Germany's Merz floats possibility of EU-India trade deal by end of January

AHMEDABAD (Reuters) - German Chancellor Friedrich Merz floated on Monday the possibility that the European Union and India could sign a landmark free trade agreement by the end of January, a move that could reshape global trade ties as protectionism rises and US-India talks remain stalled.

Top EU leaders would travel to India to seal the deal if negotiations wrap up in time, Merz told reporters in the western Indian city of Ahmedabad on Monday after meeting Indian Prime Minister Narendra Modi.

"In any case, they will take another major step forward to ensure that this free trade agreement comes into being," Merz said during his first trip to India since becoming chancellor.

European Union officials have yet to comment.

A trade deal, under discussion for years, is seen as a chance for both sides to strengthen economic ties and cut reliance on China and Russia.

Bilateral trade between India and the EU totalled 120 billion euros ($140.21 billion) in 2024, making the bloc India's biggest trading partner.

URGENCY GROWS

Talks have gathered pace since the United States, under President Donald Trump, raised tariffs on Indian goods and pressured New Delhi to stop buying Russian oil.

A separate India-US trade deal collapsed last year after a breakdown in communication between the two governments.

The EU-India pact would follow on the heels of the European Union's recent agreement with South America's Mercosur group and support Europe's push to build new trade networks as global rules shift.

Indian Trade Minister Piyush Goyal, speaking at a separate event in the western state of Gujarat, said an agreement was almost at its final stages.

German officials told Reuters the latest talks between Merz and Modi were "very intensive", raising hopes for a breakthrough.

The EU is pushing for steep tariff cuts on cars, medical devices, wine, spirits and meat, along with stronger intellectual property rules, while India is seeking duty-free access for labour-intensive goods and faster recognition of its growing autos and electronics sectors.

An Indian official familiar with the talks told Reuters last month that disputes over steel, carbon levies and market access would need further compromise.

The two countries signed agreements on minerals, healthcare and artificial intelligence during Merz's visit.

'RENAISSANCE OF UNFORTUNATE PROTECTIONISM'

Germany, which relies on India as a growing market, is also urging New Delhi to reduce its dependence on Russian energy and arms. India still works closely with Russia, where much of its military equipment originates, on security policy, and it is one of the largest buyers of Russian gas and oil alongside China.

"We are in complete agreement in our assessment of Russia's war of aggression against Ukraine," Merz said.

At the same time, he understood how dependent India still is on Russian oil and gas. "Obviously, it is not that simple in India, and I am the last person to visit other countries wagging my finger at them."

Merz chose India for his first Asian trip as chancellor, highlighting a shift in strategy among European leaders, who previously focused on China.

The German chancellor said the world is experiencing "a renaissance of unfortunate protectionism" that harms Germany and India. He did not name any countries.

While the United States has imposed tariffs on trading partners, China introduced export controls on minerals used in areas such as autos, causing months of supply chain disruption last year due to the US-China trade war and affecting German carmakers.

Beijing also slapped restrictions on some semiconductors widely used in the car industry after the Dutch government's decision to seize control of Chinese-owned chipmaker Nexperia.