Gold tariff concessions, which account for 80% of India’s imports from Peru, are the most challenging issue for New Delhi under the proposed free trade agreement with the South American country, a report said on Sunday. The Global Trade Research Initiative (GTRI), an economic think tank, said that gold, a high-value, low-volume product, attracts a basic tariff of 10% in India, and even a small tariff preference may lead to a significant increase in imports. India and South American country Peru are negotiating a free trade agreement to boost bilateral trade and investment between the two countries.

In such an agreement, two trading partners significantly reduce or eliminate tariffs on the largest number of goods traded between them, in addition to relaxing norms to facilitate trade in services. The next round of negotiations is expected to begin this week in Lima, Peru.

Ajay Srivastava, founder of GTRI, said: “Gold tariff concessions are the most challenging issue for India, accounting for US$1.8 billion or 80% of India’s imports from Peru in FY23.” He believes that in the India-UAE free trade After the agreement provides tariff concessions, gold imports from the United Arab Emirates, India’s second largest gold supplier, will double in 2023 compared with 2022.

“If concessions are made, India’s fifth-largest supplier Peru could see a similar surge in gold imports,” the report said. India’s global unwrought gold imports are expected to reach $43 billion by 2023, the report said, Switzerland accounts for 40% of this, adding that given Peru’s gold mines, its gold would easily meet any rules of origin criteria.

“FTAs provide concessions on effective tariffs rather than bound tariffs. Excluding gold from FTAs ​​would violate Article 24 of the World Trade Organization, which requires tariff reductions for a substantial amount of trade covered by FTAs,” Sri Lanka Rivastava said. He also said that India’s bound tariff on gold is set at 40%, but the current applicable tariff is 10%.

“FTA allows for concessions in effective tariffs rather than bound tariffs. If the FTA does not include gold, it may not meet the conditions of WTO Article 24 for FTAs ​​to reduce taxes on substantive trade.” Srivastava said. Peru has bilateral trade agreements with major economies such as the United States, the European Union, China, Australia and Singapore. It also has multinational agreements with the Pacific Alliance (Chile, Colombia and Mexico) and the Andean Community (Bolivia, Colombia, Ecuador).

These free trade agreements allow most products imported into Peru to be imported duty-free. “A notable aspect of Peru’s trade regime is its low tariff barriers, with a large proportion of goods being duty-free. 70.4% of goods in the Peruvian tariff schedule are duty-free. The simple average tariff is 2.2%. This means that removing tariffs will not give Indian products bring substantial market access.”

Negotiations for the agreement began in 2017, and the fifth round concluded in August 2019. Negotiations are on hold due to the coronavirus pandemic. During 2022-23, the bilateral trade volume between India and Peru was US$3.12 billion (exports of US$866 million and imports of US$1.4 billion).

India exported goods worth US$865.91 million to Peru and imported goods worth US$2.25 billion. India’s major exports to Peru include motor vehicles/cars ($282 million), cotton yarn ($101 million), electrical and electronic products ($51.3 million), machinery ($50.2 million), tires ($17 million) and pharmaceuticals ( US$87.3 million), and imported items include gold (US$1.77 billion), copper ore and concentrate (US$391 million), and silver (US$14.5 million).

Peruvian companies are also looking to export agricultural products such as avocados, fresh grapes and blueberries to India, as well as natural resources such as calcium phosphate. India and Peru (population 34.2 million) are more than 17,000 kilometers apart.

Peru’s economy is far away and small in scale. It mainly focuses on ores and mineral products, which is the main reason for the low bilateral trade volume. India’s gross domestic product (GDP) is US$3.75 trillion, far exceeding Peru’s US$268 billion, and the economy is much larger.

In global trade, India’s exports in 2023 will reach US$760 billion, significantly higher than Peru’s exports of US$66 billion. Likewise, India’s imports were higher at $840 billion, while Peru’s imports were $56 billion.

(This story has not been edited by News18 staff and is published from associated news agency – PTI)