The European Union and India finalised a crucial free trade agreement, aiming to create a giant new free trade zone, as European leaders push to diversify their trade partners amid uncertainties with the United States.
The trade deal with India has been long in the making and is part of the Commission’s general strategy to speed up trade deals.
While the deal with the South American union Mercosur still encounters significant roadblocks, this deal with India reached the end of negotiations smoothly, even though it also had a long gestation, with first negotiations starting in 2007, then a pause in 2013, and a relaunch in 2022.
“We have sent a signal to the world that rules-based cooperation still delivers great outcomes. And, best of all, this is only the start,” commented Commission President Ursula von der Leyen.
Under the negotiated deal, the EU has several safety valves for its products, and both partners will slowly remove tariffs across a wide variety of goods. According to the Commission’s estimates, by 2032 the deal could double trade between the EU and India, currently valued at around €180 billion. Lowering tariffs alone could save up to €4 billion per year. It will open up the Indian market for several products.
“Under this agreement, European wines, spirits, beers, olive oil, confectionery, and other products will enjoy preferential access to the rapidly growing Indian market,” said Christophe Hansen, Commissioner for Agriculture and Food.
India will lower tariffs across the board on several key goods, including cars, agricultural products, machinery, chemicals, and pharmaceuticals. So far, India has never granted such tariff reductions to any of its trading partners. In particular, the car sector will see tariffs being slashed from the current 110% to 10% over the next few years. Wine exporters will enjoy similar reductions, going from 150% to 75% and eventually to 20%. Similarly, the current tariffs of 50% on processed food products, 44% on machinery, 11% on pharmaceuticals, and 22% on chemical products will eventually all but disappear.
Indian exports, particularly agricultural products, will still have to comply with EU health and safety standards. In addition, some sensitive products, such as beef, chicken meat, rice, and sugar, have been exempted from the slashing tariffs.
Finally, India and the EU will enter into a stricter intellectual property protection regime that will include copyright, trademarks, designs, trade secrets and plant variety rights.
The deal will now have to be ratified by the European Council before signature by the European and Indian authorities. After that, the parliaments of both partners will have to vote in its favour before it enters into force.
As Commissioner for Trade Maroš Šefčovič said, “now, our focus is clear: ensuring businesses reap tangible benefits from this FTA as quickly as possible.”
