India-EU Trade Talks: Balancing Economics and Environmental Regulations

The European Union's strict environmental regulations pose significant challenges to its proposed trade pact with India. New rules on carbon tax and supply chain diligence could increase costs for Indian exporters. Both parties aim to reconcile these issues in ongoing negotiations, focusing on trade balances and investment commitments.

The European Union's stringent environmental regulations, including carbon tax, deforestation rules, and supply chain due diligence laws, present one of the major hurdles in negotiating a proposed trade pact with India, according to economic think tank GTRI. These regulations threaten to impose additional costs on Indian exports.

Under the EU's Carbon Border Adjustment Mechanism, Indian exports of steel, aluminum, and cement could face tariffs of 20-35%. This is causing concern that while EU goods might enter India duty-free, Indian goods would still face indirect barriers. Ongoing negotiations in Brussels aim to address these challenges, with India seeking exemptions or compensatory measures to balance out the impact of EU's regulations.

Beyond trade in goods, the EU's restrictions on remote service delivery and data privacy are also points of contention. India is advocating for easier business visa procedures and recognition of professional qualifications, while the EU is pushing for greater access to India's financial and service sectors. A resolution could pave the way for increased trade and investment between the two economies.

(With inputs from agencies.)