The EU estimates the deal could double EU exports to India by 2032 and generate annual duty savings of up to 4 billion euros on European products. However, this will also hurt the enemies of India.
India’s trade deal with the European Union has caused ripples from across the border to the United States as well. Not only Bangladesh, Pakistan but even the United States and Turkey will feel the heat of the historic trade agreement between India and the EU. Under the agreement, tariffs on over 90 per cent of EU goods exports to India will be eliminated or reduced, including steep duties of up to 44 per cent on machinery, 22 per cent on chemicals, and 11 per cent on pharmaceuticals, which will be mostly phased out.
Tariffs on EU beer will be cut to 50 per cent, while duties on chemicals, aircraft, and spacecraft will be eliminated for almost all products. The EU estimates the deal could double EU exports to India by 2032 and generate annual duty savings of up to 4 billion euros on European products. However, this will also hurt the enemies of India.
The relations between India and Turkey went downhill after Operation Sindoor, where Ankara helped Pakistan with drones and loitering ammunition. Since then, the relations between the two nations have been strained. Now, the India-EU trade deal is likely to hurt Turkey as well.
Notably, the EU–Turkey Customs Union obliges Ankara to match the EU’s common external tariff with any partner country. Ankara has previously raised concerns related to this with the EU, but there has been no headway made to resolve the issue. When the EU lowers tariffs for an FTA partner (like India), Turkey must do the same for that country. However, India won’t have an obligation to do the same to Turkey. It will be interesting to see how Turkey responds to this.
Impact On Bangladesh
A few months ago, during an interview, Bangladesh’s interim leader Muhammad Yunus said that due to higher US tariffs on New Delhi and lower on Dhaka, Indian companies may shift their bases to Bangladesh. Also, Bangladesh, being the Least Developed Country (LDC), has zero duty while exporting to the EU, whereas India faced higher duties. This helped Dhaka capture a larger market share in the EU.
Reacting to the EU trade deal, Commerce Minister Piyush Goyal said, “India can boost textile exports to Europe from $7 billion to $30-40 billion quickly. We were always asked how Bangladesh exports so much to Europe. They had zero duties and captured a $30 billion share.”
With Indian garment exports competing with Bangladeshi products in the EU, the market share of Dhaka will shrink for sure due to pricing and quality.
Impact on Pakistan
A fragile economy struggling to survive, Pakistan is irked with India’s growing ties with the EU. The India-European Union Free Trade Agreement has also irked Pakistan-backed Khalistanis. They feel that close ties between the European Union (EU) and India mean that the latter gains more leverage to target Khalistani elements.
The Khalistan groups, which have made countries such as Canada, Germany, and the United Kingdom their base, believe that this proximity between India and the EU would harm their movement. The EU-India defence partnership also includes anti-terror cooperation and thus poses a challenge for Khalistani terrorists.
Also, the United States is miffed with the deal because its pressure tactics on New Delhi did not materialize. Despite President Donald Trump making absurd statements, India refused to bend, and the Indo-US trade deal is stuck. Now, the EU-India trade deal will put more pressure on Trump from his supporters and leaders, as America is missing out on a strategic partnership deal.
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