India-EU FTA Adds Safeguards Against Future Regulatory Trade Barriers

The provisions -- a Rapid Response Mechanism and a Non-Violation Complaints (NVCs) clause -- are aimed at addressing the risks posed by the EU's expanding regulatory framework, which Indian exporters and service providers have increasingly flagged as a source of uncertainty and compliance burden.

The safeguards assume significance against the backdrop of the EU's growing use of regulations covering sustainability, climate action, labour standards, digital governance and product compliance, many of which, while not directly discriminatory, can materially affect market access for trading partners.

These two provisions will help India in dealing with challenges of EU's regulations in future and protect FTA benefits.

Explaining the rationale behind the mechanisms, India's chief negotiator Darpan Jain said regulations could emerge in future that may not breach the letter of the agreement but could still disrupt trade flows.

"Regulations may come up which may raise concerns for trade. To deal with such situations, we have agreed on a high-powered rapid response mechanism which allows an issue to be taken up immediately between the two sides," Jain said.

He added that if a matter is not resolved at the technical or official level, it can be escalated to the ministerial level. "This escalation mechanism itself is a new element in the India-EU agreement," he said.

The Non-Violation Complaints provision, Jain said, is designed to address scenarios where a new regulation, law or administrative instruction does not directly violate the agreement but still impairs its benefits.

"There is no direct violation -- that is why it is called non-violation -- but the measure acts in a manner that market access gets impaired. This provision gives us a structured way to deal with such measures," he said.

India and the EU signed the agreement on Tuesday, with officials describing it as one of the most comprehensive trade pacts concluded by New Delhi, combining market access with built-in safeguards against future regulatory shocks.

Under the agreement, India will secure preferential market access on 96.8% of EU tariff lines, covering 99.5% of India's exports to the bloc. As much as 90.7% of Indian exports by value are set to become duty-free immediately upon the agreement's entry into force, marking one of the deepest tariff liberalisation commitments secured by New Delhi in any trade pact.

Labour-intensive sectors accounting for over USD 33 billion in exports -- including apparel, textiles, leather and footwear, and gems and jewellery -- are among the biggest beneficiaries, with duty-free access kicking in from day one, officials said.

In agriculture, India has secured preferential access on around 87% of tariff lines for products of key interest such as tea, coffee, spices, table grapes, cucumber and gherkins, dried onion, sweet corn, select fresh fruits and vegetables, and processed food products.

The FTA provides market access in 144 services subsectors, including IT and ITeS, professional services, other business services and education. It also establishes a facilitative and predictable framework for short-term business mobility and temporary travel.

AYUSH practitioners will be able to offer services in the EU based on qualifications obtained in India, while the agreement also provides for continued engagement on social security arrangements, with 13 agreements already in place and seven under negotiation.

- ANI