India-Australia Economic Cooperation and Trade Agreement (AI-ECTA)


    In News

    • The Australian Parliament recently approved the free trade agreement inked with India paving the way for the rollout of the pact from January 2023.
      • The agreement is likely to push the bilateral trade to USD 45-50 billion in the next five-six years from the present USD 31 billion

    More in news

    • This was the third such agreement signed by this government, after the Mauritius and UAE trade pacts.
    • The India-Australia Economic Cooperation and Trade Agreement (ECTA) needed ratification by the Australian Parliament before its implementation. 
      • In India, such pacts are approved by the Union Cabinet. 
        • This is the first agreement with a developed country after a decade

    Major highlights on AI-ECTA

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    • Data on trade:
      • India’s goods exports to Australia stood at USD 8.3 billion and imports from the country aggregated to USD 16.75 billion in 2021-22. 
    • Duty-free access: 
      • It would provide duty-free access to Indian exporters of over 6,000 broad sectors including textiles, leather, furniture, jewellery and machinery in the Australian market.
      • Australia will open 100 per cent of their lines (products) with no restriction on even quota. This is the first time Australia has done this for any country.
      • Australia is offering zero-duty access to India for about 96.4 per cent of exports (by value) from day one. This covers many products that currently attract 4-5 per cent customs duty in Australia.
    • Double Taxation Avoidance Agreement (DTAA):
      • The Australian Parliament has also approved an amendment to the Double Taxation Avoidance Agreement (DTAA), a move which would help the Indian IT sector in operating in that market.  
      • It would stop the taxation on the offshore income of Indian firms providing technical support in Australia.

    Significance of the pact

    • Labour-intensive sectors:
      • They would gain immensely from textiles and apparel, few agricultural and fish products, leather, footwear, furniture, sports goods, jewellery, machinery, and electrical goods.
    • Job opportunities: 
      • It will be a great job opportunity for Indians when Australian investment comes here. 
    • More visas:
      • India has got visas for Indian chefs and yoga instructors and also got a commitment that every child going to study in Australia will get an opportunity to work there depending on the level of education.
    • Beneficial for farmers:
      • The pact will help farmers growing grapes for making wine to explore more business opportunities in Australia.
      • There are 6,000 grape farmers in India who grow grapes for wine purposes. It will help attract investments, and new farmers can also come into the sector.
    • Increased Exports:
      • The agreement has opened vistas of opportunities for domestic exports as over 98 per cent of the tariff lines will have tariff advantage from day one.
    • Duty-free imports: 
      • We will also get duty-free imports of critical raw materials like coal, alumina, manganese, copper, nickel, wool, hides and skin. It will impart further competitiveness to our manufacturing and exports. 
    • Indian IT sector is the biggest gainer of that amendment:
      • The move may lead to savings of about USD 200 million each year for over 100 Indian IT firms operating in Australia.

    Way Forward

    • The FTA is a win-win for both. On one hand it would open up the Indian market for quality Australian wines, and on the other it would help the Indian wine industry evolve further benefiting from the expertise and investment from their Australian counterparts.  

    What is a Free Trade Agreement (FTA)?

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    • A free trade agreement is a pact between two or more nations to reduce barriers to imports and exports among them.  
    • Under a free trade policy, goods and services can be bought and sold across international borders with little or no government tariffs, quotas, subsidies, or prohibitions to inhibit their exchange.
    • The concept of free trade is the opposite of trade protectionism or economic isolationism.

    Key Benefits of Free Trade Agreements      

    • Reduction or elimination of tariffs. 
    • Intellectual Property Protection.
    • Development of product standards.
    • Supplying services in the FTA partner country.
    • Fair treatment for investors.  

    Source: IE