The ‘mother of all trade deals’ was Ursula von der Leyen’s description of the EU-India trade agreement in Davos last week. 

On signing the deal at the start of this week in New Delhi, she had toned down the rhetoric, albeit only slightly, to ‘a tale of two giants’.

Yet opposition members of India’s Congress have been quick to critique the agreement as “overhyped”, complaining that India did not secure any exemptions for its metal industries from the EU’s carbon border tax.  

In truth, both statements are correct. 

The big win for the EU was persuading India to agree to 250,000 European car exports per year at a tariff rate of 10 percent. 

Last week, the European Automobile Manufacturers Association, an industry lobby group, warned that there was a “real risk that the agreement will be restricted by quotas, market segmentation rules, residual tariffs, licensing systems, and various other mechanisms that will make the benefits of any deal hard to access.”   

Though the EU has agreed to a quota system that is unlikely to be changed any time soon, vehicle exports currently face duties of up to 100 percent.  

But plenty has been kept off the table.  

Kiwi fruits

Kiwi fruit and pears are the only food products that will be traded tariff-free.

Keeping almost all of the agriculture sector out of the agreement was a ‘red line’ for India, which subsidises its farmers more heavily than the EU. 

Added together, that means that the commercial value of the “mother of all deals” will probably only be a few billion euros a year. 

But the symbolic value is immense. 

Defence cooperation

Aside from the commercial benefits of slightly more liberalised trade with the world’s fifth largest – and rapidly growing – economy, the defence and security agreement that leaders also signed this week joins similar arrangements with Canada and the UK. 

The defence deal will allow Indian firms access to the EU’s defence procurement market and mean more joint navy exercises in the Indian Ocean.

It could also help cleave Narendra Modi’s government away from its cosy relationships with China and Russia. Ahead of last November’s G20 summit in Johannesburg, the Indian navy took part in joint military exercises with China and Russia off the South African coast. 

Textiles and electronics

For its part, the big winners for India’s economy are expanded market access for electronics, textiles and chemicals. 

In particular, India sees improved market access and lower duties as vital to its chances of closing the gap on China for its textiles and automotive sectors. 

The EU currently imports around €105bn of textiles per year, of which India currently accounts for five to six percent, compared to China’s 30 percent. 

Conversely, liberalising textiles trade will anger a significant section of MEPs in the European Parliament, especially since the trade deal does not include any provisions or guarantees on workers rights and social protection. 

Carbon tax and Trump

CBAM (the Carbon Border Adjustment Mechanism, in Brussels-speak) and steel were the main Indian concerns in the final months of the trade negotiations.  

It got little change on the EU’s carbon border tax beyond a promise that the EU will not give other countries more favourable treatment than India.

That could have implication for the EU’s trade relations with the US Trump administration. After last August’s declaration on trade, Donald Trump claimed that the EU had agreed to exempt American firms from paying the levy. 

What India did obtain is the promise of a joint EU-India platform on climate action in the first half of this year, and the commission’s pledge that it will provide €500m in EU funding to assist India’s efforts to mitigate the effects of greenhouse gas emissions. 

On steel, however, India did secure significant concessions.

Last November, the commission announced a 47-percent cut to steel imports. Under the agreement, India will receive a duty-free export quota for metal products to the EU of 1.6 million tonnes, which is approximately half of its annual supplies to the bloc.

Major win for Delhi?

Having complained that its steel exports to the EU dropped in value from $7bn [€5.9bn] to $5bn last year, a figure that would have fallen further because of the EU’s new quota system, this is a major win for Delhi. 

Congress leader Jairam Ramesh complained this week that the agreement was “hugely overhyped”. 

He added that while India had obtained nothing on the carbon tax, which India has described as a non-tariff barrier to trade and filed complaints to the World Trade Organisation over, the EU got most of the benefits.  

“The biggest trade opening India has given to any trade partner,” was Ramesh’s verdict, warning that by reducing tariffs on over 96 percent of EU exports to India, the EU’s imports could double. 

Or quiet win for Brussels?

Those remarks will be quietly welcomed by the EU commission and should make it easier to sell the trade pact to EU governments and MEPs.

But the EU-India pact is unlikely to face the same difficulties as Mercosur, which has been referred to the European Court of Justice by MEPs following sustained lobbying by France and the EU farming lobby.

With agriculture off the table, cheaper clothes bound for Europe and more German cars heading for India, EU officials are, understandably, confident that this agreement will pass within months, and without a hiccup.