India and EU has jointly announced yesterday the conclusion of the India–European Union Free Trade Agreement at the 16th India–EU Summit held in New Delhi. This agreement is a landmark one.
It was described as “The Mother of All Deals” because –
While India has gained preferential access to EU markets across 97% of tariff lines, covering 99.5% of trade value, EU has 92.1% tariff lines covering 97.5% of trade value.
In one line, this trade agreement is a big respite for India from the tariff barrier raised by US on other world issues. India’s major export items like garments, gems and jewellery, leather items etc. are on zero duty. EU too gains with the reduction of tariff but on a plain reading, the reduction comes in phases spread over many years and is restricted through quotas. This helps Indian entities to prepare themselves for competition from EU manufacturers. Quota system will limit the markets like premium cars to 1,50,000 units an year.
India has prudently safeguarded sensitive sectors such as dairy, cereals, certain fruits and vegetables etc. which was one of the main issue that it faced on its trade deal with US. That apart, the sensitive European agricultural sectors such as beef, sugar, or rice will not be liberalized at all.
For readers with technical and commercial interest there are many requirements on trade like rules on country of origin, flexibility in the rules for MSMEs by locking quotas, transition period applicability, so on and so forth.
Besides commodity trade, the service sector gets a big boost. IT/ITeS, professional services, education, and other business services are well covered for easy access. Alongside, mobility and education field gets a well-deserved accessibility for Indians. With aging population of EU, this offers a welcome abroad reception from EU nations unlike US’s recent blockage of Indians.
There are still some issues on which EU has not given up and rightfully so – Issues like requirement on carbon footprint reduction, employee welfare requirements through CBAM provisions etc. which need to be discussed and standards to be agreed upon between India and EU.
As next steps, the agreement will have to get a technical closure and legal scrubbing before it is adopted by the Council and both the parties sign the agreement. To be followed by ratification by Indian Cabinet and the EU Parliament.