Europe turbocharges trade liberalization agenda

The old adage among travelers and commuters is that one often waits a long time for a bus or train, then two or three arrive at once. Turning to the global landscape, the same appears true of EU trade deals.

After years of painstaking negotiations with key powers, the EU has had success after success since European Commission President Ursula von der Leyen’s second term of office began in December 2024. Only earlier this week came the latest breakthrough with a deal agreed with Australia.

This adds to the recent EU agreements with Mercosur in South America and India, plus also a Brexit reset deal with the UK, closer to home in Europe. Key targets on the horizon include the Gulf Cooperation Council states.

Of course, the EU has long had some of the largest economic networks in the world. For instance, even before the recent deals of von der Leyen’s second term, the EU benefited from around 75 partners and more than $2 trillion in trade ties.

This reflects not only Europe’s longstanding outward orientation. In addition, the region has sought to double down on its economic links with the rest of the world following Russia’s invasion of Ukraine in 2022; plus wider new uncertainties, including the policies of US President Donald Trump’s second term since January 2025.

The shifting landscape was showcased by the Australia deal this week, which came after talks had collapsed in October 2023 during Joe Biden’s US presidency. Von der Leyen alluded to the extra stimulus for a deal now, saying that “none of us is immune to the shocks, both geopolitical and economic, including that the war in Iran brings to our populations.”

Given this geopolitical insecurity, Canberra and Brussels also announced a new defense partnership. Australian Prime Minister Anthony Albanese said this will provide a framework for the EU and Australia to cooperate in agendas including defense industries, maritime security, cybersecurity, counter-terrorism, and combating hybrid threats such as disinformation. 

Key targets on the horizon include GCC states.

Andrew Hammond

As a bloc, the EU was Australia’s third-largest two-way trading partner in 2024 as well as the sixth-largest export destination. The bloc was Australia’s second-largest source of foreign investment in 2024.

Moreover, Australia’s strategic value is rising fast for the EU. This is not least because it is home to the world’s third-largest reserves of rare earth elements and is the top global producer of lithium, a keystone of battery production for electric vehicles.

In 2024, EU exports to Australia totaled around €37 billion ($42 billion) in goods and €28 billion in services. The agreement could boost that by about a third in a decade, the European Commission estimates, through tariff liberalization on almost all EU goods and many services which could save around €1 billion a year in duties. The Australian government is also happy with the deal, predicting that it could add about AU$7.8 billion ($5.3 billion) to its national economy by 2030.

The Australia deal this week follows hot on the heels of the EU’s agreement with India earlier this year. This latter deal between the powers covers around 2 billion people and about a quarter of global gross domestic product.  

The India deal is a huge prize for the EU given that the emerging market power is forecast to best both Japan and Germany to soon become the world’s third-largest economy, behind China and the US. The Indian middle-class consumer market, alone, will reach about 95 million by 2035, larger than the population of Europe’s biggest economy, Germany. 

The India deal is a huge prize for the EU.

Andrew Hammond

As with the Australia deal, what underpins the EU’s trade pact with India is growing political warmth with New Delhi, which is widely perceived in the West as an increasingly friendly, long-term geopolitical ally with a shared commitment to a rules-based global order, effective multilateralism, and sustainable development. This includes converging interests around shared defense mechanisms, including for maritime security in the Indian Ocean where about 40 percent of bilateral Europe-India trade passes.

These points were highlighted by Finland President Alex Stubb when he called the EU-India deal a “strategic geopolitical move” between two powers that are also the world’s largest democracies, in terms of overall population. What Stubb emphasizes here is a growing view that trade is becoming increasingly intertwined with wider foreign policy issues at a time of international political flux. 

The EU is already India’s largest trade partner, with bilateral trade in goods standing at around $135 billion in the financial year 2023-24, an increase of almost 90 percent in the last decade.

There is much upside potential given that EU tariffs on Indian goods average 3.8 percent, while India’s on EU goods are 9.3 percent. Forecasts for future bilateral trade indicate this could exceed $200-250 billion in goods and services within a decade.

The EU also hopes to expand cooperation with India in clean energy. According to the Climate Trends organization, the trade deal builds on bilateral frameworks including the Clean Energy and Climate Partnership, first signed in 2016, which coordinates joint efforts on renewable energy, energy efficiency and clean hydrogen. Green hydrogen, in particular, has become a growing pillar of cooperation, with both powers identifying it as central to their long-term decarbonization pathways. 

Taken together, the EU’s trade liberalization agenda is growing in momentum. Von der Leyen and her commission colleagues will now double down with negotiations with other key targets, including the GCC.

• Andrew Hammond is an associate at LSE Ideas at the London School of Economics.