LONDON — British students will once again be able to take part in the EU’s Erasmus+ exchange scheme from January 2027 — following a six-year hiatus due to Brexit. U.K. ministers say they have secured a 30 percent discount on payments to re-enter the program that strikes “a fair balance between our contribution and the benefits” it offers. The move is one of the first tangible changes out of Keir Starmer’s EU “reset,” which is designed to smooth the harder edges off Boris Johnson’s Brexit settlement while staying outside the bloc’s orbit. In an announcement on Wednesday Brussels and London also confirmed they were formally beginning negotiations on U.K. re-entry into the EU’s internal market for electricity. Both sides hope the move, which was called for by industry in both sides of the Channel, will cut energy bills while also making it easier to invest in North Sea green energy projects — which have been plagued by Brexit complications. They also pledged to finish ongoing talks on linking the U.K. and EU carbon trading systems, as well as a new food and drink (SPS) deal, by the time they meet for an EU-U.K. summit in 2026. The planned meeting, which will take place in Brussels, does not yet have a date but is expected around the same time as this year’s May gathering in London. The announcements give more forward momentum to the “reset,” which faltered earlier this month after failing to reach an agreement on British membership of an EU defense industry financing program, SAFE. The two sides could not agree on the appropriate level of U.K. financial contribution. The pledge to finalize carbon trading (ETS) linkage next year is significant because it will help British businesses avoid a new EU carbon border tax — CBAM — which starts from Jan. 1 2026. While the tax, which charges firms for the greenhouse gas emissions in their products, begins on Jan. 1, payments are not due until 2027, by which time the U.K. is expected to be exempt. But it is not yet clear whether British firms will have to make back payments on previous imports once the deal is secured, and there is no sign of any deal to bridge the gap. WIDENING HORIZONS EU Relations Minister Nick Thomas-Symonds, who negotiated the agreement, said the move was “a huge win for our young people” and would break down barriers and widen horizons so that “everyone, from every background, has the opportunity to study and train abroad.” European Parliament President Roberta Metsola welcomes British Minister for the Constitution and European Union Relations Nick Thomas-Symonds. | Ronald Wittek/EPA “This is about more than just travel: it’s about future skills, academic success, and giving the next generation access to the best possible opportunities,” he said. “Today’s agreements prove that our new partnership with the EU is working. We have focused on the public’s priorities and secured a deal that puts opportunity first.” The expected cost of the U.K.’s membership of the Erasmus+ program in 2027 will be £570 million. Skills Minister Jacqui Smith said Erasmus+ membership is “about breaking down barriers to opportunity, giving learners the chance to build skills, confidence and international experience that employers value.” Liberal Democrat Universities Spokesperson Ian Sollom also welcomed U.K. re-entry into the exchange scheme but said it should be a “first step” in a closer relationship with the EU. “This is a moment of real opportunity and a clear step towards repairing the disastrous Conservative Brexit deal,” he said. “However while this is a welcome breakthrough, it must be viewed as a crucial first step on a clear roadmap to a closer relationship with Europe. Starting with negotiating a bespoke UK-EU customs union, and committing to a youth mobility scheme for benefit of the next generation.”

Anchal Vohra is a Brussels-based international affairs commentator. On a smog-filled day in New Delhi, I watched as a few German cars struggled to navigate a massive traffic jam. A British SUV was also in the mix, trailing not so far behind. Last year, these foreign cars accounted for only 0.1 percent of India’s imports, with Germans in the lead and the British coming in a near second. However, British businesses have gained an edge ever since the U.K. and India inked a free trade agreement earlier this year, with India finally lowering its protectionist guard. Once this deal fully comes into effect, overall bilateral business is expected to grow by more than 50 percent in about a decade-and-a-half, as New Delhi slashes its car tariffs from 100 percent to 10 percent, and its tariffs on scotch from 150 percent to 40 percent over a period of 10 years — all despite the cost to its domestic industries. It also gains particular advantage for its textile sector, which was hard hit by U.S. President Donald Trump’s 50-percent tariff, removing tariffs on Indian textiles exported to the U.K. The EU, meanwhile, remains the single largest market in the world, with a much higher chance of growing its exports to a country packed with over 1.46 billion consumers. Yet, negotiations between New Delhi and Brussels are forever hitting roadblocks, even as negotiators shuttle between the two capitals to get a deal across the finish line — a deadline that’s now been postponed to Jan. 26. And as these talks continue, the bloc could stand to learn from the flexibility of its former member. According to an Indian official in New Delhi, granted anonymity in order to speak freely, the biggest barriers to an agreement are currently the EU’s insistence on greater market access in the politically sensitive agriculture sector, and its insistence on a carbon tax under the Carbon Border Adjustment Mechanism (CBAM). On top of all this, the bloc’s protectionist tendencies — displayed by its higher tariffs on steel and its recent decision to curb rice imports from India — are also unexpected hurdles. In contrast to this rigidity, India’s concessions in its deal with the U.K. emerged from the flexibility it was granted in the agriculture sector, which was largely insulated from British products, the official said. “For all its faults, [the U.K.] understands India and Indians better.” Nearly half of Indians depend on agriculture for their livelihood, and farmers make up a strong voting bloc that holds strong political clout. Back in 2021, farmer protests even forced Prime Minister Narendra Modi to withdraw agricultural reforms and apologize. In fact, I have been told by former Indian officials and experts that the U.S. tariffs on India weren’t punishment for the country’s purchase of Russian oil, as Trump has claimed, but rather for its refusal to let U.S. food products flood the country. Nearly half of Indians depend on agriculture for their livelihood, and farmers make up a strong voting bloc that holds strong political clout. | Jagadeesh Nv/EPA “The interests of our farmers are top priority. India will never compromise on the interests of its farmers, dairy farmers and fishermen,” Modi had said at the time. But these same differences now threaten the EU-India relationship before it even properly takes off. “The Europeans could learn from the British,” the Indian official noted. “They excluded dairy, chicken and apples from the deal,” he explained, listing products particularly important to India. “In exchange, we let them bring in salmon, cod and lamb.” He also alluded that India could consider dropping tariffs on cars and wine if the bloc kept out of agriculture: “In liquor, luxury cars and wine, there is always room, since that doesn’t affect our most vulnerable people.” Instead of any such changes,, however, India is now growing peeved by what it sees as last-minute pressure tactics by Brussels. Just this month, the EU decided to “limit rice imports from India” and other Asian countries to the benefit of domestic rice growers and millers. And the bloc’s unexpected decision to spike tariffs on steel imports outside its quota to up to 50 percent has rattled Indian negotiators. New Delhi was already opposed to the EU’s incoming carbon tax, believing it would make its steel exports uncompetitive. The Secretary of India’s Ministry of Steel Sandeep Poundrik described the European carbon tax as a bigger threat to Indian exports than Trump’s tariffs. On top of all this, the bloc’s protectionist tendencies — displayed by its higher tariffs on steel and its recent decision to curb rice imports from India — are also unexpected hurdles. | Piyal Adhikary/EPA Moreover, some experts like former trade negotiator for India Sangeeta Godbole argue the EU stands to gain more from an FTA whereas India stands to lose if the carbon tax provision isn’t reconsidered. “Nearly 80 percent of Indian exports to the EU even now face miniscule tariffs below 1 percent,” she noted recently, demanding India shield exports “from excessive environmental rules” the EU is trying to impose. To that end, the country has decried the bloc’s tax on carbon intensive imports via CBAM as a violation of the Common But Differentiated Responsibilities (CBDR) principle, which doesn’t hold developing countries equally responsible for climate change due to differences in historical contributions and the state of their economic development. And here, too, India argues, the understanding with the British could be emulated. Although it failed to gain an exemption on the U.K.’s version of the carbon tax, India has reserved the right to retaliate if the FTA’s benefits are negated by this tax. For its part, the EU claims the carbon tax is intended to encourage the use of clean energy in heavy polluting industries. And as Commissioner for Trade Maroš Šefčovič said back in September: “We also need an understanding from the Indian side that we also have our constituency, we also have our audience” to consider — especially after the farmer protests over the recent deal with Mercosur nations. Meanwhile, the EU is also concerned about whether a deal with India might end up benefiting China. The bloc is desperately trying to reduce its dependence on Beijing in strategically important sectors and hoping India could replace it, but India itself is heavily reliant on China as well — for example, nearly half of the components in Indian semiconductors are imported from there. It also gains particular advantage for its textile sector, which was hard hit by U.S. President Donald Trump’s 50-percent tariff, removing tariffs on Indian textiles exported to the U.K. | Divyakant Solanki/EPA However, speaking with a highly placed EU insider who was granted anonymity, I learned the bloc is now ready to make concessions, offering to jointly manufacture cars to encourage India to lower its tariffs, to leave out access to certain agricultural products, and to possibly even relent on garment duties. And last week, negotiators went through sector by sector once more, trying to get a better deal for their domestic industries, trying to keep the balance sheet even. The truth is, India — home to a large number of people living below the poverty line despite its rapid economic growth — needs an FTA with the single largest market to attract foreign investment. But the EU needs India too.

BRUSSELS — The EU aims to seal a free-trade agreement with India by late January instead of the end of the year as initially envisaged, Trade Commissioner Maroš Šefčovič told POLITICO. “The plan is that, most probably in the second week of January, that [Indian Commerce Minister] Piyush Goyal would come here” for another round of negotiations, Šefčovič said in an interview on Monday. “There is a common determination that we should do our utmost to get to the [free-trade agreement] and use every possible day until the Indian national day,” he added. India celebrates its annual Republic Day on Jan. 26, and both Commission President Ursula von der Leyen and Council President António Costa have been invited as guests of honor. Von der Leyen and Indian Prime Minister Narendra Modi pledged in February to clinch the free-trade agreement (FTA) by the end of the year — something even they recognized would be a steep target. But a number of issues keep gumming up the works, Šefčovič said, including that India is linking its objections to the EU’s planned carbon border tax and its steel safeguard measures with the EU’s own demand to reduce its tariffs on cars. Šefčovič traveled again to New Delhi last week in an effort to clear major hurdles to conclude the EU’s negotiations with the world’s most populous country. “The ideal scenario would be — like we announced with Indonesia — that we completed the political negotiations on the FTA,” Šefčovič said. “That would be my ideal scenario, but we are not there yet.” The EU and Indonesia concluded their agreement in September. “It’s extremely, extremely challenging,” he said, adding: “The political ambition of our president and the prime minister to get this done this year was absolutely crucial for us to make progress.”

EU climate chief Wopke Hoekstra thinks reports of the death of Europe’s green agenda have been greatly exaggerated. “There’s always a lot of talk about backlash,” Hoekstra told POLITICO’s Sustainable Future Summit Tuesday. “That is, I think, one of the big misconceptions.” The EU’s new climate goal for 2040, agreed by ministers last month, “is actually an acceleration, rather than a downgrade, of what we are having today,” he said. The EU’s approach to its environmental and climate rules has been placed under extreme pressure from a combined pushback from far right parties, heavy industry and some leading members of Hoekstra’s own center right European People’s Party. That has led to the scrapping or weakening of some existing standards and made setting the 2040 target a brutal political fight. But Hoekstra said the realignment of some green policies was not about resiling from Europe’s environmental ambitions. “We’ll need to find a recipe — and I’ve been saying that over and over again — where we really make sure that climate, competitiveness and independence are being brought together. That in the end, is the winning formula,” he said. Hoekstra also pushed back on criticism by countries whose exports will be hit by the EU’s carbon border tax. This was a major feature of the recent COP30 climate negotiations, with large emerging economies like South Africa, India and China expressing concern about a measure they believe unfairly disadvantages their industries. Hoekstra dismissed that griping as a way to gain advantage in the course of the COP30 talks. “It is a tool that is being used, as quite often is the case in diplomacy,” he said. What he had heard “behind-closed-doors,” he said, was a completely different story. “Those who might have expressed their concerns publicly are not only acknowledging inside of a room that actually the effects are not that large, they’re actually even saying that it helps them to have a different type of conversation,” he said.

BRUSSELS — Europe’s most energy-intensive industries are worried the European Union’s carbon border tax will go too soft on heavily polluting goods imported from China, Brazil and the United States — undermining the whole purpose of the measure. From the start of next year, Brussels will charge a fee on goods like cement, iron, steel, aluminum and fertilizer imported from countries with weaker emissions standards than the EU’s. The point of the law, known as the Carbon Border Adjustment Mechanism, is to make sure dirtier imports don’t have an unfair advantage over EU-made products, which are charged around €80 for every ton of carbon dioxide they emit. One of the main conundrums for the EU is how to calculate the carbon footprint of imports when the producers don’t give precise emissions data. According to draft EU laws obtained by POLITICO, the European Commission is considering using default formulas that EU companies say are far too generous. Two documents in particular have raised eyebrows. One contains draft benchmarks to assess the carbon footprint of imported CBAM goods, while the second — an Excel sheet seen by POLITICO — shows default CO2 emissions values for the production of these products in foreign countries. These documents are still subject to change. National experts from EU countries discussed the controversial texts last Wednesday during a closed-door meeting, and asked the Commission to rework them before they can be adopted. That’s expected to happen over the next few weeks, according to two people with knowledge of the talks. Multiple industry representatives told POLITICO that the proposed estimated carbon footprint values are too low for a number of countries, which risks undermining the efficiency of the CBAM. For example, some steel products from China, Brazil and the United States have much lower assumed emissions than equivalent products made in the EU, according to the tables. Ola Hansén, public affairs director of the green steel manufacturer Stegra, said he had been “surprised” by the draft default values that have been circulating, because they suggest that CO2 emissions for some steel production routes in the EU were higher than in China, which seemed “odd.” “Our recommendation would be [to] adjust the values, but go ahead with the [CBAM] framework and then improve it over time,” he said. Antoine Hoxha, director general of industry association Fertilizers Europe, also said he found the proposed default values “quite low” for certain elements, like urea, used to manufacture fertilizers. “The result is not exactly what we would have thought,” he said, adding there is “room for improvement.” But he also noted that the Commission is trying “to do a good job but they are extremely overwhelmed … It’s a lot of work in a very short period of time.” Multiple industry representatives told POLITICO that the proposed estimated carbon footprint values are too low for a number of countries, which risks undermining the efficiency of the CBAM. | Photo by VCG via Getty Images While a weak CBAM would be bad for many emissions-intensive, trade-exposed industries in the EU, it’s likely to please sectors relying on cheap imports of CBAM goods — such as European farmers that import fertilizer — as well as EU trade partners that have complained the measure is a barrier to global free trade. The European Commission declined to comment. DEFAULT VERSUS REAL EMISSIONS Getting this data right is crucial to ensure the mechanism works and encourages companies to lower their emissions to pay a lower CBAM fee. “Inconsistencies in the figures of default values and benchmarks would dilute the incentive for cleaner production processes and allow high-emission imports to enter the EU market with insufficient carbon costs,” said one CBAM industry representative, granted anonymity to discuss the sensitive talks. “This could result in a CBAM that is not only significantly less effective but most likely counterproductive.” The default values for CO2 emissions are like a stick. When the legislation was designed, they were expected to be set quite high to “punish importers that are not providing real emission data,” and encourage companies to report their actual emissions to pay a lower CBAM fee, said Leon de Graaf, acting president of the Business for CBAM Coalition. But if these default values are too low then importers no longer have any incentive to provide their real emissions data. They risk making the CBAM less effective because it allows imported goods to appear cleaner than they really are, he said. The Commission is under pressure to adopt these EU acts quickly as they’re needed to set the last technical details for the implementation of the CBAM, which applies from Jan. 1. However, de Graaf warned against rushing that process. On the one hand, importers “needed clarity yesterday” because they are currently agreeing import deals for next year and at the moment “cannot calculate what their CBAM cost will be,” he said. But European importers are worried too, because once adopted the default emission values will apply for the next two years, the draft documents suggest. The CBAM regulation states that the default values “shall be revised periodically.” “It means that if they are wrong now … they will hurt certain EU producers for at least two years,” de Graaf said.

BRUSSELS — What began as a push to free Europe’s businesses from crippling rules has morphed into yet another tactic to appease Donald Trump.  Since taking office, the U.S. president has repeatedly threatened to hike tariffs on EU goods unless the bloc agrees to roll back some of its laws that also apply to American companies. That presents Brussels with a dilemma. If it bows to the U.S. pressure, it risks ending up with strict regulations that only apply to European businesses — potentially destroying their competitiveness. Conversely, if it scraps the rules altogether, it abandons key aims like digital sovereignty and environmental protection. Enter the simplification agenda, Brussels’ new plan to get the best of both worlds. Cutting red tape is one of the few areas of policymaking on which EU countries largely agree; in fact, they want more of it. Later this week, European leaders meeting in Brussels will instruct the European Commission to speed up its work “as a matter of utmost priority, on all files with a simplification and competitiveness dimension,” according to draft conclusions obtained by POLITICO.  Driving home that message, 19 EU leaders — including Friedrich Merz of Germany, Emmanuel Macron of France, Giorgia Meloni of Italy and Donald Tusk of Poland — have issued a presummit appeal for “a systematic review of all EU regulations to identify rules that are superfluous, excessive, or unbalanced.” In a letter, obtained by POLITICO, they also called on Brussels to dismantle outdated rules, demanded a “constant stream” of simplification measures and urged self-restraint when it comes to new legislation. Still, the simplification drive is being spun as a way to address some of Washington’s concerns with what it sees as regulatory overreach by Brussels.  “Since Trump is willing to swallow a number of jokes — he doesn’t look too closely at it anyway — if we can say to him, ‘Donald, thank you very much, it’s thanks to you that we’ve cleaned things up a bit,’ why not?” asked Pascal Lamy, a former EU trade commissioner and head of the World Trade Organization. SWEEPING ROLLBACK In a bid to bring struggling European industries back from the brink, Commission President Ursula von der Leyen has made deregulation — or “simplification” — the North Star of her second term. In less than 12 months, her Commission has come up with plans to cut much of the red tape crafted during her first mandate, touching on almost all areas of EU law, from defense and agriculture to digital rules and the environment.  At first, the logic was straightforward: Fewer rules would be good for European companies struggling to remain competitive against their U.S. and Chinese rivals.  Now, the simplification push comes as a diplomatic gesture — to smooth relations with Washington after Trump made it clear that U.S. companies shouldn’t be bound by European rules he has denounced as discriminatory.  Commission President Ursula von der Leyen has made deregulation — or “simplification” — the North Star of her second term. | Thierry Monasse/Getty Images Under the trade deal von der Leyen struck with Trump at his Scottish golf resort in July, the Commission pledged that its green rules would “not pose undue restrictions on transatlantic trade.” The list agreed by the two sides included Europe’s rules on supply chain oversight, sustainability reporting, a carbon border tax and rules aimed at preventing the import of goods produced on deforested land. All have already been the target of simplification measures launched by the Commission.   Explaining the strategy, Danish Foreign Minister Lars Lokke Rasmussen likened it in an interview with POLITICO to a Kinder Egg — an Italian-made children’s treat with chocolate on the outside and a toy on the inside. Cutting red tape is in Europe’s “own self best interest. But at the same time, it also serves others’ interest as well,” explained Rasmussen, whose country holds the presidency of the Council, the bloc’s intergovernmental branch. Others say it’s not so clear cut.  “We can’t say on the one hand that we’re willing to pay for American strategic protection in terms of tariffs, and on the other hand that we’re not going to change our regulations for that, neither on data, nor on DMA, DSA, nor everything else that Americans criticize about what they see as our hyper-regulation,” Lamy said, referring to the twin pillars of EU tech regulation, the Digital Markets Act and the Digital Services Act.  The Commission stressed that while Washington and Brussels have agreed to look at ways to cut red tape, “this will not lead to a lowering of EU standards or legislation,” said Olof Gill, deputy chief spokesperson for the Commission.  “The EU has been firm on defending our fundamental principle — our legislative framework and our regulatory autonomy are not up for negotiation,” added Gill, whose remit covers trade.  LEADERS JUMP IN The letter from the 19 EU leaders intensifies the pressure on the EU executive from the bloc’s leading economies to keep deregulating — above all from Macron and Merz. Backed by their largest businesses, the two leaders have echoed U.S calls for the EU to ditch its supply chain oversight directive. But the European debate has the added benefit of having — apparently — convinced Trump’s new ambassador to Brussels, Andrew Puzder, that the EU’s drive to slash red tape is in its own essential interest.  “Chancellor Merz and President Macron have both said it should be repealed … not because that’s in America’s best interest. They’re saying it’s the best interest of Germany and France,” Puzder told a recent event in Brussels, referring to the supply chain rules. For a veteran like Lamy, the simplification imperative arose from internal EU pressure following strategy recommendations by former Italian Prime Ministers Mario Draghi and Enrico Letta. The former leaders warned that Europe must become more competitive or face the “slow agony” of decline. “If we look at the history of these simplification packages, they were entirely generated within the EU by pressure from employers,” Lamy said.  But even with the political wind in her sails, delivering on simplification won’t be a pleasure cruise for von der Leyen.  Negotiations on the first simplification package — aimed at cutting green reporting obligations for companies — nearly destroyed the coalition of political groups that elected her to a second term, while efforts to simplify Europe’s farming policy and budget have sparked another backlash from the agriculture sector.  National calls for massive cuts to EU rules have also drawn criticism from EU decision-makers who are reluctant to see trade talks or corporate interests derail the bloc’s green agenda.  “No one should be mistaken, we will not lower these standards because there is no competitiveness in a race to the bottom,” said Teresa Ribera, the Commission’s No. 2 and top competition regulator. Nor are European lawmakers giving up on the “Brussels effect” — whereby rules set by the EU set a standard for how business is done internationally. That EU rules should apply to foreign companies is “a fundamental element of … Europe’s normative power,” said Pascal Canfin, a centrist member of the European Parliament, who has worked on several of the simplification packages.  Hans von der Burchard and Nette Nöstlinger contributed to this report from Berlin. This story has been updated. 

BRUSSELS — The United States will cap tariffs on European cars, pharmaceuticals and semiconductors at 15 percent, Washington and Brussels agreed in a joint statement on Thursday that locks in a deal struck last month and averts a full-blown transatlantic trade war. Hailing the deal, EU Trade Commissioner Maroš Šefcovič said it was the result of “intense, essential work.” But, he told a news conference: “This is not the end; it’s the beginning. This framework is a first step.” The four-page text, obtained by POLITICO earlier, builds out the handshake agreement that U.S. President Donald Trump agreed with European Commission President Ursula von der Leyen when the two met at his Turnberry golf resort in Scotland on July 27. The two leaders’ account of the deal differed on the day, notably on pharma, causing concern that drug producers in Europe could end up being priced out of the U.S. market entirely. In another key clause, the joint statement confirms that the U.S. will lower tariffs on autos and auto parts in most cases to 15 percent from 27.5 percent — but only after the EU formally introduces legislation to “eliminate tariffs on all U.S. industrial goods.” The EU now has a 10 percent levy on car imports. The European Commission will initiate that legislation this month, Šefčovič said, ensuring that Washington will reduce tariffs on European autos effective Aug. 1. The reduction in U.S. tariffs on European autos would be retroactive, he added. MARKET ACCESS The bloc will expand market access for U.S. agricultural goods that are not sensitive for its own market. The U.S., meanwhile, commits to exempting aircraft and parts as well as cork and generic drugs from higher tariffs, applying its most-favored nation tariff to those imports.  Washington and Brussels will join forces to tackle overproduction on steel and aluminum, and will explore the possibility of setting tariff-rate quotas. This was a key request from the European side, to avoid its steel and aluminum exports facing a 50 percent tariff. The EU and the U.S. will also team up against countries — such as China — that are imposing export restrictions on critical minerals. The European Commission will also explore providing “additional flexibilities” in the implementation of the EU’s carbon border tax to American companies, as well as ensure that the EU’s sustainability reporting obligations (CSRD) or the supply chain oversight rules (CSDDD) “do not pose undue restrictions on transatlantic trade.”  Confirming verbal assurances made in Turnberry, the EU intends to procure $750 billion of U.S. energy, including liquified natural gas, oil and nuclear energy products, through 2028. It will also buy “at least” $40 billion worth of U.S. AI chips.  On top of that, “European companies are expected to invest an additional $600 billion across strategic sectors in the United States through 2028,” the document adds. Brussels and Washington have been haggling over the document since the handshake deal between von der Leyen and Trump averted the U.S. president’s threat to hit the EU with an across-the-board 30 percent tariff. Summing up, Šefčovič called the agreement a “serious, strategic deal.” The alternative, he said, would have been “a trade war with sky-high tariffs and political escalation.” This story has been updated.

BRUSSELS ― The European Commission has dropped plans to levy a tax on digital companies, a move that hands victory to Donald Trump and U.S. tech giants like Apple and Meta. With the EU and the U.S. embroiled in the final stretch of negotiations over a trade deal, Brussels removed the digital tax option from its ― supposedly unrelated ― list of proposed taxes for bringing in revenue during its next seven-year spending program, according to a document circulated on Friday seen by POLITICO. With only days to go until the budget plan is unveiled, top EU officials are locked in high-stakes talks to decide which levies will feature in the Commission’s proposal, to be published on Wednesday, for the budget starting in 2028. The document, which still could be revised by officials before publication, set out a list of possible taxes but did not quantify how much money each one would likely generate. Deciding against a digital levy would be a major turn-around for the EU, which as recently as May floated taxing tech giants as a way of paying back the bloc’s debt. The idea was mentioned in a document on the next budget discussed by the EU’s 27 commissioners. The U-turn could be a strategic move by the EU, which is desperate for advantageous terms on trade with the U.S. President Donald Trump threatened tariffs against Canada as payback for their digital levies. WHAT THE NEW EU TAXES COULD BE The issue of the EU raising its own taxes has always been a sensitive one, with national governments wary of giving the bloc too much power to extract money from their voters and too much autonomy over how it spends it. The vast majority of EU funds comes from governments’ contributions. But with politicians increasingly demanding Brussels tighten the purse strings, the Commission is on the lookout for new sources of cash. According to Friday’s document, instead of a digital levy it wants to propose three new taxes targeting electric waste, tobacco products and large companies in the EU with a turnover of over €50 million. The aim is to generate from €25 to €30 billion per year that will be used to repay EU joint debt that was used to finance its post-Covid recovery. The Commission will propose an EU-wide levy on tobacco products such as cigarettes and cigars. These goods are currently being taxed by individual countries, who keep the revenues for themselves. The EU’s idea comes amid a push to introduce new taxes on e-cigarettes and vapes that are opposed by Italy, Greece and Romania. | Tolga Akmen/EPA The EU’s idea comes amid a push to introduce new taxes on e-cigarettes and vapes that are opposed by Italy, Greece and Romania. While not opposing the proposed new taxes, Sweden said that handing part of its national revenues to the EU is “completely unacceptable.” The Commission also suggests taxing discarded electrical equipment. Wednesday’s proposal is expected to also confirm proposals from 2021 to levy a carbon border tax ― a popular idea among countries ― and a take share of the revenues generated by the emissions trading scheme (ETS). This idea is politically sensitive among Eastern European countries who are most affected by ETS. In a concession to critics, the Commission suggested that only a small share of ETS revenues will flow to the EU budget, while the rest would stay with national governments. It added that a controversial plan to extend the scheme to buildings and road transport ― known as ETS2, which will come into force in 2027 ― won’t be funneled into the EU budget. National governments will have to unanimously approve the new taxes over two years of fraught negotiations that will start after the Commission makes its proposal.  

BRUSSELS — The European Commission has for the first time signaled flexibility on a major digital rulebook as it seeks relief from Donald Trump’s impending trade tariffs. Amid growing pressure to find an agreement with Washington ahead of a July 9 deadline, the EU executive said Monday that nothing is off the table in ongoing talks — a shift from its previous position that its digital regulations are not up for negotiation with Trump. That raised immediate criticism from lawmakers who said they fear Brussels will go too far in its bid to appease U.S. concerns as the deadline nears. While the EU and the U.S. have increased the pace of talks since the end of May, Brussels is under pressure to find an agreement with Washington as Trump threatens to impose a 50 percent tariff on all its goods as of July 9. “We will from our side definitely not speculate on a potential outcome, on what may or not be affected,” said Commission spokesperson Thomas Regnier on Monday when asked whether EU legislation, such as the bloc’s green and digital rules, were still red lines in talks with Trump. “We are deeply engaged. We want to find a fair and balanced deal, [a] mutually beneficial deal … I will not, here from this podium, prejudge what can be or is not in this deal,” Regnier told reporters at a briefing in Brussels. The comments came after the Wall Street Journal reported that Brussels and Washington are nearing a draft agreement on non-tariff barriers, under which the EU would grant American companies exceptions to the EU’s flagship Digital Markets Act (DMA), as well as to environmental laws such as the bloc’s carbon border tax. The details of the draft agreement, circulated by the U.S. Trade Representative’s office, would effectively gut the EU’s tech competition rulebook, which was expressly designed to regulate how U.S. Big Tech companies should operate on the European market. “Putting the DMA on hold to placate the United States would be an unacceptable capitulation,” said Stéphanie Yon-Courtin, a French MEP from the Renew party. She warned it would set “a dangerous precedent” if the EU allows countries to pressure it into rewriting laws after they’ve been agreed. ‘NOT A TRADE INSTRUMENT’ The Commission had previously been categorical in its stance that tech laws are not up for negotiation with the United States as part of trade talks. “The DMA is not a trade instrument,” said German center-right lawmaker Andreas Schwab, adding that the Commission would be making “a big mistake” if it gave the U.S. the impression that this were the case. Depending on the scope of the deal, the Commission may not need the Parliament’s sign-off for the final agreement, but would face huge political backlash if it changed the bloc’s laws. The European Commission has for the first time signaled flexibility on a major digital rulebook as it seeks relief from Donald Trump’s impending trade tariffs. | White House/EPA During a press conference Monday evening, Commission President Ursula von der Leyen was asked if the EU would be prepared to sign a deal that included changes to existing regulations. “In general, negotiations are only closed at the moment everything is negotiated, but I am very clear on some topics that touch [on the] sovereignty of the decision-making process in the European Union — this is for us absolutely untouchable. We are very clear about that,” she said. “Of course, we discuss tariff lines, we discuss nontariff barriers … We discuss all these topics. But when it is the sovereign decision making process of the EU and its member states that is affected — that is too far.” The bloc’s tech rulebooks have been under immense pressure since Trump returned to the White House, with the U.S. president likening the EU’s tech fines to “taxation” and “tariffs.” As well as pushing back against the digital antitrust law, tech giants have also pushed the Commission to tone down other laws on social media, artificial intelligence and privacy. Anna Cavazzini, an MEP with the German Greens, said “the U.S. attack on our legislation, aided by illegal tariffs, constitutes economic coercion,” to which “we have the tools to respond and should do so.” Now “is not the time to give in to bullies,” Cavazzini said. The Commission’s Regnier stressed that the EU continues to apply its rulebook regardless of the geopolitical context. “Let me just refer also to the fact that DMA decisions were adopted recently,” he said, referring to the Commission’s fines on U.S. tech giants Apple and Meta. “Whatever is part of the negotiations will stay in the negotiations until the final deal is found.” But Yon-Courtin criticized the Commission’s stance on enforcing the laws in recent months. Both the Apple and Meta decisions were delayed and the Commission has yet to conclude other major investigations, including potential fines against X for breaching online content rules. “We’ve already seen Commissioner [Henna] Virkkunen appear weak, and President [Ursula] von der Leyen reluctant to take the bold step of issuing the first DMA fines in the midst of a trade dispute,” Yon-Courtin said. Commission President Ursula von der Leyen was asked if the EU would be prepared to sign a deal that included changes to existing regulations. | Spencer Colby/EPA She called on the European Commission “to publicly and unequivocally deny that there is any horse-trading on the enforcement of our European rules.” Speaking of Monday’s trade talks in Berlin, Trade Commissioner Maroš Šefčovič said: “We are moving in the right direction. But the race isn’t won until the finish line is crossed.” “We are doing our utmost to get the best possible deal for the EU,” the Slovak commissioner said. Yurii Stasiuk contributed reporting.

LONDON — The fifteenth time’s a charm, it would seem. After a series of false starts, missed Diwali deadlines and changes of government, the U.K. and India have finally put their differences aside to strike a free trade agreement. But the final pact — with some details set out Tuesday — is far from what negotiators imagined when they launched the talks back in 2022, with compromises made on both sides. From tariffs to visas and services, we talk through the key concessions in the long-awaited agreement, and what they could mean for U.K. businesses, as well as the big unanswered questions. WHAT WE KNOW Tariffs will be cut across the board The agreement will cut Indian tariffs on 90 percent of product lines, with 85 percent of those becoming fully tariff-free within a decade, according to basic details published by the U.K.’s Department for Business and Trade (DBT) on Tuesday. British alcoholic drink exporters look set to be big winners. Whisky and gin tariffs, currently set at 150 percent, will be halved to 75 percent before falling to 40 percent after 10 years. Mark Kent, chief executive of the Scotch Whisky Association, said the change would be “transformational” and create 1,200 jobs across the U.K..  There also appears to be positive news for another key sector: car manufacturing. DBT says automotive tariffs will be cut from over 100 percent to 10 percent — but crucially, subject to a quota. Trade Secretary Jonathan Reynolds told reporters on Tuesday that the U.K. would get access to a quota to sell 22,000 higher-value electric vehicles to India at the lower 10 percent tariff rate. India would meanwhile get a quota to sell low- and mid-range electric vehicles to the U.K. The government says this quota will be phased in over time in discussion with industry in order to align with their production plans. Industry group the SMMT welcomed the deal but said the details “will likely feature compromises, and might not offer unfettered market access to all UK automotive goods.” Other Indian tariffs cut under the FTA include those on imported British cosmetics, aerospace, lamb, medical devices, salmon, electrical machinery, soft drinks, chocolate, and biscuits. The U.K. has in turn cut tariffs on clothes, footwear, and some food products — including, the government is keen to note, frozen prawns. On the flipside, tariffs remain in areas like dairy and milled rice where both sides wanted to protect domestic industries from competition. Together with the other changes in the agreement, the government expects a steep 59.4 percent increase in U.K. exports to India — worth £15.7 billion. This is matched by a smaller 25 percent increase in Indian exports to Britain, worth £9.8 billion.  This all adds up to a 38.8 percent increase in trade worth £25.5 billion — or 0.1 percent of GDP by 2040. The number is tiny when compared to the much larger expected 4 percent hit from leaving the EU single market, but looks a bit more impressive when compared to the 0.08 percent expected benefit from, for example, the FTA the last government signed with Australia.  India scores concessions on social security payments Visas have become the most headline-grabbing issue in the negotiations. After the Indian side talked up an “unprecedented” win on its workers being exempt from employee tax contributions in Britain, Starmer’s political opponents hit back at the deal. Conservative Leader Kemi Badenoch said she refused to sign a deal on similar terms back when she was trade secretary, arguing: “When Labour negotiates Britain loses.” In the end, it’s a mixed bag when it comes to mobility concessions. Jonathan Reynolds said on Tuesday that an existing visa route for some temporary workers that’s not currently available to India — and capped at 1,800 people — will now be open to Indian employees. That list of professions includes musicians, yoga teachers and chefs. Indian applicants will still need to meet the usual visa requirements on salary and skills and the cap won’t be lifted. The U.K.’s visa concession is a long way from New Delhi’s first requests, with India originally proposing larger quotas for professionals, particularly in sectors like IT and healthcare. But there are already political fireworks over one big Indian demand in the talks — an easing of social security payments for Indian workers in the U.K. The U.K. and India have agreed to a Double Contributions Convention, which means that neither Indian nor British workers will be required to pay national insurance contributions in both their home country and the one they are working in — they will only pay it in one for the first three years of a placement.  The deal also covers employers, who do not have to pay social security contributions in the U.K. for three years.  This concession means “Starmer has hiked National Insurance on Brits while giving an exemption to Indian migrants,” Shadow Justice Secretary Robert Jenrick wrote as Tory MPs criticised the move in parliament Tuesday afternoon. There will be greater access to Indian government contracts “For the very first time British businesses will have guaranteed access to India’s vast procurement market covering good services and construction,” Trade Policy Minister Douglas Alexander told parliament on Tuesday. More than a decade ago, Indian PM Narendra Modi launched the country’s Make in India program, which prevents foreign competitors from accessing the government’s procurement market. India has since been pouring government stimulus into large infrastructure projects throughout the country. But in a major win for the U.K., Delhi has agreed a carve out allowing British firms to access some areas of the country’s procurement market and compete for tenders. British firms will now “be able to bid for approximately 40,000 tenders worth at least £38 billion a year,” Alexander said.  WHAT WE DON’T KNOW How will the UK and India resolve their differences over carbon taxes? India has been vocal about its distaste for the U.K.’s proposed carbon border tax. Wrangling over CBAM has at times seemed likely to sink talks.  In the end, the solution was to dodge the question entirely. The FTA won’t address the question of CBAM directly. Draft U.K. legislation for its CBAM anticipates that the levy will apply to imported goods from 1 January 2027, covering carbon-intensive industries like steelmaking, cement, aluminum and fertilizer. Some Indian sectors are expected to be hit hard. Dialogue is expected to continue on the issue, but not at the expense of doing this FTA.  Will the two sides sign a bilateral investment treaty? A key win for the City of London would have been a bilateral investment treaty, which appeared alongside the FTA text. But both sides weren’t able to get this over the finish line.  The proposed pact, controversial in India, would have given firms the right to sue governments over policy changes they claim would harm their investments, through a mechanism known as the Investor-State Dispute Settlement (ISDS).  In 2016, India scrapped a number of its older treaties with other countries, after facing a wave of arbitration claims, which now total at 29 cases against its domestic regulations and policy measures.  Although talks on the investment treaty continue, there’s still no clear timeline for when — or if — a deal will ever be agreed. How much will services firms really benefit? The British government insisted Tuesday that the pact includes India’s most ambitious services commitments to date, but details were hard to come by and some sectors are less than impressed. Trade Policy Minister Douglas Alexander said it will ensure U.K. banks and finance companies are placed on an equal footing with Indian suppliers. “It also encourages the recognition of professional qualifications, so that U.K. and Indian firms can access the right talent at the right time, whether they are in Mumbai or indeed in Manchester.” Yet a trade body for Britain’s legal services sector — the second largest in the world — called it a “failure” and a “a missed opportunity” that the deal doesn’t give them more market access. The sector is “disappointed to see that the U.K.-India FTA has been agreed without reference to legal services,” said Law Society president Richard Atkinson. Changes to India’s regulations that would allow foreign firms to practice without a domestic partner were unveiled by the Bar Council of India in March 2023, but they remain in limbo following pushback from local legal firms. The digital trade provisions in the deal also “don’t go as far as we’d have liked to see,” said Julian David, CEO of techUK which advocates for tech giants. David said business groups in both countries are looking forward to working with the U.K. and Indian governments “to turn this deal into real momentum for the sector.” How long will it take to ratify?  Opposition parties are already calling for parliament to be given a vote on the new free trade agreement.  Ed Davey, the leader of the Liberal Democrats, was quick out the gate on Tuesday warning that not consulting MPs would set a “dangerous precedent for future deals” — particularly one with the United States.  Under the Constitutional Reform and Governance Act 2010 (CRAG), parliament only has the power to delay ratification of a treaty and to force the government to formally explain its rationale. But even this can only happen if the government actively chooses to set aside time for a debate and vote on the agreement, which it is under no obligation to do. The last government was criticised by a parliamentary committee for not giving MPs time to debate its post-Brexit FTA with Australia.  The Labour government has only said in relation to the U.S. trade deal that it is committed to the CRAG process.  Douglas Alexander on Tuesday said the House would “need time to scrutinize this deal before the ratification process” but notably did not commit to a vote. “My department will follow the process set out in the Constitutional Reform and Governance Act 2010,” he said, which requires the government to lay the treaty in parliament for 21 days. “The house will, of course, have the opportunity to scrutinize any legislation associated with its implementation.” Trade Secretary Jonathan Reynolds told reporters that the ratification process would take “broadly” around 12 months. That gives the government’s critics plenty of time to find more they don’t like.