The ‘Mother of All Deals’: Why the EU–India Alliance Matters
The EU and India are also set to sign agreements covering the movement of workers, exchanges of students, researchers, and professionals.
Quick overview
- The European Union and India have formalized a significant trade agreement after two decades of negotiations, creating a free trade zone for nearly two billion people.
- The pact aims to enhance cooperation in various sectors, including automobiles, wine, and military equipment, while reducing tariffs on European imports significantly.
- Indian Prime Minister Narendra Modi and European Commission President Ursula von der Leyen highlighted the agreement's potential to provide substantial market access and economic opportunities.
- The deal is expected to boost India's exports in textiles and other goods, while also facilitating agreements on worker movement and security cooperation.
Both sides will deepen cooperation across a wide range of strategic sectors, including automobiles, wine, and even military equipment.
The European Union and India on Tuesday formalized what they described as the “mother of all trade deals,” an agreement that—after two decades of negotiations—will create a free trade zone encompassing nearly two billion people. The pact aims to shield both sides from Chinese competition and from the fallout of the tariff-driven trade war proposed by the United States.
“This agreement will bring many opportunities,” said Indian Prime Minister Narendra Modi. European Commission President Ursula von der Leyen echoed the sentiment in a post on X, writing: “Europe and India made history today.” She added that the EU expects to benefit from “the highest level of market access ever granted by India to a trading partner,” noting that the agreement covers economies that together account for roughly 25% of global GDP and one-third of international trade.
The announcement follows the EU’s signing on January 17 of a long-awaited agreement with the South American Mercosur bloc after more than 25 years of negotiations. However, the European Parliament has referred that deal—reached with Argentina, Brazil, Paraguay, and Uruguay—to the bloc’s courts for a legal review, delaying ratification by up to 18 months.
Deal details: cars, chocolate, and military equipment
Cuts to Indian tariffs on European imports are expected to save the EU up to €4 billion ($4.75 billion) per year.
Under the agreement, India will reduce tariffs on European vehicles from 110% to 10%, on wine from 150% to 20%, and will eliminate duties entirely on products such as pasta and chocolate, according to European officials. For its part, India expects the deal to boost exports of textiles, jewelry, gemstones, and leather goods, Modi said.
The EU and India are also set to sign agreements covering the movement of temporary workers, exchanges of students, researchers, and certain professionals, as well as a security and defense pact. In this area, New Delhi has been diversifying its military procurement away from its long-standing reliance on Russia, while Europe is pursuing a similar strategy to reduce dependence on the United States.
According to International Monetary Fund (IMF) projections, India could overtake Japan to become the world’s fourth-largest economy—behind the United States, China, and Germany—and could reach the global top three before 2030, according to the Indian government.
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