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India and Chile Cooperating under a Preferential Trade Agreement

By IBLS Editor

India and Chile signed a Preferential Trade Agreement (PTA) in 2005 as the initial step towards a potential Free Trade Agreement between these two nations.  India's Cabinet approved the PTA on February 23, 2006, and came into force by Custom Notification No. 101/2007-Customs dt. 11/09/2007. The Chilean Parliament approved the PTA in April 2007 and its implementing Decree was issued on August 16, 2007. Thus, this agreement that promotes economic cooperation between an Asian and a Latin American economic leader is fully in force. Following there is a synopsis of the India-Chile PTA.

The Indian-Chile PTA's goal is to establish economic cooperation between these two countries and set the rules to govern this relationship. Both countries have working groups that continue functioning towards the implementation of a Free Trade Agreement, as these nations' ultimate goal. The PTA defines preferential treatment as "any concession or privilege granted under this Agreement by a Party through the progressive reduction and/or elimination of tariffs on the movement of goods."  The PTA defines tariffs as any customs or import duty and any charge related to the importation of goods.  These charges do not include (1) internal taxes imposed according to the GATT 1994- Article III: 2; (2) antidumping or countervailing duty; and (3) fees or charges related to importation commensurate with the cost of services rendered.  According to Article V, India and Chile will accord national treatment to their goods according to Article III of GATT 1994 and provided that the rules of origin as set out in Annex C are followed.

The Indian-Chile PTA provides fixed tariff preferences to products from both countries.  It has two Annexes containing the list of products receiving these preferences and three Annexes regarding the Rules of Origin, Preferential Safeguard Measures, and Dispute Resolution Procedures.  Through this PTA, India offers tariff preferences ranging from 10% to 50% on 178 tariff lines at the 8 digit level while Chile offers the same tariff preferences on 296 tariff lines at the 8 digit level.  For instance, India offers preferential treatment to meat, fish, rock salt, iodine, copper ore and concentrates, chemicals, leather products, newsprint and paper, wood and plywood articles, some specific industrial products, shorn wool and noils of wool, among others. Chile offers preferential treatment to agricultural products, chemicals, and pharmaceuticals, dyes and resins, plastic, leather products, textiles and clothing, footwear, rubber and miscellaneous chemicals, some specific industrial products, etc.

The PTA expressly prohibits import and export restrictions to the other party's goods.   Regarding export subsidies for agricultural products, the PTA recognizes that the parties are working towards a final free trade agreement and that these subsidies may be necessary for some time. Yet, the parties agreed to follow the WTO Doha Ministerial Declaration (WT/MIN(01)/DEC1) and the Decision adopted by the WTO General Council on 1 August 2004 (WT/L/579).  On the issue of Global Safeguards, the PTA allowed the parties to establish these provided that they are consistent with Article XIX of GATT 1994 and the WTO Agreement on Safeguards.  No other safeguards will be allowed.  Under the PTA, India and Chile affirmed their rights and obligations with respect to each other under the WTO Agreement on Technical Barriers to Trade.  Thus, to promote trade and cooperation between them, the parties will harmonize their technical regulations and conformity assessment.  Custom valuation, an issue extremely important for e-commerce transactions, shall be governed by Article VII of GATT 1994 and the WTO Agreement on the Implementation of Article VII of GATT 1994.  Disputes arising under the PTA will be solved according to a dispute settlement procedure included in Annex E. 

The India-Chile PTA is a comprehensive economic and trade cooperation agreement and, given the international trade commitment observed from these two nations, will definitely lead to a free trade accord.  A Joint Administration Committee will meet at least once a year to review the progress in implementing this agreement and to ensure that both countries equally benefit from this preferential treatment relationship.  Consumers and, particularly, e-commerce buyers should be aware of bilateral and regional trade agreement because of their incidence on  the final price to be paid for goods or services.     

Full post as published by IBLS Internet Law Blog on December 08, 2008 (boomark / email).