The Australia-India Economic Cooperation and Trade Agreement was signed (April 2 , 2022) in a virtual ceremony by Trade Minister of Australia Dan Tehan and India’s Minister of Commerce & Industry, Piyush Goyal. Australia’s Prime Minister Scott Morrison and India’s Prime Minister Narendra Modi witnessed the virtual ceremony. Australian PM later said that the agreement with the world’s second most populous nation represented “one of the biggest economic doors there is to open in the world today”. He said, “ These are never all or nothing deals as far as we’re concerned, we see all of these as the next step and the next step and the next step.”
This trade deal confirms the resolve of India and Australia to enhance economic ties. Morrison’s government is seeking to diversify export markets and reduce Australia’s dependence on its biggest trading partner China, after diplomatic spats led to Beijing sanctioning certain Australian products.
Highlights of the deal
- The deal with India removes tariffs on more than 85% of Australian goods exports to India, worth A$12.6 billion, rising to almost 91% over 10 years.
- Tariffs will be scrapped on sheep meat, wool, copper, coal, alumina, fresh Australian rock lobster, and some critical minerals and non-ferrous metals to India.
- It will see 96% of Indian goods imports enter Australia duty-free.
- Both countries would continue to work towards a full free trade agreement.
- Under the agreement, Canberra would offer zero duty access to India for about 96.4 per cent of exports (by value) from day one. This covers many products which currently attract 4-5 per cent customs duty in Australia.
- On the other hand, India will be offering zero duty access for over 85 per cent of its tariff lines for Australia which will include products like coal, sheep meat, wool, LNG, coal, alumina, metallic ores, including manganese, copper and nickel; titanium and zirconium.
- India has also agreed to reduce duties on Australian wine. Tariffs on shipments with a minimum import price of $5 per bottle will be reduced to 100 per cent from 150 per cent while duty on bottles costing $15 is being slashed to 75 per cent.
- Under the agreement, Australia has also agreed to resolve the double taxation issue being faced by domestic IT companies in that market.
- The agreement will also allow for faster approval of Indian medicines by Australian regulators as they have agreed to use inspection reports and approvals from Canada and the EU in the evaluation process for India pharmaceuticals and manufacturing facilities.
- The ECTA will also allow for granting extended post-study work visas to Indian graduates from STEM (Science, Technology, Engineering and Mathematics).
List of Exclusion
India has placed several goods in the exclusion category in which no duty concessions will be accorded to Australian imports. Certain products would not be allowed to be imported by India under the trade deal from Australia with duty concessions including dairy products.. These products are: milk and dairy, chickpeas, walnuts, pistachio nuts, wheat, rice, bajra, apples, sunflower seed oil, sugar, oil cake, gold, silver, platinum, jewellery, iron ore and most medical devices.
Benefits
- The Australia-India Economic Cooperation and Trade Agreement will offer zero duty access to India for about 96.4 per cent of exports, among other benefits. Both governments opine that this deal will boost bilateral trade to $45-50 billion over five years
- According to a government statement, the pact is expected to boost bilateral trade in goods and services to $45-50 billion over five years, up from around $27 billion, and generate over one million jobs in India.
- For India, as Australian exports are more concentrated in raw materials and intermediates, many industries in India will get cheaper raw materials which will make them competitive, in particular sectors like steel, aluminium and fabric/garments.
- Additionally, as the ECTA allows for zero duty access to India, it will enjoy greater market access, pushing India’s export momentum only higher.
- The easing of regulatory processes in the pharmaceutical sector will give India access to Australia’s attractive $12 billion sector.
Way Forward
After signing the deal, Minister of Commerce & Industry Goyal said India wanted to progress a full free trade agreement with Australia in an “accelerated manner”. The federal government of Africa also wants to go for a full fledged FTA with India. The Indian Commerce Minister said, “Soon after this current agreement comes into force, we’ll get down to cracking the whip on the next stage to make this a comprehensive economic partnership.” On the Other hand, Australian Trade Minister Tehan said he was confident negotiations would advance even if the Morrison government was replaced at the upcoming national election.