India and Peru are set to convene for the sixth round of Free Trade Agreement (FTA) discussions next week in Lima. This initiative, spotlighted by the Global Trade and Research Initiative (GTRI), promises to unlock new dimensions of bilateral trade, particularly spotlighting gold—a sector fraught with both prospects and intricacies.
This forthcoming India-Peru FTA delineates India’s ambitious stride towards a comprehensive economic partnership within Latin America, diverging from previous Preferential Trade Agreements with Chile and the Mercosur bloc. This agreement extends beyond tariff concessions, encompassing services, thereby positioning Peru as a crucial conduit for India’s strategic penetration into the Latin American market.
The dialogue unfolds against a backdrop of burgeoning gold imports into India, especially post tariff adjustments under the India-UAE Free Trade Agreement. Peru, ranking as India’s fifth-largest gold supplier, stands at a juncture where favorable concessions could potentially replicate the UAE’s export boom. Notably, in FY23, gold represented a staggering 80 percent of India’s imports from Peru, amounting to $1.8 billion.
The deliberation on gold market access emerges as a nuanced challenge. With India levying a 10 percent basic customs duty on gold, even marginal tariff relaxations could precipitate a marked influx of imports, given the commodity’s high-value, low-volume profile. This scenario necessitates adept negotiation prowess from New Delhi, as Peru seeks to amplify its gold exports through reduced import duties.
The ambit of the proposed FTA transcends goods, embracing sectors ranging from Rules of Origin and Customs Procedures to Trade Facilitation, alongside Technical Barriers to Trade, Sanitary and Phytosanitary Measures, illustrating a comprehensive approach to fortifying bilateral trade ties. The inclusion of chapters on Services, Movement of Natural Persons, Trade Remedies, and Investment underscores the extensive scope of this agreement.
The trajectory of trade between India and Peru evidences a consistent ascent, with the trade volume reaching $3.12 billion during FY 2022-23. Indian exports to Peru span an array of sectors including motor vehicles, cotton yarn, and pharmaceuticals, counterbalanced by Peruvian exports primarily comprising gold, copper ores, and concentrates.
The India-Peru FTA signals a strategic quest to deepen economic relations, fostering growth and establishing a resilient partnership between India and Latin America. As negotiations advance, both nations stand on the precipice of charting a course towards a more integrated and mutually advantageous economic future.
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