India-Australia ECTA in Force from December 29, 2022: Here’s How it Will Benefit India

Posted by Written by Naina Bhardwaj Reading Time: 5 minutes

The India-Australia Economic Cooperation and Trade Agreement (ECTA) recently entered force on December 29, 2022. Under the pact, Australia is offering zero-duty access to India for about 96.4 percent of exports (by value) from the day the agreement is enforced. In this article, we detail the specifics of the ECTA and discuss how they will boost India’s trade and investment prospects.


On December 29, 2022, the India-Australia Economic Cooperation and Trade Agreement (ECTA), which was signed on April 2, 2022, entered into force. Over the next five years, it is anticipated that the India-Australia ECTA, which aims to improve trade and investment opportunities between the two nations, will propel bilateral trade to US$50 billion Australia trade to cross US$45-50 billion from the existing US$31 billion.

According to the agreement, Australia would grant India preferred market access on all of its tariff lines. All of the labor-intensive industries with export potential for India are included in this, including gems and jewellery, textiles, leather, footwear, furniture, food, agricultural products, engineering products, medical technology, and autos.

Meanwhile, India will grant Australia preferential access to over 70 percent of its tariff lines, including those that are relevant to Australia from export perspective, including raw materials and intermediaries like coal, mineral ores, wines, etc.

In this post, we go over the specifics of the ECTA and describe how they would help the Indian economy.

What are the salient features of India-Australia ECTA?

The India-Aus ECTA provides for an institutional mechanism to encourage and improve trade between the two countries and covers almost all the tariff lines dealt in by India and Australia respectively. It encompasses cooperation across the entire gamut of bilateral economic and commercial relations between India and Australia, and covers areas like:

  • Trade in goods
  • Rules of origin.
  • Trade in services.
  • Technical barriers to trade (TBT).
  • Sanitary and phytosanitary (SPS) measures
  • Dispute settlement
  • Movement of natural persons
  • Customs procedures.
  • Telecom, pharmaceutical products, and cooperation in other areas.

Terms and Conditions of India India-Australia ECTA

Categories

Features

Trade in goods

Exports from India to Australia

Australia will provide zero-duty access to India for 100 percent of its tariff lines in two categories under this Agreement:

  • Zero duty immediately on 98.3 percent of tariff lines, amounting to 96.4 percent of the value of Indian exports. For those tariff lines, Indian exports will have immediate market access at zero duty from December 29, 2022. Exports in labor-intensive sectors, currently subjected to import duties ranging from four to five percent by Australia, will benefit from immediate duty-free access.
  • Phasing out to zero duty on the remaining 113 tariff lines, constituting 1.7 percent of tariff lines and amounting to 3.6 percent of India’s exports (in value terms) in five years.

Imports from Australia to India

  • For imports from Australia, India is offering concessions mostly on raw materials and intermediates, either in the form of tariff elimination or tariff reduction (TR) with or without a tariff-rate quota (TRQ).
  • Only a few agricultural products, such as oranges, mandarins, almonds, pears, and cotton, among others, have been allowed with limited quotas.
  • India will provide zero-duty access immediately on 40.3 percent of its tariff lines and the remaining 30 percent in a phased manner over a period of three, five, seven, and 10 years. This also includes 125 tariff lines where duties will be reduced rather than eliminated.
  • India has kept many sensitive products in the exclusion category without offering any concessions. They include milk and other dairy products, chickpeas, walnuts, pistachio nuts, wheat, rice, bajra, apples, sunflower seed oil, sugar, oil cake, gold, silver, platinum, jewelry, iron ore, and most medical devices.

Rules of origin

Strict rules of origin have been included to prevent third-party goods routed through the partner country from getting preferential treatment under ECTA.

Trade remedies

  • To control the surge in imports and protect the domestic industry, the ECTA offers a safeguard mechanism that enables fast application of interim measures.
  • This mechanism will be available for 14 years from the date of completion of elimination or reduction in tariff.

Trade in services

  • In terms of market access to services, Australia has offered 135 sub-sectors to India, and India has offered 103 sub-sectors to Australia.
  • Key areas of India’s interest like IT, ITES, business, professional services, health, education, and audio-visual are committed by Australia under this agreement.
  • Further, Australia will provide post study work visas up to four years for Indian students, work and holiday visa arrangements for young professionals, and temporary entry and temporary stay commitments for up to four years for intra-corporate transferees, contractual service suppliers, and independent executives.

Dispute settlement

  • Under this agreement, any dispute shall be resolved through consultations and negotiations, failing which parties from both countries may resort to an arbitral panel, which shall consist of three members.
  • Each party to the dispute shall appoint a member and the third member who would be the Chair of the panel, shall be appointed by mutual agreement.

 

Resources for Information and Procedural Assistance on India-Australia ECTA

Customs notifications

Customs tariff concessions

Rules of Origin (No. 112/2022-Customs)

Director general of foreign trade (DGFT) notifications and public notices

List of agencies for Certificate of Origin Origin

Trade Notice on Electronic filing and Issuance of Preferential certificate of Origin

TRQ allocation

DGFT Helpdesk for Common digital platform for issuance of Certificate of Origin (CoO)

Phone: 1800-111-550

Email: coo-dgft@gov.in

Website for online registration: coo.dgft.gov.in

How will the India-Australia ECTA benefit India’s trade and investment prospects?

According to Sanjay Budhia (Chairman, Confederation of Indian Industry (CII) National Committee on EXIM), “The India-Australia ECTA is expected to boost investments, enhance market access, create additional job opportunities, and most importantly strengthen the bilateral ties of two important players in the Indo-Pacific region.” According to the Global Trade Research Initiative (GTRI), bilateral trade between India and Australia is expected to reach US$70 billion by 2028.

According to GTRI, trade with a value of US$23 billion would become duty-free from the day the agreement is enforced, i.e., December 29, 2022. This value accounted for 93 percent of merchandise trade between India and Australia in the financial year (FY) 2022. In the same period, India’s goods exports to Australia valued US$8.3 billion and imports were about US$16.7 billion. Two-way trade in goods and services in FY 2020 were valued at US$24.3 billion. India’s merchandise exports to Australia grew 135 percent between 2019 and 2021.

This trade agreement is expected to bring immediate progress in India’s labor-intensive sectors, which will see a removal of import duties ranging from four to five percent. Furthermore, this agreement is also estimated to create 40,000 additional jobs in the Indian textile sector and increase mobility for Indian working professionals in 11 sectors.

Besides providing cheaper raw materials to many sectors, including steel and aluminum from Australia, the ECTA would also facilitate increased investments from Australia and support Indian manufacturing. Further, the Confederation of Indian Industry (CII) expects that the deal would allow large Indian IT companies to increase their involvement in Australian government projects.

(This article was first published on January 2, 2023 and last updated on January 12, 2023.)


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