India, EU Fast Track FTA To Guard Against More American Disruptions

US President Donald Trump has made disruption a governing principle in his second tenure. Nowhere is it more visible than in his assault on global trade and his contempt for long-standing allies. From publicly hectoring the European Union (EU) at Davos to testing Europe’s resolve over Greenland, he’s done it all. But with Europe showing some spine over Greenland, Trump, in true business negotiation style, briefly backed down from threats to use force to negotiate a settlement with Denmark and Greenland. However, Trump continues to signal the transatlantic partnership is no longer a given.

The fallout of US policy is forcing capitals to hedge. As Washington grows more erratic, countries are scrambling to lock in trade pacts that can cushion them from American tantrums. One of the clearest beneficiaries of this churn is the long-stalled India-EU Free trade Agreement, which was fast tracked and is now on the brink of being signed.

The presence of the EU’s top leadership as chief guests at India’s Republic Day celebrations signals that India, too, is looking to Europe as it scrambles to insulate itself from Donald Trump’s unpredictable ways. New Delhi has its own set of problems with the US, with tariffs now at 50 per cent as it negotiates a bilateral trade deal with America. India, too, is on the lookout for fresh markets that could offset the closure of US markets.

Talks on an India-EU FTA began as early as 2007, but were suspended in 2013 over differences and then re-launched in 2022. But with both India and the EU looking to quickly wrap up proceedings and seal the deal during the India-EU summit in New Delhi on Tuesday, both sides are hyping up the deal, with Piyush Goel, India’s commerce minister, referring to it as ``the mother of all deals.’’

Trade deals usually take time as countries quibble over every minute detail to protect their interests. Agreements with the EU are always difficult, thanks to the bloated European bureaucracy. It is slow and given to excessive red-tape and is often dubbed as a mammoth "regulatory leviathan". The Indian bureaucracy is not far behind, but because the EU constitutes as many as 27 countries with different perspectives, progress is even slower. But the Trump assault on global trade has led to fast-tracking the process.

India’s invitation to the two top EU dignitaries to be the guests of honour for the Republic Day celebrations is a clear diplomatic signal of how much importance New Delhi is giving to Europe. A day before the summit, Antonio Luis Santos da Costa, president of the European Council and the president of the European Commission Ursula von der Leyen, will watch the parade flanked by the President and Prime Minister of India. The guest of honour is chosen with great care. EU Commission chief Leyen will arrive on Saturday, while the Council chief Antonio Costa lands on Sunday.

India’s relations with the EU have generally been good and got fresh impetus when US ties with India took an upward trajectory since 2000. As a close ally of America, the general trend had been for Europe to follow Washington’s lead. India and the European Union have been strategic partners since 2004 and New Delhi’s relations with European powers like Germany and France are excellent.

There was some heartburn in Europe when India refused to side with Ukraine after Russia’s invasion. In fact, Europe exerted the maximum pressure on New Delhi to break with Moscow and stop buying Russian oil. India’s foreign minister Subrahmanyam Jaishankar had hit back bluntly, much to the delight of ordinary Indian citizens. But Ukraine has not come between India and the EU trading links.

Now Brussels and New Delhi are planning to sign a framework security and defence partnership covering maritime security, cyber security and counter-terrorism, according to the EU’s highest-ranking diplomat Kaja Kallas. This will give new energy to the India-EU partnership. Details are not available, but the framework agreement will be sealed on Tuesday. A joint comprehensive strategic vision for the 2026–2030 period is also expected to be announced, signalling the growing partnership between EU and India.

The European Union is India's biggest trade partner with bilateral trade in goods recording USD 135 billion in the financial year 2023-24. Bilateral Trade in Services in 2023 stood at US $ 53 billion (comprising Indian exports worth US $ 30 billion and imports worth US $ 23 billion) registering the highest ever trade in services. EU investments in India are valued at over US$117 billion with around 6,000 European companies present in India. India's investments in the EU are valued at around US$40 billion.

India and the European Union are betting that deeper economic and strategic ties with each other offer the surest hedge against a world where old certainties no longer hold.