It took almost 2 decades to finalize. But now that it has been inked, the EU-India trade agreement is yet another reminder that higher principles such as climate policy and labor protection can get sidelined when geopolitics is at play. The need for both parties to find alternatives to the US as a major trade partner has brought them closer together, enabling more market access than ever before.

If it were not for President Trump and his tariff regime, both India and the EU would have likely continued with their hesitation on finalizing the trade deal. Negotiations first began in 2007, and have mainly stalled over the EU’s traditional refusal to broker a deal with states that do not commit to more stringent environmental practices and increased labor welfare. 

Irrespective of where one stands on the debate over developing countries arguing for a more equitable distribution of the global responsibility to combat climate change, the EU and the US had historically jointly shared the burden of climate and human development leadership. With the EU left on its own, it is now clear that this is a luxury agenda item and ring hollow when the global hegemon refuses to espouse the same principles.

There are tangible wins for the EU in gaining access to India’s historically protectionist market. The automobile sector of the EU will be a beneficiary, because New Delhi has agreed to 250,000 European car exports annually with the gradual reduction of the existing 110% tariff to just 10%. This comes as a shot in the arm for the EU’s automobile sector, which has recently faced stiff competition from the rising popularity of Chinese vehicles in several markets. 

Other sectors such as chemicals, metals, plastics and machinery will get complete removal of duties for most products, saving up to €4 billion per year in duties on European products. 

The agricultural and food production sector will also benefit from the greatly reduced duties. Wines, olive oil and processed food are just some examples of exports that will likely see an increase in market share in India.

For New Delhi, it is easy to see why this deal was greenlit. Sectors that were previously hit with EU tariffs ranging from 4 to 26 percent, will now have zero duty. This includes textile and clothing, leather products, footwear, chemicals, plastics, sports goods, toys, gems and jewelry, among others. A lot of these are labor-intensive markets in India and the increase in demand for these products in the EU market could potentially lead to more jobs in India.

Once agreed upon, a lot was made of the deal on both sides, but in reality, beyond the trade revenue numbers, the bigger story here is how both sides are insulating themselves against the impact of losing the US as a trade partner.

If Washington keeps icing out its historical allies, it is only a matter of time before they increase cooperation in other areas as well, such as defence and foreign policy. The absence of the US from those conversations would be damaging for its global power projection in the long run.