India-EU Trade Deal: A Game Changer for Both Sides
The upcoming trade agreement between India and the European Union (EU) is being hailed as the “mother of all trade deals” by Commerce Minister Piyush Goyal. Set to be signed on January 26, this agreement has garnered unanimous support from all 27 EU member states, indicating a strong commitment to mutual benefits. The deal is anticipated to be comprehensive, addressing the interests and sensitivities of both sides.
Goyal emphasized that during various high-level meetings, no EU state opposed the agreement, highlighting its significance. An official elaborated that India has secured favorable terms in sectors of interest, while also providing the EU with access to its desired markets. This partnership is viewed as complementary, fostering a win-win relationship.
Among the key discussions was the carbon border adjustment mechanism (CBAM), where India's national interests, particularly those of farmers, were prioritized. Additionally, India is working on a “new chapter” that aims to enhance regulatory certainty in the domestic manufacturing sector to attract EU investments. Conditions such as local employment and the use of local raw materials are being negotiated to create a favorable environment for foreign direct investment (FDI).
The deal follows a trend of India seeking investment commitments in exchange for lowering tariffs, a strategy evident in previous agreements with Western partners. For instance, the trade pact with the European Free Trade Association (EFTA) will see EFTA countries commit $100 billion to India over 15 years. Similarly, New Zealand has pledged $20 billion in investments.
The India-EU trade agreement has taken decades to come to fruition, with negotiations relaunched in July 2022 after stalling in 2013. The urgency surrounding these talks has increased due to shifting global trade dynamics, particularly following the protectionist measures adopted by the Trump administration.
India is particularly focused on gaining market access in labor-intensive sectors like textiles, footwear, and jewelry, while the EU seeks to enhance its market presence for automobiles and beverages. Both parties share concerns about China's dominance in critical technologies, further motivating this partnership.
The NDA government's Look West policy has positioned India favorably in trade relations with developed nations, where sectors do not directly compete. While negotiations with the US remain stalled, India has successfully established trade agreements with Australia, New Zealand, and the UK.
