EU and India ink historic free-trade agreement

The European Union and India have made "history" by finalizing a free-trade deal, European Commission President Ursula von der Leyen and Indian Prime Minister Narendra Modi announced during an EU-India summit in New Delhi.

"The EU and India make history today, deepening the partnership between the world's biggest democracies," von der Leyen said on Tuesday.

"We have created a free trade zone of 2 billion people, with both sides set to gain economically. We have sent a signal to the world that rules-based cooperation still delivers great outcomes," she said.

Under the deal, India is to gradually reduce tariffs on imported cars from 110% to as low as 10%, at least for 250,000 vehicles per year, and tariffs on car parts are to be abolished after five to 10 years, the commission said.

Tariffs on machinery, chemicals and pharmaceuticals are also to be "mostly eliminated," it said.

Duties on some EU agricultural products are also to be lowered significantly.

The finalization of the talks between the EU and India comes after the signing of a heavily contested trade deal with four Mercosur countries - Brazil, Argentina, Paraguay and Uruguay - earlier this month.

The trans-Atlantic trade deal, which was 25 years in the making, was referred to the European Court of Justice (ECJ) by the European Parliament for a legal review after the deal triggered large-scale protests by European farmers fearing crushing competition from Latin American producers.

Waiting for the court's opinion could significantly delay the ratification process for the agreement.

Similar protests to the Mercosur agreement are not expected, as the EU-India agreement will not include sensitive areas for local farmers.

"Sensitive European agricultural sectors will be fully protected," the commission said. Products such as beef, chicken meat, rice and sugar are excluded from the deal, and EU standards are to continue to apply to all Indian imports, it said.

According to the commission, the removal of what it calls prohibitive tariffs on some products means that European farmers will gain access to new markets.

Tariffs on wine are to be reduced from currently 150% to as low as 20% in future, those on spirits are to be lowered from 150% to 40%, and beer will be taxed at 50% instead of the current 110%.

Duties on olive oil and other vegetable oils, fruit juices, processed foods and mutton are to be abolished, the commission said.

The deal will have to be formally adopted by EU countries as well as the European Parliament before it can enter into force.

Currently there is no timeline for the adoption and the ratification of the agreement. It is unclear how long this process will take.

In New Delhi, top EU diplomat Kaja Kallas also signed a security and defence partnership with Indian Minister for External Affairs Subrahmanyam Jaishankar.

"The pact launches an annual security and defence dialogue – with the first meeting taking place in a month – and deepens cooperation on maritime security, cyber issues and counterterrorism," Kallas said.

"We will also explore Indian participation in European defence initiatives," Kallas said.

"As the global order shifts, the EU will continue to deepen its diplomatic and economic ties across the world. Strong partnerships multiply our strength."

The EU already has similar partnerships with Japan and South Korea.

With a population of more than 1.45 billion, India is the world's most populous country, ahead of China. The European Union is home to around 450 million people.

India and the EU account for nearly a quarter of the world's population and global gross domestic product (GDP).

The negotiations on the free trade deal initially started in 2007 but were suspended in 2013 over a lack of progress.

Russia's full-scale invasion of Ukraine led to the relaunch of the talks in 2022, and US President Donald Trump's tariff policy spurred rapid progress.