On January 27, the European Union and India announced a historic trade deal, the biggest one ever for both parties involved. The Free Trade Agreement (FTA) negotiations have concluded today, after almost two decades of talks.
The deal creates a free trade zone of 2 billion people, sending a signal to the world that rules-based cooperation delivers great outcomes, the European Commission President Ursula von der Leyen believes.
The historic deal comes at a time of rising geopolitical tensions and global economic challenges, as the US continues the tariff war against multiple nations.
Von der Leyen called the event "the mother of all deals" during a media briefing in Delhi, while the Indian Prime Minister Narendra Modi highlighted that the pact is historic.
India and the EU strengthen economic and political ties
The newly-announced deal highlights the countries' commitment to economic openness and rules-based trade. The EU and India already trade over 180 million Euros worth of goods and services per year, supporting over 800,000 EU jobs.
The agreement is expected to double EU goods exports to India by 2032 by eliminating or reducing tariffs by almost 100%. The tariff reductions could save 4 billion Euros per year in duties on European products.
Official EU reports state that this is the most ambitious trade opening that India ever granted to a trade partner, and it will provide the EU access to the largest country in the world in terms of population. India is among the world's fastest-growing large economies with an annual GDP of over 3.4 trillion Euros.
Key points about the India-EU deal
The most important points of the trade deal between the EU and India include the following:
- New opportunities for EU businesses of all sizes - Tariff reductions of up to 100% will be in place for cars, and other tariffs on machinery, chemicals, and pharmaceuticals will also be abolished.
- Benefits for SMEs in both countries - Small to medium businesses will benefit from tariff reductions, removal of regulatory barriers, transparency, stability, and predictability.
- Reducing agri-food tariffs - The FTA reduces tariffs on EU exports of agri-food products, supporting EU farmers; EU agricultural sectors will be fully protected, and all Indian imports will respect the EU's strict health and food safety rules; EU farming products will sell more in India following negotiations in a separate agreement.
- EU companies get access to the Indian services market and protected IP - Companies in the EU will receive privileged access to key Indian sectors like financial services and maritime transport; a high level of IP protection is provided by the FTA for businesses in both countries.
- Enhanced sustainability commitments - The FTA also boosts environmental protection, protects workers' rights, and women empowerment; 500 million Euros in EU support will help India accelerate sustainable industrial transformation.
What's next
The negotiated draft texts will be published by the EU soon and will go through legal revision and translation into all EU languages. The EU and India can sign all the agreements after they are adopted by the Council.
Following the signature, the FTA requires the EP's consent, and the Council's decision on conclusion for it to enter into force. After India also ratifies the agreement, it can eventually enter into force, the European Council reports.
EU and India first launched negotiations for an FTA in 2007, and talks were suspended in 2013 and relaunched in 2022.
India and the EU are actively working to strengthen relationships, and the countries are looking to diversify away from the US amidst rising tariff threats from Trump.
EU countries will benefit from the new FTA with India, which aims to support business development, improve market access, safeguard sensitive sectors, and potentially boost the regional GDP over the coming years.
