Why India is at the centre of global trade talks – Firstpost

In 1860, Richard Cobden and Michel Chevalier brokered what became a landmark trade agreement between Britain and France, known as the 
Cobden-Chevalier Treaty. The treaty institutionalised the principle of reciprocity over unilateral tariff advantages, marking a departure from the protectionist mercantilism that had long dominated European trade policies. More significantly, it embedded the Most Favoured Nation (MFN) clause, ensuring that any tariff concession extended to one country would automatically apply to all others with the same status. This principle later became a cornerstone of multilateral trade liberalisation, shaping the General Agreement on Tariffs and Trade (GATT) and its successor, the World Trade Organization (WTO).

Trade agreements have historically oscillated between two competing paradigms, i.e., liberal trade theory, which emphasises efficiency gains from comparative advantage 
(Ricardo, 1817), and strategic trade theory_,_ which argues that state intervention through tariffs or subsidies can create long-term advantages for domestic industries 
(Brander & Spencer, 1985). The tension between these approaches has shaped global trade regimes, from the repeal of the Corn Laws (1846) to the establishment of preferential trading blocs such as the European Economic Community (1957). The 20th-century trade agenda was further transformed by new trade theory 
(Krugman, 1979). It highlighted the role of economies of scale and imperfect competition.

However, today’s trade is defined by a paradox. Many nations are becoming more inward-looking. The post-pandemic world has seen the resurgence of economic nationalism, reshoring of supply chains, and increasing scepticism toward multilateral trade frameworks. The United States has moved away from large-scale free trade agreements. The European Union has introduced more stringent trade and investment screening mechanisms. China’s economic policies are increasingly centred on self-reliance.

Further, the World Trade Organisation, once the arbiter of global trade, faces an existential crisis. It is struggling with structural and geopolitical challenges that undermine its effectiveness. The deadlock of the Doha Development Round, launched in 2001 to make trade more inclusive and assist developing countries, remains unresolved due to persistent disagreements over agricultural subsidies and industrial tariffs.

This failure has cast doubt on the WTO’s ability to facilitate comprehensive trade agreements. Compounding the problem is the paralysis of its dispute settlement mechanism, particularly the Appellate Body, which has been non-functional since 2019 after the United States blocked new appointments, leaving the WTO unable to resolve trade disputes effectively. Additionally, the rise of protectionist policies, particularly under US President Donald Trump, has further weakened the organisation’s relevance, with unilateral tariffs and bilateral agreements challenging its foundational multilateral principles.

Amid this shift, India has emerged as a focal point for trade negotiations. The United Kingdom, seeking to redefine its economic strategy post-Brexit, is eager to secure an FTA with India to expand its Indo-Pacific trade footprint. The European Union, despite past deadlocks, has revived trade talks as part of its efforts to reduce dependency on China and secure alternative supply chains. Even the United States, despite its protectionist stance, is exploring deeper economic engagement with India through a proposed Bilateral Trade Agreement.

There are five reasons for this renewed interest in trade with India, occurring at a time when global economic fragmentation is deepening. First is access to a vast and growing market. India’s 1.4 billion population and rapid economic growth make it a huge prize. It is already the fifth-largest economy and is on track to be third largest by 2030. India’s middle class is projected to swell to 250 million by 2050. This would translate into a surging consumer demand. Preferential access to this market would allow UK and EU businesses to expand exports as they ride India’s growth wave.

Second, after recent supply disruptions, diversifying sourcing is a priority. India’s emergence as an alternative manufacturing base to China offers the UK and EU a chance to reduce reliance on any single country. A trade deal would ease integration of Indian suppliers, making supply chains more resilient to geopolitical or pandemic shocks. The UK in particular is keen to “friend-shore” production. It aims to replace some Chinese imports with Indian ones in key manufacturing sectors.

Third, India remains one of the world’s most protected major market. A trade agreement that lowers tariff walls can significantly boost UK/EU exports. Hefty duties, often over 100% on imported cars or spirits, currently make many European products uncompetitive in India. Removing such barriers will make British and EU goods cheaper for Indian consumers, directly increasing export volumes. Better access to India should also help reduce trade deficits and support jobs in export industries.

Fourth, beyond goods, both sides want to partner in new sectors. India’s fast-growing digital economy and ambitious clean energy goals complement UK/EU technological strengths. An agreement could spur collaboration in areas like semiconductors, renewable energy, and artificial intelligence by aligning standards and promoting investment. India’s internet economy alone is projected to reach $1 trillion soon which is a huge opportunity for European tech firms.

Fifth, a trade pact with India also yields geopolitical dividends. By tightening economic ties with India, the UK and EU bolster a like-minded partner in the Indo-Pacific, serving as a counterweight to geopolitical rivals and protectionism. For the UK, an FTA with India advances its post-Brexit strategy in Asia. For the EU, it diversifies partnerships in a volatile world. In short, the deal is as much about strategic alignment as about trade.

Sixth, a trade agreement also gives investors more confidence, encouraging Indian firms to expand in the UK/EU and vice versa. Already, Indian companies support over half a million UK jobs. Reducing barriers would accelerate such investment-driven growth and employment.

However, India should be cautious during these negotiations. India faces pressure to cut its high import tariffs on sensitive goods (e.g. autos, alcohol, dairy). Any reductions must be calibrated. Some duties approach 100 per cent, and analysts warn that slashing them too fast could “hit domestic industry”. There is no doubt that we should reduce our tariffs as higher tariffs have made many of our industries uncompetitive. Textiles is one of the examples.  India will likely insist on gradual tariff phase-outs and shield certain products to safeguard sectors like agriculture and small manufacturers.

Further, stronger patent and copyright rules sought by Western partners can conflict with India’s priority of affordable medicines and tech access. India will be wary of accepting any “TRIPS-plus” provisions that go beyond WTO norms. The aim is to protect innovation and assure investors while not undermining India’s ability to produce low-cost generics and software.

India has long prioritised easier work visa access for its professionals in trade negotiations, while the UK and EU have been reluctant to liberalise visa policies. However, clinging to this demand weakens our bargaining position. Indian talent will find global opportunities regardless, and we should not concede trade advantages merely in exchange for visa relaxations. Instead, negotiations should focus on securing broader economic benefits.

Apart from this, the UK and the EU often link trade deals to strict environmental and labour rules. India traditionally resists such clauses, fearing they could become non-tariff barriers — for example, it strongly opposes the EU’s planned carbon border levy on steel. We should rather negotiate against such restrictive measures.

The Commerce Ministry must accelerate trade negotiations and finalise these agreements without further delay. Prolonged discussions have led to opportunity costs, especially as global trade dynamics evolve. Securing these deals will enhance India’s integration into global value chains, improve market access, and boost export competitiveness. Deliberation must now give way to execution, ensuring agreements align with India’s strategic economic objectives while mitigating risks. A proactive stance is essential to capitalise on shifting trade patterns and drive sustained growth.

Aditya Sinha (X:@adityasinha004) is a public policy professional. Views expressed in the above piece are personal and solely those of the author. They do not necessarily reflect Firstpost’s views.