The Times of India
By Nitin Sethi, TNN
June 30, 2009

NEW DELHI: Should the industrialized world be allowed to put an import tax on goods from India because it has a ‘high carbon content’? In what is bound to stir the hornet’s nest in days to come, the US House of Representatives has passed a Bill that demands additional tarrifs on goods from countries that do not take on commitments to cut their greenhouse gas emissions.

The Indian government has reacted strongly against the move which came tagged along with a report from the WTO that said trade concerns should be subjugated to climate change issues hinting that the tarrifs such as the ones US proposes could not be outrightly rejected.

"The environment and commerce ministries are unanimous that there can be no linkage between trade and environment. While it is too early to comment on what would finally emerge out of the process, India will take recourse to whatever means available to prevent this unfair trade practice if it is introduced," said Jairam Ramesh, environment and forests minister who has earlier served as minister of state for commerce as well. "Such a move smacks of protectionism," he added.

The US logic runs like this. If the climate change Bill is enacted, caps will be imposed on emissions from different sectors. The imposition of these cut-offs would increase the cost of the products emerging from the sector. But if other countries do not impose a similar cap on their sectors, then the products from these countries would be cheaper.

By putting in provisions to tax such products from countries that do not impose curbs on the emissions, US intends to target India and China specifically.

While the two countries, renowned hubs of cheaper labour, export plenty of goods to the US, especially gems, jewels and textiles in India’s case, they are not obligated under the existing UN convention on climate change to undertake any mandatory emission cuts. US and other industrialized countries have been demanding that emerging economies such as India and China should also be brought under the emission cut regime.

While the EU and other developed nations have been threatening such a carbon-based tarrif on exports, the noise from the West on the issue has been seen mostly as the rich nations using the issue as a bargaining chip. The provision for such a tariff has for the first time been seen in the US Bill which will now move to the Senate for voting.

The clause introducing the tarrif on imports to US was introduced by the Democrats to shield US industries such as steel and cement. Some experts believe it would give the US Congress the handle to impose tariffs even if President Obama desists.