India-aus trade pact in force from Dec 29
The India-australia Economic Cooperation and Trade Agreement (ECTA) will come into force from December 29 after both partners completed all formalities, paving the way for two-way duty-free trade, the two countries officially confirmed on Wednesday.
India will get zero duty benefit on 98.3% of its exports to Australia from the Day 1, and on 100% of tariff lines within five years; tariffs on 85% of Australia’s exports to India will be eliminated immediately. The deal will benefit India’s IT industry, labour intensive sectors, and students with post-study work visas.
“India & Australia consolidate their long-standing partnership. Economic Cooperation & Trade Agreement, realised under the guidance of leaders of both countries, comes into effect from December 29, 2022. It is the dawn of a whole new era for our businesses & people,” commerce minister Piyush Goyal said in a tweet, highlighting key features such as zero duty access on 100% tariff lines and creation of 1 million additional jobs.
Australian Prime Minister Anthony Albanese on Wednesday called the agreement
another step towards strategic relationship between two partners. “Australia and India are increasingly working together as strategic and economic partners… The Australia-india Economic Cooperation and Trade Agreement is the next step in elevating our relationship with India, the world’s fastest growing large economy,” he said.
The deal is expected to take two-way trade to $45-$50 billion in five years from the existing $31 billion, officials have said.
A commerce ministry statement said India and Australia have exchanged written notifications, and as per the agreement it will enter into force 30 days after this exchange. “Accordingly, the Agreement will come into effect from 29 December 2022,” it said.
“It is estimated that an additional 10 lakh (1 million) jobs would be created in India under ECTA. Indian Yoga teachers and chefs are set to gain with the annual visa quota. Over 1 lakh (100,000) Indian students would benefit from post-study work visa (1.5-4 years) under the ECTA,” it said.
The deal will also increase investment opportunities, promote exports, create significant additional employment and facilitate strong bonding between the two countries, it added.
An Australian government statement said: “From 29
December, tariffs on 85% of Australia’s exports to India will be eliminated and high tariffs on a further 5 per cent of goods will be phased down.”
It added: “Entry into force of the agreement before the New Year delivers a double bonus of two tariff cuts in quick succession: one as the agreement comes into effect and a second on 1 January 2023.”
Australian trade minister Don Farrell said businesses have to prepare themselves now to take advantage of the substantial improvements in market access to India under the new agreement. “The ECTA’S two tariff cuts in quick succession intensify the up-front benefits of this agreement for our exporters,” he added. The deal, signed on April 2, is India’s first trade deal in a decade with any developed country.
India already has a free trade agreement with UAE, which was signed on February 18 and officially entered into force on May 1. It is in the process of negotiating similar in some deals with four key economies or blocs: the UK, the European Union (EU), Canada and the Gulf Cooperation Council (GCC). Official timelines for the negotiations are yet to be finalised.
The deal closest to formalisation is the free trade agreement with the UK, which is expected to be concluded by March next year.
With Canada, meanwhile, the
Indian side held the fifth round of talks between November 14 and 18 while a third round of discussions will be held with the European Union this week after trade talks were resumed this summer after a gap of almost a decade. India is also negotiating the terms of reference for a trade deal with GCC, which includes UAE, Bahrain, Saudi Arabia, Oman, Qatar and Kuwait.
“India has been approached by many other countries, but we don’t have any spare capacity left to engage with them immediately,” one official said.
Australia finalised its domestic requirements for the trade agreement last week with the unanimous passage of government bills through both houses of Parliament. “The date is set! The Economic Cooperation and Trade Agreement will enter into force on 29 December, delivering new market access opportunities for both countries & securing the [Australia-india] friendship in the decades to come,” Australian high commissioner Barry O’farrell tweeted on Wednesday.
Indian officials have said the deal is expected to take two-way trade to $45-$50 billion in five years from the existing $31 billion, with India’s merchandise exports to Australia expected to jump $10 billion by 2026-27 from $7 billion at present. Two-way trade also has the potential to create more than a million additional jobs in India, besides increasing remittance flows to the country, they said.
“The deal will also set up a resilient supply chain wherein cheaper raw materials and intermediate products from Australia will be made available to make our finished product competitive,” one of them said.
India is Australia’s ninth largest trading partner, and the balance of trade is in Australia’s favour.
ECTA will save Australian exporters around $2 billion a year in tariffs, while consumers and business will save around $500 million in tariffs on imports of finished goods, and inputs for Australia’s manufacturing sector, the Australian government’s statement said.
Tariff commitments provided by India in the deal will open up access for Australia’s exports such as critical minerals, pharmaceuticals, cosmetics, lentils, seafood, sheepmeat, horticulture and wine.
Ajay Sahai, director general and chief executive of the Federation of Indian Export Organisations (FIEO) said that exporters are gearing up to send the first shipment under the agreement on the appointed date.
“While many advanced economies are facing global headwinds, Indian and Australian economies are in relatively better situation and this agreement will immensely help both. India will get key raw materials and gain a vast market for its finished goods,” he said.