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America wants a carbon tax on imports from countries without their own emission caps. India disagree. China has trhreatened a global trade war. The greenhouse gases are major components of global warming. The western world is reeling under economic depression. Europe and America need a pretext to tax the imports from India and China at a higher rate.
China claims that US is unfair in pointing China out for higher import levy. India is also expressing discomfort secretly. Both the countries are heavily dependent on exports to US and Europe. It is estimated the Chinese economy will actually shrink by a few percentage points if US and European exports are taxed 20% higher. India is far less dependent on such exports.
The Chinese threatening of gloabal trade war follows the passage of a cap-and-trade bill in the US House of Representatives last weekend, which has tough provisions to impose carbon tariffs to ensure that American companies would not lose competitive advantage to countries that will not sign the treaty.
A recent report by the World Trade Organisation and the UN said that the carbon taxes as proposed by the US legislatures could in theory be crafted to be compatible with WTO law.
However, the WTO report also says that it would be hard to prove they were not an illegal disguised restriction on international trade.
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