Post-PTA, India-Mercosur trade to touch $10 bn

With preferential trade agreement with the Mercosur group coming into effect from June 1, the combined trade between India and the South American bloc is expected to more than double to $10 billion in the next five years.

"This development will open up new trade and business opportunities for the nations at a time when adverse fallout of the international financial turmoil has engulfed the world," said G V Pappalardo, ambassador of Paraguay, one of the Mercosur members.

The South American Common Market, more commonly known as Mercosur, is the largest integrated market after the European Union and North American Free Trade Agreement. This treaty is, significantly, the bloc's first outside the region.

At present, the goods' flow between the parties stood at $3.9 billion for the nine months ended December 2008. Unlike a free trade agreement, PTA only reduces the tariff of agreed list of items to a lower rate on majority of tariff lines.

Typically in an FTA, duty rates on more than 80 per cent of tariff lines are completely eliminated over a period of time.

"The PTA will allow a more favourable setting for the exchange of goods between partners by lowering tariff rates," said Ficci secretary-general Amit Mitra.

India and Mercosur have agreed to reduce duty by 10 to 100 per cent in 450 products that are traded.

The economic bloc comprises Brazil, Argentina, Uruguay and Paraguay. Among the member nations, India has the highest volume of trade with Brazil. However, with possible inclusion of Venezuela, a leading oil seller, in Mercosur, the trade volume is expected to increase substantially, experts said.

Venezuela is currently a special member of Mercosor.

India's major trade items to Mercosur include drugs, pharmaceuticals and fine chemicals and major imports from the South American trade block comprise edible oils (primarily soya bean), metal scrap and non-electrical machinery. This, according to Mitra, offers a huge playing field beneficial to both parties.