India-EU Free Trade Agreement: Domestic Industries Push for Zero-Duty Concessions to Boost Competitiveness
As the India-European Union free trade agreement (FTA) is poised for announcement on Tuesday, attention is sharply focused on several critical sectors where the domestic industry is advocating for zero-duty concessions. These measures are seen as essential to enhance competitiveness against rivals like Bangladesh and Vietnam, particularly in labour-intensive segments.
Textiles, Marine Products, and Leather Seek Tariff Elimination
Among the top priorities is the elimination of tariffs in sectors such as textiles, marine products, sports goods, toys, and leather. A Sakthivel, chairman of the Apparel Export Promotion Council, emphasized the potential benefits, stating, "Once the FTA is implemented and we achieve zero duty, we can secure more orders from the 27 EU countries. This will place us on par with Bangladesh, especially given our raw material advantages. A boost in apparel exports will positively impact the entire value chain, from cotton to fabrics and yarn." Currently, Indian garments face an 11% duty in the EU, compared to zero duty for products from Bangladesh.
In the leather and footwear industry, Israr Ahmed, director of Farida Group and former vice-president of the Federation of Indian Export Organisations (FIEO), highlighted the competitive edge. "A tariff cut would provide a significant advantage, making us equally competitive with Vietnam, which already has an FTA with the EU. This support is crucial amid current challenges like US tariffs."
Ramesh Juneja, chairman of the Council for Leather Exports, projected a substantial increase in exports, noting, "With competitors from Pakistan and Bangladesh enjoying zero-duty access in the EU, the FTA is expected to offer us similar benefits. We anticipate our exports to the EU rising from $2.25 billion to $6 billion by 2030."
Automobile Sector: Balancing Competition and Protection
While sectors like wines and automobiles are under close scrutiny, Indian and European negotiators have agreed to exclude agriculture—often the most contentious area in trade talks. Indian auto manufacturers express confidence in managing costs and competing with European counterparts, but they harbor concerns about Chinese companies leveraging the trade pact to sell electric vehicles (EVs) in India.
To address this, the industry has requested protection or a transition period to allow domestic players to mature and safeguard investment commitments. This would also provide Indian auto component makers with time to develop and integrate into the global value chain.
In the internal combustion engine segment, where 90% of sales are in vehicles priced below Rs 25 lakh, there is a push for protection in the middle and smaller categories. European manufacturers face challenges in selling vehicles with on-road prices around Rs 25 lakh, making gains more likely for premium brands like Mercedes, BMW, and Audi. If the UK-India deal serves as a template, the government may phase out concessions by gradually reducing tariffs from the current 110%, possibly with quotas. EVs, which were not included in the UK deal, might receive a longer transition period.
Additional Benefits: Mobility and Market Access
Beyond tariff reductions, the FTA is expected to include mobility-related easing, facilitating access for Indian professionals and businessmen to European markets. This move aims to enhance bilateral trade and economic cooperation, further strengthening the India-EU partnership.
As negotiations conclude, the focus remains on balancing competitive advantages with protective measures to ensure sustainable growth across key industries.
