India-EU FTA negotiations resume today, with year-end deadline to wrap up deal – Economy News

India and the European Union (EU) will start the 10th round of negotiations for a bilateral Free Trade Agreement (FTA) on Monday, with a clear deadline from its top leadership to finalise the pact by this year-end.

While the issues that were holding up the progress remain, the global tariff war set-off by the US, change in approach of India to import duties reinforced in the latest budget and flexibility shown by EU on matters of carbon tax and related matters could push negotiations much further in this round, according to experts.

The 10th round of talks in Brussels from March 10 to March 14 come immediately on the heels of top level engagement between the two sides with the European Commission’s president Ursula von der Leyen and a full college of commissioners visiting India late last month for detailed talks on the entire spectrum of the relationship.

For India, the EU is as big a market as the US with bilateral goods trade of $ 190 billion. While there is a lot of uncertainty on what a Bilateral Trade Agreement (BTA) with the US would entail, talks with the EU have been going on since 2022 in the current phase.

From the Indian side the concerns centre around agriculture, duties on wines and automobiles, and flexibility on movement of professionals for services delivery.

“While both sides seek to expand trade, differences persist over scope of tariff reductions, regulatory barriers, and market access across agriculture, labor-intensive goods, and wines and the automobile sector. While the EU seeks tariff elimination on over 95% of its exports, India may be filling to open not more than 90% of its market,” founder of Global Trade Research Initiative (GTRI) Ajay Srivastava said.

In agriculture the EU is pushing for India to cut tariffs on cheese and skimmed milk powder while it imposes high duties and very tough standards. Even if tariffs are reduced, the EU’s regulatory framework will remain a major hurdle for Indian farmers and food producers.

The EU wants India to cut duties on wines to 30-40% from 150%. India has offered 50% duties in its trade deal with Australia and this might be repeated for the EU.

The duty cuts in labour intensive sectors can come very early on in the deal. Currently, India’s textile exports to the EU face tariffs between 12-16%, making Indian products less competitive compared to exports from countries like Bangladesh and Vietnam, which enjoy preferential market access under EU trade agreements.

In auto EU manufacturers want India to cut import duties on completely built-up (CBU) vehicles to 10-20%, down from the current 100-125%. The EU already exports over $2 billion worth of automobiles and auto parts to India annually, with most arriving in completely knocked-down (CKD) form, which face a 15% tariff when assembled locally. India has previously refused to lower auto tariffs for Japan and South Korea under its existing FTAs. “A potential middle ground may involve allowing a limited number of European cars to enter India at lower tariffs,” Srivastava said.

The EU imposes restrictions on remote online service delivery and does not recognise India as a data secure country thereby restricting data flows. In services European firms are seeking greater access to India’s banking, legal, accountancy, auditing, and financial services sectors.

To these old issues new ones have been added through Carbon Border Adjustment Mechanism (CBAM) or carbon tax. India has asked for exemption for small and medium enterprises from the obligations of CBAM. At the 2nd Trade and Technology Council (TTC) meeting both sides agreed to address the challenges that the small and medium businesses will face due to CBAM.

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