Opinion India-EU deal signals freer trade, protectionism in retreat

After several rounds of talks, India and the EU have finally concluded negotiations on an enormously consequential free trade agreement — a deal that creates a trade zone of regions that are home to around 2 billion people and account for 25 per cent of global GDP. The “mother of all deals” underlines Delhi’s desire to seek deeper global integration within a predictable rules-based framework at a time when US President Donald Trump has taken a wrecking ball to the trading system. Though the formal signing will take place only after the legal scrubbing is finished, this pact will help facilitate the diversification of India’s export markets — critical when the country faces a 50 per cent tariff levy on exports to the US. The relationship with the EU is deepening beyond trade as well, with the signing of a Security and Defence Partnership that will facilitate greater collaboration in areas of maritime security, counter-terrorism and cybersecurity.

Under the agreement, India has received preferential access to the European markets across 97 per cent of tariff lines, while for the EU, India has offered tariff liberalisation on 92.1 per cent of tariff lines. Some tariff lines will see immediate reductions, while in certain cases the duty reductions will be implemented in a phased manner. Others are subject to tariff-rate quotas. For India, labour-intensive sectors are likely to get a boost. For instance, the FTA creates a more even playing field in accessing the EU’s ready-made garment market, which is pegged to reach $105 billion as per CareEdge Ratings. This will create tremendous opportunities for exporters. And while India has stuck to its red lines — such as dairy — it has also secured commitments across 144 services subsectors, including IT/ITeS, education and professional services. At a time when there are issues regarding H-1B visas in the US, the EU FTA puts in place a mobility framework that “eases the movement of employees of Indian corporations”.

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The political will in pushing through this long drawn out agreement — talks for the deal had begun in 2007 — along with the spate of recent trade agreements, signals a desire to embrace freer trade, and points to protectionist impulses in retreat. While the deal with the US hangs in limbo, the government should look to sustain the movement and push to join other larger trade groupings.