India and the European Union Sign a Historic Free Trade Agreement Following 17 Years of Discussions

India and the European Union have finalized a significant trade agreement, reducing tariffs and strengthening their relationship in the context of global tensions.

The European Union and India have unveiled a significant free trade agreement, concluding nearly twenty years of intermittent negotiations. Both parties assert that this development will greatly enhance economic relations amid increasing global protectionism and escalating tensions with the United States.

During a media briefing in New Delhi on Tuesday, European Commission President Ursula von der Leyen characterized the pact with great enthusiasm, stating: “We did it, we delivered the mother of all deals.”

Indian Prime Minister Narendra Modi praised the agreement as “historic,” describing it as the largest free trade deal India has ever finalized.

The agreement will facilitate increased trade in goods between the 27-member European Union and the world’s most populous nation, collectively representing nearly 25 percent of global gross domestic product and a combined market of approximately two billion individuals. There is an expectation for a significant reduction in tariffs and an expansion of market access for exporters from both parties.

In Delhi, Von der Leyen and European Council President António Costa are participating in a bilateral summit with Modi, highlighting the significance both parties place on the agreement.

The European Commission stated that the agreement would remove tariffs on the majority of exports related to chemicals, machinery, electrical equipment, and aircraft and spacecraft, implemented through gradual reductions. One of the most important concessions pertains to motor vehicles, with duties that currently reach as high as 110 percent being reduced to 10 percent under a quota of 250,000 vehicles.

The quota is six times greater than the 37,000-unit quota that India allocated to the United Kingdom as part of a trade agreement established last July, as reported by Bloomberg.

The deal is anticipated to decrease expenses for various European products entering India, such as cars, industrial machinery, and agricultural food items, due to the reduction of import duties.

Brussels stated that the agreement would bolster investment flows, enhance access to European markets, and strengthen supply-chain integration between the two economies.

Delhi stated that nearly all Indian exports would gain “preferential access” to the EU. Sectors anticipated to gain advantages encompass textiles, leather goods, marine products, handicrafts, gems, and jewellery, with tariffs set to be reduced or eliminated.

India indicated that commodities like tea, coffee, spices, and processed foods would also gain advantages, while emphasizing that it had “prudently safeguarded sensitive sectors, including dairy, cereals, poultry, soy meal, certain fruits and vegetables, balancing export growth with domestic priorities.”

Both parties have reached an agreement on a mobility framework designed to facilitate short-term travel restrictions for professionals transitioning between India and the European Union.

“This is the largest free trade agreement in India,” Modi stated. “It will facilitate easier access to European markets for farmers and small businesses in India.” It will additionally enhance the manufacturing and services sectors. It will enhance collaborative partnerships.

The agreement is set against a backdrop of economic and geopolitical pressure from the United States affecting both parties.

India is facing challenges due to the 50 per cent tariffs imposed last year by President Donald Trump, while discussions aimed at achieving a bilateral trade agreement with Washington remain prolonged. The European Union has encountered trade tensions with the US as well.

Last week, Trump issued a warning about intensifying a trade conflict with European allies due to their resistance to a suggested US acquisition of Greenland, although he later retracted his stance.

The leaders’ remarks clearly reflected the wider geopolitical context.

On Tuesday, von der Leyen remarked: “This is the tale of two giants — the world’s second and fourth largest economies.” Two giants that opted for collaboration in a genuinely mutually beneficial manner. A powerful statement emphasizing that collaboration is the most effective solution to worldwide issues.

A day earlier, Costa remarked — without specifying the United States — that the agreement would convey “an important political message to the world that India and the EU prioritize trade agreements over tariffs,” especially as protectionism grows and “some countries have opted to raise tariffs.”

Over the weekend, Von der Leyen and Costa arrived in Delhi, serving as the chief guests at India’s Republic Day celebrations on Monday. On Tuesday, they took photographs with Modi, showcasing a clear sense of camaraderie between the leaders.

The agreement is set to undergo approval by both the European Parliament and the European Council, with a formal signing anticipated later this year.

In addition to trade, India and the European Union are progressing discussions on security, defense collaboration, and climate initiatives.

On Tuesday, India’s Defence Minister Rajnath Singh stated that he had engaged in discussions covering a broad spectrum of bilateral security and defence matters with the European Commission’s Vice-President Kaja Kallas. The talks included opportunities for integrating supply chains, establishing trusted defence ecosystems, and developing capabilities for the future.

As reported by Reuters, both parties are collaborating on a draft security and defense partnership that encompasses maritime security, cyber threats, and organized defense dialogue.

The European Union stands as India’s foremost trading partner in goods, with bilateral merchandise trade soaring to $136 billion in the 2024-25 financial year — almost twice the amount noted a decade earlier.

The negotiations for the deal commenced in 2007 but faced a standstill in 2013 due to disputes regarding market access and regulatory standards. Negotiations were officially resumed in July 2022, with representatives from both parties intensifying their efforts in recent days to finalize the remaining chapters before the visit of EU leaders.

The agreement arrives at a time when both Delhi and Brussels are under increasing pressure to find alternative markets for their exporters.

Over the last seven months, India has entered into significant trade agreements with the United Kingdom, Oman, and New Zealand. A pact signed in 2024 with the four-nation European Free Trade Association bloc — Switzerland, Norway, Iceland, and Liechtenstein — has come into effect, alongside a trade deal with Australia that was signed in 2023.

Earlier this month, the European Union finalized a long-anticipated trade agreement with South America’s Mercosur bloc, bringing to a close 25 years of negotiations.