Middle East. Dieter emphasized the necessity of infrastructure for successful trade, while Palit highlighted the security and defense partnership formalized alongside the trade deal.
The agreement will eliminate or reduce customs duties on 96.6% of EU-origin goods, potentially saving European companies approximately pound 4 billion ($4.7 billion) annually. An analysis by the Kiel Institute for the World Economy estimates an annual GDP boost of 0.13% on both sides, with bilateral trade expected to surpass $200 billion by 2030.
India's import duties on cars will be drastically reduced, benefiting European automakers. Duties on machinery, chemicals, and agricultural products will also see significant reductions. The deal will ease the movement of skilled Indian professionals to EU countries like Germany, which are facing labor shortages.
Overall, India's labor-intensive exports such as textiles, garments, and pharmaceuticals stand to benefit significantly, while the EU is poised for gains in automobiles, beverages, food products, and scientific equipment.