India–Mexico FTA talks begin amid looming tariff hikes

The initiation of Free Trade Agreement (FTA) talks between India and Mexico marks a significant development in India's evolving trade policy and its engagement with Latin America. This move is not merely about expanding trade; it is a strategic response to changing global trade dynamics and an effort to bolster India's economic resilience. Understanding this development requires delving into its background, key players, implications, and relevant policy frameworks.

**Background Context and What Happened:**

Historically, India has pursued FTAs as a cornerstone of its foreign trade strategy, aiming to integrate into global value chains and diversify its export markets. The discussions with Mexico are particularly timely, spurred by Mexico's impending plan to impose new tariffs on imports from nations it does not have preferential trade agreements with. India falls into this 'non-preferential partner' category. Such tariffs could significantly impact Indian exports to Mexico, making them less competitive. Therefore, an FTA becomes a crucial mechanism to mitigate these potential barriers and ensure continued, unhindered market access for Indian goods. Both nations are currently working on finalizing the 'terms of reference' for the pact, which will lay down the scope and framework for the negotiations. This proactive step by India demonstrates its commitment to safeguarding its trade interests and exploring new growth avenues.

India and Mexico share a robust bilateral trade relationship, which, while not as extensive as with some other major partners, has been steadily growing. In the fiscal year 2022-23, bilateral trade stood at approximately $12.5 billion. Key Indian exports to Mexico include pharmaceuticals, automobiles, engineering goods, and textiles, while India imports crude oil, electronics, and machinery from Mexico. An FTA is expected to provide a structured framework to not only protect this existing trade but also to significantly expand it by reducing or eliminating tariffs and non-tariff barriers across a broader range of products and services.

**Key Stakeholders Involved:**

On the Indian side, the **Ministry of Commerce and Industry** is the primary driver of these negotiations, representing the government's trade policy objectives. **Indian businesses and exporters**, particularly those in sectors like pharmaceuticals, auto components, and IT services, stand to gain immensely from preferential market access in Mexico. Conversely, some domestic industries might voice concerns about increased competition from Mexican imports. **Indian consumers** could benefit from a wider array of goods at potentially lower prices. For Mexico, its **Ministry of Economy** will lead the negotiations, aiming to secure market access for its products in India and attract Indian investment. **Mexican businesses**, especially those involved in oil and gas, electronics, and agriculture, are key stakeholders, alongside their domestic industries that might face competition.

**Significance for India and Historical Context:**

This FTA holds immense significance for India. Economically, it offers a gateway to the broader Latin American market, a region that India has increasingly sought to engage with under its 'South-South cooperation' initiatives. Diversifying trade partners helps India reduce dependence on traditional markets and builds resilience against global economic fluctuations. Strategically, strengthening ties with Mexico, a significant economy in North America and a member of the USMCA (United States-Mexico-Canada Agreement), enhances India's geopolitical footprint. It aligns with India's broader objective of becoming a major global trading power, as articulated in its Foreign Trade Policy (FTP 2023), which aims for $2 trillion in exports by 2030.

Historically, India's engagement with Latin America has been modest compared to its ties with Asian, European, or North American partners. However, in recent years, there has been a conscious effort to deepen these relations, recognizing the vast potential for trade, investment, and technological collaboration. Mexico, with its strategic location and well-developed manufacturing base, is a crucial partner in this endeavor. For Mexico, an FTA with India could diversify its trade relationships beyond its overwhelming reliance on the North American market, providing new opportunities in a rapidly growing Asian economy.

**Future Implications and Related Constitutional Articles/Policies:**

If successfully concluded, the India-Mexico FTA could unlock substantial growth in bilateral trade and investment. It could lead to increased foreign direct investment (FDI) in both directions, foster technology transfer, and create new job opportunities. However, negotiations will likely face challenges, including identifying sensitive sectors for tariff reductions, establishing robust rules of origin, and setting up effective dispute resolution mechanisms. The outcome will also influence India's broader trade policy, particularly how it balances its 'Atmanirbhar Bharat' (Self-Reliant India) vision with the imperatives of global trade integration.

From a constitutional perspective, international agreements like FTAs fall under the purview of the Union government. **Article 253** of the Indian Constitution empowers Parliament to make laws for implementing any international treaty, agreement, or convention, or any decision made at any international conference, association, or other body. This provides the legal basis for India to enter into and enforce such trade agreements. Furthermore, **Entry 14 of the Union List in the Seventh Schedule** explicitly grants the Union government the power for "Entering into treaties and agreements with foreign countries and implementing of treaties, agreements and conventions with foreign countries." The **Customs Act, 1962**, would be the primary legislation affected, as it governs the levy and collection of customs duties, which would be modified under the FTA. India's **Foreign Trade Policy (FTP)** provides the strategic direction for these negotiations, emphasizing market access, export promotion, and integration into global value chains.