Ink Trade Pact between India and Australia; thousands of Indian goods to get duty free access
The agreement is expected to be implemented in approximately four months.
The India-Australia Economic and Trade Cooperation Agreement (IndAus ECTA) was signed by Minister for Trade and Industry Piyush Goyal and Australian Minister for Trade, Tourism and Investment Dan Tehan during a virtual ceremony, in the presence of Prime Minister Narendra Modi and his Australian counterpart. Scott Morrisson.
Goyal said the deal would help boost bilateral trade from the current $27.5 billion to $45-50 billion over the next five years.
He further said that the pact will contribute to significant job creation which is estimated to be around 10 lakh over the next 5-7 years as labor intensive sectors are likely to gain the more.
Under the pact, Australia offers duty-free access to India for approximately 96.4% of exports (by value) from day one. This covers many products that are currently subject to 4-5% tariffs in Australia.
Labor-intensive sectors that would gain hugely include textiles and clothing, some agricultural and fishing products, leather, footwear, furniture, sporting goods, jewelry, machinery, electrical appliances and railway carriages.
On the very first day of the pact’s implementation, over 6,000 tariff lines would be available to Indian exporters at zero duty.
Australia trades around 6,500 tariff lines, while India has over 11,500 tariff lines.
Since Australian exports are more concentrated in raw materials and intermediate products, many industries in India will get cheaper raw materials that will make them competitive, especially sectors like steel, aluminum and fabrics/ clothes.
To protect sensitive sectors, India has several products in the exclusion category in which no tariff concessions will be granted to Australian imports.
These goods will include milk and other dairy products, toys, sunflowers, seed oil, nuts, pistachios, platinum, wheat, rice, bajra, apple, sugar, cakes , gold, silver, chickpeas, jewelry, iron ore and most medical products. devices.
The agreement will also include a safeguard mechanism including stricter rules of origin to prevent any routing of products from a third country; safeguard mechanism to deal with any unusual surge in imports; and similar standards for the steel sector.
For the pharmaceutical segment, the pact would provide expedited approvals and expedited quality assessment/inspection of manufacturing facilities.
In the service sector, benefits for India include 2-4 year post-study work visa for Indian students on reciprocal basis; and the work and holiday visa agreement for young professionals, Goyal said.
“Post-study work visas will provide expanded options for working in Australia to eligible Indian graduates, postgraduates and STEM (science, technology, engineering and mathematics) specialists,” he said, adding that ‘Currently, more than one million Indian students are enrolled. in various courses in Australia.
He added that Australia has agreed to address the double taxation problem faced by domestic IT companies in this market.
Canberra has also agreed to amend its national tax laws to end the taxation of offshore income from Indian companies providing technical services in Australia.
On the other hand, India will provide zero-duty access for over 85% of its tariff lines to Australia, which will include products such as coal, mutton, wool, LNG, , alumina, metal ores including manganese, copper and nickel. ; titanium and zirconium.
Coal accounts for approximately 74% of imports from Australia and is currently subject to a 2.5% tariff. About 73% of coking coal, used mainly by steelmakers, is imported from Australia. India also imports thermal coal from this country.
India will also grant tariff concessions to Australian wines on a phased basis over a 10-year period. Concessions would be given on Australian wines based on price.
Customs duties on wine with a minimum import price of USD 5 per bottle will be reduced from 150% to 100% upon implementation of the agreement, then to 50% over 10 years.
Similarly, the duty on bottles with a minimum import price of USD 15 will be reduced from 150% to 75% and then to 25% over 10 years.
According to a statement from the Australian Department of Commerce, duties of up to 30% on avocados, onions, shelled pistachios, inshell cashews, blueberries, raspberries and blackberries will be removed over seven years.
“Tariffs on pharmaceuticals and some medical devices will be eliminated over five and seven years,” he said. “The 30% mutton tariff will be removed as soon as it comes into effect, boosting Australian exports which already make up almost 20% of the Indian market.”
Tehan said the pact will create new opportunities for jobs and businesses in both countries, while laying the groundwork for a comprehensive free trade agreement.
Both countries will facilitate the recognition of professional qualifications, licensing and registration procedures between professional services organizations.
The agreement will consist of eight chapters – goods, services, rules of origin, sanitary and phytosanitary measures, technical barriers to trade, customs procedure and trade facilitation, legal and institutional issues and movement of natural persons, and trade remedies.
The interim agreement will pave the way for a Comprehensive Economic Cooperation Agreement (CEPA) with Australia. This will be the second such pact after the one with the United Arab Emirates (UAE), signed in February.
Australia is India’s 17th largest trading partner, while New Delhi is Canberra’s 9th. India’s merchandise exports stood at USD 6.9 billion and imports at USD 15.1 billion in 2021.