India has inked a landmark Free Trade Agreement(FTA) with the European Union(EU) which is hailed as the “mother of all deals”. With this agreement India has not just scripted a new economic path to secure the interests of the domestic economy, but has stimulated a structural shift in the world economic order, which particularly acts as a prickle against the bully behaviour of Pakistan, Bangladesh and Turkey who hitherto are antithetical to India’s sovereignty, national security and strategic autonomy. The trade deal thus also testifies the stellar diplomatic and negotiation credentials of New Delhi, which helps to seek domestic security amidst global economic distortions.
The India-EU FTA has redrawn the global trade map and has accelerated a series of business and investment opportunities for both the nations with duty-free access, increased export opportunities and reduction of other trade and non-trade barriers. Most importantly, India has gained a clear strategic edge as the FTA aids New Delhi to emerge as a dominant regional trade player that helps to reinvigorate the trade games of Asia and beyond. India has unequivocally gained a competitive advantage by sealing the FTA with the European Union and has clearly cornered Pakistan, Bangladesh and Turkey by drastically altering the global trade equations. With the India-EU FTA, Islamabad, Dhaka and Ankara come under severe economic pressure whose economy is hitherto massively fractured.
India-EU FTA: Antipathy to Pakistan
The India-EU FTA provides greater market access to the Indian commodities across the European market encompassing 27 nations. This agreement is a major boost to diversify and strengthen the supply chains in a fragile trade landscape characterised by power competition. Due to increased market access and export opportunities for the Indian goods and services, it will also lead to the creation of more job opportunities. However, as India establishes a clear strategic and regional advantage by signing the FTA with the European Union, the nations that have been cornered are Pakistan, Bangladesh and Turkey whose economies are apparently entangled in a severe crisis.
To illustrate the scenario for Pakistan, Islamabad annually exports goods worth USD 32 billion. In this 27 per cent of the goods goes to the European Union. Textiles and apparel form a major chunk of this export from Pakistan which adds up to USD 9 billion. The trade between Pakistan and the European Union for these years was sustained through the duty-free access under the GSP system. It is the Generalized System of Preferences(GSP), where developed countries grant preferential tariff treatment to specific goods imported from the developing countries. However, with the latest India-EU FTA, New Delhi’s textiles will also get duty-free access to the European market, which will definitely sideline Pakistani exports.
Pakistan industries and economy are hitherto fragile with frequent power cuts, import dependence for raw materials, lack of adequate government & policy support etc. This will further reduce the export competitiveness of Pakistan against the Indian commodities in the global market. This will also further weaken the Pakistan economy which is suffering from high inflation, cost of living crisis and other structural inequalities. The threat & fear is already resonating among the textile bodies and manufacturing industries of Pakistan.
India-EU FTA: A bristle to Bangladesh & Turkey
Strategic advantage gained by India through the FTA with the European Union is also a demerit for Bangladesh in the global economic ladder. For example, Bangladesh exports 44 per cent of its total exports to the European Union. Dhaka earns USD 16 billion by exporting mere textiles to Europe. However, now with the entry of Indian textiles into the European market, Bangladesh indeed suffers from competitive disadvantage. Additionally, Europe has decided to phase out the duty-free benefits to the Least Developed Countries(LDCs). This will be an added burden to Bangladesh while competing with India to gain access to the European market. On the other hand, with Indian textiles gaining duty-free access to Europe, while grants given for Dhaka fades, Bangladesh textile industry will suffer.
The textile sector of Bangladesh is hitherto in a crisis mode, since the ouster of Sheikh Hasina regime in August 2024 and the takeover of the country’s administration by the interim regime under Muhummad Yunus. Without adequate government support coupled with political instability, violence, public uprising, soaring inflation, many textile firms have been shut down in Bangladesh. Thus, the masses are upset at the interim rule. With India’s accelerated access to the European market, Dhaka will further suffer from the economic hiccups.
Turkey is yet another economy which will be at a disadvantageous position as an impact of the India-EU FTA. Turkey is not part of the European Union. However, it is part of the Customs Union of the EU. Accordingly, Turkey now has to cut tariffs on Indian exports, in line with the actions taken by the European Union as per the norms of the FTA. However, in return for cutting tariffs, Ankara will not get any easier access into the Indian market. To sum up, India will get duty-free entry into Turkey, but the goods from Turkey have no entry into India. This is the biggest strategic disadvantage for Turkey which plotted against India during Operation Sindoor, by aligning with Pakistan. The Turkish media has in fact described the India-EU FTA as a biggest strategic shock.
India, thus has gained swift and resilient access to one of the largest markets of the globe with the aid of FTA. It will help to propel India’s textile & other exports to the EU by USD 30-40 billion more. In the long-run, it is estimated that the India-EU FTA will harness 6-7 million new jobs. Beyond these domestic economies of scale, the FTA has helped India to redefine its strategic predisposition and geopolitical posturing in the world order by consolidating a solid footprint in the world’s biggest trade bloc by backfooting other players. The agreement also aims to carve a balance of power amidst tilted and irrational economic conspirers who seek to fulfill hegemonic motives at the cost of global economic stability and prosperity.
