Opinion India should conclude pact with EU, seek greater integration in global supply chains

India-US trade relations continue to be mired in uncertainty. A 50 per cent tariff on exports to America remains in place and there appears to be little clarity over the broader trade deal. However, Delhi is moving ahead with its trade talks with the EU. On September 4, Prime Minister Narendra Modi and European Union leaders spoke about an “early conclusion” of the India-EU Free Trade Agreement. As per a report in this paper, top negotiators of the EU, in charge of trade and agriculture, are slated to visit India this week as they try to resolve some of the more contentious issues of the trade deal. Seen against the backdrop of global trade uncertainty, these talks underline India’s willingness to deepen its trade relationship with the world. These are welcome signs in uncertain times.

The EU is a large market. In 2023-24, the bilateral trade in goods between India and the EU stood at $137.41 billion. In services, it was $51.45 billion in 2023. And then there is investment — FDI flows from the EU were valued at $107.27 billion between April 2000 to December 2023. A trade deal would deepen the relationship. Several rounds of negotiations on the agreement have already taken place. Of the 27 chapters in the trade deal, negotiations have reportedly been concluded on 11 chapters. There are, however, several contentious areas, agriculture and dairy in particular. Another area of concern is the EU’s Carbon Border Adjustment Mechanism, which enters into its definitive regime from January 1, 2026. This would impact a range of sectors like steel, cement, and automobiles. As per a report in this paper, Delhi is looking for concessions similar to those received by the US. The two sides are looking to conclude negotiations by the end of this year. Delhi will, however, have to be mindful of its red lines. The recently concluded India-UK trade deal could offer a framework for a pact with the EU. But the relationship between India and the EU is deepening beyond just trade. As per a report in this paper, on September 17, the EU Commission will unveil a strategic agenda roadmap document, which is expected to lay out an ambitious agenda, cutting across security, defence, trade, and tech sectors. An India-EU leaders summit is also slated for early next year.

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Even as India pursues these trade agreements that will increase its market access in the high-income economies of the West — in the recent past, it has also signed agreements with Australia and the UAE — Delhi must seek greater integration with supply chains that run through East and Southeast Asia. It must also evaluate the benefits of joining trade agreements such as the Comprehensive and Progressive Agreement for Trans-Pacific Partnership.