India and EU announce landmark free trade deal

NEW DELHI — India and the European Union have announced a landmark trade deal after nearly two decades of on-off talks, as both sides aim to deepen ties amid tensions with the United States.

"We did it, we delivered the mother of all deals," European Commission President Ursula von der Leyen said at a media briefing in Delhi. Indian Prime Minister Narendra Modi called the deal "historic"..

The pact is expected to significantly reduce tariffs and expand market access for both sides.

Modi said during a speech at the India Energy Week earlier onTuesday India and the European Union had closed a “landmark” free trade agreement on Monday.

The FTA with the EU, which represents about 25% of global GDP and about a third of global trade, will also complement India’s deals with Britain and the European Free Trade Association, Modi said.

Von der Leyen and European Council President António Luís Santos da Costa arrived in Delhi over the weekend and were the chief guests at India's colourful Republic Day celebrations on Monday.

The agreement will forge a market of 2 billion people at a time when trade ties are being tested amid rising geopolitical tensions.

The European Commission said the agreement would eliminate tariffs on most exports of chemicals, machinery and electrical equipment, as well as aircraft and spacecraft, following phased reductions. Significantly, duties on motor vehicles, currently as high as 110%, would be cut to 10% under a quota of 250,000 vehicles. That is six times larger than the 37,000-unit quota India granted to the UK in a deal signed last July, Bloomberg reported.

India's deal with the EU is set to lower costs for European products entering the country — such as cars, machinery and agricultural food items, after import duties are reduced.

Brussels said the agreement would support investment flows, improve access to European markets and deepen supply-chain integration.

Delhi said almost all of its exports would get "preferential access" into the EU, with textiles, leather, marine products, handicrafts, gems and jewellery set to see a reduction or elimination of tariffs.

While commodities such as tea, coffee, spices and processed foods will benefit from the agreement, Delhi "has prudently safeguarded sensitive sectors, including dairy, cereals, poultry, soy meal, certain fruits and vegetables, balancing export growth with domestic priorities", it said.

Delhi and Brussels have also agreed on a mobility framework that eases restrictions for professionals to travel between India and the EU in the short term.

"This is India's biggest free trade agreement," Modi said. "It will make access to European markets easier for India's farmers and small business. It will also boost manufacturing and services sectors. It will boost innovative partnerships."

“I congratulate our colleagues associated with every sector, such as textiles, gems and Jewelry, leather and shoes. This deal will prove to be very supportive to these sectors,” Modi said in a speech at the India Energy Week..

Both India and the EU are seeking to strengthen strategic and trade ties with the rest of the world as they contend with economic and geopolitical pressure from the US.

Delhi is grappling with 50% tariffs imposed by President Donald Trump last year amid talks aimed at securing a trade deal between India and the US that are still dragging on.

The EU has just emerged from a stressful week after Trump threatened to escalate his trade war with European allies for opposing a US takeover of Greenland before backing off.

The trade deal will send an "important political message to the world that India and the EU believe more in trade agreements than in tariffs" at a time when protectionism is on the rise and "some countries have decided to increase tariffs", Costa said on Monday without naming the US.

Von der Leyen said that Europe and India are "committed to working together to shape a new global order".

Talks for a deal between India and the EU started in 2007 but stalled in 2013 over roadblocks in market access and regulatory demands. Discussions were formally restarted in July 2022.

The main sticking points were access to India's automobile market, agriculture goods and carbon-linked tariffs - and analysts will be reading the fine print to see what the final agreement says on these issues.

Officials from both sides worked hard over the past few days to finalise outstanding chapters of the agreement, aiming to wrap it up before the EU leaders' visit.

The agreement — von der Leyen and India's commerce minister Piyush Goyal have described it as the "mother of all trade deals" — comes as pressure grows on Delhi and Brussels to secure alternative markets for exporters.

In the past seven months, India signed major trade agreements with the UK, Oman and New Zealand, and a 2024 pact signed with the four-nation European Free Trade Association bloc of Switzerland, Norway, Iceland and Liechtenstein has come into effect. — Agencies