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India-Chile Preferential Trading Agreement

Region:
World
Category:
Economy
Article type:
Informed
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Under the expansion of the PTA, Chile has offered concessions to India on 1,798 tariff lines with Margin of Preference (MoP) ranging from 30-100 per cent, with India reciprocating on 1,031 tariff lines with MoP at 10-100 %

With an aim to help in doubling of exports to the Lain American nation in near future, the Modi led government has given its approval for the expansion of the Preferential Trade Agreement (PTA) between India and Chile. Under the expansion of the PTA, Chile has offered concessions to India on 1,798 tariff lines with Margin of Preference (MoP) ranging from 30-100 per cent, with India reciprocating on 1,031 tariff lines with MoP at 10-100 %. Under the proposed expanded PTA, 86 % of India's exports to Chile will get covered with concessions, which is likely to result in doubling of India's exports in future.

Agribusiness sector in Chile has grown tremendously in the last two decades. The domestic market for agricultural products is relatively small, forcing producers to rely heavily on exports, thus leading to the worldwide recognition of its agribusiness industry. Chile enjoys several competitive advantages. For instance, its position in the Southern Hemisphere provides a seasonal cycle opposite to those of the principal consumer markets, which are primarily located in the Northern Hemisphere. Thus, Chile can produce fresh vegetables and fruits for Northern markets during their winter season. It is a top exporter of fresh fruits in the southern hemisphere and is also 5th largest exporter of wine. Through Chile's trade agreements, its agricultural products have gained access to markets contributing 77% of the world's GDP. Andrés Rebolledo, Director General for International Economic Relations, Ministry of Foreign Affairs of Chile, speaks with Huma Siddiqui in an exclusive interview. Following are excerpts:

What does the Expanded PTA with India mean for fruit imports from Chile?

Today, Chile is a major player in the global food industry. It is a reliable supplier of safe and healthy food products which delight international markets. Chile is internationally recognized for its many advantages, such as its geographical isolation (the Atacama Desert, the Pacific Ocean, the Andes mountains and the Patagonian ice fields), which converts it into a phytosanitary island that protects its products from pests and diseases; its Mediterranean climate that is beneficial for obtaining optimal raw materials; staggered production and counter-seasonality with respect to the Northern Hemisphere.

Other advantages include Chile's political and economic stability, its modern infrastructure and export logistics, its use of technology for producing and processing products and its compliance with strict international standards and certifications, and an extensive network of free trade agreements with major economies around the world.

Considering the significant size and growth of the Indian market, there is great potential for fruits from Chile to increase their market share. The Expanded PTA will increase preferential tariffs for both countries. The Chilean fruits which will benefit from this process include avocadoes, clementines, grapes, apricots, cherries, nectarines, raspberries, cranberries and kiwis.

What is the new shipping route that is making news? How will it help with importing fruit from Chile? How long will shipments take now compared to previously?

The aim of this process is to extend the number of products which currently have preferential tariffs in the PTA. It also considers a deepening in matters relating to rules of origin, sanitary and phytosanitary measures (SPS), technical barriers to trade (TBT) and customs procedures in order to modernize and adapt them to modern standards. Although shipping routes are not part of trade negotiations, attention to such topics attests to both countries' interest in ensuring secure trade routes and facilitating the flow of trade.

What will be the impact on costs? Which fruits will India now be importing from Chile?

The expanded PTA will allow the two countries to increase the number of products which are covered by the PTA from 474 to around 2,800. It will also provide tariff preference margins of between 50% and 80% in the case of India, and between 80% and 100 % in the case of Chile. In the agricultural sector, the following fruits will benefit from this process: avocadoes, clementines, grapes, apricots, cherries, nectarines, raspberries, cranberries and kiwis. These fruits will have a new margin of preference of between 20% and 100%, which will allow Chilean products to access the market at lower effective tariffs than products from competing countries.

What is the current status on the negotiations to improve access for Chilean cranberries, nuts and avocados and for Indian coconuts and bananas?

Cranberries and avocados from Chile will have a new tariff preference of 50%. In the case of nuts from Chile, just hazelnuts will benefit from the new 50% preferential rate.

For bananas imported from India, these will have a new tariff preference of 60%, while coconuts will remain at the current tariff of 6%.

Are there any plans to involve India's agri-food sector in Chile?

The enhancement of the PTA will grant new opportunities for various sectors of the Indian economy, including the agricultural sector. In this context, the scope of the enhanced PTA does consider preferential tariff rates for Indian agricultural products.

The enhancement of the PTA is seen as just the first step in the search for a more integrated trade relationship between the two countries. Looking ahead, both countries will work hard at incorporating new elements to build the future backbone of a trade and economic relationship based on trade in goods, services, investment and cooperation.