‘Mother of all deals’: EU and India sign free trade agreement | International trade
India and the EU have completed a landmark free trade agreement that European Commission president Ursula von der Leyen hailed as the “mother of all agreements”.
The agreement comes after almost two decades of negotiations between India and the EU, which accelerated significantly in the last six months and finally concluded late on Monday night.
The deal is expected to open India’s large and traditionally closely guarded market to the bloc’s 27 countries, with a focus on manufacturing and the services sector. Market access for key European products, including automobiles and wine, is expected to be facilitated in exchange for facilitating exports of textiles, jewelery and pharmaceuticals.
The deal is expected to double EU exports to India by 2032 by eliminating or reducing tariffs on 96.6% of traded goods by value, saving European companies €4bn (£3.5bn) in tariffs, the EU said.
“Europe and India are making history today,” von der Leyen said in a statement after landing in Delhi on Tuesday, where she met with Indian Prime Minister Narendra Modi. “We signed the mother of all agreements. We created a free trade area for two billion people that will benefit both sides.”
Von der Leyen has previously said she expects exports to India to double following the deal, giving the EU unprecedented access to the previously tightly guarded Indian market.
India, the world’s largest country with a population of 1.4 billion, is also one of the world’s fastest growing economies and is on track to become the fourth largest economy this year, according to the International Monetary Fund.
The agreement is one of the most comprehensive agreements India has ever signed, and Modi called it the “largest free trade agreement in history”, highlighting that it represents nearly a third of global trade.
“This agreement has brought great opportunities for 1.4 billion Indians and millions of people in European countries,” he said. “It has become a great example of the synergy between the world’s two great economies.”
According to the EU statement, the agreement will lead Delhi to reduce customs duties on automobiles from 110 percent to 10 percent within five years, which will benefit European automakers such as Volkswagen, Renault, Mercedes-Benz and BMW.
Under the agreement, up to 250,000 European-made vehicles will ultimately enter India at a preferential tax rate; This is well above the 37,000 limit Britain agreed to in a separate agreement last year.
Trade talks between the two countries began in 2007 but were interrupted due to disagreements over access to automobiles, agriculture and dairy products.
However, it was relaunched in 2022 and has accelerated with gusto over the past six months in the face of heavy punitive tariffs from the Donald Trump administration in the US and shared concerns about China’s monopoly on global manufacturing and the country’s restrictions on key exports.
India is grappling with a 50 percent tariff on exports to the US, and the EU faces threats of higher tariffs over its objections to Trump’s attempts to seize Greenland.
According to officials, the official signing of the agreement will take place late this year and could come into effect early next year.
