India and the EU sign a landmark $27 trillion trade deal, expanding market access, reducing tariffs, and boosting economic growth, with significant benefits for sectors like automotive, seafood, and steel.
India and the European Union have ushered in a new era in their trade relations with the signing of a landmark agreement. In a remarkable turn of phrase, the deal has been increasingly referred to as “The Mother of All Deals,” a term that is rapidly gaining traction in both political and economic circles. After nearly two decades of negotiations, this deal emerges at a pivotal moment when both India and the European Union find themselves increasingly alienated by Trump's trade disruptions. The timing further underscores a shared desire for stability and cooperation amid the shifting dynamics of global trade. This article will tell you all that you need to know about this deal.
Key takeaways at a glance
This trade agreement, valued at $27 trillion, represents a transformative shift in global economic partnerships, positioning both India and the EU as key players in the post-pandemic trade landscape, with long-term benefits for economic growth and geopolitical stability.
India and the EU signed a major trade agreement, dubbed "The Mother of All Deals," after nearly two decades of negotiations, aimed at fostering stability in global trade amidst shifting dynamics.
India agreed to gradually reduce tariffs on EU cars, with tariffs for vehicles priced above €15,000 phased down to 10% over time, excluding electric vehicles in the first five years.
The EU will eliminate tariffs on 90% of Indian goods, benefiting sectors like seafood, chemicals, textiles, and metals. Zero-tariff access starts immediately, with further reductions over seven years.
India seeks better steel export quotas and faces a carbon border adjustment mechanism from the EU, though it may negotiate exemptions based on future flexibility from the EU.
This deal provides India access to 144 services subsectors, such as environmental services or postal services and foreign investment in a range of sectors like maritime, financial or telecommunications, whilst India is opening up 102 subsectors, including IT-enabled services, for the Union.
Another landmark decision taken under this agreement by New Delhi is to open it's long safeguarded automobile industry to EU imports, slashing tariffs on most cars from the EU to 30 to 35 per cent, which are to be then phased down to 10 per cent over several years.
Cars sold in the EU market for less than 15,000 euros ($17,800) will remain subject to higher tariffs, as they are excluded from the deal. Cars above this price point will be divided into three price categories, each having different tariffs and quotas. Additionally, in the first five years, no reductions in import duties will apply to electric vehicles to protect domestic Indian electric vehicle manufacturers' investments. Post which, imports from the EU will be restricted to 160,000 internal combustion engines and 90,000 electric vehicles per year.
The EU will eliminate all tariffs on 90 per cent of Indian goods, which will extend to 93 per cent of Indian goods after the seven-year period ends.
The zero-tariffs policy which takes effect immediately will benefit marine/seafood products which include shrimp and frozen fish that currently have a tariff of up to 26 percent and chemicals which have a 12.8 percent tariff and plastics and rubber which have a 6.5 percent tariff and leather and footwear which have a 17 percent tariff and textiles which have a 12 percent tariff and apparel which has a 4 percent tariff and base metals which have a 10 percent tariff and gems and jewellery which have a 4 percent tariff.
India is pursuing better tariff-free steel export quotas through ongoing negotiations, which will conclude before June 30, when EU regulations become effective on July 1. Current trade agreement terms allow India to export 1.6 million tonnes of steel to the EU without paying duties, which represents only 50 per cent of India's current annual steel exports.
In this context, it's important to understand that the European Union has not provided India with a carbon border adjustment mechanism (CBAM) exemption, which imposes taxes on goods that require high energy consumption for their production.
The only nations that receive exemptions from these requirements are those that maintain ties with the European Union through their participation in the EU emissions trading system and associated agreements, which include Norway, Iceland, Liechtenstein and Switzerland. The European Union emissions trading system provides exemptions to countries whose emissions-trading systems are directly linked with its system, including Switzerland.
However, India will be able to negotiate this if the EU grants flexibility to another country.
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