Challenges in Indian Trade Negotiations with Western Labour and Environmental Standards
Indian trade negotiators face significant challenges due to Western labour and environmental standards, particularly relating to the UK’s carbon tax. This tax is expected to affect India's exports like iron, steel, aluminium, ceramics, and cement.
UK's Carbon Border Adjustment Mechanism (CBAM)
- The UK is firm on not providing concessions under the CBAM, which imposes duties on carbon-intensive imports.
- India proposed a "rebalancing mechanism" to compensate for industry losses due to CBAM.
- This mechanism is included in the 'general exceptions' chapter, which helps avoid WTO disputes.
General Exceptions in Trade Agreements
Under GATT, countries can implement measures that violate trade rules if justified by public health or environmental protection needs.
India's Negotiation Points and CBAM Legislation
- Calls for concessions for Indian MSMEs and country-specific exemptions.
- Ongoing discussions on harmonizing carbon emission standards, though measurement discrepancies persist.
- The UK CBAM will apply from January 1, 2027, targeting high-emission sectors.
Concerns and Recommendations
- Ajay Srivastava highlights the significant concerns for Indian exports due to CBAM's potential high tax rates.
- Emphasizes vigilance on non-traditional trade topics like labour, environment, gender, and intellectual property.
Criticism and Global Context
- Finance Minister Nirmala Sitharaman and Commerce Minister Piyush Goyal criticize CBAM as "unfair."
- The principle of "common but differentiated responsibilities" in climate talks is central to India's argument.
- EU's CBAM, set for 2026, is relevant as India exports 15% of goods to the EU, with a $75 billion trade in 2022-23.
- Countries like China, Russia, Brazil, and South Africa have challenged the EU's CBAM at the WTO; India is yet to do so, focusing on a free trade agreement.
Current Status
Negotiations between India and the UK continue, focusing on finding mutual agreement. The Indian Ministry of Commerce and Industry has not yet responded to related queries.