Trade agreements with Australia and UAE

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    • Recently, Various export promotion councils (EPCs) praised the trade agreements signed by India with the UAE and Australia.
      • They said that these agreements will help India in boosting its exports by granting preferential access to those markets for Indian products. 

    More about the news

    • The recent pacts:
      • India–UAE Comprehensive Economic Partnership Agreement (CEPA) which became effective from May 2022.
      • The India-Australia Economic Cooperation and Trade Agreement (ECTA) will come into force from December 29. 
        • India is the sixth largest trading partner of Australia.
        • India’s bilateral trade in goods and services with Australia rose 106.5% to $25.04 billion so far in 2022 compared to 2021.
    • FTA’s and PTA’s 
      • India has signed 13 free trade agreements (FTAs) and six preferential pacts so far with its trading partners for ensuring greater market access for domestic goods and promoting exports.
        • The country has recently signed three such agreements with Mauritius, the UAE and Australia.
        • India is also actively engaged in FTA negotiations with some of its trading partners including the UK, European Union and Canada.

    Significance of the trade agreement with Australia 

    • Job creation: The trade agreement is expected to create 10 lakh jobs and raise Indian merchandise exports to Australia by $10 billion.
    • Cheap imports: the ECTA will also allow zero duty on 100% tariff lines and provide cheaper raw materials to steel and aluminium sectors. The trade pact will also raise the bilateral trade volume to $45-50 billion in five years.
    • Supply chain resilience: ECTA will help Australian manufacturers strengthen their supply chain resilience and enhance trade diversification while also connecting the two complementary and stable economies. 
    • Jewellery exports: ECTA would help double India’s gem and jewellery exports to Australia, from its current $350 million to $800 million in three years.
    • Export potential for plastics from India stands at $6 billion to Australia.
      • Import duty applicable in Australia had been reduced on all tariff lines for plastic products with immediate effect which would act as a great booster for outbound shipments. 
    • Zero duty access: India is providing zero-duty access to Australia for 70.3 per cent of its tariff lines.
      • India has offered zero duty access on coal, alumina calcined, manganese ore, copper concentrates, bauxite, sheep meat, rock lobster, macadamia nuts, cherries, and wool.
      • Australia is offering zero-duty access to India for about 96.4 per cent of exports. 

    Significance of the trade agreement with UAE

    • Boost in exports: The country had benefited from preferential market access provided by the UAE on more than 97% of its tariff lines which account for 99% of Indian exports to the region in value terms.
    • Bilateral trade: The CEPA with the UAE is expected to increase the total value of bilateral trade in goods to over $100 billion and in services to more than $15 billion within five years.
    • Jewellery trade: Post the India-UAE CEPA, gems and jewellery exports to the region witnessed an overall export growth of 20% to the region.
    • Export potential for plastics from India stands at $5 billion to the UAE.
      • Import duty applicable in the UAE on 260 plastic products has been reduced from 5% to zero with immediate effect. 

    Different Types of Economic Engagements:

    • Preferential Trade Agreement (PTA)
      • In a PTA, two or more partners agree to reduce tariffs on an agreed number of tariff lines. 
      • The list of products on which the partners agree to reduce duty is called a positive list. 
      • India MERCOSUR PTA is such an example. 
      • However, in general PTAs do not cover substantially all trade. 
    • Free Trade Agreement (FTA)
      • In FTAs, tariffs on items covering substantial bilateral trade are eliminated between the partner countries but each country maintains an individual tariff structure for non-members. 
      • The key difference between an FTA and a PTA is that while in a PTA there is a positive list of products on which duty is to be reduced; in an FTA there is a negative list on which duty is not reduced or eliminated.
    • Comprehensive Economic Cooperation Agreement (CECA) and Comprehensive Economic Partnership Agreement (CEPA): 
      • These terms describe agreements which consist of an integrated package on goods, services and investment along with other areas including IPR, competition etc. 
    • Custom Union
      • In a Customs union, partner countries may decide to trade at zero duty among themselves, however they maintain common tariffs against the rest of the world. 
      • An example is Southern African Customs Union (SACU) amongst South Africa, Lesotho, Namibia, Botswana and Swaziland. 
      • The European Union is also an outstanding example. 
    • Common Market
      • Integration provided by a Common market is one step deeper than that by a Customs Union. 
      • A common market is a Customs Union with provisions to facilitate free movements of labour and capital, harmonise technical standards across members etc. 
      • The European Common Market is an example. 
    • Economic Union: 
      • Economic Union is a Common Market extended through further harmonisation of fiscal/monetary policies and shared executive, judicial & legislative institutions.

    Source: TH