The India-Australia FTA

The India-Australia FTA

Subject: Economy

Section: External Sector 

Context: India-Australia FTA

Concept:

The India-Australia FTA, officially called the Australia-India Economic Cooperation and Trade Agreement, is the first trade agreement signed by India with a developed economy after more than a decade.

Details:

The Agreement encompasses cooperation across the entire gamut of bilateral economic and commercial relations between the two friendly countries, and covers areas like:

• Trade in Goods
• Rules of Origin
• Trade in Services
• Technical Barriers to Trade (TBT)
• Sanitary and Phytosanitary (SPS) measures
• Dispute Settlement
• Movement of Natural Persons.
• Telecom
• Customs Procedures
• Pharmaceutical products, and Cooperation in other Areas.

ECTA provides for an institutional mechanism to encourage and improve trade between the two countries.

The ECTA between India and Australia covers almost all the tariff lines dealt in by India and Australia respectively.

• Australia will provide zero-duty market access for 96.4 per cent value of Indian exports (98 percent of tariff lines) on the first day of implementation of the agreement. Tariffs on the remaining 113 tariff lines, amounting to 3.6 per cent of India’s exports, will be phased out in five years.
• India will also eliminate tariffs on more than 85 percent of the Australian goods exports immediately, rising to almost 91 percent in over 10 years.

Under the agreement, Indian graduates from STEM (Science, Technology, Engineering and Mathematics) will be granted extended post-study work visas.

Australia will also set up a programme to grant visas to young Indians looking to pursue working holidays in Australia.

The exclusion list:

India has managed to completely shield its dairy sector from any tariff reduction under the FTA while excluding most sensitive agriculture items such as chickpea, walnut, pistachio nut, wheat, rice, bajra, apple, sunflowers seed oil and sugar.

Other items where no concessions have been extended include silver, platinum, jewellery, iron ore, and most medical devices.

Types of Trade Agreements

Free Trade Agreement (FTA):

A free trade agreement is an agreement in which two or more countries agree to provide preferential trade terms, tariff concession etc. to the partner country.

India has negotiated FTA with many countries e.g. Sri Lanka and various trading blocs as well e.g. ASEAN.

Preferential Trade Agreement (PTA):

In this type of agreement, two or more partners give preferential right of entry to certain products. This is done by reducing duties on an agreed number of tariff lines.

Tariffs may even be reduced to zero for some products even in a PTA. India signed a PTA with Afghanistan.

Comprehensive Economic Partnership Agreement (CEPA):

Partnership agreement or cooperation agreement are more comprehensive than an FTA.

CEPA covers negotiation on the trade in services and investment, and other areas of economic partnership.

India has signed CEPAs with South Korea and Japan.

Comprehensive Economic Cooperation Agreement (CECA):

CECA generally covers negotiation on trade tariff and TRQ (Tariff Rate Quotas) rates only. It is not as comprehensive as CEPA. India has signed CECA with Malaysia.