India and Australia have signed an ambitious free trade agreement (FTA) in goods and services on Saturday slashing import duties on a wide variety of items including wines, coal, meat, macadamia nuts and wool from Australia and pharmaceuticals, textiles, engineering goods, leather and gems & jewellery from India.
Concessions have also been provided in the services sector with both countries willing to facilitate the recognition of professional qualifications, licensing, and registration procedures between professional services bodies. Australia has agreed to provide new access for young Indians to participate in working holidays in the country.
“The agreement will help in taking bilateral trade from $27 billion to $45-50 billion in the next five years. India expects one million jobs will be created in the country in the next five years,” Commerce and Industry Minister Piyush Goyal said at a press conference after signing the agreement with Australian Trade Minister Dan Tehan in a virtual event.
Modi, Morrison participate
The free trade pact, officially called the Australia-India Economic Cooperation and Trade Agreement, was signed in the presence of Prime Minister Narendra Modi and Australian Prime Minister Scott Morrison. It was signed in just a little over six months after the re-launch of negotiations in September 2021. The countries are now expected to towards a wider Comprehensive Economic Cooperation Agreement to include more elements such as agriculture trade.
“This is a watershed moment for our bilateral relations.... On the basis of this agreement, together, we will be able to increase the resilience of supply chains, and also contribute to the stability of the Indo-Pacific region,” Modi said in his speech at the event.
Tariffs will be eliminated on more than 85 per cent of Australian goods exports to India, rising to almost 91 per cent over 10 years, while 96 per cent of Indian goods imports will enter Australia duty-free on entry into force, as per a statement by the Australian government.
Importantly, many of India’s sensitive agriculture and dairy items, such as milk and other dairy products, chickpeas, walnut, pistachio nut, wheat, rice, bajra, apple, sunflowers seed oil, sugar, and oil cake have been excluded from the free trade pact.
There is, however, a provision that both countries will cooperate to promote agricultural trade as part of the agreement and will work toward concluding an enhanced agricultural Memorandum of Understanding (MoU). Other Indian items in the exclusion category include gold, silver, platinum, jewellery, iron ore, and most medical devices.
Morrison said the agreement would create enormous trade diversification opportunities for Australian producers and service providers bound for India, valued at up to $14.8 billion each year.
In 2020, India was Australia’s seventh-largest trading partner, with two-way trade valued at $24.3 billion, and the sixth largest goods and services export market, valued at $16.9 billion, according to estimates by the Australian government. “Our government’s goal is to lift India into our top three export markets by 2035, and to make India the third-largest destination in Asia for outward Australian investment,” Tehan said.
For India, the FTA will translate into zero duty on 96.4 per cent value of exports (98 per cent of tariff lines) from day one of the entry into force of the Agreement, according to a release issued by the Commerce & Industry Ministry.
The sectors that will gain from this include most textiles and apparel, some agricultural and fish products, leather, footwear, furniture and sport goods, jewellery, machinery, electrical goods, railway wagons, selected pharmaceutical products, and medical devices and furniture. The pharmaceutical sector will gain from the easing of regulations. Tariffs on the remaining items will be phased out in the next five years.
Tariffs on sheepmeat, wine
Australia will benefit from an immediate elimination of 30 per cent tariffs on sheepmeat and a 2.5 per cent tariff on wool, according to Australia’s statement. Tariffs on wine with a minimum import price of $5 per bottle will be reduced from 150 per cent to 100 per cent on entry into force and subsequently to 50 per cent over 10 years
Tariffs on wine bottles with a minimum import price of $15 will be reduced from 150 per cent to 75 per cent on entry into force and subsequently to 25 per cent over 10 years. Tariffs up to 30 per cent on avocados, onions, broad, kidney and adzuki beans, cherries, shelled pistachios, macadamias, cashews in-shell, blueberries, raspberries, blackberries, currants will be eliminated over seven years.
Tariffs on almonds, lentils, oranges, mandarins, pears, apricots and strawberries will be reduced, improving opportunities for Australia’s horticulture industry to supply India’s growing food demand.
“The resources sector will benefit from the elimination of tariffs on entry into force for coal, alumina, metallic ores, including manganese, copper and nickel; and critical minerals including titanium and zirconium. LNG tariffs will be bound at 0 per cent at entry into force,” the release said.