EU, India strike mega trade deal, creating 'free trade zone' of 2bn people

India and the European Union have announced the conclusion of a trade agreement creating "the world’s biggest free trade zone", which covers 2 billion people.

The deal will cut or eliminate tariffs on most goods, aiming to boost two‑way trade and reduce reliance on the US amid growing global trade tension.

With the India–European Union Free Trade Agreement (India–EU FTA), the two parties are making history, said European Commission President Ursula von der Leyen.

"We do not just trade more; we invest in each other’s future", she said in a social media post, "and our scale gives us global influence".

Stephen Grootes interviews Thembisa Fakude, senior research fellow and director at Africa Asia Dialogues (Afrasid).

While the global shift in trade relations sparked by the Donald Trump administration in the US certainly plays into this development, Fakude points out that the agreement has been in a negotiation process already for years.

He highlights the driving force of the proposed India-Middle East-Europe Economic Corridor (IMEC), aimed at enhancing trade between Asia, the Gulf and Europe.

"It seeks to avoid the Red Sea and the Suez Canal, so for me the signing of this deal with the Europeans indicates that corridor is going to be up and running pretty soon... which is of course going to be competing with the Belt and Road Initiative of China."

"I think THAT is what actually prompted this move in preparation for that corridor which will go straight from India, past some of the Middle Eastern countries, all the way into Europe."

Fakude also references the much-quoted speech by Canadian Prime Minister Mark Carney at the World Economic Forum, where he said that “middle powers” must work together to counter the rise of hard power, a message clearly aimed at the US.

Scroll up to the audio player to hear more of Fakude's analysis