The European Union (EU) and India are at a pivotal juncture in their trade relationship, with negotiations for a Free Trade Agreement (FTA) gaining momentum amid a rapidly shifting global economic landscape. As of March 5, 2025, a Business Sentiment Survey conducted by the Federation of European Business in India (FEBI) has underscored a pressing demand from EU firms operating in India: the removal or streamlining of non-tariff barriers (NTBs). These barriers, ranging from Quality Control Orders (QCOs) to complex customs procedures, have long been a thorn in the side of European businesses seeking to deepen their foothold in one of the world’s fastest-growing economies. With the FTA talks slated to conclude by the end of 2025, the stakes are high, and the call for reform is louder than ever.
This article delves into the nature of these non-tariff barriers, the specific demands of EU firms, the broader context of the India-EU FTA negotiations, and the geopolitical forces—such as U.S. tariff threats under President Donald Trump—that are accelerating this dialogue. It also critically examines the challenges and opportunities ahead, questioning whether both sides can reconcile their divergent interests to forge a mutually beneficial deal.
Understanding Non-Tariff Barriers in India
Non-tariff barriers are regulatory and procedural hurdles that impede trade without relying on direct taxes like tariffs. In India, these barriers manifest in various forms, creating a labyrinthine environment for foreign businesses. The FEBI survey highlights several key NTBs that EU firms want addressed:
These NTBs, while rooted in India’s efforts to protect consumers and bolster domestic industries, are perceived by EU firms as protectionist measures that undermine the spirit of free trade. The FEBI survey reflects a broader sentiment: for the FTA to unlock its full potential, India must streamline these processes to create a level playing field.
The India-EU FTA: A Long-Awaited Pact
The India-EU FTA has been in the works for over two decades, with negotiations first launched in 2007 only to stall in 2013 over irreconcilable differences. Talks resumed in 2021, and by early 2025, both sides committed to a year-end deadline—a rare concrete timeline signaling renewed urgency. The FTA promises to be a game-changer, potentially becoming “the largest deal of its kind anywhere in the world,” as European Commission President Ursula von der Leyen stated during her February 2025 visit to New Delhi.
For the EU, India represents a vast market of 1.4 billion consumers, a growing middle class, and a hub for manufacturing and services. For India, the EU offers access to advanced technology, investment, and a diversified export destination amid global trade uncertainties. Bilateral trade between the two stood at $120 billion in 2024, with ambitions to double or triple that figure within a decade under the FTA. However, NTBs remain a critical stumbling block.
EU firms see the FTA as an opportunity to dismantle these barriers, arguing that tariff reductions alone—while significant—won’t suffice without addressing regulatory bottlenecks. India, on the other hand, has historically been cautious about liberalizing trade, prioritizing self-reliance under its “Make in India” initiative. The FEBI survey’s findings thus set the stage for a contentious yet pivotal negotiation phase.
EU Firms’ Specific Demands
The FEBI survey, released on March 5, 2025, provides a roadmap of what EU firms expect from India in the FTA:
1.] Simplification of QCOs: Rather than scrapping QCOs entirely, EU firms advocate for mutual recognition agreements (MRAs), where India accepts EU certifications as equivalent to its own. This would reduce redundant testing and cut compliance costs.
2.] Streamlined Customs Processes: EU businesses call for digitization and standardization of customs procedures, drawing inspiration from models like the EU’s Single Window system. Faster clearance times would enhance supply chain efficiency, particularly for time-sensitive goods.
3.] Harmonized Labelling and Testing Standards: Firms seek alignment with international norms, such as those set by the Codex Alimentarius for food products, to avoid re-labeling or re-testing goods already approved in the EU.
4.] Easing Data Localisation Rules: In an era of digital trade, EU companies—especially in tech and e-commerce—want flexibility to process data across borders without mandatory localisation, aligning with the EU’s push for a global digital economy.
These demands reflect a broader EU strategy: to leverage the FTA not just for market access but to export its regulatory framework, fostering a business environment in India that mirrors Europe’s. However, this approach raises questions about sovereignty and whether India will concede to such reforms without reciprocal gains.
India’s Perspective: Balancing Openness and Protectionism
India’s stance on NTBs is shaped by a dual imperative: integrating into global trade networks while safeguarding its economic interests. The country has already forgone ₹94,172 crore ($11.3 billion) in customs duties in FY25 due to existing FTAs with Japan, South Korea, and ASEAN, according to Business Standard. With customs revenue projected to grow just 2.1% to ₹2.4 trillion in FY26, further concessions in the EU FTA could strain public finances—a concern for a government investing heavily in infrastructure and social programs.
Moreover, NTBs like QCOs and data localisation are tied to strategic goals. QCOs protect domestic manufacturers from substandard imports, while data rules bolster cybersecurity and digital sovereignty amid tensions with China and the U.S. India also worries about the EU’s own NTBs, such as the Carbon Border Adjustment Mechanism (CBAM), which could impose up to 35% tariffs on high-carbon Indian exports like steel and cement. New Delhi views CBAM as a disguised trade barrier and wants it addressed outside the FTA framework.
India’s negotiators are thus likely to push back against EU demands unless they secure concessions like visa liberalization for Indian professionals, greater market access for pharmaceuticals and chemicals, and protection for sensitive sectors like agriculture and dairy. This tit-for-tat dynamic underscores the complexity of the talks.
The Geopolitical Catalyst: Trump’s Tariff Threats
The urgency of the India-EU FTA cannot be divorced from the global trade upheaval sparked by U.S. President Donald Trump’s policies in 2025. Trump’s imposition of 25% tariffs on Canadian and Mexican goods, alongside threats of similar duties on the EU and India, has sent shockwaves through the international economy. The U.S., once a champion of free trade, is now retreating into protectionism, forcing its allies and partners to seek alternative alignments.
For the EU, Trump’s tariffs threaten its $1.7 trillion transatlantic trade relationship, prompting a scramble for new markets. India, with its large consumer base and strategic position in the Indo-Pacific, is a natural pivot. Conversely, India sees the EU as a buffer against U.S. tariff pressures, especially after Trump criticized its “unfair” levies and prompted a retaliatory cut in bourbon whisky tariffs from 150% to 100% in early 2025.
This geopolitical flux has injected momentum into the FTA talks, with both sides recognizing the need to diversify trade dependencies. Yet, it also complicates the negotiations. The EU’s haste to conclude a deal may pressure India into concessions it might otherwise resist, while India’s leverage as an alternative market could embolden it to demand more from Brussels.
Challenges and Opportunities Ahead
The path to an FTA free of NTBs is fraught with challenges. Beyond technical issues like QCOs and customs, deeper structural differences loom. The EU wants India to slash tariffs on cars, wines, and spirits—currently exceeding 100%—while India seeks greater access for its cost-effective drugs and chemicals, often blocked by stringent EU regulations. Visa curbs on Indian professionals remain a sore point, with New Delhi accusing the EU of hypocrisy in preaching free trade while restricting labor mobility.
Politically, both sides face domestic pressures. In India, farmers and small businesses wary of European competition could mobilize against the FTA, as seen in past protests over trade deals. In the EU, populist movements skeptical of globalization may resist concessions to India, especially if they perceive a loss of jobs or sovereignty.
Yet, the opportunities are immense. A successful FTA could boost EU-India trade to $300 billion by 2035, create millions of jobs, and position both as counterweights to U.S. and Chinese economic dominance. For EU firms, dismantling NTBs would unlock India’s potential as a manufacturing and digital hub. For India, aligning with EU standards could elevate its global competitiveness, attracting more foreign investment.
Conclusion: A Test of Will and Vision
As the India-EU FTA negotiations approach their 2025 deadline, the removal of non-tariff barriers stands as a litmus test for both sides’ commitment to free trade. EU firms have made their case clear: without regulatory reform, the deal’s promise will remain unfulfilled. India, meanwhile, must weigh the benefits of openness against its instinct for self-reliance—a delicate balance in an era of global uncertainty.
The outcome will hinge on compromise. Can the EU offer enough on visas and market access to offset India’s NTB concessions? Can India embrace regulatory harmonization without compromising its strategic goals? And will the shadow of Trump’s tariffs force a deal that might otherwise falter?
One thing is certain: the world is watching. If successful, this FTA could redefine global trade dynamics, proving that even in a fractured economic order, cooperation can prevail. If it fails, it risks reinforcing the very barriers—tariffed and non-tariffed alike—that both sides seek to overcome.
