India-EU Free Trade Agreement (FTA): Key Highlights
The India-EU FTA marks a significant milestone in global trade relations, underscoring the importance of a rules-based trade order amidst current geopolitical and economic challenges.
Significance of the FTA
- The agreement represents a constructive engagement between two major economies, accounting for approximately 25% of global GDP and a combined market of 2 billion people.
- It demonstrates the capacity to uphold international norms while respecting domestic priorities, such as India’s protected agricultural sectors and the EU’s stance on the Carbon Border Adjustment Mechanism (CBAM).
- The FTA serves as a blueprint for modern trade negotiations, emphasizing the necessity of multilateralism and dispute resolution mechanisms.
Economic Impact
- In 2024-25, bilateral merchandise trade reached $136.54 billion, with India exporting $75.85 billion to the EU.
- The FTA is projected to unlock $75 billion in new exports, particularly in labor-intensive sectors, while Indian tariff cuts are expected to save the EU €4 billion annually in duties.
Harmonization and Market Access
- The alignment of standards, such as product safety and environmental requirements, is critical for predictable market access.
- The agreement reduces overdependence on single trade corridors by diversifying trade flows and creating a $136 billion de-risked trade corridor.
Impact on WTO and Global Trade Order
- The FTA arrives at a crucial time for the WTO, ahead of the 14th Ministerial Conference, reinforcing the need for predictability, fairness, and flexibility in international trade.
- It underscores the importance of bilateral agreements in maintaining trade stability while multilateral reforms are pursued.
Dispute Settlement and Enforcement
- The agreement strengthens dispute settlement mechanisms, thereby reducing the risk of arbitrary measures and boosting investor confidence.
- Effective enforcement is highlighted as essential for trust and stability in the trading system.
Overall, the India-EU FTA exemplifies how adherence to a rules-based order can unlock opportunities for businesses, workers, and consumers globally. It sets a precedent for future trade agreements and the restoration of the WTO's credibility.
