India should push for inclusion of protective provisions in proposed FTA with European Union
The Global Trade Research Initiative (GTRI) has said that India should push for inclusion of protective provisions in its proposed free trade agreement (FTA) with the European Union to safeguard its interests against the EU's carbon tax. The EU has decided to impose Carbon Border Adjustment Mechanism (CBAM), or carbon tax, which will come into effect from January 1, 2026. It would mainly impact seven carbon-intensive sectors, including steel, cement, fertiliser, aluminium and hydrocarbon products.
GTRI has said that if protective language is not included in the agreement, post FTA, EU goods will enter India duty-free, while Indian steel and aluminum could face high carbon charges under CBAM when exported to the EU. It said since CBAM imposes tariffs based on production methods, it violates WTO (World Trade Organisation) rules. India must push for protective language in the FTA to address this issue.
The suggestions came at a time when European Commission President Ursula von der Leyen, accompanied by the EU College of Commissioners or senior political leaders of the bloc, began a high-profile two-day visit to India on February 27, 2025. The issue is expected to figure in the meetings between the two sides. So far nine rounds of talks have been completed between India and the European Union (EU) on the proposed agreement. The 10th round of talks are scheduled from March 10, 2025 to March 14, 2025.
In June 2022, India and the EU resumed the negotiations after a gap of over eight years. It was stalled in 2013 due to differences over several issues. In December last year, the commerce and industry ministry said that the proposed trade agreement negotiations need political directions to reach a commercially meaningful deal while understanding each other's sensitivities. In the pact, the EU is looking at duty cuts on products such as automobiles, wines and whiskey.
