India-EU FTA Talks: Progress on dispute settlement, stalemate on rules of origin

“Negotiators made good progress, particularly on mediation. The main sections of the dispute settlement text are now substantially agreed upon. Intense discussions took place on rules of origin but did not lead to major breakthroughs,” a report released by the European Union on progress made in the tenth round of talks stated.

“A particular focus was given to chapters related to market access. For the first time, sectoral sessions took place, examining specific industries such as automotives and medical devices from a holistic perspective, addressing all obstacles impeding market access, including tariffs, rules of origin, and Technical Barriers to Trade (TBT),” the report said.

Specific discussions on cars and medical devices follow an EU official’s statement last month that the 27-member bloc would not sign a trade deal without “substantive” market access from India for the sale of European-made cars. The emphasis on automobile exports likely stems from the ongoing automobile crisis in the region. In October 2024, Germany-based Volkswagen announced plans to close at least three of its German factories.

The EU report noted that “intense discussions took place on rules of origin” but did not lead to any major breakthrough. Both sides discussed the product-specific rules for several sectors, including: “processed agricultural products, fisheries, pharmaceutical products, chemical products, fertilisers, textiles and clothing, car parts, wood pulp, and paper.”

The report also stated that limited progress was made on technical regulations, market surveillance, and technical discussions, adding that important divergences remain on a number of issues, including the incorporation of WTO provisions and the annexes on pharmaceutical products and motor vehicles.

“The EU raised the issue of India’s Quality Control Orders (QCOs),” the report said. The QCOs block the import and sale of items that do not bear a Bureau of Indian Standards (BIS) mark, and a number of countries have cited them as a barrier to trade.

Last month, Ursula von der Leyen stated that the free trade agreement between the EU and India would be the largest deal of its kind anywhere in the world. Without naming China, she suggested that India and the EU could help each other achieve the “common goal” of de-risking their economies in sensitive sectors such as batteries, pharmaceuticals, semiconductors, clean hydrogen, and defence.