India must consider imposing retaliatory customs duties
To deal with European Union’s decision to impose a carbon tax on imports of certain sectors, says GTRI
image for illustrative purpose
When US imposed import tariffs on India’s steel and aluminium, India responded by increasing tariffs on 29 specific US products. This retaliation involved precise calculations, ensuring that India collected equivalent revenue from US products
Burden for Businesses
♦ Carbon border adjustment mechanism (CBAM) compliance starts from October 2023
♦ Steel, aluminium, cement, fertiliser will have to share detailed production data
♦ It is expected to impose a significant compliance burden on businesses
New Delhi: India should positively consider imposing retaliatory customs duties in a calibrated manner on certain EU goods to deal with the European Union’s decision to impose a carbon tax on imports of certain sectors, a report by think tank GTRI said on Wednesday.
The European Union (EU) has decided to impose a carbon border adjustment mechanism (CBAM) from January 2026. But, its compliance starts from October this year, as businesses exporting carbon-intensive goods like steel, aluminium, cement and fertiliser will have to share detailed production data from next month with the EU authorities. The retaliation measures, it said, offer several advantages, including rapid implementation. India can easily adjust product lists and tariff levels to mirror the actions of the EU or any other partner country precisely. “Use a calibrated retaliation mechanism (CRM) to retaliate in equal measure. We have done it before,” GTRI co-founder Ajay Srivastava said. In March 2018, when the US imposed import tariffs on India’s steel and aluminium, India responded by increasing tariffs on 29 specific US products.
This retaliation involved precise calculations, ensuring that India collected equivalent revenue from US products as the US did from Indian steel and aluminium. “Moreover, it is essential to recognise that CBAM is just one of several schemes that could negatively affect Indian exports. The EU has also introduced the Deforestation Regulation, Foreign Subsidies Regulation (FSR), and Supply Chain Due Diligence Act (SCDDA). CRM, if adopted, could be used to counteract the impact of these schemes on Indian exports,” the report said. The imposition of carbon tax is expected to disrupt global supply chains, increase trade costs, render free trade agreements meaningless, and impose a significant compliance burden on businesses, it added.
