European Automotive Components and Environmental Policy Framework Agreement (): EU-India Free Trade Agreement Strives for Comprehensive Trade Agreement and Reciprocal Market Access

Key Chapter Title List

1. Executive Summary
2. Current Trade Relations
3. Market Access and Trade Liberalization
4. Rules of Origin
5. Raw Materials
6. Customs
7. Regulatory Cooperation and Automotive Annex
8. Technical Barriers to Trade
9. Tariff Schedule
10. Background of the Free Trade Agreement
11. Conclusion and Outlook

Document Introduction

This position paper was published by the European Association of Automotive Suppliers (CLEPA) in April 2023, aiming to provide professional industry analysis and policy recommendations for the Free Trade Agreement (FTA) currently under negotiation between the European Union and India. The document states upfront that India represents a significant market opportunity for the European automotive components industry. However, current high tariffs, regulatory differences, and uncertainties severely limit the deepening of bilateral trade. CLEPA supports the European Commission's push for a comprehensive FTA to restore a level playing field and achieve reciprocal liberalization of tariff schedules based on modern rules of origin and facilitated customs procedures.

The report first examines the current trade relationship between the EU and India in the automotive components sector. Data shows that the EU's average import tariff for automotive components is 4%, while India's average tariff is approximately 15%. Since 2019, the EU's trade balance with India in this sector has shifted from a surplus to a deficit, with annual imports of around €9 billion and exports of about €7 billion. The EU's share of India's total automotive components imports is about 26%, but its market share has been under pressure since 2018, with competitors like China and Japan gradually eroding its position. Due to India's existing FTAs with ASEAN countries, Japanese and Korean manufacturers enjoy tariff preferences, placing EU suppliers at a competitive disadvantage in the Indian market. Therefore, the EU-India FTA is seen as a key strategic tool to reverse this situation.

In terms of market access and rule-building, the document puts forward systematic policy proposals. The core objective is to achieve comprehensive reciprocal liberalization for all relevant automotive tariff lines, with the possibility of considering a progressive transition period of up to seven years for some lines. Regarding rules of origin, it recommends adopting modern rules allowing preferential treatment based on value addition or change in tariff subheading, permitting non-originating materials to account for up to 50% of value, and supporting full bilateral cumulation and the use of average cost for origin calculation to reduce administrative burdens. On non-tariff barriers, the report highlights India's additional licensing requirements for safety glass and wheel rims, as well as restrictions under its National Geospatial Policy on high-precision map data collection and processing by non-Indian companies, advocating for their elimination through negotiations.

Regulatory harmonization is given prominent emphasis. CLEPA strongly supports using the United Nations Economic Commission for Europe (UNECE) process as the primary platform for international technical regulation harmonization and advocates for the inclusion of an ambitious automotive annex in the FTA. The core of this annex would be to promote India's accession to the 1958 UN Vehicle Agreement and the full application of UN Regulations adopted by the EU, or at least the recognition and acceptance of EU and UNECE certifications and markings, thereby avoiding additional testing or administrative procedures for EU automotive products. Furthermore, the report emphasizes the importance of establishing partnerships in specific raw materials (such as copper, manganese, lithium, and particularly magnesium) to help the EU diversify its supply sources and reduce its high dependence on China.

Finally, the document places the EU-India FTA within the broader context of global FTA strategy. CLEPA expresses concern over the slow approval processes in recent years for FTAs with Mercosur, Mexico, Chile, and New Zealand, and calls on EU institutions to complete ratifications promptly. Simultaneously, the association also supports FTA negotiations with Indonesia and Australia, considering the former strategically significant for its automotive market and nickel resources, and the latter as an important supplier of critical raw materials. CLEPA states that it will continue to act as a partner, committed to promoting an open EU trade policy and securing market access for the European automotive supplier industry.

Based on detailed trade data (sources include IHS GTA) and in-depth industry insights, this report serves as an authoritative reference for policymakers, trade negotiators, international business analysts, and geo-economic researchers to understand the trade dynamics of the EU-India automotive industry and the key focal points of future agreement negotiations.