India-Australia Economic Cooperation and Trade Agreement

The agreement was signed on April 2, 2022, between India and Australia. The paper aimed to strengthen the economic and trade relations between the mentioned significant countries. This is clearly an interim activity; it would take time to discuss and deliver negotiations in the next 75 days for a full-fledged free trade between the borders of India and Australia. It turned out that the parties had made some broad commitments throughout the text regarding organic foods, work visas, holiday visas, and post-study work visas. In addition to the normal topics, other topics were also discussed, such as trade in goods and services, technical trade barriers, sanitation, and temporary movements of natural persons. This article will examine some of the key points of discussion at the India-Australia Economic Cooperation and Trade Agreement (ECTA).

Overview

On April 2, 2022, India and Australia signed a new agreement regarding economic cooperation and trade. As part of the ECTA negotiations, an interim free trade agreement will be negotiated within 75 days.

Imports into India at present are subject to an average customs duty rate of 13.8%. Australia, however, has kept its tariff rates low on a majority of its tariff lines, with many items having zero tariffs. In its ECTA, Australia has offered zero tariff rates on all tariff lines. Items such as textiles, leather, footwear, and furniture, etc., have been liberalized immediately with no waiting period. While the Indian government has offered to eliminate duties on 40% of its tariff lines throughout three, five, seven, and ten years. Additionally, 29.8% of India’s commitments are not applicable to sensitive items, including dairy products, chickpeas, wheat, rice, etc.

According to estimates, the ECTA will serve as a catalyst for the expansion of bilateral trade between the two parties, increasing the value of bilateral trade from USD 27.5 billion at present to USD 45-50 billion in the following five years.

In India, the Free Trade Agreement (FTA) with Australia is expected to send a positive signal to other developed countries such as the United Kingdom, Canada, and the European Union. These countries are already in negotiations for similar deals with New Delhi. If a balanced deal could be struck, it would demonstrate India’s commitment to business.

CEPA Benefits

The Comprehensive Economic Cooperation Agreement (CEPA) with Australia will now be possible due to the interim deal. The two agreements are the second of their kind after the deal with the United Arab Emirates (UAE) in February. New Delhi and Canberra are Canberra’s ninth and 17th largest trading partners, respectively. A total of USD 6.9 billion in goods exports and USD 15.1 billion in imports were recorded by India in 2021.

Tariff Reduction

There are significant commitments to reduce tariffs as part of the India-Australia FTA. On the first day of implementation of the agreement, Australia will offer zero-duty market access for 96.4 percent of Indian exports (98 percent of tariff lines). In addition, exports from several labor-intensive sectors will benefit from the immediate duty-free access. At present, import duty on many labour-intensive products in Australia is 4-5 per cent. Textiles and apparel are among the most common. They are followed by a few agricultural products and fish products, leather, footwear, furniture, and sports goods, jewelry, engineering goods, and selected pharmaceuticals and medical devices. Over the next five years, India will phase out tariffs on the remaining 113 tariff lines representing 3.6 percent of its exports.

With the elimination of tariffs on more than 85 per cent of Australian goods exports in India, the Australian economy will also gain substantial entry into the Indian market. That amount will rise to almost 91 per cent in ten years.

Wool, sheep meat, coal, alumina, metallic ores, and critical minerals will be exempt from tariffs immediately, while avocados, onions, cherries, shelled pistachios, macadamia nuts, cashews in shell, blueberries, raspberries, blackberries, and currants must undergo a phase-out process over time. The import duty on Australian wines will also be cut, though not eliminated.

Conclusion

There are already significant concessions in the ECTA for many industries, such as textiles, leather, etc., as well as various features to encourage the development of trade in services. More clarity regarding non-tariff barriers will have to wait until the ECTA is finalized. Once the final agreement is revealed, the ECTA’s holistic impact will become more apparent. A Comprehensive Economic Cooperation Agreement (CECA) is a goal shared by both parties. A negotiating subcommittee will begin negotiating the FTA into a CECA within 75 days of its signing. This will include issues such as market access for goods and services, a chapter for digital trade, and a chapter focusing on government procurement.