Tit-for-tat tariffs or waiver talks: Choices India have to navigate new EU regulations

economictimes.indiatimes.com:

European Parliament adopted a unique law under which exporters of select products have to certify that their items sold in the European Union (EU) had not led to deforestation and forest degradation. Under the EU Deforestation Regulation, a slew of products, from coffee to wooden furniture, must not have come from fields that have been deforested after 2020.

While the Government of India is still grappling with this new legislation — a bolt from the blue when New Delhi is engaging with the 27-nation bloc to craft a favourable free trade agreement (FTA) — Indian exporters will have to bear the brunt of it, especially those shipping commodities such as coffee, leather hide, skin and preparations, oil cake and wooden furniture. This regulation plus three other new laws in the EU — all centred on climate change and subsidies — may turn out to be major bottlenecks for traders across the globe, with a discernible fallout on Indian exporters as well.

The EU is India’s largest export market, commanding 16.5% of the nation’s exports. Last fiscal year, New Delhi exported items worth $74.8 billion, up from $64.9 billion a year ago, registering a 15% growth.

In April-May this fiscal year, the EU’s share jumped to 17.4%, indicating the growing importance of the European bloc for India’s export trajectory. How should New Delhi respond to these EU laws since Indian exporters will be seriously hit and rushing to the World Trade Organization (WTO) with a complaint is meaningless as the body’s dispute settlement mechanism is near-defunct? The government has two options, according to officials and experts ET spoke to.