India, Mexico sign terms to negotiate a trade pact

India and Mexico signed Terms of Reference that formally launch negotiations on a Preferential Trade Agreement covering goods, rules of origin and trade remedies - ten months after Mexico imposed tariffs of up to 50 per cent on imports from countries without trade deals, India among them.

What happened

• India and Mexico signed the Terms of Reference (ToR) for negotiations on a Preferential Trade Agreement (PTA), setting its framework, scope, modalities and roadmap and formally launching talks.
• The move follows the understanding between PM Narendra Modi and President Claudia Sheinbaum at the G7 Summit in Canada (June 2025); it came during Commerce Secretary Rajesh Agrawal's visit, in talks with Undersecretary of Foreign Trade Luis Rosendo Gutiérrez Romano, for Secretary of Economy Marcelo Ebrard.
• The ToR covers market access for goods, rules of origin, customs procedures and trade facilitation, dispute settlement, sanitary and phytosanitary measures, technical barriers to trade and trade remedies.
• Sectors flagged: automotive, chemicals, electronics, pharmaceuticals, agri-food, energy, critical minerals, medical devices and advanced manufacturing; Mexico is described as an important market for Indian exporters because of its global value chain links.
• Both sides discussed a Mexican business mission to India in the first quarter of 2027, to arrange business-to-business meetings and identify commercial opportunities.

For Prelims

• PTA vs FTA: a Preferential Trade Agreement cuts tariffs on an agreed list of products; a Free Trade Agreement removes duties on substantially all trade. In WTO law, FTAs rest on GATT Article XXIV, while preferential deals among developing countries can use the Enabling Clause of 1979.
• Mexico's tariff wall: Mexico's Congress approved on 11 December 2025 duties of 5-50 per cent on about 1,463 tariff lines - autos, auto parts, textiles, clothing, plastics, steel - from countries without a trade agreement with Mexico, including India, China, South Korea, Thailand and Indonesia, effective 1 January 2026.
• The trade numbers: India exported about US$5.75 billion to Mexico in 2024-25 and imported about US$2.9 billion, a surplus in India's favour. The think-tank GTRI estimated that Mexico's tariff increase would affect about 75 per cent of India's exports to Mexico.
• Terms of Reference: the pre-negotiation document that fixes what an agreement will cover, how the talks will be run and on what roadmap. Signing it formally opens negotiations; it is neither an agreement nor a tariff cut.
• What the ToR leaves out: every listed chapter concerns goods - market access, origin, customs, SPS, TBT, remedies and disputes. There is no mention of services, investment, intellectual property or government procurement, which a comprehensive agreement would usually include.
• Rules of origin: the criteria that decide when a product counts as made in a partner country and so qualifies for the lower duty - usually a minimum value-addition share or a change in tariff classification. They prevent third-country goods being routed through a partner.
• India's Latin American precedent: the India-MERCOSUR PTA (Brazil, Argentina, Uruguay, Paraguay), signed in 2004 and operational since June 2009, gives concessions on about 450 Indian and 452 MERCOSUR tariff lines; the two sides have been discussing an expansion.
• The other chapters: trade remedies are anti-dumping, countervailing and safeguard duties; SPS measures protect human, animal and plant health; TBT covers technical regulations, standards and conformity assessment. Each rests on a WTO agreement that a PTA chapter builds on.

For Mains

Syllabus: GS2.18 · GS3.1 · Linkage L1