Today, the EU-India trade discussions are experiencing unique levels of urgency. With current escalations of global tensions, this is forcing both parties to expedite decision-making. Both parties are aware of the changing power balances that exist between the larger economies of the world and are racing to close the still remaining gaps. The intensity of the discussions between the top representatives is heightened by increasing expectations. The close attention observers are paying to this process is due to the extremely high price tags attached to a successful deal for all involved.
Germany’s Role in Accelerating EU–India Trade Progress
Experts are pointing out that the acceleration is due to Germany purposely creating this momentum. Merz’s meeting with Modi allowed for the rapid acceleration of previously negotiated critical topics. As well, Merz’s comments regarding progress made at those meetings are bolstered by the mistakes made by the U.S. that resulted in tariffs that were imposed on Indian products, creating opportunities for Europe to further solidify trade agreements with India. European officials are confident that, barring last-minute issues, they can complete negotiations by January. Issues relating to Tariffs and Investment Access, as well as India’s wanting further recognition for its industrial markets, are being addressed by both parties’ teams.
The road to closure, however, is complicated by still ‘sticky’ issues that need to be resolved before the Agreement can be finalized. One is the difference in negotiation stances regarding steel tariffs and carbon levies. Another barrier to agreement is the lack of consensus around market access issues for both negotiating parties. Nevertheless, German officials describe the level of discussion as being “very intensive,” indicating the desire and confidence that it will be reached before the deadline. It is believed that a successful conclusion to these negotiations will result in significant shifts in Global trading patterns towards European Union interests and significantly reduce the EU’s reliance on China.
Strategic Security Issues Shape EU–India Relations
Following the events of recent years and growing concerns about Russia’s war in Ukraine, Europe and Germany are starting to look at their relationship with India through a more security-focused lens. One of Germany’s main goals is to help India reduce its dependence on Russian energy imports, although Germany acknowledges that India’s relationship with Russia is primarily driven by historical ties to Russian military equipment.
While Merz has acknowledged several constraints that India is facing, he did not use the meeting to specifically call out or criticize India for its continued relationship with Russia. Experts believe that Germany has not placed any direct pressure on India to change its relationship with Russia, but has and will continue to support and encourage India to change its relationship with Russia at a slower pace than it might expect from Turkey or Spain. This is evident by India continuing to purchase oil from Russia, which has created tensions between Washington and Brussels.
Rising Protectionism Intensifies Need for an EU–India Trade Deal
Merz has warned that we may see a “sad return to protectionism all over the World.” Major World economies share this concern and saw disruptions to global supply chains in 2020 when the Chinese Government imposed restrictions on certain exported minerals. As a result of the restrictions on semiconductor exports to the European automobile industry, EU officials have been aggressively pursuing new strategic partnerships; for example, they are negotiating a new Trade Agreement with India that will better diversify their markets. European leaders also believe that enhanced cooperation in the areas of minerals and technology will help both the EU and India to better absorb global Economic Disruptions. In India, Modi observed that “the new agreements we are signing today will provide both new momentum for and strengthen our Partnership.”
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