The EU and India are moving closer together. Against the backdrop of growing tensions with the USA and China, Europe must strengthen its “strategic independence”, said EU Commission President Ursula von der Leyen during a visit to New Delhi to mark the 77th Republic Day.
A new free trade agreement, which von der Leyen described as the “mother of all deals”, should contribute to this. Closer cooperation in security and defense is also planned. A “strategic agenda” envisages, among other things, joint armaments projects.
Von der Leyen and Indian Prime Minister Narendra Modi signed several documents in New Delhi that are intended to seal the rapprochement. However, it will probably take some time before it is implemented. The joint strategy targets the year 2030; So far, India has cooperated primarily with Russia in armaments. The trade agreement is ready, but still has to overcome many hurdles. It is scheduled to come into force in 2027 at the earliest.
The agreement followed almost 20 years of negotiations. It comes at a time when the EU and India are suffering from the consequences of US President Donald Trump’s aggressive customs and trade policies. Those too Chinese export offensive has brought both sides closer together.
Free trade only within narrow limits
The trade deal gives the EU better access to one of the fastest growing and largest economies in the world. However, free trade only takes place within narrow limits. India has resisted fully opening its markets and has excluded several strategically important areas such as the sought-after rare earths.
“The Indians have told us that they have suffered long enough from European colonialism and now they do not want neo-colonialism,” said the EU Commission in Brussels. That is why the trade agreement was not quite as ambitious as initially hoped.
The new pact is expected to eliminate or reduce tariffs on more than 96 percent of traded goods. The EU expects its exports of goods to India to double by 2032. This could save European companies €4 billion in tariffs.
EU parliamentarians welcome agreement
German car manufacturers are particularly likely to benefit. India is gradually reducing import duties on cars from up to 110 percent to 10 percent. However, a quota of 250,000 cars applies. Tariffs on wine will fall from 150 to 75 percent, with 20 percent planned later.
The new agreements still need to be approved by the EU member states and the European Parliament. Initial reactions from EU MPs were positive. “The conclusion of the negotiations with India is a glimmer of hope given the chaotic geopolitical situation,” said the head of the Trade Committee, Bernd Lange (SPD).
Also the Greens signal consent. Your trade policy spokeswoman, Anna Cavazzini, spoke of successful negotiations. “The fact that India is now taking the step towards free trade with the EU is a strong geopolitical signal towards the EU,” said Cavazzini.
Modi: “A new era begins here”
India’s Prime Minister Narendra Modi from the Hindu nationalist conservative party BJP staged the summit as a political turning point. “A new way of thinking begins here, a new era begins here,” he said. It is “not just a trade agreement, but a blueprint for shared prosperity”.
The aim is to give farmers, small businesses and the service sector better access to the European market and to upgrade India as a production location.
For India, the EU is the second most important export market after the USA. Labor-intensive sectors such as textiles, clothing, jewelry, leather and shoes, where EU tariffs have so far been set higher, are likely to particularly benefit. Agricultural products such as milk, grain, meat and certain types of fruit and vegetables are excluded in order to limit political resistance.
Also at CO₂-Border Adjustment System (CBAM), the agreement creates a formal framework for dialogue and technical cooperation for the first time. This is attached Dispute over climate tariffs but not.