OPINION | EU–India FTA: Why structure must trump tariffs 

Indian firms, especially MSMEs, continue to face hurdles that blunt the benefits of tariff concessions.

The European Union and India are nearing the conclusion of a Free Trade Agreement that has been under negotiation for years. While tariff reductions will inevitably capture headlines, the real test of this agreement lies in whether it addresses the structural barriers that have long constrained trade between the two regions.

Tariffs are not the decisive factor

In today’s global economy, tariffs are no longer the decisive factor; tax regimes, compliance frameworks, dispute-resolution mechanisms, and governance standards determine whether businesses can operate with predictability and trust.

This perspective has consistently emerged in my engagements at the European Parliament and the UK Parliament, where policymakers agree that without structural clarity, tariff liberalisation becomes symbolic rather than transformative.

EU’s regulatory ecosystem is the issue for MSMEs

India’s relationship with the EU is already significant. Yet Indian firms, especially MSMEs, continue to face hurdles that blunt the benefits of tariff concessions. The EU’s regulatory ecosystem, from the Carbon Border Adjustment Mechanism to complex VAT rules, remains difficult for smaller firms to navigate. For them, the real challenge is not opportunity but the cost of unpredictability.

Without clarity, it’s only large firms that will benefit

Unless the FTA provides structural clarity, the agreement risks disproportionately favouring large corporations already equipped with international compliance frameworks. 

SMEs remain the backbone of both economies. But exporting to the EU often requires certifications, audits, sustainability compliance, and documentation that are time-intensive and expensive. Larger firms can absorb these costs; smaller ones cannot. If the FTA is to be inclusive, it must streamline taxation rules, simplify standards, and provide accessible arbitration mechanisms.

In my conversations with policymakers in Brussels and London, the consensus is clear: standards harmonisation and governance alignment, not just tariff cuts,will unlock competitiveness.

UAE’s approach provides a template

The broader global context reinforces this urgency. The UAE has emerged as a bridge jurisdiction in global trade, managing $1.42 trillion annually. Its efficient regulatory systems, robust DTAs, and sophisticated logistics ecosystems have positioned it as a natural springboard for Indian firms exploring EU markets.

This demonstrates how regulatory clarity, built intentionally, reduces friction and enhances global integration.

The EU–India FTA should aspire to similar outcomes.

The nature of the FTA will serve as a signalling mechanism

We stand at a rare policy moment. India is one of the world’s fastest-growing economies, and the EU is actively diversifying supply chains. If negotiators embed forward-looking principles, tax transparency, regulatory certainty, simplified arbitration, and digital compliance, the agreement will empower millions of Indian and European SMEs to scale globally.

The measure of success will not be trade volume alone. It will be whether this agreement enables the textile weaver in Tiruppur, the engineering unit in Surat, or the pharma innovator in Hyderabad to operate internationally with clarity, confidence, and continuity. Without structural alignment, SMEs risk being left behind.

The EU–India FTA is not merely a treaty, it is an opportunity to redefine how India engages with the world. To fully realise its promise, negotiators must prioritise lowering barriers rather than only lowering tariffs. Only then can this partnership become one of the defining economic relationships of the coming decade

(Harsh Patel – International Tax Lawyer & Founder, Water & Shark.)

(Delivered following the author’s second consecutive address at the European Parliament on EU–India economic integration, and earlier remarks at the UK Parliament’s House of Lords on India–UK trade cooperation.) 

Views are personal and do not represent the stand of this publication.