To resolve trade tensions, the EU has initiated fresh negotiations with India following its decision to implement the Carbon Border Adjustment Mechanism (CBAM) on imported steel and aluminum.
European Commission (EC) Secretary-General Gerassimos Thomas led a delegation to New Delhi in early July to discuss a range of taxation and customs issues, including CBAM. The visit aimed to harmonize decarbonization efforts between Indian and European industries and address the challenges Indian companies face under CBAM.
During his visit, Thomas met with Indian government officials and steel industry stakeholders to deliberate on various carbon neutrality agendas. He reiterated Europe’s commitment to importing low-carbon products to support global decarbonization and ensure equitable treatment of imported goods under CBAM. This mechanism will be introduced gradually to provide maximum predictability for investors and businesses.
Thomas commended India's economic decarbonization plans and highlighted the mutual commitment of the EU and India to tackle environmental issues collaboratively.
The EC delegation's visit provided a platform for discussing the challenges Indian companies might encounter in implementing CBAM. Despite the primary focus on large corporations, the delegation also sought to understand the potential impact on Indian SMEs.
Technical meetings with India's Ministry of Energy are set to continue, and a CBAM transition assessment report will be submitted to the European Council and Parliament by the end of next year. This document will be made publicly available for Indian industries and authorities to provide feedback and engage in further discussions with the EC.
Beyond CBAM, both parties expressed mutual interest in cooperation on carbon trading markets, pricing mechanisms, energy efficiency, renewable energy, and clean technology.
The EU will also consult with major Asian trading partners, including South Korea and Japan, regarding CBAM. Both countries have committed to cooperating to address uncertainties related to CBAM.
Last month, the EU and India engaged in trade negotiations in New Delhi to mitigate the adverse effects of expanded safeguards and tariffs on certain steel imports but failed to reach an agreement. India had requested the EU to maintain equivalent levels of concessions and other obligations, along with appropriate trade compensation, to mitigate the impact of the forthcoming safeguard measures, but no agreement was reached.
With the impending EU import restrictions on Indian steel products, there were expectations that the Indian government might retaliate through WTO litigation and trade reprisals. However, the recent EC delegation visit, which initiated discussions on various steel-related trade issues including CBAM, suggests a potential easing of trade conflicts and the start of new negotiations.
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