Economy & Business23 Oct 2026 · about 6 min

EU firms must look for trusted partner countries as manufacturing costs surge: Piyush Goyal

The brief

A trusted partner country is a place where companies expect stable relations, predictable rules and dependable supply chains. In this context, European manufacturers may shift some production to countries they can rely on instead of making every product in increasingly expensive European facilities. Piyush Goyal linked trust with certainty, continuity and predictability. He said a free trade agreement is not only about lower duties or market access. It also signals that supply chains will remain open and that the participating countries will maintain friendly relations. India wants to benefit from this shift. Goyal said about $200 billion will be invested in Indian data centres, which are built only in trusted nations. He also pointed to expanding electronics and semiconductor companies. The proposed EU-India FTA could strengthen that confidence by creating clearer, more stable commercial ties.

What does a “trusted partner country” mean in the context of global manufacturing and supply chains?

Piyush Goyal linked trust with certainty, continuity and predictability. He said a free trade agreement is not only about lower duties or market access. It also signals that supply chains will remain open and that the participating countries will maintain friendly relations.

India wants to benefit from this shift. Goyal said about $200 billion will be invested in Indian data centres, which are built only in trusted nations. He also pointed to expanding electronics and semiconductor companies. The proposed EU-India FTA could strengthen that confidence by creating clearer, more stable commercial ties.

Why are European manufacturing costs rising, and how have wars and economic weakness made companies more dependent on reliable foreign suppliers?

The article does not identify one single cause for Europe’s rising manufacturing costs. It says European goods are becoming “very expensive” to produce at home. It also describes global supply chains as strained by ongoing wars in West Asia and Ukraine, alongside a broader economic slowdown.

These pressures make dependable foreign suppliers more valuable. When conflict disrupts trade routes, materials or commercial relationships, companies need partners that can continue producing and shipping goods. Weak economic growth adds pressure to control costs and find more efficient production locations. The IMF projects only 1.3% growth for the EU in 2026.

Goyal therefore expects European manufacturing to seek trusted partner countries. India’s faster growth, forecast at 7% for FY27, strengthens its appeal. The proposed EU-India FTA could offer more certainty, while Indian exporters may receive support for certifications and decarbonization.

How large is the economic opportunity involved in closer EU-India trade, given that the EU has 27 countries and a combined GDP of nearly $20 trillion?

A 27-country EU market with nearly $20 trillion in combined GDP represents a very large potential customer and investment base. Closer trade with India could give businesses broader access to buyers, suppliers and production networks across Europe. However, the article does not provide a forecast for the extra trade or investment the FTA would create.

The existing relationship offers a concrete scale marker. Germany is India’s largest trading partner in the EU. Bilateral trade reached $31 billion in FY26, up 4.83% from $29.57 billion in FY25. India’s EU exports include chemicals, machinery, mineral products, textiles and base metals.

The proposed FTA would cover India and all 27 EU members. It is expected to be signed by the end of the calendar year and implemented within four to five months. Its value would include market access, greater certainty and more resilient supply-chain links.

What would the proposed EU-India free trade agreement change for businesses, beyond simply lowering import duties?

A free trade agreement would change the business relationship beyond tariff reductions. Goyal described it as a symbol of certainty, continuity and predictability. That matters because companies make production and investment decisions over several years, not only at the moment a duty is paid.

The key mechanism is confidence. Businesses would expect clearer market access and more dependable supply chains between India and the EU. The agreement could also reinforce trust between the two sides. India and the EU are preparing to sign it by the end of the calendar year, with implementation expected within four to five months.

The wider effects could include more investment and expansion. Goyal cited data centres, electronics and semiconductors as sectors already choosing trusted jurisdictions. India’s Export Promotion Mission would support exporters with certification costs, especially micro and small enterprises, through the DGFT.

What is the EU’s Carbon Border Adjustment Mechanism, and how could it raise the cost of carbon-intensive Indian exports?

The EU’s Carbon Border Adjustment Mechanism, or CBAM, is a tax on carbon-intensive imports. Its purpose in the article is to attach a financial cost to goods made with high carbon emissions when they enter the EU. That can affect exporters whose production remains more carbon-intensive.

The mechanism works through the carbon content associated with imported products. If an exported good falls within CBAM’s carbon-intensive scope, its seller may face an additional charge at the European border. The article does not list the specific products covered or provide a tax rate, so it does not quantify the possible burden for Indian exporters.

Goyal said India has secured a forward-looking most-favoured nation assurance. Any CBAM flexibilities or exemptions granted to another country would automatically extend to India. He also said India and Europe have reached an amicable settlement on CBAM, while India supports exporters in decarbonizing.

Why does India believe that rapidly reducing its carbon emissions could give its exporters an advantage over competitors under CBAM?

India’s argument is based on relative cost. If Indian producers reduce the carbon intensity of their goods faster, their exports may face a smaller CBAM burden than goods from competitors that remain more carbon-intensive. Goyal said India could therefore gain an advantage rather than simply absorb the new EU charge.

The mechanism matters because CBAM places a tax on carbon-intensive imports. Goyal said India’s competitors would bear the financial burden, while India is rapidly decarbonizing its economy. He did not provide emissions data, product-level comparisons or a precise estimate of the advantage.

India plans to support exporters through faster decarbonization. Goyal said the government will help industries exporting to Europe, while Europe will also participate in supporting Indian industry. India’s MFN assurance adds protection by extending future CBAM flexibilities or exemptions granted to other countries.

Why do differences in production costs, skills, infrastructure, and political trust cause manufacturing to spread across countries rather than remain in one place?

Manufacturing rarely stays in one place when countries offer different advantages. Lower production costs can attract factories, while specialized skills can support more complex goods. Reliable infrastructure helps companies make and move products. Political trust matters because businesses need confidence that rules, trade links and partnerships will remain stable.

The article highlights two parts of this process. Goyal says European manufacturing is becoming very expensive at home, so companies may seek trusted partner countries. He also says data centres, electronics and semiconductor firms invest only in trusted jurisdictions. These examples show how cost and reliability can jointly shape location decisions.

India is positioning itself for that role. Its faster growth, proposed FTA with the EU and export-certification support could improve its appeal. The article does not compare countries’ skills or infrastructure in detail, but it clearly links trust and production choices.

This brief was written by AI from the original reporting and checked by other models. Names, figures and quotes come from the source; read it for full context.