Opinion The return of trade policy as an instrument of statecraft
Rather than accepting a bloc-wide compact, India has assembled a network of trade corridors to preserve optionality amid a period when geopolitics routinely spills into commerce
The next generation of trade outcomes will be shaped less by headline tariffs and more by behind-the-border frictions. Donald Trump’s trade policy now moves at the speed of a social media post: One day a targeted tariff threat, the next a blanket penalty on “any country” dealing with a sanctioned state. Uncertainty is no longer a by-product; it is the instrument raising risk premia for exporters across Asia and forcing governments to treat trade strategy as contingency planning. For India, the European track increasingly looks like the anchor: An India-EU FTA is being positioned as the set-piece that locks in market access, standards alignment, and supply-chain upgrading. The real question is what this does to India’s Indo-Pacific play after RCEP (Regional Comprehensive Economic Partnership) trajectory warrants closer scrutiny — whether New Delhi can peg a coherent regional corridor strategy to the EU deal’s disciplines and leverage, or whether the Indo-Pacific remains a loose patchwork that is harder to operationalise.
When New Delhi withdrew from RCEP in 2019, it was widely interpreted as a retreat from the central economic architecture of the Indo-Pacific. In practice, it amounted to a deliberate refusal to enter a single, comprehensive arrangement that Indian policymakers judged to be misaligned with domestic political constraints and sectoral risks. India did not disengage from the region, but it shifted to a strategy of incremental agreements that could be calibrated, safeguarded, and periodically upgraded.
India’s concerns remain essentially unchanged: The risk of import surges in sensitive sectors, rules of origin that can be exploited to dilute “regional” preferences, and a structural asymmetry with large manufacturing economies, particularly China. What has changed is the method. Rather than accepting a bloc-wide compact, India has assembled a network of trade corridors to preserve optionality amid a period when geopolitics routinely spills into commerce.
The numbers explain the intent. India’s trade deficit with ASEAN (Association of Southeast Asian Nations) has expanded to roughly $43-44 billion in recent years, making the performance of the India-ASEAN Free Trade Agreement (FTA) not only an economic concern but also a domestic political imperative. At the same time, India is using trade agreements to advance longer-term industrial objectives, as illustrated by the $100 billion investment commitment over 15 years embedded in its partnership with the European Free Trade Association (EFTA), alongside an explicit ambition to support employment creation. Meanwhile, India-New Zealand trade remains modest at around $2.4 billion (2024), yet the FTA concluded in late 2025 carries strategic weight because it extends India’s preferential trade footprint across almost the entire RCEP geography without requiring India’s membership in the bloc.
India’s newer geoeconomic approach breaks market access into smaller, negotiable bargains that can be tailored to Indian strengths and constrained where domestic costs are high. Australia illustrates the template: Broad openings for competitive exports, combined with careful protection for politically sensitive agricultural lines. West Asia adds a different dimension. The UAE-Oman agreements are not only about tariff liberalisation but also aim to build trade-and-logistics corridors that expand India’s operational reach, particularly in services and re-export ecosystems.
Europe, meanwhile, is being treated as a supply chain and upgrading partner. The United Kingdom (UK) agreement expands access to a high-income market, while the Trade and Economic Partnership Agreement (TEPA) with EFTA links trade to investment and capability-building at home. The New Zealand pact complements this corridor-based strategy by providing an additional bridge into Oceania without the rigidity of a single, bloc-wide commitment.
A network strategy may appear coherent on paper, but its credibility will ultimately be judged by how existing agreements perform. That is why the India-ASEAN FTA review is the centrepiece of India’s trade recalibration. The deficit is politically salient, but the underlying challenge is operational: Tariff anomalies that create inverted duty structures, rules of origin that are difficult to enforce at scale, and non-tariff barriers that prevent “access on paper” from translating into market share. If India can tighten terms, reduce loopholes, and lower compliance friction, the ASEAN pact can again function as a meaningful growth channel; if it cannot, the agreement will remain vulnerable to the charge that it disproportionately favours imports.
The same logic applies to Japan and South Korea, where India’s effort to reopen and modernise agreements is not simply about narrowing imbalances. It reflects the changing nature of competitiveness. The next generation of trade outcomes will be shaped less by headline tariffs and more by behind-the-border frictions: Conformity assessments, professional mobility, digital trade disciplines, investment protections, mutual recognition arrangements, and stable regulatory pathways. For deeper integration with advanced manufacturing economies, these issues determine whether agreements are commercially viable.
There is, however, a structural trade-off in India’s corridor strategy. Multiple agreements inevitably produce various rulebooks. Varying rules of origin, differing standards regimes, and uneven safeguard provisions can raise compliance costs and inadvertently exclude smaller exporters. If India wants preferential access to translate into orders and jobs, trade diplomacy must be matched by domestic trade facilitation with stronger logistics, predictable refunds, simpler customs processes, and credible standards and testing infrastructure. In the tariff age, diversification has value only if firms can switch markets without being delayed by months of procedural friction.
China’s absence from India’s preferential architecture is the other defining feature of this strategy. The exclusion is structural rather than rhetorical, shaped by India’s experience of persistent deficits, vulnerability to import surges, and the strategic overlay that distinguishes the India-China relationship from most others. New Delhi is not attempting to sever economic ties; regional value chains make that neither realistic nor desirable. It is, however, trying to avoid a design in which China becomes the unavoidable centre of India’s trade dependence.
The larger lesson is that trade policy has returned as an instrument of statecraft, not merely a route to efficiency. In a tariff-prone world where access can be tightened with little notice, India’s advantage will depend on whether its agreements are commercially usable through enforceable rules, predictable implementation, and low-friction exporting for firms of all sizes. If New Delhi can translate negotiated access into real utilisation through tighter disciplines, credible compliance systems, and faster trade facilitation, its corridor-based strategy will not only hedge risk but also steadily build competitiveness.
The writer is a fellow, Centre for New Economic Diplomacy, ORF
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