The Takeaway
As the U.S. and China continue to deploy coercive trade instruments, including tariffs and export controls, as tools of strategic leverage, the recently concluded European Union–India free trade agreement (FTA) negotiations signal something different: a renewed commitment to a rules-based free trade partnership. The deal is an indicator of India’s shift toward comprehensive partnerships, integrating market access with security, technology, climate action, and mobility.
For Canada, the deal could serve as a benchmark as it pursues trade talks with New Delhi. Canadian Prime Minister Mark Carney’s expected visit to India in early 2026, therefore, comes at a critical time.
In Brief
- European Council President Antonio Costa and European Commission President Ursula von der Leyen visited India from January 25-27 at the invitation of Indian Prime Minister Narendra Modi. In addition to focusing on trade, Costa and von der Leyen were also chief guests at India’s 77th Republic Day celebrations on January 26 — the first time EU leaders had been invited in this capacity.
- The agreement links India with the EU’s 27 member states, covering nearly 2 billion people with a combined market of approximately US$24 trillion and around 25 per cent of global GDP. The pact is expected to raise two-way trade by nearly 50 per cent from 2024–25 levels by 2030. It is the largest FTA either side has ever concluded; von der Leyen described it as the “mother of all deals.”
- Under the agreement, India will grant tariff concessions to 97.5 per cent of the EU’s exports, benefiting sectors such as machinery, automobiles, aircraft, steel, alcohol, and processed foods. In return, the EU will offer preferential access covering 99.5 per cent of India’s trade value, largely benefiting India’s labour-intensive export sectors, including textiles, apparel, leather, gems, and jewellery. Both sides will protect sensitive sectors such as agriculture.
- Beyond trade, the EU–India Summit on January 27 also saw the signing of an EU–India Security and Defence Partnership and the adoption of the “Towards 2030” Joint Strategic Agenda, anchoring long-term co-operation in critical technologies, peaceful uses of nuclear energy, green hydrogen, research and innovation, supply-chain resilience, connectivity, and skills mobility.
Implications
Tariff pressure accelerated the deal’s conclusion. EU–India FTA negotiations spanned nearly two decades: they were launched in 2007, stalled in 2013, and resumed in 2022. Momentum intensified following the historic February 2025 visit of 22 of the 27 commissioners of the EU, led by von der Leyen, and was reinforced by sustained high-level engagement across bilateral and multilateral platforms, including the G7 (where India is a frequent invitee) and G20. That groundwork paid dividends when heightened uncertainty — India is facing U.S. tariffs of up to 50 per cent, and Washington recently threatened to raise tariffs against Europe amid tensions over Greenland — created a policy window for both sides to act.
India offered the EU its best deal thus far. The EU–India FTA grants the EU India’s deepest tariff concessions to date, covering 97.5 per cent of EU exports — exceeding those offered in recent deals by India with the U.K. (91 per cent) and the European Free Trade Association bloc (95.3 per cent), a non-EU grouping comprising Iceland, Liechtenstein, Norway, and Switzerland. Specifically, the EU–India FTA opens 102 services sub-sectors to European firms, including financial, business, maritime, and telecommunications services. Most notably, India has extended unprecedented market access in the automotive sector, including a vehicle import quota more than six times larger than that granted to the U.K., and steep, phased tariff reductions from as high as 110 per cent to as low as 10 per cent. Beyond autos, EU exporters gain expanded access across key industrial and agri-food categories, translating into estimated annual duty savings of around C$6.46 billion (€4 billion) for European exporters.
The deal offers lessons for Canada’s future negotiations with India. With India looking westward for new trade agreements, the EU FTA — India’s eighth trade deal since 2021 — underscores New Delhi’s renewed emphasis on bilateral arrangements following its exit from the Regional Comprehensive Economic Partnership (RCEP) in 2019. As India offers increasingly ambitious tariff concessions in recent FTAs, covering sectors such as automobiles, machinery, chemicals, and precious metals, Canada risks being at a competitive disadvantage without preferential access. Notably, the EU–India agreement includes a dedicated chapter for small and medium-sized enterprises (SMEs) that improves access to information on operating in each market. That point is particularly relevant for Canada, given that SMEs account for nearly 98 per cent of Canadian businesses. In addition, India has accepted binding commitments on labour rights, environmental protection, women’s empowerment, and climate co-operation, lowering political and regulatory barriers for partners such as Canada to pursue similar provisions. Expanded co-operation on talent mobility, defence, Indo-Pacific security, and secure shipping lines further illustrates how India’s newer trade agreements are increasingly embedded within broader strategic partnerships.
What’s Next
1. Future of India-EU trade deal
The FTA’s legal texts will now undergo finalization, translation, and ratification by the European Council, the European Parliament, and India’s cabinet, with entry into force expected later in 2026. Several elements, including investment protection and geographical indications, will be concluded separately. As the ratification process unfolds, domestic political parties, trading partners, and civil society groups will be watching the agreement closely, reflecting both its scale and far-reaching economic and regulatory implications.
2. Takeaways for Canada
As Canada moves from public consultations to formal negotiations on a Comprehensive Economic Partnership Agreement (CEPA) with India, the EU experience highlights the value of continuous high-level engagement and a broader strategic framing that packages trade alongside shared priorities such as security, technology, clean energy, critical minerals, R&D, and talent mobility. Carney’s expected visit represents an opportunity to reset Canada–India trade talks with greater urgency and ambition.
• Edited by Vina Nadjibulla, Vice-President Research & Strategy, and Ted Fraser, Senior Editor, APF Canada
