Sunil Barthwal, Minister of Commerce
India on Saturday said unilateral environmental measures such as the European Union’s (EU) carbon tax are inconsistent with principles of fairness and hinder fair global trade.
According to Trade Minister Sunil Barthwal, countries in the Global South face challenges both in developing climate and sustainable development strategies and in responding to unilateral measures such as CBAM (carbon border adjustment mechanism).
“Unilateral environmental measures do not reflect the principles of equity and common but differentiated responsibilities; they hinder fair global trade,” he said in a virtual speech at the third Voice of Global South Summit.
India has raised concerns on various platforms over the EU’s decision to impose carbon tax on certain sectors, saying it would hurt the country’s exports. The country is in talks with the EU on the issue.
The EU has decided to introduce a CBAM (carbon tax), which will come into force on 1 January 2026. Initially, the tax would be imposed on seven carbon-intensive sectors, including steel, cement, fertilisers, aluminium and hydrocarbon products.
According to think tank GTRI, the EU-CBAM, when fully implemented, will lead to an import duty of 20-35 percent for Indian companies. Moreover, the domestic industry will have to share all factory and production data with the EU.
The countries of the Global South include both developing countries and the least developed countries (LDCs).
The Secretary also said that these countries should enhance cooperation on food security and global value chains and address the challenges faced by SMEs and the challenges posed by the current international trading system.
He advocated for investment in advanced production methods and at the same time for training a workforce with the necessary skills to apply high-quality production methods, as this is crucial for developing countries and least developed countries (LDCs) to move up the value chain.
On services exports, the secretary said that developing countries account for 24 percent of global trade in services, while the share of least developed countries is only 0.61 percent.
“We need to develop a vibrant service sector. Our people who provide services in other countries make a significant contribution to global prosperity,” Barthwal said. In 2023, developing countries, including the least developed countries, received about $687 billion in remittances.
However, the high cost of remittances is a concern for developing and least developed countries, he said.
He gave the example that a 5 percent cost reduction would yield an additional $40 billion for recipient countries.
India’s proposal to reduce the cost of cross-border remittances has received support from several members of the World Trade Organization (WTO).
On food security, the Secretary said that countries in the South must work together and find solutions to address food security challenges.
He further said that SMEs play an important role in trade growth and job creation, but face challenges such as high trade finance costs, information gaps and lack of capacity to access foreign export markets.
“I must emphasize that digital solutions hold great promise in addressing trade cost issues in accessing export markets for SMEs. In this regard, countries in the Global South should consider implementing payment system interoperability to enable greater trade connectivity and help SMEs improve their access to global markets,” Barthwal said.
He added that these companies also face challenges in terms of infrastructure for trade and logistics facilities.
The secretary said they face barriers to accessing foreign markets due to high costs of complying with trade regulations related to customs formalities, procedures and other regulations.
“We must tackle all these issues with one voice,” he said.
He added that developing and least developed countries should be given flexibility in the form of SDT (special and differential treatment) and CBDR (common but differentiated responsibilities) principles so that they can maintain their policy space to achieve development goals.
“SDT remains a crucial and non-negotiable right within the WTO framework to ensure that global trade is fair, inclusive and sustainable,” he said.
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First publication: Aug 17, 2024 | 8:31 PM IST