Strong take and I agree. This feels like a starting point, not the endgame.
India–EU is less about tariffs and more about strategic hedging in a fragmented trade world.
India’s shift - from cautious participant to selective integrator in global trade - is the real story here. Pharma, tech and consumer will move first; capital and supply chains will follow.
I’m reflecting more on these trade realignments and what they mean for leaders in The Marcus Brief.
If you look at media headlines and commentators on social media, all you see is hype about the EU-India FTA. However, this euphoria is misleading.
The evaluation of how “good” or “beneficial” an FTA (bilateral) needs to consider the following:
First, an FTA is essentially a “government-to-government” overarching framework in which to conduct a “business-to-business” activity. The actual operative entities on both sides are private parties making commercial decisions.
Second, all FTAs have what in investment theory is called “time to build”—the reduction in duties is phased out over long periods up to 10 years. So, nothing is going to happen tomorrow morning or even the day after tomorrow morning.
Third, a bilateral FTA does not imply that each party cannot be a party to other bilateral or multilateral FTAs. It is therefore important that an Indian exporter, for example, can quote a landed price that, with the reduced tariff, makes it competitive vis-à-vis other international producers. There are other subtleties, like “quality” [hedonic pricing] aspects, that might mean that the lower price may not always prevail – but let’s abstract from that for now.
The key issue, often forgotten, is that in FTAs the key players are private parties, not the government. To quote a competitive landed price, they need to be “efficient” producers in a sort of “globally competitive market” scenario. The landed price depends on firm-level efficiencies – input costs, labour costs, power costs, etc. The question is: Are these comparable with those of competing foreign producers? In a sense, an FTA is irrelevant; if you were a competitive producer, you would already be exporting with or without an FTA. The key issue lies in structural reform: domestic economic policies that encourage competition (even in the domestic market), allow firms to produce at lower costs, permit economies of scale, etc. Structural changes are a prerequisite. They don’t disappear when you sign an FTA. For example, the PLI scheme is a recognition of this – whether it will work remains to be seen.
Simply put, the question is: do you have a competitive price for a generic garment as compared to a Bangladeshi or Cambodian producer? Because the garment demand in the EU is not going to increase in the short run, you must compete for market share. For that, domestic productivity has to increase first; it’s the horse in the FTA cart.
All great points. In simple terms, it's a distillation of the idea that trade policy in isolation doesn't work unless complemented by industrial policy.
However, a few notes:
1. An FTA like this does have some amount of private lobbying (interestingly, this is something that our older pre-2020 FTAs lacked). I don't think it's always useful to look at it as a state-to-state framework for a business activity. For instance, it's pretty clear that our auto industry had a huge role to play. It's the reason EVs are excluded from tariff benefits to Europe for the first 5 years - so that it doesn't mess up our national EV push.
2. That's true and perhaps no one's denying that. But the idea of any FTA, be it the one we signed with ASEAN years ago or the one with the EU, is to integrate with global trade gradually without endangering domestic industry. It has less to do with immediate give-and-take / quid pro quo.
3. Yes. Which is why what matters more is complementarity: we could sign an FTA with ASEAN today. But they effectively have many goods that compete head-on with ours (and will probably mog us competitively).
The over-financialization of the U.S. economy is no longer a domestic issue—it’s a global threat.A single-day drop of nearly 30% in silver and 10% in gold didn’t happen in a vacuum.The widening divergence between U.S. silver prices and Asian physical markets is clear evidence of how distorted price discovery has become.This is a battle between paper claims and real metal—and the outcome will matter far beyond commodities.
hello daily brief i follow you on you youtube and read the article.its really great insight by you guys but how many aritlcle/newspaper do you guys read to cover one in-depth analysis writing, how many finance folks are there to do this.
Strong take and I agree. This feels like a starting point, not the endgame.
India–EU is less about tariffs and more about strategic hedging in a fragmented trade world.
India’s shift - from cautious participant to selective integrator in global trade - is the real story here. Pharma, tech and consumer will move first; capital and supply chains will follow.
I’m reflecting more on these trade realignments and what they mean for leaders in The Marcus Brief.
Thanks so much Marcus, glad you liked it!
If you look at media headlines and commentators on social media, all you see is hype about the EU-India FTA. However, this euphoria is misleading.
The evaluation of how “good” or “beneficial” an FTA (bilateral) needs to consider the following:
First, an FTA is essentially a “government-to-government” overarching framework in which to conduct a “business-to-business” activity. The actual operative entities on both sides are private parties making commercial decisions.
Second, all FTAs have what in investment theory is called “time to build”—the reduction in duties is phased out over long periods up to 10 years. So, nothing is going to happen tomorrow morning or even the day after tomorrow morning.
Third, a bilateral FTA does not imply that each party cannot be a party to other bilateral or multilateral FTAs. It is therefore important that an Indian exporter, for example, can quote a landed price that, with the reduced tariff, makes it competitive vis-à-vis other international producers. There are other subtleties, like “quality” [hedonic pricing] aspects, that might mean that the lower price may not always prevail – but let’s abstract from that for now.
The key issue, often forgotten, is that in FTAs the key players are private parties, not the government. To quote a competitive landed price, they need to be “efficient” producers in a sort of “globally competitive market” scenario. The landed price depends on firm-level efficiencies – input costs, labour costs, power costs, etc. The question is: Are these comparable with those of competing foreign producers? In a sense, an FTA is irrelevant; if you were a competitive producer, you would already be exporting with or without an FTA. The key issue lies in structural reform: domestic economic policies that encourage competition (even in the domestic market), allow firms to produce at lower costs, permit economies of scale, etc. Structural changes are a prerequisite. They don’t disappear when you sign an FTA. For example, the PLI scheme is a recognition of this – whether it will work remains to be seen.
Simply put, the question is: do you have a competitive price for a generic garment as compared to a Bangladeshi or Cambodian producer? Because the garment demand in the EU is not going to increase in the short run, you must compete for market share. For that, domestic productivity has to increase first; it’s the horse in the FTA cart.
All great points. In simple terms, it's a distillation of the idea that trade policy in isolation doesn't work unless complemented by industrial policy.
However, a few notes:
1. An FTA like this does have some amount of private lobbying (interestingly, this is something that our older pre-2020 FTAs lacked). I don't think it's always useful to look at it as a state-to-state framework for a business activity. For instance, it's pretty clear that our auto industry had a huge role to play. It's the reason EVs are excluded from tariff benefits to Europe for the first 5 years - so that it doesn't mess up our national EV push.
2. That's true and perhaps no one's denying that. But the idea of any FTA, be it the one we signed with ASEAN years ago or the one with the EU, is to integrate with global trade gradually without endangering domestic industry. It has less to do with immediate give-and-take / quid pro quo.
3. Yes. Which is why what matters more is complementarity: we could sign an FTA with ASEAN today. But they effectively have many goods that compete head-on with ours (and will probably mog us competitively).
Well researched and written pieces both!
Thank you!
Insightful! In our post we breakdown if the India-EU “Mother of All Trade Deals” will actually deliver. Let us know your thoughts!
https://investorsight.substack.com/p/will-the-india-eu-mother-of-all-trade
The over-financialization of the U.S. economy is no longer a domestic issue—it’s a global threat.A single-day drop of nearly 30% in silver and 10% in gold didn’t happen in a vacuum.The widening divergence between U.S. silver prices and Asian physical markets is clear evidence of how distorted price discovery has become.This is a battle between paper claims and real metal—and the outcome will matter far beyond commodities.
hello daily brief i follow you on you youtube and read the article.its really great insight by you guys but how many aritlcle/newspaper do you guys read to cover one in-depth analysis writing, how many finance folks are there to do this.
thank you
best regards
kshithij s hegde