01 January 2023, New Delhi: The implementation of the Economic Cooperation and Trade Agreement (ECTA) between India and Australia has the potential to double bilateral trade in goods and services to USD 45 billion in five years, said the Confederation of Indian Industry (CII). Congratulating the Prime Ministers of the two countries for the quick conclusion of the agreement, CII noted that zero-duty access to Australia’s market will be available to India immediately as the ECTA enters into force on 29 December 2022.
“Australia and India are increasingly working together as strategic and economic partners. India Australia ECTA is a ground-breaking agreement that will leverage the industry to capitalize the enormous untapped potential. The agreement is expected to boost investments, enhance market access, create additional job opportunities, and most importantly strengthen the bilateral ties of two important players in Indo-Pacific region” by Sanjay Budhia, Chairman – National committee on EXIM and Managing Director of Patton International Ltd.
Australia will provide zero-duty access to India for 100% of its tariff lines (98.3% tariff lines from day one and the remaining 1.7% in a phased manner in 5 years). This is expected to lead to USD 10 billion jump in India’s merchandise exports by 2026-27 and would help in creating additional 10 lakh jobs in India and more job opportunities in Australia. Besides providing cheaper raw materials to many sectors including steel and aluminium from Australia, the ECTA would also facilitate increased investments from Australia and will support Indian manufacturing, said CII.
The major boost for India would be in its labour-intensive sectors, which are currently subject to import duty of 4-5 % by Australia, will gain immediate duty-free access, according to CII. The sectors that would gain immediately are textiles and apparel, leather and footwear, furniture, sports goods, jewellery, machinery, railway wagons and select agricultural and marine products. CII noted that substantial gains are expected in pharmaceuticals whereby drugs approved in other developed jurisdiction will get approval in Australia much faster.
India, on the other hand, is providing zero-duty access to Australia for 70.3% of its tariff lines (40.3% tariff lines from day one and the remaining 30% in a phased manner). India has offered zero duty access on coal, alumina calcined, manganese ore, copper concentrates, bauxite, sheep meat, rock lobster, macadamia nuts, cherries, and wool.
About 96% of Australia’s exports to India comprised of raw materials and intermediate products, thus the tariff concessions offered by India will allow local/domestic industries to get cheaper raw materials and enhance their competitiveness.
CII is also looking forward to various opportunities for trade in services. Australia has made wide ranging commitments in around 135 sub sectors with most-favoured nation (MFN) status in around 120 sub-sectors. The major gains are for the Indian IT sector followed by healthcare and education, and service professionals such as yoga teachers and chefs.
CII expects that the deal would provide large Indian IT companies to increase their involvement in Australian government projects. The deal enables India and Australia to collaborate and develop niche skill sets, provide global digital solutions, and further develop fintech capabilities. On the other hand, India is making commitments in around 103 Service sub-sectors with MFN in 31 sub-sectors.
Another important announcement made by Australian Parliament is the double tax avoidance agreement (DTAA) ratification, along with its trade deal with India. The DTAA may come into force on April 1, 2023. The DTAA is expected to eventually lead up to USD 1 billion in savings for Indian IT companies operating in Australia. Therefore, Indian IT companies may be able to generate roughly USD 4-8-billion business income from Australia each year.
The ECTA covers major areas of economic cooperation including Trade in Goods, Trade in Services, Rules of Origin, Technical Barriers to Trade (TBT), Sanitary and Phytosanitary (SPS) measures, Customs Procedures and Trade Facilitation, and Trade Remedies besides resolution of some of the legal / institutional Issues and Movement of Natural Persons.
With ECTA as an interim trade deal, CII looks forward to negotiations for the bilateral Comprehensive Economic Cooperation Agreement (CECA) agreement which may be concluded by September 2023. The full-fledged CECA will formally begin negotiations from next month, with many sensitive sectors including digital trade, government procurement, labour and environment.
CII observed that the agreement with Australia sends a positive signal and sets the pace for FTAs with other developed partners like UK, Canada, and EU, which are already on the negotiating table for similar pacts with India.
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