Week after UK deal, EU and India wrap up IPR, talks on carbon tax left
In a significant stride toward finalizing a comprehensive trade agreement, the European Union and India recently concluded negotiations on five crucial chapters, including Intellectual Property Rights (IPR). This development marks a notable moment in the 11th round of trade negotiations, held from May 12 to May 17, setting the stage for an ambitious timeline that aims to complete the free trade agreement (FTA) by December 2025.
While the progress is commendable, a major stumbling block remains: the Carbon Border Adjustment Mechanism (CBAM). The EU’s controversial carbon tax policy continues to cast a shadow over the talks, especially for India, which is concerned about the impact on its exports and small manufacturers.
A Week After the UK Deal: Momentum Builds
Just a week before these advances with the EU, India wrapped up a landmark free trade agreement with the United Kingdom. The UK deal covered diverse areas, from industrial goods to services and professional mobility. Many observers believe that the momentum from this bilateral success has encouraged Indian negotiators to push forward with the EU.
However, negotiating with the 27-member European Union is inherently more complex than with a single nation like the UK. With a broad and diverse range of policy interests to accommodate, the EU–India deal requires meticulous alignment on economic, environmental, and regulatory matters.
What’s Been Finalized So Far?
During the 11th round of negotiations, five chapters were fully concluded, including:
- Intellectual Property Rights (IPR)
- Transparency
- Good Regulatory Practices
- Customs and Trade Facilitation
- Mutual Administrative Cooperation
These chapters represent substantial progress, particularly the IPR chapter, which has historically been a sticking point. Issues surrounding pharmaceutical patents, traditional knowledge, and geographical indications have previously posed challenges. That both parties have now found common ground signals a stronger alignment on innovation protection and enforcement mechanisms.
Moreover, significant advancement has been made in digital trade—including areas like e-invoicing, cross-border data flows, e-contracts, and online consumer protection. The services and investment sectors have also seen constructive discussions, although final agreements are still pending.
Why the Carbon Border Tax Is a Thorny Issue
Despite the optimism, the Carbon Border Adjustment Mechanism (CBAM) remains unresolved. Scheduled to take effect in 2026, the CBAM is the EU’s way of imposing a carbon price on imports of high-emission products like steel, aluminum, cement, fertilizers, and electricity.
From the EU’s perspective, the CBAM is about leveling the playing field: European producers must adhere to strict emission standards and carbon taxes, while foreign competitors often face looser regulations. The CBAM ensures that imports are subject to a similar carbon cost.
However, for India, this mechanism is seen as unilateral, protectionist, and punitive. Indian exporters argue that they already bear the cost of transitioning to greener technologies and that CBAM could act as a disguised tariff, harming micro, small, and medium enterprises (MSMEs). New compliance and reporting requirements could add layers of complexity and cost to exports.
India is pushing for either a longer transition period, financial compensation, or sectoral exemptions. Without clarity or concessions on CBAM, Indian negotiators are hesitant to proceed with sensitive concessions in other sectors.
What’s Still on the Table?
With 23 chapters in total, only five have been fully concluded, and eight others have been agreed upon in principle. That leaves 10 chapters open, including:
- Market Access for Industrial Goods
- Rules on Automobiles and Spirits
- Agricultural Products
- Labor and Environmental Standards
- Sustainable Development
- Carbon Border Tax (CBAM)
Agricultural products, particularly dairy and rice, remain sensitive topics for India. Protecting domestic farmers is a political and economic priority, and there’s little indication that India will open up these sectors anytime soon.
Similarly, the EU has its own protectionist concerns—such as steel quotas and safeguard duties—that Indian exporters find burdensome. Negotiators are working to address these asymmetries.
Timeline and Outlook
Despite the hurdles, both parties are committed to moving the needle. The next round of negotiations is expected to take place in early July 2025, with an eye toward reaching a comprehensive agreement by December 2025.
This timeline is ambitious, but not impossible—especially if negotiators can resolve the CBAM dispute and find middle ground on agricultural sensitivities.
India’s recent trade deal with the UK has certainly added pressure on both sides to expedite the EU-India agreement. However, the complexity and breadth of the EU’s policy framework mean that compromises will require both political will and technical finesse.
Strategic Implications
The successful conclusion of this trade pact would represent a milestone for India–EU relations. The EU is India’s third-largest trading partner, and a comprehensive deal could significantly boost exports, technology partnerships, and investment flows.
For the EU, India offers a rapidly growing market and a democratic alternative to China in global supply chains. From clean energy collaboration to digital innovation, the trade pact can unlock deeper cooperation on a wide array of issues.
Final Thoughts
The closing of the IPR chapter is a welcome step, and the groundwork laid in digital trade and services is promising. Yet, unless the CBAM issue is resolved in a way that balances climate responsibility with developmental fairness, the deal may continue to face delays.
If India and the EU manage to bridge these final divides, the result could be a modern, balanced agreement that not only benefits both economies but also sets a progressive global standard for inclusive and sustainable trade.
