The EU and India sign “the mother of all trade agreements” | Economy

While the old rules of the international order, the European Union and India have opted to strengthen ties with the signing of what both delegations have called the “mother” of all trade agreements, according to the definition of the president of the European Commission, Úrsula von der Leyen. She, together with the president of the European Council, António Costa, traveled to New Delhi to hold a summit between the EU and India in which they closed the negotiations. It represents a decisive step to eliminate barriers to imports between both areas: 4,000 million less in tariffs, Brussels estimates. But, above all in this continuous geostrategic earthquake, it is a step to reduce dependencies on the United States and China.

This global uncertainty, without a doubt, has contributed to accelerating the free trade pact that began to be negotiated in 2007, stalled between 2013 and 2022, and has taken off in the last year, coinciding with the arrival of Trump. The path was sealed this January after 26 years of deliberations (although it has now stumbled in its parliamentary processing after the European chamber voted to refer the treaty to the Court of Justice of the EU).

Brussels defends that the new framework will contribute to opening markets, integrating supply chains and generating employment and wealth for two “giants” that total 2 billion people.

“It brings together the skills, services and scale of India with the technology, capital and innovation of Europe,” Von der Leyen said during an appearance in the Asian country, after the summit with the Indian Prime Minister, Narendra Modi. “It will create levels of growth that neither side could achieve alone. And by combining these strengths, we reduce strategic dependencies, at a time when trade is increasingly used as a weapon.”

The Indian leader highlighted in a video message that the agreement represents close to 25% of world GDP and approximately a third of global trade, and that it reinforces, beyond the commercial sphere, “the shared commitment to democracy,” according to the Efe agency. For India, the agreement complements the trade pacts signed with other partners, such as the United Kingdom or the countries of the European Free Trade Association (Iceland, Liechtenstein, Norway and Switzerland). “It will contribute to strengthening global trade and supply chains,” he highlighted.

The High Representative for Foreign Policy and Security of the EU, Kaja Kallas, who is also part of the European delegation and has negotiated the deepening of relations in the field of Security and Defense, assured last week that the link between India and the EU is going through a “crucial moment” in a world that has become “more dangerous.” “The rules-based international order,” he said.

Reaching a trade agreement with India is very significant. This Asian giant has much higher tariff barriers than other areas and countries. That is also why the EU, the most open trading area in the world, celebrates it. Brussels calculates that by reducing tariffs on those 4,000 million euros per year for European exports – by eliminating or reducing 90% of current taxes – European exports to India will double, which in 2024 reached 48,800 million. Imports, for their part, reached 71.3 billion.

Among the benefited sectors is the motor sector, which suffers. India is committed to gradually lowering the very high import tariffs on European cars from 110% to 10%, with a quota of 250,000 vehicles per year. Tariffs of up to 44% on machinery, 22% on chemical products, 11% on pharmaceuticals and an average of 36% that weigh on the agri-food industry will also be largely eliminated, according to the documents on the agreement provided by Brussels.

For New Delhi, the fourth largest economy and the most populous country on the planet, the agreement is a key step in the Government’s modernization strategy. India is a country where legions of software developers coexist with the most absolute misery. But it is growing at a good pace (7.3% is projected by the IMF for 2026) as it has become a growing alternative to China as a technological, industrial and manufacturing base: foreign direct investments in India soared by 73% in 2025, while those directed to the People’s Republic fell for the third consecutive year, by 8%,

Modi, who has been in power for almost 12 years, has sought to navigate the complex waters of geopolitics by pivoting between capitals, seeking opportunities without fully committing to anyone, defending a kind of third way of non-aligned countries.

At the same time as he approaches Brussels, he maintains an exquisite deal with Vladimir Putin’s Russia: he is the second buyer of its oil since the invasion of Ukraine in 2022, which earned him in August Far from retracting, Modi defended the sovereignty of his energy purchases and traveled to China, a neighbor with which he has maintained a tense historical relationship, in a sign that there is no bad partner in fickle times.

This Tuesday, when speaking about the agreement with the EU, Modi highlighted that India is working to increase investment in the oil and gas sector to 100 billion dollars by the end of this decade and that it seeks to expand the exploration area to one trillion square kilometers. “Friends, today India is actively working on global alliances in all sectors,” he noted. “India is emerging as a global hydrocarbon hub.”

The new harmony with the EU can be taken as a thermometer of the mood among certain orphan powers, which are facing a new way of exercising hard power, based on commercial and military attacks.

“Cooperation is the best response to global challenges,” Von der Leyen outlined in her speech in which she thanked Modi for his “exceptional hospitality” during a long, four-day visit. US President Donald Trump and his tariffs and threats have not been mentioned; nor are Beijing’s recent restrictions on critical materials, such as rare earths. But both have floated around the words of the head of the community Executive, announcing “the mother of all trade agreements.”

At the moment, the EU is India’s first trading partner (representing 11% of the total) while, conversely, the Asian country is the ninth partner of the Twenty-Seven (with 2.4%). Exchanges have doubled in the last decade. Although the community bloc imports more than it sells, it is one of the main foreign investors in the Asian country, with more than 140,000 million euros in 2023, and the presence of some 6,000 companies.