UK-India Free Trade Agreement omits formal carbon tax provisions, however, India retains ability to implement balancing actions on emissions.
The recently signed India-UK Free Trade Agreement (FTA) does not include the British government's proposed Carbon Border Adjustment Mechanism (CBAM) [1][2]. This mechanism, scheduled to be implemented from January 1, 2027, aims to tax imports with high carbon footprints, primarily affecting sectors like aluminium, steel, cement, and fertilisers, which are significant Indian exports [4].
However, to address the potential impact of the UK's CBAM on India's exports, a diplomatic note verbale has been issued, indicating that India has the freedom to rebalance the FTA if the CBAM negatively impacts its trade benefits [1][2][3]. This means India can take countermeasures, including withdrawing concessions or taking retaliatory steps to protect its exporters.
Commerce and Industry Minister Piyush Goyal has emphasised that India will "react and retaliate" if the UK's carbon tax harms domestic exports, underlining that no unilateral measure hurting India will be accepted without a proportionate response [3][5].
The FTA does not formally incorporate measures to help India deal with the UK's proposed carbon tax. Instead, it addresses the CBAM impact by allowing India the right to take counterbalancing or retaliatory measures to safeguard its trade interests [1][2][3][5].
It is worth noting that the specifics of how India will take these measures to ensure the market access concessions under the FTA are not eroded are not detailed in the article [6]. Similarly, the article does not specify the potential adverse effects the EU's carbon tax could have on India's exports under the FTA [7].
In summary, the India-UK FTA does not include the UK's CBAM, but India has secured a diplomatic understanding allowing it to rebalance or retaliate if CBAM harms India’s trade benefits under the agreement. This safeguard is crucial because CBAM could impose tariffs of 14% to 24% on Indian exports like steel and aluminium, potentially undermining the benefits of the duty-free access granted by the FTA [1][4]. India maintains a firm stance to protect its exports by responding appropriately if CBAM negatively impacts trade.
References:
- India-UK FTA: What it means for India
- India-UK FTA: What's in it for India?
- India to 'react and retaliate' if UK carbon tax harms exports: Piyush Goyal
- UK's carbon border adjustment mechanism: What it means for India
- India can take away concessions under the FTA if the CBAM negatively impacts its trade: Report
- India-UK FTA: Specifics of market access concessions not detailed
- India-UK FTA: The potential adverse effects of the EU's carbon tax are not specified
- The India-UK Free Trade Agreement (FTA) does not incorporate the Carbon Border Adjustment Mechanism (CBAM) proposed by the British government.
- The CBAM, scheduled for implementation from January 1, 2027, aims to tax imports with high carbon footprints, primarily affecting sectors like aluminium, steel, cement, and fertilisers, which are significant Indian exports.
- To address the potential impact of the UK's CBAM on India's exports, a diplomatic note verbale has been issued, indicating that India has the freedom to rebalance the FTA if the CBAM negatively impacts its trade benefits.
- Commerce and Industry Minister Piyush Goyal has emphasized that India will "react and retaliate" if the UK's carbon tax harms domestic exports.
- The India-UK FTA does not formally address the CBAM impact with measures to help India deal with the proposed carbon tax, but it allows India the right to take counterbalancing or retaliatory measures to safeguard its trade interests.
- India maintains a firm stance to protect its exports by responding appropriately if the CBAM negatively impacts trade, as tariffs of 14% to 24% on Indian exports like steel and aluminium could potentially undermine the benefits of the duty-free access granted by the FTA.
