India-Chile should target five billion dollar trade by 2014

New Delhi, Mar.15 (ANI): In order to propel the economy during this economic downturn, CII recommends boosting trade ties with other Latin American countries like Chile, and leverage the immense potential that exists between the two countries, by setting up bilateral forums to harness the economic linkages.

A study by CII finds ample scope for business and recommends targeting USD five billion trade between India and Chile by 2014.

In a paper to be released on Monday, CII notes that an institutionalised bilateral Trade and Investment Promotion Forum between India and Chile should have the active participation of both governments as well as industry leaders in key sectors. Continuous and regular interaction and dialogue between governments and industry of both countries would create further opportunities to increase bilateral trade and economic cooperation. The two nations should use the period of the economic downturn to consolidate on existing trade and build avenues for future trade.

The two economies can benefit from each other's macroeconomic experiences by sharing data and policy interventions, especially during the crisis period. Chile's sound macroeconomic management and commitment to liberalization has transformed it into one of most efficient and business-friendly environments in the region, with stable and strong macroeconomic fundamentals. The Heritage Foundation ranks it as 11th in its 2009 Index of Economic Freedom, citing its transparent and efficient regulatory systems. Similarly, India's calibrated approach to reforms has helped protect it from the worst of the economic crisis.

The chief barriers to trade that have been cited are distance, lack of information, poor connectivity of air and shipping lines, language, unfamiliarity with local trade regulations, etc. However, these factors have not deterred robust trade between Chile and key exporting nations in Asia.

It is evident that given the strong industrial profile of both countries, as well as synergies arising from large number of agri-climatic zones in both countries, there is high potential in bilateral trade.

Both countries should view each other as stepping-stones for their respective regions, according to the CII. India is geo-strategically situated at the center of East, West and Central Asia, while Chile's trading agreements can help India access other markets in South America. Chile has FTAs with Canada, USA, EU, and Mexico and is a member of Mercosur and Latin America Integration Association. It is a participant in the Free Trade Area of the Americas which seeks to create a single FTA for the region.

The CII note examining the potential of trade between the two countries recommends a partnership in which India could learn about raising agricultural productivity from Chile, where Chile has acknowledged strengths. Best practices in commercial agriculture management, supply chain linkages including cold storage, warehousing and transport, setting up a robust infrastructure for meeting international quality and sanitary and phytosanitary norms, and strengthening the link between agriculture and industry can be focus areas. Experts from Chile could provide consultation, advice and handholding to Indian corporates as well as government in these areas, it suggested.

For Chile also, this would be a profitable area to consider as India's natural advantages in climate and other conditions are very different from those of Chile. India is the world's second largest producer of fruits and vegetables, but has high wastage in the supply chain. With the help of Chile, India can expand its international agricultural activities.

On the other hand, India can provide expertise on services. IT, education, healthcare, training and skill development, software services, etc are India's areas of strength. This might involve mutual recognition of professional degrees, facilitation of travel and work permits, access to higher education, and greater movement of personnel. Chile is particularly interested in positioning itself as an outsourcing hub with the help of Indian companies. In addition, IT education and training as well as language training could be an area of opportunity for Indian companies.

The two countries need to actively explore newer areas of cooperation in areas such as mining, manufacturing, railways, leather and textiles. India's engineering goods, machinery, equipment and machine tools may find a good market in Chile. Defence production and trade is also an area of high potential.

To realise the potential, the CII paper said that trade facilitation issues such as direct shipping, aviation links, and non-tariff barriers need to be addressed. A protocol on trade and business facilitation should be set in place, which could include agreements on rule of origin measures, valuation and standards. Such a protocol could facilitate certification by industry associations for easier and faster implementation.

India's overall trade with Chile expanded from 586.65 million dollar in 2005-06 to 2093.35 million dollars in 2007-08. However, trade has been fluctuating with the price of commodities, particularly copper.

India's exports to Chile have gone up by almost three times since 2003-04. But the export level is still far below potential and Chile forms a minuscule proportion of India's total exports. India's imports from Chile have risen by more than ten times in the same period, quadrupling between 2005-06 and 2006-07.However, the next year, imports moderated somewhat to 1.8 billion dollars. (ANI)