The Australian Parliament recently approved the free trade agreement with India. In India, such agreements require approval from the Union Cabinet.
What is AI-ECTA?
- The Australia-India Economic Cooperation and Trade Agreement (AI-ECTA) was signed by the two countries on April 2, 2022.
- This free trade agreement eases trade between India and Australia by reducing customs duties, regulatory laws, subsidies and quotas on products under import-export.
- The pact ensures that the cost of production is cheaper when compared with other countries.
Why is AI-ECTA significant?
- AI-ECTA is the first free trade agreement that India signed with a large developed economy in the last decade.
- Besides AI-ECTA and an FTA with Japan, all of India’s FTAs are with other developing countries like Singapore, South Korea, ASEAN, Malaysia and UAE.
- Once it becomes operaitonalized, AI-ECTA will provide India a duty-free access to Australian market for over 6,000 broad sectors. These include textile, leather, furniture, jewellery, machinery and others.
- It will help Australia reduce its dependence on Chinese market and forge new bilateral trade ties.
- Under this free trade agreement, Australia will provide zero-duty access to India for some 96.4 per cent (by value) of its exports. This includes products that currently incur 4 to 5 per cent customs duty in Australia.
- Numerous labour-intensive sectors in India are expected to benefit from this trade pact. These include textile and apparel, agricultural and fish products, leather, footwear, furniture, sports goods etc.
- India exported to Australia goods worth 8.3 million USD in 2021-22. India’s imports from Australia was at 16.75 billion USD during this period. The FTA will increase the bilateral trade value from the present 27.5 billion USD to 45-50 billion USD in the next five years.
- It will enhance people-to-people relations and foster cultural ties between the two countries.
- It will increase access to a range of skilled service providers, investors and business visitors, boosting investments and business opportunities significantly.