European Commission President Ursula von der Leyen said during her visit to New Delhi on February 28 that a landmark free trade agreement between the EU and India could be concluded by the end of 2025. She also added pompously that “this visit marks the beginning of a new era. It is time to take our EU-India Strategic Partnership to the next level—for our security, prosperity, and for addressing global challenges together.”
It should be noted that von der Leyen also announced that the European Union is actively exploring the possibility of a new “Security and Defense partnership” with India, similar to existing the EU agreements with key partners like Japan and South Korea.
The history of relations between India and the EU is quite long. India was among the first countries to establish diplomatic relations with the European Economic Community in 1962. Following the EU-India 1994 Cooperation Agreement, the parties built a multi-tiered institutional architecture of cooperation, and eventually upgraded their relationship to a ‘Strategic Partnership’ in 2004.
As a result, the parties began negotiations on a broad-based bilateral trade and investment agreement in 2007. However, after 15 rounds of negotiations, talks between the parties stalled in 2013, due to diverging ambitions between the counterparts.
On 8 May 2021, the EU and Indian leaders agreed to resume negotiations for a ‘balanced, ambitious, comprehensive and mutually beneficial’ trade agreement, and to launch separate negotiations on an investment protection agreement and an agreement on geographical indications. In addition, they decided in April 2022 to launch an EU-India Trade and Technology Council.
According to official documents of the European Union, the EU is India’s largest trading partner, accounting for €124 billion worth of trade in goods in 2023 or 12.2% of total Indian trade. India is the EU’s 9th largest trading partner, accounting for 2.2% of the EU’s total trade in goods in 2023. Trade in services between the EU and India reached €59.7 billion in 2023, up from €30.4 billion in 2020.
The trade negotiations aim to:
- Remove barriers and helping EU firms – especially smaller ones – to export more;
- Open up services and public procurement markets;
- Ensure protection of geographical indications;
- Pursue ambitious commitments on trade and sustainable development, and;
- Make sure the agreed rules are enforceable.
The investment protection negotiations aim to provide investors from both sides with a predictable and secure investment environment.
In general, it was previously planned that the negotiations would be completed in 2024.
The latest round of negotiations between India and the EU took place in November 2024 on tariffs for communication technology (ICT) goods. According to the plan, the parties were supposed to present their vision by February 10, 2025. Apparently, the data exchange happened to be successful, which is why EU representatives announced that the agreement could be signed as early as this year.
In addition to purely technical nuances and the protection of its own interests by the EU and India, the current geopolitical circumstances are pushing Brussels towards the agreement, which leave little room for maneuver. The new US leadership has promised that 25% tariffs on EU goods will be introduced from April in response to Brussels’ protectionist measures. On the other hand, there is concern within the EU about China’s increasing influence on the European market, especially in the field of rare earths and telecommunications products. By the way, the EU can also use the historical confrontation between India and China to its advantage, which is why the head of the European Commission spoke about defense cooperation. As India tries to diversify arms supplies and develop its own military-industrial complex, the EU’s proposals on this issue may come in handy for New Delhi.
Let’s add that India has previously signed a number of agreements with the United States in advanced technologies and science, and personal relations between Prime Minister Narendra Modi and President Donald Trump are developing quite well. And amidst criticism of the EU from the White House and the current disagreements, India is in a winning position. To this can be added the ongoing cooperation with Russia, which helps India to develop its own economy. It is likely that the EU’s decision to establish free trade with India may have a hidden agenda – if some of the oil products from Russia have so far been supplied to the EU through third countries, then under the new agreement, India can expand in this area much more widely. Petroleum products are one of the main commodities that India supplies to the EU. And, most importantly, the country is not afraid of any sanctions, since both the United States and the EU are unlikely to impose restrictions any, which is confirmed by the previous waivers of the sanctions regime against New Delhi.
Other Indian goods that go to the EU include ready-to-wear, steel, electrical machinery, and pharmaceuticals. Exports of services such as telecommunications, business and transportation services may also grow significantly after the signing of the agreement.
The EU is expected to benefit from increased exports of essential goods from India, such as aircraft and parts for them, electrical equipment, chemicals and diamonds. The service sector will also benefit from increased trade in intellectual property services, telecommunications, and IT services.
Taking into account the fact that two and a half million Indians live in the EU countries, and this figure will clearly grow in the near future, India actually has its own consumer agents on the ground who will actually lobby for India‘s entry into the European market.
According to the latest data, the EU is seeking to eliminate duties on more than 95 percent of its exports, including sensitive agricultural products and automobiles. For its part, India wants to open only about 90 percent of its market to the EU, hesitating to reduce tariffs on large agricultural products.
As for the direct route for the supply of products in both directions, the EU is now betting on the Middle East corridor. Both the classic route through the Suez Canal and alternative routes through Turkey, Iraq and Iran can be used here. However, a route through Russia after the lifting of sanctions cannot be ruled out in the future. In addition, the products of Russian and Indian joint ventures in India can also be supplied to the EU. This option may be quite useful in the future.
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