European Commission President Ursula von der Leyen announced on Friday that the European Union and India are committed to finalizing a free-trade agreement by the end of the year.
Speaking in New Delhi during her two-day visit, von der Leyen emphasized that strengthening ties with India is a strategic priority for Europe. She described the potential agreement as the most significant deal of its kind, underpinned by deeper cooperation in trade, technology, security, and defense.
“This free-trade agreement would be the largest of its nature globally,” she stated following discussions with Indian Prime Minister Narendra Modi.
“Negotiations will be challenging, but with the right timing and determination, we can achieve this. Prime Minister Modi and I have agreed to accelerate efforts to finalize the deal this year, and I am fully committed to making it happen.”
This marks the first visit to India by the new European Commission leadership, reflecting the EU’s intent to solidify relations with New Delhi amid growing geopolitical tensions involving the United States and China.
Trade talks between the EU and India initially began in 2007 but were suspended in 2013. Negotiations resumed in 2021, though progress has been gradual. With global trade dynamics shifting, both sides are now eager to advance discussions, particularly as a counterbalance to U.S. tariff policies and China’s aggressive trade strategies.
Tensions over deforestation and CBAM, also with other trading partners
Tensions over a number of issues however remain, as the EU refused to signal relief for India on the EU’s climate tariff CBAM and its new deforestation regulation. A senior EU official commented:
“The EU says that some of India’s concerns on the carbon border adjustment mechanism (CBAM) are “illegitimate”, but it is ready to address them, a senior trade-bloc official said.”
No relief for India on CBAM, ahead of Ursula von der Leyen’s visit
‘The EU says that some of India's concerns on the carbon border adjustment mechanism (CBAM) are "illegitimate", but it is ready to address them, a senior trade-bloc official said.’ pic.twitter.com/acGllrmI9B
— Kashish Parpiani (@kparpiani) February 27, 2025
The official also commented on the EU’s deforestation regulation, stating: “We will be addresing those concerns (on deforestation regulation) and we can reassure our Indian friends and operators in the market that we look forward to receiving their high-standard products, of course, in full compliance with our deforestation regulation.”
The EU’s deforestation regulation (EUDR) has been angering the EU’s trading partners since it was proposed. As a result of this, the EU has postponed implementation with one year, until 2026. The regulation introduces a whole range of extra requirements in order to import certain products in the EU that are seen as vulnerable to deforestation.
Malaysia was one of the first countries to raise the alarm, which is also due to its important palm oil exports. Despite the fact that the country has been lauded by NGOs for having managed to reduce deforestation, the EU is unwilling to recognise Malaysian MSPO standards as equivalent.
That is despite the fact that other Western trading partners, like the UK, are willing to do so. It is also despite the fact that a new, updated version of MSPO will in fact be even more strict than EU standards. Malaysia maintains that it should be considered “low risk” under the EU’s new regime, both due to its track record on deforestation and due to its sharpening up of its own standards.
Also the United States has voiced its discontent with EUDR, when Joe Biden was still President. Expectations are that it may not escape the anger of new US President Donald Trump, who is getting increasingly vocal about various protectionist EU policies. According to a Reuters report, the U.S. paper and pulp industry has been lobbying Trump’s administration to ask the EU to declare the United States deforestation-free, which would make it easier for exporters to meet the EU’s new requirements.
US paper industry asks Trump to seek lighter EU deforestation rules https://t.co/DHhQ3guKhb
— Reuters Energy and Commodities (@ReutersCommods) February 19, 2025
CBAM
India on its turn has urged for a “transition period”, so its businesses are able to prepare to adhere to these regulations. It reportedly considers the gains of these new rules to be limited, as these are eventually likely to be considered a non-trading barrier, once a trade agreement with the EU will have been agreed.
Also with regards to CBAM, India is annoyed. Ajay Srivastava, a former member of the Indian Trade Service, comments that “since the CBAM imposes tariffs based on production methods, it violates rules of the World Trade Organisation. India must push for protective language in the FTA to address this issue. EU officials have a tough task placating India’s concerns because there are no exemptions for any country, including FTA partners, on the CBAM.”
The official also commented on the EU’s deforestation regulation, stating: “We will be addresing those concerns (on deforestation regulation) and we can reassure our Indian friends and operators in the market that we look forward to receiving their high-standard products, of course, in full compliance with our deforestation regulation.”
A proposed simplification to the EU carbon border adjustment mechanism (#CBAM) would save small importers over €1.12 billion per year, according to the @EU_Commission. https://t.co/gHySpKAguG
— Tax Notes (@TaxNotes) February 28, 2025