New Delhi: India and the 27-nation European Union (EU) bloc will start the tenth round of negotiations for a proposed free trade agreement from Monday in Brussels amid Trump tariff threats, according to an official.
The talks are expected to focus on resolving remaining issues so that the agreement can be finalised by the end of this year.
During the recent visit of EU Commissioner for Trade and Economic Security Maros Sefcovic, the two sides have discussed ways to accelerate efforts towards a balanced and mutually beneficial trade pact.
Prime Minister Narendra Modi and European Commission President Ursula von der Leyen last month agreed to conclude the ambitious India-EU free trade deal by this year amid fears of the Trump administration’s threat of higher tariffs.
“The two sides are scheduled to hold the tenth round of negotiations for the FTA from March 10-14 in Brussels,” the official said.
In June 2022, India and the 27-nation EU bloc resumed the negotiations after a gap of over eight years. It stalled in 2013 due to differences over the level of opening up of the markets. The two sides are also negotiating an investment protection agreement and an agreement on Geographical Indications (GIs).
According to the think tank Global Trade Research Initiative (GTRI), key sticking points include agricultural tariffs, especially on dairy and wine import duties, automobile tariffs, and regulatory barriers affecting labour-intensive goods.
India is reluctant to lower auto import duties and is cautious about committing to EU demands on sustainability and labour standards, it said, adding that services trade remains another contested area, with India seeking easier mobility for professionals and data security recognition under the EU’s GDPR framework (European Union’s General Data Protection Regulation).
“Government procurement, investment protection, and environmental regulations like the Carbon Border Adjustment Mechanism (CBAM) further complicate talks. Despite these challenges, a successful agreement could significantly enhance bilateral trade, which exceeded USD 190 billion in FY 2024,” GTRI founder Ajay Srivastava said.
India exported USD 76 billion in goods and USD 30 billion in services to the EU, while the EU exported USD 61.5 billion in goods and USD 23 billion in services to India.
Agriculture remains a highly sensitive area in the negotiations, as the EU is pushing India to cut tariffs on cheese and skimmed milk powder, which India currently shields through high duties to protect its domestic dairy industry.
Srivastava also said that the EU’s complex tariff system for agriculture makes negotiations particularly challenging, as it applies Non-Ad Valorem tariffs (NAVs) on 915 agricultural tariff lines (or product categories), which significantly raise the effective duty rates on imported products.
“These high tariff structures, combined with stringent Sanitary and Phytosanitary (SPS) measures and Technical Barriers to Trade (TBT), make it difficult for Indian agricultural exports to enter the European market. Even if tariffs are reduced, the EU’s regulatory framework remains a major hurdle for Indian farmers and food producers,” he added.
European winemakers are pushing for greater access to the Indian market, where imported wines currently face a 150 per cent tariff.
The EU wants India to eliminate or significantly reduce these duties to 30-40 per cent levels, he said, adding that India may like to match what it offered to Australia under the India-Australia Economic Cooperation and Trade Agreement (ECTA), where tariffs on wines were slashed to 50 per cent in 10 years.
India and the EU may be willing to eliminate tariffs on all textiles and garments from the first day of the pact’s implementation.
Currently, India’s textile exports to the EU face tariffs between 12-16 per cent, making Indian products less competitive compared to exports from countries like Bangladesh and Vietnam, which enjoy preferential market access under EU trade agreements.
On auto, Srivastava said that European car manufacturers want India to cut import duties on completely built-up (CBU) vehicles to 10-20 per cent, down from the current 100-125 per cent.
This would significantly lower the price of European luxury cars in India, making brands like BMW, Mercedes-Benz, and Volkswagen more accessible to Indian consumers.
The EU already exports over USD 2 billion worth of automobiles and auto parts to India annually, with most of them in completely knocked-down (CKD) form, which faces a 15 per cent tariff when assembled locally.
However, India’s auto industry is a major pillar of its economy, accounting for one-third of its manufacturing GDP and employing over 40 million people.
“Reducing import duties on CBUs could hurt domestic carmakers. Moreover, India has previously refused to lower auto tariffs for Japan and South Korea under its existing FTAs,” Srivastava said.
If India agrees to significant tariff cuts for the EU, it may have to extend the same benefits to other trading partners, reducing incentives for Japanese and Korean automakers to manufacture in India and instead increasing direct imports from their home countries, he added.
A potential middle ground may involve allowing a limited number of European cars to enter India at lower tariffs, he suggested.
PTI
