EU – INDIA

Free Trade Agreement

Comprehensive Analysis Report

Key Findings and Sectoral Impact Assessment Based on 2024 Data 

BASIC TRADE INDICATORS 

1. SUMMARY

The Free Trade Agreement (FTA) negotiated between the European Union and India is the tangible outcome of a historic economic integration process that will fundamentally transform the trade relations between the two parties. According to 2024 data, the bilateral trade volume reaching 120 billion Euro in goods trade alone clearly demonstrates the strategic importance of this agreement.

The agreement includes a wide range of regulations such as customs tariffs, trade in services, digital trade, intellectual property, sustainable development, and investment. Both parties have committed to opening their markets significantly while protecting the structural sensitivities of their economies.

2. TARIFF COMMITMENTS AND MARKET ACCESS

   1. Tariff Liberalization in Goods Trade

The tariff commitments, which form the backbone of the agreement, exhibit an asymmetric but balanced structure for both parties. The EU will apply zero customs duties on more than 90% of tariff lines and 91% in terms of value. India will remove tariffs on 86% of tariff lines and 93% in terms of value.

When partial liberalization commitments are also taken into account, the overall scope of trade liberalization reaches 99.3% for the EU and 96.6% for India. These rates place the agreement among the most comprehensive free trade agreements signed by the EU.

2. India's Tariff Reductions for Industrial Products

India will make reductions within the scope of high industrial tariffs, which currently hover over an average of 16%, primarily in the following sectors:

• Chemicals – Current tariffs reaching up to 22% will be largely removed upon the entry into force of the agreement.

• Cosmetics – Tariffs reaching up to 22% will be removed within 5-7 years.

• Plastics – Partly upon entry into force, the vast majority within 7 years.

• Automobile parts – Most of the tariffs will be removed within 5-10 years

• Textiles and apparel – Most of the tariffs will be removed upon entry into force.

• Machinery and equipment – Half of the tariffs upon entry, the remainder in a period extending up to 10 years.

• Boats and marine vessels – Largely upon entry into force.

3. Agriculture and Food Sector

The agriculture sector has remained the most sensitive chapter in the negotiations. The agreement is designed within a framework balanced by considering India's high level of protection and sectoral sensitivities. The EU will not grant any concessions on products such as sugar and ethanol, rice and soft wheat, beef and poultry, milk powder, bananas, and honey.

The main gains provided for the EU's agricultural exports can be summarized as follows:

• Olive oil – Tariffs up to 45% will be reduced to zero upon entry into force or after 5 years.

• Non-alcoholic beer and certain fruit juices – 55% tariff will be removed within 5 years.

• Confectionery, bread, pasta, chocolate, pet food – 33% tariff will be removed upon entry or gradually.

• Sheep meat – 33% tariff will be subject to a phased reduction period.

 For alcoholic beverages and fruits, the following regulations are being introduced:

• Wines – High tariffs reaching up to 150% will be reduced to 30% for most over time.

• Spirits beverages – Tariff will be reduced to 40%.

• Beer – Tariff will be reduced to 50%.

• Fruits like kiwi and pear – Market share will be increased through **Tariff Rate Quotas (TRQs)**.

3. SERVICES, DIGITAL TRADE, AND INTELLECTUAL PROPERTY

   1. Trade in Services

In bilateral services trade, which reached 59.8 billion Euro in 2024, the EU is a net importer with 26 billion Euro. Although the agreement is based on the WTO’s General Agreement on Trade in Services (GATS), it offers significant improvements in many areas.

The main innovations in the field of trade in services are as follows:

• Most of the WTO Domestic Regulation Joint Initiative rules have been included in the agreement.

• A structure has been established for financial services within the framework of 'Understanding on Commitments' which India did not follow in GATS.

• Binding commitments regarding senior management and boards of directors as well as local presence requirements have been accepted for the first time.

• Provisions on the mobility of professionals are among the most ambitious commitments ever undertaken by both parties in previous agreements

2. Digital Trade

The Digital Trade Section is critical for establishing a predictable and secure digital trade environment. The agreement includes comprehensive rules that strengthen consumer trust, provide legal certainty for businesses, and support the competitiveness of the EU's technology sector.

• Protection is provided against the mandatory disclosure of software source code.

• Most of the WTO Electronic Commerce Joint Initiative rules have been integrated.

• Rules have been established to address unsolicited commercial communications (spam) and protect online consumers.

3. Intellectual Property

The intellectual property section of the agreement covers a comprehensive range of IP categories, including copyrights and related rights, trademarks, designs, trade secrets, and plant varieties. A high standard of protection and enforcement aligned with both EU and Indian legislation is targeted.

4. SUSTAINABILITY, ENVIRONMENT, AND LABOR STANDARDS

   1. Trade and Sustainable Development

The Trade and Sustainable Development (TSD) section of the agreement presents one of the most comprehensive examples of modern EU free trade agreements. Environmental protection, combating climate change, labor rights, and the economic empowerment of women are handled with a holistic approach.

Regarding multilateral environmental agreements, both parties will cooperate for the implementation of the following agreements:

• Paris Agreement

• Convention on Biological Diversity

• Convention on International Trade in Endangered Species of Wild Fauna and Flora (CITES)

2. Labor Rights

The agreement brings the following obligations within the framework of ILO's fundamental standards:

• Freedom of association and the right to collective bargaining

• Elimination of all forms of forced and compulsory labor

• Prohibition of child labor

• Combating discrimination in the workplace

• Ensuring a safe and healthy working environment

TSD commitments are legally binding and have been made enforceable through a special advisory mechanism involving technical experts and political decision-makers. Non-governmental organizations also play an active role in monitoring the agreement.

5. INSTITUTIONAL STRUCTURE AND DISPUTE SETTLEMENT

   1. Institutional Mechanism

The governance structure of the agreement consists of a Joint Committee and specialized sub-committees. These intergovernmental bodies oversee the implementation of the agreement and coordinate cooperation between the parties. Furthermore, special channels have been established for the participation of civil society.

• Fast Response Mechanism: Issues that may negatively affect bilateral trade between the parties can be escalated to the highest level and resolved when necessary.

• SME Contact Points: Special contact units will be established on both sides to facilitate small and medium-sized enterprises' utilization of the agreement.

2. Dispute Settlement

The dispute settlement mechanism ensures independent arbitration panels, binding panel reports, and transparent process management. An implementation mechanism that allows for the suspension of concessions in case of non-compliance with commitments is also included in the agreement. The inclusion of a mediation option provides a basis for resolving disputes through reconciliation.

6. SMEs, TRANSPARENCY, AND REGULATORY FRAMEWORK

   1. SME Support

The section for SMEs offers practical tools for small businesses to benefit from free trade advantages. Information regarding market access on both sides will be published on a single and universally accessible digital platform.

Tariff reductions, the removal of regulatory barriers, and increased transparency will contribute to reducing costs, simplifying procedures, and strengthening the predictability of the business environment. These developments are particularly important for SMEs, which often have fewer resources to navigate complex trade procedures.

2. Customs and Trade Facilitation

The Customs and Trade Facilitation Section includes the following key commitments:

• Conduct of legitimate trade between the EU and India in a faster and easier manner

• Ensuring compliance of imported products with the rules of the importing country through effective customs control

• Provisions regarding transparency, advance rulings, and simplified procedures

• Cooperation on supply chain security and sharing of customs data

3. Good Regulatory Practices

The Good Regulatory Practices (GRP) Section stipulates that parties perform regulatory impact assessments before implementing new regulations, grant sufficient consultation periods to all stakeholders, and examine alternative regulatory options. These principles increase the predictability of the business environment and prevent unnecessary trade barriers.

Considering that the agreement will be subject to a comprehensive evaluation five years after its entry into force as per the General Review Clause, it is important for stakeholders to closely monitor the developments throughout the said process.

7. TURKEY IMPACT ANALYSIS

EU–India FTA is not just a trade arrangement between two distant economies for Turkey, but a critical development with direct and structural consequences. As stated by Ayhan Zeytinoğlu, President of the Economic Development Foundation (İKV), this second major FTA following the Mercosur agreement significantly erodes Turkey’s deep-rooted advantages in the EU market. At the heart of this risk lies a structural asymmetry of the Customs Union Turkey established with the EU.

1. Structural Asymmetry of the Customs Union

Turkey is obliged to comply with the EU’s external customs tariff; however, it cannot automatically benefit from the free trade agreements concluded by the EU with third countries. In practical terms, India will obtain duty-free access to the EU market, while Turkish exporters will not receive equivalent preferential access to the Indian market unless a separate FTA is concluded between Turkey and India. This situation highlights the structural asymmetry of the Customs Union: Indian products will be able to enter both the EU market and, through the principle of free circulation, the Turkish domestic market without customs duties, whereas Turkish products will not benefit from comparable market access in India.

2. Sectoral Risk Map

The potential effects of the agreement on Turkey will manifest in different intensities on a sectoral basis:

3. Domestic Market Threat: Second-Round Effect

Due to the technical structure of the Customs Union, Indian-origin products entering the EU duty-free will also be able to enter the Turkish domestic market without paying tariffs within the framework of the free circulation principle. This shows that the risk is not limited to Turkish exporters. Domestic producers operating in the domestic market will also face more intense price competition. According to the assessment made by Economist Prof. Dr. Ümit Özlale in the Plan and Budget Committee, the real risk arises not from the increase in India's exports to Turkey, but from the emergence of intense competition with Turkey in the EU market.

4. Geopolitical Context and Trump Factor

It is observed that US-based trade policy uncertainties played a decisive role in the signing of the agreement on January 27, 2026. According to the analyses of the Kiel Institute for the World Economy (IfW), the Trump administration’s customs threats against India directed New Delhi toward the European market; this development has been the primary source of political will accelerating negotiations that could not be completed for approximately 20 years. On the other hand, it is predicted that Trump’s trade policy will direct Indian exports from the US to various developed markets, and it is assessed that this trade diversion may negatively affect Turkey, especially in textiles and ready-to-wear.

5. Structural Policy Proposals for Turkey

Many analysts, especially İKV (ECONOMIC DEVELOPMENT FOUNDATION), emphasize that this agreement is not a short-term problem for Turkey, but a systematic signal pointing to the accumulation of permanent structural disadvantages. The strategic steps Turkey can take in the upcoming period can be summarized under the following headings:

• Updating the Customs Union: Expanding the 1995 Customs Union Agreement with the EU to include services, agriculture, and public procurement has now become an urgent priority. Without updating the current structure, each of the EU’s new FTAs will continue to produce systematic disadvantages for Turkey.

• Turkey–India Bilateral FTA Negotiations: Negotiating a separate free trade agreement with India stands out as the most direct structural solution to eliminate the current asymmetry. This step will also mitigate the risk of trade diversion from India to Turkey.

• Transforming the Geographical Proximity Advantage: While transportation from India to Europe takes weeks, delivery from Turkey is possible within 48–72 hours. Railway connections should be strengthened, quota and bureaucratic obstacles in road transport should be removed, and this logistical advantage should be systematically marketed to buyers in the EU.

• Transition to Value-Added Production: Instead of entering price competition in high-risk sectors such as textiles and automotive, product quality, design, brand, and technology intensity should be prioritized. This transformation will make competitiveness permanent in both EU and third markets.

• Compliance with the Green Transition: Compliance with the EU’s Carbon Border Adjustment Mechanism (CBAM) and legal framework in the field of green standards will be a decisive factor in accessing the EU market in the medium term. Turkey's early and proactive provision of this compliance will strengthen its current position in the supply chain.

• Digital Infrastructure and B2B Marketing: Digital brand investments that will strengthen the perception of reliability, speed, and sustainability among European buyers should be encouraged; the visibility of SMEs on international B2B platforms should be increased.