Pragmatic stand on trade with the EU

As a hard-to-ignore potential partner, India has the leverage to force the EU to rethink and even push for exemption from tariff barriers such as the carbon tax

The Trump-fostered uncertainty -- primarily on trade, but virtually no segment of global economy and politics is left untouched -- that the global community finds itself in can be advantageous for India. The US becoming more inward-looking and confrontational with the Trump tariffs has left developed countries and economic blocs scrambling to find alternative trading partners. China can’t decouple itself from the US fast enough, which means the US pivot could cause serious pain to China’s economy. India, which ticks many boxes with its large, growing market, a section of the consuming class that has high purchasing power, and relative political and policy stability, should certainly seem worthy. India recognises this, and is ready to be wooed, but, as commerce minister Piyush Goyal’s recent statement shows, this has to happen under its own terms.

India recognises this, and is ready to be wooed, but, as commerce minister Piyush Goyal’s recent statement shows, this has to happen under its own terms (PTI)

Terming the EU’s non-trade specifications -- some of these relate to climate regulation and labour standards -- for a trade deal as “irrational commitments”, the commerce minister said a trade deal with the bloc will be difficult if it sought to impose a non-trade agenda through this channel. As a hard-to-ignore potential partner, India has the leverage to force the EU to rethink and even push for exemption from tariff barriers such as the Carbon Border Adjustment Mechanism on exports to the EU. This stand is no doubt pragmatic, and India would do well to push for a more favourable deal from the bloc.

That said, there needs to be an acknowledgment of the long-run needs of the economy. With the climate crisis set to deepen, thanks to the Trump administration’s climate antagonism, India will have to play a bigger role in global decarbonisation efforts, starting at home. Climate regulation thus automatically becomes a core focus. Similarly, as its economy’s heft increases, it will have to contend with essential protections for labour, guaranteeing certain minimum standards. To such ends, the country will need to balance pragmatism in trade talks with efforts at home to lower its economy’s carbon burden and improve labour conditions. It must play both for short-term gains and long-term wins.