Description: European officials, Ursula von der Leyen, Antonio Costa and Kaja Kallas met with Indian Prime Minister, Narendra Modi and Foreign Minister, Subrahmanyam Jaishankar in New Delhi where they concluded more than 10 years of trade negotiations into a groundbreaking free trade agreement (FTA). The FTA removes tariffs on 96.6% of Europe’s exports to India and on 99.5% of India’s exports to Europe. Key economic sectors such as textiles, leather, gems, jewelry, chemicals, base metals, wine and cars would be primarily affected by the FTA, with both sides safeguarding their critical economic sectors. The agreement would open a market channel for than 2 billion people and create an economic zone that represents 25% of the global GDP and one third of global trade. EU and India also concluded a defense and security cooperation pact and a separate agreement for relaxing mobility for skilled workers and students. Europe is overtly allowing India access to 144 services and subsectors while India reciprocates with opening up 102 subsectors including key industries such as financials, maritime trade and telecommunications.
Impact: The FTA, which had been undoubtedly precipitated by the US tariff policies, enforces India’s position of strategic ambiguousness, positions the Indian foreign trade in a pole position to influence other trade agreements in light of the global trade war and makes India an independent global economic force of influence. Europe gains by diversifying its trade ties in the midst of antagonized relations with the US, reinforces the continent’s bid for economic independence by complementing the Mercosur agreement as well as the independent agreements between the EU and Japan, Mexico and Indonesia and commences a longstanding process of trade decoupling from the US as a key traditional trading partner. Key challenges would persist and remain dependent on Europe’s flexibility in terms of policy and integration of goods from a market that is not that highly regulated. The agreement in essence represents an active counteraction of Europe’s foreign policy since it ignores the bilateral relations between Russia and India, however, it also represents a telegraphed message to the Trump administration that stable and strong alliances shouldn’t withstand hostile economic policy measures.