Govt signs agreement to widen trade pact with Chile

Source: Business Standard, Sept 07, 2016

New Delhi: The government on Tuesday signed an agreement with Chile to expand the existing India-Chile Preferential Trade Agreement (PTA), offering more than 10 times the number of existing tariff lines, which are open to concessional rates of trade.

Under the expanded PTA, Chile has offered concessions to India on 1,798 tariff lines with Margin of Preference (MoP), or rate of concessions, ranging from 30-100 per cent. Likewise, India has offered concessions to Chile on 1,031 tariff lines, with MoP ranging from 10-100 per cent. “India’s export basket with Chile is diversified and keeping in view, the wide variety of tariff lines offered by Chile, the expanded PTA would immensely benefit India,” the commerce ministry said.

Signed in March 2006 and coming into force with effect from August 2007, the original PTA had India offering 178 tariff lines to Chile, with MoP ranging from 10-50 per cent. On the other hand, Chile had offered 296 tariff lines to India with MoP range of 10-100 per cent.

A meeting between Commerce Secretary Rita Teaotia (pictured) and Chilean Ambassador Andrés Barbé González on Tuesday saw the new agreement being signed. The Cabinet had approved the agreement in April.India’s bilateral trade with Chile stood at $2.34 billion with $0.67 billion worth of exports and $1.96 billion imports, respectively, during 2015-16. Among the Latin American and Caribbean Nations (LAC), Chile was India’s third largest trading partner during this period.

Exports to Chile are diverse and consist of transport equipment, drugs and pharmaceuticals, iron and steel, aluminium products, among others. Among major import items from the nation, mineral ores like copper ore and concentrates, iodine, copper anodes, molybdenum ores and concentrates, apart from fresh fruits like apple, kiwi and inorganic chemicals are significant.

However, India’s total trade with Chile has reduced by more than 26 per cent in 2015-16 over the previous year.

Also, on the cards is a free trade agreement (FTA) with South American nation Peru, with both sides examining how ambitious the pact should be. Earlier this year, both nations held a meeting in the Peruvian capital of Lima and decided to finalise the joint study group report soon.

The government also wishes to widen the scope of its PTA with the Mercosur bloc (Brazil, Argentina, Uruguay and Paraguay). India has partial admission in the regional bloc and about two-thirds of its total trade with the region is through this avenue. Commerce Secretary Teaotia had called for the PTA to be re-examined since it is “limited in many ways”. It came into force on June 1, 2009.

Business relations between India and LAC are mainly by way of investments, as conventional trade in goods has challenges on account of distance, time zone difference and business culture.

While commodities trade is dependant on bulk nature and involvement of mega institutions, at a conclave held last year with LAC nations, the commerce ministry had suggested focusing on manufacturing and services, essentially through investments, which is expected to automatically lead to further trade growth.

However, even as India’s trade with the LAC region has grown at 25 per cent annually over the past decade, touching $46 billion in 2012-13, bilateral investments remain at a relatively low level. While the region received only four per cent of India’s outward foreign direct investment, investments from LAC region in India are still low.

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