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Jaibal Naduvath, “Reimagining the European Union’s Engagement with the Global South,” ORF Occasional Paper No. 498, Observer Research Foundation, October 2025.
The Global South—understood as a region comprising developing countries with lower average incomes[a]—is home to over 80 percent of the world’s population[1],[2] and contributes close to 54 percent of global GDP in purchasing power parity terms, with India and China alone comprising nearly half of that.[3] By 2030, the Global South is projected to have three of the world’s four largest economies.[4] The region holds most of the world’s critical minerals essential for the energy transition, including cobalt, lithium, and rare-earth elements. Africa alone accounts for nearly 30 percent of global mineral wealth, including 90 percent of the world’s platinum reserves, 56 percent of cobalt, 36 percent of chromium, and 30 percent of rare-earths.[5] Meanwhile, Latin America and Southeast Asia are critical to global food and biodiversity security; Latin America accounts for 61 percent of global soybean exports and 59 percent of sugar exports.[6] The decisions made by these nations are increasingly shaped by their strategic leverage over supply chains, natural resources, and geopolitical alignments, making the Global South the most dynamic arena in the contest for global influence.
The Global South is the linchpin for managing nearly all the threats and opportunities that Europe will face in the coming years, and the European Union (EU) is recalibrating its engagement accordingly.[7] From securing resources and markets to advancing security, trade, and climate action, a strong foothold in this geography is crucial to enhancing the EU’s geopolitical relevance and economic resilience. Key initiatives, such as the Global Gateway,[8] ambitious trade agreements with Mercosur[b],[9] and India,[10] and a reimagined approach to external financing through the Neighbourhood, Development and International Cooperation Instrument – Global Europe (NDICI-Global Europe) initiative,[11] illustrate this ambition. The EU is also heavily dependent on the Global South for transition minerals, such as cobalt, nickel, and lithium, which are vital to achieving its goal of climate neutrality by 2050.[12]
Moreover, geopolitical fragmentation and intensifying strategic competition with China are compelling the EU to diversify its value chains and seek reliable partners in the Global South.[13] Much of the EU’s trade diplomacy and development assistance now targets this region. In 2023, the EU accounted for 42 percent of global official development assistance, making it the world’s largest aid provider.[14] Against this backdrop, the consolidation of multiple external financing instruments into the unified NDICI–Global Europe framework reflects the bloc’s aim to enhance the coherence and impact of its interventions in the Global South. Deepening its presence in the Global South is also critical to the EU’s ambition to shape the international order in line with its values and interests, advancing the so-called ‘Brussels Effect’—the EU’s capacity to project its standards globally.[15] However, the bloc is lagging in essential enablers, and member countries’ contradictory approaches present a challenge to the realisation of this ambition.
Bureaucratic shortcomings, differences in priorities among member states, and fragmented approaches have hindered the EU's ability to respond to global developments in a timely manner. For instance, the trade agreement with Mercosur took nearly two decades to conclude (in June 2019),[16] required another six years to reach a political agreement,[17] and still awaits full ratification[18] amid opposition from a number of EU member states.[19] Similarly, the EU’s free trade talks with India have spanned nearly 20 years, including a nine-year hiatus between 2013 and 2022.[20] Action is particularly time-consuming in matters where decisions must be taken by consensus, as mandated by the grouping’s principle of unanimity.[21] Discussions can become protracted as members respond from positions of self-interest and remain reticent to diminish their influence to advance bloc commons.[22] Notably, in matters of trade policy, national governments have ceded decision-making to the EU, which maintains a unified trade policy due to its customs union, unlike the more contentious domain of foreign policy.[23]
While some degree of internal divergence is to be expected in a grouping as diverse as the EU and where countries retain national agency, the bloc’s internal framework can at times be self-limiting. A case in point is the disconnect between the EU’s climate ambitions and its external engagement.[24] Climate goals are not mainstreamed across trade and foreign policy, while climate commissioners lack mandates to build external partnerships, risking climate priorities being pursued in isolation and delaying responses that require coordinated action. Likewise, the EU’s network of institutions with distinct responsibilities and powers necessitates extensive inter-institutional coordination, which adds to the delay.[25]
For instance, the signature Global Gateway initiative is implemented through a web of EU institutions (such as the European Commission and the European External Action Service), development finance institutions (such as the European Investment Bank and the European Fund for Sustainable Development Plus), and member states' bilateral development agencies.[26] Due to these challenges, the EU struggles to achieve a ‘whole-of-bloc’ approach that requires coordinated statecraft spanning all elements of power—military, economic, diplomatic, industrial, scientific, educational, and ideological. While approaches such as the Team Europe Initiatives,[27] which seek to channel multiple EU resources more effectively, signal a shift towards greater coherence, their real-world effectiveness arguably remains limited.
Despite widespread reservations,[28],[29] China remains the dominant partner for several Global South countries.[30] At the same time, Japan is also a leading trading partner for a number of countries,[31] and India is fast emerging as one.[32] A common strand is the flexibility they demonstrate in their engagements with the Global South, which involves juggling choices. For instance, although India has a preferential trade agreement (PTA) with Mercosur, efforts to expand it have yet to yield results. In the meantime, even as it continues to advocate for an expanded PTA, India is pursuing bilateral free trade agreements with individual Mercosur countries, allowing for more customised arrangements.[33] Likewise, Paraguay’s diplomatic relations with Taiwan have not hindered China’s efforts to build trade and geopolitical leverage with that country.[34]
Such flexibility is arguably lacking in the EU’s approach in the Global South. For instance, while the EU actively seeks to build bridges with the Global South, it has also adopted measures such as the Carbon Border Adjustment Mechanism (CBAM)[35] and the EU Deforestation Regulation (EUDR),[36] which raise entry barriers into the EU, creating trade strangleholds for nations in the Global South. Some assessments suggest the CBAM could reduce Africa’s GDP by as much as US$25 billion, money that could otherwise be allocated towards urgent needs in a continent where massive development gaps remain.[37] Notably, the trade minister of South Africa, a key EU partner, has labelled the CBAM “protectionist”, arguing that it fails to recognise “differential levels of development”.[38] Yet, the issue is not protectionism alone, as all countries tend to protect their markets, but the EU’s seeming rigidity on the matter, especially without compensatory measures, such as a roadmap for capacity building to address these challenges or offering any strategic offsets to these nations.
Notably, several commodities listed under the CBAM face notable demand from the markets of large developing economies that do not have such barriers, potentially raising costs for the EU and undermining the CBAM’s objectives.[39] Likewise, instances such as the EUDR’s adverse impact on small-scale coffee growers in Uganda,[40] which exports 60 percent of its coffee to the EU, highlight the challenges posed by the grouping’s blanket approaches.
The EU’s emphasis on “values” (such as human and labour rights, democracy, the rule of law, sustainability, transparency, and anti-corruption) as policy priorities is perceived mainly as “self-serving” in the Global South.[41] The framing of CBAM,[42] EUDR,[43] and even trade negotiations[44] through the lens of protectionism in the developing countries highlights the cognitive dissonance between Brussels and the Global South. Notably, the Global Gateway, positioned as a values-based alternative to China’s Belt and Road Initiative (BRI), has faced criticism for many of the same reasons as the BRI itself—i.e., the initiative has been accused of lacking transparency and of being misleading and extractive.[45]
For instance, the Global Gateway’s signature Lobito Corridor project, designed to transport critical raw materials from the Democratic Republic of the Congo and Zambia to the port of Lobito in Angola for export, has drawn backlash for “resource plundering”[46] and allegedly violating the rights of indigenous communities.[47] In South Africa, large, export-oriented green hydrogen projects have sparked concerns over whether they genuinely contribute to local development or primarily serve the EU’s interests.[48] Similarly, the EU’s trade agreements for critical minerals with African nations have been criticised as exploitative, shifting the environmental and social costs of Europe’s resource overconsumption onto countries ill-equipped to manage them.[49] The EU and other high-income countries consume six times more materials per capita than low-income nations. Yet, it is the latter that bear the brunt of CO₂ emissions, water stress, and forced labour risks. In Africa alone, an estimated 89,000 miners are exposed to modern slavery risks due to this.[50] Denis Mukwege, the 2018 Nobel Peace Laureate, last year accused the EU of “reaching the height of cynicism in terms of geostrategy, […] illustrating a policy of double standards that undermines the credibility of international institutions.”[51]
In 2022, Africa and Latin America shouldered the greatest burden of global land biodiversity degradation, accounting for over half of it; yet they contributed less than 10 percent to the world’s economic value derived from global resources.[52] The inverse was true for Europe and North America. Exacerbating matters is the EU’s perceived prescriptive approach, in which partner countries feel relegated to junior stakeholder status,[53] with relationships viewed as primarily serving the EU’s interests, from access to large markets to securing raw material sources.[54] Europe’s legacy behaviour, from vaccine hoarding[55] and reticence to change an outdated multilateral system,[56] to unfulfilled climate finance promises[57] and exclusionary decision-making,[58] continues to weigh heavily on how the Global South views the EU. These weaken the EU’s ability to build meaningful partnerships.
In the EU’s Global Gateway, which aims to mobilise up to €300 billion (approx. US$351.5 billion) between 2021 and 2027,[59] with half of that earmarked for Africa alone under the Africa-Europe Investment package,[60] low-risk appetites among investor groups,[61] particularly private capital, are inhibiting project development and diluting the geopolitical leverage it was intended to deliver. European financial institutions such as the European Investment Bank and the European Bank for Reconstruction and Development struggle to attract private capital, with their efforts fragmented and limited in scale.[62] EU projects are also hindered by regulatory burdens, including strict rules on sustainable financing, which limit investment flows. These put EU initiatives at a considerable disadvantage compared to Chinese offerings, for instance, which typically come as state-backed turnkey solutions with bundled financing, where the state absorbs the risk as a trade-off for geopolitical gain. A case in point is the Hambantota Port in Sri Lanka, a financially unviable but geostrategically significant investment, where low projected traffic did not deter Chinese involvement.
The deeper issue is the EU’s difficulty in understanding local contexts.[63] In many regions, investments are viewed primarily through the lens of job creation and profit, whereas the EU often leads with sustainability and environmental standards. This disconnect diminishes the strategic leverage of large investments, such as the €2 billion (approx. US$2.3 billion) financing for critical raw materials,[64] as local participation remains muted in the face of rigid, and often unfulfillable, conditionalities. Arguably, the bloc’s ‘EU First’ impulse, guided by an assumption of value superiority, has led to insular policymaking that overlooks the economic and political costs of regulatory fragmentation.[65]
The EU’s challenge in the Global South is less a single deficiency and more a cumulative credibility dilemma.
Agility remains a persistent issue. The EU-Mercosur trade agreement, for example, took nearly 25 years from inception to political agreement and remains unratified. The EU–India free trade talks have spanned two decades, including a nine-year pause. Yet, agility by itself is not a limiting factor. Japanese investments, for instance, are also known for their relatively slow pace; however, Japan’s approach, based on the principle of ‘Shinrai Kankei’ (trust-based relationships[66]), guarantees that once investments are made, they are stable, long-term, and resilient to political or economic changes, helping establish the country as a preferred partner in the Global South.[67]
Trust is another issue. Accusations of ‘resource plundering,’ stemming from the impacts on local communities and reluctance to develop local capacity[68] (such as refining units near sources of raw materials) as well as perceived protectionist policies like the CBAM and EUDR, have fuelled criticism that the EU’s engagement is exploitative and neocolonial. Nevertheless, trust deficits alone have not stopped countries from engaging deeply with partners like China.
Similarly, while pragmatism and coherence pose hurdles—such as the EU’s climate regulations undermining its overseas development assistance agenda—they are not uniquely disqualifying. The real problem arises when all these factors converge, forming a far greater challenge that is damaging the EU’s credibility. Taken together, these challenges are symptomatic of a broader issue: the EU’s struggle to present a genuinely distinctive proposition to prospective partners to choose it over competing others. The Global Gateway is emblematic of this dilemma. Some argue that it is merely a rebranding of existing projects,[69] while its key projects, such as the Lobito Corridor, involve extensive Chinese participation. The port and rail upgrades have received Chinese financing,[70] Chinese locomotives operate on the lines,[71] a Chinese joint venture provided the first long-term commercial commitment to the Lobito Atlantic Railway,[72] most of the mines are Chinese-owned, and much of the minerals are destined for China for refining.[73] This undercuts the EU’s narrative of offering a genuine alternative.
For the EU to deepen its engagement with the Global South, it must reimagine its partnership model, building on its strengths and principles to create a compelling partnership proposition. Divergent approaches by India, Japan, and China offer valuable lessons. China invests capital, machinery, and workforce to complete projects swiftly but is often perceived as extractive, creating dependencies that translate to geopolitical influence. India’s model is viewed as more sustainable, focusing on capacity building, technology transfer, concessional credit, and reducing dependencies.[74] Japan, meanwhile, offers a trust-based, long-term development approach prioritising stability over speed.[75] The EU needs to develop its own distinctive model, which could incorporate elements from these approaches while offering unique value.
In this context, triangular development partnerships with like-minded partners from the Global South present a promising pathway. When the EU collaborates with an emerging power to jointly intervene in another emerging region within a triangular North-South-South framework, it can benefit from South-South solidarity, innovation, and the political capital of these powers. India exemplifies this approach. As a large economy with diplomatic influence, India has become a leading voice of the Global South. A legacy of purposeful interventions in underserved regions—through initiatives such as the long-running Indian Technical and Economic Cooperation (ITEC) programme[76]—and more recent efforts, such as advocating for the African Union’s inclusion as a permanent G20 member[77] and initiatives like ‘vaccine maitri' (vaccine diplomacy) during the COVID-19 pandemic,[78] have strengthened its franchise. This enables India to serve as a bridge between the EU and nations of the Global South through triangular cooperation. India’s development experience is also highly valued across the Global South.
An EU–India partnership, aligned with their respective strengths, will benefit all parties involved. Initiatives such as the proposed Asia-Africa Growth Corridor,[79] conceptualised by Japan and India, and India’s partnership with France on the International Solar Alliance,[80] reflect a shift in India’s approach towards pragmatic, results-driven collaborations.[81] Likewise, countries such as Indonesia[82] and Brazil[83] present opportunities for North-South-South triangular collaborations.
Sustainable partnerships are built on trust, not tutelage. This requires strategic patience and a willingness to accept short-term setbacks, as exemplified by Japan. Japanese institutions, such as the Japan International Cooperation Agency, build their franchise through long-term investments in sectors such as manufacturing, infrastructure, financial services, and national prestige projects.[84] These investments are grounded in sound economic and geopolitical logic, bringing Japanese technology and expertise while embedding Japanese firms within the partner nation’s economic landscape. Over time, this fosters trust and provides privileged access. India approving Japanese bank Sumitomo Mitsui Banking Corporation acquiring a 20-percent stake in the government-linked Yes Bank,[85] the largest cross-border investment in India’s banking sector, is an example of the credibility Japanese entities have built over time. In contrast, European entities struggle to demonstrate similar depth or continuity.
Adopting a long-term investment mindset will unlock access, trust, and franchise. However, this requires reimagining current approaches. The Global Gateway, for instance, could turn into the EU's golden passport to lasting influence, given the strategic importance of its projects for partner states. Underwriting part of the risks could spur greater EU private sector investment and participation, which in turn will minimise dependence on third parties for success. An innovative, yet underexplored funding pathway is the EU’s vast philanthropic capital. [86] Detached from the risk considerations associated with financial return on investment (ROI)-driven investments, philanthropy’s focus on generating social and economic impact could serve as a force multiplier for the EU.
The Philanthropy Europe Association (Philea) estimates that European philanthropies hold combined assets of around €516 billion (≈US$605 billion), with €76 billion (≈US$89 billion) in annual spending.[87] Of the nearly US$471 trillion in global personal wealth, about 16.6 percent is estimated to reside in the EU.[88],[89] Changing attitudes towards charitable giving are driving rising contributions.[90] Further incentivisation, such as additional tax breaks or reward schemes, could increase this substantially. If, for argument’s sake, through these measures, even a two-hundredth fraction of the EU’s personal wealth were channelled into philanthropy, it would net funds in excess of US$390 billion, far exceeding the amount targeted for mobilisation under Global Gateway by 2027. However, these will require bold, unconventional thinking and strong political will. Done right, these could prove game-changing, embedding the EU firmly in the long-term development trajectory of the Global South and earning it unprecedented goodwill and influence.
To build genuine partnerships, the EU must pursue pathways co-developed with partners that respond to local needs and engage on equal terms. Moving away from approaches rooted in normative superiority is vital to counter criticisms of paternalism. In many parts of the Global South, memories of colonialism remain raw, and these nations are wary of hegemons with a ‘civilising’ purpose. There is growing unease with what are seen as prescriptive approaches from countries that have not addressed their own domestic challenges, such as xenophobia, democratic backsliding, and socio-economic disparities, while adopting assertive responses to issues like migration,[91] often rooted in their own past actions.
The EU’s credibility will rest on co-creating agendas that reflect mutual priorities and actively seeking areas of consensus. In this regard, recalibrating climate action efforts presents an opportunity, as it is a priority area for both the EU and the Global South. The Global South are disproportionately reeling from the effects of climate change. A ramp-up of adaptation efforts and funding is urgently needed. However, currently, approximately two-thirds of EU climate finance is allocated to mitigation efforts, with loans increasingly provided at non-concessional rates.[92] While that may be sound from a ROI perspective, it does little to build franchise, and the relationship remains transactional. A recalibration could yield the EU substantial diplomatic dividends and go a long way in building sustainable partnerships.
Yet perhaps the single most important area where the EU could build consensus is in debt management, which remains the foremost concern for many developing nations. Numerous countries in the Global South remain burdened by overwhelming debt, with UNCTAD reporting that the external debt of developing nations exceeded US$11.4 trillion in 2023—nearly 99 percent of their export earnings. Debt servicing today exceeds the costs of health, education, and other essential services in many of these countries, shaped by predatory lending practices that carry perilous consequences not just for these nations but for the global rules-based order.
The EU could shift both perceptions and outcomes by expanding its focus on mechanisms that redirect debt to meet critical needs such as climate resilience, food security, and infrastructure development in these regions. Debt-for-nature swaps in Ecuador and Belize, and the debt-for-climate swap in Barbados, offer valuable precedents. Such instruments could be repurposed and scaled up to address wider development gaps in these regions, particularly in critical infrastructure, sustainable industrialisation, and skills development. On the one hand, they would enable European companies to benefit from lower production costs, access to talent, and potential carbon credits generated through participation in climate-positive projects; on the other, the large-scale employment opportunities it creates and the economic growth it stimulates, could offer a viable counterbalance to the challenge of migration, extending the ‘Brussels Effect’ in its most substantive form.
The Global South is now an arena of active choice. These nations recognise their central role in the global economic architecture—whether in securing supply chains or ensuring food security—and are prepared to leverage it. Their growing economic weight and demographic dividend mean that all pathways to global influence run through them. Any prospective partner must approach them with this shift in mindset. This demands a recalibration of extant engagement models. Ultimately, countries in the Global South will choose partners that deliver the greatest net benefit to them. For the EU, getting this calculation right is critical to its ambition of being a defining actor in a fast-fragmenting geostrategic arena.
Jaibal Naduvath is Vice President and Senior Fellow, Observer Research Foundation.
All views expressed in this publication are solely those of the author, and do not represent the Observer Research Foundation, either in its entirety or its officials and personnel.
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Jaibal is Vice President and Senior Fellow of the Observer Research Foundation (ORF), India’s premier think tank. His research focuses on issues of cross cultural ...
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