As S Jaishankar assumes charge as Minister of External Affairs for the second time in the South Block, he has newer challenges to negotiate. India faces a ‘green squeeze’ from Europe. Amidst the Raisina Dialogue in February, EAM Jaishankar made a grave yet insightful statement on the dire state of the global trading system, noting that “world trading rules have been gamed.” Despite its headline-worthy nature, this comment has largely slipped under the radar. This manipulation is not a new phenomenon; globalisation has long favoured a few powerful nations, often at the expense of developing countries.
For instance, during the 20th century, global trade dynamics were manipulated to support the resurgence of English industrialisation. Today, with economic growth saturating in the West and an astounding rise of emerging economies like India, strong counteracting forces are at play. Developed countries are now arming themselves with new tools to maintain their economic dominance. One such tool is the guise of environmental stewardship within the global trading system, effectively rebranding trade protectionism as a noble endeavour.
This strategy allows Western nations to impose stringent environmental regulations that disproportionately impact developing countries, thereby safeguarding their own economic interests under the pretext of combating climate change.
The European Union (EU) Green Deal, a comprehensive series of legislations aiming to reduce greenhouse gas emissions by 30 per cent by 2030, poses significant challenges for developing countries exporting to European markets. While the environmental objectives of the Green Deal are commendable, its implementation reveals a deeper, more troubling agenda. This set of policies serves as a microcosmic view of how the developed world is currently manipulating the global trading order through three primary mechanisms. By examining these mechanisms, we can understand how environmental regulations are being weaponised to maintain economic hegemony, undermining the principles of fair and free trade that the global community strives to uphold.
Firstly, there is an indirect but clear attempt by these countries to subvert their commitments under the World Trade Organisation (WTO). The EU exploits the virtually non-existent dispute settlement system of the WTO, allowing it to bypass established rules with little to no repercussions. One glaring example is the deforestation-free supply chain legislation under the Green Deal, which prohibits the sale of commodities produced on deforested lands within EU markets. This policy directly violates the National Treatment (NT) obligation, which mandates that a country must not discriminate against the import of a ‘like’ product.
The EU contends that commodities from deforested lands are not ‘like’ those from non-deforested lands, yet this argument is flawed. The ‘likeness’ of a product is determined by its physical attributes and consumer preferences, neither of which differ between the two categories. If European consumers were truly discerning enough to differentiate between these commodities, there would be no need for the EU to enforce such a market-correction law. Moreover, this legislation also violates the WTO’s Most Favoured Nation (MFN) obligations by discriminating between imports from member countries and third countries, such as beef from France versus Argentina. This selective application of environmental standards reveals an underlying motive to protect domestic industries from international competition, rather than genuinely addressing environmental concerns.
Secondly, in a blatant defiance of multilateralism, developed nations are enacting unilateral laws with extraterritorial implications, showing complete disregard for national sovereignty. The Carbon Border Adjustment Mechanism (CBAM) is a prime example of such a law. CBAM imposes a carbon tariff on products imported into the EU, using the EU’s Emission Trading System (ETS) as a benchmark and disregarding the individual carbon pricing mechanisms of other countries. This means that even if a country like India has an operational carbon trading system, it would still incur additional carbon taxes based on CBAM’s prices. This form of ‘ecological imperialism’ fails to acknowledge that countries have unique needs and advantages that allow them to carve their own paths to reducing emissions.
For instance, India has implemented innovative solutions such as the state-subsidised rooftop solar panel initiative and the PM Suryoday Yojana, which reflect its tailored approach to combating climate change. By imposing its own standards, the EU undermines these national efforts and disregards the principle of sovereign decision-making in environmental policy.
Thirdly, the design and execution of new trade policies by the EU seem primarily aimed at protecting uncompetitive domestic industries from imports rather than genuinely tackling climate change. The CBAM, for instance, merely taxes emissions without effectively reducing them.
According to the United Nations Conference on Trade and Development (UNCTAD), CBAM is estimated to reduce global carbon emissions by no more than 0.1 per cent. This negligible impact on emissions highlights that the primary function of CBAM is to shield European producers from international competition as domestic producers in Europe benefit from carbon allowances provided by the government, offsetting their carbon tax costs.
Similarly, the legislation restricting imports of products cultivated on deforested lands will do little to halt deforestation. Instead, it will divert these products to less regulated markets, perpetuating land-use changes. This approach protects intra-EU trade by preventing cheaper imports from Asia and Latin America, under the pretence of environmental conservation. The EU’s policies reveal a pattern of protecting its economic interests while maintaining a façade of environmental stewardship.
Europe’s sanctimonious stance on environmental issues is underscored by its historical consumption of deforestation-causing commodities. Europe’s forests were largely depleted long before its industrialisation reached a peak, with less than one per cent of its forests currently untouched by human activity. This historical context reveals a deep hypocrisy in the EU’s current trade policies.
The ‘greening’ of trade laws appears to be an attempt to pull up the ladder just as developing nations seek to climb it. By imposing stringent environmental regulations on imports, the EU effectively hinders the economic growth of developing countries while protecting its own interests. Similar tactics are being mirrored by the US in its regulation of trade in competitive goods, further entrenching global inequalities.
Developing countries must critically scrutinise the ‘greening’ of trade laws by the West, especially those that have secured a seat at the table in global trade negotiations. This is an opportunity to challenge the status quo and address the long-standing imbalances in the global trading system, ensuring that environmental policies do not become tools for economic dominance.
Shobhit Mathur is the Co-founder and Vice-Chancellor of Rishihood University; Sakshi Abrol is a DAAD PhD Scholar at the University of Bonn. Views expressed in the above piece are personal and solely those of the author. They do not necessarily reflect News18’s views.
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