The draft of the historic Free Trade Agreement (FTA) between India and the European Union (EU) has been finalized. According to a Reuters report, after this agreement comes into force, both sides will give Most Favored Nation (MFN) status to each other. This means that both sides will be bound by the rules of the World Trade Organization (WTO) and will not be able to impose any new export-import restrictions deviating from global rules.
This agreement has been reached after a process of almost two decades. Prime Minister Narendra Modi has described this agreement as a new blueprint for shared prosperity. European Union (EU) President Ursula von der Leyen has described it as a free trade area for 2 billion people which will further strengthen the world’s economic security.
European markets will be fully opened for India
This agreement will eliminate or reduce tariffs on 96.6 percent of products based on trade value. EU will open 99.5 percent of its market to India. Tariffs on most products will be reduced immediately or within a maximum of seven years. India will remove tariffs on 96% of traded goods.
Agriculture sector out of this agreement
This process will be completed in different phases in the next 10 years. Both sides have kept sensitive agricultural sectors like dairy, rice, sugar and beef out of this agreement to protect the interests of local farmers. This agreement is expected to bring huge economic benefits to both the parties. Indian exporters of textiles, leather, gems and jewellery, and seafood will get immediate zero-tariff access to the European market.
cooperation on digital trade
European car manufacturers and wine producers will benefit from a major reduction in tariffs in the Indian market. It is estimated that European exports to India will double by 2032, which will save European companies about 4 billion euros every year. In addition to tariffs, an agreement has been made to align food safety with the WTO.
In addition, both sides have committed to deepen digital trade cooperation, considering privacy as a fundamental right. However, both countries will retain their rights over personal data protection and cross-border data flows.