Can India-EU trade ties withstand global geopolitical fragmentation?

Even if a trade deal remains elusive, the current geopolitical environment offers numerous opportunities for the two large democratic entities to collaborate on technology, connectivity, and green transition

From today, President of the European Commission Ursula von der Leyen, accompanied by the College of Commissioners is on an unprecedented visit to India. In addition to der Leyen, the college consists of Foreign Policy Chief Kaja Kallas, five executive vice-presidents, and 20 commissioners overseeing their respective portfolios. The 27 commissioners represent each of the EU's member states, with one from each country. They will meet Prime Minister Narendra Modi and their other counterparts in the Indian government.

During the visit, the India-EU Trade and Technology Council (TTC) meeting will also take place. Historically, Europe has been crucial for India's trade and investment. As India pursues its modernisation ambitions, the EU will remain a key partner in trade, technology, investment, and energy transition. In 2021, Modi met all 27 EU leaders, leading to the resumption of three separate negotiations on trade, investment, and Geographical Indications (GI) agreements as well as a ‘connectivity partnership’.

Last year, bilateral trade in goods and services reached nearly $200 billion and has remained balanced for many years. India has also attracted approximately $120 billion in investment from the EU. After exercising caution on trade deals for nearly a decade, India recently signed several agreements, including one with the four-nation European Free Trade Association (EFTA). Momentum is also building in India-UK trade negotiations.

The 10th round of India-EU trade talks is expected next month. Similarly, six rounds of negotiations have been held on investment and GI agreements. With the EU’s trade agreements cover 76 countries, India faces challenges in some of its exports. While a trade deal would be mutually beneficial, several issues still need to be resolved.

Even if the FTA remains elusive, the current global geopolitical fragmentation offers new opportunities for the world’s two largest democratic entities to collaborate in many other areas. With a growing convergence of interests in the Indo-Pacific, both sides are actively exploring new avenues through initiatives like the TTC and the India Middle-East Europe Economic Corridor (IMEC).

Russia has become a major strategic challenge for the EU. For the past three years, India's perspective on the Ukraine war has differed from that of the EU. While the EU and several member states were disappointed with India’s stance, co-operation continued as their interests aligned in many areas. Now, the EU finds itself sidelined as the Donald Trump administration engages directly with Russia to resolve the conflict.

Ursula von der Leyen has advocated for a ‘geopolitical Europe’ for the past four years, but European leaders are now confronted with real geopolitical shifts driven by the US and Russia. This has sparked discussions among European leaders about achieving greater ‘independence’ from the US in strategic affairs. Against this backdrop, India could emerge as a key partner for the EU in the evolving global order. In fact, the EU, India, and other partners could develop a joint strategy to counter Trump's tariff war.

In recent years, India’s engagement with the EU has expanded beyond its traditional focus on key member states like Germany, France, and the UK (when it was part of the EU). India has strengthened ties with the Nordics, Central, and Eastern Europe, and the Mediterranean region. It has launched India-Nordic summits, Baltic-Nordic business conclave, and established new strategic partnerships with Greece, Italy, and Poland.

Energy transition challenges in Europe differ significantly from those in India. New Delhi also has serious reservations about the EU’s Carbon Border Adjustment Mechanism (CBAM). However, the threat of climate change remains real. With the US once again withdrawing from the Paris Agreement, India and the EU have an opportunity to lead global climate initiatives. The International Solar Alliance is one such example. Since 2004, they have collaborated through various bilateral action plans. Additionally, India and the EU could also collaborate on transferring climate technology solutions to countries in the Global South.

Despite anti-immigrant rhetoric, particularly from far-Right political forces, most European nations are grappling with labour shortages. Unemployment rates are low, and the EU is facing a decline in competitiveness. This makes skilled and semi-skilled migration, as well as student mobility from India, beneficial for the EU. Since migration policies fall under the jurisdiction of individual member states, New Delhi has already signed — or is in the process of signing — migration and mobility agreements with several EU countries.

The EU College of Commissioners’ visit to India signals the EU’s strong intent to build a meaningful partnership with India. Geopolitical developments have opened new avenues for collaboration. However, both the EU and India must make serious intellectual efforts to understand each other. Otherwise, discussions will remain focused on peripheral issues rather than engaging on matters of real significance.

(Gulshan Sachdeva is the Chief Coordinator of DAKSHIN-Global South Centre of Excellence at RIS, New Delhi, and a Professor and Jean Monnet Chair at the School of International Studies, Jawaharlal Nehru University.)

Disclaimer: The views expressed above are the author's own. They do not necessarily reflect the views of DH.