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India is likely to discuss the possible impact of the EU’s Carbon Border Adjustment Mechanism (CBAM), which could result in 20-35 per cent additional tax on select Indian goods exported to the bloc, and ways to mitigate it, in the next negotiating group meeting for the India-EU Free Trade Agreement (FTA) scheduled on June 19-23.
“The additional taxes on certain goods, such as steel, aluminium and cement, that the implementation of CBAM may result in, has the potential of taking away some of the market access benefits that India is hoping to gain under the the FTA being negotiated with the EU. In the future, if the CBAM products list is expanded, more items from India could get affected. India needs to discuss with the EU how the situation can be avoided,” a person tracking the matter told businessline .
Under the proposed CBAM, the EU will levy an import tariff on carbon-intensive goods from 2026 onwards. The CBAM will enter a transitional phase from October 1 2023, when importers of goods, covered by the new rules, have to report their greenhouse gas emissions (GHGs).
“The MSMEs in India will find it especially tough to meet the reporting obligations. There may be a need for exempting such units,” the source added.
The India-EU FTA talks, that were formally re-launched on June 17, 2022, have considerably progressed with modalities for exchange of offer in goods and services discussed in the last round. Discussions on 21 policy areas took place in 74 technical sessions.
Agenda ahead
Apart from chapters on goods and services, where discussions are majorly on elimination of tariffs and liberalising flow of services through easing of regulations, the talks focus on a host of other areas such a rules of origin, customs and trade facilitation, sanitary and phytosanitary measures, technical barriers to trade and trade remedies.
Some new areas, earlier not included in bilateral trade agreements, are also on the table such as digital trade, government procurement and trade and sustainable development including environment, labour, gender equality.
“Both sides expect the talks to progress further in the fifth round that will take place in India this month,” the source said.
In August, the Commerce Secretary is expected to hold a review meeting with DG(Trade) of the European Commission to take stock of the negotiations.
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