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EU-India historic trade deal: Key points and tariff cuts

EU and India sign historic trade agreement after two decades of negotiations, eliminating tariffs on 96.6% of European exports and creating a €4 billion market.

EU-India historic trade deal: Key points and tariff cuts
World
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After nearly two decades of negotiations, the European Union and India announced a historic trade agreement, as both sides seek to deepen their relations amid tensions with the US. “We did it, we concluded the mother of all agreements,” declared European Commission President Ursula von der Leyen at a press conference in Delhi. Indian Prime Minister Narendra Modi called the agreement “historic”.

The agreement will enable free trade of goods between the union of 27 European states and the world’s most populous country, which together represent nearly 25% of global gross domestic product and a market of two billion people. The agreement is expected to significantly reduce tariffs and expand market access for both sides.

The European Commission stated that the agreement will eliminate tariffs on most exports of chemical products, machinery and electrical equipment, as well as aircraft and spacecraft, following gradual reductions. Importantly, tariffs on motor vehicles, which currently reach 110%, will be reduced to 10% with a quota of 250,000 vehicles. This is six times larger than the 37,000-unit limit that India granted to the United Kingdom in an agreement signed last July, according to Bloomberg.

EU-India agreement: Benefits from the trade memorandum

India’s agreement with the EU is expected to reduce the cost of European products entering the country, such as cars, machinery and agricultural food products, following the reduction of import tariffs.

Brussels stated that the agreement will support investment flows, improve access to European markets and deepen supply chain integration.

Delhi said that almost all of its exports will have “preferential access” to the EU, with textiles, leather, marine products, handicrafts, precious stones and jewelry expected to see tariff reductions or eliminations.

Key points of the agreement

The reduction or in some cases even elimination of tariffs is at the forefront of the historic trade agreement between the EU and India.

Specifically:

– Tariffs will be eliminated or reduced on 96.6% of EU commodity exports
– Savings of up to 4 billion euros annually from tariff reductions on European products
– Elimination of tariffs on EU fruit juices and processed foods
– Elimination of tariffs on EU olive oil, margarine and vegetable oils
– Reduction of tariffs on European beer by 50%
– Reduction of tariffs on EU alcoholic beverages by 40%
– Reduction of tariffs on EU wine by 20-30%
– Elimination of tariffs on most EU chemical products
– Elimination of tariffs on EU optical, medical and surgical equipment for 90% of products
– The agreement is expected to double EU exports to India by 2032
– Tariffs on EU aircraft will be eliminated
– Car tariffs will be gradually reduced to 10% for 250,000 vehicles annually
– Elimination of tariffs on pasta and chocolates from the EU

Protection from Trump tariffs

In an uncertain geopolitical context, this agreement is expected to allow both parties to better protect themselves from Chinese competition and the impact of the tariff war with the United States.

“In the world they say it’s the deal of all deals,” Modi said expressing his satisfaction in a speech delivered in New Delhi before his late morning meeting with European Council President Antonio Costa and European Commission President Ursula von der Leyen.

“This pact will offer numerous opportunities to 1.4 billion Indians and millions of EU residents,” he added, “it covers about 25% of global Gross Domestic Product and one third of global trade”.

The last obstacles to concluding the agreement were removed yesterday, Monday, during last-minute consultations between negotiators.

India and the EU hope it will increase their trade transactions by reducing customs duties in numerous sectors. In 2024, the two parties exchanged goods worth 120 billion euros – an increase of nearly 90% in ten years – and services worth 60 billion euros, according to the EU.

According to projections by the International Monetary Fund (IMF), India with 1.5 billion inhabitants, which records very strong growth, 8.2% annually in the last quarter, is expected to take from Japan this year the title of the fourth economy in the world, after the United States, China and Germany. According to its government, it could climb to the podium before 2030.


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