3 Years of India-Australia Economic Cooperation and Trade Agreement (Ind-Aus ECTA)

Syllabus: GS2/ International Relations

In News

• The India–Australia Economic Cooperation and Trade Agreement (Ind-Aus ECTA) has completed three years of operation since its implementation in December 2022.

What is Ind-Aus ECTA?

• The Ind-Aus ECTA is a bilateral free trade agreement between India and Australia, signed on 2 April 2022 and implemented from December 2022.
• It is termed an “early harvest” or interim agreement, meaning it focuses on quick and high-impact liberalisation in goods trade, with limited but important commitments in services and investment. 
• The ECTA serves as a foundation for a deeper and more comprehensive Comprehensive Economic Cooperation Agreement (CECA) in the future.

Key Features of the Ind-Aus ECTA

• Tariff Liberalisation in Goods:
  • Australia’s commitments: Duty-free access for Indian exports on over 95% of tariff lines from day one.
    • From 1 January 2026, 100% of Australian tariff lines will be at zero duty for Indian exports.
  • India’s commitments: Gradual tariff reduction on Australian exports, with sensitivity for sectors such as agriculture, dairy, and wine.
    • Phased liberalisation protects domestic producers while allowing adjustment.
• Rules of Origin and Trade Facilitation: Clearly defined Rules of Origin (RoO) prevent misuse and trans-shipment.
  • Simplified customs procedures aim to reduce transaction costs and delays, particularly benefiting exporters and MSMEs.
• Services and Mobility: Limited but significant provisions for business visitors, contractual service suppliers, and professionals.
  • Enhanced cooperation in IT, education, and professional services, though deeper liberalisation is reserved for CECA.
• Investment and Safeguards: Provisions for investment promotion and protection.
  • Safeguard mechanisms to address sudden import surges that could harm domestic industries.

Significance of the India–Australia Relationship

• Strategic and Geopolitical Significance: India and Australia share a common vision of a free, open, and rules-based Indo-Pacific.
  • Cooperation under initiatives like the Australia–India Indo-Pacific Oceans Initiative Partnership (AIIPOIP) strengthens maritime governance and regional stability.
• Strategic Alliances: Both are core members of the Quadrilateral Security Dialogue (QUAD) along with the US and Japan.
  • ECTA adds an economic dimension to QUAD’s strategic and security cooperation.
• Defence and Security Cooperation: Mutual Logistics Support Agreement (MLSA) enables reciprocal access to military bases and logistics support.
  • Joint military exercises between both nations like Malabar (naval, QUAD countries), AUSINDEX (bilateral naval exercise) enhances interoperability, maritime security, and trust.
• Multilateral Alignment: India and Australia work closely in global and regional forums such as G20, East Asia Summit (EAS) & Indian Ocean Rim Association (IORA).
• Supply Chain Resilience: Both countries are partners in the Supply Chain Resilience Initiative (SCRI) along with Japan.
  • This would reduce dependence on single-country supply chains and promote trusted, resilient production networks.
• Critical Minerals Partnership: Australia is a major global supplier of lithium, cobalt, and rare earth elements. These minerals are essential for India’s Electric Vehicle (EV) mission, battery manufacturing, and clean energy transition.

Challenges 

• Services share: Services form ~55% of India’s GDP, but get limited coverage under ECTA.
• Domestic sensitivity: Dairy sector employs ~80 million rural households in India, a key reason for cautious liberalisation.

Way Forward 

• Improve MSME utilisation rate of FTAs (currently estimated below 30% across Indian FTAs).
• Fast-track CECA negotiations focusing on services, digital trade, and investment protection.
• Expand cooperation in green hydrogen, critical minerals processing, and skill mobility.

Source: TH