India- MERCOSUR Preferential Trade Agreement

• 21 Oct 2025

For Prelims: Preferential Trade Agreement , MERCOSUR, World Trade Organization, European Union 

For Mains: India’s Preferential Trade Agreements, Strategic trade diversification and multipolar foreign trade policy 

Source: TH 

Why in News?

India and Brazil have announced a joint declaration to expand the India–MERCOSUR Preferential Trade Agreement (PTA), strengthening India’s trade ties with Latin America, especially within the Mercosur bloc of Brazil, Argentina, Uruguay, and Paraguay.

What are the Key Highlights of India–Brazil Joint Declaration for Deepening of India-MERCOSUR PTA? 

• India–Brazil Joint Declaration:   Both nations agreed that the PTA will be significantly broadened to include both tariff and non-tariff issues, allowing more trade to benefit from preferential access. 
  • A technical dialogue will soon begin, led by the Joint Administration Committee established under Article 23 of the PTA. This will help define the scope and modalities of the expanded deal. 
  • The move aims to broaden tariff preferences and scale up bilateral trade between India and Brazil from the existing USD 12.2 billion to USD 20 billion by 2030. 
• India - MERCOSUR PTA: India signed a Framework Agreement in 2003 to facilitate trade negotiations through reciprocal tariff preferences, followed by a PTA in 2004, which was implemented in 2009 in accordance with World Trade Organization (WTO). 
  • A PTA allows countries to give preferential tariff access on certain products, unlike FTAs, which are broader and cover more goods. 
  • India - MERCOSUR PTA is implemented through five annexes, covering tariff concessions for Indian and MERCOSUR products, rules of origin, safeguard measures, and a dispute settlement mechanism.  
    • These annexes provide the framework to operationalise and manage trade under the agreement. 
    • It currently covers around 450 tariff lines, providing limited duty concessions.

What is MERCOSUR?

• About:  MERCOSUR (Southern Common Market) is a regional trading bloc in Latin America, initially established by Argentina, Brazil, Paraguay and Uruguay, and subsequently joined by Venezuela and Bolivia. 
  • It was established in 1991 under the Treaty of Asuncion with the goal of promoting free movement of goods, services, capital, and people among member states. 
  • The Treaty of Ouro Preto (1994) gave MERCOSUR a legal identity and established it as a customs union, allowing common external tariffs and coordinated trade policies. 
  • The bloc’s headquarters are in Montevideo, Uruguay, and its official languages are Portuguese and Spanish. 
• Significance: MERCOSUR is the fourth largest integrated market after the European Union (EU), North American Free Trade Agreement (NAFTA), and Association of Southeast Asian Nations (ASEAN). 
  • MERCOSUR countries form the world’s 6th largest economy with a total population of 270 million people. 

What is the Significance of India-MERCOSUR PTA? 

• Strengthening South–South Cooperation: As key members of BRICS, G20, and IBSA, India and Brazil are enhancing trade and strategic ties, reinforcing South–South Cooperation. 
  • India’s engagement with PTAs in emerging Latin American economies is advancing its multipolar foreign trade strategy. 
• Enhanced Market Access: Wider tariff concessions will make Indian products more competitive in Latin America, reducing dependence on Chinese and European suppliers.  
  • In FY 2024-25, India’s exports to MERCOSUR were USD 8.12 billion, with imports at USD 9.36 billion, mainly from Brazil. 
• Strategic Trade Outreach: Deepening ties with MERCOSUR complements India’s push for Free Trade Agreements (FTAs) with the EU, the US, and Indo-Pacific partners, diversifying its trade portfolio. 
• Agriculture and Energy Opportunities: India can benefit from agricultural imports, energy resources, and raw materials, while exporting pharmaceuticals, engineering goods, and IT services.

What are the Challenges in Expanding the India-MERCOSUR PTA? 

• Agricultural Protectionism: MERCOSUR countries, especially Brazil and Argentina, have strong protection for their agricultural sectors, limiting India’s access for goods like sugar, pulses, and dairy. 
• Economic Asymmetry: MERCOSUR economies are heavily commodity-export oriented, while India is more diversified in manufacturing and services.  
  • This asymmetry makes it hard to agree on reciprocal concessions without deepening trade imbalances. 
• Consensus Among Member States: Unlike bilateral FTAs, all MERCOSUR countries  must approve product lists, tariff lines, and rules of origin, slowing decision-making. 
• Infrastructure and Logistics Constraints: Even with tariff concessions, trade flows can be limited by transportation, shipping, and supply chain inefficiencies between India and South America. 
• Non-Tariff Barriers (NTBs): Differences in standards, technical regulations, and customs procedures can restrict trade even if tariff concessions are granted. Harmonizing NTBs is often more challenging than tariff negotiations. 

What Measures can Strengthen India-MERCOSUR PTA? 

• Deepening Product Coverage: Expand the PTA beyond 450 tariff lines and prioritize mutually beneficial sectors such as IT, clean energy, and automotive components. 
• Addressing Non-Tariff Barriers:  Align standards, technical regulations, and sanitary measures with WTO norms, streamline customs procedures, and strengthen digital trade facilitation to boost ease of doing business. 
• Agricultural Negotiations and Market Access: Secure phased access for pulses, rice, and processed food while respecting MERCOSUR sensitivities. 
  • Explore cooperation in agri-technology, food processing, and joint value chains. 
• Strategic Alignment with South-South Cooperation: Leverage India-Brazil ties under BRICS and IBSA (India, Brazil and South Africa)  for coordinated policy support and promote investment linkages alongside tariff negotiations.
  

Conclusion 

The expansion of the India-MERCOSUR PTA offers a strategic opportunity to deepen trade, diversify markets, and strengthen South–South cooperation. Addressing non-tariff barriers and agricultural sensitivities will be key to its success.

Read more: India's Diplomatic Shift to Latin America 

Drishti Mains Question:

Q. Critically examine the significance of expanding the India-MERCOSUR Preferential Trade Agreement in India’s foreign trade strategy.

Frequently Asked Questions (FAQs) 

1. What is MERCOSUR? 
MERCOSUR (Southern Common Market) is a Latin American trading bloc established by Brazil, Argentina, Paraguay, and Uruguay in 1991 to promote free movement of goods, services, capital, and people. 

2. When was the India–MERCOSUR PTA signed and implemented? 
The PTA was signed in 2004 following a Framework Agreement in 2003 and came into effect in 2009, covering around 450 tariff lines. 

3. Why is the India–MERCOSUR PTA significant for India? 
It strengthens South–South cooperation, enhances market access in Latin America, supports exports in pharmaceuticals, engineering, and IT, and diversifies India’s trade portfolio beyond China and Europe.