European Union’s Carbon Tax May Hurt Metal Exports, Says GTRI Report

The European Union‘s (EU) Carbon Border Adjustment Mechanism (CBAM) will not only disrupt global trade but also have a negligible impact on climate, according to a report released by Global Trade Research Initiative (GTRI). The carbon tax is also expected to pose a significant challenge to India‘s metal industry. As much as 27 per cent of India‘s iron, steel, and aluminium exports worth $8.2 billion went to the EU in 2022, the think tank said. Electricity, fertiliser, hydrogen, and cement will also attract carbon tax, but in this case, India will not be affected as it does not export these products to the EU.

The CBAM will be implemented in four phases. Starting October 1, there will be a 27–month transition period. Exporters will not have to pay tax, but will have to share details of the carbon content of aluminium and steel, and other covered products with the respective EU–based importers. This data will be shared with the European Commission. From January 1, 2026, the EU will start collecting carbon tax on each consignment of steel and aluminium. By 2034, all goods and materials imported into the EU will be taxed under the mechanism.

This will push up tariffs for iron and steel as well, as aluminium products to 20–35 per cent, up from the average 2.2 per cent bound tariff rate agreed upon by the EU for its manufacturers at the World Trade Organisation (WTO). “High tariff walls will disrupt world trade,” the think tank said. According to the EU, the CBAM is a tool to put a fair price on the carbon emitted during the production of carbon–intensive goods that are entering the EU.

The trade bloc also wants to encourage cleaner industrial production in non–EU countries. Carbon tax is not Indiaspecific. The think tank has suggested the government set up a task force to prepare administrative ministries and industry to meet the challenge pertaining to the carbon tax.

The ministry of steel and mines can educate firms to meet the October 1 deadline. “(The government should) factor in the impact of the CBAM in FT A negotiations with the UK and EU. Even if both agree to zero tariffs under the FTAs, the CBAM will ensure that while EU goods enter India at zero tariffs, Indian goods will pay very high CBAM tariffs.”

– Credits: GTRI and FIEO Intratrade. 

India Expects Free Trade Agreement with EU to be “Game Changer” External Affairs Minister

India expects its proposed free trade agreement (FTA) with the European Union to be a “game–changer“ and is looking forward to securing a mutually advantageous conclusion to the negotiation process for the pact within a “short planned timeline“, External Affairs Minister said. In an address at an event at the Confederation of Indian Industry (CII), the Minister also noted that both Europe and India can strengthen each other‘s strategic autonomy by reducing dependencies, cooperating on critical technologies, and restructuring their respective supply–chains.

“We expect the India–EU FTA will be a game–changer for the India–EU relationship. We look forward to a mutually beneficial, mutually advantageous conclusion to the negotiation process within a reasonably short planned timeline,” said the Minister.

In June 2020, India and the European Union restarted negotiations for the long–pending trade and investment agreement after a gap of over eight years. Since being launched in 2007, talks surrounding the agreement have been hampered by fundamental differences on key issues. In regards to this, the External Affairs Minister said that “India‘s new approach to trade agreements addresses issues of non–tariff and behind–the–border barriers, quality standards and related benchmarks…with like–minded partners, we have actually demonstrated in recent years a fast–track change in our FTA negotiation processes. FTAs with the UAE and Australia were actually concluded in record time.” Behind–theborder barriers are non–tariff discriminatory trade barriers within a country.

“Europe and India can strengthen each other‘s strategic autonomy by reducing dependencies; cooperating on critical technologies; and ensuring supply chain restructuring. The India–EU FTA is, therefore, our very important goal,” said the External Affairs Minister. She additionally touched on the recently unveiled Trade and Technology Council (TTC), stating that it would provide structure and strategic guidance to enhance the partnership between both entities. It is expected that TTC will facilitate exchange of critical technologies such as artificial intelligence, quantum computing, semiconductors, and cyber security. This marks as the second such technology partnership between the EU and a Western nation following one with the United States in 2021.

Finally, External Affairs Minister highlighted that “India‘s relations with Europe [are] stronger and deeper than ever before” – illustrated by this event itself – making clear that “the business communities of India and Europe have a large stake and an enabling role in this transformation.”

Benefits of Importing from India

India is quickly becoming an attractive hub for international trade. The country has an abundance of resources and a competitive market, making it an ideal destination for importers looking to purchase quality goods at competitive prices. In this article, we’ll take a look at some of the major benefits of importing from India, from access to lower production costs to reduced tariffs.

Lower Production Costs

One of the key benefits of importing from India is the lower production costs. India has a large pool of talented professionals and a growing manufacturing base, which enables importers to secure quality goods at a fraction of the cost of what they would pay in other countries. For example, India’s manufacturing labor costs are some of the lowest in the world, providing cost–savings for importers that would otherwise be unable to afford production in more developed nations.

Access to Skilled Labour

India also has a vast pool of skilled workers from a range of fields, from engineering and technology to fashion and design. Importers can take advantage of this expertise to secure the skilled labour they need for projects that require specialized knowledge. What’s more, the country’s universities are now producing a high number of postgraduates in fields such as engineering and technology, offering importers unparalleled access to the expertise needed to complete even the most complex projects.

Reduced Tariffs

The Indian government also provides reduced tariffs to importers when shipping goods into the country. Importers can also benefit from preferential rates under various bilateral and multilateral trade agreements between India and other countries. This helps to reduce the cost of imports, enabling importers to take advantage of the market without incurring prohibitive costs.

Increased Customer Base

Importing from India also provides an opportunity to increase a business’s customer base. With access to the Indian market and its vast potential, importers can reach a large number of potential customers. What’s more, India is a major player in international trade, meaning that businesses can take advantage of the country’s trading relationships with other nations in order to access new markets and customers.