NEW DELHI: Policymakers and businesses are bracing to face the threat of higher entry barriers for Indian goods in the Western markets under the garb of environmental protection. Both the US and the EU are discussing additional taxes on carbon-emitting products from advanced developing countries, such as India and China, which could render products from the region uncompetitive, a commerce department official has said. “India is keeping a close watch on the developments to make interventions at the multilateral level at the right time,” the official said, requesting anonymity. While the EU is India’s largest trading partner with E78 billion annual trades, the US is the fourth largest with $ 40 billion of trade in 2008-09.

The logic behind the carbon taxes planned by the West on imported goods is to create a level playing field between its own companies that are subject to stricter environment laws and companies in competing countries. It would, however, serve as a new barrier to imports from developing countries like India, even as tariff walls are expected to crumble as an outcome of the ongoing Doha round of trade negotiations at the World Trade Organization (WTO). India has been hoping for drastic cuts in tariffs imposed by the developed countries on products like textile and leather at the WTO. The EU was earlier planning to impose carbon taxes on certain countries, it had now started the process of identifying product groups, which, supposedly are more polluting like metals, certain textiles and chemicals, said Biswajit Dhar, director general of Research and Information Systems for Developing Countries, a New Delhi-based think-tank.

“We are carrying out a study to find out individual items that could come under the tax net,” he said. The Waxman Markey Bill, which seeks to set a limit on the total amount of greenhouse gases that can be emitted nationally, was passed in the US House of Representatives last year. It is currently in consideration in the Senate. “While India cannot take any action against these countries at a stage when the taxes are being planned, we are preparing to fight them as soon as they translate into trade barriers,” the commerce ministry official said. The Centre for WTO studies, a research body under the commerce department, has already prepared a report on WTO compatibility of border trade measures for environmental protection.

The report says that if the measures fail to take into account the specific conditions prevailing in developing countries such as their level of development and per capita emissions, they may be dismissed as arbitrary by the WTO. Such taxes are against multilateral rules as there was no provision for border adjustment measures on climate related issues in the WTO, said Rita Roy Choudhury, head, environment and climate change at industry body Ficci. “They would affect global competitiveness of our companies. We have been voicing concerns in various forums and during visits made by policy makers from the US and the EU,” she said.

While India has the option of fighting such measures at the WTO, the Indian industry should also start thinking in terms of making more environment friendly products, Mr Dhar said. “We have to understand that if we want to engage with the global economy, we have to change our ways. Unless we get our industry to accept standards, we cannot put our act together,” he said.