Beyond the Handshake, Navigating the Perilous Terrain of Post-Deal Realities in India’s Trade Triumph

Beyond the Handshake, Navigating the Perilous Terrain of Post-Deal Realities in India’s Trade Triumph

The past week has witnessed a diplomatic and economic feat of rare magnitude in New Delhi. The triumphant conclusion of the long-pending Free Trade Agreement (FTA) with the European Union, swiftly followed by the strategic recalibration of trade terms with the United States, represents a dual-track victory of profound consequence. Hailed as the “mother of all deals” and “the biggest victory for US-India relations in nearly a year,” these agreements signal India’s confident arrival as a central node in the reconfiguring geo-economic map. They promise enhanced market access, restored competitiveness for key sectors, and a powerful statement of India’s strategic alignment with the democratic West. Yet, as the analysis rightly warns, the celebratory signing ceremonies and triumphant headlines mark not the finish line, but merely the exit from the starting blocks. “The day after the deal is the true starting point,” a phase characterized not by the clarity of negotiation but by the murky, often treacherous waters of implementation, enforcement, and political contestation in an era of “dynamic protectionism.”

The Illusion of Finality: When Deals Enter the Real World

The hard-won text of an FTA is a static document, a snapshot of consensus captured at a moment in time. Its translation into lived economic reality, however, is a dynamic, non-linear process fraught with obstacles. The post-deal world is no longer governed by the relatively straightforward calculus of tariffs. Instead, it is dominated by what the article terms “dynamic protectionism”—a sophisticated arsenal of non-tariff barriers (NTBs), regulatory chokepoints, legal challenges, and sub-national political maneuvering designed to slow, reshape, or even nullify the concessions granted.

This shift means the battleground moves from trade ministries to courtrooms, parliamentary committees, provincial assemblies, and the opaque corridors of bureaucratic standard-setting bodies. The goal is no longer to block a deal outright, but to render its benefits so difficult to claim that they become functionally inaccessible. For India, having secured the promise of preferential access, the infinitely more complex task of actually securing that access now begins.

Cautionary Tales: The Precarious Fate of Preferential Access

The experiences of other nations provide a sobering playbook of what India can expect, illustrating that preferential access is never truly “free” and is always provisional.

• The United States and the “National Security” Trump Card: The US offers the most blunt illustration of raw power overriding contractual commitment. Its imposition of a 25% tariff on advanced computing chips and automobiles last month, overriding FTA protections cited by South Korea by invoking “national security” under Section 232 of its trade laws, is a masterclass in post-deal realpolitik. It demonstrates that even a signed deal exists at the sufferance of Washington’s shifting strategic priorities. The image of the Korean trade minister in a perpetual shuttle between Washington offices is a potent warning: the deal is not self-executing; it requires constant, vigilant diplomacy to defend against being unilaterally rewritten.

• The Cost of Compliance: Japan and Vietnam’s Burdens: The deals struck by other Asian partners reveal the heavy price of access. Japan’s July 2025 agreement, which capped US tariffs at 15% in exchange for a staggering $550-billion investment commitment in US energy, AI, and semiconductors, has ignited a fierce domestic backlash. Critics decry “capital flight” and a loss of economic sovereignty, showing that the political cost of a deal can manifest long after the signing. Vietnam’s experience is even more instructive for India’s export sectors. Facing 40% US tariffs on goods suspected of being transshipped from China, Vietnam has been forced into a costly, comprehensive overhaul of its entire customs and origin-tracking infrastructure to prove the authenticity of “Made in Vietnam” labels. This underscores that market access is contingent on meeting burdensome compliance costs, shifting the administrative and financial onus onto the exporting nation. Moreover, the US decision to lower India’s tariffs to 18% has instantly narrowed Vietnam’s competitive edge, proving that the landscape of “preferential” access is constantly contested and subject to change based on Washington’s broader strategic calculations.

• The European Quagmire: Ratification and the Veto of the Parts: The EU FTA presents a distinct, labyrinthine challenge. Its full legal force is not automatic; it is contingent upon ratification by the European Parliament and, critically, by all 27 member states. This process plunges the agreement into a “fragile middle ground” of EU politics, where it becomes vulnerable to a multitude of veto points. The EU-Mercosur FTA serves as a dire precedent. Signed in January, it was almost immediately ensnared in political contest. Within weeks, intense lobbying—spearheaded by farmer protests framed as a revolt against “cars for cows”—pushed the European Parliament to refer the deal to the European Court of Justice. While provisional application may proceed, full ratification is now in indefinite limbo, trapped in a “political loop disguised as a legal process.”

The parallel to the 2016 EU-Canada Comprehensive Economic and Trade Agreement (CETA) is chilling. That landmark deal was nearly scuttled not by a major national parliament, but by the regional Parliament of Wallonia in Belgium, over concerns for local farmers and labour standards. Given that the EU-India deal grants the bloc significant access to India’s labour-intensive sectors (textiles, leather, etc.), it is almost guaranteed to attract similar resistance from European industries and their political champions, risking delay and dilution.

Most stark is the ghost of the EU-China Comprehensive Agreement on Investment (CAI). After seven years of grueling negotiation and a celebratory conclusion in late 2020, the CAI is now a “zombie agreement”—technically alive but functionally inert, frozen by sanctions, parliamentary hostility, and a transformed geopolitical mood. It stands as a monument to the fact that a signed text is worthless without enduring political will to enact it.

India’s Post-Deal Battlefield: The Coming Administrative Trench Warfare

For India, the “day after” will involve navigating multiple, simultaneous fronts in what will resemble “administrative trench warfare.”

1. The Ratification Gauntlet (EU): Indian diplomats must now engage in a granular, state-by-state and party-by-party lobbying effort across Europe to shepherd the FTA through the ratification process, defending it against protectionist interests masquerading as concerns over environmental standards, labour rights, or data privacy.

2. Defending Against US Unilateralism: With the US deal, India must establish robust, real-time monitoring and diplomatic channels to instantly push back against any future invocation of “national security” tariffs or other unilateral measures that contravene the spirit of the agreement. The deal’s predictability, as noted, is only as stable as the US administration’s discretion.

3. Navigating the Regulatory Thicket: Both deals will unleash a flood of technical committees on standards, conformity assessment, and regulatory cooperation. Indian businesses and officials must be equipped to engage in these highly specialized forums to ensure EU and US technical regulations or sanitary and phytosanitary (SPS) measures do not become de facto barriers. A primary example is the EU’s Carbon Border Adjustment Mechanism (CBAM), a complex carbon tax on imports. If not navigated skillfully, the CBAM could act as a “double tax” that completely erodes the tariff benefits won in the FTA, punishing Indian exporters for their carbon footprint.

4. Managing Domestic Implementation and Sidelined Issues: India itself must undertake a massive internal exercise. This includes educating exporters about new rules of origin, upgrading domestic quality and certification infrastructure, and ensuring state-level policies align with central commitments. Furthermore, issues that were strategically “set aside” to secure the deal—be they data localization, agricultural safeguards, or patent regulations—will resurface in future reviews and must be managed with foresight.

Conclusion: From Diplomatic Momentum to Durable Gains

The convergence of the EU and US agreements is undeniably a testament to India’s growing economic heft and its perceived strategic indispensability. It reflects a hard-earned credibility. However, the ultimate measure of success will not be the pageantry of the signing ceremony, but the tangible increase in two-way trade and investment flows five years hence.

The real work starts now. It is a work of relentless, unglamorous diligence: of legal verifications, of constant diplomatic engagement, of building domestic capacity, and of shrewd geopolitical navigation. India must convert its hard-won diplomatic momentum into durable commercial outcomes. It must prove that it can not only secure a deal but also steward it through the hostile terrain of global realpolitik and bureaucratic inertia. In the grand theatre of international trade, the signing is the climax of Act II. The true drama—and the determination of whether this story ends in triumph or disappointment—unfolds in the long, complex, and perilous Act III that begins the day after the deal.

Q&A: Navigating the Post-Deal Challenges of India’s Trade Agreements

Q1: What is meant by “dynamic protectionism,” and why does it make the post-deal phase more challenging than the negotiations themselves?
A1: Dynamic protectionism refers to the modern practice of restricting trade not through simple tariffs, but through a constantly evolving set of non-tariff barriers. These include complex regulatory standards, stringent sanitary rules, legal challenges, and political maneuvering at sub-national levels. It makes the post-deal phase more challenging because the battle shifts from the clear-cut table of tariff negotiations to a diffuse, multi-front conflict in courtrooms, parliamentary committees, and bureaucratic agencies. The goal of dynamic protectionism is not to reject a deal but to create so many administrative and legal hurdles that its practical benefits are nullified, requiring continuous vigilance and diplomacy to overcome.

Q2: How does the US use of “national security” tariffs, as seen with South Korea, serve as a warning for India?
A2: The US imposition of a 25% tariff on South Korean chips and cars by invoking Section 232 “national security” overrides the protections of their existing trade deal. This serves as a stark warning to India that even a signed agreement with the US offers no absolute guarantee. The US can unilaterally impose such tariffs if it perceives its interests are threatened, rendering negotiated terms conditional. For India, this means its newly won 18% tariff access exists at the discretion of the US administration and must be defended through constant, proactive diplomacy to prevent similar override actions in the future.

Q3: What are the key risks India faces during the ratification process of the EU FTA, based on past examples?
A3: Based on past deals, the EU ratification process presents two major risks:

1. The “Wallonia Veto”: Following the EU-Canada (CETA) precedent, a single regional parliament (like Wallonia in Belgium) can block or delay ratification over localized concerns, such as protecting farmers or labour standards. Given the EU-India deal’s focus on labour-intensive Indian exports, similar protectionist resistance is likely.

2. Judicial and Political Limbo: As seen with the EU-Mercosur deal, intense lobbying (e.g., from European farmers) can lead the European Parliament to refer the agreement to the European Court of Justice for review, freezing full ratification indefinitely in a “political loop disguised as a legal process.”

Q4: What specific post-deal challenge does the EU’s Carbon Border Adjustment Mechanism (CBAM) pose to Indian exporters?
A4: The CBAM is a carbon tax the EU will levy on imports based on their carbon footprint. For Indian exporters, this poses the risk of a “double tax” that could erase the tariff advantages gained through the FTA. If Indian industries cannot demonstrably lower their carbon emissions or navigate the complex CBAM reporting system, the additional cost imposed by the mechanism could make their goods uncompetitive in the EU market, effectively negating the FTA’s core benefit. Navigating CBAM compliance will be a critical, technical post-deal task.

Q5: Why are the experiences of Japan and Vietnam relevant cautionary tales for India?
A5: Japan and Vietnam illustrate the hidden costs and conditional nature of “preferential” access:

• Japan’s Experience: Its deal required a $550-billion investment commitment in US sectors, sparking domestic backlash over “capital flight” and loss of economic autonomy. This shows the political and economic price that can be extracted beyond tariff schedules.

• Vietnam’s Experience: Facing 40% US tariffs on suspected transshipped goods, Vietnam had to undertake a costly overhaul of its entire customs and origin-tracking system to prove compliance. This demonstrates that preferential access comes with heavy administrative and infrastructure burdens imposed by the importing country. Furthermore, the US’s subsequent tariff favor to India (18%) instantly eroded Vietnam’s edge, proving that such advantages are provisional and subject to change based on the larger strategic interests of the powerful partner.