EU-India Trade Deal at a Crossroads: Can Brussels Learn from London’s Playbook? 

The EU-India free trade negotiations, struggling to meet a January 26 deadline, are stalled primarily over the EU’s insistence on greater access to India’s politically sensitive agricultural sector and its non-negotiable Carbon Border Adjustment Mechanism (CBAM), which India views as a protectionist measure violating climate equity principles. In contrast, the recently concluded UK-India deal succeeded by demonstrating pragmatic flexibility, notably excluding sensitive farm products like dairy and chicken to secure Indian concessions on cars and Scotch whisky.

With India seeking to diversify exports amid high U.S. tariffs and the EU aiming to “de-risk” from China, the bloc faces a critical choice: adapt its comprehensive, rules-based approach by learning from the UK’s sector-sensitive pragmatism to secure a strategic partnership, or risk the collapse of a deal that holds significant economic and geopolitical importance for both sides.

As one Indian official noted, the biggest barriers are the EU’s insistence on market access in agriculture and its carbon tax, describing the British approach with the understatement: “For all its faults, [the U.K.] understands India and Indians better.” 

In the intricate chessboard of global trade, a critical match is entering its final moments. The European Union and India, having missed a year-end deadline, are now racing toward a new political target: India’s Republic Day on January 26, 2026. The goal is a landmark free trade agreement (FTA) that could redefine economic ties between the world’s largest democratic bloc and its most populous nation. 

Yet, the path to a deal is strewn with hurdles that have repeatedly stalled progress. From the politically explosive issue of agricultural imports to the foundational clash over climate policy, the negotiations reveal a deep divide in priorities. In this high-stakes standoff, the recent success of the United Kingdom—the EU’s former member—in securing its own trade deal with India offers a compelling case study in pragmatic flexibility. 

The Core Stumbling Blocks: Agriculture, Steel, and Carbon 

1. The Agricultural Impasse: A Political Third Rail

At the heart of the negotiation deadlock is agriculture, a sector that is far more than an economic statistic in India. 

• Livelihoods and Votes: Nearly half of India’s population depends on farming for their livelihood, making farmers an exceptionally powerful political constituency. The memory of the massive 2021 farmer protests, which forced Prime Minister Narendra Modi to repeal proposed agricultural reforms, hangs over the talks. Modi himself has stated that the interests of farmers, dairy farmers, and fishermen are a non-negotiable “top priority.” 

• The UK’s Pragmatic Exclusion: Recognizing this sensitivity, the UK-India FTA strategically excluded key sensitive products like dairy, chicken, and apples from its terms. In return, India granted concessions on other goods like salmon and lamb. This “selective exclusion” model allowed both sides to claim victory without triggering domestic upheaval. 

• The EU’s Harder Line: In contrast, the EU continues to press for greater access to India’s agricultural market for its products. This puts it on a collision course not just with Indian negotiators, but with the country’s political reality. Indian officials have signaled that they are far more willing to lower tariffs on luxury goods like cars and wine—which don’t affect vulnerable populations—if the EU eases its demands on farming. 

2. The CBAM Controversy: Climate Justice vs. Level Playing Field

Perhaps the most complex technical and philosophical hurdle is the EU’s Carbon Border Adjustment Mechanism (CBAM). 

• The EU’s Green Arsenal: CBAM is a cornerstone of the European Green Deal, designed to put a fair price on carbon emitted during the production of imported goods like steel, cement, and electricity. Its purpose is to prevent “carbon leakage”—where EU industries move production to countries with looser environmental rules—and to encourage cleaner production globally. The mechanism entered a transitional phase in 2023 and is scheduled for full implementation from 2026. 

• India’s Development Argument: New Delhi views CBAM as a protectionist tariff in green clothing and a violation of the “Common But Differentiated Responsibilities” (CBDR) principle enshrined in UN climate agreements. This principle acknowledges that developed nations, responsible for the bulk of historical emissions, should bear a larger burden than developing economies. India’s Secretary of Steel has called the EU’s carbon tax a bigger threat to exports than recent U.S. tariffs. 

• Linking Issues: India has explicitly linked its objections to CBAM and EU steel safeguards with the bloc’s demands for lower Indian tariffs on European cars. This linkage makes a resolution on one impossible without progress on the other, creating a tough knot for negotiators to untie. 

3. Market Access and “Last-Minute” Pressure

Beyond these major themes, other frictions are poisoning the negotiation atmosphere. 

• Reciprocal Demands: The EU seeks drastic Indian tariff reductions on cars, wines, spirits, and medical devices, alongside stricter intellectual property rules. India, in turn, wants better access for its labor-intensive manufactured goods and services. 

• Protectionist Accusations: Recent EU moves have been perceived in New Delhi as aggressive pressure tactics. These include a decision to limit rice imports from India and other Asian nations and to increase tariffs on steel imports outside its quota to up to 50%. From the Indian perspective, these actions undermine the EU’s free trade rhetoric and display a lack of good faith. 

The Strategic Context: Why This Deal Matters Now 

The urgency behind these talks is not merely bureaucratic. It is driven by powerful geopolitical and economic currents reshaping global trade. 

Table: Comparing Key Aspects of UK-India and EU-India Trade Approaches 

• India’s FTA Sprint: Facing steep 50% U.S. tariffs on sectors like textiles and auto components, India has accelerated its FTA negotiations worldwide. Deals with the UAE, Australia, the UK, and Oman are part of a clear strategy to diversify export markets, integrate into global supply chains, and cushion against geopolitical shocks. An agreement with the EU, its third-largest trading partner, is a central pillar of this plan. 

• The EU’s Strategic Pivot: For the EU, a deal with India is a key element of its “de-risking” strategy, aimed at reducing economic dependencies—particularly on China. The hope is that India can become an alternative partner in strategically important sectors. However, this ambition is complicated by India’s own deep trade ties with China, such as sourcing nearly half its semiconductor components from there. 

• The “China Plus One” Imperative: Both partners share an interest in building resilient supply chains less reliant on a single dominant actor. A successful FTA could make the EU-India corridor a foundational axis for a more diversified global economy. 

What the EU Can Learn from the UK Model 

The UK-India deal, signed in July 2025 after negotiations launched in 2022, demonstrates a pathway through the thicket. Its lessons for Brussels are clear: 

• Prioritize Political Sensitivity Over Comprehensive Access: The UK treated Indian agriculture not as an economic sector to be conquered, but as a political reality to be respected. By taking key products off the table, it built trust and created space for gains elsewhere, such as in automobiles and Scotch whisky. The EU’s insistence on a broader deal risks achieving no deal at all. 

• Manage the Green Transition Collaboratively: While the UK did not grant India an exemption from its carbon adjustment mechanism, it did agree to a clause allowing India to retaliate if the tax negated the FTA’s benefits. This creates a built-in incentive for dialogue. The EU could explore similar “safeguard” consultations or offer technical and financial support for green transition in Indian industry, framing CBAM as a shared challenge rather than a unilateral penalty. 

• Sequence the Agreement for Early Wins: The complexity of EU-India ties may be too great for a single, all-encompassing “big bang” agreement. A phased approach, concluding what’s achievable now (e.g., on goods, with sensitive areas in annexes) while establishing frameworks for continued negotiation on CBAM and services, could build momentum. 

The Path Forward and Stakes of Failure 

EU Trade Commissioner Maroš Šefčovič has conceded that reaching a deal is “extremely, extremely challenging,” but that the political commitment from the highest levels remains. The invitation of EU leaders to India’s Republic Day provides a powerful symbolic deadline. 

The cost of failure is high for both sides. For India, missing out on deeper access to the world’s largest single market could slow its export-driven growth and job creation ambitions. For the EU, a failed negotiation would represent a significant setback in its Indo-Pacific strategy, leaving it more exposed to supply chain vulnerabilities and potentially ceding economic influence in Asia to other actors. 

The fundamental question is whether the EU, a bloc of 27 nations with its own complex internal politics, can muster the same agile pragmatism as the UK. Can it adapt its principled stands on agriculture and climate to the realities of a developing partner with over a billion people and its own democratic pressures? 

The blueprint for success exists. It requires the EU to view the negotiation not as a technical exercise in tariff reduction, but as a strategic partnership built on mutual recognition of vulnerabilities. The UK showed that understanding India means respecting its red lines. As the January deadline approaches, the EU must decide if it, too, is willing to learn that lesson. The future of one of the world’s most significant economic relationships depends on it.