India-EU FTA nears completion: CTA Apparels calls it game-changer for apparel industry

The impending Free Trade Agreement (FTA) between India and the European Union (EU) marks a pivotal moment in India's economic diplomacy and trade strategy. This agreement, particularly highlighted by its potential as a "game-changer" for the apparel industry, signifies a deeper integration of India into global value chains and a strategic pivot towards strengthening ties with one of the world's largest economic blocs.

**Background Context and Historical Trajectory:**

India and the EU have a long-standing relationship, evolving from a bilateral trade agreement in 1994 to a Strategic Partnership in 2004. The idea of a comprehensive FTA, then known as the Broad-based Trade and Investment Agreement (BTIA), was first initiated in 2007. Negotiations continued for six years across 16 rounds but stalled in 2013 due to significant differences on crucial issues such as market access for automobiles and wines, intellectual property rights, data security, and the movement of natural persons (Mode 4 services). After a hiatus of nearly nine years, a renewed political impetus led to the re-launch of negotiations for a comprehensive India-EU FTA, an Investment Agreement, and an Agreement on Geographical Indications (GIs) in June 2022. This renewed push reflects a changed geopolitical landscape and a mutual desire to diversify supply chains and strengthen economic resilience.

**What's Happening Now?**

The current phase of negotiations is progressing positively, with a clear focus on achieving a balanced and comprehensive agreement. For India's apparel sector, the most significant anticipated benefit is the reduction or elimination of import duties on Indian garments entering the EU market. Currently, Indian textile and apparel exports face an average Most Favoured Nation (MFN) tariff of around 9.6% in the EU, placing them at a disadvantage compared to competitors like Bangladesh and Vietnam, which enjoy duty-free access under the EU's Generalized System of Preferences (GSP) or specific FTAs. The article highlights that this duty reduction is projected to boost India's apparel exports to the EU by 20-25% in the coming years, transforming market access and competitiveness.

**Key Stakeholders Involved:**

On the Indian side, the **Government of India**, primarily through the Ministry of Commerce and Industry, is the lead negotiator. The **Indian apparel manufacturers and exporters**, represented by bodies like the Clothing Manufacturers Association of India (CMAI) and specific entities like CTA Apparels, are crucial beneficiaries and advocates, providing industry-specific inputs. The broader **textile and handloom sector**, including cotton farmers and workers, also stand to gain from increased production and employment. On the EU side, the **European Commission** spearheads the negotiations on behalf of its 27 member states. European businesses, particularly importers and retailers, and ultimately EU consumers, are key stakeholders who will benefit from diversified sourcing and potentially lower prices.

**Significance for India:**

This FTA holds immense significance for India across multiple dimensions. Economically, it promises a substantial **boost to exports**, particularly for labor-intensive sectors like apparel, leading to **job creation** across the value chain, from farming to manufacturing and logistics. It aligns perfectly with the government's "**Make in India**" initiative, encouraging domestic manufacturing and enhancing its global competitiveness. Access to the EU, a premium market with high purchasing power, will help **diversify India's export basket** and reduce reliance on traditional markets. Furthermore, the agreement is expected to **foster stable foreign investment** into India's manufacturing sector, bringing in capital, technology, and best practices. Strategically, strengthening economic ties with the EU, a major global power, enhances India's **geopolitical standing** and contributes to its vision of becoming a global economic powerhouse.

**Future Implications:**

Beyond the immediate benefits to the apparel sector, a successful India-EU FTA could pave the way for deeper cooperation in other areas like digital trade, green technologies, and critical minerals. It would also set a precedent and build momentum for India's ongoing FTA negotiations with other significant partners, such as the UK. The agreement could position India as a more attractive destination for global supply chain diversification away from other regions. However, India will need to implement domestic reforms to fully capitalize on the FTA, including improving ease of doing business, enhancing infrastructure, and ensuring compliance with EU's stringent quality and sustainability standards. Success here would significantly contribute to India's ambition of becoming a $5 trillion economy.

**Related Constitutional Articles, Acts, and Policies:**

Several constitutional provisions and policy frameworks underpin India's approach to international trade agreements. **Article 246** of the Indian Constitution places 'Trade and Commerce with foreign countries' (Entry 41) in the Union List, empowering the Parliament to legislate on such matters. **Article 253** grants Parliament the power to make any law for implementing any international treaty, agreement, or convention. The **Foreign Trade (Development and Regulation) Act, 1992**, provides the legal framework for governing foreign trade. Policy-wise, initiatives like the "**Make in India**" program aim to boost domestic manufacturing and exports. The **National Textiles Policy (drafted in 2016)** seeks to achieve a textile business of $300 billion by 2024-25 and create 35 million jobs, goals that would be significantly aided by this FTA. The **Production Linked Incentive (PLI) Scheme for Textiles** (notified in September 2021) also aims to promote the manufacturing of Man-Made Fibre (MMF) apparel and technical textiles, making the sector more competitive for exports.