German Media: The Impact of the India-EU Free Trade Agreement on China

India and the EU started trade negotiations as early as 2007, but the talks broke down in 2013 and were only restarted in 2022. Analysts believe that under the current turbulent geopolitical situation, both sides feel an urgent need to reduce their economic dependence on the US and China – on one hand, the tariff policies of former US President Trump are full of uncertainty, and on the other hand, reliance on Chinese supply chains has increased the vulnerability of domestic economies.

Economists predict that after the new agreement between India and the EU is reached, Europe's investment, production, sales, and research and development, i.e., part of the global production capacity, will shift from China to India.

A related report by German media Table.Briefings on January 26 stated that preliminary estimates show that if the India-EU free trade agreement eventually becomes a long-term agreement, it would cause losses amounting to hundreds of billions of euros for China over the next decade. India will become an increasingly important component of the international value chain and will face its long-term competitor China with a stronger stance; while the EU will take an important step toward enhancing its industrial resilience and thus increasing its political influence.

Peter Fintl, head of technology and innovation at consulting firm Capgemini, told the media, "If this agreement lasts for ten years, it will bring additional business worth hundreds of billions of euros, which would have likely been conducted with China." This includes all key industries related to China, from automotive, mechanical engineering, to electronics and pharmaceuticals.

The German Chamber of Commerce (IHK) praised the trade agreement between the EU and India. IHK said the agreement is the largest free trade agreement in the world and a "game-changer" for the German economy. In the 120 billion euros of trade between India and the EU in 2024, Germany-India trade amounted to about 31 billion euros, accounting for a quarter. Of this, Germany's exports to India were 17 billion euros. The new agreement will also significantly promote German services entering the Indian market and bring new investments to India.

The limitations of the India-EU free trade agreement on China's geopolitical influence should not be underestimated. Economist Eike Wenzel from the Institute for Trends and Future Studies in Heidelberg said, "The agreement between the EU and India is so important because it opens up a huge growth market with about 1.4 billion people, reduces dependence on China, achieves supply chain diversification, strengthens European industry, and consolidates geopolitical partnerships in a multipolar world."

India will also use this opportunity to enhance its position in global supply chains and geopolitics, strengthening its ability to withstand the threat of US tariffs and compete with China in Asia.

Beijing is well aware of the impact of this agreement. China recently stated at the World Economic Forum that China is not only willing to be the world's factory but also the world's market. It also subtly criticized, "Unilateral actions and trade arrangements by certain countries clearly violate the basic principles and rules of the World Trade Organization, seriously undermining the international economic and trade order." How Beijing will respond to this remains to be seen.

Source: DW

Original: toutiao.com/article/1855484697077836/

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