Amid pressure on goods exports due to steep 50 per cent US tariffs and the trade deal with Washington still hanging in the balance, India is pushing to complete negotiations for a trade deal with the European Union by next month and has asked the legal team working on the deal text to refrain from taking leaves before the trade deal with EU is signed, The Indian Express has learnt.
While an EU delegation is expected to visit India on December 3, both countries have ramped up negotiating rounds, and a key virtual stocktaking meeting between Commerce Secretary Rajesh Agrawal and the EU’s Directorate-General for Trade Sabine Weyand took place on Friday as both partners enter the final lap of negotiations.
While 10 out of 23 chapters have been closed, key issues, particularly related to rules of origin and market access that include agriculture, remain pending, two people aware of the development said. Both countries have reached a landing ground on sanitary and phytosanitary measures (SPS), which means an agreement on the use of different methods of control, inspection and approval procedures to verify compliance with pre-agreed standards that have a bearing on food items.
With the deadline approaching, both partners have also likely dropped a few sensitive chapters, including one on state-owned enterprises (SOEs), as New Delhi was not on board with putting the same on the negotiating table. The SOE chapter in a trade deal typically deals with rules and governance surrounding businesses that are partially or wholly owned by a government, covering their commercial activities and competitive neutrality.
On the issue of the carbon tax that the EU is expected to implement from January 1, India has introduced a ‘rebalancing’ provision, as it is unlikely that the EU is willing to give Indian products a concession. The rebalancing provision would mean that if Indian products face a restriction in market access in the EU, India will subject European products to restrictions in equal measure.
The Indian Express had reported that India had pitched for a similar provision in the trade deal with the UK to ensure that when London introduces its version of Carbon Border Adjustment Mechanism (CBAM), it does not impact the concession won by India under the trade deal. The rebalancing mechanism has also been introduced as the carbon tax legislation has the scope of including more and more products going forward.
The carbon tax, which will ensure that imported carbon-intensive goods into the EU bear a carbon cost starting January 2026, is seen by several developing nations as discriminatory and in conflict with international environmental law. Brazil, China, India and South Africa have raised serious concerns about CBAM in World Trade Organisation (WTO) forums, and Russia initiated a formal dispute on May 12 this year.
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A statement released by the Commerce and Industry Ministry in October had said that there was intensive engagement to explore possible landing zones on the outstanding issues, and there was also a good discussion on India’s concerns over non-tariff measures and new EU regulations.
“During the negotiations, Commerce Minister Piyush Goyal emphasised the need for preferential treatment for India’s key asks, particularly those relating to labour-intensive sectors. Both sides agreed to work closely to finalise the non-sensitive industrial tariff lines. They also agreed that issues related to steel, automobiles, CBAM and other EU regulations still require further discussion, as these have higher sensitivities,” the statement said.
Official trade data shows that steel and aluminium shipments to the EU have already dropped by 24.4 per cent – from $7.71 billion to $5.82 billion in FY25 compared with the previous financial year. This is concerning as Indian products are already facing 50 per cent tariffs on steel and aluminium in the US market.
The EU is India’s largest trading partner, accounting for €124 billion worth of trade in goods in 2023 or 12.2 per cent of total Indian trade. India is the EU’s 9th largest trading partner, accounting for 2.2 per cent of the EU’s total trade in goods in 2023. Trade in services between the EU and India reached €59.7 billion in 2023, up from €30.4 billion in 2020.
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After the phone call on September 4, in a post on X, Prime Minister Narendra Modi had said, “Had a very good conversation with European Council President Antonio Costa and European Commission President Ursula von der Leyen. Reaffirmed our shared commitment to an early conclusion of the India-EU FTA and implementation of the IMEEC corridor.”
Ajay Srivastava, former trade official and founder of the Global Trade Research Initiative (GTRI), said that, unlike the US—whose recent 50 per cent steel and aluminium tariffs are harsh but clearly defined—the EU’s trade barriers are complex and opaque. He added that a fair FTA with the EU should address measures such as the carbon tax.
Srivastava said that CBAM, when fully implemented, will result in a 20–35 per cent import tax on Indian firms and that the industry will have to share all plant and production details with the EU. “Large firms may need to run two production lines: expensive yet greener ones for making products for exports to EU countries, and normal ones for the rest of the world,” Srivastava said.
Barring the carbon tax, other sensitive issues include whisky, cars, and automobiles. While market access to the UK was given in stages, experts said that the volumes in the case of the EU would be much higher, and hence market access negotiations on these items would be more complicated.
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In response, Costa and von der Leyen had said, “Looking ahead, we plan to agree on a joint strategic agenda at the next EU-India summit, as early as possible in 2026. We also remain fully committed to concluding the Free Trade Agreement negotiations by the end of the year. To achieve this, progress is needed now.”
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