INDIA-MERCOSUR

What is it?

• MERCOSUR is a trading bloc in South America region comprising of Argentina, Brazil, Paraguay and Uruguay
• This is modelled on the lines of European Union, and is the fourth largest integrated market after the European Union (EU), North American Free Trade Agreement (NAFTA) and Association of Southeast Asian Nations(ASEAN)

Fact Check  MERCOSUR has negotiated only one FTA since its inception, i.e. with Israel

Preferential Trade Agreement between MERCOSUR and India

Purpose of the Agreement

• For the creation of a Free Trade Area between MERCOSUR and the Republic of India , for a first stage of action aimed at increasing trade, including the mutual granting of tariff preferences
• For regional integration and trade among developing countries, including through the creation of free trade areas, that are compatible with the multilateral trading system, and contribute to the expansion of world trade
• Integration of the economies into the global economy, and to the social and economic development of their people

Highlights of the Agreement

• • General Exceptions
    • Nothing in this Agreement shall prevent any Signatory Party from taking actions and adopting measures consistent with the Articles XX and XXI of the GATT 1994
      • These include the national security exceptions in General Agreement on Tariffs and Trade (GATT)
  • National Treatment
    • On matters relating to taxes, fees or any other domestic duties, the products originating from the territory of any of the Signatory Parties shall receive in the territory of the other Signatory Parties the same treatment as applied to the national products
  • Antidumping and Countervailing Measures
    • In relevance to this, the Signatory Parties shall be governed by their respective legislation, which shall be consistent with GATT 1994 agreement, and the WTO Agreement on Subsidies and Countervailing Measures
  • Technical Barriers to Trade
    • The Signatory Parties shall abide by the rights and obligations set out in the WTO Agreement on Technical Barriers to Trade
    • Also, The Signatory Parties shall co-operate in the area of standards, technical regulations and conformity assessment procedures with the objective of facilitating trade
  • Sanitary and Phytosanitary Measures
    • The Signatory Parties shall abide by the rights and obligations set out in the WTO Agreement on the Application of Sanitary and Phytosanitary Measures
  • The Joint Administration Committee
  • Such a committee set up under the agreement will have following functions:
    • To ensure the proper functioning and implementation of this Agreement, its Annexes and additional Protocols, and continuation of the dialogue between the Parties.
    • To consider and submit to the Parties any modifications and amendments to this Agreement.
    • To evaluate the process of trade liberalisation established under this Agreement, study the development of trade between the Parties and recommend further steps to create a Free Trade Area
    • To perform other functions that may arise from the provisions of this Agreement, it’s Annexes and any additional Protocols.
    • To establish mechanisms to encourage the active participation of the private sectors in areas covered by this Agreement between the Parties.
    • To exchange opinions and make suggestions on any issue of mutual interest relating to areas covered by this Agreement, including future actions.
    • The creation of subsidiary bodies as may be necessary, inter alia on Customs, Trade Facilitation and Technical Barriers to Trade, and Sanitary and Phytosanitary Measures.
  • Depositary
    • The Government of the Republic of Paraguay shall be the Depositary of this Agreement for the MERCOSUR
  • Annexures
    • The five finalized Annexes are following:
      • Annex I to the PTA – Offer List of MERCOSUR for tariff concession on Indian products in MERCOSUR. It contains 452 products.
      • Annex II to the PTA – Offer List of India for tariff concession on MERCOSUR’s products in India. It contains 450 products.
      • Annex III to the PTA – Rules of Origin
      • Annex IV to the PTA – Safeguard Measures
      • Annex V to the PTA – Dispute Settlement Procedure (DSP)
  • Major Products covered
    • The major products covered in Indian offer list are meat and meat products, organic & inorganic chemicals, dyes & pigments, raw hides and skins, leather articles, wool, cotton yarn, glass and glassware, articles of iron and steel, machinery items, electrical machinery and equipment, optical, photographic & cinematographic apparatus
    • The major product groups covered in the offer list of MERCOSUR are food preparations, organic chemicals, pharmaceuticals, essential oils, plastics & articles, rubber and rubber products, tools and implements, machinery items, electrical machinery and equipment

Recent Developments

• • India has been reaching out to the members of the grouping to fast track negotiations for the expansion of the existing Preferential Trade Agreement (PTA)
    • The member countries have been in talks with India, seeking expansion of the existing PTA, in an effort to achieve a trade target of $30 billion in 2030
    • While the preferential trade agreement (PTA) between India and Mercosur is presently limited to just 450 products, the two sides have raised their ambitions and are currently negotiating preferential access to about 3,000 items

Associated Issues/Roadblocks

• Structural Asymmetries
  • There are power and structural asymmetries among the members; and there is no convergence on their interests
  • For Brazil, joining the Mercosur responded to a strategic aim in international negotiations more than to commercial reasons. In the case of Argentina and Uruguay, the interest was commercial: to access the market of the South American giant
• Imperfect market
  • Mercosur is, actually, an imperfect common market because the full liberalization of tariffs among the members have not been achieved after 30 years. In this sense, the lists of exceptions are still in practice
  • Therefore the bloc is not complying with its founding objective of creating a great common market
• Protectionist stalemate with India
  • There is a stalemate in the negotiations regarding the deepening of the agreement of 2004 due to the fact that both actors apply protectionist policies to the goods they export and both have signed few trade agreements
  • The pressure of the industrial sectors of Argentina and Brazil and the agricultural sector in India, have been important in this delay

Way forward

• India should expedite the process of expansion of PTA with MERCOSUR, for better negotiations and in more areas of cooperation
• On the whole, the advantage of Mercosur for India, and especially its wealthy, vested interest business connections, is that the Mercosur bloc is some distance away and is unlikely to pose much of a threat to domestic businesses in the Indian domestic market.
  • Hence, the potentialities in sectors relevant for both, like energy, agriculture and its technology, complementarities in the pharmaceutical sector, IT and creative industries should be harnessed together, to mutually benefit from the agreement