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

• The historic interim Economic Cooperation and Trade Agreement (INDAUS ECTA) between India and Australia, which came into effect on December 29, 2022 will boost Indian exports of textiles, leather, gems, and jewellery to Australia.
• The free trade deal signed with India was recently ratified by the Australian Parliament, opening the path for its implementation beginning in January 2023.

What precisely is the India-Australia ECTA?

• After the trade pacts with the UAE and Mauritius, this was the third such agreement that this government had signed.
• The deal is expected to increase bilateral commerce from its current level of USD 31 billion to USD 45–50 billion in the following five–six years.
• It covers practically all of the tariff lines that Australia and India, respectively, deal with.
• India will profit from Australia's offer of preferential market access on all of its tariff lines.
• Over 70% of India's tariff lines will grant Australia preferential access.
• A formal framework for promoting and enhancing trade between the two nations is provided by ECTA.
• This comprises all the labour-intensive export industries that India is interested in, such as textiles, leather goods, footwear, furniture, and gems and jewellery.
• Indian STEM (Science, Technology, Engineering, and Mathematics) graduates will be eligible for extended post-study work visas under the terms of the agreement.
• 96% of India's exports to Australia will have zero-duty access, and 85% of Australia's exports will have zero-duty access to the Indian market.

Significant highlights of AI-ECTA:

• Information on trade shows that in 2021–2022, India's goods exports to Australia totalled USD 8.3 billion while its imports totalled USD 16.75 billion.
• Duty-free access: It will give Indian exporters duty-free access to the Australian market for over 6,000 different industries, including textiles, leather, furniture, jewellery, and machinery.
• Australia will open all of its product lines without any limitations, not even quotas. Australia is the first nation to have done this for another.
• As of today, Australia is providing zero-duty access to India for roughly 96.4% of exports (by value). This applies to a wide range of goods that are now subject to a 4%–5% customs charge in Australia.
• Double Taxation Avoidance Agreement (DTAA): An modification to the DTAA has also been adopted by the Australian Parliament, which will make it easier for the Indian IT sector to compete in that market.
• It would halt the taxation of Indian companies that provide technical support in Australia on their offshore income.

What is its Significance ?

• Competitivee goods: In several labour-intensive industries, Indian exports currently face a tariff disadvantage of 4–5% compared to rivals on the Australian market like China, Thailand, Vietnam, South Korea, Japan, Indonesia, and Malaysia.
• The ECTA's removal of these obstacles can greatly increase India's exports of goods.
• Cheaper Raw Materials: The majority of Australian exports to India are made up of intermediate and raw goods. Many Indian companies will benefit from cheaper raw materials and increase their competitiveness as a result of having zero-duty access to 85% of Australian goods, especially in industries like steel, aluminium, electricity, engineering, and so forth.
• Sectors that require a lot of labour: Textiles and apparel, a few agricultural and fish products, leather, footwear, furniture, sporting goods, jewellery, machinery, and electrical items would all be very profitable for them.
• Better Indo-Pacific: Australia's strength Economic ties with India will also pave the way for a stronger Indo-Pacific economic architecture that is based on developing capacity-led connections, complementarities, sustainable commitments, and mutual dependence among nations and sub-regions rather than just on flows of physical goods, money, and people.
• More visas: India has visas for Indian chefs and yoga instructors in addition to a promise that every youngster who travels to Australia to study will have the chance to work there, based on their educational background.
• Farmers will benefit from the accord since it will enable them to explore new economic prospects in Australia when cultivating grapes for wine.
• India has 6,000 grape farmers who cultivate grapes for wine. In addition to bringing in new farmers, it will aid in attracting capital.

How might India be affected by investment exclusion?

• The goal of India's signing an extensive economic partnership with these nations is to join the global value chains (GVCs), which place high importance on both trade and foreign direct investment.
• Decoupling commerce from investment in these CECAs thus goes against economic common sense.
• Investment protection is covered in many recent mega-economic treaties, including the Regional Comprehensive Economic Partnership (RCEP) Agreement and the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP).

Way Forward

• The India-Australia ECTA will significantly improve bilateral trade in goods and services, create new employment opportunities, raise living standards, and enhance the overall welfare of the two peoples. It will also further solidify the already close, strategic, and deep relationships between the two nations.
• The Indo-Pacific region should be free, open, inclusive, and governed by rules, according to the shared vision of India and Australia. Disputes should be settled peacefully rather than through the use of force or unilateral action, and all parties should adhere to international law, including the United Nations Convention on the Law of the Sea (UNCLOS).

India-Australia Economic Cooperation and Trade Agreement

The India-Australia Economic Cooperation and Trade Agreement (Ind-Aus ECTA) was just passed by the Australian Parliament.

About Ind-Aus ECTA.

• It is India's first Free Trade Agreement (FTA) with a significantly developed nation in more than ten years.

• The Agreement covers cooperation in the following areas across the whole spectrum of bilateral economic and commercial ties between the two friendly nations which includes:
• Trade in Goods and Rules of Origin
• Exchange of Services
• Technical Barriers to Trade (TBT)
• SPS (sanitary and phytosanitary) precautions
• Settlement of Disputes, Movement of Natural Persons
• Procedures for Telecom and Customs
• Pharmaceuticals and other areas of cooperation
• A formal framework for promoting and enhancing trade between the two nations is provided by ECTA.
• Nearly all of the tariff lines that India and Australia, respectively, deal in are covered by the ECTA.
• India will profit from Australia's offer of preferential market access on all of its tariff lines.
• This comprises all the labor-intensive export industries that India is interested in, such as textiles, leather goods, footwear, furniture, and gems and jewellery.
• On the other hand, India will grant Australia preferential access to more than 70% of its tariff lines, including those that are relevant to Australia's export interests and are principally for the importation of raw materials and intermediaries like coal, mineral ores, and wine.
• Indian STEM (Science, Technology, Engineering, and Mathematics) graduates will be eligible for extended post-study work visas under the terms of the agreement.
• Additionally, Australia will establish a scheme to issue visas to young Indians desiring to take working holidays there.
• A limit of 1800 visas will be issued each year to Indian chefs and yoga instructors.
• Additionally, it is predicted that ECTA will result in the creation of 10 lakh new jobs.

How have relations between India and Australia been so far?

• Excellent bilateral ties exist between Australia and India, which have recently experienced a transformational evolution and are progressing well toward becoming a cordial friendship.
• This unique cooperation is characterized by common principles of liberal parliamentary democracies, Commonwealth traditions, growing economic participation, long-standing inter-ethnic ties, and rising high-level interaction.
• The cornerstone of the complex bilateral relations between India and Australia is the Comprehensive Strategic Partnership, which was launched during the Leaders' Virtual Summit in June 2020.
• A fast broadening and strengthening the bilateral relationship between India and Australia is strengthened and stabilised by expanding economic and commercial ties between the two nations.
• Australia and India have both been significant trading partners for one another.
• India's top trading partner is Australia, while Australia's top trading partner is India.
• In 2021, the bilateral commerce between India and Australia would be worth USD 27.5 billion in goods and services.
• India's exports of goods to Australia increased by 135 percent between 2019 and 2021. India exported USD 6.9 billion worth of goods in 2021, the majority of which were finished goods from a diverse range of industries.
• In 2021, India imported commodities worth USD 15.1 billion from Australia, primarily in the form of raw materials, minerals, and intermediate products.
• The trilateral Supply Chain Resilience Initiative (SCRI), which aims to improve the resilience of supply networks in the Indo-Pacific Region, includes Japan, India, and Australia as partners.
• To further strengthen cooperation and develop partnerships on a number of issues of shared concern, India and Australia are also members of the QUAD grouping (India, the US, Australia, and Japan), which also includes the US and Japan.

Way Forward

• The India-Australia ECTA will significantly improve bilateral trade in goods and services, create new employment opportunities, raise living standards, and enhance the overall welfare of the two peoples. It will also further solidify the already close, strategic, and deep relationships between the two nations.
• The Indo-Pacific region should be free, open, inclusive, and governed by rules, according to the shared vision of India and Australia.
• Disputes should be settled peacefully rather than through the use of force or unilateral action, and all parties should adhere to international law, including the United Nations Convention on the Law of the Sea (UNCLOS).