Syllabus: GS2/International Relations
Context
- India and Australia now stand at a pivotal moment to deepen their strategic and economic partnership with tariffs eliminated under the India-Australia Economic Cooperation and Trade Agreement (ECTA).
India-Australia: A Tariff-Free Era
- Australia has officially removed all tariffs on Indian goods, marking a historic milestone in bilateral trade relations as of January 1, 2026.
- It follows the full implementation of the India–Australia Economic Cooperation and Trade Agreement (ECTA) that came into effect in December 2022.
- Now, India can access the A$2-trillion Australian market tariff-free, marking the full realization of the Australia-India ECTA.
- In return, many Australian goods now enter India with reduced or zero duties, deepening the spirit of reciprocity and shared prosperity that ECTA was designed to foster.
Impacts of Tariff-Free Trade
- Trade and Economy: Two-way trade between India and Australia has now crossed A$50 billion (₹3 lakh crore) for the first time, nearly doubling over the past five years.
- Meanwhile, India’s exports to Australia have grown 200% in five years, compared to just 40% growth in its global exports.
- It means India’s trade with Australia has expanded five times faster than its trade with the rest of the world.
- India’s exports: refined petroleum, medicaments, gems, textiles.
- Imports from Australia: coal, copper ore, LNG, metals, and education services.
- Australian commodity exports have surged, supporting India’s ‘Make in India’ initiative by supplying essential inputs like minerals and raw materials.
- Jobs and Economic Opportunity: In Australia, where one in four jobs is linked to trade, an estimated 200,000 jobs are now tied to commerce with India.
- In India, ECTA would create 1 million new jobs, a goal that appears to have been achieved ahead of schedule given the current trajectory.
- These outcomes underscore how open trade directly benefits working families, small businesses, and industries on both sides.
- Natural Economic Partnership: The India-Australia partnership thrives because of its natural complementarity.
- Australia offers what India needs: critical minerals, rare earths, advanced skilling expertise, and resources that fuel industrial growth.
- India provides what Australia seeks: quality manufactured goods, competitive agricultural products, and a growing consumer market.
| Overview of India–Australia Relations – High-Level Engagements: Key outcomes include agreements on migration and mobility (2023), renewable energy, green hydrogen, and the Centre for Australia-India Relations in Sydney. a. The Prime Ministers of both nations launched the India-Australia Renewable Energy Partnership (REP) at the G20 Summit in Rio de Janeiro in November 2024. b. Comprehensive Strategic Partnership (CSP) of 2020, reaffirmed during the Foreign Ministers’ Framework Dialogue, 2024. – Dialogue & Cooperation Mechanisms: Numerous institutional dialogues exist, such as: a. 2+2 Foreign & Defence Ministerial Dialogue; b. Foreign Ministers’ Framework Dialogue (FMFD); c. Joint Ministerial Commission on Trade; d. India–Australia–Japan and India–Australia–Indonesia trilaterals; e. Defence Policy & Maritime Dialogues; – Economic & Trade Relations: Bilateral trade crossed USD 31.3 billion in 2023–24, up 12% from 2022–23. a. India’s key imports: coal, LNG, education services. b. Australia’s key imports: pharmaceuticals, gems & jewellery, machinery. – Defence and Security: Robust defence cooperation through AUSINDEX, AUSTRAHIND, and participation in MALABAR, TALISMAN SABRE, and MILAN exercises. a. Regular defence staff talks, joint R&D, and officer exchange programs (e.g., General Rawat Young Defence Officers’ Exchange). b. Cooperation extends to maritime security and defence industrial collaboration. – Education and Migration: Over 120,000 Indian students were studying in Australia by late 2024. a. Post-study work rights and mutual recognition of qualifications were implemented under the Migration and Mobility Partnership Arrangement (MMPA) b. The new Centre for Australia–India Relations promotes institutional collaboration and scholarships. – Climate, Technology, and Critical Minerals: India and Australia cooperate on critical minerals (lithium, cobalt, rare earths). a. India-Australia Green Hydrogen Taskforce; b. Joint R&D projects in clean energy, AI, and cyber security under the Indo-Australian Innovation and Technology Challenge 2024. – Regional and Multilateral Cooperation: Cooperation continues within: a. QUAD (India, Australia, Japan, USA); b. Indian Ocean Rim Association (IORA); c. East Asia Summit and ASEAN Regional Forum; d. Shared commitment to maritime security and supply chain resilience. – Science, Technology, and Energy: India–Australia Strategic Research Fund (AISRF) supports collaborative R&D. a. Partnerships in space (ISRO–ASA), agriculture, and critical minerals are active. b. Launch of Green Hydrogen Task Force (2023) and Renewable Energy Partnership (2024). |
Building Beyond Tariff-Free Trade
- Finalizing the Comprehensive Economic Cooperation Agreement (CECA): The ECTA was always envisioned as a stepping stone.
- A full CECA would address services, investment, digital trade, and regulatory cooperation, areas that are increasingly vital in the 21st-century economy.
- Boosting Services and Skilled Mobility: There is immense potential for collaboration in healthcare, education, and IT services with Australia’s aging population and India’s young, skilled workforce.
- Streamlining visa processes and recognizing qualifications can unlock this potential.
- Strengthening Supply Chains: India and Australia can co-develop resilient supply chains in critical minerals, pharmaceuticals, and semiconductors.
- Australia’s resource wealth and India’s manufacturing prowess are natural complements.
- Collaborating on Clean Energy: Both nations have committed to ambitious climate goals. Joint ventures in green hydrogen, solar energy, and battery storage can position them as leaders in the global energy transition.
Towards a Comprehensive Economic Cooperation Agreement (CECA)
- Both nations are now working to upgrade it to a CECA building on ECTA’s success. It expanded framework aims to deepen cooperation across:
- Goods and services trade;
- Investment flows;
- Critical minerals supply chains;
- Skills development and innovation partnerships
- Recently, India and Australia reaffirmed their commitment to concluding CECA as soon as possible, signaling strong political will on both sides.
A Roadmap for the Future
- Australia’s recently released strategy, ‘A New Roadmap for Australia’s Economic Engagement with India’, outlines how the nation plans to both contribute to and benefit from India’s economic rise.
- It envisions long-term collaboration in technology, education, resources, and clean energy, sectors poised to define the next phase of the bilateral relationship.
| Daily Mains Practice Question [Q] Discuss how India and Australia can strategically leverage the Economic Cooperation and Trade Agreement (ECTA) to deepen their bilateral relationship beyond trade. |
Previous article
A Multipolar World with Bipolar Characteristics
