INDIA - AUSTRALIA TRADE PACT – ECONOMY
News: Economic Cooperation and Trade Agreement (ECTA) with Australia will significantly open up opportunities for Indian businesses: Piyush Goyal
What's in the news?
● The trade pact with Australia that was ratified by the Australian Parliament on November 22 will “significantly open up opportunities” for many Indian business sectors, said Commerce and Industry Minister Piyush Goyal.
India - Australia ECTA:
● The
Agreement spans cooperation throughout the entire gamut of bilateral economic
and commercial relations between the two friendly countries, and it is India’s
first trade agreement with a developed country in more than a decade.
● 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.
Main features:
1. Preamble:
● 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
covers topics such as trade in goods,
rules of origin, trade in services, technical barriers to trade (TBT), sanitary
and phytosanitary (SPS) measures, dispute resolution, natural person movement,
telecommunications, customs procedures, pharmaceutical products, and other areas
of cooperation.
● As
part of the Agreement, eight subject-specific side letters addressing various
sectors of bilateral economic cooperation were also signed.
2. Rules of origin:
● It
has a section on goods exports, and lays out clearly “Rules of Origin” that are
aimed at creating anti-dumping measures.
● What
are the rules of origin included in the agreement?
○ The
rules of origin are based on the principle that they should be “wholly obtained
or produced in the territory of one or both of the parties”.
○ This
section ensures that waste material will not be exported by either side unless
they contribute to the production of any of the items listed in the ECTA.
3. Dispute settlement mechanism:
● There
are also sections that are aimed at providing remedies and mechanisms for
resolving trade disputes.
● Under
Article 13.5, both parties have agreed to hold consultations and make “every
effort” to find a solution - in case of disputes that may emerge in the course
of trade in goods or services.
● They
have also recognised that in case they have to resort to international arbitration, they may opt for an organization
(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.
● 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.
4. Agricultural market:
Australia's access:
● With
limited exceptions, Australia will be able to export some agricultural items
like potatoes, lentils, and meat
products under this agreement.
● Bovine
meat, on the other hand, is not included in the agreement.
● Under
this agreement, Australia may also provide machines that are required for food processing.
● India
may become the first country in the world to allow a wide range of alcoholic and non-alcoholic beverages,
including Australian beer.
● In
India, wines costing more than $5 may be subject to lower import charges.
India's access:
● The
Indian side said Australia will provide ‘preferential
access’ to “all the labor-intensive sectors” of export items from India
such as gems and jewelry, 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.
5. Preferential Market Access:
Australia’s PMA to India:
● India
will benefit from preferential market access provided by Australia on 100% of its tariff lines.
● This
includes all the labor-intensive sectors which are of interest to India such as
Gems and Jewellery, Textiles, leather, footwear etc.
India’s PMA to Australia:
● India
will be offering preferential access to Australia on over 70% of its tariff lines.
● This
includes lines of export interest to Australia which are primarily raw
materials and intermediaries such as coal, mineral ores and wines etc.
6. Services sector:
● The
Government of India has said that Australia has “offered wide ranging
commitments” in around 135 sub-sectors and Most Favored 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 be given special admission quotas into Australia,
while Indian students studying in Australia will be able to obtain work visas on a reciprocal basis for
periods ranging from 18 months to four years.
● According
to the pact’s provisions, students who complete a diploma in Australia will be
considered for an 18-month work visa; those who complete their undergraduation
will be considered for two years; and those with a Ph.D. would be considered
for a four-year visa.
7. Pharmaceuticals sector:
● 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.
Significance of India Australia Trade Agreement:
1. Boosting Trade:
● Bilateral
trade in goods and services for both countries is expected to touch US$ 45 billion in five years.
● India’s
exports of goods and services are expected to increase from US$ 10.5 billion in
2021 to US$ 20 billion by 2026-27 and then cross US$ 35 billion by 2035.
2. Parity with Competitors:
● Indian
exports face a tariff disadvantage of 4-5% in many labor-intensive sectors
vis-à-vis competitors in the Australian market such as China, Thailand,
Vietnam, South Korea, Japan etc.
● This problem would be removed by the current agreement that offers parity treatment to Indian exporters.
3. Engagement with a Developed Nation:
● The
ECTA is the first agreement with a large
developed economy of the world after more than a decade.
● Australia
is also the third OECD country after
Japan and Korea with which India has signed a free trade agreement (FTA).
4. Boost to Make in India:
● Many
industries in India will get cheaper raw
materials and thus become more competitive, particularly in sectors like
steel, aluminum, power, engineering and so on.
5. Strategic interest:
● This
agreement has strategic significance too, as both India and Australia are part
of the QUAD and partners in the Supply
Chain Resilience Initiative (SCRI).
● Further,
the agreement will be beneficial for reducing
their reliance on China.
6. Industry Enthusiasm:
● Industry
was consulted at every stage of negotiations, which has helped industry members
articulate their overseas market-access
interests.
7. Boost employment:
● It
will benefit India’s labor-intensive
exports such as textiles and apparel, agriculture and fish products. These
now fetch 4-5 percent import duty in the Australian market.
● The agreement is expected to generate over one million jobs in India
The
India Australia ECTA will further cement
the already deep, close and strategic relations between the two countries.
It will significantly enhance bilateral trade in goods and services, create new
employment opportunities, raise living standards, and improve the general
welfare of the peoples of the two countries.