EU-India: The mother of all deals

Welcome to Trade Off, the podcast about the people politics and power inside Europe's trade policy. I'm Tom Moilin, your host, and this episode is going to be quite a big deal. The biggest deal, in fact. Yes, we will be speaking about the EU-India Free Trade Agreement, which will create the largest free trade zone in the world, with 2 billion people and 1/4 of global economic output. And to help guide us through this vast territory, we will have three exceptionally well-informed guests. Two of them are here with me in the Commission's recording studio in Brussels, and my third guest will be joining us from New Delhi a little later on. Dora Kareya is a director here in DG Trade and Economic Security, and her portfolio covers not only trade relations with India, but also the rest of South and Southeast Asia, Australia, New Zealand, Africa, the Caribbean, and the Pacific, as well as everything to do with trade and the environment, climate and labour. Even more importantly, she is a return visitor to the podcast. Welcome back, Dora. Thank you. Always a pleasure to be here. My second guest is Kristoff Kiener. He's the EU Chief Negotiator for the Agreement, and has been right in the middle of this process over the last few years. Nice to have you here, Kristoff. Thanks for inviting me, Tom. So, in every episode of Trade Off, we start with just that. A trade. I bring the guests something, and they bring me something in exchange. So, what have you brought for me? Dora? Tom, I've brought chilies. Now, you wonder why chilies? And for two reasons. First, because it's an illustration of the first globalization, I'm Portuguese. And as you know, my country was sailing around the globe in the 16th century, trading things across continents. And they actually brought chilies to India. So, in the 16th century, from, of course, South America, they brought it to the trading post in Goa. And the Indians eagerly adopted them, in fact. Of course, they already had spice. They had black ginger, black peppers and ginger. But the spice of the South American chilies quickly took over the whole continent. And it's now a staple feature of Indian and Asian cuisine more widely. The second reason, if you may remember for my first appearance here in the podcast, I grow my own vegetables. I do remember that. Do you remember? So, this is a 2025 crop. And no way. Oh, yes. Super. Chili's from Brussels. So, there you go. Wonderful. Thank you so much. And Christoph, what have you brought for me? So, I'm less of a gardener. So, I brought some books by Indian authors showing that what's nice in the, perhaps the second or the current phase of globalization, is that it's not any more mainly about Europe projecting its value, its goods, its trade, and sometimes imposing itself on partners such as India, we've gone through the colonial period. Now, we're having much more diverse world, and India is obviously rising on all fronts. It's got to do a lot about trade and investment. But it's also got to do with the history of ideas. And this is why I love about trade, is the exchange of ideas, the intellectual dialogue. And so, I've brought one book on an Indian retelling of the Greek myth by an Indian writer called Devdut Patanak, the title is Olympus. So, it shows that this interaction, the cultural interaction between India and Europe, or in that case Greece, goes very, very far back in history. But I've also brought a second book called Provincializing Europe by Mr. D. Pesh Shakrabarti, that calls for provincializing Europe, trying to illustrate the fact that in the history of ideas now, Europe is only one of the sources of philosophy and so on, and that the rest of the world is rising, and we need to take Europe for what it is, which is a bit less dominant than it was in the past. Lovely, thank you so much. And so for me, I have brought yoga mats for two reasons. Trade related, India is a top global sourcing hub for yoga mats. And it's often exporting eco-friendly materials, which there's a big demand for in Europe, these days, but there's also a kind of a personal reason where I spent some time working in India, and it was the first time I ever tried yoga, was in a teeny tiny photocopy studio, with a little man who was extremely, extremely flexible, one of the most striking and pleasant early exchanges I had while I was there. So thank you all so much, and let's get on with the conversation. India is obviously not the only free trade agreement the commission has been working on. We've had Merkiser, Australian Indonesia, and the EU is talking to Thailand, Malaysia, and the Philippines. So what's unique about the India FTA, and why has President Fonderland called it the mother of all deals? Maybe Dora, would you like to begin? Well, I think the sheer dimension to start with, we're talking about the two biggest democracies in the world. We're talking about the big economic blocks, a huge amount of global trade, and we're talking about a deal which is going to liberalize over 90% of that trade. So the sheer dimension is huge. India is the most populous country in the world, and the fastest growing large economy is already the fifth largest economy in the world, and the pace is extremely fast. And in the current geopolitical context, in the current instability and volatility of global trade, we are talking about two major actors in the global trading system, who are dear to a rules-based trade, and who are sending a strong signal in terms of, in a way, support this multilateral system. Christoph, well on my side, rather than calling it the mother of all deals, I'd rather call it the everest of all free trade negotiations. And you know, this is something that took quite a while. It took a lot of preparations. This is something that we did together with our Indian counterparts at all levels. I mean, it involved our director-general Sabine Veow and her counterpart. It involved commissioner Chiefs of each and Minister Goyal, who spent hundreds of hours together working on this. And it was a huge collective adventure that allowed us to reach the top at the end of January. Christoph, you referred to this negotiation as an everest, and it's been a long process, right? Starting with a first phase a long time ago, it broke down in 2013, and then it was picked up again in 2021. Walk me through some of that. What was it like climbing this mountain? And what led to that resumption in 2022? And how do we get to a conclusion? The external circumstances were probably a very decisive factor. Back in 2021, when the leadership, the political leadership decided to resume those negotiations, we had lived through the rise of China, we had discovered in the COVID period that we had some dependencies on certain products that we needed to make up for. And then remember that in the winter of 2022, there was the war in Ukraine, that broke out, which confirmed this need for the European Union to diversify, not just its sources of imports, but also its export outlets. Then in January 2025, President Vandelaein took the entire College of Commissioner to New Delhi and announced a big push with a declared objective to conclude the negotiations by the end of 2025. And this is where I lost all my credibility because I immediately said that this would be impossible. However, we did it in the end. Now I think, to be honest, again, that one of the decisive factors had a lot to do with external circumstances and behind the reasons why the EU and India managed to successfully conclude this process was also the fact that the overall trade and investment landscape was undergoing through turbulence, let's put it like that. Just to pick up one point mentioned by Christoph, I think there was a growing awareness that given different external shocks, that the EU needs to diversify its sources of supply, that there are issues of economic security, you know, staving off unhealthy dependencies. I think also we need to frame this as well in the overall context of EU-India relations because it's not only trade, We have been strengthening our relations with India more generally. India is a strategic partner for the EU and I think this was only possible because we have very good and experienced negotiators on both sides leading this through. So there is, I would say, a constellation of factors that helped to bring about this deal. Sometimes stars align and this is the case. So the stars aligned and it all happened and Christoph must have been quite a moment. It was very symbolic with President Vandaleen and President Costa as a guest of owners of Republic Day. The broader strategic agenda was also adopted at that time. So it felt a great reward for the entire team because as I said, it was a gigantic collective effort. You do not climb the Everest on your own. So let's get into what is actually in this agreement. What are the benefits? We already have a trade relationship that amounts to 180 billion euro counting both goods and services. And this entertains or supports 800,000 jobs in the EU as of today. So you can make your own calculation if we are to double our exports to India. The number of jobs supported by EU India trade will be multiplied. Now I think what's going to emerge in terms of benefits from this agreement will be found quite extensively on the industrial and manufacturing. Side of things. We're going to have exports of European wines, European cars into India which were blocked by tariff barriers that were above 100% until now. Aircraft, pharmaceutical products are all areas where the customs duties will be reduced down to zero. We estimate that European exporters will save 4 billion euro of customs duties per year. But if you look at it more strategically and I was looking at our trade figures again this morning, India continues to represent only between 2 and 2.9% of EU trade. And this is ridiculous. India is a country that represents 18% of world population. What we're striving to achieve is to bring India to punch at its own weight also when it comes to bilateral trade with the European Union. And Dora, what about services? Is there something you'd like to highlight in that area? Yes, of course. I mean, the agreement includes disciplines on trading services and this will increase the legal certainty for operators working in the Indian market and vice versa. Notably in key sectors for the EU such as financial services are shipping and services is indeed one of the most promising sectors in the Indian economy. So when it comes to the politics of trade and the EU agriculture is a big topic of discussion. Christoph, is that likely to be the case here? No, I don't think so because the production and export patterns of India make this topic less controversial than in other situations. There was also the fact that from the outset because of the sensitive agriculture also for India both sides agreed that we would set aside certain sectors. So that means the European Union did not take any commitments on poultry, on beef, on sugar, rice, while at the same time India managed to fully carve out its dairy sector which is extremely sensitive politically. Now I'd like to look at sustainability issues and in particular environment and labor. Dora, I know you are close to this part of the negotiation. Yes, indeed and I'm very satisfied with the outcome. It is a very ambitious outcome. The outcome of the negotiations include binding commitments on a number of areas, notably labor and covering the respect of the economy. The respect of the core ILO principles in things like child labor and freedom of association. We also have commitments in the environmental area such as combating the forestation, illegal wildlife trade and illegal fishing. And of course also a commitment to fight climate change and implement the Paris agreement. We then have put in place a dedicated consultation mechanism on the trade and sustainability issues that would bring any disagreement up to the ministerial level. We have also put in place a trade and sustainability committee. This joint committee is really provide for a platform for discussion and engagement on sustainability issues that would otherwise not exist if we didn't have the FDA. Kristoff, India is a huge and fast growing economy with ambitions to be the largest economy in the world. Do they see these environmental labor issues as a priority in the negotiations? No, would be the short answer but I think India came to realize that this was an issue on which the EU would not be able to compromise as much as they would have liked. So they have taken steps in the agreement with the European Union that they had never taken before. Now I am delighted to say that we're going to get out of our Brussels trade bubble for a bit and here from the Indian perspective. I'm joined by Ambassador Dr Mohan Kumar on the line from New Delhi. He is the Dean of OP Jindal Global University in Delhi and a former senior Indian diplomat with a lot of experience in trade policy. Among other posts he was India's ambassador to France. Welcome Mohan. Thank you very much. It's a great pleasure to be on your show. I'm very glad you could join us. So Mohan, I kind of like to draw on your perspective as both an academic and a former ambassador to France. I think that's a very academic and a former practitioner and look backwards a little bit and have India and the EU had the same ideas about trade policy historically. No, the honest answer to that question is no. These two entities are at very different levels of development. EU protected agriculture for a very, very long time. I'm talking about the EU Aki as they say in French. The Aki is you have to protect the people and that is part of the EU Aki. In India's case, the protectionism has to do with what I call the poverty veto. In my book India's moment, I talk of the poverty veto that is constantly exercised by 500 million people in India who are poor. It has been my contention that these 500 million people have always cast a veto on India's trade policy. People misunderstand India's trade policy by saying they are a naysayer. All of that is true. It's not untrue. But there are profound reasons why the Indian government is forced to do it. No consumable Indian can leave this 500 million people in a worse situation than what they are. In that sense, both EU and India on a superficial level may seem protectionist, but the driving forces are very, very different. Looking at the market opening, India has agreed to in this FDA. How was that politically possible given the poverty veto that you mentioned? So that is why India had to do this tough balancing act. What we have done for the 500 million people is that we have tried to get 0% duty or duty free access for key labour intensive sectors like textiles, apparel, marine, leather, footwear, chemicals, plastics, rubber, gems and jewelry. This is where a lot of unskilled and semi-skilled workers work. We are hoping that this will create more jobs for these 500 million people. In return, we have of course provided important benefits for the EU in their exports to India, whether it is autos and the wine and the spirits, agricultural products, the hope that the 500 million people can be protected against these EU exports. There is a complementarity and this is what was missing in some of the FDA's we concluded into the east of India. Any EU export which otherwise might have impacted this fire. 500 million people adversely would have been very difficult for India to do. When I look at the details of the FDA, what I find is that there is a complementarity and that's why the deal worked. Now, what about the bigger picture, Mao-Han? It's part of the logic of that deal for India, the idea of a broader strategic alliance between the EU and India. We believe that in this kind of a world characterized by geopolitical turbulence with the general rule being that each country to its own and devalute behind most, it's very important for EU and India to come together. I believe that this FDA is only one part of the architecture that we are trying to build between EU and India. An important part because it provides ballast to a geopolitical alliance. I want to call this a geopolitical alliance and that is why a security and defense partnership has also been signed between the EU and India. It would be wrong, Tom, in my view, to just see this as a purely dollars and cent straight agreement. Now I want to speak a little bit about putting this agreement into practice. What will the challenges be, Mao-Han? There are some things that can throw the FDA off balance and I think both sides should be mindful of it and proactively try and look at issues. The expected benefits from the FDA for India will be determined by the regulatory obstacles that it faces in EU. Nobody is going to say French wine is not meeting standards in India. Everybody knows Borgo. Everybody knows BMW. Everybody knows your products. They are world-class. But Indian Ag products, Indian labor intensive products, they will be subject to technical barriers to trade and sanitary, phytosanitary standards. The worst outcome will be if the TBT and SPS standards in Europe manage to thought the expected anticipated benefits from the FDA for India. That would be a bad outcome. So that is something that both sides should be mindful of. Mao-Han, I want to have one last question for you. If we were having this conversation five years from now, what would need to have happened for you to say that this agreement truly changed the EU and India's relationship? Oh, three things straight away. A hundred and forty billion dollars should become at least five hundred billion dollars. This is seventy seven should become something like two hundred billion dollars. So dollars and cents first requirement, just the crude quadripling of the numbers. So that is one. Second, this can reduce EU's dependence on China. Can India help EU achieve that? I'm not sure we can do it in full measure because there is a tremendous power gap between China and India. Last, I would say EU-India cooperation in 6G, Quantum and Artificial Intelligence. If in the cutting edge sectors, if EU's amazing, shall we say, technological, provis, if it can be combined with the manpower that India has in terms of the reservoir of engineers and scientists that we have. This has been unexploded potential so far. If that can be done, we can become leaders in 6G, AI and quantum. So that will be my dream five years from now. Mohan, thank you very much for sharing your views, your insights and those perspectives from your experience. It's been a real pleasure talking to you and a real pleasure to hear from you. Thank you very much, Tom. I enjoyed it hugely. I just want to wish you a wonderful day ahead, a wonderful week ahead and let me say what a pleasure it's been talking to you on this podcast for EU-India FDA. Thank you. Wonderful. Thanks so much. And to you too. So Dora, Kristoff, Mohan was fairly candid there. He flagged the challenges of complying with EU regulation as a main risk to India's anticipated gains from this agreement. Did you have a reaction to that? I wouldn't say the EU was a regulatory champion as such to be honest, as lots of regulation as well on the Indian side. And the feedback we get from European business there is that it's quite difficult and challenging sometimes to enter the Indian market. And if I may compliment that India has not always shined as a model of predictability in this regard, when I think of quality control orders or the way they've been administrating their import licensing system, we had lots of difficult discussions in the negotiations. And indeed, the agreement is comprehensive. We have chapters on technical barriers to trade, on sanitary and phytosanitary measures, good regulatory practice, transparency, etc. These are all rules based aspect of the deal that will improve the situation in this regard hopefully. And so in that context, if you were giving advice to European companies going into India after this trade agreement, what advice would you give them? Be ready to go in for the long haul. India is not an easy market, but it's well worth investing. And Dora, the opposite direction, Indian companies looking to enter Europe. Do you have any advice for them? Actually, I think the same advice applies. And the point that we have created an integrated single market for 27 countries is indeed the best enticement for Indian businesses to come and invest in Europe. And so finally, looking at this from the perspective of the consumer doing their shopping on a Saturday afternoon, what would you say to them about the benefits? Between cashmere sholes or running shoes, there will be a lot for European consumers to benefit from this agreement, very concretely. Now what I would also want to emphasize is that this agreement beyond the benefits, counting both goods and services. We cover almost 20 different chapters from competition policy to intellectual property, digital trade, small and medium-sized enterprise, all that, and forced with a very effective system of dispute settlement. So overall, while consumers on shopping streets on Saturday afternoon may not immediately realize that these are all elements that will ensure a smoother trade relations between the EU and India. If I could add for our listeners who are based in India, one thing I would want to recommend is that they use the benefits of the agreements by testing wines coming from different European countries. I guess French wines don't need much advertisement, but I would recommend Italian, Hungarian, Greek or Spanish wines, but also Belgian chocolate. So before I let you go, I want to ask you a few rapid fire questions. A book you think everyone should read, the Mahabharata. No, I will go for 1984. Early morning negotiator or late night negotiator. Late night. Same here. Your favorite European city. Paris. Brussels, of course. One Indian city every European should visit. Udaipur or Puskar. I'll be more traditional, say Mumbai. Who is your biggest professional inspiration? People who put the European cause above their personal ego. I would say the founding fathers, because Shuman Monet, because they have the vision to go beyond the fudes in a post-war Europe and actually put together the foundation for Europe. Thank you both so much for your time and for the interesting conversation. Thank you. Thank you.