01-07-2025
India-EU trade talks gained urgency due to US tariffs, Europe's trade deficit with China: EU envoy
Negotiations for the India-European Union (EU) free trade agreement have gained urgency because of US tariff policies and Europe's trade deficit with China, and both sides are committed to the yearend deadline for finalising the deal because failure will result in a 'significant cost', EU ambassador Hervé Delphin has said. The two sides set to begin the 12th round of negotiations in Brussels on July 7. (@EUAmbIndia)
With the two sides set to begin the 12th round of negotiations in Brussels on July 7, Delphin said in an interview that five chapters of the proposed FTA on intellectual property, customs and trade facilitation, transparency, good regulatory practices and mutual administrative assistance were closed at the last round in May.
Delphin acknowledged that 'big blocks', such as core market access issues, tariffs, and technical barriers to trade, are yet to be agreed on, though negotiations haven't been blocked by such matters as the two sides are holding talks to 'delineate the parameters of [a] landing zone'.
The yearend deadline set by Prime Minister Narendra Modi and European Commission President Ursula von der Leyen during the EU College of Commissioners visit in February gave focus to the FTA negotiations, which were relaunched in June 2022 after a hiatus of almost a decade.
'Since this pronouncement by the leaders, the geo-economic environment has made this guidance even more compelling. There was a foresight [and] a clear vision that this FTA is needed,' Delphin said, adding the deal will help in derisking and providing stability.
'There are the tariffs by the US, but there is also, as far as the EU is concerned, this trade deficit we have with China. That creates a significant trade distortion…The fact that it's not just tariffs, it's the whole construct of what was the so-called global trade order, which is unravelling,' he said.
India and the EU stand to gain from the deal because of complementarities between the two economies. 'With this context of geopolitical and geoeconomic turbulence, the fact that derisking is increasingly important and Covid-19 showed the importance of diversifying, there are a lot of elements to make the case for the FTA even more compelling,' Delphin said. 'If you put all that together, that has given so much traction and so much focus to get the FTA done by the end of the year.'
Delphin pointed to the frequency and intensity of negotiations, including recent visits to Brussels by commerce minister Piyush Goyal and external affairs minister S Jaishankar, and said the message emerging from these meetings was the same - the determination to get the deal done.
'I think we can be reasonably confident that it's going to be there because in a way, failure, at this point in time, would have a significant cost for both. I think failure is not contemplated. We want to get [the trade deal],' he said.
Besides formal rounds of negotiations, there have been other contacts to push the trade deal, with the EU's chief negotiator travelling to New Delhi to meet his Indian counterpart last Saturday to take stock of the talks.
'If you look at the substance, at the last round, we closed five chapters on intellectual property, customs and trade facilitation, transparency, good regulatory practices, and mutual administrative assistance. We are moving closer to closing chapters on dispute settlement, state-owned enterprises, subsidies and digital trade,' Delphin said.
Delphin acknowledged India's sensitivities about the agricultural sector, noting that red lines had been 'framed from the very beginning', but said wines and spirits continue to be an important element for the EU side. 'We are not going to lose time on those, to be very frank. But there is one element within the agriculture chapter, which is wines and spirits…This is part of the elements that would form meaningful trade. On this, we are quite optimistic of progress,' he said.
Asked if the India-UK FTA finalised in May - which envisages cutting Indian import duty on Scotch whisky and gin from 150% to 75% initially, with a further reduction to 40% over 10 years - can serve as a template for India and the EU, Delphin replied: 'Not a template, but a reference point because it gives a benchmark. The size of the EU economy is 12 or 14 times…bigger than the UK. You want this somehow to be reflected in the agreement,' he said.
India's move to revise the text of the model Bilateral Investment Treaty and a proposed amendment of the Geographical Indications (GI) of Goods Act are positive developments that will have a 'net positive fallout' on India-EU negotiations for agreements on bilateral investments and GI, Delphin said. He sought to address the Indian side's concerns about the EU's Carbon Border Adjustment Mechanism (CBAM), set to kick in from January 2026, by saying it is 'not a trade instrument'.
The EU has engaged in an outreach to Indian industry through the Federation of Indian Chambers of Commerce and Industry (FICCI) to explain the new CBAM simplification package. 'It's part of our climate agenda…CBAM induces this whole agenda of decarbonisation,' he said.
Also Read: EU to accept Trump's universal 10% tariff, seeks exemptions on key sectors
Delphin said it would be unfair to impose CBAM on European companies while allowing firms from outside to import high carbon content goods. 'We have engaged with partners, listened to partners, and we did several rounds here in India, took back the comments, and we adjusted,' he said.
The EU is India's second-largest trade partner, accounting for trade in goods worth €120 billion in 2024, or 11.5% of India's total trade, while trade in services was worth €59.7 billion in 2023. Though India-EU trade in goods increased by nearly 90% in the past decade, India is the EU's 9th largest trade partner, accounting for 2.4% of the EU's total trade in goods in 2024, behind the US (17.3%), China (14.6%) and the UK (10.1%).
