Mercosur and India in PTA

24-Jul-06

The preferential trading arrangement (PTA) between India and Mercosur, scheduled to be implemented later this year, will allow preferential access to the 460-odd items from India to the markets of Argentina, Brazil, Paraguay and Uruguay. India will give preferential access to 424 products originating from the 4 Mercosur members including chemicals, machine tools, petrochemicals, steering boxes and electrical equipment. India is eager to enter the Mercosur region where it currently exports less than 1%, of the total trade estimated at US$ 200 bln annually. To explore the untapped potential of the region, India has decided to show unique flexibility in the area of rules of origin (ROO) guiding the agreement and settle for a lenient criteria- using a single criteria (value-addition) instead of the favoured twin-criteria (value addition plus change-in-tariff heading). Interestingly, India's refusal to change its demand for a twin-criteria for ROO has delayed a number of bilaterals India has negotiated so far. ROO is an important part of a bilateral agreement as it determines which product should be considered as originating from the participating country and given preferential treatment and which should be excluded.