EU-India pact shows free trade still has a future

The EU–India trade deal, formally known as the EU–India Broad-based Trade and Investment Agreement, stands out as one of the longest, most intricate and politically revealing trade negotiations in the European Union’s contemporary history.

Its roots lie in the early 2000s, when India and the EU — already significant commercial partners — began exploring ways to move beyond sectoral cooperation toward a more structured and strategic economic relationship.

This aspiration took institutional form in 2004, when both sides elevated their engagement to a “strategic partnership,” signaling shared interests in trade, technology and global governance.

The formal launch of negotiations in 2007 reflected this ambition, with the agreement envisioned as a comprehensive framework covering trade in goods and services, investment protection, public procurement, intellectual property rights and regulatory cooperation.

Yet progress proved elusive. Between 2007 and 2013, negotiations advanced unevenly as fundamental structural differences came to the fore.

The European Union pressed for deeper market access in areas such as services, automobiles, wine and spirits, pharmaceuticals and public procurement, alongside stringent intellectual property and investment protection standards.

India, by contrast, prioritized greater mobility for its skilled professionals — particularly under Mode 4 of services trade — while insisting on policy space to accommodate its development priorities and regulatory autonomy.

These divergences, compounded by the aftershocks of Europe’s financial crisis and shifting political priorities in India after 2014, ultimately led to a de facto suspension of talks in 2013, even though negotiations were never formally terminated.

For nearly a decade thereafter, the agreement remained stalled, mirroring broader transformations in global trade politics. The EU adopted an increasingly values-driven trade policy, embedding sustainability, labor rights and environmental standards into its external economic relations.

India, meanwhile, grew more skeptical of comprehensive trade agreements, emphasizing domestic manufacturing, strategic autonomy and economic resilience. It was only in the late 2010s and early 2020s — amid supply-chain disruptions, intensifying US-China rivalry and Europe’s search for dependable economic partners — that momentum returned.

In 2021 and 2022, negotiations were formally relaunched through a more pragmatic, modular approach that separated trade, investment and geographical indications into parallel negotiating tracks.

The prolonged gestation of the EU–India trade deal thus reflects not diplomatic inertia but the challenge of reconciling two large, diverse economies with distinct development models, regulatory philosophies and global ambitions.

Its conclusion in early 2026 marked not merely a bilateral breakthrough but a broader recalibration of trade strategy in an era defined by geopolitical uncertainty and economic fragmentation.

That uncertainty intensified dramatically after Russia’s full-scale invasion of Ukraine in February 2022, which reshaped global trade relations and sharpened diplomatic frictions. India’s continued economic engagement with Russia — particularly its imports of discounted Russian crude oil — quickly became a point of contention in its relations with the United States.

Washington increasingly framed India’s trade choices as incompatible with a rules-based international order, resorting to economic pressure to signal its disapproval. The announcement in mid-2025 of a 25% tariff on selected Indian exports, explicitly linked to India’s purchases of Russian oil, marked a notable escalation in economic diplomacy and underscored US frustration with India’s insistence on strategic autonomy.

From India’s perspective, however, such measures appeared disproportionate and disconnected from the country’s material realities. With a population of roughly 1.46 billion and one of the world’s fastest-growing major economies, energy security is not a discretionary policy choice but a development imperative.

Since the onset of the Ukraine war, India’s crude oil imports from Russia have surged from marginal levels to an estimated 35% to 40% of its total crude mix by mid-2025, making Russia one of its principal suppliers. Bilateral trade expanded accordingly, surpassing US$68 billion in 2024-25 as both countries adapted to sanctions-driven shifts in global markets.

Indian officials have also pointed to what they view as inconsistencies in Western policy. The European Union, for instance, continued substantial trade with Russia in 2024, with bilateral goods trade valued at approximately 67.5 billion euros, alongside significant imports of Russian liquefied natural gas amounting to a record 16.5 million metric tons.

The US, too, has maintained imports of selected Russian-origin commodities, such as uranium for civilian nuclear use and palladium critical to electric vehicle manufacturing, even while criticizing India’s energy purchases.

From New Delhi’s vantage point, these patterns reveal a double standard, under which India is penalized for pursuing affordable energy while Western economies retain selective commercial ties with Moscow.

Europe’s response, by contrast, has been marked by pragmatism rather than overt coercion. While firmly condemning Russia’s actions in Ukraine and maintaining an extensive sanctions regime, European policymakers have acknowledged that trade and energy flows remain essential to economic stability and social welfare.

This calibrated approach reflects an understanding that sanctions alone cannot shield populations from economic hardship, particularly in energy-intensive economies facing inflationary pressures.

The same pragmatism has informed Europe’s renewed engagement with India, culminating in the 2026 EU–India trade agreement, which leaders have described as creating an economic space of nearly 2 billion people and laying the groundwork for a substantial expansion of bilateral trade.

This evolution highlights a striking paradox in contemporary geopolitics. Although the United States originally coined and promoted the concept of the “Indo-Pacific” as a strategic framework — designed to link the Indian and Pacific oceans through security alliances, supply chains and governance norms — Europe now appears better positioned to reap its economic dividends.

While Washington has largely emphasized the Indo-Pacific as a theater of strategic competition and security alignment, European actors have approached it primarily as a space for commerce, connectivity and economic diversification.

Through trade agreements, infrastructure partnerships, regulatory cooperation and sustained engagement with India and Southeast Asia, the EU has translated the Indo-Pacific concept into a commercially grounded strategy.

The divergence between US and European approaches reflects deeper differences in strategic outlook. The US has increasingly deployed trade as an instrument of geopolitical signaling within its Indo-Pacific strategy, seeking alignment through conditionality and pressure.

Europe, while sharing many normative commitments, has prioritized economic interdependence, diversification and resilience — maintaining selective trade channels where necessary while deepening partnerships with India through trade agreements, supply-chain integration and market access.

In effect, Europe has operationalized the Indo-Pacific not as a battleground of influence but as a platform for mutually beneficial economic integration.

These choices carry significant global implications. India’s expanding economy — driven by a young workforce, rising consumption and rapid industrial transformation — offers major opportunities across technology, pharmaceuticals, services and green energy.

With India’s GDP firmly in the multitrillion-dollar range and the EU’s combined GDP exceeding $15 trillion, closer EU–India integration strengthens global growth prospects, enhances supply-chain resilience and mitigates systemic risks in an increasingly fragmented world economy.

The EU–India trade deal reflects a growing recognition that while wars may persist and sanctions shape behavior at the margins, trade remains one of the most effective tools for sustaining livelihoods, stabilizing economies and fostering long-term cooperation.

In this sense, Europe’s engagement with India — marked by restraint, sensitivity and an appreciation of differing national circumstances — signals an acceptance of the limits of coercive economic diplomacy.

By foregrounding interdependence and human welfare alongside political principle, the EU’s approach gestures toward a more nuanced global order. In an age defined by uncertainty, it may be Europe’s commercially grounded interpretation of the Indo-Pacific — rather than a militarized conception — that ultimately delivers the greatest and most enduring benefits for the global economy.

Saroj Kumar Rath (sarojkumarratha@cvs.du.ac.in) is a strategic expert and academic based in New Delhi. He teaches at the University of Delhi, where his work focuses on security studies, geopolitics and strategic affairs. His research and commentary engage closely with issues of conflict, statecraft and international order.