# EU-India Trade Deal: Geopolitics and Economics

**Podcast:** The Economics Show
**Published:** 2026-01-30

## Transcript

The politicians called it the mother of all trade agreements.
After two decades of negotiations, the EU and India managed to get their trade deal over the line.
It doesn't take a genius to see what spurred it on.
President Donald Trump has been pretty hostile towards his Indian and European counterparts.
This deal is a geopolitical statement.
It's a way of saying if you're mean to us, we're going to band together.
So it makes for good politics.
But what about the economics?
Which concessions did each side manage to squeeze out of the other?
How big of a deal is the EU-India trade agreement?
This is the Economics Show with Samea Keynes.
I am very happy to be back after a long stint away, having a baby, and writing a book, How to Win a Trade War.
This week on the show, I thought I would try something slightly different and speak to two experts to get both a European and an Indian perspective on the deal.
So first I'm joined by Nicolas Gurlos Suzuki, advisor for trade and economic security at the Jacques Delore Institute.
Nicholas, hello.
Hi, Sameya.
Okay, you've listened to the show.
You know that we always start with a question for which the answer is on a scale from one to ten.
So on that scale, how big of a deal is this agreement for the EU politically?
Well, if 10 is the mother of all deals, I would give it maybe a seven.
Seven?
Okay, all right.
And what about economically?
Maybe a six out of ten economically.
It certainly deviates slightly from the standard template that the European Union has used in the past, but it is still a commercially meaningful deal.
Okay, interesting.
Well, I want to get on to that.
But first, can we just get a bit of context here?
So I guess thinking back to 2007, what was the original impetus for this deal?
There has certainly been a strong drive to go beyond the market access that the EU has gotten to uh the multilateral regime.
There was a break in the negotiations in 2013 when Moody came to power because he stopped all trade negotiations at the time.
The EU has tried to be part of India's growth story for a long time and gain market access to uh one of the most protected markets in the world.
Okay, so everyone who follows trade negotiations knows that the toughest issues are agreed right at the end.
So in this case, what were they?
What did the EU most want from India?
The EU really wanted to get access to the Indian car market, because it's a large market, it's growing, but it's been highly protected so far.
So they've been trying for a long time to get a piece of that pie.
The EU has also been very interested in the alcohol market, so the rapidly growing base of consumers on in the Indian middle class that want European wines and spirits, which have also been faced with very, very high tariffs of up to 150%.
I've heard on the grapevine that the EU is pretty pleased that they got a better deal than the UK.
Is that right?
Yes, that is partly right.
There are some areas that we're also very close to the negotiating objectives of the UK.
For example, on spirits, where the EU got slightly shorter phase-out periods.
So these tariff concessions don't come all at once.
They phase in usually over a longer period of time.
For Scottish whiskey, for example, this was a phase-in period of around 10 years.
For the EU, it's slightly shorter, it's only seven years.
The same goes for cars.
The EU got a much larger tariff rate quota of almost 250,000 cars per year.
For the UK, that's only 37,000.
Now the UK car market is obviously a lot smaller than the EU's.
But still, I would say this is a very substantive difference.
Okay, but cars, booze, what we're talking about here essentially is this trade deal cutting tariff barriers essentially.
Were there any non-tariff barriers that the EU wanted the Indians to dismantle?
Yes, indeed.
So the EU has in the past always been very keen to also get access to procurement markets.
And if you look at recent agreements that the EU has concluded with Indonesia, for example, or with New Zealand, it would usually get a chapter in its agreements.
This was until very late in the negotiations on the table.
But as far as we know, this is actually not part of the final deal.
Okay, so this is essentially a request that the Indians not discriminate against European countries when offering government contracts, right?
And so they just gave up and said, nope, too difficult, we're not gonna do it.
I think there was a lot of political pressure in the end to say we have a package, we have a deal to announce it by the time of the visit of von der Leyen.
So they didn't want to keep dragging it on much longer.
And there was a certain willingness in this case to say, okay, we're gonna do something that is a little bit different than what we've done in the past.
Because India is also so much bigger.
There was negotiation much more at eye level than between, for example, the EU and a country like Vietnam.
All right, can I ask now about the EU's defensive interests?
What were the concessions that it really didn't want to make?
The EU started to introduce this carbon border adjustment mechanism.
The Indians were very concerned that this would hit one of their fastest growing exports to the EU, which is steel, and Indian steel is a lot more carbon intensive than the global average, about 30 to 50 percent more carbon intensive.
So they were worried that on the one hand they would get some concessions, but on the other, they would just be hit by CBAM, and then they would not really win anything.
In the end, this is actually something where the EU kind of stood the line.
So there's no major concession on CBAM.
However, what India was very concerned about right until the very end, is that the EU would give preferential treatment to other partners, notably to the United States, which was something that came up during the Turnberry agreement, where the EU said, okay, we're going to make some changes to the way that we look at US uh imports under CBAM.
It was all quite wishy-washy, so there was no real commitment on that side.
But the Indians were concerned that there would basically be discrimination against others.
And what they got is an understanding that there's a most favored nation treatment for India when it comes to CBAM.
In practice, that's probably not going to mean much.
Okay, so other than steel, what were the other kind of major defensive EU areas?
What did they really not want to give up?
So in 2009, there was a big constitutional change in Europe, which basically gave co-decision power to the European Parliament to sign off on trade deals, which in practice, in the last couple of years has meant that every trade agreement the EU has signed would include a substantive chapter on sustainability and labor clauses that were enforceable.
The problem in this case is that there was a very negative reaction in India to the idea that such a chapter could infringe on Indian sovereignty.
There was talk about regulatory imperialism, which is basically the flip side of the infamous Brussels effect.
And the Indians have been very, very reluctant to make any concessions in that regard, because it would be a very poor sell domestically.
Politicians like to rail against precisely such measures.
But can you spell out exactly what that would mean?
What are the Indians worried about happening?
So, for example, there is a concern that the European Union would use this as a form of hidden protectionism, that they would say, okay, we have this agreement, but now we see that your labor standards are actually not up to the standards that we would like to see.
So we're going to not grant you these preferences after all.
Which I don't think is really the correct reading of what's happening and why the EU has been wanting to include these clauses, but I think that has been the Indian concern for a long time.
But can I just jump in there and ask what you think the EU was trying to do or is trying to do with these sustainability provisions?
Well, there was a genuine demand from different European civil society groups to get these standards, both environmental standards and labor standards exported for having other countries adopt them so to have a value-based approach to trade.
And I would say for the most part, this was actually genuine.
There's obviously always the temptation that some parts of this will be abused by companies.
And I think that is mostly the reading on the Indian side that this is actually a form of hidden protectionism, where you're just putting up a show of saying you're upholding values, but actually you're just protecting your domestic companies.
But I don't think that has been true in the European case.
Okay, so I guess the EU message to the Indians is don't worry, our companies aren't gonna exploit this to protect themselves from competition.
Actually, it's our activists who are gonna make sure that your labor standards are up to scratch.
That was certainly a European message, but I'm not sure it was a message that the Indians like to hear in any case, which is why it was so contentious for the Indians to agree on anything that is binding.
And the mechanism that was now agreed on, we still have to see.
I think likes to say that it's not.
So the devil is going to be in the details of what this is actually going to entail.
Okay, so now I want to ask about ratification, right?
Not the EU's strength uh when it comes to trade deals.
They tend to diddy-dally when it comes to putting these deals into practice.
Do you think that's gonna be an issue in this case?
So we all have these pictures in mind of the French farmers on the streets of Brussels for the Mercosur Agreement, because they were protesting against what they consider to be excessive imports of beef, of poultry.
We are not going to see that with the India Agreement simply because all of these sensitive areas are carved out on both sides.
It's very sensitive for the Indian side, it's very sensitive for the European side.
There are agricultural items that are part of this deal, which are very important for the EU, like wines, like spirits, like beer, like certain processed foods.
But these are offensive interests, if you will, and not defensive.
You see already that the largest farm associations in Europe have put out statements that are very positive that are welcoming this deal.
And that is, I think, a substantial difference to what we had with Mercosur.
I don't expect major resistance from the farmers, which is going to be quite meaningful in order to ratify the deal in a more or less short time frame.
Okay, is there anything else that's kind of unusual, striking, noteworthy about this deal that maybe you don't see in many other deals?
Yes.
In fact, during the signature ceremony, there was not just a trade agreement, but there was also an agreement on labor mobility, which is quite unusual for the European Union to have with its trading partners.
But this has been a major ask from the Indian side for basically every agreement that they've signed.
They call this mode for mobility, sending Indian workers, especially highly skilled workers in the information technology sector, for example, for short period of time to partner countries.
Okay, but give us a timeline.
How short are we talking?
Right now, we're still waiting for the publication of the actual negotiating text.
Then there's a process of legal scrubbing, as it's called, where lawyers on both sides are going through the agreements to see if they're consistent internally, but also with other rules and regulations.
So that can take anywhere from one to two years.
And then it will have to go to ratification by the council, then to the parliament on the European side, and then it can be signed.
I mean, obviously, it also has to be ratified on the Indian side.
But this is the process on the European side, which has taken quite long in a number of agreements.
Now, there's maybe one thing that is important to mention that brings us back to this question of sustainability, because we might not have as many defensive industries, but these sustainability issues and labor issues have been very important to certain political groups in the European Parliament.
And we really need to watch closely what this mechanism that the Commission and India announced is going to look like to see whether some political groups in parliament are going to be happy with that chapter or whether they might want to see a modification.
This is trade and services.
Now, on the European side, there's a slight complication because the European Union doesn't have any competence for immigration policy.
Since this is a competence of the member state and not of the European Union, it will have to go through the domestic legal frameworks of each member state that will announce such a mobility framework.
Obviously, in the current political climate, there is a certain risk that this will lead to negative domestic political reactions if you have a certain quota of visas reserved to Indians.
Okay, big picture question.
This deal comes at a geopolitical moment when the EU is clearly trying to make a statement to President Donald Trump, you know, we have friends.
At the same time, it's also, I think, trying to diversify away from China, this major trading partner that isn't quite like the US, right?
Just not the ideal trading partner in several ways.
Do you think this deal takes the EU closer towards doing that?
I do think it's a meaningful step.
I do think as well, though, that we really have to think about this as a long-term process.
Because these changes will take a very long period to even phase in.
The tariff liberalization will happen over a period of up to 10 years.
We can't expect for anything to happen overnight, especially because the Indian market is still a lot smaller and it's also still a lot smaller in the EU's export basket.
So right now, for example, we export only about 2% to India compared to 10% to China.
And this has been almost relatively consistent over the last two decades.
So this agreement really has the kernel of what we need to diversify away from China, but this is going to take a long, long time.
It, however, is meaningful enough to alter the incentive structures for firms to start trading more with India, to start investing more in India, because it will be easier over time to get things into the country and out of the country so that India could also become a manufacturing hub, maybe not one that equals China, but one that will at least take part of what China was doing in recent years and help the EU to become less dependent on a single supplier.
Nicholas, thank you so much for joining me.
Thank you so much for having me.
Okay, we are going to go to a break now, but when we get back, I'm going to ask how all of this looks from the Indian perspective.
So that was a European perspective on the deal, but I also wanted to hear an Indian perspective.
So I reached out to Ajay Stravasta, founder of the Global Trade Research Initiative in Delhi and former trade negotiator.
Ajay, hello.
Hi, thanks for inviting me.
Oh no, thanks for being here.
Okay, so first question.
We always start with something a bit silly on this show.
So on a scale of one to ten, how big of a deal is this agreement for India politically?
It's the most ambitious deal for India politically, economically.
Scale one to ten I rate it at eight.
That is a good and higher number.
And you already hinted at this politically it's a really big deal but economically is it as major on that same scale please?
So economically I'll rate it as six.
Okay.
Slightly less important but more important than the middle can you just walk me through the context here because the Indian government has a reputation for being very difficult to do deals with does this suggest that it's now super easy to do trade deals with India?
Does it really want to do lots of these kinds of deals?
That's the wrong impression created see we have done the most number of deals in the past four years anywhere in the world any country in the world we did sign nine FTs in the past four years.
Nobody else has signed.
So we cannot be called difficult people call us difficult but I don't agree with that.
Well I mean you know one person's difficult is another person you know fearsome negotiator refusing to make concessions just thinking about this particular deal with the EU what do you think the most important concession was that the Indian side got?
So the import duties on labor intensive goods like garments, textiles, shoes, handicrafts, marine products, they're high.
They range from eight to twenty percent in EU, very high.
And our competitors are countries like Vietnam or Bangladesh.
Their products enter EU at zero tariffs.
So we were getting beaten there.
EU allowing tariff elimination on India's labor intensive goods like garments, shoes, textiles, etc., and marine products was great.
It will provide immediate benefit to Indian exports to the EU.
Can I ask about the end of the negotiations?
Because we all know that the last minute is when all the toughest concessions get made.
And so what was the EU holding out on right at the end that the Indian negotiators managed to get?
That we will never come to know these things.
They remain official secrets from both the sides.
We'll never come to know.
But we have been told that all along the EU has been pressing for deeper tariff cuts in automobiles.
In European Union, we have been very ambitious and granted deep cuts on auto for the first time.
We were willing to cut auto tariffs by 50-60%, but EU was willing for deeper cuts.
So I think now EU haggled for this for long and they could secure a great deal on auto from India.
Just thinking about other concessions, though, I mean, there's a lot of emphasis on tariff cuts.
You know, those are the easiest to shout about after negotiating a trade deal.
But often it's the non-tariff barriers that are really important in a trade deal.
Which do you think are the most significant ones in this deal?
Indian exporters find it very difficult to meet EU's registration charges.
For example, if I want to export a medical device, I need to register it.
And registration charges may increase maybe upwards of $100,000 for each medical device.
It takes a long time also.
Similarly, if we want to register any of our generics, it takes a lot of time, process delayed.
Similarly, say traces, we call them maximum residue limit or pesticide traces.
PCs are not welcome.
But there is scientific way, for example, for rice, if the limit is 50 mg per ton of rice say in US, EU limit will be 20% of that.
That's unreasonably low and cannot be captured by any scientific equipment available so far anywhere in the world.
So we find many of the things like registration charges are exorbitant and the residue limits for many of the agriculture products, they are very low.
It simply means you don't want our products.
Right.
Were you surprised by anything that was in the deal?
Yeah, so EU mentioned that India agreed to intellectual property chapter.
Both are coming together and India is moving towards EU's regulation.
Not much detail has been provided by the EU.
But we have been opposing these things.
We say whatever India agreed at the WTO on intellectual property, that will be the baseline.
But now EU's one para, which doesn't give much detail, says that India has agreed to some of their demands.
I don't know what are those demands that Para doesn't make explicit.
So we are waiting for the full text.
And what were the grounds on which India was you know resisting some of those intellectual property regulations?
So basic objection is on uh medicines like product patent is there.
So patent life is suppose 18 years or 20 years.
Now there is a concept of evergreening of the patents that without changing the basic molecule of a medicine, you want to extend the patent life of that medicine.
So we oppose that.
We say whatever is the rule, let's follow that, let's not beat that rule.
Similarly, data exclusivity and so many other things are there.
Generally, the impact is we are big into generics.
We supply generics to Africa, America, Europe, and most other countries, cheaper, cheaper price medicines.
So these will be delaying the introduction of genetics, will be increasing the price of the medicines, which we generally oppose.
Can I ask about you know the effects of the deal and the relationship with countries other than the EU?
So, you know, the obvious context is the Trump administration putting up tariffs against India.
Can the EU replace the US as a buyer of India's exports?
So our exports to the US are down by 21% if we compare the exports made in May 25 to exports made in December 25.
They are down by 22%.
Now, EU deal will take at least one year before it's being implemented.
So one is timing thing.
And second, US is a big market, like EU is a big market.
US is easy market to sell.
Some part which we lose in the US, say labour-intensive goods.
Of course, we hope to recover through increased export to the EU, but that may happen after certain years, not now.
Can I ask about how this deal is being received in India?
I mean, in the EU, trade deals are very controversial, and you know, Indian negotiators certainly claim that lots of trade concessions are very controversial within India.
How is this one being received now?
So reception is generally positive for one single reason that we are reading what we are being given to read by Indian government or the EU side.
Both the sides talking about their big achievements.
It's like marketing copy.
So I don't see any opposition in India on the deal so far.
Where could it come?
So for uh people like me who are watching, I think C BAM is a big disappointment.
Carbon tax by EU.
We thought that the deal could have sorted out uh the CBAM issue for India.
Otherwise, what happens is after some years, when the deal is being implemented, EU goods will keep on coming in India at zero tariffs, whereas Indian goods will be charged C BAM tax in EU.
That's unfair.
And today C BAM covers six products like steel, aluminium, cement, etc.
Tomorrow it's going to cover all industrial goods in the next few years only.
That will be a big problem.
Big UN tribe will be there then.
Some lines are there in the agreement about C BAM, but they are not satisfactory enough.
Okay, and I suppose just to give the EU side the, you know, they would say, well, this is a tax on carbon.
We're not discriminating between our trading partners.
The FTA, the free trade agreement still gives India special access relative to other trading partners.
So there's still an advantage there.
And we're just equalizing the tax on carbon between our domestic producers and international producers.
So China is the big manufacturing competitor to India.
I know India has ambitions to be a manufacturing hub.
Do you think this deal could help with those ambitions?
I see the great part of India's EU deal is that product complementarity.
In many deals, domestic industries suffer because of higher imports.
That's not going to happen in most products from either side.
For example, India exports labor-intensive goods, EU imports most of those from other countries.
So if Indian exports to the EU increase.
Basically, Indian exports will be replacing the imports into EU from other countries.
So EU industry will not be hurt.
Similarly, EU is into upstream products.
For example, they'll supply rough diamond.
We process them, cut and polish diamonds, and export it.
EU supplies metal scrap.
We we convert into say steel or aluminum and export or use it.
EU is into capital intensive and high-tech goods, aircraft, high-tech machinery, electronic component.
We buy electronic component, assemble it into a smartphone or other electronic devices.
We are a different step of the value chain.
So there is no competition.
Basically, there is a cooperation.
It may lead to deeper development of uh value chains between the two sides, and that will be the most uh positive aspect of the agreement.
Okay, one last question.
This deal is really being framed, at least in the media, as a kind of statement to the US government, right?
A sort of message that you know we're gonna be friends with each other if you're mean to us.
To what extent do you think it's a sort of anti-US deal?
I don't think they they will be influenced by India EU deal.
Of course, they don't look very comfortable with this deal, but I I don't have any reasons to believe.
In fact, India EU deal is not an alignment against the US.
Both the sides are just providing an insurance to their own trade.
It's not anti US, neither from Indian side nor from EU side.
But the US is on a different orbit, and uh, I don't think the deal will influence our dealings with the US.
Okay, well, a very friendly deal all round.
That's a great note to end on.
Jay, thank you so much for joining me.
So yeah, nice talking to you.
That is all for this week.
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This episode was produced by Josh Gabbat Doyen with original music and sound design from Breen Turner.
Our executive producer is Manuela Saragosa.
I'm Samea Keynes.
Thanks for listening.