Carbon tariffs

India's attitude at the WTO needs to be constructive

The 12th Ministerial Conference of the World Trade Organization (WTO) is fast approaching. It is to be held from November 20 onwards in Geneva, and will focus on a new agreement regarding fishing subsidies; progress on pandemic-related intellectual property issues and trade restrictions; and questions on how to incorporate climate change-related issues into trading norms. Of course, broader questions about WTO reform, including fixing the broken dispute settlement system, will never be off the radar. India is being seen as a broad impediment to addressing many of these questions; the WTO’s secretary-general visited New Delhi last month, and United States Trade Representative Katherine Tai is to visit in the next few days to relaunch the US-India Trade Policy Forum after a four-year gap during the Donald Trump administration in Washington. Ms Tai will reportedly seek to mend fences with India on issues as wide-ranging as digital policies, tariffs, and regulatory barriers; if progress is achieved, India might well be re-admitted to the crucial Generalised System of Preferences programme, which would allow barrier-free access to US markets for Indian exporters. Environment-related trade questions may also be on the agenda. 
 

The intransigent attitude of Indian trade negotiators might be in line with historical precedents but does not take into account a changed world, new technology, and the possible benefits of greater market access. The question of incorporating environmental concerns into trading rules is a perfect example of an issue where greater imagination and initiative are required from the Indian bureaucracy. For decades, India — alongside other developing economies — has opposed the incorporation of labour or environmental standards into multilateral trading rules. This was for good reason, as these could translate into protectionism by rich nations with higher such standards. But the world has moved on since the contentious GATT negotiations decades ago. 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 the broader claim that sustainability has no role to play in the trading architecture is insupportable in the age of climate crisis. The high political leadership will have to remind India’s negotiators that the national interest is wider than they imagine. This was, after all, what happened at COP26.

The fact is that, unless India is in the room where these 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 fait accompli whatever India’s position at the WTO would be. Other markets will inevitably follow suit, and India will be left out in the cold. This is a sub-par outcome. India’s negotiators need to be primed 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. Just saying “no” at the WTO will not pay India any dividends. It must strive to turn the conversation to its advantage.