Ursula von der Leyen, the President of the European Commission, has announced that the European Union (EU) and India are determined to finalize a Free Trade Agreement (FTA) within the year. Speaking in Delhi, von der Leyen emphasized that while the negotiations would be challenging, both parties are committed to achieving the deal, which would become the largest agreement of its kind globally.
Von der Leyen’s visit to India, accompanied by the entire College of Commissioners, marks the first after the European parliamentary elections of June 2024. The Commission chief met with Indian Prime Minister Narendra Modi on Friday, discussing deepening trade relations and investment collaboration across multiple sectors, including semiconductors, artificial intelligence (AI), and cleantech.
EU and India Relaunch FTA Negotiations
The EU and India restarted negotiations on a long-pending Free Trade Agreement in 2021, with another round of talks scheduled for March 2025. A high-level India-EU Summit will also take place later this year. The FTA aims to strengthen economic ties and promote sustainable trade across various industries.
Von der Leyen further emphasized that the EU and India are exploring a future Security and Defence Partnership, similar to agreements the EU has with Japan and South Korea. This collaboration is seen as crucial in enhancing security and stability in the Indo-Pacific region.
Importance of Trade and Security Cooperation
As the EU seeks to expand its influence in the Indo-Pacific, particularly in light of rising tensions between the US and Europe over trade tariffs and the Ukraine conflict, fostering robust trade and security relations with India has become increasingly important. Analysts suggest that a strong partnership with India is essential for the EU’s geopolitical strategy, especially as trade discussions with the US under President Donald Trump become more strained. Trump has threatened to impose 25% tariffs on EU-made goods, claiming that the bloc was established to disadvantage the US.
In response, the European Union has pledged to react “firmly and immediately” to any unjustified tariffs, reaffirming its commitment to protecting its economic interests.
EU-India Trade Relations: A Strong Foundation for Growth
Despite the challenges in reaching a trade agreement, EU-India trade continues to thrive. The EU is India’s largest trading partner, with bilateral trade reaching a remarkable $135 billion (£107 billion) in 2022-23. This trade volume has nearly doubled in the past decade, highlighting the growing importance of this partnership. Around 6,000 EU companies currently operate in India, further solidifying economic ties between the two regions.
India’s approach to Free Trade Agreements has evolved significantly, with the country now actively pursuing deals with multiple nations and trade blocs. This week, India resumed negotiations for a Free Trade Agreement with the UK, nearly a year after talks were paused due to elections in both countries. Additionally, India recently signed a $100 billion trade deal with the European Free Trade Association (EFTA) after 16 years of negotiations.
The Road Ahead for EU-India Free Trade Agreement
Despite renewed efforts to finalize an FTA, significant hurdles remain in sectors such as agriculture and manufacturing. According to the Observer Research Foundation (ORF), a prominent think tank, progress on the FTA has been slow, with little to show from the talks so far. However, both India and the EU remain committed to overcoming these challenges and securing a comprehensive trade deal that will benefit both sides.
As India and the EU continue their negotiations, the global focus on their economic partnership is expected to intensify, with the potential for a landmark deal that will shape trade relations for years to come.
