The Green Initiatives of the EU may put India’s exports at risk

India’s exports to the European Union worth USD 37 billion may face significant challenges due to the proposed Carbon Border Adjustment Mechanism (CBAM) and other eco-focused measures. According to a report from the Delhi-based think tank Centre for Energy, Environment, and Water, released earlier this week, these challenges could affect 43% of India’s crucial EU exports.

Prerna Prabhakar and Hemant Mallya authored a report that points out the exposure of certain sectors in India’s foreign trade when considered in the context of the EU’s efforts to maintain sustainable trade and supply chains. These sectors, including textiles, chemicals, select consumer electronics, plastics, and vehicles, make up 32% of India’s 2022 exports to the EU. If CBAM sectors are also considered, the value of at-risk exports amounts to $37 billion, which is almost half of India’s EU exports in 2022.

The report also highlights the global trend of developed nations that adopt non-tariff measures to address sustainability and environmental concerns, including energy efficiency, carbon reduction, waste management, water conservation, and sustainable forestry. The report recommends that India needs to develop a structured approach to protect its interests and mitigate these measures’ impact on exports.

The report also adds that to protect its exports, India can move towards bilateral free trade agreements (FTAs) that encourage mutual recognition of compliance assessments. The report also states that India needs to leverage the World Trade Organization (WTO) framework to voice concerns about non-trade measures imposed by other WTO member nations. While India has upped its involvement in the WTO, the report explores strategic formulation to effectively use the WTO mechanism to address future issues and seek viable solutions.