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India and Australia have signed an Economic Co-operation and Trade Agreement (ECTA) in the presence of Prime Minister Narendra Modi and his counterpart in Canberra Scott Morrison, with an eye on doubling bilateral trade to $50 billion in five years and ease movement of people, goods and services across borders. The agreement with Australia is expected to create 10 lakh additional jobs in the country over the next five years.
About ECTA
- ECTA is an interim trade agreement that would be followed by a comprehensive deal by the end of the year. Trade talks between Delhi and Canberra had resumed in September last year after it began nearly a decade back in 2011.
- It will facilitate zero duty access on over 96% of Indian exports, including several labour-intensive industries.
- India will, in turn, offer preferential access to Australia on over 70% of its tariff lines on goods imports, including ‘lines of export interest to Australia which are primarily raw materials and intermediaries such as coal, mineral ores and wines, etc.
- Tariffs will be eliminated on more than 85% of Australian goods exports to India (valued at more than $12.6 billion a year), rising to almost 91% (valued at $13.4 billion) over 10 years.
- It said this is the first trade deal which includes a compulsory review mechanism after 15 years.
- Australia is the 17th largest trading partner of India and India is Australia’s 9th largest trading partner. India-Australia bilateral trade for both merchandise and services is valued at $27.5 billion in 2021.
- India’s merchandise exports to Australia grew 135% between 2019 and 2021. India’s exports consist primarily of a broad-based basket largely of finished products and were US$ 6.9 billion in 2021.
- India’s merchandise imports from Australia were US$ 15.1 billion in 2021, consisting largely of raw materials, minerals and intermediate goods. India and Australia are partners in the trilateral Supply Chain Resilience Initiative (SCRI) arrangement along with Japan which seeks to enhance the resilience of supply chains in the Indo-Pacific Region. Further, India and Australia are also members of the recently formed Quad, also comprising the US, and Japan, to further enhance cooperation and develop partnerships across several issues of common concern.
- The ECTA is expected to increase trade between the two sides to $45-50 billion over five years, from the current estimate of $27 billion, and create over 10 lakh additional job opportunities.
- Under this agreement, India will give 85% of Australia’s exports zero-duty access to its domestic market. India is expected to get zero-duty access to Australia for its goods over five years.
- The ECTA is guided by a Preamble and is divided into multiple sections that will govern what is hoped to be the most expansive bilateral trade since the two countries established diplomatic ties before India attained independence.
- It has a section on goods exports, and lays out clearly “Rules of Origin” that are aimed at creating anti-dumping measures. There are also sections that are aimed at providing remedies and mechanisms for resolving trade disputes.
- The Commerce Ministry underlined that this is the first trade deal signed by India that has a compulsory review mechanism after 15 years of implementation.
- Under this agreement, Australia will get the opportunity to export certain varieties of agricultural produce like potatoes, lentils, and meat products with some caveats. However, bovine meat is not part of the agreement. Australia may also send machineries that are required for food processing under this agreement.
- In a historic first, India may open up to a wide-range of alcoholic and non-alcoholic drinksincluding Australian beer. Australian wines costing over $5 may face lower import duties in the Indian market.
- The Indian side said Australia will provide ‘preferential access’ to all the labour-intensive sectors of export items from India such as gems and jewellery, textiles, leather, footwear, furniture, food, engineering products, medical devices and automobiles.
- India will also allow Australia to export raw materials under preferential terms like coal and mineral ores.
- The Government of India has said that Australia has offered wide ranging commitments in around 135 sub-sectors and Most Favoured Nation in 120 sub-sectors which cover key areas of the Indian services sector like IT, ITES, business services, health, education and audio-visual services.
- Indian chefs and yoga teachers will get specific entry quotas into Australia, while Indian students in Australia will be able to secure work visas for periods ranging from 18 months to four years on a ‘reciprocal’ basis.
- India and Australia have agreed to enable fast track approval for patented, generic and biosimilar medicines.
- Therapeutic Goods Regulators of both sides will have a role to play in monitoring and ensuring smooth trade in pharma products between the two sides.
- Both sides have agreed to audits of imports that require sanitary and phytosanitary inspection as per the law of the land. The importing side will ensure that plants and plant products, animal products and other goods, and their packaging are inspected through recognised methodologies. If either party finds examples of non-compliance, remedial measures will be taken by both sides.
- They have also recognised that in case they have to resort to international arbitration, they may opt for an organisation (i.e, World Trade Organization) where both are members. They may also use “good offices” and form panels with qualified members drawn from government and business to resolve the disputes.
- The dispute resolution may range from 45 days to 15 months