EU Trade Deal Impact: Why It May Have Triggered the US Announcement

NEW DELHI: Last February, Prime Minister Narendra Modi and US President Donald Trump announced the start of discussions for a bilateral trade agreement, giving India’s long-running FTA negotiations with the UK and the EU a surprise boost.

With a twist, the design has been replicated. This time, the US seems to have been strongly motivated to conclude the protracted talks with India by the trade agreement with the EU.

With the WTO in disarray and no signs of a multilateral trade system returning, bilateral agreements are the norm.

There are compelling arguments in favor of close commercial relations between the US and India. The expectation that the first trade agreement under Trump 2.0 will be with India is explained by their complementarities and comparative advantages. However, non-trade-related factors caused chaos, including India’s unwillingness to address Trump’s assertions over Operation Sindoor and local pressure on him to appear tough on Moscow, which led to a 25% secondary tax on India’s purchases of Russian petroleum.

The accord remained on the table even as the chances of an early settlement dwindled. Even the tough-talking Americans participated. Naturally, India took it very seriously.

Given its extensive market exposure, India had invested substantial resources on the trade agreement with the United States. Piyush Goyal, the minister of trade and industry, and S Jaishankar, the minister of external affairs, spoke with their Washington counterparts while Modi and Trump were on the phone. Despite the ups and downs, the Indian embassy in Washington also maintained the conversation, in addition to representatives from the ministries of trade and external affairs.

Due to people acquainted with the bilateral negotiations, Sergio Gor’s entry contributed to the “normalization” of commercial relations, which seemed to have been severely damaged a few months prior.

India was also encouraged to pursue accords, which were never at the top of the agenda, by the protracted talks with the US. Suddenly, every bloc and nation was involved, whether it was Israel, New Zealand, or Mercosur. Also included in the give and take of trade discussions were a number of agricultural items, cars, and wine and spirits.

Over the past 12 months, Indian trade negotiators have been hopping from one trading partner to another, balancing commodities and geographical locations.

Although the trade agreement between India and the UK was finalized in early May, the US President’s efforts forced the Brussels bureaucracy to be more accommodating in its discussions, which resulted in the deal’s announcement on January 27 after 18 years of negotiations.

Over two-thirds of India’s exports and nearly half of its imports are now covered by the major free trade agreements (FTAs) due to the rush for trade agreements that include products and services as well as new sectors including intellectual property regimes, small business, labor, and sustainability.

Key Developments in India’s Recent Trade Agreement Push