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Trade Agreements:
India-Australia Economic Cooperation & Trade Agreement
(IA- ECTA)
Background of India-Australia Trade
India & Australia signed the India-Australia Economic Cooperation & Trade Agreement (IndAus ECTA). The agreement is expected to boost bilateral commerce in products & services from $27.5 billion to $45 billion in five years, creating over 10 Lakh employment in India.The India Australia ECTA is Australia’s 17th FTA & India’s 13th FTA. As per FY 2021-22 Australia is the 20th largest trading partner of India, & India is the 7th largest trading partner of Australia.
Raw materials, minerals, & intermediate products make up the majority of Australia’s exports to India which are about to benefit from the IA- ECTA. It aims to enhance trade & economic cooperation between nations, the IA- ECTA will help in relations between the two nations by extending work, study, & travel opportunities.The majority of India’s exports to Australia are a wide range of mostly completed goods, including petroleum products, textiles & clothing, leather goods, chemicals, gems & jewelry, & goods for engineering.
Overview of IA- ECTA:
This is the first trade agreement with 100% tariff elimination by India’s partner country wherein Australia will provide zero duty access to India for 100% of its tariff lines. The agreement prescribes strict Rules of Origin to prevent the third-party goods routed through the Partner country to get preferential benefit. The agreement also has provisions to control unexpected hikes in imports & safeguard the domestic businesses. Over & above the support in goods movements, the partnering countries have made commitments to support a few broad service sectors such as information technology, education, tourism, sports & recreation.
Benefits of IA- ECTA
Benefits for Australia
Indian taxes on more than 90% of Australia’s products exported to India by value are eliminated. Tariffs on more than 85% of our exports are eliminated on December 29, 2022, & tariffs on the remaining 5% of our exports will be phased down to zero percent over the next 2-6 years.
It will open the door for Australian goods exports & create new opportunities, including where trade was previously not economically feasible due to high tariffs. Lower Australian tariffs will reduce the cost of imported Indian items & expand the range of goods available to Australian customers.
Impact on Goods exported from Australia:
Key Australian goods that will enter duty free as soon after the agreement:
Sheep meat, wool, barley, oats, seafood, metallic ores, certain metals, cosmetics & railway equipment.
For example, Wine: Tariffs reduced from 150% to 50% over 9 years for bottles valued over US$5 & tariffs reduced from 150% to 25% over 9 years for bottles valued over US$15. India will extend any market access improvements to future FTA partners to Australia.
Seafood: Elimination of 30% tariff for fresh rock lobsters & elimination of tariffs for most other fresh, frozen & processed seafood products including salmon, tuna & frozen rock lobster.
Fruit & vegetables: Avocados, cherries, raspberries, blueberries, blackberries, onions, cabbage, lettuce, asparagus, spinach, peas, beans & others will be exempted from tariffs for the next six years. Tariff reductions for garlic, apricots, figs, pineapples, kiwi fruit, & strawberries during a six-year period. Also there is immediate 50% duty reduction on oranges, mandarins & pears.
Tariffs on coal will be eliminated, & Australia will also have immediate access to a duty-free quota for cotton, as well as instant access to a 50% tariff reduction in-quota for almonds, lentils, oranges, mandarins, & pears.
Impact on Services from Australia
The service sectors benefited from the ECTA include: Higher education, business services (tax, medical & dental, architectural & urban planning), research & development, communication, construction & engineering, insurance, banking, hospital, audiovisual, tourism & travel.
Benefits for India
Over 85% of Australian products exported to India by value become tariff-free, rising to 90% in 6 years. Furthermore, hefty taxes on several agricultural items will also significantly decrease. Furthermore, 96% of Indian imports are currently duty-free, with the goal of reaching 100% in 4 years.
For India, The benefitted sectors are Textiles, Engineering Products, Gems, Jewelry, Leather, Footwear, Pharma, Computer Related Services, Professional services, Legal Services, Accounting, Taxation, Architectural Services, Engineering, Urban Planning, Landscape, Architectural services, Medical & dental, Telecommunication Construction, Environmental, Financial, Tourism & Travel related, Recreational, & Transport Services & few others. ECTA also provides quotas for chefs & yoga teachers, as well as post-study employment visas & work & holiday visas.
Conclusion of Trade in Goods & Services
Sector specific gains- Goods w.r.t India
Many industries & sectors will benefit from the IA- ECTA for reference-
Textiles: Many of the new Made-up manufacturing units are anticipated to be established in Tier 2 & Tier 3 cities & rural areas, establishing an industrial ecosystem & creating jobs.
Engineering Products: With tariffs eliminated, engineering product exports are estimated to increase by around 15% per year.
Gems & Jewelry: With the abolition of duty, there is a possibility of an increase in our jewelry exports, which presently face a 5% charge in Australia.
Leather & Footwear: Approximately 94% of India’s leather goods exports to Australia face a 5% tariff disadvantage.
Pharma Sector: Use the Comparable Overseas Regulator method to expedite clearance for proprietary, generic, & biosimilar pharmaceuticals; similarly, expedite quality assessment/inspection of manufacturing facilities.
Sector specific gains- Services w.r.t India
Services with regard to India benefitting from the IA-ECTA are Market Access, Computer Related Services, Also, Professional Services such as Legal Services, Accounting, Taxation, Architectural Services, Engineering, Integrated Engineering, Urban Planning, & Landscape Architectural Services, Medical, Dental, & Veterinary Services will be benefitted.
Along with Telecommunications, construction, distribution, education, the environment, finance, tourism & travel-related services, recreation, transportation services, & so on.
IA-ECTA provides benefits such as quotas for chefs & yoga teachers, post-study work visas, & work & holiday visas.
Agreement to Avoid Double Taxation (DTAA): To prevent DTAA, the Australian Government has agreed to change Australian domestic taxes legislation to prohibit the taxation of offshore revenue of Indian enterprises providing technical services to Australia, therefore increasing their international competitiveness.
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