Explained : EU chiefs aim to set Trump aside and close bumper India trade deal and Its Impact

After two decades of talking, a trade accord between the EU and India couldn’t come at a better time for the bloc’s beleaguered leadership.

Fresh from fending off threats from Donald Trump over recent weeks, European Commission President Ursula von der Leyen and European Council President António Costa should sign a long-awaited trade deal with India’s Prime Minister Narendra Modi at an EU-India summit in New Delhi on Tuesday.

Its signing – should last minute chinks around climate policy be resolved – come as the EU seeks to diversify its trading partners amid rising trade tensions with the US.

“We are showing a fractured world that another way is possible,” von der Leyen said on Sunday of cooperation with India.

The accord will provide access to a market of around 1.5 billion people, with India emerging as a key strategic partner for Europe as the world’s largest democracy.

Top negotiators have already said the agreement, once dubbed the ‘mother of all deals’ owing to the size of India’s market, has been “extremely difficult” to close.

Art of the deal

Under the agreement, India is set to cut tariffs on cars imported from the EU, down from rates as high as 110% to potentially to 40%, Reuters reported over the weekend.

This would create major opportunities for European car manufacturers such as Volkswagen or Renault which have been struggling of late. Tariff reductions under the pact could also benefit sectors including automotive components, chemicals, and plastics, while the text is also expected to improve market access for EU wines and spirits.

“This is very good news for producers given the size of the market and the excise duties currently in place,” one EU diplomat told Euractiv.

In turn, India should benefit from easier exports for sectors such as textiles, jewellery, pharmaceuticals, machinery, and IT services.

As ever, the EU won’t get everything it wants.

New Delhi and Brussels clashed over the sustainability commitments within the deal.

While human rights and commitments around the Paris Agreement should be included in the deal, they are unlikely to be designated as ‘essential elements,’ an EU diplomat told Euractiv. This means that a breach would not allow the deal to be suspended, unlike for the EU-Mercosur agreement.

India also requested exemptions from EU climate laws, such as the carbon border tax (CBAM), which was refused. The issue appears unresolved.

“Both sides are working intensively to address the remaining challenges,” von der Leyen told The Times of India over the weekend.

Some sensitive areas will remain outside the deal, including agricultural products like dairy. Plans to protect traditional foods under the Geographical Indications (GI) system have been postponed until India finalises revisions to its own GI legislation.

Once signed, the agreement will still need to be ratified by the European Parliament before entering into force.

Sofia Sanchez Manzanaro contributed reporting.

(jp)