EU’s dense web of non-tariff barriers blunts impact of tariff cuts: GTRI

New Delhi: India should press the European Union (EU) to clear the "dense web" of non-tariff barriers for domestic products, especially in the agri and pharma sectors, under the proposed free trade agreement, as such restrictions often "blunt" the benefits of tariff reductions, think tank GTRI said on Monday.

The conclusion of the India-EU free trade agreement (FTA) negotiations is expected to be announced on January 27 during the visit of the EU team here. The pact is nearing the finishing line after 18 years. The talks started in 2007.

The President of the European Council, Antonio Luis Santos da Costa, and the President of the European Commission, Ursula von der Leyen, will be on a state visit to India from January 25-27. They are chief guests at the 77th Republic Day celebrations.

The barriers faced by Indian products in the EU include regulatory delays in pharmaceutical approvals, stringent sanitary and phytosanitary (related to plants and animals) rules affecting food and agricultural exports such as buffalo meat, and complex testing, certification and conformity-assessment requirements.

Agricultural exports such as basmati rice, spices and tea are frequently rejected or subjected to heightened inspections due to sharply lowered EU pesticide residue limits, while marine exports face higher sampling rates over antibiotic concerns, the Global Trade Research Initiative (GTRI) said.

It added that in manufacturing, compliance with regimes such as REACH for chemicals and evolving climate-related rules adds significant cost, particularly for MSMEs with limited certification capacity.

India argues that while these measures are framed as consumer or environmental safeguards, their cumulative effect functions as a de facto trade barrier, it said, adding that Indian exporters face a dense web of non-tariff barriers in the European Union that often blunt the impact of tariff cuts.

"Tariff liberalisation alone will not deliver proportional export gains unless accompanied by regulatory cooperation, faster approvals and mutual recognition in any trade deal with the EU," GTRI Founder Ajay Srivastava said.

He said that the trade pact should also resolve the two critical concerns of India with regard to carbon tax - carbon border adjustment mechanism (CBAM). It has come into effect from January 1 on products which emit high carbon during their manufacturing processes, such as steel and aluminium.

"The EU has already signalled flexibility by offering CBAM carve-outs to US goods, and India may ask for similar treatment," Srivastava said.

He said this tax is particularly damaging for MSMEs, which face high compliance costs, complex reporting requirements and the risk of being penalised using inflated default emissions values.

"Without exemptions, carve-outs or at least safeguard language (on CBAM), the FTA could become structurally unbalanced, allowing EU goods' duty-free access to India while Indian exports remain constrained by Europe's climate-linked border measures," he added.

At the services front, the GTRI also said that the EU limits remote delivery of services by requiring Indian firms to set up local offices and by imposing high minimum salary thresholds for Indian professionals.

India argues that these conditions defeat the purpose of digital trade and weaken its IT exports, which rely heavily on cross-border delivery, it added.

India is also seeking EU recognition as a 'data-secure' country under the EU's General Data Protection Regulation (GDPR), which would allow smoother transfer of EU citizens' data.

Without it, Indian firms face higher compliance costs than competitors from Japan or South Korea, it said. "The EU, however, wants India to adopt privacy rules closer to GDPR. New Delhi counters that its Digital Personal Data Protection Act, 2023 already provides adequate safeguards and that tighter alignment would burden its fast-growing digital economy," Srivastava said.

He said that India is also pressing for easier short-term business visas, totalisation agreements to avoid double social security contributions, and mutual recognition of professional qualifications, while the EU is seeking broader access to India's banking, legal and financial services markets.

"With EU governments cautious about labour mobility, India's services gains will hinge on progress in data-secure status, totalisation, and temporary movement of professionals," he said. Further, the 27-nation bloc is seeking access to India's about $ 600 billion government procurement market, including contracts awarded by the central government and public sector undertakings