Amid tariff storm, India, EU aim to seal FTA by year-end

European Commission President Ursula von der Leyen. (AP file photo)

India and European Union (EU) have agreed to ramp-up talks for the proposed free trade agreement (FTA) and close it this year, as both sides look to enhance bilateral commerce in a world bracing for disruptions and tariff troubles.

While Prime Minister Narendra Modi said relevant teams have been asked to conclude a mutually-beneficial India-EU FTA by this year, visiting European Commission president Ursula von der Leyen, too, confirmed that the aim is to seal the trade pact before the end of 2025.

"We are expecting a lot from our trade negotiations and we told them they should surprise us. Now more than ever the geopolitical content asks for decisive action," Von der Leyen added.

Modi and Von der Leyen were speaking at the India-EU joint press briefing in New Delhi.

Von der Leyen is leading a 27-member delegation on a two-day India visit, as both sides look to speed up talks for the proposed deal, negotiations for which were re-launched in June 2022. Though the visit was planned much earlier, US President Donald Trump's tariff proposals have added urgency to such bilateral pacts.

A meaningful visit

Terming, India and EU as "natural and organic" partners, Modi said that the two sides have conducted 20 ministerial-level meetings between February 27 and 28, in which sincere, meaningful discussions took place.

"India and EU have also prepared a blue print for collaboration in trade, technology, investment, innovation, green growth, security, skilling, and mobility," Modi added.

Earlier in the day, Von der Leyen said at an event, "An FTA between EU and India would be the largest deal of its kind anywhere in the world. I am very well aware it will not be easy but I also know timing and determination counts and this partnership comes at the right moment for the two of us."

She also outlined three areas – trade and technology, security and defence, and connectivity and global partnership – that can take the partnership between India and EU to the next level.

India and EU have conducted nine rounds of FTA talks since 2022 , with the last one held from September 23-27, 2024. The tenth round of talks are scheduled in Brussels in March.

The EU is India's largest trading partner, accounting for 12.2 percent of Indian trade, ahead of the US (10.8 percent) and China (10.5 percent). The 27-country bloc is the second-largest destination for Indian exports after the United States.

India, on the other hand, is the EU’s ninth-largest trading partner, accounting for 2.2 percent of its total trade in goods in 2023, well behind the US, China, and the UK.

Beyond FTA

Apart FTA talks, India and EU agreed to push forward on the investment protection and Geographical Indications (GI) agreements as well strengthen collaboration in key sectors such as semiconductors, artificial intelligence (AI), high performance computing, among others.

The European chief said India and EU can strengthen their relationship by collaborating sectors such as clean technology and digital public infrastructure.

"In these sectors India and EU can invest together and by building strong supply chains we can create an advantage for ourselves in today’s competitive economy," Von der Leyen said.

Other agreements between the two sides included a new "bold and ambitious" strategic roadmap, beyond 2025, which will be launched during the next India-EU Summit, and on conducting joint research on EV batteries, marine plastics, and green hydrogen.

The two sides also agreed to launch a joint task-force for green hydrogen and a closer cooperation on 6G through the industrial associations.

The EU chief said both India and EU are looking to diversify critical value chains, "from our side it is the case for batteries, pharma products, for semiconductors, for clean hydrogen or defence and we can support each other to achieve this and for that we need to have an ambitious trade and investment partnership".

Von der Leyen said the EU is exploring a future security and defence partnership with India, similar to ones the bloc has with the likes of Japan and South Korea.

"This will help us step up our work to counter common threats whether on cross-border terrorism, maritime security threats and issues in cyber tech space, among others," she said.

Modi said that India and EU have decided to take concrete steps to push forward with the proposed India–Middle East–Europe Economic Corridor (IMEEC) corridor.

"I am certain IMEEC will work as an engine to drive global commerce, sustainable growth, and prosperity," Modi added.

The EU chief termed IMEEC as a modern golden road that would directly connect India, Arabian Gulf and Europe.

"It (IMEEC) will make trade between India and Europe 40-percent faster. This can be a real win, win, win for Europe, India and our partners. We are ready to invest in concrete projects to make these connections happen," she said.

The proposal for the IMEEC corridor was firmed up on the sidelines of the G20 Summit in September 2023 in New Delhi. The agreement was signed by India, Saudi Arabia, the European Union, the United Arab Emirates (UAE), the US and some other G20 partners.

The project is seen as an initiative by like-minded nations to gain strategic influence in the face of Beijing's Belt and Road Initiative (BRI). The BRI is a mega connectivity project that connects China with Southeast Asia, Central Asia, Russia, and Europe.