India-EU Trade Deal Negotiations: Differences over Food Safety Rules Persist

Syllabus: GS 2/IR

In News

• India and EU have exchanged offers on goods and services in the 12th round of FTA talks, marking key progress on risk assessment and regionalization, but harmonization and dispute resolution remain unresolved.

Background 

• The India-EU relationship can be traced back to the early 1960s, with India being amongst the first countries to establish diplomatic relations with the European Economic Community.
  • Relationships developed over the years, culminating in a formal Strategic Partnership in 2004 and the start of talks for a Bilateral Trade and Investment Agreement, or India-EU FTA, in 2007.
• FTA talks stalled in 2013 after 15 rounds due to a “gap in ambition.
  • The EU sought market access in sensitive sectors like wine, cheese, and spirits, while India prioritized liberalization of services trade and visa access.
• India and the European Union (EU) resumed negotiations for a Free Trade Agreement (FTA) in June 2022. 

Coverage

• The India-EU trade pact negotiations cover 23 policy areas or chapters, including Trade in Goods, Trade in Services, Investment, Sanitary and Phytosanitary Measures, Technical Barriers to Trade, Trade Remedies, Rules of Origin, Customs and Trade Facilitation, Competition, Trade Defence, Government Procurement, Dispute Settlement, Intellectual Property Rights, Geographical Indications, and Sustainable Development. 

Present Status of Trade Relations and Relevance for India

• India’s bilateral trade in goods with the EU was $137.41 billion in 2023-24 (exports – $75.92 billion, imports – $61.48 billion), making it the largest trading partner for goods.
• The EU market accounts for about 17% of India’s total exports, while exports to India make up 9% of its total exports.
• In addition, the bilateral trade in services, in 2023, between India and the EU was estimated at $51.45 billion.
• The two sides are negotiating a free trade agreement, an investment protection agreement and an agreement on geographical indications (GIs).
  • The trade agreement with the EU would help India in further expanding and diversifying its exports of goods and services while securing the value chains. India is seeking to forge balanced agreements with major world economies to increase its market share in global trade.

Key Issues

• Agriculture & Dairy: India imposes high tariffs (39%) to protect small-scale farmers, while the EU pushes for access to its dairy and agricultural products.
  • The EU has proposed excluding agriculture from the FTA to advance other sectors.
• Services & Mobility: India seeks Mutual Recognition Agreements (MRAs) for qualifications and relaxation in visa rules.
  • The EU’s restrictive policies and refusal to grant India ‘data secure’ status under General Data Protection Regulation (GDPR) pose hurdles for digital services trade.
• Sustainability & CBAM: The EU’s Carbon Border Adjustment Mechanism (CBAM)—a levy on carbon-intensive imports—has raised concerns in India, especially from MSMEs.
  • India criticizes CBAM as unfair to developing countries and burdensome due to excessive data requirements.
• Sanitary and Phytosanitary (SPS) Measures : Despite progress in several areas, differences over food safety regulations—specifically SPS measures—continue to hinder the deal’s finalization
• EU’s Stringent Standards: The EU enforces pesticide residue limits and aflatoxin thresholds that are stricter than WHO Codex norms.

Impact on Indian Exports

• India’s exports of coffee, tea, spices, and rice face frequent rejections due to these standards.
• Growth in agri-exports to the EU has been modest—from $3.02 billion in FY2019 to $4.54 billion in FY2025.

Future Outlook 

• India and the EU are planning to conclude the FTA in two phases, with the first phase targeting areas of convergence by the end of 2025.
• Successful finalisation of the India-EU FTA will depend on mutual flexibility, phased compromises, and pragmatic approaches, especially in sensitive areas like agriculture, services, and sustainability.
  • India and the EU could adopt flexible models, as seen in EU’s FTAs with Singapore and Vietnam—phased liberalisation or sectoral exemptions.

Source: IE