In a strategic move to secure better market access for its exporters, India has formally proposed a limited trade agreement with Mexico. The initiative aims to address the challenge of high tariffs that Indian products like automobiles, pharmaceuticals, and textiles currently face in the Mexican market.
The Core Proposal: A Limited Trade Agreement
The Indian government, through its commerce ministry, has put forward the idea of a limited or sectoral trade pact to its Mexican counterparts. This proposal was a key topic of discussion during the recent visit of a high-level Mexican delegation to New Delhi. Unlike comprehensive free trade agreements (FTAs), this proposed pact would focus specifically on reducing or eliminating tariffs for a select group of goods where Indian exports have strong potential.
This targeted approach is seen as a pragmatic solution to an immediate problem. Mexico imposes tariffs ranging from 10% to 35% on numerous products imported from India. These significant duties put Indian goods at a competitive disadvantage compared to products from countries that already have preferential trade agreements with Mexico.
Why Mexico? A Strategic Trade Partnership
Mexico holds a unique and important position in India's global trade strategy. It is not only a major economy in Latin America but also serves as a critical gateway to the larger North American market, including the United States and Canada, through existing regional trade networks.
Despite the tariff barriers, bilateral trade between the two nations has shown robust growth. According to official data, two-way trade reached approximately $8 billion in the 2023-24 financial year. However, Indian officials and industry experts believe this figure could be substantially higher if the tariff obstacles are removed. Key sectors poised to benefit from a pact include:
- Automobiles and Auto Components: A major export sector for India facing high Mexican tariffs.
- Pharmaceuticals and Chemicals: India's generic drug industry seeks easier market entry.
- Textiles and Apparel: To compete with suppliers from nations that have FTAs with Mexico.
- Engineering Goods: Including machinery and electrical equipment.
Next Steps and Broader Trade Strategy
The proposal marks the beginning of a negotiation process. The Mexican delegation has taken India's suggestion back for internal review and consultations. The next step involves both nations conducting a joint feasibility study to identify the specific sectors and products that would be covered under the limited agreement and to assess the potential economic impact.
This move with Mexico aligns with India's broader, calculated approach to international trade. Rather than rushing into sweeping multilateral deals, the country is actively pursuing tailored, bilateral agreements that address specific export hurdles. Similar targeted discussions and agreements are underway with other key partners to enhance trade flows and strengthen economic diplomacy.
Successfully concluding a trade pact with Mexico would represent a significant win for Indian exporters, providing them a stronger foothold in a valuable market and helping to correct the current trade imbalance. It underscores India's proactive stance in crafting trade policies that directly support its domestic industries in the global arena.
