India and Australia have signed a historic interim Economic Cooperation And Trade Agreement (INDAUS ECTA), which will give a fillip to India’s exports in the textiles, leather, gems, and jwellery sector Down Under.
For India, the ECTA with Australia is the first agreement with a large developed economy of the world after more than a decade. Australia is also the third OECD country after Japan and South Korea with which India has signed a Free Trade Agreement (FTA).
It covers almost all the tariff lines dealt in by India and Australia respectively. India will benefit from preferential market access provided by Australia on 100% of its tariff lines. India will be offering preferential access to Australia on over 70% of its tariff lines.
Importance of Agreement
- Enhanced Exports: Currently, Indian exports face a tariff disadvantage of 4-5% in many labour-intensive sectors vis-à-vis competitors in the Australian market such as China, Thailand, Vietnam, South Korea, Japan, Indonesia and Malaysia.
- Cheaper Raw Materials: Australian exports to India are more concentrated in raw materials and intermediate products. Due to zero-duty access to 85% of Australian products, many industries in India will get cheaper raw materials and thus become more competitive, particularly in sectors like steel, aluminium, power, engineering and so on.
- Stronger Indo-Pacific: Strong Australia India economic ties will also pave the way for a stronger Indo-Pacific economic architecture, that’s not just based on flows of physical goods, money and people, but on the basis of building capacity led connections, complementarities, sustainable commitments and mutual dependence across countries and sub-regions.