Home > Research > Newsletters & Policy Updates
Far and Wide | August 2023 (I)

Our lead story this week covers the concern of developing countries raised by the new regulations by the European Union countries. It includes deforestation rules, carbon tax, shipping entering the EU’s emissions trade system and Foreign subsidies regulation. This, among other things, means that only products that have been produced on land that has not been subject to deforestation or forest degradation after December 31, 2020, may be placed on the E.U. market or exported. This is just one more sign of the ongoing expansion of regulations focused on risks related to environmental, social & governance (ESG) issues — in this case, those with a focus on the E. However, E is not alone in this regulation, as respect for human rights will be considered an obligation for a product to be considered deforestation-free. It is expected to likely make exports costlier for developing countries and affect their domestic industry.

These concerns are to be raised by India too, in the 13th ministerial conference (MC) of the World Trade Organization (WTO) which is scheduled for February 26 next year in Abu Dhabi. Though the regulations hope to limit the impact of large-scale deforestation and hold companies accountable for how their products are made; it is also true that the EU will collect billions annually once these provisions come into operation completely. They need these funds to provide subsidies to their companies and farmers. But the additional carbon tax could impact India’s exports of iron, steel, aluminum, and cement. The deforestation rules could affect exports of crops like soya beans, palm oil, and coffee. While the Foreign Subsidies Regulation could judge our domestic MSP regime unfavorably. Discussions are ongoing since this is an important issue keeping in mind that the EU accounts for 16% of India’s exports.