India & Australia Signs Interim Trade Agreement
Within one-and-half months of signing a comprehensive economic and partnership agreement (CEPA) with the United Arab Emirates (UAE), India entered into an economic cooperation and trade agreement (ECTA) with Australia last Saturday (April 2). Without splitting hairs on the difference in scope between a CEPA and an ECTA, it can be safely said that India, in recent times, has been rooting for bilateral deals to bolster its external trade engagements. The interim pact or India-Australia Economic Cooperation and Trade Agreement (ECTA) was inked by Commerce and Industry Minister Piyush Goyal and Australian Minister for Trade, Tourism and Investment Dan Tehan in the presence of the respective prime Ministers.
According to the text of ECTA, both the countries have established a negotiation sub-committee which shall be composed of government representatives of both the sides. "Within 75 days after the date of signature of this (ECTA) agreement, the negotiation sub-committee shall commence negotiations on amendments to this agreement, on a without prejudice basis, on areas including inter alia market access for goods and services, a complete product-specific rules schedule, a digital trade chapter, and a government procurement chapter, to transform this agreement into a Comprehensive Economic Cooperation Agreement," the text said. Following those negotiations, the two countries "may make amendments to this agreement...to transform this agreement" into a CECA.
which is set to provide zero-duty access to 96% of India’s exports to Australia including shipments from key sectors such as engineering goods, gems and jewellery, textiles, apparel and leather. The pact is expected to boost bilateral trade in goods and services to $45-50 billion over five years, up from around $27 billion, and generate over one million jobs in India, according to a government estimate. The agreement will also give about 85% of Australia’s exports zero-duty access to the Indian market, including coal, sheep meat and wool, and lower duty access on Australian wines, almonds, lentils, and certain fruits. Zero-duty access for Indian goods is set to be expanded to 100% over five years under the agreement.
The interim pact announced comes after more than a decade of talks and analysts have said that Australia is eager to reduce its reliance on China — its biggest trading partner — after diplomatic tensions in recent years prompted Beijing to impose sanctions on some Australian goods. Australian coal, wine and other commodities have been hit by various restrictions introduced by Chinese authorities. This dispute stems, in part, from Australia’s call for an independent inquiry into the origins of COVID-19. Beijing interpreted the demand as criticism of its handling of the virus that was first detected in Wuhan, China. The agreement with India is an attempt by Australia to diversify its commercial ties.
India has emerged as an ideal strategic partner for Australia as it strives to overcome the challenges of rapid urbanization and infrastructure development, resources like clean water, digital connectivity and health amenities for its growing and aspirational population. India needs Australian commodities like Lithium, Cobalt, Vanadium, Rare Earths, Coal and LNG for its development needs, as well as technology to solve problems in areas such as financial inclusion, healthcare, and education, jointly with Australia. Australia has reserves of 21 of the 49 minerals identified as critical for India’s future strategy, especially the e mobility programme.. New possibilities for collaboration have opened up in the defence and space sectors. India has a large technology resource pool which is complementary to Australian requirements.
The current trend of geoeconomics favours enhancement of investment and trade relationships with reliable partners. Their partnership in the Quad and participation in Malabar exercises has reinforced their shared security outlook. Investments are already driving the trade relationship between India and Australia – roughly US$20 billion has been invested by them into each other’s economies. Bilateral trade this year is poised to cross US$27 billion. However, liberalization of trade and services, and steps towards ease of doing business will add immensely to this momentum. There is thus new optimism after the signing of the Australia India Economic Cooperation and Trade Agreement (AusInd ECTA).