EU-India Pact: Progress, but Regulatory Hurdles Remain
New Delhi: European Union (EU) and Indian negotiators concluded a week of talks today, reporting narrowed differences and consensus on multiple issues across the proposed free trade agreement (FTA), with both sides pledging to accelerate efforts toward a balanced final text. The sessions, held from November 3 to 7, 2025, covered trade in goods and services, investment protocols, sustainable development clauses, rules of origin, and technical barriers.
Commerce Secretary Rajesh Agrawal held a two-day stocktake on November 5 and 6 with Sabine Weyand, the European Commission’s Director-General for Trade, reviewing progress and remaining hurdles across all tracks. Delegates noted substantive gains, with divergences reduced and common ground reached on several points.
Agrawal reiterated India’s aim for a growth-oriented, equitable pact and pressed for the predictable implementation of emerging EU regulations. Chief among these is the Carbon Border Adjustment Mechanism (CBAM), which imposes a fee on embedded emissions in imports of carbon-intensive goods—iron and steel, cement, aluminium, fertilisers, and electricity. After a reporting-only phase (2023–2025), financial obligations begin in January 2026, though EU procedural updates defer certificate sales to 1 February 2027 for 2026 emissions, with prices tied to the European Union Emissions Trading System (EU ETS) quarterly average—€80.17 per ton of CO2 equivalent on 6 November 2025. [EU ETS is the world’s first and largest carbon market. Launched in 2005, it caps total greenhouse gas emissions from over 10,000 power plants, factories, and airlines in the EU, Iceland, Liechtenstein, and Norway.] Importers must declare emissions using standardised methods, with credits available for equivalent carbon pricing paid abroad, subject to verification, and de minimis relief for shipments under 50 tonnes to ease SME burdens. India has sought phased support for exporters while advancing domestic alignment through expanded Perform, Achieve and Trade (PAT) schemes and ETS consultations. A forthcoming EU steel regulation also drew calls for transparency.
The talks reaffirmed mutual commitment to a resilient, sustainable, and inclusive India-EU partnership, with technical engagement in the coming weeks flagged as critical to closing gaps. Any final agreement will require European Parliament approval and alignment across 27 member states, adding layers of political and timing uncertainty.
Economic modelling underscores the stakes. A European Parliament impact assessment projects short-term real income gains of €3–4.4 billion annually for each side, based on baseline EU imports from India rising from $62 billion in 2025 to $72 billion by 2030 without a deal. For India, tariff cuts could trigger a revenue loss of up to $32 billion per VIF analysis—roughly 1.8% of central government revenue or 0.8% of GDP—offset by long-term gains in services, manufacturing, and supply chain integration, potentially adding 0.1–0.2 percentage points to annual GDP growth amid 7–8% baseline expansion. The EU eyes access to India’s youthful market—40% under 25 by 2030—while reducing Asian supplier reliance, though agricultural sensitivities remain. Unmitigated CBAM costs could reach several billion euros annually for Indian exporters, equivalent to a 0.02–0.03% GDP drag through 2030, per the Centre for Social and Economic Progress.
By contrast, the recently concluded United Kingdom (UK)-India FTA—signed July 24, 2025, after the May agreement and now pending ratification—serves as a bilateral benchmark. Both pacts cover goods, services, investment, IP, and sustainability, but the UK deal prioritises digital trade, data flows, and professional qualifications—reflecting its 80% services-based economy. India secured Mode 4 mobility concessions despite UK labour concerns.
On climate-linked trade disciplines, however, the divergence is clear. The UK framework offers greater flexibility than the EU’s CBAM, with London planning a 2027 carbon border levy but granting India transitional exemptions and technical aid. The UK deal eliminates duties on 99% of Indian tariff lines (nearly all trade value) and 90% of UK lines, with phased cuts on autos, whisky, and pharmaceuticals; India retained protections for dairy and poultry—echoing EU sensitivities but resolved bilaterally.
The UK’s swift timeline—driven by bilateral focus and no parliamentary layers—enabled convergence on investment disputes and geographical indications, areas still fragile in the EU track. Yet the EU’s 27-nation market offers India far greater merchandise export potential (textiles, gems, marine products), albeit under stricter Green Deal scrutiny.
UK Department for Business and Trade modelling forecasts a 0.13% long-run GDP lift for the UK (£4.8 billion/year by 2040) and 0.06% for India (£5.1 billion/year), with trade rising £25.5 billion toward $100 billion by 2030. India expects 30–40% growth in chemical exports ($650–750 million in 2025–26) and doubled engineering shipments ($7.5 billion by 2030), per Economic Times and S&P Global. UK apparel faces competition, but wage gains are projected at £2.2 billion annually.
In sum, the UK pact exemplifies a streamlined, services-heavy engagement, whereas the EU negotiation—larger in scope but more encumbered by regulatory harmonisation—tests India’s capacity to reconcile carbon compliance with export competitiveness.
– global bihari bureau
