The paper, “The road to hell is paved with good intentions —and EU spreadsheets,” focuses on two incompatible economic strategies of the European Union (EU). On the one hand, the EU wants to be a player in geopolitics and intends to use trade policy to increase its power in international relations. On the other, Brussels wants to set standards, particularly in three fields: the production of certain products shall have little or no CO2 emissions, people in developing countries shall not be exploited, and agricultural products shall not be coming from recently deforested land. While the good intentions of policy makers in Brussels are obvious and laudable, the effect of the three measures will reduce the EU’s relevance in international economic relations. Rather than improving the welfare of people in developing countries, the EU’s policies are leading to self-isolation and a diminishing relevance of Brussels. Today, economies in Africa, Asia and Latin America have the option of doing business with China, Russia and non-aligned countries. An EU that insists on unilateral measures in international trade weakens, rather than strengthens, its relevance in international affairs.

Carnegie India hosted Heribert Dieter for a discussion on his paper The road to hell is paved with good intentions—and EU spreadsheets and the implications of the India-EU Free trade Agreement (FTA) at the Security Studies Seminar. The discussion was moderated by Srinath Raghavan.

DISCUSSION HIGHLIGHTS

EU’s regulatory barriers and their impact: Participants discussed the EU’s long-standing emphasis on values-based trade and economic governance, which has allowed it to shape global regulatory standards. The EU has developed a framework that integrates environmental, labor, and ethical considerations into trade policy, through initiatives such as the Carbon Border Adjustment Mechanism, the Corporate Sustainability Due Diligence Directive, and deforestation laws. While these prevent exploitation of workers and ensure environmental sustainability, they also shield the European industries from external competition and reduce the EU’s economic relevance and role in global supply chains. Due to these barriers, the EU has struggled to finalize trade agreements, and innovation and business development have suffered. Additionally, its ability to implement regulatory standards internationally, known as the “Brussels Effect,” has faced limitations. However, challenges in recent years, particularly increasing economic competition, the rise of China, and imposition of tariffs by the second Trump administration have contributed to a rethink in the EU’s trade policy. European policymakers and institutions have begun to acknowledge that maintaining global relevance will require openness and flexibility to the priorities of other countries.

India-EU FTA and recent convergence: Participants emphasized that EU’s regulatory barriers were impacting trade relations with India as companies and policymakers often faced challenges navigating Europe’s regulatory landscape. However, recent economic and strategic pragmatism in Brussels and New Delhi’s continued efforts to diversify partnerships led to a rethink over the relationship. The Free Trade Agreement is a testament to those efforts and a significant opportunity for strengthening relations and expanding cooperation in trade, technology, and defense and security. Additionally, there is a greater appreciation in Europe for Indian diplomacy in an uncertain geopolitical environment. Participants noted that India’s earlier decision to continue purchasing Russian oil was heavily criticized by Western countries but is increasingly viewed as a practical model for managing energy security. Moreover, India’s balance of relations with Washington was viewed more positively by participants, compared to the European approach to the Trump 2.0 administration. Concludingly, Europe is increasingly searching for new partnerships as it attempts to adapt to shifting geopolitical realities and, in this context, India has emerged as an important partner.

Europe’s decline and weak geopolitical position: The EU’s weakened global influence in recent years was a recurring theme in the discussion. A major geopolitical and economic powerhouse of the past, it now faces increasing internal and external pressures. First, several structural economic challenges undermine the EU’s growth and industrial competitiveness. Capital investment, research and innovation, and industrial expansion are not prioritized, and regulatory governance often takes precedence over technological advancement and economic experimentation. Second, the EU’s broader strategic and global decline is evident and was discussed in the context of the recent crisis in West Asia. From playing a pioneering role in diplomatic initiatives such as the denuclearization program in Iran, it now appears largely absent from the current crisis. Lastly, for decades, its security architecture has relied on the United States as European countries operated under the assumptions of stability and reliability of American security guarantees. However, the EU now finds itself in a difficult position as it faces challenges with Washington. Resultantly, the EU has pushed for greater strategic autonomy as, for instance, Germany is expected to significantly increase its military expenditure. Nonetheless, this also presents challenges, such as seeking strategic cohesion in a diverse bloc like EU, complex domestic political factors, and increasing competition over defense capabilities within the bloc, particularly between Germany and France.

This summary was prepared by Swasti Sachdeva, research assistant and program coordinator, and Mugdha Satpute, research assistant, with the Security Studies Program at Carnegie India.