The not too long ago concluded EU-India unfastened commerce settlement is notable for the large scale and ambition of the deal. Labelled the “mother of all deals” via Ecu Fee President Ursula von der Leyen, it comes as India has overtaken Japan as the sector’s fourth-largest economic system.
Bilateral commerce in items and services and products between the EU and India is already value €180 billion (£155 billion). The settlement targets to double EU exports to India via 2032 and create a free-trade space representing round 1 / 4 of the sector’s inhabitants (just about two billion other people). This is able to additionally quilt about 25% of the sector’s GDP.
At this level in historical past, the sector’s multilateral buying and selling device is beneath risk from price lists and geopolitical tensions. However this settlement gives a transparent instance that the generation of unfastened commerce isn’t over.
Reasonably, it demonstrates how international locations are adapting to new international realities to liberalise commerce (this is, take away obstacles). As a substitute of steerage clear of unfastened commerce, international locations are changing into selective and searching for bilateral preparations with strategic companions. The United Kingdom signed its personal commerce settlement with India in July 2025.
Historically, a unfastened commerce settlement would have a algorithm for a way two or extra international locations will have to deal with one every other when uploading, exporting, making an investment or doing every other trade in combination.
However to view the EU-India commerce settlement throughout the lens of classical unfastened commerce could be deceptive. Industry agreements of the Nineties and early 2000s similar to Nafta and the EU, had been pushed principally via tariff discounts and potency positive factors. The EU-India deal alternatively has been formed via moving geopolitical pressures and issues about resilience within the face of commerce shocks or different crises.
Very long time within the making
Industry talks between the EU and India started in 2007 however negotiations received momentum in 2025 amid renewed tariff threats from america beneath Donald Trump’s 2d management.
This deepened commerce imbalances between the EU and China because of Beijing’s force to be extra self-reliant and make use of export controls. It additionally raised issues in regards to the resilience of worldwide provide chains. The EU-India Industry and Era Council used to be arrange in 2023, modelled at the EU-US framework, and highlights how fashionable commerce agreements can package financial, technological and strategic targets in combination.
At a time when international commerce has turn into increasingly more protectionist and with geopolitical competition rising, this settlement supplies a possibility to recalibrate commerce alignment. It’s also a possibility to reshape commerce structure whilst bolstering provide chain resilience throughout Asia, Europe and the Atlantic.
For the EU, the deal is a central pillar of its diversification technique. There used to be an pressing want for the bloc to succeed in an settlement with India with the intention to be much less depending on China, its biggest commerce spouse.
In 2024, greater than 21% of the EU’s imports got here from China. In the meantime, China purchased best 8.3% of the bloc’s exports. For the EU, this has led to a €304 billion (£264 billion) commerce deficit with China.
So the EU-India deal supplies a possibility for the EU to cut back its over the top dependence on China. It’s additionally a possibility to take away one of the most chance from its provide chains and safe get right of entry to to India’s fast-growing shopper marketplace. This must be offering Ecu corporations expansion alternatives in Asia at a time when EU home call for is slow and flat.
The settlement will even make it more uncomplicated for EU corporations to supply providers temporarily and construct choice production bases when provide chains are threatened. India’s location within the Indo-Pacific is of strategic passion for the EU because of the rising interdependence and the significance of maritime provide chains. This additionally makes India a key spouse in opposition to the uncertainty of the bloc’s long term members of the family with the USA.
For India, the settlement promises marketplace get right of entry to to Indian corporations at a time of emerging commerce uncertainty – particularly after its members of the family with the USA had been broken following Trump’s risk of 500% price lists.
The settlement must supply a competent buying and selling spouse for Indian garment manufacturers.
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The EU-India deal will do away with price lists on textiles and attire, and when it comes into drive it is going to give Indian garment-producers a competent buying and selling spouse. The deal will permit Ecu manufacturers, similar to Zara and H&M, to diversify clear of China in opposition to Indian production hubs. It’s estimated prices right here might be decrease because the deal will permit clothes to be zero-tariff.
The prescribed drugs sector additionally gives a possibility for India. Whilst EU price lists are already low, the deal targets to simplify law and to reach more potent highbrow belongings frameworks. This may combine Indian generic drug manufacturers into Europe’s healthcare provide chains.
The scope of the settlement extends well past items, services and products and funding. Plans to co-operate on blank power aligns Europe’s Inexperienced Deal (the bloc’s framework for attaining web 0) with India’s goal of manufacturing 500 gigawatts of renewable capability via 2030. This must open up avenues for joint management in sun, wind, grids and inexperienced hydrogen.
The EU-India deal neither marks a go back to the unfastened commerce orthodoxy of an previous age nor alerts the top of unfastened commerce in nowadays’s fractured international order. Reasonably, it highlights how commerce has developed into a device for attaining geopolitical targets. The deal additionally presentations that international locations are opening their markets – selectively and after cautious deliberations. Industry agreements are evolving: increasingly more they’re formed now not best via marketplace get right of entry to issues, but in addition via financial safety.
