Australian parliament passes historic ECTA deal with India
Australia and India crossed a landmark in their relationship today as the Australian parliament passed the Economic Cooperation and Trade Agreement (ECTA).
A free trade agreement (FTA) is an international treaty between two or more economies that lowers or removes some restrictions on investment and trade in goods and services. The trade agreements are necessary for the economic prosperity of the countries. It not only reduces and removes tariffs but free trade agreements also aid in addressing invisible trade barriers that would otherwise obstruct the flow of goods and services.
The two important Indo-Pacific partners, India and Australia were in talks for a bilateral trade agreement. On April 2, 2022, an interim agreement Australia-India Economic Cooperation and Trade Agreement (ECTA) was signed which has now recently been ratified by the Government of Australia. Australian Prime Minister, Anthony Albanese tweeted, "Our Free Trade Agreement with India has passed through parliament.” In response, Indian Prime Minister Narendra Modi wrote, "The entry into force of IndAus ECTA will be greatly welcomed by our business communities, and will further strengthen the India-Australia Comprehensive Strategic Partnership."
Australian Trade Minister Don Farrell said in a statement, "The quality of this Agreement, in terms of market access and opportunity for Australian businesses, demonstrates India's commitment to our bilateral economic partnership."
India's Minister of Commerce and Industry Piyush Goyal called it a “landmark moment” for both the countries as the free trade agreement will be a "first'' in Australian history as all items that will be imported will be duty-free which will provide Indian companies a bigger market share in Australia. Goyal said, “First time in Australia’s history, they are giving 100 percent tariff lines”
The bilateral treaty between Australia and India is a historic treaty as it is the first successful trade deal in more than a decade after one with Japan in 2011. The economic links between the two countries have grown significantly over the past few years.
The trade deal will open Australian exports of goods and services to India’s expanding market of about 1.5 billion customers. In addition to opening up new opportunities and markets, it will also provide for the elimination or reduction of tariffs on a wide variety of important Australian products exports, this will allow Australian products to be exported and to open up new business opportunities especially in regions where trade was previously unfeasible due to high tariffs.
The value of Australian exports to India will be 85 per cent tariff-free, while the remaining 5 per cent will be allowed entry without paying tariffs for a maximum of 10 years. Once the agreement is in effect, more than 6,000 different Indian products, including those from the textile, leather, furniture, jewelry, and machinery industries, would have duty-free access to the Australian market. This trade agreement is a significant acknowledgement of India's rising international importance. It will generate employment prospects and will also create new opportunities for India as well. The bilateral trade is expected to expand from $27 billion to $45-50 billion in the next five years.
India is the eighth largest partner in trade for Australia. The raw materials and resources from Australia are essential for the growth of Indian industry. Australia's globally renowned essential minerals and resources sectors are also seeing increased demand from India. At least 21 of the 49 important minerals listed by the Indian government are found in Australia's reserves, and Australia may be a key player in enhancing India's supply chains.
India has guaranteed Australian service suppliers in 31 sectors and subsectors including higher education, business services, research and development communication, construction and engineering insurance and banking hospital, audiovisual, tourism and travel. As per the agreement, post study work visas of 2-4 years for STEM (Science, Technology, Engineering and Mathematics) students will be provided to the students from both the countries.
The agreement will enhance people-to-people ties and promote cultural interaction between Australia and India. Both the countries will also deal in organic goods and products, alcoholic beverages and work and holidays visas.
This agreement will be a high point for Australia-India ties, some sectors that India will benefit from this agreements are -
Services Trade - Not only will this agreement provide visas to students but there is a separate quota for Indian chefs and yoga instructors.
Pharmaceutical Sector - Fast -track approval for patented, generic and biosimilar medicines.
Technology and Information Technology Sector - Australia requires skilled tech staff which India can provide help with as India has a sizable pool of highly skilled tech experts. At the same time, Australia can serve as the ideal market for Indian start-ups.
Healthcare Sector - There will be increased collaboration between the two countries in medical devices partnerships and consultations from India through telemedicine.
The trade deal will not only strengthen the economic cooperation but will also build a strong and deeper base for the strategic relationship. The strong economic relationship between India-Australia will also lead to a strong partnership in the Indo-Pacific area.