India-EU Trade Talks Conclude With Plan To Extend Most Favoured Nation Status For 5 Years

New Delhi: Many important things have come to light after the draft of the proposed free trade agreement between India and the European Union became public. Both sides will give each other 'Most Favored Nation' status for five years from the date of implementation of the agreement. This will bring stability to business rules and give a clear signal to companies that policies will not change suddenly in the coming years.

What does 'Most Favored Nation' status mean?

This status means that for the next five years, India and the EU will not give any third country superior tariff benefits that are not available to each other. That means the concessions decided between the two will remain a priority. This will give confidence to the businessmen and the balance of competition will be maintained.

What will be the benefit to Indian exports?

The agreement has already been called the “Mother of All Deals”. Under this, about 93 percent of India's exports will be able to enter the European Union of 27 countries without duty. This will have a direct impact on sectors like textiles, pharma, engineering and agricultural products.

On the other hand, goods like luxury cars and wine coming from Europe may also become cheaper in India. That means consumers on both sides will also benefit.

How will a dispute be resolved?

An addendum has been added to the draft, under which there will be a system of arbitration to resolve any dispute. The arbitrator chosen with the consent of both parties will be able to find a solution through an expedited process. This will avoid long legal battles.

Will new import-export restrictions be imposed?

Both sides have decided that no new import or export restrictions will be imposed outside the WTO rules. Besides, it has also been agreed to increase cooperation in the field of digital trade so that barriers related to online transactions and data are reduced.

What steps will be taken to make business easier?

Rules related to food safety and plant health will be brought in line with WTO standards. Certification and audit processes will be simplified. Custom cooperation will increase and measures will be taken to speed up clearance of goods.

The two sides will share annual import data one year after the agreement comes into force to monitor how the concessions are being utilized.

How important is this agreement?

The European Union is currently India's largest trading partner. Goods trade between the two has reached $135 billion in the financial year 2023-24. In such a situation, this agreement is not limited to just reducing tariffs but is considered to decide the direction of trade relations in the coming years.

Overall, this move is an attempt to bring the two economies closer. Now the focus will be on when the agreement is formally implemented and after that how much change is seen at the ground level.