Britain's steel safeguard, carbon tax sticking points in implementation of India-U.K. trade pact

📌 Summary:

• India and the UK will discuss two contentious issues on June 2, 2026: (a) Britain's steel safeguard measures, and (b) the UK's Carbon Border Adjustment Mechanism (CBAM)

• Both threaten implementation of the India-UK Free Trade Agreement (CETA) signed on July 24, 2025

• India has warned it may "re-balance" duty concessions on items like Scotch Whisky if the UK does not address Indian concerns

• UK's CBAM (planned 2027) imposes a carbon tax on imports of steel, cement, aluminium, fertiliser, hydrogen, and electricity — directly hitting Indian exporters

• The steel safeguard quota system threatens to limit India's steel exports to the UK irrespective of the FTA's tariff cuts

• India-UK CETA targets nearly doubling bilateral trade to ~$60-100 billion by 2030; covers 99% of Indian export lines

🎯 UPSC Relevance: GS Paper 3 — External sector and trade; GS Paper 2 — India and developed-world relations; intersection of climate policy (CBAM) and trade policy.

📝 Prelims Facts:

• India-UK CETA (Comprehensive Economic and Trade Agreement) signed on July 24, 2025

• UK CBAM scheduled to take effect January 1, 2027 (EU CBAM's transition phase already began October 2023)

• CBAM is a WTO-compliance-tested unilateral tariff aimed at preventing "carbon leakage"

• Scotch Whisky tariffs were reduced significantly under CETA (from 150% to 75%, with further phased reduction)

🔑 Key Term: CBAM (Carbon Border Adjustment Mechanism) — A tariff levied on imports based on the carbon emissions embedded in their production, designed to equalise the carbon cost faced by domestic and foreign producers.