For years, even decades, Europe pursued free trade agreements with India and South America — without success. Then came America’s retreat from free trade.
Now, the long-delayed deals are being rushed to fruition — and importantly, they aim to boost not only trade in goods, but also in digital services. By working with these so-called “Middle Powers,” as well as Japan, Korea, and others, Europe hopes to reduce dependence on both Chinese and American tech.
Brussels pitches the India agreement as the biggest trade deal either side has ever done. It covers the usual big-ticket items on goods, investment reassurances, and market access.
Digital provisions aim to cut paperwork, allowing cross-border transactions to work electronically through e-signatures and e-invoices. They also protect companies’ core intellectual property: firms cannot be forced to hand over their software source code as a condition for selling or operating in the market, except in limited, specific circumstances.
But the text avoids one major issue: privacy protections. It fails to include binding rules for free cross-border data flows — both sides keep their own privacy regimes and agree only to revisit data transfer rules in five years.
The Mercosur South American deal unlocks a large market, a potential source of critical minerals needed to power chips and data centers. Europe’s farmers remainopposed to competition from Argentinian beef and Brazilian soy and wheat, and the European Parliament has asked the Court of Justice to judge the treaty’s legality.
But Brussels is determined to move ahead and has put the treaty into provisional application. The EU and Brazil also recently adopted mutual adequacy decisions on data protection, aligning their privacy rules and easing personal data transfers.
Alongside the new deals, Europe should expand an existing tool, called digital partnerships. It already has signed digital partnerships with four countries: Japan, SouthKorea, Singapore, and Canada.
In their current form, these partnerships are rather toothless. They create Digital Partnership Councils, glorified talk shops to discuss issues such as semiconductors, 5G/6G, digital identity, data governance, and AI. Practical outputs are limited.
But what if the partnerships contained real bite? The EU could use them to grant special status, allowing software, cloud, and other “digital” products from these countries to obtain the highest cybersecurity and other certificates, which are denied to other non-European countries, notably the US.
Washington is pressing Europe to soften its strict digital rulebook. Europe insists it will hold the line, and is debating how to reduce its dependency on American tech. US firms control between 70 and 80% of the continent’s cloud market. They design all the cutting-edge chips. They dominate AI software. In response, Europe is debating new schemes to promote “Made in Europe” products.
The old trade model no longer fits cross-border business. In many sectors, the real value now sits in the digital layer: data flows, cloud services, platforms, cybersecurity, and digital identity.
Strengthened digital partnerships could be extended to other middle powers such as India and Brazil. They could deliver predictable operating conditions for data- and cloud-enabled business and give clarity around cross-border data use.
Europe realizes it must boost its competitiveness and spark its moribund economies. It needs to improve its digital performance. Decoupling from both US and Chinese tech looks unrealistic. But the search to diversify trade — and add digital to the equation — might provide at least part of the answer.
Dr. Anda Bologa is a senior researcher in the Tech Policy Program at the Center for European Policy Analysis (CEPA).
Bandwidth is CEPA’s online journal dedicated to advancing transatlantic cooperation on tech policy. All opinions expressed on Bandwidth are those of the author alone and may not represent those of the institutions they represent or the Center for European Policy Analysis. CEPA maintains a strict intellectual independence policy across all its projects and publications.
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