| COLUMN |
April 5 2010
The European Union and the US are trying to link international trade with environment protection through some kind of a pollution tax on imports from the countries not obliged to undertake binding emission reductions. This is nothing but a sinister protectionist move that will be detrimental to the cause of both international trade and environment.
Carbon tax is an environmental tax on carbon emissions. However, the EU and the US have been threatening to use carbon tax on exports from developing countries under the guise of controlling emissions.
The US House of Representatives has already passed a Bill that allows import taxes on goods from countries that do not have statutory curbs on greenhouse gas emissions. The EU has considered such a proposal on several occasions, but is yet to take a final decision on it.
The proponents of this move, led by France, argue that it would create a level playing field between polluting developing countries (read India, China and the like) and the developed countries that have accepted emission cuts under the Kyoto protocol on climate change.
In India, export of items such as iron, steel, aluminium, cement and chemicals could be potentially affected by a carbon levy.
The idea of a carbon-based import tariff at this juncture is condemnable on several counts. First, the current debate on the extent of climate change, its causes, its consequences and the sharing of its responsibility and costs by different countries is far from over. When the debate is far from settled, it is grossly improper and unwarranted for the rich countries to put pressure on other economies.
Secondly, as the Doha Round has yet to be concluded, the carbon tax cannot be justified under present WTO rules. In any case, the declared WTO focus is on the liberalisation of trade in environment-related goods and services and not on punitive measures affecting the free flow of trade on the ground of “violation” of non-existent environment standards.
Finally, the pretext offered for such a tax is not well-founded. The developing countries may be exempt from targeted emission reductions under the Kyoto accord, but that does not mean that they are unmindful of their duty to safeguard the environment. Most of them have voluntarily opted for measures to curtail environmental damage. India, on its part, has decided to reduce its carbon emissions by 20-25 per cent by 2020.
That is why India has warned that it could exercise the option of moving the WTO Dispute Settlement Body if the European Union and the US impose carbon tax on Indian exports. Such trade barriers, being inimical to the promotion of free and fair global commerce, are unlikely to be WTO-compatible.
Fortunately, India will not be alone in resisting this move. Some other emerging economies, such as China and Brazil, which are also likely to be affected by it, will surely join India in opposing it. In fact, China has more at stake than any other developing country, because of its higher volume of exports to both the US and the EU and also because its carbon emissions are much higher than those of other emerging economies.
The point has been repeatedly made that issues such as labour and environment do not fall under the auspices of the WTO but should be dealt with by bodies such as the International Labour Organisation and the UN Environment Programme. Unilateral measures to reduce carbon emissions through non-tariff barriers are bound to weaken the environmentalist’s cause by arousing domestic political resistance.
Views expressed by the author are his own and do not reflect the newspaper’s policy.
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