The European Union’s (EU) latest ecodesign regulation is poised to reshape the landscape of international trade, particularly affecting India’s textiles and footwear exports. Designed to enforce stringent sustainability standards across member states, these regulations mandate rigorous energy performance and environmental sustainability criteria that could limit export volumes from India.
Regulatory Impact on Export Volumes
The new ecodesign rules necessitate that products meet minimum standards for energy efficiency and environmental impact throughout their lifecycle. This includes stringent provisions against the disposal of unsold textiles and footwear, which may constrain order volumes for Indian exporters. Reports suggest that these regulations, aimed at promoting circular economy principles, pose significant challenges for Indian industries.
Industry Response and Challenges
Industry experts, such as Mithleshwar Thakur from the Apparel Export Promotion Council, have highlighted the challenges posed by adapting to these Environmental, Social, and Governance (ESG) standards. For smaller enterprises, in particular, compliance with the new regulations is daunting, potentially impacting their competitiveness in the European market. Concerns have been raised that these regulations could act as non-tariff barriers, offsetting the benefits of tariff reductions negotiated through free trade agreements.
Scope and Exemptions
While temporary exemptions have been granted to small and medium enterprises (SMEs) from certain aspects of the regulation, industry stakeholders argue that these exemptions are inadequate. The EU’s ecodesign standards cover a wide range of products but exclude sectors such as automobiles and defense-related items. Key criteria under the regulation include product durability, reusability, upgradability, reparability, and restrictions on substances hindering circularity.
Implementation and Integration
The regulation also introduces mechanisms like the Carbon Border Adjustment Mechanism (CBAM) and anti-deforestation regulations to further mitigate environmental impact. It integrates eco-design principles into public procurement policies, promoting the acquisition of eco-friendly products and mandating transparency through the Digital Product Passport.
Strategic Engagement for Adaptation
In conclusion, while SME exemptions offer temporary relief, the broader implications of the EU’s ecodesign regulation necessitate strategic adaptation within global supply chains. Indian exporters are urged to engage proactively in compliance measures and innovation to align with evolving sustainability standards. The regulatory landscape underscores the importance of sustainable practices and transparent supply chain management in securing long-term market access in the EU.
