Negotiations for a Free Trade Agreement (FTA) between India and the European Union (EU) face significant challenges due to the EU’s stringent environmental regulations, digital trade restrictions, and demands for broader market access. As the tenth round of talks begins in Brussels, India is pushing for exemptions to mitigate the impact of EU policies, while European negotiators seek binding commitments in multiple areas.
The Global Trade Research Initiative (GTRI) highlighted that the EU’s carbon tax under the Carbon Border Adjustment Mechanism (CBAM) could impose tariffs of 20-35% on Indian exports of steel, aluminum, and cement, even if an FTA is signed. This raises concerns that while EU goods could enter India duty-free, Indian exports might still face indirect trade barriers.
Ajay Srivastava, GTRI Founder, stated that India is seeking exemptions or compensatory measures to neutralize CBAM’s impact, fearing that such regulations could act as disguised trade barriers. Other EU environmental policies, such as deforestation rules and supply chain due diligence laws, could also increase compliance costs for Indian exporters.
The EU imposes restrictions on remote service delivery by requiring Indian firms to establish local offices and set high salary thresholds for professionals. Additionally, India has long sought recognition as a ‘data secure country’ under the General Data Protection Regulation (GDPR) to enable seamless data transfers, a status granted to Japan and South Korea. However, the EU continues to push for stricter privacy regulations, while India argues that its Digital Personal Data Protection Act, 2023, should suffice.
India is also advocating for easier business visas for professionals, while the EU is pressing for greater access to India’s banking, legal, and financial services sectors. Another sticking point is the recognition of professional qualifications, where India seeks Mutual Recognition Agreements (MRAs) to allow its professionals to work in the EU.
The EU is pushing for access to India’s government procurement market, but India is unlikely to concede, as this sector plays a crucial role in supporting small businesses, particularly in infrastructure and defense.
Investment negotiations also remain complex, with India proposing its Model Bilateral Investment Treaty (BIT) as the framework, while the EU demands more flexible investment protection clauses. India is reluctant to dilute its regulatory autonomy, fearing excessive legal claims from foreign investors.
The EU wants India to commit to binding agreements on labor rights and environmental sustainability, including stricter workplace standards and international labor norms. However, India prefers a best-effort approach, arguing that rigid obligations could conflict with its domestic policies.
Intellectual property (IP) remains another contentious area. The EU is pushing for TRIPS-plus provisions that exceed WTO requirements, seeking stronger patent protection and extended data exclusivity for pharmaceuticals. India opposes these demands, arguing they could drive up drug prices and harm its generic medicine industry.
On Geographical Indications (GIs), the EU wants India to bypass its standard registration process for certain European products like Champagne and Roquefort cheese, granting them automatic GI recognition. India insists that all GIs follow legal scrutiny, just as its products, such as Darjeeling Tea and Basmati Rice, undergo in the EU.
The India-EU trade deal has the potential to boost bilateral trade. The EU, with a GDP of $18.4 trillion, is a major global trading power, while India’s $3.9 trillion economy is rapidly growing.
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