India ‘concerned’ over countries’ green protectionist measures’
The increasing use of protectionist measures by countries around the globe in the name of environment protection is a serious concern to the Indian government, a senior figure said at the recent WTO Ministerial Conference held in Abu Dhabi.
Speaking at a session on sustainable development and policy space for industrialisation, Commerce Secretary Sunil Barthwal said developing countries require flexibility when it comes to the existing WTO (World Trade Organisation) agreements, to help them overcome the constraints they face as they develop their economies.
At the conference India flagged issues over the European Union’s (EU) decision to impose carbon taxes on sectors such as steel and fertiliser, in effect creating an import tax for countries from outside the bloc.
The Carbon Border Adjustment Mechanism (CBAM), or carbon tax, will come into effect from 1 January 2026 for seven carbon-intensive sectors, including steel, cement, fertiliser, aluminium and hydrocarbon products.
The CBAM effectively introduces a 20-35% tax on some imports from that date. Some 26.6% of India’s exports of iron, steel and aluminium products go to the EU, which will be subject to CBAM. India exported these goods worth $7.4 billion in 2023 to the EU.
Barhthwal “expressed serious concerns regarding the increasing use of trade protectionist unilateral measures, which are sought to be justified in the guise of environmental protection”.
India’s exports of products like coffee, leather and paper, worth $1.3 billion annually to the European Union, are likely to be impacted due to the deforestation regulation adopted by the EU in May 2023.
In another session entitled Trade and Inclusion, Barhthwal cautioned other WTO members that mixing non-trade topics with WTO rules can lead to greater trade fragmentation.
“Bringing issues like gender and MSMEs in the realm of WTO discussions was not practical because these issues were being discussed in other relevant international organisations already,” he said.
He said issues like inclusion can be better addressed through targeted national measures, as they did not fall in the domain of international trade relations.
Expressing concerns, he said such unilateralism had a negative impact on the trade interests of developing countries.
Barhthwal added that India has taken a series of measures for greater inclusion of MSMEs and women, especially through use of Digital Public Infrastructure.
A team of Indian officials represented the country in Abu Dhabi, which was attended by trade ministers of 164 member countries of the multilateral trade body.
New report backs government’s views
Meanwhile, a new report from the Asian Development Bank (ADB) backed up the government’s stance, saying the European Union plan to impose tariffs on high-carbon imports (CBAM) could hurt developing countries in Asia but is unlikely to lead to big reductions in greenhouse gas emissions.
ADB said CBAM was expected to cut Asian exports to the EU, with steel from India also likely to take a hit.
But any small reduction in emissions would quickly be offset by the continuing increase in carbon-intensive production throughout Asia, and mechanisms to share emission reduction technology would be more effective, it said.
“It’s actually a relatively limited policy at the moment,” said Neil Foster-McGregor, ADB’s senior economist. “It only imports into the EU (and) only covers six sectors. The way the scale of production is increasing, even if we do this carbon pricing more broadly across the globe, you’re still going to see rising emissions unless we see a fundamental change in production techniques.”
The report said CBAM could raise around €14 billion (£12 billion) in revenue by 2030, and the proceeds should be used to provide climate finance for developing countries to decarbonise manufacturing, Foster-McGregor said.
He said one of the aims of CBAM was to incentivise non-EU economies to impose stricter climate policies of their own: if exporting nations can demonstrate that a carbon price has already been paid, the CBAM levy will be reduced.