Is the India-EU FTA equitable? Europe’s Digital Product Passport raises questions on that score

The new India-EU free trade agreement (FTA), termed the ‘mother of all deals’ is viewed by many as an important opportunity for Indian exporters with anticipated preferential access for 90 per cent of traded goods by value and large tariff reductions. Some of the industries benefiting from this agreement include textile, leather and engineering manufacturing, all of which are all labour-intensive sectors.

However, whether exporters can actually benefit from these tariff gains will depend on their ability to comply with the European Union’s new sustainability rule, Ecodesign for Sustainable Products Regulation (ESPR), which is set to be enforced from July 18, 2026.  ESPR will cover most physical goods sold in the EU (except a few products, such as food, medicine, etc), ensuring consumers are provided with safe, circular and environmentally sustainable products. However, for manufacturers from India and the Global South, who sell their goods into the European markets, this change carries operational implications. A series of rules is being created that will determine how companies outside the EU will be able to do business with entities in the bloc.

One of the key instruments in ESPR is the introduction of Digital Product Passport (DPP), a structured digital system through which each individual product can be identified throughout its lifecycle (from creation to disposal). The legislation requires manufacturers to provide data on durability, reparability and recyclability and energy use. Detailed rules on the criteria for each of these parameters are being developed by the EU. In practice, ESPR will effectively make ‘sustainability’ a mandatory production requirement for all products sold on the EU market.

Invisible infra shaping trade

For implementation of the initiative, information required in DPP will be encoded through a QR code-based system. Scanning the QR code will provide access to digital records, enabling traceability of products within the ESPR framework. The operational link between physical and digital products will be supported by established global identification standards. These technical standards are established by GS1, a global non-profit and provide technical framework for interoperability between all supply chain participants.

Impact on non-EU exporters

The ESPR will be extended to different products in a phased manner. EU’s first action plan will affect textiles, apparel, tyres, iron and steel, aluminium, furniture and mattresses, as well as cross cutting requirements for electronic goods, which include DPP obligations for repair and recycling. Timeframes for these sectors are approximately 2026 to 2029 for EU adoption of detailed provisions and around 2027 to 2030 for implementation after transition periods. As a result of this, exporters, especially in sectors like textile, steel and aluminum to European construction and automotive supply chains, will likely be among the first in the country to face DPP obligations. Businesses that already operate within such standardised identification systems will be able to connect their products to the DPP architecture through their existing infrastructure. However, for smaller producers, this will have greater implications.

Question on equitable market access

The EU is right to enforce improved environmental performance with the introduction of ESPR. However, as the standards are being adopted by companies for DPP, they will be major enablers in the market. The pressing question in such a scenario is who will take decisions regarding access rights, pricing and interoperability? Smaller suppliers from India and other countries in the Global South may find it difficult to participate. It is important to have a strong monitoring system in place for the enablers. The cost of providing sustainability services and having a workforce dedicated to managing this type of sustainability data is easy for large entities with significant digital infrastructure and already established business operations in the EU. But for smaller manufacturers and recyclers based in India, making investments in IT infrastructure and workforce to install and maintain these systems for data storage on all future export shipments will require greater operational and financial obligations. This means that there is a chance that a regulation requiring companies to demonstrate their sustainability will become just another non-tariff barrier, limiting the ability of smaller businesses from participating at a level comparable to larger companies.

This presents a serious conflict with the overall political narrative regarding the FTA, which models itself on a ‘win-win’ type of relationship and broader market access for Indian exporters, and if the FTA does not explicitly address how Indian firms will be provided assistance to comply with the ESPR and DPP, then ultimately the savings from lower tariffs will go primarily to the larger companies that have greater resources at their disposal and the smaller suppliers will simply be pushed out of compliance quietly. In order for the EU to make the system more transparent, it will need to take steps to regulate infrastructure in terms of governance and clarify how technical standards are governed. This is especially important, since more countries will eventually bring similar sustainability rules for products and ESPR may serve as a baseline for drafting national and regional policies in the coming years.