Decoding the EU–India FTA: What European Businesses Need to Know

I. Strategic Imperative

• Why It Matters: The EU–India Free Trade Agreement (FTA) is more than a trade pact — it’s a geopolitical de-risking lever for Europe.

• Current Context: The EU remains one of India’s top trading partners, making this agreement economically and strategically significant.

• Negotiation Status: Talks resumed in June 2022 and are now in advanced stages. Reports suggest a “balanced, ambitious, and comprehensive” deal is being shaped, with significant progress: about 10 out of ~20 chapters are reportedly closed.

II. Core Pillars: What Will Change for Goods

A. Tariff Elimination (Market Access)

• India currently imposes relatively high tariffs on several goods.

• The FTA is expected to phase out tariffs in stages — immediate, medium-term, and long-term — depending on product sensitivity.

• Beneficiary Sectors: European machinery, transport equipment, high-value chemicals, and luxury goods are likely to gain significantly.

B. Rules of Origin (ROO)

• ROO will determine which goods genuinely qualify for reduced duties.

• This is critical to prevent “trade deflection” (i.e., routing goods through third countries).

• Negotiating ROO is complex, particularly for products with global supply chains.

C. Regulatory Alignment & Non-Tariff Barriers (NTBs)

• India’s Quality Control Orders (QCOs) and mandatory certifications pose challenges for European exporters.

• The FTA aims to address these via the Technical Barriers to Trade (TBT) and Sanitary & Phytosanitary (SPS) chapters by establishing Mutual Recognition Agreements (MRAs).

III. Major Sticking Points: Sensitivities & Geopolitics

A. Carbon Border Adjustment Mechanism (CBAM)

• The EU’s CBAM imposes a carbon price on imports such as steel, aluminum, and cement.

• India strongly resists this, viewing it as a protectionist measure rather than a purely environmental policy.

B. Sensitive Sectors: Steel, Automobiles & IP

• Automobiles: European companies want steep Indian tariff cuts, especially on fully built cars.

• Intellectual Property: The EU is pushing for more robust IP protections (TRIPS-plus), but India fears this could restrict access to affordable generics.

C. Trade & Sustainable Development (TSD)

• The EU favors binding commitments on labour rights and environmental norms.

• India prefers a more flexible “best-effort” approach to avoid constraints on its development agenda.

IV. Beyond Goods: Services, Digital & Investment

A. Services Trade

• The EU seeks greater access to India’s financial, legal, and accounting sectors.

• India is advocating for “Mode 4” — easier movement of professionals, especially IT talent, to the EU.

B. Digital Trade

• A digital trade chapter is expected, but India is cautious about EU-style data flow and localization demands.

• Plans also include an Investment Protection Agreement (IPA) to safeguard European investments in India.

C. Geographical Indications (GIs)

• The FTA will protect European GI products (e.g., Champagne, Parmigiano Reggiano) in India, offering automatic recognition and reducing misuse.

V. How European Companies Should Prepare

• Review Supply Chains: Map current sourcing and assess how Rules of Origin changes could affect costs.

• Regulatory Readiness: Anticipate shifts in Indian certification standards and evaluate impact of CBAM.

• Strategic Investment: Reassess India as a manufacturing base, factoring in investment protection and expected market access gains.

VI. Conclusion: Watching Closely, Acting Wisely

• Strategic Opportunity: The EU–India FTA holds enormous promise — from supply chain diversification to access to India’s vast market.

• Challenges Remain: Sensitive issues like CBAM, autos, and IP still require intensive negotiation.

• What to Do Now: Monitor FTA developments carefully. For tailored advice and sector-specific updates, follow EuroBharat — we will guide you through navigating and capitalizing on this transformative deal.