More Regulatory barriers to trade by European Union

More Regulatory barriers to trade by European Union

Subject : Economy

Section: External sector

Key points:

• EU has come up with yet another regulation that is likely to negatively impact exports from developing countries like India.
• The regulations are proposed in form of due diligence obligations on human rights and environment sustainability.
• This is the latest addition to other trade impeding measures like the Carbon Border Adjustment Mechanism (CBAM) and the Deforestation Free regulations,
• The official name of the measure is Corporate Sustainability Due Diligence Directive (DD).
• It targets important sectors such as textiles, agriculture, and mining, has still not been formalised
• As the burden of proof will be on EU importers, who may face penalties for any breach of obligations by their suppliers, they in turn would be careful in sourcing.
• Impact on India:
  • the proposed EU legislation likely to make trade difficult for Indian exporters.
• We could see serious impact especially on MSME suppliers as they may not be able to provide all the in formation sought by EU importers to complete their due diligence process
• EU is one of India’s largest trading partners, accounting for 16.6 per cent of the country’s total ex ports in 2022–23 at $74.83 billion

European Union

• The European Union is a unique economic and political union between 27 EU countries that together cover much of the continent.
• 19 of these countries use EURO as their official currency. 8 EU members (Bulgaria, Croatia, Czech Republic, Denmark, Hungary, Poland, Romania, Sweden) do not use the euro.
• The EU grew out of a desire to form a single European political entity to end centuries of warfare among European countries that culminated with World War II and decimated much of the continent.
• The EU has developed an internal single market through a standardised system of laws that apply in all member states in matters, where members have agreed to act as one.

Origin of the European Union:

• Despite not being officially formed until 1993, the European Union’s foundations actually reach further back to 1957, when the European Economic Community was established.
• The EEC was formed out of a previous group called the European Coal and Steel Community – which had its own start in 1951.
• In 1993, the EEC morphed into the European Union following the new Maastricht Treaty (also known as the Treaty on European Union).
• Additionally, the Treaty of Lisbon, enacted in 2009, gave the European Union more broad powers that included being authorized to sign international treaties, increase border patrol, and other security and enforcement provision