Opinion India’s trade posture explains why the EU FTA matters now

The point is deterrence: To make coercion costly, rule-bound, and politically usable. For India, the coercion lesson has been familiar. The United States has used punitive trade tools in recent years — including tariffs that reached 50 per cent on Indian exports after late August 2025 — linked to geopolitical pressure over Russian oil purchases. In such an environment, every major negotiation becomes a question of optionality: How to secure access without becoming hostage to the next demand. That is why the EU-India FTA is being treated less as a conventional trade bargain and more as strategic architecture.

The headline numbers justify attention, but they also demand sobriety. EU-India trade in goods totalled about €120.1 billion in 2024, and services trade was about €66 billion. Yet India remains a modest slice of Europe’s overall trade — roughly 2.4 per cent of EU trade in goods. India matters to Europe, but not as indispensably as the US or China. That asymmetry is precisely why India needs rules that convert interest into predictable market access, especially for firms beyond India’s largest conglomerates.

If an FTA is to be meaningful, it will not be decided only by tariff headlines. The real battleground is behind the border: Standards, conformity assessment, and the capacity to test and certify at scale. A tariff cut is a promise; a certificate is a passport. India’s ability to issue that passport cheaply will decide who actually benefits.

Tariff cuts still matter politically. Reports indicate India will reduce duties on a limited set of high-end European cars priced above €15,000 from 70-110 per cent to 40 per cent as a first step, while keeping electric vehicles outside the cut initially. But the decisive battleground is elsewhere: Conformity assessments, product standards, testing and certification capacity, public procurement rules, digital and data governance, investment safeguards, and workable mobility pathways for professionals. This is the “next generation” of trade: The rules that determine whether market access exists only in legal text or in actual purchase orders.

India’s broader trade posture explains why the EU deal matters now. When India stepped away from the Regional Comprehensive Economic Partnership (RCEP) in 2019, it did not exit the Indo-Pacific economy; it exited the premise that a single mega-bloc bargain could be absorbed domestically without political cost. New Delhi has since favoured calibrated corridors: Smaller agreements that can be sequenced, safeguarded and upgraded, and aligned with industrial policy.

The rationale is visible in the data. India’s trade deficit with ASEAN has been politically salient, strengthening the case for tougher rules of origin and a more enforceable review of the India-ASEAN FTA. At the other end, the EFTA pact is tied to a reported $100 billion investment commitment over 15 years, linked to employment targets — a template for connecting trade to domestic outcomes.

Two issues will decide whether the EU-India FTA becomes confidence or controversy.

The first is climate-linked trade. The EU’s Carbon Border Adjustment Mechanism (CBAM) shifts climate policy into the domain of market access, with its definitive phase beginning in 2026. Indian exporters worry that climate-conditioned access will function as a non-tariff barrier for emissions-intensive sectors such as steel and aluminium; Europe argues it is levelling costs with domestic producers. The workable response is not rhetoric but readiness: Credible measurement, reporting and verification systems, and negotiated transition arrangements that preserve competitiveness while meeting environmental constraints.

The second is implementation capacity at home. Multiple agreements create multiple rulebooks. Differing standards and rules of origin raise compliance costs and can inadvertently exclude smaller exporters. If India wants preferences to translate into orders and jobs, trade diplomacy must be matched by domestic trade facilitation: Stronger testing infrastructure, simpler customs processes, predictable refunds, better logistics, and exporter-facing compliance support that MSMEs can use without hiring a compliance army.

Negotiations can be concluded and summits can be staged. The real test is at the file counter: Whether an apparel manufacturer in Tiruppur, an engineering exporter in Pune, or a services firm in Bengaluru can use the agreement’s promised pathways predictably and at scale. In a coercive trading order, India’s advantage will lie not only in signing big agreements, but in building the domestic capability — standards, logistics, and industrial upgrading — that makes each agreement deliver.

The writer a German Chancellor Fellow (2024-25) with the Alexander von Humboldt Foundation and writes on the Global South, geopolitics, and the digital-policy landscape