Daily Newsings: 28 April 2025

On the India-EU Free Trade Agreement and disagreements over sustainability

Daily Newsings are musings on the daily news.

Last week we looked at the talks on the US-India Bilateral Trade Agreement. Today we will look at the India-EU Free Trade Agreement (FTA) talks.

Talks for an FTA have been going on between India and the European Union for more than a decade now. Right now the two sides seem determined to finalise an agreement by the end of 2025. Time will tell whether that determination will result in success.

But why is it so difficult for the two sides to come to an agreement?

The reason for the difficulty lies in the fact that both sides have different priorities. The EU is highly committed to sustainability. EU standards of environment protection are much higher than the rest of the world. At the same time India prioritises economic development, even sometimes at the cost of environmental concerns.

So what does the EU care about?

The EU Deforestation Regulation (EUDR), for example, bans the sale of any products that was produced in an area where deforestation took place in recent years. In other words, if a manufacturer or a trader is unable to prove that a product was produced in a place where no deforestation took place in recent years, they cannot sell the product in Europe.

The Carbon Border Adjustment Mechanism (CBAM) is another such sustainability policy of the EU.

Europe makes it expensive to manufacture goods while producing a lot of greenhouse gases. This makes greener alternatives cheaper and encourages people to buy greener goods. But this can make companies move their manufacturing factories to countries outside the EU. The EU wants to make their market more environment-friendly. So to ensure that goods manufactured elsewhere that emit more greenhouse gases are not sold for cheap in the EU markets, they impose a tax known as the Carbon Border Adjustment Mechanism (CBAM). This means that producers have to prove their manufacturing process is environment-friendly. If they fail to do that, they have to pay the CBAM tax and risk their products getting costlier.

What does India want though?

While the EU cares about sustainability, India prioritises high employment for Indians and protection of Indian businesses.

If the taxes on European manufactured cars are removed for example, Indian car manufacturers might suffer losses. This could lead to job losses in the manufacturing sector in India. Similarly, lowering taxes on European-origin agricultural products could mean that agricultural products from India face lower sales, and small farmers suffer as a result.

But India also opposes the sustainability policies of the EU such as the CBAM and the EUDR.

This is because India feels that the responsibility to address climate change should be significantly lesser for India than for Europe. This is a principle of the Paris Agreement (a landmark agreement on climate change) and the principle is known by the phrase: "common but differentiated responsibilities."

The reasoning for such differentiated responsibilities to address climate change are based on the understanding that developed economies such as the EU contributed a lot more to climate change back in the 18th and 19th centuries. After becoming industrialised and economically well-off, they have the luxury to now care about environment protection. On the other hand, developing economies are just starting out on their industrialisation journey. They argue that their priority is to first lift people out of poverty and then care about environment protection. Thus, the same standards cannot be applied on all the countries.

It is not easy to balance development with stewardship of God's creation

As Bible-believing Christians, we recognize the importance of stewarding God's creation. When God created humanity, he made us care-takers of the earth.

But we also recognize that in this sin-infected world, we will always be facing tough choices. Till the return of the King and the restoration of the cosmos, sometimes we have to make the difficult decision to sacrifice environmental concerns in favour of human development. We must not forget that although the environment needs to be taken care of, it is only human beings who are created in the image of God. And lifting millions out of poverty often comes through an increase in manufacturing jobs. And manufacturing industries sometimes have an adverse effect on the environment.

At the same time, increasing damage to the environment also results in adverse climatic conditions and increased incidence of extreme weather events such as droughts, floods, landslides, and so on. At the end of the day, it is the poor who will negatively be affected due to such extreme weather events. It doesn't matter if the developed economies contributed more to climate change, it is often poorer countries that suffer more from the effects of climate change. Therefore, one can argue that stewarding creation well is in fact a form of loving one's neighbour well.

We also cannot tell whether the EU's motives are truly to protect the environment or whether they are trying to use such policies to prioritise their own industries unfairly. India claims that with policies such as the EUDR, it will become difficult for small and medium enterprises in India to show all the documentation to prove their products were not made from deforested land. This will put them at a disadvantage in the EU markets. India's claim is that the purpose of such policies is to protect Europe's businesses under the guise of sustainability.

In all this, one must also remember that there are scholars and scientists who genuinely question whether using greener products truly benefits the environment. These are not easy questions to answer.

Both India and the EU will need to remember that one cannot both have their cake and eat it too. India cannot continue to place high tariffs to protect its local businesses while at the same time demanding that the EU reduce its barriers to business such as the CBAM or the EUDR. The EU at the same time does need to consider that poorer economies will have different circumstances and priorities. Mutual respect and negotiation will be the way forward.

Let me also repeat what I wrote on this blog last week.

Faithfulness for Indian Christians ought to involve regular praying for our leaders (1 Tim 2:1-2) — that they may govern with wisdom and compassion.

It also involves the members of the church serving the country through a wide range of vocations. Public policy making and policy research, Indian Administrative Services, the Judiciary, economists, academic researchers in a wide range of subjects (Economics, law, public policy, agriculture sciences, international relations, etc), Politics, law enforcement... These are all vocations where faithful and diligent men and women can bless the country in various ways. We also need entrepreneurs who start businesses and create jobs. We need innovators and engineers who might bring down the cost of creating things through new ideas and technologies. We need educators who upskill the people of the land and healthcare professionals who keep them in good health. One could go on and on.

What's important is that Christians should not be motivated to pursue these vocations just to get a high income, higher standard of living, or a comfortable safe life. They ought to pursue such vocations in order to serve their neighbours. After all, they follow a master who came not to be served but to serve others and to give his life as a ransom for many.