India Australia Economic Cooperation and Trade Agreement (IndAusECTA)

Context- Recently, the IndAusECTA Agreement, has come into force after Ratification and Exchange of Written Instruments.

Major Areas of IndAusECTA

• Trade in Goods
• Trade in Services
• Rules of Origin
• Technical Barriers to Trade (TBT) and Sanitary and Phytosanitary (SPS) measures
• Customs Procedures and Trade Facilitation
• Trade Remedies
• Legal & institutional Issues
• Movement of Natural Persons
• Current Trade trends between India and Australia

Imports:

• India’s imports from Australia amount to 17 billion US $ India’s imports from Australia are primarily (96%) raw materials and intermediate goods. 
• Imports are highly concentrated in Coal (74% of Australia’s exports to India) out of which 71.4% is coking coal. 

Exports:

• India’s exports to Australia amount to about 10.5 US $ billion. 
• India’s exports to Australia are broad-based and dominated by finished products (consumer goods). 
• India also spends $ 4 bn approx. each year on education of students in Australia.

Benefits for India

• Benefits under Trade in Goods:

• • • Indian goods on all tariff lines in order to get access to the Australian market with zero customs duty (currently subjected to 5% import duty by Australia). 
    • Immediate duty-free access covers all labour-intensive sectors like Textiles and Apparel, Agricultural and Fish products, Leather, Footwear, Furniture, many Engineering Products, Jewelry and select Pharmaceuticals. 
    • Availability of cheaper Raw Materials and Faster Approval for Medicines
    • Immediate Duty-Free Access is projected to potentially create 10 lakh jobs in India and additional exports of $ 10 billion from India to Australia in the next five years.
    • India has also offered concessions on Tariff lines of export interest to Australia like Coking coal and Thermal coal, Wines, Agricultural products – 7 of them with TRQ (Cotton, Almonds shelled and in shell, Mandarin, Oranges, Lentils, Pear), Metals (Aluminium, Copper, Nickel, Iron & Steel) and Minerals (Manganese Ore, Calcined Alumina). 
  • Exceptions: 
    • Many sensitive products such as milk and other dairy products, wheat, sugar, iron ore, apple, walnuts and others, have been placed in India’s Exclusion list.

• Benefits under Trade in Services:

• • • Australia has committed its schedule in the negative list and has made wide-ranging commitments in around 135 sub-sectors with Most Favoured Nation (MFN) status in around 120 sub-sectors.  
    • India has for the first time agreed to Negative listing after 5 years of coming into force of such Agreement.
    • India is making a commitment to Australia in around 103 Service Sub-Sectors with Most Favoured Nation status in around 31 Service Sub-sectors for the very first time. 
    • The Agreement opens avenues for investment in computer related services, telecom, construction, health and environmental services. 
    • More than 1 lakh Indian students in Australia will benefit from post-study work visas i.e. 18 months to 4 years.
    • The Agreement provides for an Annual Quota of 1,800 for Yoga teachers and forIndian Chefs. 
    • It also makes an arrangement for Work and Holiday Visas for young professionals.
    • Commitments have also been made to pursue Mutual Recognition Agreements (MRAs) in professional services in 12 Months.

• Protective Features to guard against Unintended Consequences:

• • • The IndAusECTA has certain ‘protective features’ aimed at guarding both countries against unintended consequences on trade.
  • Stringent Rules of Origin – 
    • Value Addition of 35% + Change in Tariff Subheading (CTSH)
    • In calculation of Value Addition, 2 different values agreed to i.e. 35% or 45% depending on method of calculation based on whether profit is excluded or included
    • Product Specific Rules has been negotiated for 807 products
    • Requirement of ‘melt and pour’ for iron and steel products included in the Product Specific Rules for these products.

• Strict Operational Customs Procedures

• • • A specific clause included to ensure only items made in Australia count for value addition
    • A Bilateral Safeguard Mechanism will be available for 14 years in case of surge in imports
    • A special clause on Review has also been agreed upon to enable either country to request a Review for parts of the Agreement which may be a cause of concern, after 15 years
    • Review is compulsory if requested (it shall happen)
    • And it must be completed in 6 months

• End to Double Taxation:

• • • A provision in the Double Taxation Avoidance Agreement (DTAA) was used to tax the remittance.
    • However, the Agreement has removed the discrepancies with reference to use of DTAA for taxation of Indian firm royalties, fees and charges.
    • Australia has no domestic provision for charging tax on royalties, fees and charges by firms sending them to parent companies. 

• Boost to Economy:

• • Exports are also expected to increase by 10 billion by 2026-27 with a creation of approximately 10 lakh jobs. 
  • The total bilateral trade is expected to cross US $ 45-50 billion by the year 2035. 
  • The coming into force of the India Australia ECTA is expected to consolidate and help in the progressive growth of market share of Indian products and services. 

Way Ahead

• There is a lot of potential for exporting finished goods to Australia, since they hardly manufacture anything, as it is largely a raw material and intermediate producing country. 
• India can get cheaper raw materials which will not only make India more competitive globally but will also enable it to serve Indian consumers better; enabling it to provide more quality goods at more affordable prices
• Ind – Aus ECTA brings together two significant economies of the world, – India the 5th largest economy and Australia the 14th largest economy. 
• The trade between the two countries is largely complementary, this offers opportunities on both sides and will pave the way for a win-win solution for both India and Australia.

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