Carbon tariffs: On 12th Ministerial of WTO

News: India must follow a constructive approach while negotiating trade rules in the upcoming WTO summit.

A range of issues will be discussed in the upcoming 12th Ministerial Conference of the WTO at Geneva such as fishing subsidies, progress on pandemic-related intellectual property issues, broader questions about WTO reform, including fixing the broken dispute settlement system etc.

India is being seen as a barrier in addressing many of these questions. The inflexible attitude of India’s trade negotiators can cost India.

Why India’s attitude at the upcoming WTO ministerial needs to be constructive?

It helps India to act in the broader public interest. Consider this example: India alongside other developing economies has opposed the incorporation of labour or environmental standards into multilateral trading rules.

This was for good reasons,

– One, as these could translate into protectionism by rich nations with higher such standards.

– Two, lowering tariffs on crucial environmental goods such as, say, solar panels to zero may well not be in India’s interests and those of other emerging economies.

But, sustainability has also a broader role to play in the trading architecture in the current age of climate crisis. Hence India’s attitude at the WTO needs to be accommodative.

Secondly, India needs to be a part of the process: If India is not in the room where crucial trade policy decisions are being made, they will be made without India’s interests in mind.

Consider the question of “border adjustment” mechanisms, which essentially put a tax on the implicit carbon emissions in imports.

The European Union has already moved towards imposing such a tax, which may become a reality whatever India’s position at the WTO would be.

Other markets will inevitably follow, and India will be left out in the cold. This would obviously be against India’s interests.

What is the way forward?

India’s negotiators need to be well-informed with facts and figures regarding the structure of fuel taxes in India and the implicit price of carbon this implies.

They should also present positive and constructive suggestions about how such national taxation can fit into a broader trans-national carbon pricing scheme.

Source: This post is based on the article “Carbon tariffs” published in the ToI on 11th November 2021.

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