India, Peru to begin sixth round of FTA talks today
Financial Express - 12 February 2024
India, Peru to begin sixth round of FTA talks today
By Mukesh Jagota
Peru is a mineral rich nation and a leading producer of gold, silver, copper, zinc and lead. Some part of the gold mined in Peru is refined in Switzerland and from there finds its way to international markets.
As negotiators from India and Peru start the next round of talks on a bilateral Free Trade Agreement in Lima today, the tariff concessions on gold would be the most challenging issue for New Delhi.
Negotiators will meet for the sixth round of talks from February 12 to 15 and from the Indian side diversification of the import basket in terms of essential minerals and metals is one of the expected outcomes of the agreement. India is also seeking to explore the untapped potential of the Latin America and Caribbean (LAC) region.
Peru is a mineral rich nation and a leading producer of gold, silver, copper, zinc and lead. Some part of the gold mined in Peru is refined in Switzerland and from there finds its way to international markets.
According to trade policy think tank Global Trade Research Initiative, gold, a high-value product with low volume, attracts a 10% basic customs duty in India and even minor tariff concessions could lead to a significant increase in imports. After tariff concessions under the India-UAE Free Trade Agreement, gold imports from the UAE, India’s second-largest gold supplier, doubled in the calendar year 2023 compared to 2022. Peru, the fifth-largest supplier to India, could see a similar surge in gold imports if concessions are made,” GTRI said in its report.
In 2022-23 around 80% of the total imports from Peru comprised gold worth $1.8 billion. In 2023, India’s global imports of unwrought gold were estimated at $ 43 billion, with Switzerland accounting for 40% of these imports.
Given Peru’s gold mines, its gold would easily meet any Rules of Origin criteria. Rules of Origin provisions in a FTA between two countries or a group of countries lay down the extent of local value addition in a product to qualify for trade on concessional terms. “Excluding gold from an FTA would violate the World Trade Organization’s Article XXIV, which requires duty cuts on substantial trade for FTAs,” GTRI said.
India’s bound duty (the maximum it has agreed to at WTO) on Gold is 40% and current applied tariffs are 10%. In FTA concessions are sought and given on applied tariffs. Apart from gold, other imports from Peru are copper concentrates ($391 million), calcium phosphate ($ 21.6 million) and silver ($ 14.5 million).
In FY 23 India imported $2.25 billion worth of goods from Peru and its exports stood at $ 865.91 million.
Key Indian exports to Peru are automobiles, textiles and pharma products. Apart from minerals Peru is looking at exporting agricultural products like avocados, fresh grapes and blueberries to India. Most of the blueberries that are sold in India are sourced from Peru.
India and Peru had first started negotiating an FTA in 2017 and five rounds of talks had been held till August 2019 before COVID pandemic disrupted the process. In August last year it was decided to re-start the negotiations. Prior to the sixth round virtual intersessional track-wise meetings are being held for mutual clarity on the text.
According to GTRI the tariff elimination by Peru will not result in substantial market access for Indian products as 70% of the items in Peru’s tariff schedule are already duty-free and simple average tariff is 2.2%.
“In the services sector, India may push for commitments in sectors like IT, finance, tourism. However, the potential gains in services are limited, as countries typically agree to bind existing levels of policy commitments, implying a continuation of the status quo. Low level of trade is a major deterrent,” GTRI said.
