Will India-MERCOSUR PTA be impacted by the new leader of Brazil?

By: | Published: December 31, 2018 4:45 PM

President-elect Jair Bolsonaro takes office in Brasilia tomorrow Jan. 1. The new administration is expected to negotiate with the three other full members of the Common Market of the South (Mercosur) Uruguay, Paraguay and Argentina to lift the restrictions that prevent member states from negotiating and signing bilateral free trade agreements.

india brasilia ties, Jair Bolsonaro, Uruguay, Argentina, PTA, India-MERCOSUR ties, narendra modiThe MERCOSUR is seeking greater market access to India and lower duties in both industrial and agricultural products.

President-elect Jair Bolsonaro takes office in Brasilia tomorrow Jan. 1. The new administration is expected to negotiate with the three other full members of the Common Market of the South (Mercosur) Uruguay, Paraguay and Argentina to lift the restrictions that prevent member states from negotiating and signing bilateral free trade agreements.

Impact on India

India needs to watch what will happen in the next few months as it had asked the member countries of the grouping to fast-track negotiations for the expansion of the India-MERCOSUR Preferential Trade Agreement (PTA), which is in line with Prime Minister Narendra Modi’s strategy of expanding India’s trade basket.

The MERCOSUR is seeking greater market access to India and lower duties in both industrial and agricultural products.

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As has been reported by The Financial Express Online, all stakeholders have been in discussions to increase the tariff lines in order to boost the trade volumes. The expansion of the agreement will enhance trade relations between the countries involved, and the trade volume target is set at $30 billion in 2030.

All sides have agreed that there is an urgent need to significantly increase the number of tariff lines in the existing India-MERCOSUR PTA so that the agreement could cover a sizable proportion of bilateral trade.

In a meeting held in 2017, a list of 484 tariff lines was handed over to Brazil which was holding the presidency of the grouping at the time. They had offered the same number of lines to India.

Both sides have already exchanged lists of items where each side is seeking greater market — India has exchanged a wish list of 4,836 tariff lines mentioning 8-digit HS codes with MERCOSUR in July 2016 and the MERCOSUR grouping has exchanged their wish list of 3,358 tariff lines.

What is a PTA?

It is a limited Free Trade Agreement, in which the partner countries agree to reduce import duties on few select products for the other. Under the existing India MERCOSUR PTA, such is a list is limited to just 450 products. However both sides have become more ambitious and aiming at providing preferential access to about 3,000 items.

What India wants?

India wants to export a wide range of pharmaceuticals, engineering goods and processed foods.

So far it has preferential access in the MERCOSUR for organic chemicals, pharmaceuticals, essential oils, plastics & articles, rubber and rubber products, tools and implements, machinery items, electrical machinery and equipment.

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