Roughly a third of India’s exports to Chile comprise only cars and other vehicles, while 70% of Chile’s exports to India have been just ores, slag and ash.
Chile, India’s sixth largest trade partner in the Latin American region, wants to expand relations with India. It is exploring avenues to increase knowledge sharing between the countries about each other’s production structures as well as to identify value chains. As Chile and India celebrate 70 years of establishment of diplomatic relations, its vice minister of trade, Rodrigo Yanez, who is on a visit to India, said in an interview with FE’s Rishi Ranjan Kala that his country is interested in transforming the preferential trade agreement (PTA) into a more comprehensive accord. Excerpts:
How would you characterise the relationship between India and Chile?
This year (2019), Chile and India are celebrating 70 years of establishment of diplomatic relations, and I believe that our countries are currently under a unique position to further our bilateral economic relations. I would also like to highlight the outstanding economic relationship between our countries, primarily achieved through the PTA, which came into force in August 2007 and the positive effects generated by the expansion of the PTA in May 2017, which has substantially increased our bilateral trade.
The India-Chile merchandise trade dropped to $2.2 billion in 2018-19 from around $2.9 billion in the previous fiscal. How do you propose to boost bilateral trade that is currently far below the potential?
So, in the context of room for expansion of PTA, the opportunities are enormous. Around 70% of our tariff lines are yet to be opened for India and 90% of Indian tariff lines are yet to be opened for Chile. What we have seen after the last expansion of the PTA is that regardless of how limited it was, it has boosted our trade with India. So, I think we have proof that PTA has been successful and as we have agreed with India to substantially increase the number of tariff lines so that trade is more comprehensive.
What items do you think can help expand trading relations between the countries?
We have our wine. Also, there is a whole industry of health foods in Chile that we believe has a lot of potential in India given the change in consumption patterns and a growing middle class who Chile can serve. For instance, oats can be a good product to expand trade. We can also provide raw materials for making food products and also items like avocado and fish (salmon). Besides, something discussed by our President Sebastian Pinera and Prime Minister Narendra Modi which is to look at growth in services and investments (this will be dealt independently). Pharmaceuticals, especially high quality generic pharma (we have inked an MoU in this direction) and Chile is a big consumer of Pharma products.
Roughly a third of India’s exports to Chile comprise only cars and other vehicles, while 70% of Chile’s exports to India have been just ores, slag and ash. Do you think the lack of variety has hampered bilateral trade growth and how can the export product basket be widened to improve trade volumes?
We can help each other identify value chains on both sides. More knowledge of each other’s production structures will help expand trade. So, we are increasing our trade commission here. So, probably, we will be opening a second trade commission office in a large Indian city because we have to increase and remain close to India and understand the opportunities here. We are willing to make investment and efforts in Indian market and help India look at Chile as a gateway to Latin America.
Is Chile considering any free trade agreement with India?
Well, this is something which is part of our trade policy and we want and would like to see our trade relations from a more comprehensive manner. We want relations to expand and go deeper. After Brazil, we are the second largest importer in Latin America and India represents roughly 1% of our inputs so I think different opportunities can be explored to grasp that potential and must be accompanied by a proper framework. Certainly, we would love to advance in the medium term to a comprehensive economic agreement with India or a Free Trade Area (FTA), but we don’t want it in anyway to diminish the relevance of the steps we are taking today because I think both parties are determined to advance with an ambitious approach.
These are challenging times for global trade, given the US-China trade. How do you see the impact on Chile in particular and Chile-India trade in general?
Chile is highly exposed to international situations and like the one going on now because we are a very open economy. Our first and second trading partners are the China and the US. Half of our exports go to these markets and therefore the situation is stressing our economy and exports. Price of copper has dropped nearly 12% this year and overall because mainly of the impact in copper our exports have decreased by about 6% during the first 6 months of this year. So in this context what we look to make trade more resilient and stronger from this situation. In order to do so what we are doing is increasing our presence in markets like India, Southeast Asia and Asean countries. Besides, we will soon enter into an FTA with Indonesia and also the Comprehensive Economic Partnership Agreement. In India, we have started the process of modernisation of our PTA. This was discussed by our leaders at the G7 summit recently.
The US has been seeking reforms to the WTO. It has also complained that many countries are ‘self-designating’ themselves as developing nations at the WTO to enjoy special and preferential treatment. What is Chile’s views on these issues?
We are part of the countries, that according to the US, should waive their special and differential treatment because we are an OECD country and because we are a high income country according to the World Bank. But, we of course are not closed to the idea of further discussing this. As given the context of the world scenario around the trade uncertainty and the future of WTO, all WTO members should be willing to discuss to improve and strengthen the WTO. So in this particular case, I think as a developing country, we have a pragmatic approach in terms of being open to discuss and review and how we could improve the use of this special status, while at the same time not forgetting the need and purpose for this special and differentiated treatment.
Because it has rationale and simply it has to remain, but we are open to participate in a constructive manner to the discussion around these and the challenges of developing countries in trade. But we have many tasks still pending. For instance for us being a small and highly competitive economy and so subsidies on fisheries and agriculture are relevant. We have a clear position and we are trying to participate in exploring a solution.