Interviews | Economy | South Asia

EU-India Free Trade Agreement: Deal Of Democracies

Insights from Nicolas Kohler-Suzuki.

The Diplomat author Mercy Kuo regularly engages subject-matter experts, policy practitioners, and strategic thinkers across the globe for their diverse insights into U.S. Asia policy. This conversation with Nicolas Kohler-Suzuki – adviser for trade and economic security at the Jacque Delors Institute in Paris – is the 501st in “The Trans-Pacific View Insight Series.”

Explain the strategic significance of the EU-India free trade agreement (FTA) as a partnership between the world’s largest democracies. The EU-India FTA is strategically significant because it alters the long-term incentive structure for European and Indian firms to trade, invest, and build supply chains across the two markets. For India, it will be the deepest trade agreement it has ever concluded. For the EU, it will increase market access to one of the largest and fastest growing economies in the world. 

In view of economic pressure from China and policy uncertainty linked to the United States, the FTA may encourage European companies to view India not only as a consumer market but also as a production hub that can help to de-risk supply chains. That said, the ratification process, including scrutiny in the European Parliament, and long phase-in periods for tariff preferences, mean the biggest structural effects are more likely to become clearly visible in the mid-2030s rather than in the next few years.

Examine how the EU and India will each benefit from the trade deal.

For the EU, the FTA promises better access to the fast-growing Indian consumer market. Most importantly, it lowers very high Indian tariffs on key EU exports like spirits and cars through tariff-rate quotas. The labor mobility arrangement that was signed in parallel with the FTA may also help address skill bottlenecks, notably in IT and other high-skill services. 

For India, the agreement offers immediate export gains in sectors where EU tariffs had eroded India’s competitiveness compared to Vietnam and Bangladesh. Tariff elimination on labor-intensive goods (garments, textiles, shoes, handicrafts, and marine products) could therefore raise its market share in the EU quickly. Over time, clearer rules for trade and investment may also help attract EU capital and technology and support India’s ambition to grow as a manufacturing hub. 

Analyze the impact of the EU-India FTA on the global trading system.

With the global........

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