India Australia Economic Cooperation and Trade Agreement (IndAusECTA)


    In News

    • Recently, the IndAusECTA Agreement, which was signed last year, has come into force after Ratification and Exchange of Written Instruments.

    Major Areas of IndAusECTA

    • Trade in Goods
    • Trade in Services
    • Rules of Origin
    • Technical Barriers to Trade (TBT) and Sanitary and Phytosanitary (SPS) measures
    • Customs Procedures and Trade Facilitation
    • Trade Remedies
    • Legal & institutional Issues
    • Movement of Natural Persons

    Current Trade trends between India and Australia

    • Imports:
      • India’s imports from Australia amount to 17 US $ billion India’s imports from Australia are primarily (96%) raw materials & intermediate goods.  
      • They are highly concentrated in Coal (74% of Australia’s exports to India) out of which 71.4% is coking coal. 
    • Exports:
      • India’s exports to Australia amount to 10.5 US $ billion. 
      • India’s exports to Australia are broad-based and dominated by finished products (consumer goods). 
      • India also spends $ 4 bn approx. each year on education of students in Australia.

    Benefits for India

    • Benefits under Trade in Goods:
      • Indian goods on all tariff lines to get access to the Australian market with zero customs duty (currently subjected to 5% import duty by Australia). 
      • Immediate duty-free access covers all labour-intensive sectors such as Textiles and Apparel, Agricultural and Fish products, Leather, Footwear, Furniture, many Engineering Products, Jewelry and select Pharmaceuticals. 
      • Cheaper Raw Materials, Faster Approval for Medicines
      • Immediate Duty-Free Access is projected to potentially create 10 lakh jobs in India and additional exports of $ 10 bn from India to Australia in the next five years.
      • India has offered concessions on Tariff lines of export interest to Australia like Coking coal and Thermal coal, Wines, Agricultural products – 7 of them with TRQ (Cotton, Almonds shelled and in shell, Mandarin, Oranges, Lentils, Pear), Metals (Aluminium, Copper, Nickel, Iron & Steel) and Minerals (Manganese Ore, Calcined Alumina). 
      • Exceptions: Many sensitive products such as milk and other dairy products, wheat, sugar, iron ore, apple, walnuts and others, have been kept in India’s Exclusion list.
    • Benefits under Trade in Services:
      • Australia has committed its schedule in the negative list and has also made wide-ranging commitments in around 135 sub-sectors with Most Favoured Nation (MFN) status in around 120 sub-sectors.  
      • India has for the first time agreed to Negative listing after 5 years of coming into force of the Agreement.
      • India is also making a commitment to Australia in around 103 Service Sub-Sectors with Most Favoured Nation status in around 31 Service Sub-sectors for the first time. 
      • The Agreement opens avenues for investment in computer related services, telecom, construction, health & environmental services. 
      • More than 1 lakh Indian students in Australia will benefit from post-study work visas (18 months – 4 years).
      • The Agreement provides for an Annual Quota of 1,800 for Yoga teachers and Indian Chefs. 
      • It makes an arrangement for Work and Holiday Visas for young professionals.
      • Commitments have also been made to pursue Mutual Recognition Agreements (MRAs) in professional services in 12 Months.
    • Protective Features to guard against Unintended Consequences:
      • The #IndAusECTA also has certain ‘protective features’ aimed at guarding both countries against unintended consequences on trade.
      • Stringent Rules of Origin – 
        • Value Addition of 35% + Change in Tariff Subheading (CTSH)
        • In calculation of Value Addition, 2 different values agreed to (35% or 45%) depending on method of calculation (based on whether profit is excluded or included)
      • Product Specific Rules negotiated for 807 products
        • Requirement of ‘melt and pour’ for iron & steel products included in the Product Specific Rules for these products.
      • Strict Operational Customs Procedures
        • A specific clause included to ensure only items made in Australia count for value addition, no other country products
        • A Bilateral Safeguard Mechanism will be available for 14 years in case of surge in imports:
      • A special clause on Review has been agreed upon to enable either country to request a Review for parts of the Agreement which may be a cause of concern, after 15 years
        • Review compulsory if requested (it shall happen)
        • Must be completed in 6 months
    • End to Double Taxation:
      • A provision in the Double Taxation Avoidance Agreement (DTAA) was used to tax this remittance.
      • However, the Agreement has removed the discrepancies with regard to use of DTAA for taxation of Indian firm royalties, fees and charges.
      • Australia has no domestic provision for charging tax on royalties, fees and charges by firms sending these to parent companies. 
    • Boost to Economy:
      • Exports are expected to increase by 10 billion by 2026-27 with a creation of approximately 10 lakh jobs. 
      • The total bilateral trade is expected to cross US $ 45-50 billion by 2035. 
      • The coming into force of the India Australia ECTA is expected to consolidate and help in the growth of market share of Indian products and services. 

    Way Ahead

    • There is a lot of potential for exporting finished goods to Australia, since they hardly manufacture anything, they are largely a raw material and intermediate producing country. 
    • India can get cheaper raw materials which will not only make India more competitive globally but also enable it to serve Indian consumers better; enabling it to provide more quality goods at more affordable prices
    • Ind – Aus ECTA brings together two major economies of the world, – India the 5th largest economy and Australia the 14th largest economy. 
    • The trade between the two countries is hugely complementary, this offers opportunities on both sides and will pave the way for a win-win solution for both India and Australia.

    Source: PIB