India gets 1.64 mt EU steel quota, imports of EU cars may rise 6-fold, Pg13

Key Highlights:

• India has secured an annual steel export quota of 1.64 million tonnes (mt) to the European Union (EU) under a draft Free Trade Agreement (FTA).
• This quota is split into a 0.69 mt FTA-specific component and a 0.95 mt Most Favoured Nation (MFN) component.
• The agreement also grants the EU a first-year Tariff Rate Quota (TRQ) of 100,000 completely built-up cars for export to India, which is six times the current import volume.
• India's concessions on car imports apply to vehicles priced above €15,000, with no concessions for cars below this threshold.
• The steel quota addresses concerns arising from the EU's Carbon Border Adjustment Mechanism (CBAM) and its Steel Overcapacity Regulation, which came into force on July 1st.

Detailed Insights:

• India's current steel exports to the EU stand at 4 million tonnes, indicating that a significant portion will still face duties or competition outside the new quota.
• The Tariff Rate Quota (TRQ) mechanism allows a specific quantity of goods to be imported at a lower duty, aiming to protect the importing region's domestic industry.
• The EU's Steel Overcapacity Regulation aims to safeguard its steel industry from the negative effects of global overcapacity.
• The Indian Council for Research on International Economic Relations (ICRIER) suggests India should shift towards higher-value-added steel products to reduce the CBAM tax burden.
• India has not offered concessions for cars priced below €15,000 to protect its domestic automobile manufacturing sector.
• The Global Trade Research Initiative (GTRI) noted that this agreement makes the EU the second major trade partner, after the UK, to secure automotive tariff concessions from India.
• Concessions for electric vehicles (EVs) and plug-in hybrids begin in the fifth year of the agreement, applicable only to vehicles priced at €20,000 or more.

Key Concepts Involved:

• Free Trade Agreement (FTA): A pact between two or more countries to reduce or eliminate barriers to imports and exports among them.
• Carbon Border Adjustment Mechanism (CBAM): An EU policy imposing a carbon price on imports of certain goods to prevent carbon leakage.
• Tariff Rate Quota (TRQ): A trade policy tool that allows a specified quantity of a product to be imported at a lower tariff rate.
• Most Favoured Nation (MFN): A principle under WTO where a country treats all its trading partners equally, granting them the same trade advantages.