The EU and India have signed a historic free trade agreement. What is needed now is an active, long-term, progressive trade strategy. This must put goals such as sustainability, security, and partnerships between equals at the forefront.
Amid historic shifts in the geopolitical power balance and under considerable pressure, the EU has concluded a free trade agreement with India after nearly 20 years of negotiations. It is right that we in Europe reach out to our partners, achieve long-term goals, and demonstrate our ability to act – especially at this time. The agreement will cover a market of almost two billion people and reduce tariffs, some of which previously reached over 100 per cent. This is not only an important step forward for mutual trade. With this agreement, the EU and India are also strengthening important industries within global markets, reducing their dependence on the US and China, and setting an example for new partnerships within a rules-based order. The EU-India Security and Defence Partnership, concluded alongside the trade deal, demonstrates that security is also being given high priority.
EU Commission president Ursula von der Leyen and Indian commerce minister Piyush Goyal described the agreement as the "mother of all deals". Viewed through a more pragmatic lens, it is primarily an initiative by two partners to formulate a response to the trade policy upheavals of recent years and increasing pressure from the US and China. A trade agreement only goes part of the way towards achieving this goal. Important areas where Europe needs to improve – from weak innovation and sluggish decarbonisation to a lack of digital sovereignty – are not addressed. Structural imbalances also remain problematic, and many critical issues have been left out in favour of a quick conclusion. Nevertheless, given the lack of alternatives, this agreement represents an important geopolitical tool and a major step forward in the European-Indian partnership.
At the same time, the shock waves generated by the European Parliament's vote on the EU-Mercosur agreement are still reverberating. A majority of MEPs voted in favour of having the agreement reviewed by the European Court of Justice, thereby delaying its ratification. In addition to MEPs from the Social Democratic, Left, and Green parliamentary groups, this majority included MEPs from right-wing and nationalist groups in the European Parliament, who want to roll back free trade and even the European Union itself. This situation illustrates the dilemma facing progressive trade policy. New partnerships and global cooperation are more important than ever, but they are coming at an increasing price that we must be prepared to pay. What is particularly difficult in this case is that, in addition to economic disadvantages for European farmers, the trade deal carries the risk of further deforestation and environmental destruction. It is not us who pay the price of the latter, but rather local ecosystems and communities. We want to be pragmatic and decisive, but also ambitious and strategic. It isn’t possible for everyone to have everything they want, as soon as they want it; the geopolitical situation demands compromise. However, these dilemmas also offer lessons for a new form of free trade.
The European Union and India Are Allies in a Fragmented World
True to the motto "where there's a will, there's a way", India and the European Union have found a compromise. The agreement deepens the EU-Indian partnership and, in addition to boosting trade, will promote mutual understanding and respect. This is important and entirely logical, considering the challenges they face. Both the EU and India see themselves as global mediators, are under massive pressure from their ally, the US – including being subject to tariffs – and have a complex, ambivalent relationship to China.
In addition, their common interests go beyond the mere exchange of goods – they lie in the expansion of the two parties’ respective green tech sectors, in defence, and in raw materials. Under a best-case scenario, trade, security and climate policy would be considered together. This would help create the strategic foundation essential for such agreements to be effective in today's world.
At the same time, the EU must find a way of dealing with India's multi-alignment strategy. India is in demand globally and knows how to use this to its advantage. In addition, it is crucial to recognise from the outset that both sides have differing perceptions and priorities on many major issues. This is the only way to avoid unrealistic expectations.
These different ideas must find their place within the partnership. This has been achieved in the free trade agreement on agriculture, where critical sectors such as dairy farming and certain other agricultural products have been excluded. Mutual recognition of vulnerable industrial sectors is an important first step in this direction.
Traditional Free Trade Agreements Are Products of a Bygone Era
One major question remains unanswered: does the EU have the right tools at its disposal to productively implement new partnerships? We believe there are some gaps here.
Both the EU-Mercosur and EU-India agreements were negotiated in the style of "old" comprehensive free trade agreements, which are rightly criticised for their disadvantages – including their impact on local net product and on industrial development in the Global South, as well their use of controversial private arbitration tribunals (Investor-State Dispute Settlements, ISDS). In excluding vulnerable industries and not including a traditional ISDS clause, the India deal does represent some progress here.
Green trade policy has long focused on fighting for the inclusion of sustainability and social standards within already extensive free trade agreements – or rejecting these agreements altogether. This strategy has not been successful. Increasingly, our civil society partners on the ground are signalling that European standards are perceived as disadvantageous or paternalistic. At the same time, a strict rejection of free trade is naïve in today’s world. Neither European, nor Latin American, Asian or African states can counter the geoeconomic power of China and the US completely by themselves.
However, in these challenging times, we must also acknowledge that large free trade agreements no longer offer appropriate answers to many of Europe's problems. Investment and innovation are given as little attention as decarbonisation and the circular economy. One could argue that this was never the aim of traditional free trade agreements. Our approach should therefore be to create more far-reaching agreements that take both the present and the future into account.
Approaches That Give Cause for Hope
What should be the guiding principles for a modern, progressive trade policy? We believe that smaller, more targeted, and more dynamic trade instruments are needed. Smaller, in that they focus on fewer sectors and individual partners rather than just supra-regional economic areas. More targeted, in that they are linked to investment agreements and common political goals (see the negotiations with India on defence). And more dynamic, in that they are adjusted more frequently and equipped with mutual checks and balances rather than unilaterally setting standards. Our overarching goal is for trade agreements to represent "alliances for trade and climate" that defend the rules-based international order as well as global climate and environmental policy goals.
On this, we are not on our own. Other countries have already joined forces in plurilateral agreements – most notably the 2024 Agreement on Climate Change, Trade and Sustainability (ACCTS) between Costa Rica, Iceland, New Zealand, and Switzerland – to pursue new and more sustainable approaches to trade policy. This agreement should serve as the template for new partnership models.
The EU has also taken steps in this direction. Clean Trade and Investment Partnerships (CTIPs) were created as a strategic instrument under the European Green Deal, with a clear set of objectives comprising decarbonisation and joint value creation. For the first time, three different agendas (trade, climate, and investment) were to be combined and strategically important value chains and sectors identified and prioritised. The first CTIP, signed with South Africa, is a non-binding declaration of intent without any investment commitments. As such, it doesn’t yet meet the requirements. But that should be an incentive for further development, not to wind up the initiative.
We, as Greens, can make a special contribution here by developing a new approach to partnerships. This must acknowledge that partners will not always support the implementation of European environmental and labour protection standards within trade instruments – for their own good reasons – but instead wish to develop them jointly and in line with local conditions. The consistent implementation of the European Green Deal at home is the other side of the coin when it comes to demands for sustainability standards; this is essential for credibility and planning security.
Three elements should be part of a new progressive trade strategy towards countries in the Global South and can help navigate the dilemma. First and foremost, a focus on bilateral transition paths for individual value chains such as steel or cement (rather than a one-size-fits-all approach). Such pathways would enable partner countries to gradually adapt to European rules such as the Carbon Border Adjustment Mechanism (CBAM). The EU should act with foresight here; if calls for cooperation and support with adapting to EU regulations continue to fall on deaf ears, China will become an increasingly attractive partner. Secondly, in the interests of credibility and integrity, it should become standard practice for the EU to back up the desired environmental and social standards with investment commitments. And finally, efforts in partner countries to promote (often developing) industry through local content requirements (LCR) should be supported. This would be beneficial to the EU in the context of current debates on industrial policy. Such a strategy would also be in the EU’s own interest, and it should be confident in stating this. After all, more resilient supply chains, new markets, joint contributions to climate and industrial goals, and reliable contracts benefit all sides.
When viewed against many of these proposals, the picture is mixed on the new free trade agreement between India and the EU. Perhaps this ambivalence is unavoidable in today’s world. But it remains an incentive to ensure that the new free trade agreement is only the beginning of a deeper partnership. The agreement’s pragmatic scope is a start, but the fact that an investment agreement was not negotiated simultaneously is a missed opportunity. As with further Clean Trade and Investment Partnerships, this should be the starting point, not the finish line.
Get Involved - Presidents' column
Get involved! There’s no other way to be real – thus the message of Heinrich Böll, and, to this day, his encouragement is inspiring us. With this column the Presidents of the Foundation involve themselves in current social and political debates. This column will appear each month, authored, in turn, by Jan Philipp Albrecht and Imme Scholz.