BRUSSELS — In a significant move against the backdrop of U.S. tariff threats, the European Union and India unveiled a landmark trade agreement aimed at fortifying economic ties between the two regions. Announced on Tuesday, the deal marks an end to nearly two decades of negotiations and is poised to create a free trade zone encompassing 2 billion people.
European Commission President Ursula von der Leyen heralded the agreement, referring to it as “the mother of all deals” and noting its potential to benefit both parties. The agreement was finalized after von der Leyen and European Council President António Costa visited New Delhi, where they participated in India’s Republic Day celebrations alongside Prime Minister Narendra Modi.
The trade accord could potentially double the value of E.U. exports to India within the next six years, by reducing Indian tariffs on European products like cars and pharmaceuticals, while lowering European tariffs on Indian goods, including chemicals and textiles. However, the deal still requires additional political and legal approval within both the E.U. and India.
As President Trump has challenged U.S. alliances and emphasized a protectionist stance, both the E.U. and India have been motivated to seek new partnerships. The E.U. has been particularly proactive in strengthening its global trade relations and reducing its economic risks associated with the U.S. As outlined in a recent speech by Canadian Prime Minister Mark Carney, middle powers need to collaborate based on shared interests instead of solely relying on U.S. leadership.
The proposed agreement comes at a time when relations between India and the U.S. are strained. Previously initiated trade discussions have faltered, particularly following recent U.S. tariffs imposed on Indian products. In contrast, India is expanding its trade horizons, having recently signed agreements with the U.K., New Zealand, and Oman.
During the announcement, Prime Minister Modi emphasized the transformative potential of the trade deal, characterizing it as India’s largest ever and a means to bolster the nation’s farmers, small industries, and services by granting them greater access to European markets. This initiative could breathe new life into India’s economy, which has been grappling with challenges such as sluggish manufacturing and insufficient job creation.
The E.U. also stands to gain, as tariffs on over 90 percent of European goods exported to India are anticipated to be reduced, opening up new markets for European car manufacturers who are currently facing challenging conditions due to U.S. tariffs and competition from China. In addition to enhancing trade in automotive goods, the agreement is projected to foster growth in financial services, maritime transport, and professional services sectors.
While the groundwork for this collaboration has been laid over the years, analysts suggest that the geopolitical shifts initiated by major powers have propelled both sides to solidify their friendship. Now, the focus is on fostering a strategic partnership that benefits both regions while maintaining their respective interests.
Despite some historical tensions, particularly regarding India’s ties to Russia and the E.U.’s concerns over democratic values, both sides are keen to present themselves as leaders of democracy, reinforced by their commitment to deeper economic and political collaborations.
The successful conclusion of this trade agreement signals a hopeful shift in global trade dynamics, underlining the capacity of nations to forge mutually beneficial partnerships in an increasingly complex world. With both Europe and India embracing this opportunity, the accord symbolizes a commitment to shared prosperity in the face of global economic uncertainties.