India challenged them and then withdrew his file from the WTO due to a “mutual regulation”, although the United States has never withdrawn these additional rates. OMC panels initiated by other members, including Norway, Switzerland and China, judged in 2023 that the prices had not succeeded in the “national security” test.
Read also: The EU CBAM has lent the emergency of fair carbon prices
However, the United States has ignored these decisions. Trump’s second presidency saw the wider national security shield, first for the prices of the day of sweeping release against more than 90 countries, and more recently, for a 50% rate against imports of steel and aluminum.
In the United States, a group of companies successfully challenged the Liberation Day rates, but the administration appealed the decision. India has so far not retaliated. The United Kingdom could obtain a conditional exemption from the 50% rate on steel as part of an American free trade agreement (ALE), although Tata Steel as a large British stereal does not obtain this advantage because the American import rules require that steel be “melted and paid” in the country of origin, in this case the United Kingdom. It is difficult to envisage a more striking repudiation of the rule of law.
In the middle of the disarray, the FTAs have become more relevant than ever for the commercial interests of India. New Delhi is at the heart of negotiations with the United States and the EU, after recently announced an agreement with the United Kingdom. The EU, however, is not unrelated to unilateral actions. It is in fact the chief architect of “green protectionism” – the steps sought to be justified at the altar of climate change. At the heart of the measures of the United States and the EU is the alleged belief that they would protect the competitiveness of local industries.
While the buffoonemeries on Trump’s trade policy make the headlines, EU measures – ranging from its carbon border adjustment mechanism (CBAM) and the EU deforestation regulation (EUDR) to the Declaration of the Environment and Mandates of Durability Diligence for Companies – pose important challenges for Indian industry.
Read also: India and the EU have a lot to gain by forging closer bilateral links
India exports of almost $ 100 billion to the EU, mainly including fuel, textiles, machines, chemicals, cars, gems, steel and pharmaceutical products, represent around 14% of its total exports of goods. Given this strategic relationship, the main concerns must be dealt with before finalizing the Indian-EU FTA.
For steel and aluminum, even if the most favored EU’s current rights (MFN) are reduced to zero in the FTA, the CBAM would cancel this advantage. In addition, the imminent expansion of the CBAM to indirect electricity emissions will make the impact of duty much greater, effectively blocking exports to the EU. The EU proposed minimis The threshold exempting from small importers from CBAM obligations offers little relief, especially for small producers who are already faced with numerous non -tariff barriers.
In addition, the EU has safeguarding measures for various categories of steel imports, including rate rate quotas which can be extended to other metals. The recently announced European European and metallic action plan will still be tightening commercial defense measures, presenting other challenges for our exports to the EU. India will have to negotiate carefully each of these aspects under the bilateral Ale to mitigate the impact on the Indian industry.
The EU proudly claims that the EUDR will guarantee that the products that EU citizens consume do not contribute to deforestation or degradation of forests in the world. Under this assertion, however, is an intelligent legal drafting which will benefit its own producers of the EU on importers.
The EUDR obliges importers to ensure that imports do not come from land that have been deforested or subject to forest degradation since December 31, 2020. Degradation is defined as the conversion of primary forests or naturally regenerating forests into planting forests or other wooded lands. It is estimated that the EU has only 2 to 3% primary forest coverage, while India has almost 23%, which makes the impact disproportionate obvious.
Read also: Why the expansion of the euro zone should be welcome in the world
EU sustainability directives, while aiming to increase business transparency and responsibility, will increase the cost of India Inc to do business in this region. It is no longer enough for a company to guarantee compliance with labor and environmental laws; He will also have to assume responsibility for the conformity of each player in his direct and indirect supply chain.
The EU would also seek a chapter on energy and raw materials in the FTA. We must beware of obligations restricting the political space of India for local supply or the establishment of export restrictions and offering budgetary incentives for its own creation of capacities. The emphasis on the EU on securing access to raw materials for its own green transition can only be synchronized with our objectives that if there are rules of fair play for Indian access to resources and technologies, and India is not treated as a simple supplier of raw materials.
The realization of a winner in the EU-India negotiations needs to take into account each of these aspects.
The authors are, respectively, partners, Clarus Law Associates and business economist based in Mumbai.
About The Author
