India and EU to hold crucial FTA talks tomorrow
What's the story
India and the European Union (EU) will commence their 10th round of negotiations for a proposed free trade agreement (FTA) in Brussels tomorrow. The talks will focus on key issues such as agricultural tariffs, auto import duties, and regulatory barriers, with hopes to finalize the deal by the end of the year.
Trade talks
India-EU trade pact discussions
The negotiations were fueled by the recent visit of EU Commissioner for Trade and Economic Security Maros Sefcovic. Both sides discussed steps to accelerate efforts toward a balanced and mutually beneficial trade pact. PM Narendra Modi and European Commission President Ursula von der Leyen had agreed last month to conclude the ambitious India-EU free trade deal by this year, amid fears of the Donald Trump administration's threat of higher tariffs.
Trade hurdles
Stalled negotiations and key sticking points
Negotiations between India and the EU resumed in June 2022 after a gap of over eight years due to differences over market access. Apart from the FTA, both sides are negotiating an investment protection agreement and a deal on Geographical Indications (GIs). According to the Global Trade Research Initiative (GTRI), agricultural tariffs—especially on dairy and wine import duties, auto tariffs, and regulatory barriers affecting labor-intensive goods are some major sticking points.
Trade dynamics
Trade balance and agricultural tariffs
In FY 2024, bilateral trade exceeded $190 billion. India exported $76 billion worth of goods and $30 billion worth of services to the EU, while the latter exported $61.5 billion worth of goods and $23 billion worth of services to India. Agriculture continues to be a sensitive area in negotiations as the EU is eyeing lower tariffs on cheese and skimmed milk powder, which India presently shields with high duties to protect its domestic dairy industry.
Market access
European winemakers seek greater access to Indian market
European winemakers are eyeing greater access to the Indian market, where imported products currently face a 150% tariff. The EU wants India to eliminate or significantly lower these duties to 30-40%. India might consider aligning with what it offered to Australia under the India-Australia Economic Cooperation and Trade Agreement (ECTA), where taxes on wines were slashed to 50% over 10 years.