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Posted: Monday, 30 Sep 2019 06:46

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Import Duties on Wines from Chile ruled out in Proposed FTA

Sep 30: Several import duty cuts are being proposed by both Chile and India to further the trade of $2.5 billion between the two countries but India has reportedly regretted bringing the duties down on wines as it is considered a sensitive segment, writes Subhash Arora who is always posed this question from Latin wine producers and regrets it is not feasible due to economic factors involving domestic wines and is not surprised the government is moving on the expected lines

India hopes to export more generic drugs and textiles to Chile while the South American country wants to increase its exports of fish, oats, fruits, industrial products and chemicals, according to the terms of reference exchanged for expanding the bilateral business through a Foreign trade Agreement (FTA). India hopes to source more Lithium from Chile to promote the use of e-vehicles in India, According to The Hindu Business Line these points were discussed between Indian Commerce Secretary Anup Wadhawan and Special Envoy of Chile for Asia Pacific Eduardo Frez Ruiz-Tagle.

A partial FTA was signed between the two countries about a decade ago and the efforts have been on for a full-scale FTA since then. The trade between the two countries are at a relatively low level partly because of the long distance. Once the new treaty takes place there will be greater incentive for exporters in both countries to increase business. The two countries will then also explore a full Comprehensive Economic Partnership Agreement including goods, services and investments.

Apparently, India has not signed any FTA or Preferred Trade Agreement (PTA) with any government for 4 years now. The all important treaty talks between India and EU where talks of duty reduction on wine was an important contentious issue where both parties were firm in their stand, fizzled out in 2013 after 7 years of discussion, a year before the general elections took place in India. The new government is taking its time to sign any new FTAs, a few minor, partial ones notwithstanding.

Chile has offered concessions to India on 1,798 products with duties preference margin of 30-100 per cent. India has offered preference on duties to Chile on 1,031 products with the margin ranging from 10-100 per cent. Although a number of farm and food products including meat and fishery products and vegetable oils, it has not agreed to reduce import duties on Chilean wines as it is a sensitive sector, according to the Report.

In fact, there has been a strong resistance from the domestic wine producers who are building the foundation of the Indian industry without much aid from the government and the wines are relatively expensive. They need time to establish the industry without much financial support from the  government, especially in terms of tariffs. It is important that there are enough duty barriers so foreign producers cannot dump wine into India. Chile offers value for money wines at a price as low as $1.5 a bottle (though decent wines rarely cost less than $2 even from Chile). At a landed price of around Rs. 140 a bottle, it would not be possible to compete against the export-oriented industry of Chile and hence the resistance and strong lobby from Maharashtra and Karnataka producers.

Ironically, they producers are not against duty reduction on the higher priced Chilean wines and this could be used as leverage by the government by allowing them rebates on higher priced quality wines. But perhaps the government does not want to come out of its comfort zone on the import duty issues and believes in arm-twisting of the fragmented imported wine industry and the Indian producers who do not have a very strong intra-industry alliance except support and empathy from the State legislators who in turn are fairly powerful. In any case, it is in the interest of the country to encourage Indian wine production. In fact, ‘Make in India’ is a slogan handed down by the inimitable Prime Minister Mr Narendra Modi.  

Interestingly, India has increased dialogue with Chile as a part of its strategy of expanding business with Latin America to take its trade interests beyond the traditional markets of the EU and the US.

Subhash Arora

 

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