Making the India-EU FTA Deliver and Renewing Multilateralism
The conclusion of the India-EU Free Trade Agreement (FTA) marks a significant achievement at a time when the global trading system faces increasing fragmentation, strategic competition, and weakening adherence to multilateral rules. Amidst growing use of tariffs, unilateral trade measures, supply-chain leverage, and regulatory instruments by major economies, the FTA demonstrates that ambitious, rules-based trade agreements between large partners remain achievable.
In this brief, the author argues that the success of this FTA will now depend on its effective implementation. Particular attention must be paid to addressing emerging regulatory challenges, including the EU's Carbon Border Adjustment Mechanism (CBAM), the Ecodesign for Sustainable Products Regulation (ESPR), data adequacy and cybersecurity frameworks for IT-enabled services, and arrangements on double social security contributions for short-term professionals. The early conclusion of negotiations on Geographical Indications and Investment Protection agreements would further strengthen the India-EU partnership. Ultimately, the FTA should result in fostering deeper industrial cooperation, investment, and resilient value chains in various manufacturing sectors such as automobiles, pharmaceuticals, electronics, critical minerals, steel and other metals, chemicals, and medical devices.
Beyond its bilateral economic benefits, the mutual understanding generated by the FTA negotiation and its implementing process offers an opportunity to build greater trust between India and the European Union, enabling closer cooperation on reforming the World Trade Organization (WTO). While differences remain on several issues, including on relatively newissues such as plurilateral agreements and the inclusion of the investment facilitation agreement into the WTO framework, both partners share an interest in preserving an open, rules-based multilateral trading system while accommodating legitimate concerns relating to economic security, industrial policy, and development.
The brief identifies several areas for collaborative reform, including disciplines on industrial subsidies and global overcapacity, treatment of critical supply chains, the future of the Most-Favoured-Nation principle, and more. Exploring development of guardrails for any plurilateral agreement to be included among WTO rules, such as the Investment Facilitation for Development Agreement, could be important areas for in depth discussion.
The brief concludes that effective implementation of the India-EU FTA can extend beyond strengthening bilateral trade and investment by laying the foundation for joint efforts, along with other like minded partners, in renewing an inclusive, balanced, and resilient multilateral trading system that preserves its foundational principles.
To read this DPG Policy Brief Volume XI, Issue 18, please click “Making the India-EU FTA Deliver and Renewing Multilateralism”.
